LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF STANLEY HILLS LLC A NEVADA LIMITED LIABILITY COMPANY Dated as of October 3, 2006
EXHIBIT
10.2
LIMITED
LIABILITY COMPANY OPERATING AGREEMENT
OF
XXXXXXX
HILLS LLC
A
NEVADA LIMITED LIABILITY COMPANY
Dated
as of October 3, 2006
TABLE
OF CONTENTS
ARTICLE I.
DEFINITIONS AND INTERPRETATION
1.1
CERTAIN DEFINITIONS.
1.2
OTHER
DEFINED TERMS.
1.3
INTERPRETATION.
ARTICLE II.
INTRODUCTORY MATTERS
2.1
FORMATION OF LLC.
2.2
NAME;
PRINCIPAL OFFICE; AGENT.
2.3
PERIOD OF DURATION.
2.4
BUSINESS AND PURPOSE OF THE LLC.
2.5
TITLE
TO ALL PROPERTIES.
ARTICLE III.
MEMBERS AND CAPITAL CONTRIBUTIONS
3.1
MEMBERS; NO PERSONAL LIABILITY.
3.2
INITIAL CAPITAL CONTRIBUTIONS.
3.3
ADDITIONAL CONTRIBUTIONS.
3.4
RIGHTS WITH RESPECT TO CAPITAL.
3.5
GENERAL RULES FOR ADJUSTMENT OF CAPITAL ACCOUNTS.
3.6
SPECIAL RULES WITH RESPECT TO CAPITAL ACCOUNTS.
3.7
TRANSFEREE'S CAPITAL ACCOUNT.
ARTICLE IV.
ALLOCATION OF PROFITS AND LOSSES
4.1
ALLOCATION OF NET PROFITS AND NET LOSSES.
4.2
RESIDUAL ALLOCATIONS.
4.3
QUALIFIED INCOME OFFSET.
4.4
MINIMUM GAIN CHARGEBACK.
4.5
MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK.
4.6
MEMBER NONRECOURSE DEDUCTIONS.
4.7
SPECIAL ALLOCATIONS.
4.8
FEES
TO MEMBERS OR AFFILIATES.
4.9
SECTION 704(c) ALLOCATION.
ARTICLE V.
DISTRIBUTIONS
5.1
AVAILABLE CASH FLOW.
5.2
LIQUIDATING DISTRIBUTIONS.
ARTICLE VI.
RIGHTS, DUTIES, OBLIGATIONS AND COMPENSATION OF MANAGER AND
OFFICERS
6.1
MANAGER.
6.2
LIMITATIONS ON RIGHTS AND POWERS.
6.3
COMPENSATION OF MANAGER.
ARTICLE VII.
MEMBERS; MEMBERS' MEETINGS
7.1
PLACE
OF MEETINGS; MANAGER TO PRESIDE.
7.2
ANNUAL MEETINGS OF MEMBERS.
7.3
SPECIAL MEETINGS.
7.4
NOTICE OF MEETINGS.
7.5
VALIDATION OF MEMBERS' MEETINGS.
7.6
ACTIONS WITHOUT A MEETING.
7.7
REQUIRED VOTE.
7.8
QUORUM AND EFFECT OF VOTE.
7.9
COMPENSATION OF MEMBERS.
ARTICLE VIII.
RESTRICTIONS ON TRANSFER OF LLC INTERESTS; ADMISSION OF NEW MEMBERS
8.1
TRANSFER OR ASSIGNMENT OF INTERESTS.
8.2.
RIGHT OF FIRST REFUSAL UPON SALE.
8.3
BUYOUT OPTION.
8.4
VOID
TRANSFERS.
8.5
SUBSTITUTION OF MEMBERS.
8.6
ADMISSION OF NEW MEMBERS.
8.7
SUBSEQUENT TRANSFERS SUBJECT TO TERMS OF AGREEMENT.
8.8
PURCHASE TERMS VARIED BY AGREEMENT.
8.9
SPOUSAL CONSENT.
ARTICLE IX.
TERMINATION AND DISSOLUTION
9.1
DISSOLUTION.
9.2
DISASSOCIATION EVENT.
9.3
STATEMENT OF INTENT TO DISSOLVE.
9.4
CONDUCT OF BUSINESS.
9.5
DISTRIBUTION OF NET PROCEEDS.
ARTICLE X.
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
10.1
MAINTENANCE OF BOOKS AND RECORDS.
10.2
ANNUAL ACCOUNTING.
10.3
INSPECTION AND AUDIT RIGHTS.
10.4
BANK
ACCOUNTS; FISCAL YEAR AND ACCOUNTING METHOD.
10.5
TAX
MATTERS.
10.6
INCOME TAX ELECTIONS.
ARTICLE XI.
INDEMNIFICATION OF THE MEMBERS, MANAGER, AND THEIR AFFILIATES
11.1
INDEMNIFICATION OF THE MEMBERS AND THEIR PRINCIPALS.
11.2
EXPENSES.
11.3
INDEMNIFICATION RIGHTS NON-EXCLUSIVE.
11.4
ERRORS AND OMISSIONS INSURANCE.
11.5
ASSETS OF THE LLC.
ARTICLE XII.
ISSUANCE OF LLC CERTIFICATES
12.1
ISSUANCE OF LLC CERTIFICATES.
12.2
TRANSFER OF LLC INTERESTS.
12.3
LOST, STOLEN OR DESTROYED CERTIFICATES.
ARTICLE XIII.
AMENDMENTS
13.1
AMENDMENT, ETC. OF OPERATING AGREEMENT.
13.2
AMENDMENT OF ARTICLES OF ORGANIZATION.
ARTICLE
XIV. REPRESENTATIONS AND ACKNOWLEDGMENTS
14.1
INVESTMENT REPRESENTATIONS.
14.2
NO
REPRESENTATIONS BY LLC.
ARTICLE XV.
MISCELLANEOUS PROVISIONS
15.1
COUNTERPARTS.
15.2
SURVIVAL OF RIGHTS.
15.3
SEVERABILITY.
15.4
NOTIFICATION OR NOTICES.
15.5
GOVERNING LAW.
15.6
FURTHER ACTIONS.
15.7
ARBITRATION OF DISPUTES.
15.8
THIRD PARTY BENEFICIARIES.
15.9
PARTITION.
15.10
ENTIRE AGREEMENT.
15.11
WAIVER.
15.12
ATTORNEYS' FEES.
15.13
CONFIDENTIALITY.
EXHIBIT A Initial
Member Names and Addresses; Initial Capital Contributions and Percentage
Interests
EXHIBIT B Form
of
Certificate for LLC Interest
XXXXXXX
HILLS LLC
LIMITED
LIABILITY COMPANY OPERATING AGREEMENT
This
Limited Liability Company Operating Agreement (this “Agreement”) is made and
entered into effective as of October 3, 2006 by and among the Persons executing
this Agreement on the signature pages hereof, with reference to the recitals
set
forth below.
R
E C I T
A L S
WHEREAS,
the Members have caused XXXXXXX HILLS LLC (the “LLC”) to be formed pursuant to
the provisions of the Nevada Revised Statutes as set forth in Title 7, Chapter
86 (the “Statute”); and
WHEREAS,
the Members do hereby adopt this Agreement as the operating agreement of
the
LLC.
NOW,
THEREFORE, in consideration of the covenants and the promises made herein,
the
parties hereto hereby agree as follows.
ARTICLE I.
DEFINITIONS
AND INTERPRETATION
In
this
Agreement, the following terms have the meanings specified or referred to
in
this Section 1.1,
which
shall be equally applicable to both the singular and plural forms.
1.1.1 “Adjusted
Capital Account Deficit”
means,
with respect to any Member, the deficit balance, if any, in such Member's
Capital Account as of the end of the relevant fiscal year of the LLC, after
giving effect to the following adjustments:
(i) increase
such Capital Account by any amounts which such Member is obligated to contribute
to the LLC (pursuant to the terms of this Agreement or otherwise) or is deemed
to be obligated to contribute to the LLC pursuant to Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) reduce
such Capital Account by the amount of the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
1.1.2 “Affiliate”
means,
when used with reference to a specified Person, (i) the
Principal of the Person, (ii) any
Person directly or indirectly controlling, controlled by or under common
control
with such Person, (iii) any
Person owning or controlling 10% or more of the outstanding voting interests
of
such Person and (iv) any
relative or spouse of such Person.
1.1.3 “Agreement”
means
this Limited Liability Company Operating Agreement, as originally executed
and
as amended from time to time.
1.1.4 “Articles
of Organization”
means
the articles of organization filed with the Nevada Secretary of State for
the
purpose of forming the LLC.
1.1.5 “Available
Cash Flow”
means,
with respect to any fiscal year of the LLC or other period, the sum of all
cash
receipts of the LLC from any and all sources, less all cash disbursements
(including loan repayments, capital improvements and replacements) and a
reasonable allowance for Reserves, contingencies and anticipated obligations,
as
determined by the Manager.
