OPERATING AGREEMENT FOR HANSEN QUALITY, LLC, a California limited liability company
TABLE OF CONTENTS
FOR OPERATING AGREEMENT OF
XXXXXX QUALITY, LLC
ARTICLE 1 DEFINITIONS | 1 | |||||
1.1
|
“Act” | 1 | ||||
1.2
|
“Adjusted Capital Account Deficit” | 1 | ||||
1.3
|
“Affiliate” | 1 | ||||
1.4
|
“Agreement” | 2 | ||||
1.5
|
“Articles” | 2 | ||||
1.6
|
“Arms-Length Transaction” | 2 | ||||
1.7
|
“Bankruptcy” | 2 | ||||
1.8
|
“Capital Account” | 2 | ||||
1.9
|
“Capital Contributions” | 3 | ||||
1.10
|
“Code” | 3 | ||||
1.11
|
“Company” | 3 | ||||
1.12
|
“Company Minimum Gain” | 3 | ||||
1.13
|
“Corporations Code” | 3 | ||||
1.14
|
“Dissolution Event” | 3 | ||||
1.15
|
“Distributable Cash” | 3 | ||||
1.16
|
“Economic Interest” | 3 | ||||
1.17
|
“Economic Interest Owner” | 3 | ||||
1.18
|
“Effective Date” | 4 | ||||
1.19
|
“FNIS” | 4 | ||||
1.20
|
“Fiscal Year” | 4 | ||||
1.21
|
“Former Member” | 4 | ||||
1.22
|
“Former Member’s Interest” | 4 | ||||
1.23
|
“Gross Asset Value” | 4 | ||||
1.24
|
“Xxxxxx Employment Agreement” | 5 | ||||
1.25
|
“Xxxxxx Quality” | 5 | ||||
1.26
|
“Xxxxxx Trust” | 5 | ||||
1.27
|
“Interim Period” | 5 | ||||
1.28
|
“Majority Interest” or “Majority in Interest” | 5 | ||||
1.29
|
“Member” | 5 | ||||
1.30
|
“Member Nonrecourse Debt” | 5 | ||||
1.31
|
“Member Nonrecourse Deductions” | 5 | ||||
1.32
|
“Membership Interest” | 5 | ||||
1.33
|
“Net Profits” and “Net Losses” | 5 | ||||
1.34
|
“Nonrecourse Deductions” | 6 | ||||
1.35
|
“Nonrecourse Liability” | 6 | ||||
1.36
|
“Percentage Interest” | 6 | ||||
1.37
|
“Person” | 6 | ||||
1.38
|
“Preferred Return” | 6 | ||||
1.39
|
“Regulations” | 6 | ||||
1.40
|
“Remaining Members” | 7 | ||||
1.41
|
“Reserve” | 7 | ||||
1.42
|
“Transfer” | 7 | ||||
ARTICLE 2 COMPANY PURPOSES | 7 |
i
2.1
|
General | 7 | ||||
ARTICLE 3 ORGANIZATIONAL MATTERS | 7 | |||||
3.1
|
Formation | 7 | ||||
3.2
|
Name | 7 | ||||
3.3
|
Statutory Filings | 8 | ||||
3.4
|
Principal Office | 8 | ||||
3.5
|
Term | 8 | ||||
3.6
|
Office and Agent | 8 | ||||
3.7
|
Addresses of the Members | 8 | ||||
ARTICLE 4 CAPITAL CONTRIBUTIONS | 8 | |||||
4.1
|
Initial Capital Contributions | 8 | ||||
4.2
|
Additional Capital Contributions | 8 | ||||
4.3
|
Voluntary Capital Contributions | 9 | ||||
4.4
|
Capital Accounts | 9 | ||||
4.5
|
No Interest | 9 | ||||
4.6
|
Withdrawals of Capital | 9 | ||||
4.7
|
Loans | 9 | ||||
ARTICLE 5 MEMBERS | 9 | |||||
5.1
|
Limited Liability | 9 | ||||
5.2
|
Admission of Additional Members | 9 | ||||
5.3
|
Withdrawals or Resignations | 9 | ||||
5.4
|
Termination of Membership Interest | 9 | ||||
5.5
|
Voting Rights | 9 | ||||
5.6
|
Meetings of Members | 10 | ||||
5.6.1 Date, Time and Place of Meetings of Members; Secretary | 10 | |||||
5.6.2 Power to Call Meetings | 10 | |||||
5.6.3 Notice of Meeting | 10 | |||||
5.6.4 Waiver of Notice or Consent | 10 | |||||
5.6.5 Action by Written Consent without a Meeting | 10 | |||||
5.6.6 Meetings Other than In-Person | 11 | |||||
5.6.7 Record Date | 11 | |||||
5.6.8 Other Procedures; Proxies | 11 | |||||
5.7
|
Certificate of Membership Interest | 11 | ||||
5.7.1 Certificate | 11 | |||||
5.7.2 Cancellation of Certificate | 12 | |||||
5.7.3 Replacement of Lost, Stolen, or Destroyed Certificate | 12 | |||||
ARTICLE 6 MANAGEMENT AND CONTROL OF THE COMPANY | 12 | |||||
6.1
|
Management of the Company | 12 | ||||
6.2
|
Officers | 12 | ||||
6.2.1 Appointment of Officers | 12 | |||||
6.2.2 Removal | 13 | |||||
6.2.3 Resignation | 13 | |||||
6.2.4 Vacancy | 13 | |||||
6.2.5 Salaries of Officers | 13 | |||||
6.2 6 Duties and Powers of the Chairperson | 14 | |||||
6.2.7 Duties and Powers of the Chief Executive Officer | 14 | |||||
6.2.8 Duties and Powers of the President | 14 |