1.1.6 “Capital
Contribution”
means
any money, property or services rendered, or a promissory note or other binding
obligation to contribute money, property or services, that a Member contributes
to the LLC as capital in such Member’s capacity as a Member and pursuant to an
agreement among the Members, including an agreement as to the value of such
contribution.
1.1.7 “Code”
means
the Internal Revenue Code of 1986, as amended.
1.1.9 “Disassociation
Event”
means
the death, retirement, resignation, expulsion, bankruptcy or dissolution
of a
Member, or any other event that terminates the continued membership in the
LLC
of a Member.
1.1.10 “Economic
Interest”
means
a
Person's right to share in the Net Profits, Net Losses or similar items of,
and
to receive distributions from, the LLC, but does not include any other rights
of
a Member including the right to vote or to participate in the management
of the
LLC or, except as provided in Section 10.3,
any
right to information concerning the business and affairs of the
LLC.
1.1.11 “LLC
Interest”
or
“Interest”
means
an ownership interest in the LLC, which includes the Economic Interest, the
right to vote or participate in the management of the LLC and the right to
information concerning the business and affairs of the LLC, as provided in
this
Agreement and under the Statute.
The
Interests of the Members, and any portion thereof, constitute the personal
property of the holders thereof.
1.1.12 “LLC
Minimum Gain”
means
the amount determined by computing with respect to each nonrecourse liability
of
the LLC, the amount of gain (of whatever character), if any, that would be
realized by the LLC if it disposed (in a taxable transaction) of the Property
subject to such liability in full satisfaction thereof, and by then aggregating
the amounts so computed as set forth in Regulations Section
1.704-2(d).
1.1.13 “Majority
in Interest of the Members”
means
with respect to any date of determination more than 50% of the interests
of the
Members in the current profits and capital of the LLC.
1.1.14 “Manager”
means
each Person designated or elected to manage the LLC pursuant to
Section 6.1
of this
Agreement.
1.1.15 “Member
Nonrecourse Debt”
has
the
meaning set forth in Regulations Section 1.704-2(b)(4).
1.1.16 “Member
Nonrecourse Debt Minimum Gain”
means
an amount, with respect to each Member Nonrecourse Debt, equal to the LLC
Minimum Gain that would result if such Member Nonrecourse Debt were treated
as a
nonrecourse liability of the LLC, determined in accordance with Regulations
Sections 1.704-2(i)(2) and (3).
1.1.17 “Member
Nonrecourse Deductions”
has
the
meaning set forth in Regulations Section 1.704-2(i)(2). The amount of Member
Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a fiscal
year of the LLC equals the excess (if any) of the net increase (if any) in
the
amount of Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt during that fiscal year over the aggregate amount of any
distributions during that fiscal year to the Member that bears (or is deemed
to
bear) the economic loss for such Member Nonrecourse Debt to the extent such
distributions are from the proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Nonrecourse Debt Minimum Gain attributable
to
such Member Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(2).
1.1.18 “Member”
means
a
Person who is a signatory to this Agreement, as the same may be amended from
time to time, and who has not resigned, withdrawn or been expelled as a Member
or, if other than an individual, been dissolved.
1.1.19 “Net
Profits”
and
“Net
Losses”
mean,
for each fiscal year of the LLC or other period, an amount equal to the LLC’s
taxable income or loss for such fiscal year or period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss
or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following
adjustments:
(i) Any
income of the LLC that is exempt from Federal income tax and not otherwise
taken
into account in computing Net Profits or Net Losses shall be added to such
taxable income or loss;
(ii) Any
expenditures of the LLC described in Code Section 705(b)(2)(B) or treated
as
Code Section 705(b)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Net
Profits or Net Losses shall be subtracted from such taxable income or
loss;
(iii) Gain
or
loss resulting from any disposition of Property with respect to which gain
or
loss is recognized for Federal income tax purposes shall be computed by
reference to the fair market value of the Property disposed of, notwithstanding
that the adjusted tax basis of such Property differs from its fair market
value;
(iv) In
lieu
of 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 or other period, computed in
accordance with the Section 1.1.8
hereof,
and
(v) Notwithstanding
any other provision of this subsection, any items of income, gain, loss or
deduction which are specifically allocated shall not be taken into account
in
computing Net Profits or Net Losses.
1.1.20 “Percentage
Interests”
of the
Members shall be as set forth on Exhibit A hereto, as the same may be amended
from time to time in accordance with this Agreement or supplemented by a
register of Interests or any other books and records maintained in conformity
with this Agreement by the LLC or its transfer agent or registrar for the
purpose of recording the interests of the LLC’s Interest holders.
1.1.21 “Person”
means
any individual, partnership, limited partnership, corporation, trust, estate,
association, limited liability company or other entity, whether domestic
or
foreign.
1.1.22 “Principal”
means
the individual who is in ultimate control of a Member.
1.1.23 “Property”
means
all assets of the LLC, both tangible and intangible, or any portion
thereof.
1.1.24 “Regulations”
means
the Federal income tax regulations promulgated by the Treasury Department
under
the Code, as such regulations may be amended from time to time.
1.1.25 “Reserves”
means
funds set aside from Capital Contributions or gross cash revenues as reserves.
Such Reserves shall be maintained in amounts reasonably deemed sufficient
by the
Manager for working capital and the payment of taxes, insurance, debt service,
repairs, replacements, renewals or other costs or expenses incident to the
business of the LLC.
1.2 OTHER
DEFINED TERMS.
The
following terms have the meanings defined for such terms in the Sections
set
forth below:
Term Section
Arbitrator 15.7
Buyout
Event 8.3.1
Buyout
Notice 8.3.1
Buyout
Option 8.3.1
Capital
Account 3.4.3
Departing
Member 8.3.1
Fair
Market Value 8.3.2
Indemnitee 11.1
LLC Recitals
LLC
Certificate 12.1
Period
of
Duration 2.5
Permitted
Transfer 8.1
Remaining
Member 8.3.1
Sale
Notice 8.2.1
Statute Recitals
Transfer 8.1
Vote 7.7
1.3 INTERPRETATION.
As
used
in this Agreement, the word “including” means without limitation, the word “or”
is not exclusive and
the
words “herein,” “hereof,” “hereto” and hereunder refer to this Agreement as a
whole. Unless the context otherwise requires, references herein: (i) to
Articles, Sections and Exhibits mean the Articles and Sections of and the
Exhibits attached to this Agreement, (ii) to an
agreement, instrument or other document means such agreement, instrument
or
other document as amended, supplemented and modified from time to time to
the
extent permitted by the provisions thereof and by this Agreement and (iii)
to a
statute means such statute as amended from time to time and includes any
successor legislation thereto. The Exhibits referred to herein shall be
construed with and as an integral part of this Agreement to the same extent
as
if they were set forth verbatim herein. Titles to Articles and headings of
Sections are inserted for convenience of reference only and shall not be
deemed
a part of or to affect meaning or interpretation of this Agreement. The language
herein shall be in all cases construed simply according to its fair meaning
and
not strictly for or against any of the Members.
ARTICLE II.
INTRODUCTORY
MATTERS
2.1 FORMATION
OF LLC.
The
parties have formed the LLC pursuant to the provisions of the Statute by
filing
the Articles of Organization with the Nevada Secretary of State.
The
rights and liabilities of the Members shall be determined pursuant to the
Statute and this Agreement. To the extent that the rights or obligations
of any
Member are different by reason of any provision of this Agreement than they
would be in the absence of such provision, this Agreement shall, to the extent
permitted by the Statute, control.
2.2 NAME;
PRINCIPAL OFFICE; AGENT.
The
name
of the LLC is “XXXXXXX HILLS LLC.” The
LLC
shall maintain its principal place of business at 1061 ½ X. Xxxxxxxxx Xxxxxx,
Xxx Xxxxxxx, Xxxxxxxxxx 00000, or at any other location mutually agreed upon
by
the Members.
The name
and address of the LLC's agent for service of process is
GKL
Corporate/ Search, Inc.
The
period of duration of the LLC (the “Period of Duration”) shall be through 2075,
unless the LLC is sooner terminated or dissolved in accordance with the
provisions of this Agreement.
2.4 BUSINESS
AND PURPOSE OF THE LLC.
The
purpose of the LLC is to engage in any lawful activities for which a limited
liability company may be organized under the Statute, provided
that the LLC shall not conduct any banking, insurance or trust company
business.
Specifically, the LLC has been formed to undertake real estate
development.
2.5 TITLE
TO ALL PROPERTIES.
Real
and
personal property owned or purchased by the LLC shall be held and owned,
and
conveyance made, in the name of the LLC. Instruments and documents providing
for
the acquisition, mortgage or disposition of Property of the LLC shall be
valid
and binding upon the LLC, except as otherwise limited by this Agreement,
if
executed by one or more Managers of the LLC.