ii
6.2.9 Duties and Powers of Chief Operating Officer | 15 | |||||
6.2.10 Duties and Powers of Chief Technical Officer | 15 | |||||
6.2.11 Duties and Powers of Vice-President | 15 | |||||
6.2.12 Duties and Powers of Secretary | 15 | |||||
6.2.13 Duties and Powers of Chief Financial Officer | 16 | |||||
6.2.14 Acts of Officers as Conclusive Evidence of Authority | 17 | |||||
6.2.15 Limited Liability | 17 | |||||
6.3
|
Manager(s) | 17 | ||||
6.4
|
Handling Funds | 17 | ||||
6.5
|
General Fiduciary Duty | 17 | ||||
6.6
|
Devotion of Time | 17 | ||||
6.7
|
Performance of Duties; Liability of Members | 17 | ||||
6.8
|
Limited Liability | 18 | ||||
6.9
|
Competing Activities | 18 | ||||
6.10
|
Transactions Between the Company and a Member | 19 | ||||
ARTICLE 7 ALLOCATIONS OF NET PROFIT AND NET LOSSES | 19 | |||||
7.1
|
Allocations of Net Profit and Net Loss | 19 | ||||
7.1.1 Net Loss | 19 | |||||
7.1.2 Net Income | 20 | |||||
7.2
|
Special Allocations | 20 | ||||
7.2.1 Minimum Gain Chargeback | 20 | |||||
7.2.2 Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt | 20 | |||||
7.2.3 Nonrecourse Deductions | 21 | |||||
7.2.4 Member Nonrecourse Deductions | 21 | |||||
7.2.5 Qualified Income Offset | 21 | |||||
7.2.6 Recapture | 21 | |||||
7.2.7 Code Section 754 Adjustment | 21 | |||||
7.2.8 Tax Allocations | 22 | |||||
7.3
|
Code § 704(c) Allocations | 22 | ||||
7.4
|
Allocation of Net Profits and Losses and Distributions in Respect of a Transferred Interest | 22 | ||||
7.5
|
Curative Allocations | 23 | ||||
7.6
|
Obligations of Members to Report Allocations | 23 | ||||
ARTICLE 8 DISTRIBUTIONS | 23 | |||||
8.1
|
Minimum Distribution | 23 | ||||
8.2
|
Distribution of Cash by the Company | 24 | ||||
8.3
|
Form of Distribution | 24 | ||||
8.4
|
Other Distribution Limitations | 24 | ||||
8.5
|
Return of Distributions | 24 | ||||
ARTICLE 9 TRANSFERS OF INTERESTS | 25 | |||||
9.1
|
“Xxxxxx’x Family” | 25 | ||||
ARTICLE 10 SPECIAL POWER OF ATTORNEY | 25 | |||||
10.1
|
Attorney-in-Fact | 25 | ||||
10.2
|
Special Provisions | 26 | ||||
10.3
|
Signatures | 26 | ||||
ARTICLE 11 CONSEQUENCES OF DISSOLUTION EVENT | 26 |
iii
11.1
|
Dissolution Event | 26 | ||||
11.2
|
Purchase Price | 26 | ||||
11.3
|
Notice of Intent to Purchase | 26 | ||||
11.4
|
Election to Purchase Less Than All of the Former Member’s Interest | 26 | ||||
11.5
|
Payment of Purchase Price | 27 | ||||
11.6
|
Closing of Purchase of Former Member’s Interest | 27 | ||||
11.7
|
Purchase Terms Varied by Agreement | 27 | ||||
ARTICLE 12 ACCOUNTING, RECORDS, REPORTING | 27 | |||||
12.1
|
Books and Records | 27 | ||||
12.2
|
Delivery to Members and Inspection | 28 | ||||
12.3
|
Annual Statements | 29 | ||||
12.4
|
Filings | 29 | ||||
12.5
|
Tax Matters for the Company Handled by Tax Matters Partner | 29 | ||||
12.6
|
Code § 754 Election | 29 | ||||
ARTICLE 13 DISSOLUTION AND WINDING UP | 30 | |||||
13.1
|
Dissolution | 30 | ||||
13.2
|
Certificate of Dissolution | 30 | ||||
13.3
|
Winding Up | 30 | ||||
13.4
|
Distributions in Kind | 30 | ||||
13.5
|
Order of Payments Upon Dissolution | 31 | ||||
13.6
|
Payment of Liabilities | 31 | ||||
13.7
|
Compliance with Regulations | 31 | ||||
13.8
|
Limitations on Payments Made in Dissolution | 31 | ||||
13.9
|
Certificate of Cancellation | 32 | ||||
13.10
|
No Action for Dissolution | 32 | ||||
ARTICLE 14 INDEMNIFICATION AND INSURANCE | 32 | |||||
14.1
|
Definitions | 32 | ||||
14.1.1 “Expenses” | 32 | |||||
14 1.2 “Proceeding” | 32 | |||||
14.2
|
Indemnification of Members and Officers | 32 | ||||
14.3
|
Successful Defense | 33 | ||||
14.4
|
Determination of Conduct | 33 | ||||
14.5
|
Payment of Expenses in Advance | 33 | ||||
14.6
|
Indemnification of Other Agents | 34 | ||||
14.7
|
Indemnity Not Exclusive | 34 | ||||
14.8
|
Insurance | 34 | ||||
14.9
|
Heirs, Executors and Administrators | 35 | ||||
14.10
|
Right to Indemnification Upon Application | 35 | ||||
14.11
|
Limitations on Indemnification | 35 | ||||
14.12
|
Partial Indemnification | 35 | ||||
ARTICLE 15 INVESTMENT REPRESENTATIONS | 36 | |||||
15.1
|
Preexisting Relationship or Experience | 36 | ||||
15.2
|
No Advertising | 36 | ||||
15.3
|
Investment Intent | 36 | ||||
15.4
|
Accredited Investor | 36 | ||||
15.5
|
Residency | 36 | ||||
15.6
|
Economic Risk | 36 |
iv
15.7
|
No Registration of Membership Interest | 36 | ||||
15.8
|
Membership Interest in Restricted Security | 37 | ||||
15.9
|
No Obligation to Register | 37 | ||||
15.10
|
No Disposition in Violation of Law | 37 | ||||
15.11
|
Legends | 37 | ||||
15.12
|
Investment Risk | 38 | ||||
15.13
|
Investment Experience | 38 | ||||
15.14
|
Restrictions on Transferability | 38 | ||||
15.15
|
Information Reviewed | 38 | ||||
15.16
|
No Representations By Company | 38 | ||||
15.17
|
Consultation with Attorney | 38 | ||||
15.18
|
Tax Consequences | 38 | ||||
15.19
|
No Assurance of Tax Benefits | 39 | ||||
15.20
|
Indemnity | 39 | ||||
ARTICLE 16 MEDIATION OF DISPUTES | 39 | |||||
16.1
|
Agreement to Use Procedure | 39 | ||||
16.2
|
Initiation of Procedure | 39 | ||||
16.3
|
Direct Negotiations | 40 | ||||
16 4
|
Mediator Selection | 40 | ||||
16.5
|
Mediation Time and Place | 40 | ||||
16.6
|
Information Exchange | 40 | ||||
16.7
|
Summary of Views | 40 | ||||
16.8
|
Parties to be Represented | 40 | ||||
16.9
|
Conduct of Mediation | 41 | ||||
16.9.1 Mediation Format | 41 | |||||
16.9.2 Commitment to Participate in Mediation in Good Faith | 41 | |||||
16.10
|
Termination of Procedure | 41 | ||||
16.10.1 Procedure to Terminate Mediation | 41 | |||||
16.10.2 If Dispute Is Not Resolved | 41 | |||||
16.11
|
Additional Proceedings | 41 | ||||
16.12
|
Mediation Fees; Disqualification | 42 | ||||
16.13
|
Confidentiality | 42 | ||||
ARTICLE 17 MISCELLANEOUS | 42 | |||||
17.1
|
Complete Agreement | 42 | ||||
17.2
|
Binding Effect | 42 | ||||
17.3
|
Parties in Interest | 42 | ||||
17.4
|
Pronouns; Statutory References | 42 | ||||
17.5
|
Headings | 43 | ||||
17.6
|
Interpretation | 43 | ||||
17.7
|
References to this Agreement | 43 | ||||
17.8
|
Jurisdiction | 43 | ||||
17.9
|
Exhibits | 43 | ||||
17.10
|
Severability | 43 | ||||
17.11
|
Additional Documents and Acts | 43 | ||||
17.12
|
Notices | 43 | ||||
17.13
|
Amendments | 43 | ||||
17.14
|
Reliance on Authority of Person Signing Agreement | 44 | ||||
17.15
|
Waiver of Action for Partition | 44 | ||||
17 16
|
Multiple Counterparts | 44 | ||||
17.17
|
Attorney Fees | 44 | ||||
17.18
|
Time is of the Essence | 44 |
v
17.19
|
Governing Law | 44 | ||||
17.20
|
Remedies Cumulative | 44 |
vi
This Operating Agreement, dated for reference purposes only May 22, 2002, is made by Xxxxxx
Quality Loan Services, a California corporation (“Xxxxxx Quality”) and Xxxxxxx X. Xxxxxx and
Xxxxxxxx Xxxxxx, as Trustees of the Xxxxxx Family Trust dated April 4, 1997, Trust 3 (the “Xxxxxx
Trust”) with reference to the following facts:
NOW, THEREFORE, the Members, intending to be legally bound, hereby agree to the following:
1. Definitions. Words or phrases having their initial letter capitalized in this
Agreement shall (unless otherwise expressly provided herein or unless the context otherwise
requires) have the respective meanings set forth below. The following definitions are for the
convenience of the reader of this document, and they are not intended to be an exhaustive list of
the definitions used herein.