ARTICLE III.
MEMBERS
AND CAPITAL CONTRIBUTIONS
3.1 MEMBERS;
NO PERSONAL LIABILITY.
The
name,
present mailing address and Percentage Interest of each Member is set forth
on
Exhibit A hereto.
No
Member shall have any personal liability for any obligation of the LLC, except
as expressly provided by law.
3.2 INITIAL
CAPITAL CONTRIBUTIONS.
Upon
execution of this Agreement, each Member shall contribute to the LLC cash
in the
amount set forth beside such Member’s name under the heading “Member’s Capital
Contribution” on Exhibit A hereto.
3.3 ADDITIONAL
CONTRIBUTIONS.
Except
as
may be otherwise expressly set forth herein, no Member shall be required
to make
any additional Capital Contributions or loan or caused to be loaned to the
LLC
any money or other assets.
3.4 RIGHTS
WITH RESPECT TO CAPITAL.
3.4.1 LLC
Capital.
Except
as otherwise provided in this Agreement, no Member shall have the right to
withdraw or receive any return of its Capital Contribution, and no Capital
Contribution may be returned in a form of property other than cash.
3.4.2 No
Interest on Capital Contributions.
Except
as expressly provided in this Agreement, no Capital Contribution of any Member
shall bear any interest or otherwise entitle the contributing Member to any
compensation for the use of contributed capital.
3.4.3 Establishment
of Capital Accounts.
A
separate capital account (each, a “Capital Account”) shall be maintained for
each Member. For book purposes, each Member's Capital Account will be separated
into a contribution account and an income (loss)
account
and will be maintained according to generally accepted accounting principles
consistently applied. Sections 3.5
and
3.6
below
describe the appropriate accounting treatment for tax purposes of the Capital
Accounts.
3.5.1 Increases.
The
Capital Account of a Member shall be increased by:
(i) Such
Member's cash contributions;
(ii) The
agreed fair market value of property contributed by such Member (net of
liabilities secured by such contributed property that the LLC is deemed to
assume or take subject to under Code Section 752); and
(iii) All
items
of LLC income and gain (including income and gain exempt from tax) allocated
to
such Member pursuant to Article IV or other provisions of this
Agreement.
3.5.2 Decreases.
The
Capital Account of a Member shall be decreased by:
(i) The
amount of cash distributed to such Member;
(ii) The
agreed fair market value of all actual and deemed distributions of property
made
to such Member pursuant to this Agreement (net of liabilities secured by
such
distributed property that the Member is deemed to assume or take subject
to
under Code Section 752); and
(iii) All
items
of LLC deduction and loss allocated to such Member pursuant to Article IV
or other provisions of this Agreement.
3.6.1 Time
of Adjustment for Capital Contributions.
For
purposes of computing the balance in a Member's Capital Account, no credit
shall
be given for any Capital Contribution which such Member is to make until
such
contribution is actually made.
3.6.2 Intent
to Comply with Treasury Regulations.
The
provisions of Section 3.5
and this
Section 3.6
and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b), and
shall
be interpreted and applied in a manner consistent therewith. To the extent
such
provisions
are inconsistent with such Regulations Section or are incomplete with respect
thereto, the Capital Accounts shall be maintained in such manner as is required
to comply with such Regulations Section.
3.7 TRANSFEREE'S
CAPITAL ACCOUNT.
In
the
event a Member or the holder of an Economic Interest transfers an Interest
in
accordance with the terms of this Agreement, the transferee shall succeed
to the
Capital Account of the transferor to the extent it relates to the transferred
Interest.
ARTICLE IV.
ALLOCATION
OF PROFITS AND LOSSES
Except
as
otherwise provided in this Article IV, Net Profits and Net Losses in each
fiscal
year of the LLC shall be allocated among the Members as follows:
(i) first,
in
proportion to and up to the amounts of Net Losses allocated for previous
fiscal
years of the LLC pursuant to Section 4.1.2(ii) and not previously affected
by
allocations pursuant to this Section 4.1.1(i);
(ii) second,
in proportion to and up to the amounts of Net Losses allocated for previous
fiscal years of the LLC pursuant to Section 4.1.2(i) and not previously affected
by allocations pursuant to this Section 4.1.1(ii); and
(iii) thereafter,
to the Members in accordance with their respective Percentage
Interests.
4.1.2 Allocation
of Net Losses.
After
giving effect to any special or other overriding allocations set forth in
this
Article IV, Net Losses shall be allocated among the Members as
follows:
(i) first,
in
proportion and to the extent of the Members’ positive adjusted Capital Accounts;
and
(ii) thereafter,
to the Members in accordance with their respective Percentage
Interests.
4.2 RESIDUAL
ALLOCATIONS.
Except
as
otherwise provided in this Agreement, all items of LLC 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 Net Profits or Net Losses, as the case
may
be, for the applicable fiscal year of the LLC.
If
any
Member unexpectedly receives any adjustments, allocation or distributions
described in clauses (4), (5) or (6) of Regulations Section
1.704-1(b)(2)(ii)(d), items of LLC income
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate the Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible. This
Section 4.3
is
intended to constitute a “qualified income offset” within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(d)(3).
If
there
is a net decrease in LLC Minimum Gain during a fiscal year, each Member will
be
allocated, before any other allocation under this Article IV, items of
income and gain for such fiscal year (and, if necessary, subsequent years)
in
proportion to and to the extent of an amount equal to such Member's share
of the
net decrease in LLC Minimum Gain determined in accordance with Regulations
Section 1.704-2(g)(2). This Section 4.4
is
intended to comply with, and shall be interpreted consistently with, the
“minimum gain chargeback” provisions of Regulations Section
1.704-2(f).
Notwithstanding
any other provision of this Article IV, but except
Section 4.4,
if
there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable
to
a Member Nonrecourse Debt during any fiscal year of the LLC, each Member
who has
a share of the Member Nonrecourse Debt Minimum Gain attributable to such
Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of LLC income and gain
for
such year (and, if necessary, subsequent years) in an amount equal such Member's
share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall
be
made in proportion to the respective amounts required to be allocated to
each
Member pursuant thereto. The items to be so allocated shall be determined
in
accordance with Regulations Section 1.704-2(i)(4). This
Section 4.5
is
intended to comply with a minimum gain chargeback requirement of that Section
of
the Regulations and shall be interpreted consistently therewith.
Any
Member Nonrecourse Deductions for any fiscal year of the LLC or other period
shall be specially allocated to the Member who bears (or is deemed to bear)
the
economic risk of loss with respect to the Member Nonrecourse Debt to which
such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(2).
4.7 SPECIAL
ALLOCATIONS.
Any
special allocations of items of Net Profits pursuant to
Sections 4.4,
4.5
and 4.6
shall be taken into account in computing subsequent allocations of Net Profits
pursuant to Section 4.1,
so that the net amount of any items so allocated and the gain, loss and any
other item allocated to each Member pursuant to
Section 4.1
shall, to the extent possible, be equal to the net amount that would have
been
allocated to each such Member pursuant to the provisions of this Article
IV if
such special allocations had not occurred.
4.8 FEES
TO MEMBERS OR AFFILIATES.
Notwithstanding
the provisions of Section 4.1,
in the
event that any fees, interest or other amounts paid to any Member or any
Affiliate thereof pursuant to this Agreement or any other agreement between
the
LLC and any Member or Affiliate thereof providing for the payment of such
amount, and deducted by the LLC in reliance on Section 707(a) and/or 707(c)
of
the Code, are disallowed as deductions to the LLC on its federal income tax
return and are treated as LLC distributions, then:
(i) the
Net
Profits or Net Losses, as the case may be, for the fiscal year of the LLC
in
which such fees, interest, or other amounts were paid shall be increased
or
decreased, as the case may be, by the amount of such fees, interest or other
amounts that are treated as LLC distributions; and
(ii) there
shall be allocated to the Member to which (or to whose Affiliate) such fees,
interest or other amounts were paid, prior to the allocations pursuant to
Section 4.1,
an
amount of gross income for such fiscal year equal to the amount of such fees,
interest or other amounts that are treated as LLC distributions.
4.9 SECTION
704(c) ALLOCATION.
Any
item
of income, gain, loss and deduction with respect to any property (other than
cash) that has been contributed by a Member to the capital of the LLC and
which
is required or permitted to be allocated to such Member for income tax purposes
under Section 704(c) of the Code so as to take into account the variation
between the tax basis of such property and its fair market value at the time
of
its contribution shall be allocated to such Member solely for income tax
purposes in the manner so required or permitted.
ARTICLE V.
DISTRIBUTIONS
5.1 AVAILABLE
CASH FLOW.
Subject
to applicable law, the Manager from time to time may elect to distribute
Available Cash Flow of the LLC to the Members in proportion to their Percentage
Interests as of the time of such distribution. For purposes of allocations
of
Net Profits pursuant to Section 4.1.1,
Available Cash Flow attributable to a specific fiscal year of the LLC shall
be
deemed distributed as of the end of such fiscal year.