1.1 “Act” means the Xxxxxxx-Xxxxxx Limited Liability Company Act, codified in the
California Corporations Code, § 17100 et seq., as the same may be amended from time to time.
1.2 “Adjusted Capital Account Deficit” shall mean, 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, after giving effect to the following adjustments:
1.2.1 Credit to such Capital Account any amounts which such Member
is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Section 1.704-2(g)(l) and 1.704-2(i)(5); and
1.2.2 Debit to such Capital Account the items described in Sections
1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(ii)(d)(5) and 1.7041(b)(2)(iii)(d)(6) of the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the
provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted
consistently therewith.
1.3 “Affiliate” of a specified Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under common control
with, such specified Person or a member of such specified Person’s immediate family. “Control”
(including the terms “controlled by” and “under common control with”) means the possession,
directly or indirectly, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise. From and after the Closing, the Company shall be an
Affiliate of Fidelity.
1.4 “Agreement” means this Operating Agreement, as originally executed and as
amended from time to time. Words such as “herein,” “hereinafter,” “hereof,” “hereto,” and
“hereunder” refer to this Agreement as a whole, unless the context otherwise requires.
1.5 “Articles” means the Articles of Organization for the Company filed with the
California Secretary of State’s office promptly after the execution of this Agreement, as they
may be amended from time to time.
1.6 “Arms-Length Transaction”: means money, services or products provided (a)
(i) to the Company by an Affiliate of it or by an Affiliate of a Member, or (ii) by the Company
to
an Affiliate of it or an Affiliate of a Member, (b) pursuant to an agreement that (i) is, on
an
overall basis, fair and reasonable to the Company, and (ii) contains terms that are at least
as
favorable to the Company as those that would be available from Persons capable of similarly
providing them in similar transactions.
1.7 “Bankruptcy” means: (a) the filing of an application by a Member for, or his or
her consent to, the appointment of a trustee, receiver, or custodian of his or her other
assets;
(b) the entry of an order for relief with respect to a Member in proceedings under the United
States Bankruptcy Code, as amended or superseded from time to time; (c) the making by a
Member of a general assignment for the benefit of creditors; (d) the entry of an order,
judgment,
or decree by any court of competent jurisdiction appointing a trustee, receiver, or custodian
of
the assets of a Member unless the proceedings and the person appointed are dismissed within
ninety (90) days; or (e) the failure by a Member generally to pay his or her debts as the
debts
become due within the meaning of § 303(h)(l) of the United States Bankruptcy Code, as
determined by the Bankruptcy Court, or the admission in writing of his or her inability to pay
his
or her debts as they become due.
1.8 “Capital Account” means, with respect to any Member, the capital account of that
Member determined from the inception of the Company strictly in accordance with the rules set
forth in Section 1.704-l(b)(2)(iv) of the Treasury Regulations. In accordance with that
Section of
the Treasury Regulations, a Member’s Capital Account shall be equal to the amount of money
contributed by the Member and the initial Gross Asset Value of any property contributed by the
Member, increased by (a) allocations of Net Income to the Member, and (b) the amount of any
Company liabilities assumed by such Member or which are secured by any property distributed
to such Member, and decreased by (v) the amount of money distributed to the Member, (w) the
Gross Asset Value of any property distributed to the Member by the Company, (x) the Member’s
share of expenditures of the Company described in Section 705(a)(2)(B) of the Code (including,
for this purpose, losses which are nondeductible under Section 267(a)(l) or Section 707(b) of
the
Code), (y) the Net Losses allocated to the Member, and (z) the amount of any liabilities of
such
Member assumed by the Company or which are secured by any property contributed by such
Member to the Company. In addition, the Capital Accounts of Members may be adjusted by a
Majority in Interest of the Members to reflect a revaluation of Company assets pursuant to
Section 2.16(b) or 2.16(c). The Capital Account of a Member shall be further adjusted as
required by Section 1.704-l(b)(2)(iv) of the Treasury Regulations. To the extent that
anything
contained herein shall be inconsistent with Section 1.704-l(b)(2)(iv) of the
Treasury
Operating Agreement for Xxxxxx Quality, LLC
Page 2
Regulations, the Treasury Regulations shall control. The Capital Account of an Assignee shall be
the same as the Capital Account of the Member from whom the Assignee acquired its Interest, as
further adjusted pursuant to this Section 1.8.
1.9 “Capital Contributions” means the total value of cash and fair market value of
property contributed to the Company by Members with respect to a Membership Interest (net of
liabilities secured by such contributed property that the Company is considered to assume or take
“subject to” under Code § 752). The principal amount of a promissory note which is not readily
traded on an established securities market and which is contributed to the Company by the maker of
the note shall not be included in the Capital Account until the Company makes a taxable disposition
of the note or until (and to the extent) principal payments are made on the note, all in accordance
with Regulations § 1.704-l(b)(2)(iv)(d)(2).
1.10 “Code” means the internal Revenue Code of 1986, as amended from time to time,
the provisions of succeeding law, and to the extent applicable, the Regulations.