If
the
LLC is liquidated, the assets of the LLC shall be distributed to the Members
in
accordance with the balances in their respective Capital Accounts, after
giving
effect to all Capital Contributions, distributions and allocations for all
periods. Distributions to the Members pursuant to this Section 5.2
shall be
made in accordance with Section 1.704-1(b)(2)(ii)(b)(2) of the
Regulations.
ARTICLE VI.
RIGHTS,
DUTIES, OBLIGATIONS AND
COMPENSATION
OF MANAGER AND OFFICERS
The
LLC
shall be managed by Xxxxx Xxxxx. A Manager need not be a Member or an
individual.
6.1.2 Execution
of Documents.
To the
extent practicable, the Manager shall operate the business and affairs of
the
LLC in consultation with one another, but notwithstanding the provisions
of this
Section 6.1,
and
except as set forth in Section 6.2
hereof,
any Manager acting alone may execute any contract, deed, lease, agreement
or
other instrument on behalf of the LLC, and the execution thereof by a Manager
shall be conclusive evidence in favor of every Person relying thereon or
claiming thereunder that such contract, deed, lease, agreement or other
instrument, when executed and delivered by such Manager, was duly authorized
by
the Members and/or the Manager, as appropriate; provided, however, that any
action by the Manager with respect to the matters set forth in
Section 6.2
hereof
shall be authorized by a majority of the Manager in the manner set forth
in this
Section 6.1.
6.1.3 Election.
Each
Manager shall hold office until such Manager’s successor has been elected by a
Vote of the Members and has qualified, unless such Manager earlier resigns
or is
removed or otherwise disqualified to serve. In voting for Manager, each Member
shall have a number of votes equal to such Member’s Percentage Interest in the
LLC. The candidate for a Manager position who receives the most Member votes
cast with respect to such position shall succeed thereto.
6.1.4 Subordinate
Officers.
The
Members may appoint a secretary, a chief financial officer and such other
officers as the business of the LLC 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 Members may determine.
6.1.5 Removal
and Resignation.
Any
Manager or other officer of the LLC may be removed, with or without cause,
by a
Vote of the Members. Any Manager or other officer of the LLC may resign at
any
time without prejudice to any rights of the LLC under any contract to which
the
Manager or other officer of the LLC is a party, by giving written notice
to the
Members or to the Manager, as applicable. Any such resignation shall take
effect
at the date of 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.
6.1.6 Vacancies.
A
vacancy among the Manager or in any office because of death, resignation,
removal, disqualification or any other cause shall be filled by a Vote of
the
Members through the appointment of a successor Manager or officer who shall
hold
office for the unexpired term.
6.1.7 Meetings.
Any
meetings of the Manager shall be held at the principal office of the LLC,
unless
some other place is designated in the notice of the meeting. Any Manager
may
participate in a meeting through use of a conference telephone or similar
communication equipment so long as all Manager participating in such a meeting
can hear one another. Accurate minutes of any meeting of the Manager shall
be
maintained by the officer designated by the Manager for that
purpose.
6.1.8 Regular
Meetings.
Meetings
of Manager shall not be required. Regular meetings of the Manager may be
held
immediately following the adjournment of any annual meeting of the Members
at
which the Manager are elected. No notice need be given of such regular
meetings.
6.1.9 Special
Meetings.
Special
meetings of the Manager for any purpose may be called at any time by any
Manager. At least 48 hours notice of the time and place of a special meeting
of
the Manager shall be delivered personally to the Manager or personally
communicated to them by an officer of the LLC by telephone, telegraph or
facsimile. If the notice is sent to a Manager by letter, it shall be addressed
to such Manager at his, her or its last known business address as it is shown
in
the records of the LLC. In case such notice is mailed, it shall be deposited
in
the United States mail, first-class postage, prepaid, in the place in which
the
principal office of the LLC is located at least four days prior to the time
of
the holding of the meeting. Such mailing, telegraphing, telephoning or delivery
as above provided shall be considered due, legal and personal notice to such
Manager.
6.1.10 Meetings
Without Notice.
Notice
of a meeting need not be given to any Manager who signs a waiver of notice,
a
consent to holding the meeting or an approval of the minutes thereof, whether
before or after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to such Manager.
All
such waivers, consents and approvals shall be filed with the LLC’s records or
made a part of the minutes of the meeting.
6.1.11 Written
Consent in Lieu of Meetings.
Any
action required or permitted to be taken by the Manager may be taken without
a
meeting and will have the same force and effect as if taken by a vote of
the
Manager at a meeting properly called and noticed, if authorized
by
a
writing signed individually or collectively by all, but not less than all,
of
the Manager. Any such consent shall be filed with the records of the
LLC.
6.1.12 Quorum.
A
majority of the total number of incumbent Manager shall be necessary to
constitute a quorum for the transaction of business at any meeting of the
Manager, and except as
otherwise provided in this Agreement or by the Statute, the action of a majority
of the Manager present at any meeting at which there is a quorum, when duly
assembled, is valid. A meeting at which a quorum is initially present may
continue to transact business, notwithstanding the withdrawal of Manager,
if any
action taken is approved by a majority of the required quorum for such
meeting.
Except
by
a Vote of the Members which is evidenced in writing, neither the Manager
nor any
officers of the LLC shall have the authority to:
(i) Enter
into or commit to any agreement, contract, commitment or obligation on behalf
of
the LLC obligating any Member or Principal to fund additional capital, to
make
or guarantee a loan or to increase its personal liability either to the LLC
or
to third parties;
(ii) Permit
the LLC's funds to be commingled with the funds of any other
Person;
(iii) Do
any
act in contravention of this Agreement;
(iv) Do
any
act which would make it impossible to carry on the business of the
LLC;
(v) Confess
a
judgment against the LLC;
or
(vi) Sell,
exchange or otherwise dispose of all or substantially all of the assets of
the
LLC, whether in a single transaction or in a series of related transactions,
or
merge the LLC with or into any other limited liability company, limited
partnership, corporation or other entity.
6.3 COMPENSATION
OF MANAGER.
The
LLC
shall pay to the Manager such salary and other benefits as shall be approved
from time to time by a Vote of the Members. The LLC shall reimburse the Manager
for any expense paid by a Manager that properly is to be borne by the
LLC.
ARTICLE VII.
MEMBERS;
MEMBERS' MEETINGS
7.1 PLACE
OF MEETINGS;
MANAGER TO PRESIDE.
Meetings
of the Members shall be held at the principal office of the LLC or at such
other
location as may be reasonably designated by the Manager.
The Manager shall preside at all meetings of the Members.
7.2 ANNUAL
MEETINGS OF MEMBERS.
Annual
meetings of the Members shall not be required. An annual meeting of the Members
may be held at such date, time and place within or without the State of NEVADA
as the Manager may determine from time to time. At any annual meeting, the
Members may elect the Manager and transact such other business as may be
properly brought before the meeting.
Notwithstanding the foregoing, the Manager shall not be under any obligation
to
convene an annual meeting of the Members unless requested to do so in writing
by
a Majority in Interest of the Members.
Special
meetings of the Members may be called at any time by any Manager or by one
or
more Members holding in the aggregate more than 10% of the Percentage Interests.
Upon receipt of a written request, which request may be mailed or delivered
personally to the Manager, from any Person entitled to call a special meeting
of
Members, the Manager shall cause notice to be given to the Members that a
meeting will be held at a time requested by the Person or Persons calling
the
meeting, which time for the meeting shall be not less than 10 nor more than
sixty 60 days after the receipt of such request. If such notice is not given
within 20 days after delivery of such request to the Manager, the Persons
calling the meeting may give notice thereof in the manner provided by this
Agreement.
Except
as
provided in Section 7.3
with
respect to special meetings, notice of meetings shall be given by the Manager
to
the Members in writing not less than 10 nor more than 60 days before the
date of
the meeting. Notices for regular and special meetings shall be given personally,
by mail or by
facsimile, and shall be sent to each Member's last known business address
appearing on the books of the LLC. Such notice shall be deemed given at the
time
it is delivered personally, deposited in the mail or sent by facsimile. Notice
of any meeting of Members shall specify the place, the day and the hour of
the
meeting, and (i) in case of a special meeting, the general nature of the
business to be transacted, or (ii) in the case of an annual meeting, those
matters which the Manager, at the date of mailing, intend to present for
action
by the Members.
7.5 VALIDATION
OF MEMBERS' MEETINGS.