1.11 “Company” means Xxxxxx Quality, LLC, the limited liability company formed as
a result of the filing of the Articles.
1.12 “Company Minimum Gain” shall have the meaning ascribed to the term
“Partnership Minimum Gain” in the Regulations § 1.704-2(d).
1.13 “Corporations Code” means the California Corporations Code, as amended from
time to time, and the provisions of succeeding law.
1.14 “Dissolution Event” means, with respect to any Member, the Bankruptcy or
dissolution of any Member; provided, however, that no “dissolution” shall be deemed to have
occurred if the dissolution of the Member occurs in connection with a merger, reorganization,
or
other transaction in which the obligations of the dissolving Member are assumed by another
Person.
1.15 “Distributable Cash” means the amount of cash from any source that a Majority
in Interest of the Members deems available for distribution to the Members, after considering
the
Reserve and the purposes of this Company.
1.16 “Economic Interest” means a Member’s or Economic Interest Owner’s share of
the Company’s Net Income, Net Losses, and distributions of the Company’s assets pursuant to
this Agreement and the Act, but shall not include any other rights of a Member, including,
without limitation, the right to vote or participate in the management, or except as required
by §
17106 of the Corporations Code and where that requirement cannot be waived by the Operating
Agreement, any right to information concerning the business and affairs of Company.
1.17 “Economic Interest Owner” means the owner of an Economic Interest who is not
a Member.
Operating Agreement for Xxxxxx Quality, LLC
Page 3
1.18 “Effective Date” means the date that the Articles are originally filed with the
California Secretary of State.
1.19 “FNIS” means Fidelity National Information Solutions, a Delaware corporation.
1.20 “Fiscal Year” means the Company’s fiscal year, which shall be the calendar year.
1.21 “Former Member” shall have the meaning ascribed to it in Section 11.1.
1.22 “Former Member’s Interest” shall have the meaning ascribed to it in Section 11.1.
1.23 “Gross Asset Value” shall mean, with respect to any asset, the asset’s adjusted basis for
federal income tax purposes, except as follows:
1.23.1 The initial Gross Asset Value of any asset contributed by a Member to the Company shall
be the gross fair market value of such asset, as determined by consent of at least three-fourth
(3/4) of the Percentage Interests of the Members or, absent such consent, by outside appraisal
(with Company paying the cost of that appraisal);
1.23.2 The Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values, determined by consent of at least three-fourth (3/4) of the
Percentage Interests of the Members or, absent such consent, by outside appraisal (with Company
paying the cost of that appraisal), with that adjustment being made at the request of any Member as
of the following times: (a) the acquisition of an additional interest in the Company by any new or
existing Member in exchange for more than a de minimis Capital Contribution; (b) the distribution
by the Company to a Member of more than a de minimis amount of property as consideration for an
interest in the Company; and (c) liquidation of the Company within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(ii)(g);
1.23.3 The Gross Asset Value of any Company asset distributed to any Member shall be adjusted
to equal the gross fair market value of such assets on the date of distribution as determined by
consent of at least three-fourth (3/4) of the Percentage Interests of the Members or, absent such
consent, by outside appraisal (with Company paying the cost of that appraisal); and
1.23.4 The Gross Asset Value 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 Regulations Section 1.704-1(b)(2)(iv)(m); provided, however,
that Gross Asset Values shall not be adjusted pursuant to this Section 1.23 to the extent it is
determined by a Majority in Interest of the Members that an adjustment pursuant to Section 1.23.2
hereof is necessary or appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to this Section 1.23.4.
Operating Agreement for Xxxxxx Quality, LLC
Page 4
If the Gross Asset Value of an asset has been determined or adjusted pursuant to Sections
1.23.1, 1.23.2, or 1.23.4 hereof, such Gross Asset Value shall thereafter be adjusted by the
depreciation taken into account with respect to such asset for purposes of computing Net Income and
Net Losses.
1.24 “Xxxxxx Employment Agreement” means the written employment agreement between Xxxx Xxxxxx
and the Company that is dated as of the same date set forth in the introductory paragraph to this
Agreement.
1.25 “Xxxxxx Qualify” is defined in the introductory paragraph on page 1 of this
Agreement.
1.26 “Xxxxxx Trust” is defined in the introductory paragraph on page 1 of this Agreement.
1.27 “Interim Period” means the term beginning on the Effective Date and ending on the
December 31, 2005, or, if earlier, the date Xxxxxx Quality no longer owns any interest in the
Company.
1.28 “Majority Interest” or “Majority in Interest” or references in this Agreement to the
“consent of the Members” or variations thereof means the vote or written consent one or more
Percentage Interests of Members which taken together exceed fifty percent (50%) of the aggregate of
all Percentage Interests entitled to vote on the matter. All references in this Agreement to a
different specified Percentage Interest of the Members means Members whose combined Percentage
Interests represent such specified percentage of the Percentage Interests held by all Members
entitled to vote on the matter.
1.29 “Member” means each Person who (a) is an initial signatory to this Agreement, has been
admitted to the Company as a Member in accordance with the Articles or this Agreement or an
assignee who has become a Member in accordance with Section 5 or Section 9 and (b) has not
resigned, withdrawn, been expelled or, if other than an individual, dissolved.
1.30 “Member Nonrecourse Debt” shall have the meaning ascribed to the term “Partner
Nonrecourse Debt” in Regulations § 1.704-2(b)(4).
1.31 “Member Nonrecourse Deductions” means items of Company loss, deduction, or Code §
705(a)(2)(B) expenditures that are attributable to Member Nonrecourse Debt.
1.32 “Membership Interest” means a Member’s entire interest in the Company including the
Member’s Economic Interest, the right to vote on or participate in the management, and the right to
receive information concerning the business and affairs of the Company.
1.33 “Net Income” and “Net Losses” shall mean the net income and net losses, respectively, of
the Company computed in accordance with federal income tax principles (i) under the method of
accounting elected by the Company for federal income tax purposes,
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(ii) as applied without regard to any recharacterization of transactions or relationships
that might otherwise be required under such tax principles, and (iii) as otherwise adjusted
pursuant to the provisions in this Section 1.33. The net book income or net loss of the Company
shall also be computed, inter alia, by:
1.33.1 including as Net Income or Net Loss, as appropriate, any adjustment to the Gross Asset
Value of any Company asset pursuant to Section 1.23.2 or 1.23.3;
1.33.2 including as income or deductions, as appropriate, any tax-exempt income and related
expenses that are neither properly included in the computation of taxable income nor capitalized
for federal income tax purposes;
1.33.3 including as a deduction or loss any losses incurred by the Company in connection with
the sale or exchange of property notwithstanding that such losses may be disallowed to the Company
for federal income tax purposes under the related party rules of Code Sections 267(a)(l) or 707(b)
or otherwise;
1.33.4 calculating the gain or loss on disposition of Company assets and the depreciation,
amortization or other cost recovery deductions, if any, with respect to Company assets by reference
to their Gross Asset Value rather than their adjusted tax basis;
1.33.5 excluding any gain or income, or loss specially allocated under Sections 7.2, 7.3 or
7.5 hereof;
1.33.6 excluding any Nonrecourse Deductions.
1.34 “Nonrecourse Deductions” in any fiscal year means the amount of Company deductions that
are characterized as “nonrecourse deductions” under Regulations § 1.704-2(b)(l).
1.35 “Nonrecourse Liability” shall have the meaning set forth in Regulations § 1.752-1(a)(2).
1.36 “Percentage Interest” means the interest of a Member as set forth on Exhibit A
and as may thereafter be adjusted as specified in this Agreement.
1.37 “Person” means any natural person, corporation, partnership, limited liability company,
proprietorship, association, trust, joint venture or other legal entity, including any governmental
authority, body or agency.
1.38 “Preferred Return” means an amount equal to fifteen percent (15%) of the Net Income of
the Company from the Effective Date through December 31, 2004.
1.39 “Regulations” shall, unless the context clearly indicates otherwise, mean the regulations
currently in force as final or temporary that have been issued by the U.S. Department of Treasury
pursuant to its authority under the Code.
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1.40 “Remaining Members” shall have the meaning ascribed to it in Section 11.1.
1.41 “Reserve” shall be the amount established as a reserve account to be used for such
purposes as working capital to provide for the anticipated needs and expenses of the Company, debt
service to third parties or Members (including made by FNIS pursuant to Section 8.1 below), the
payment of all Company expenses, reinvestment, capital improvements, acquisitions, replacements,
additional investments and contingencies, all as determined as follows: (a) during the Interim
Period, by consent of at least three-fourth (3/4) of the Percentage Interests of the Members; and
(b) after the Interim Period, by consent of a Majority in Interest of the Members.
1.42 “Transfer” means, as a noun, any attempted direct or indirect, voluntary or involuntary,
transfer, sale, assignment, mortgage, encumbrance, pledge, hypothecation, alienation or other
disposition and, as a verb, directly or indirectly, voluntarily or involuntarily, to transfer,
sell, assign, mortgage, encumber, pledge, hypothecate, alienate or otherwise dispose of.
2. Company Purposes.
2.1 General. The purpose of the Company is to engage in any lawful activity for which
a limited liability company may be organized under the Act. Notwithstanding the prior sentence,
the Company shall not, without the consent of at least three-fourth (3/4) of the Percentage
Interests of the Members, engage in any business other than the business of providing the
following real estate-related services: appraisal review, risk assessment and analysis, valuation
and consulting, provided, however, that the Company may engage in activities that are directly
related to said real estate-related services if the CEO or President of the Company determine that
those activities are necessary, advisable or appropriate.
3. Organizational Matters.
3.1 Formation. Pursuant to the Act, the Members have formed a California limited
liability company under the laws of the State of California by filing the Articles with the
California Secretary of State. The rights and liabilities of the Members shall be determined
pursuant to the Act 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 Act, control.
3.2 Name. The name of the Company shall be “Xxxxxx Quality, LLC,” and Xxxxxx Quality
and Xxxx Xxxxxx consent to the use of that name by the Company or its successors in interest,
including, without limitation, at all times after the expiration of the Interim Period. The
business of the Company may be conducted under that name or, upon compliance with
applicable laws, any other name that the CEO of the Company may designate in writing, provided,
however, that during the Interim Period the name of the Company may only be changed if Xxxxxx
Quality consents in writing to the change.