Business
transacted at a meeting of Members which was not called or noticed pursuant
to
the provisions of Section 7.3
or
7.4
shall be
valid as though transacted at a meeting duly held after regular call and
notice,
if Members holding in the aggregate more than 50% of the Percentage Interests
are present, and if, either before or after the meeting, each of the Members
entitled to vote but not present (whether in person or by proxy, as that
term is
used in the Statute)
at
the
meeting signs a written waiver of notice, a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents
or
approvals shall be filed with the records of the LLC. Attendance at a meeting
shall constitute a waiver of notice, unless an objection is made at the
beginning of the meeting that it was not duly called or convened.
7.6 ACTIONS
WITHOUT A MEETING.
Any
action which may be taken at any annual or special meeting of Members may
be
taken without a meeting and without prior notice if a consent in writing,
setting forth the action so taken, shall be signed by Members holding in
the
aggregate the number of votes equal to or greater than the number
of
votes required to approve such action at a meeting of the Members. Notwithstanding
the foregoing, unless the consents of all of the Members have been given
in
writing, notice of any approval of (i) an amendment to this Agreement or
the Articles of Organization, (ii) a dissolution of the LLC pursuant to
clause (ii) of Section 9.1
hereof
or (iii) a merger of the LLC as provided in Section 17551 of the
Statute shall be given at least 10 days
before the consummation of any such action to each Member whose consent was
not
so obtained. Any Member giving a written consent may revoke the consent by
a
writing received by the LLC prior to the time that written consents of Members
required to authorize the proposed action have been filed with the LLC. Any
such
revocation shall be effective upon its receipt by the LLC.
7.7 REQUIRED
VOTE.
Unless
otherwise expressly set forth in this Agreement or required by the terms
of the
Statute, Code or applicable Regulations thereunder, the affirmative vote
of at
least a Majority in Interest of the Members (a “Vote”), wherein each Member
casts a number of votes equal to the Member's Percentage Interest in the
LLC,
shall
constitute the approval of the Members.
7.8 QUORUM
AND EFFECT OF VOTE.
A
Majority in Interest of the Members shall constitute a quorum at all meetings
of
the Members for the transaction of business, and a Vote of the Members shall
be
required to approve any action, unless a greater vote is required or a lesser
vote is provided for by this
Agreement or by the Statute. Each Member shall have a number of votes equal
to
the Percentage Interest held by such Member, provided that if, pursuant to
the
Statute or the terms of this Agreement, a Member
is
not entitled to vote on a specific matter, then such Member's number of votes
and Percentage Interest shall not be considered for purposes of determining
whether a quorum is present, or whether approval by Vote of the Members has
been
obtained in respect of such specific matter.
7.9 COMPENSATION
OF MEMBERS.
Except
as
expressly permitted by this Agreement or any other duly authorized and approved
written agreement, the LLC shall pay no compensation to any Member or any
Principal of any Member for their services to the LLC.
ARTICLE 1.
RESTRICTIONS
ON TRANSFER OF LLC
INTERESTS;
ADMISSION OF NEW MEMBERS
No
transfer, sale, hypothecation, pledge, encumbrance, assignment or other
disposition (each of the foregoing, a “Transfer”) of a Member’s Interest, or any
part thereof, will be valid without the consent of a Majority in Interest
of the
Members. Any Transfer of an Interest, including an involuntary Transfer,
which
does not satisfy the requirements of this Section 8.1
shall be
subject to the provisions of Section 8.3
hereof;
provided, however, that any Transfer by a Member to a trust or other entity
wholly owned by or established for the benefit of such Member, or to a parent,
spouse, sibling or descendant of such Member or to a trust established
exclusively for the benefit of one or more of such Persons (any such Transfer,
a
“Permitted Transfer”), shall not require consent pursuant to this
Section 8.1.
Other
than with respect to Permitted Transfers, in the event that any Member receives
a bona fide offer for the purchase and sale of all or any portion of such
Member’s Interest, the Member shall first offer to sell such Interest or portion
thereof to the other Members and to the LLC in accordance with the provisions
of
this Section 8.2.
7.11.1 Notice
of Offer to Sell. Promptly
following the receipt of an offer to purchase all or any portion of his,
her or
its Interest, a Member shall deliver a written notice (the “Sale Notice”) to the
LLC and the other Members stating (i) such Member’s bona fide intention to sell
his, her or its Interest, (ii) the name and address of the proposed transferee,
(iii) the Interest or portion thereof to be sold and (iv) the purchase price
and
terms of payment upon which the Member proposes to sell such
Interest.
7.11.2 Right
of First Refusal.
Within
90 days after receipt of the Sale Notice, the LLC and the Members electing
to
purchase the Interest subject to the Sale Notice shall have the first right
to
purchase or obtain such Interest upon the price and terms of payment designated
in the Sale Notice. If the Sale Notice provides for the payment of non-cash
consideration, the LLC and the purchasing Members each may elect to pay the
consideration in cash equal to the good faith estimate of the present fair
market value of the non-cash consideration offered, as determined by the
Manager
or, in the absence of an agreement among the Manager as to such value, by
a
nationally recognized firm of appraisers jointly selected by the
Manager.
7.11.3 Election
to Exercise Right of First Refusal. Within
30
days after receipt of the Sale Notice, each non-selling Member shall notify
the
Manager in writing of his, her or its desire to purchase a portion of the
Interest subject to the Sale Notice. The failure of any Member to so notify
the
Manager within the applicable period shall constitute an election on the
part of
that Member not to purchase any portion of the Interest subject to the Sale
Notice. Each Member so electing to purchase shall be entitled to purchase
a
portion of such Interest in the same proportion that the Percentage Interest
of
such Member bears to the aggregate of the Percentage
Interest
of all of the Members electing to so purchase the Interest subject to the
Sale
Notice. In the event any Member elects to purchase none or less than all
of his,
her or its pro rata share of such Interest, then the other Members can elect
to
purchase more than their pro rata share. If such Members fail to purchase
the
entire Interest subject to the Sale Notice, the LLC may purchase any remaining
share of such Interest.
7.11.4 Lapse
of Right of First Refusal. If
the
LLC or the other Members elect not to purchase or obtain all of the Interest
subject to the Sale Notice, then the selling Member may sell the Interest
described in the Sale Notice to the proposed transferee, provided such sale
(i)
is completed within 30 days after the expiration of the LLC’s and the other
Members' right to purchase such Interest, (ii) is made on terms no less
favorable to the selling Member than as designated in the Sale Notice and
(iii)
the requirements of Section 8.1
have
been met. If such Interest is not so sold, the selling Member must give notice
in accordance with this Section 8.2.
prior to
any subsequent sale of such Member’s Interest.
7.12.1 Buyout
Notice.
Any
Member (a “Remaining Member”) or its designated Affiliate shall have the right
(the “Buyout Option”) to purchase all, but not less than all, of the LLC
Interest of any other Member (a “Departing Member”) in the event the Departing
Member Transfers any portion of such Member’s LLC Interest other than as
permitted pursuant to Section 8.1
hereof
(a “Buyout Event”). Within 30 days of receipt of notice of a Buyout Event, the
Remaining Member shall give written notice (the “Buyout Notice”) to the
Departing Member of the Remaining Member’s desire to purchase the Departing
Member’s LLC Interest. In the event that there is more than one Remaining Member
at the time a Buyout Event occurs, the Remaining Members shall be entitled
to
exercise the Buyout Option pro rata in accordance with their respective
Percentage Interests.
7.12.3 Exercise
Terms.
The
Buyout Notice shall specify the date on which the Transfer pursuant to an
exercise of the Buyout Option shall be consummated, which date shall be no
earlier than 30 days nor later than 90 days from the date of the Buyout Notice,
unless otherwise agreed by the Remaining Member and the Departing Member.
Except
as may be otherwise agreed by the Remaining Member and the Departing Member,
the
Remaining Member shall pay at least 20% of the purchase price for the Departing
Member’s LLC Interest in cash, with the balance of the purchase price payable
pursuant to a promissory note bearing interest at 110% of the then current
applicable federal rate for mid-term obligations (as determined pursuant
to
Section 7872 of the Code). Such note shall be payable in equal installments
of principal and interest over a period not to exceed five years. Any such
promissory note may be prepaid at any time without premium or penalty. The
Departing Member’s LLC Interest shall be transferred free and clear of all liens
and encumbrances and, except as otherwise provided, the Departing Member
shall
be released at the closing from any guarantees, obligations, liabilities
or
similar undertakings to third parties given by such Member on behalf of the
LLC.
7.12.4 Further
Cooperation.
On the
closing of the purchase and sale of the Departing Member’s LLC Interest pursuant
to an exercise of the Buyout Option, each Member shall execute, acknowledge
and
deliver to each other Member such instruments, and take such actions, as
each
Member may reasonably request in order to effect the purchase and sale of
the
LLC Interest pursuant to the terms and conditions of this
Section 8.3.
7.12.5 LLC
Option.
In the
event the Remaining Member elects not to exercise any of its rights under
this
Section 8.3,
the
LLC, at its election, may assume such rights.
If
the
Manager determine in their sole discretion that any Transfer would cause
the
termination of the LLC under the Code, then such Transfer shall be null and
void.