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3.3 Statutory Filings. The Members, or any one of them on the Company’s behalf, shall
sign and cause to be filed and published an appropriate fictitious business name statement under
the California Fictitious Business Name Law in each county in California in which the Company does
business within forty (40) days after the Company begins doing business in that county under a
fictitious name, within forty (40) days after any subsequent change in its membership which
requires and amendment to the statement previously on file, and before the expiration of any
previously filed statement.
3.4 Principal Office. The principal business office of the Company shall initially be
located at 0000 Xxxxxx Xxx., Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx, 00000. The principal place of
business or the mailing address may be changed from time to time, and other offices or mailing
addresses may be established by actions taken in accordance with the provisions of this Agreement
that govern management of the Company’s business and affairs; provided, however, that the Company
must continuously maintain an office in the State of California as required by the Act and provided
further, that during the Interim Period, the principal business office of the Company may only be
changed from the office designated in the prior sentence if Xxxxxx Quality consents in writing to
the change.
3.5 Term. The term of this Agreement commenced on the filing of the Articles, and
shall continue perpetually unless terminated as expressly provided in this Agreement.
3.6 Office and Agent. The Company shall continuously maintain an office and registered
agent in the State of California as required by the Act. The principal office of the Company shall
be as determined by a Majority in Interest of the Members. The Company also may have such offices,
anywhere within and without the State of California, as a Majority in Interest of the Members from
time to time may determine. The registered agent shall initially be as stated in the Articles and
shall thereafter be as determined by a Majority in Interest of the Members.
3.7 Addresses of the Members. The addresses of the Members are set forth on
Exhibit A.
4. Capital Contributions.
4.1 Initial Capital Contributions. The Members shall contribute the assets with the
values, net of liabilities assigned to the Company, and tax basis set forth on Exhibit A as
their initial Capital Contributions. The Company hereby agrees to assume and timely pay all of the
liabilities of the Acquired Business other than the “Excluded Liabilities,” as that term is used in
the Membership Purchase Agreement by and between FNIS, Xxxxxx Quality and the Xxxxxx Trust.
4.2 Additional Capital Contributions. No Member shall be required to make any Capital
Contributions over and above those described in Section 4.1.
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4.3 Voluntary Capital Contributions. No Member may make any voluntary contribution of
capital to the Company without the written consent of at least three-fourth (3/4) of the Percentage
Interests of the Members.
4.4 Capital Accounts. The Company shall establish an individual Capital Account for
each Member. The Company shall make an election under § 754 of the Code upon the permitted Transfer
of any Member’s interest in the Company and the assets of the Company shall be booked to fair
market value at such time with appropriate adjustments to the Members’ respective Capital Accounts.
No Member shall have any liability to the Company, to any other Member, or to the creditors of the
Company on account of any deficit Capital Account balance.
4.5 No Interest. No Member shall receive any interest with respect to its Capital
Contributions or its Capital Account.
4.6 Withdrawals of Capital. No Member may withdraw capital from the Company without
the consent of at least three-fourth (3/4) of the Percentage Interests of the Members.
4.7 Loans. Loans by a Member to the Company are allowed so long as Section 6.10 below
is complied with.
5. Members.
5.1 Limited Liability. Except as required under the Act or as expressly set forth
in this Agreement, no Member shall be personally liable for any debt, obligation, or
liability of the Company, whether that liability or obligation arises in contract, tort, or
otherwise. No Member or officer, manager or employee of the Company shall have any personal
liability for the repayment of any Capital Contributions of any Member.
5.2 Admission of Additional Members. The Company may not issue additional Membership
Interests in the Company without the unanimous consent of the Members.
5.3 Withdrawals or Resignations. No Member has the right to withdraw, resign or retire
from the Company.
5.4 Termination of Membership Interest. Upon (i) the transfer of a Member’s Membership
Interest in violation of this Agreement; or (ii) the occurrence of a Dissolution Event as to such
Member which does not result in the dissolution of the Company, the Membership Interest of a Member
shall be terminated and converted into an Economic Interest.
5.5 Voting Rights. Unless a higher percentage is expressly required by this Agreement,
then a vote, consent or approval of Members holding a Majority Interest shall be sufficient to
authorize or approve all matters in which a vote, approval or consent of the Members is required.
Operating Agreement for Xxxxxx Quality, LLC
Page 9
5.6 Meetings of Members.
5.6.1 Date, Time and Place of Meetings of Members; Secretary. No annual or
regular meetings of Members are required. Meetings of Members, if any, may be held at such
date, time and place within or without the State of California as a Majority in Interest of
the Members may fix from time to time. At any Members’ meeting, a Majority in Interest of the
Members shall appoint a person to act as secretary of the meeting. The secretary of the
meeting shall prepare minutes of the meeting that shall be placed in the minute book of the
Company.
5.6.2 Power to Call Meetings. Unless otherwise prescribed by: (a) the Act in a
provision that cannot be waived by this Agreement or (b) by the Articles, meetings of the
Members may be called upon written demand of Members holding ten percent (10%) or more of the
Percentage Interests for the purpose of addressing any matters on which the Members may vote.