7.14 SUBSTITUTION
OF MEMBERS.
A
transferee of an Interest shall become a substitute Member, provided that
(i) the Transfer was valid under Section 8.1
hereof
and not voided by the Manager pursuant to Section 8.4
hereof,
(ii) the transferee has become a party to this Agreement and (iii) the
transferee pays any reasonable expenses in connection with his, her or its
admission as a Member. A transferee who becomes a substituted Member has,
to the
extent transferred, all of the rights, powers and duties of a Member under
this
Agreement and the Statute.
7.15 ADMISSION
OF NEW MEMBERS.
A
new
Member may be admitted into the LLC only upon the consent of a Majority in
Interest of the Members. The
amount of Capital Contribution, if any, which must be made by a new Member
shall
be determined by the Vote of all existing Members.
A new
Member shall not be deemed admitted into the LLC until the Capital Contribution
required of such Person shall have been made and such Person has become a
party
to this Agreement and made any and all
investment
representations deemed necessary or advisable by the Manager in their sole
discretion.
7.16 SUBSEQUENT
TRANSFERS SUBJECT TO TERMS OF AGREEMENT.
After
the
consummation of any Transfer of any part of an LLC Interest, the Interest
or
portion thereof so transferred shall continue to be subject to the terms
and
provisions of this Agreement and any further Transfers shall be required
to
comply with all the terms and provisions hereof.
7.17 PURCHASE
TERMS VARIED BY AGREEMENT.
Provided
that the restrictions set forth in this Agreement have been satisfied, nothing
contained herein is intended to prohibit Members from agreeing upon other
terms
and conditions for the purchase by the LLC or any other Member of the Interest
(or any portion thereof) of any Member desiring to retire, withdraw or
resign.
7.18 SPOUSAL
CONSENT.
Each
Member who is married as of the date hereof or who subsequently becomes married
shall obtain his or her spouse’s signature to a spousal consent in the form
attached hereto as Exhibit C.
ARTICLE VIII.
TERMINATION
AND DISSOLUTION
The
LLC
shall be dissolved upon the occurrence of any of the following
events:
(i) When
the
Period of Duration of the LLC expires;
(ii) The
written approval by a Majority in Interest of the Members to dissolve the
LLC;
(iii) The
sale
of all or substantially all of the assets of the LLC and the distribution
to the
Members of the proceeds thereof;
or
(iv) Except
as
otherwise set forth in this Agreement, any other event causing a dissolution
of
the LLC under the Statute.
8.2 DISASSOCIATION
EVENT.
The
occurrence of a Disassociation Event shall not constitute a dissolution or
termination of the LLC.
8.3 STATEMENT
OF INTENT TO DISSOLVE.
As
soon as possible after the occurrence of any of the events specified in
Section 9.1
above, the LLC shall execute a Statement of Intent to Dissolve in such form
as
prescribed by the NEVADA Secretary of State.
Upon
the
occurrence of any event specified in Section 9.1,
the LLC
shall continue solely for the purpose of winding up its affairs in an orderly
manner, liquidating its assets and satisfying the claims of its creditors.
The
Manager who have not wrongfully dissolved the LLC or, if none, the Members,
shall be responsible for overseeing the winding up and liquidation of the
LLC,
shall take full account of the assets and liabilities of the LLC, shall cause
its assets to be either sold or distributed, and shall cause the proceeds
therefrom, to the extent sufficient therefor, to be applied and distributed
as
provided in this Section 9.4.
The
Persons winding up the affairs of the LLC shall give written notice of the
commencement of winding up by mail to all known creditors and claimants whose
addresses appear on the records of the LLC. The Manager or Manager
winding up the affairs of the LLC shall be entitled to reasonable compensation
for such services.
The
Members shall continue to divide Net Profits and Net Losses and Available
Cash
Flow during the winding-up period in the same manner and the same priorities
as
provided for in Articles IV and V hereof. The proceeds from the liquidation
of Property shall be applied in the following order:
(i) To
creditors other than Members in the order of priority provided by
law;
then
(ii) To
creditors who are Members in order of priority, except amounts owed to Members
on account of their Capital Contributions;
then
(iii) To
the
Members as provided in Section 5.2
hereof.
Where
the
distribution pursuant to this Section 9.5
consists
both of cash (or cash equivalents) and non-cash assets, the cash (or cash
equivalents) shall first be distributed, in a descending order, to fully
satisfy
each category starting with the most preferred category set forth above.
In the
case of non-cash assets, the distribution values are to be based on the fair
market value thereof as determined in good faith by the liquidator, and the
shortest maturity portion of such non-cash assets (e.g., notes or other
indebtedness) shall, to the extent such non-cash assets are readily divisible,
be distributed, in a descending order, to fully satisfy each category above,
starting with the most preferred category.
ARTICLE IX.
BOOKS,
RECORDS, REPORTS AND BANK ACCOUNTS
The
Manager shall cause the books and records of the LLC to be maintained in
accordance with generally accepted accounting principles, and shall give
reports
to the Members in accordance with prudent business practices and the Statute.
There shall be kept at the principal office of the LLC, as well as at the
office
of record of the LLC specified in Section 2.3,
if different, the following LLC documents:
(i) A
current
list in alphabetical order of the full name and last known business or residence
address of each Member and holder of an Economic Interest in the LLC, together
with the Capital Contributions, Percentage Interest and share in Net Profits
and
Net Losses of each Member and holder of an Economic Interest;
(ii) A
current
list of the full name and business or residence address of each
Manager;
(iii) A
copy of
the Articles of Organization and any amendments thereto, together with any
powers of attorney pursuant to which the Articles of Organization and any
amendments thereto were executed;
(iv) Copies
of
the LLC's federal, state and local income tax or information returns and
reports, if any, for the six most recent fiscal years of the LLC;
(v) A
copy of
this Agreement and any amendments thereto, together with any powers of attorney
pursuant to which this Agreement and any amendments thereto were
executed;
(vi) Copies
of
the financial statements of the LLC, if any, for the six most recent fiscal
years of the LLC;
(vii) The
LLC's
books and records as they relate to the internal affairs of the LLC for at
least
the current and past four fiscal years of the LLC;
(viii) Originals
or copies of all minutes, actions by written consent, consents to action
and
waivers of notice to Members and Member Votes, actions and consents;
and
(ix) Any
other
information required to be maintained by the LLC pursuant to the
Statute.
9.2 ANNUAL
ACCOUNTING.
Within
120 days after the close of each fiscal year of the LLC, the LLC shall
(i) cause to be prepared and submitted to each Member a balance sheet and
income statement for the preceding fiscal year (or portion thereof) in
conformity with generally accepted accounting principles and (ii) provide
to the Members all information necessary for them to complete federal and
state
tax returns.
Each
Member and each holder of an Economic Interest in the LLC who is not a Member
has the right upon reasonable request, for purposes reasonably related to
the
interest of that Person, to inspect and copy during normal business hours
any of
the XXX xxxxx and records required to be maintained in accordance with
Section 10.1. Such right may be exercised by the Person or by that Person's
agent or attorney. The determination of the Manager as to adjustments to
the
financial reports, books, records and returns of the LLC, in the absence
of
fraud or gross negligence,
shall be final and binding upon the LLC and all of the
Members.
In addition, upon the request of a Member or a holder of an Economic Interest,
for purposes reasonably related to the interest of that Person, the Manager
shall promptly deliver to the Member or holder of an Economic Interest, at
the
expense of the LLC, a copy of this Agreement and a copy of the information
listed in paragraphs (i), (ii) and (iv) of Section 10.1
of this Agreement.
9.4 BANK
ACCOUNTS; FISCAL YEAR AND ACCOUNTING METHOD.
The
bank
accounts of the LLC shall be maintained in such banking institutions as the
Manager shall determine. The
fiscal year and accounting method of the LLC shall be as determined by the
Manager in their reasonable discretion and in accordance with, to the extent
applicable, the Code.
One
of
the Manager who is also a Member, or in the event no Manager is a Member,
a
Member or an officer of a corporate Member, shall be designated as “Tax Matters
Partner” (as defined in Code section 6231), to represent the LLC (at the LLC's
expense) in connection with all examinations of the LLC's affairs by tax
authorities, including resulting judicial and administrative proceedings,
and to
expend LLC funds for professional services and costs associated therewith.
In
its capacity as Tax Matters Partner, the designated Person shall oversee
the LLC
tax affairs in the overall best interests of the LLC. Xxxxx
Xxxxx is hereby designated as the initial Tax Matters Partner, and shall
serve
in such capacity until such time as the Members designate another Tax Matters
Partner.
9.6 INCOME
TAX ELECTIONS.
The
Tax
Matters Partner designated pursuant to Section 10.5
shall
have the authority on behalf of the LLC to make all elections permitted under
the Code and all other tax-related statutes and regulations, including elections
of methods of depreciation and elections under
Section
754 of the Code. The decision to make or not to make an election shall be
at the
Tax Matters Partner’s sole and absolute discretion.
The
Members hereby acknowledge that they are aware of the income tax consequences
of
the allocations made by this Agreement and hereby agree to be bound by the
provisions of this Agreement in reporting their shares of the LLC income
and
loss for income tax purposes.
ARTICLE 1.
INDEMNIFICATION
OF MEMBERS,
MANAGER
AND THEIR AFFILIATES
The
LLC
shall indemnify and hold harmless the Members, the Manager, their Affiliates
and
their respective officers, directors, employees, agents and Principals
(individually, an “Indemnitee”) from and against any and all losses, claims,
demands, costs, damages, liabilities, joint and several, expenses of any
nature
(including reasonable attorneys' fees and disbursements),
judgments, fines, settlements and other amounts arising from any and all
claims,
demands, actions, suits or proceedings, whether civil, criminal, administrative
or investigative, in which the Indemnitee was involved or may be involved,
or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the business of the LLC, regardless of whether the Indemnitee continues
to be
a Member, an Affiliate, or an officer, director, employee, agent or Principal
of
the Member at the time any such liability or expense is paid or incurred,
to the
fullest extent permitted by the Statute and all other applicable
laws.
9.8 EXPENSES.
Expenses
incurred by an Indemnitee in defending any claim, demand, action, suit or
proceeding subject to Section 11.1 shall, from time to time, be advanced by
the LLC prior to the final disposition of such claim, demand, action, suit
or
proceeding upon receipt by the LLC of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that such Person
is
not entitled to be indemnified as authorized in Section 11.1.
9.9 INDEMNIFICATION
RIGHTS NON-EXCLUSIVE.
The
indemnification provided by Section 11.1
shall be
in addition to any other rights to which those indemnified may be entitled
under
any agreement or vote of the Members, as a matter of law or equity or otherwise,
both as to action in the Indemnitee’s capacity as a Member, as an Affiliate or
as an officer, director, employee, agent or Principal of a Member and as
to any
action in another capacity, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns, representatives and administrators of the
Indemnitee.
9.10 ERRORS
AND OMISSIONS INSURANCE.
The
LLC
may purchase and maintain insurance, at the LLC's expense, on behalf of the
Members and such other Persons as the Members shall determine, against any
liability that may be asserted against, or any expense that may be incurred
by,
such Person in connection with the activities of the LLC and/or the Members'
acts or omissions as the Members of the LLC regardless of whether the LLC
would
have the
power to indemnify such Person against such liability under the provisions
of
this Agreement or under applicable law.
9.11 ASSETS
OF THE LLC.
Any
indemnification under Section 11.1
shall be satisfied solely out of the assets of the LLC. No Member shall be
subject to personal liability or required
to fund or to cause to be funded any obligation by reason of these
indemnification provisions.
ARTICLE X.
ISSUANCE
OF LLC CERTIFICATES
10.1 ISSUANCE
OF LLC CERTIFICATES.
Upon
or
at any time after the execution of this Agreement and the payment of the
Capital
Contributions by the Members, the Manager may elect to cause the LLC to issue
one or more LLC Certificates in the form of Exhibit B hereto (each, an “LLC
Certificate”) in the name of each Member certifying that the Person named
therein is the record holder of the LLC Interests set forth therein. For
purposes of this Agreement, the term “record holder” shall mean the person whose
name appears on Exhibit A as the Member owning the LLC Interest at
issue.
10.2 TRANSFER
OF LLC INTERESTS.
An
LLC
Interest which is transferred in accordance with the terms of this Agreement
shall be transferable on the books of the LLC by the record holder thereof
in
person or by such record holder's duly authorized attorney, but, except as
provided in Section 12.3
hereof
with respect to lost, stolen or destroyed certificates, in the event an LLC
Certificate has been issued, no transfer of an LLC Interest shall be entered
until the previously issued LLC Certificate representing such LLC Interest
shall
have been surrendered to the LLC and canceled and a replacement LLC Certificate
issued to the assignee of such LLC Interest in accordance with such procedures
as the Manager may establish. In the event of a Transfer of less than all
of a
Member’s LLC Interests and if LLC Certificates have been issued, the Manager
shall issue to the transferring Member a new LLC Certificate representing
the
LLC Interests not being transferred. Except as otherwise required by law,
the
LLC shall be entitled to treat the record holder of an LLC Certificate on
its
books as the owner thereof for all purposes regardless of any notice or
knowledge to the contrary.
The
LLC
shall issue a new LLC Certificate in place of any LLC Certificate previously
issued if the record holder of the LLC Certificate:
(i) makes
proof by affidavit, in form and substance satisfactory to the Manager, that
a
previously issued LLC Certificate has been lost, destroyed or
stolen;
(ii) requests
the issuance of a new LLC Certificate before the LLC has notice that the
LLC
Certificate has been acquired by a purchaser for value in good faith and
without
notice of an adverse claim;
(iii) indemnifies
the LLC against any claim that may be made on account of the alleged loss,
destruction or theft of the LLC Certificate; and
(iv) satisfies
any other reasonable requirements imposed by the Manager.
If
a
Member fails to notify the LLC within a reasonable time after it has notice
of
the loss, destruction or theft of an LLC Certificate, and a transfer of the
LLC
Interest represented by the LLC Certificate is registered before receiving
such
notification, the LLC shall have no liability with respect to any claim against
the LLC for such transfer or for a new LLC Certificate.
ARTICLE XI.
AMENDMENTS
11.1 AMENDMENT,
ETC. OF OPERATING AGREEMENT.
This
Agreement may be adopted, altered, amended or repealed and a new operating
agreement may be adopted by a Majority in Interest of the Members; provided,
however, that no provision of this Agreement which requires the vote of a
greater percentage than a Majority in Interest of the Members may be amended
without the affirmative vote of such greater percentage.
11.2 AMENDMENT
OF ARTICLES OF ORGANIZATION.
Notwithstanding
any provision to the contrary in the Articles of Organization or this Agreement,
in no event shall the Articles of Organization be amended without the
affirmative vote of a Majority in Interest of the Members.
ARTICLE
XII.
REPRESENTATIONS
AND ACKNOWLEDGMENTS
12.1 INVESTMENT
REPRESENTATIONS.
Each
Member hereby represents and warrants to the Manager, the other Members and
the
LLC that such Member is acquiring his, her or its Interest hereunder for
such
Member’s own account, for investment only, not for the benefit of any other
Person and not for resale to any other Person or for future distribution,
and
that he, she or it relied solely on the advice of such Member’s personal tax,
investment or other advisors in making such Member’s investment
decision.
12.2 NO
REPRESENTATIONS BY LLC.
Each
Member acknowledges that the Manager have not made and hereby make no
representations or warranties other than those set forth in this Agreement,
and
that neither any Manager, agent or employee of the LLC or of any Manager
or any
other Person has at any time expressly or implicitly represented, guaranteed
or
warranted to such Member that he, she or it may freely transfer such Person’s
Interests, that a percentage of profit and/or amount or type of consideration
will be realized as a result of an investment in the Interest, that past
performance or experience on the part of the Manager or their Affiliates
or any
other Person in any way indicates the predictable results of the ownership
of
any Interests or of the overall LLC business, that any cash distributions
from
LLC operations or otherwise will be made to the Members by any specific date
or
will be made at all, or that any specific tax benefits will accrue as a result
of an investment in the LLC.
ARTICLE XIII.
MISCELLANEOUS
PROVISIONS
13.1 COUNTERPARTS.
This
Agreement may be executed in several counterparts, and all counterparts so
executed shall constitute one Agreement, binding on all of the parties hereto,
notwithstanding that all of the parties are not signatory to the original
or the
same counterpart.
13.2 SURVIVAL
OF RIGHTS.
This
Agreement shall be binding upon, and, as to permitted or accepted successors,
transferees and assigns, inure to the benefit of the Members and the LLC
and
their respective heirs, legatees, legal representatives, successors, transferees
and assigns,
in all cases whether by the laws of descent and distribution, merger, reverse
merger, consolidation, sale of assets, other sale, operation of law or
otherwise.
13.3 SEVERABILITY.
In
the
event any Section, or any sentence within any Section, is declared by a court
of
competent jurisdiction to be void or unenforceable, such sentence or Section
shall be deemed severed from the remainder of this Agreement and the balance
of
this Agreement shall remain in full force and effect.
Except
as
otherwise provided in Articles VI and VII with respect to notices given for
purposes of meetings of Manager and meetings of Members, any notice or other
communication required or permitted hereunder shall be in writing and shall
be
deemed to have been given if personally delivered, transmitted by facsimile
(with mechanical confirmation of transmission), or deposited in the United
States mail, registered or certified, postage prepaid, addressed to the parties'
addresses set forth on Exhibit A hereto, unless the same shall have been
changed
by notice in accordance herewith. Notices given in the manner provided for
in
this Section 15.4
shall be
deemed effective on the third day following deposit in the mail or on the
day of
transmission or delivery if given by facsimile or by hand.
13.5 GOVERNING
LAW.
This
Agreement shall be governed and construed in accordance with the internal
laws
of the State of Nevada.
13.6 FURTHER
ACTIONS.
Each
of
the Members agrees to execute, acknowledge and deliver such additional
documents, and take such further actions, as may reasonably be required from
time to time to carry out each of the provisions and the intent of this
Agreement, and every agreement or document relating hereto or entered into
in
connection herewith.
13.7 ARBITRATION
OF DISPUTES.
Any
controversy or claim arising out of or relating to this Agreement or the
breach
thereof shall be submitted to binding, non-appealable arbitration administered
by the American Arbitration Association in accordance with its Commercial
Arbitration Rules. Such controversy or claim shall be heard by a single
arbitrator (the “Arbitrator”). The award shall be made within six months of
selection of the Arbitrator. Judgment on the award may be entered in any
court
having jurisdiction and the parties hereby consent to the jurisdiction of
the
Superior Court for Los Angeles County, California, and of the United States
District Court for the Central District of California, for injunctive relief,
specific performance or other relief in aid of any proceedings hereunder,
but
not otherwise. The arbitration shall be held in Los Angeles, California or
as
otherwise mutually agreed by the parties hereto. The Arbitrator shall determine
issues of arbitrability but may not limit, expand or otherwise modify the
terms
of this Agreement nor have any authority to award punitive or other damages
in
excess of compensatory damages and each party irrevocably waives any claim
thereto. The Arbitrator shall
permit, to the extent reasonably necessary, one document production request,
and
one follow-up request, and one deposition of the principals involved in a
controversy or claim submitted to arbitration hereunder. The parties, their
representatives, other participants and the Arbitrator shall hold the existence,
content and result of the arbitration in confidence except as disclosure
is
required by law or as is reasonably necessary to defend claims or procedural
rights of the party making the disclosure.
13.8 THIRD
PARTY BENEFICIARIES.
There
are
no third party beneficiaries of this Agreement except (i) Affiliates and
Principals of the Members and (ii) any other Persons as may be entitled to
the
benefits of Article XI hereof.
13.9 PARTITION.
The
Members agree that the Property that the LLC may own or have an interest
in is
not suitable for partition. Each of the Members hereby irrevocably waives
any
and all rights that it may have to maintain any action for partition of any
Property the LLC may at any time have an interest in.
13.10 ENTIRE
AGREEMENT.
This
Agreement and the Articles of Organization constitute the entire agreement
of
the Members with respect to, and supersedes all prior written and oral
agreements, understandings and negotiations with respect to, the subject
matter
hereof.
13.11 WAIVER.
No
failure by any party to insist upon the strict performance of any covenant,
duty, agreement or condition of this Agreement or to exercise any right or
remedy consequent upon a breach thereof shall constitute a waiver of any
such
breach or any other covenant, duty, agreement or condition.
13.12 ATTORNEYS'
FEES.
In
the
event of any litigation, arbitration or other dispute arising as a result
of or
by reason of this Agreement, the prevailing party in any such litigation,
arbitration or other dispute shall be entitled to, in addition to any other
damages assessed, its reasonable attorneys' fees, and all other costs and
expenses incurred in connection with settling or resolving such dispute.
The
attorneys' fees which the prevailing party is entitled to recover shall include
fees for prosecuting or defending any appeal and shall be awarded for any
supplemental proceedings until the final judgment is satisfied in full. In
addition to the foregoing award of attorneys' fees to the prevailing party,
the
prevailing party in any lawsuit or arbitration procedure on this Agreement
shall
be entitled to its reasonable attorneys' fees incurred in any
post
judgment proceedings to collect or enforce the judgment. This attorneys'
fees
provision is separate and several and shall survive the merger of this Agreement
into any judgment.
13.13 CONFIDENTIALITY.
Each
Member for itself and on behalf of its Affiliates agrees to keep the provisions
of this Agreement and all schedules, exhibits and appendices hereto in
confidence, except pursuant to the requirements of applicable law, and shall
not
publish or otherwise disclose the same at any time without the prior written
consent of all the Members.
IN
WITNESS WHEREOF, the parties hereto have hereunto executed this Agreement
as of
the date first written above.
Euroweb
RE Corp.
By:
Xxxxx
Xxxxx, President
D’Xxxx
Xxxxx
EXHIBIT
A
INITIAL
MEMBER NAMES AND ADDRESSES; INITIAL
CAPITAL
CONTRIBUTIONS AND PERCENTAGE INTERESTS
(As
of October 3, 2006)
|
Member's
name
|
Member's
address
|
Member's
capital
contribution
|
Member's
percentage
interest
|
|
EUROWEB
RE CORP.
|
$667.00
|
66.67%
|
|
|
D’XXXX
XXXXX
|
$333.00
|
33.33%
|
|
|
TOTALS:
|
$1,000.00
|
100%
|
EXHIBIT
B
(FACE
OF CERTIFICATE)
THE
LLC
INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF
ANY STATE. SUCH LLC INTERESTS MAY NOT BE SOLD OR TRANSFERRED UNLESS SUBSEQUENTLY
REGISTERED OR QUALIFIED OR UNLESS AN EXEMPTION FROM REGISTRATION OR
QUALIFICATION IS AVAILABLE. THE AGREEMENT (AS DEFINED BELOW) PROVIDES FOR
FURTHER RESTRICTIONS ON TRANSFER OF THE LLC INTERESTS REPRESENTED
HEREBY.
CERTIFICATE
FOR LLC INTEREST
IN
XXXXXXX
HILLS LLC
Certificate
No. ______________ ________
Percentage Interest
The
undersigned, as
a
Manager of XXXXXXX HILLS LLC, a NEVADA limited liability company (the “LLC”),
hereby certifies that ___________________________ is the holder of an LLC
Interest representing a _______ percent (__%) Percentage Interest, as those
terms are defined in the Operating Agreement of the LLC, dated as of
________________, as amended and restated from time to time (the “Agreement”)
(copies of which are on file at the principal office of the LLC).
This
Certificate is not negotiable or transferable except by operation of law,
or as
otherwise provided in the Agreement, and any such transfer will be valid
only
upon delivery of this Certificate, together with a duly executed assignment
in
the form set forth on the reverse hereof (or otherwise acceptable to the
Manager
and sufficient to convey an interest in an LLC pursuant to the (NEVADA)
Xxxxxxx-Xxxxxx Limited Liability Company Act, as it may be amended and in
effect
from time to time, or any successor statute thereto) to the Manager of the
LLC.
Dated:
. XXXXXXX
HILLS LLC
By:
Its:
Manager
(REVERSE
OF CERTIFICATE)
ASSIGNMENT
OF LLC INTEREST
IN
XXXXXXX
HILLS LLC
FOR
VALUE
RECEIVED, the undersigned (“Assignor”) hereby assigns, conveys, sells and
transfers unto
(“Assignee”)
(Please
insert Social Security (Please
print or typewrite name and
or
other
identifying number of Assignee) address
of Assignee)
all
rights and interest of Assignor in ______ percent of the LLC Interest evidenced
hereby and directs that all future distributions and allocations with respect
to
such specified assigned LLC Interest be paid or allocated by the LLC to such
Assignee. The Assignor hereby irrevocably constitutes and appoints each Manager
as Assignor's attorney-in-fact with full power of substitution in the premises
to transfer the same on the books of the LLC.
Dated:
Signature
of Assignor
Note: The
signature to any assignment must correspond with the name as written upon
the
face of this Certificate, in every particular, without alteration or enlargement
or any change whatever. If the assignment is executed by an attorney, executor,
administrator, trustee or guardian, the person executing the assignment must
give such person's full title in such capacity, and proper evidence of authority
to act in such capacity, if not on file with the LLC or its transfer agent,
must
be forwarded with this Certificate.
The
undersigned, a Manager of the LLC, hereby consents to this Assignment pursuant
to Section 8.1
of the
Agreement.
Dated: ,
LLC
By:
Its: Manager
THE
LLC
INTERESTS EVIDENCED HEREBY ARE SUBJECT TO ALL TERMS AND CONDITIONS OF THE
AGREEMENT AND UNLESS AND UNTIL ADMITTED TO THE LLC AS A MEMBER, NO ASSIGNEE
SHALL BE ENTITLED TO ANY OF THE RIGHTS, POWERS OR PRIVILEGES OF THE ASSIGNOR,
EXCEPT THAT ASSIGNEE SHALL BE ENTITLED TO THE DISTRIBUTIONS PAID AND ALLOCATIONS
MADE WITH RESPECT TO SUCH INTERESTS AS DIRECTED BY THE ASSIGNOR
ABOVE.