5.6.3 Notice of Meeting. Written notice of a meeting of Members shall be sent or
otherwise given to each Member in accordance with Corporations Code § 17104(c)(2) not less
than three (3) nor more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and the general nature of the business to be
transacted. Any Member entitled to call a meeting of Members may cause notice to be given to
the Members entitled to vote that a meeting will be held at a time requested by the person
calling the meeting, not less than three (3) days nor more than sixty (60) days after the
receipt of the request. If the notice is not given within ten (10) days after the receipt of
the request, the person entitled to call the meeting may give the notice.
5.6.4 Waiver of Notice or Consent. The actions taken at any meeting of Members,
however called and noticed, and wherever held, shall have the same validity as if taken at a
meeting duly held after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the Members entitled to vote but
who was not present in person or by proxy, signs a written waiver of notice or consents to the
holding of the meeting or approves the minutes of the meeting. All such waivers, consents or
approvals shall be filed with the Company records or made a part of the minutes of the
meeting.
Attendance of a person at a meeting shall constitute a waiver of notice of that
meeting, except when the person objects, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or convened, and except that
attendance at a meeting is not a waiver of any right to object to the consideration of
matters not included in the notice of the meeting if that objection is expressly made at the
meeting. Neither the business to be transacted nor the purpose of any meeting of Members
need be specified in any written waiver of notice.
5.6.5 Action by Written Consent without a Meeting. Any action that may be taken
at a meeting of Members may be taken without a meeting, if a consent in writing setting forth
the action so taken is signed and delivered to the Company within sixty (60) days of the
record date for that action by all of the Members. All such consents shall be filed with the
Operating Agreement for Xxxxxx Quality, LLC
Page 10
Secretary, if any, of the Company and shall be maintained in the Company records. Any Member
giving a written consent, or the Member’s proxy holders, may revoke the consent by a writing
received by the president or secretary, if any, of the Company before written consents of the
number of shares required to authorize the proposed action have been filed.
5.6.6 Meetings Other than In-Person. So long as not prohibited by statute, managers or
Members may participate in any meeting through any means of communication, including conference
telephone, electronic video screen communication, or other communications equipment. Participating
in a meeting pursuant to the prior sentence constitutes presence in person at that meeting if each
participating Person is provided the means to communicate with all the other Persons concurrently
and (i) the meeting is held by conference telephone or video conferencing or other communications
mode enabling participants to determine, through voice or image recognition, that a participant is
or is not a Person entitled to participate in the meeting, or (ii) another communications device
(e.g., a computer modem) is used in conjunction with another method (determined in the discretion
of the chairperson of the meeting) enabling participants to determine that a participant is or is
not entitled to participate in the meeting. Such verification method may include use of passwords
or similar codes for gaining access to the meeting or encryption and authentication technology
approved in the discretion of the chairperson of the meeting.
5.6.7 Record Date. In order that the Company may determine the Members of record
entitled to notices of any meeting or to vote, or entitled to receive any distribution or to
exercise any rights in respect of any distribution or to exercise any rights in respect of any
other lawful action, Members representing fifty percent (50%) or more of the Membership Interests
may fix, in advance, a record date, that is not more than sixty (60) days nor less than ten (10)
days prior to the date of the meeting and not more than sixty (60) days prior to any other action.
If no record date is fixed, the record date shall be as set xxxxx xx § 00000(x) of the Corporations
Code.
5.6.8 Other Procedures; Proxies. Except as specifically altered by this Agreement, the
procedures relating to meetings of Members and the use of proxies shall be governed by § 17104 of
the Corporations Code.
5.7 Certificate of Membership Interest.
5.7.1 Certificate. A Membership Interest may, but need not be, represented by a certificate of membership. A Majority in Interest of the Members shall determine
whether Membership Interests shall be represented by certificates of membership. If a Majority in
Interest of the Members determine that Memberships Interests shall be represented by certificates
of membership, the exact contents of a certificate of membership shall be determined by a Majority
in Interest of the Members but shall be issued substantially in conformity with the following
requirements. The certificates of membership shall be respectively numbered serially; as they are
issued, shall be impressed with the Company seal or a facsimile thereof, if any; and shall be
signed by the CEO or COO and the Secretary of the Company. Each certificate of membership shall
state the name of the Company, the fact that the
Operating Agreement for Xxxxxx Quality, LLC
Page 11
Company is organized under the laws of the State of California as a limited liability
company, the name of the person to whom issued, the date of issue, and the Percentage
Interests represented thereby. A statement of the designations, preferences, qualifications,
limitations, restrictions, and material special or relative rights of the Membership
Interest, if any, shall be set forth in full or summarized on the face or back of the
certificates which the Company shall issue, or in lieu thereof, the certificate may set forth
that such a statement or summary will be furnished to any holder of the Membership Interests
upon request without charge. Each certificate of membership shall be otherwise in such form
as may be determined by a Majority in Interest of the Members.
5.7.2 Cancellation of Certificate. All certificates of membership surrendered to
the Company for transfer shall be canceled and no new certificates of membership shall be
issued in lieu thereof until the former certificates for a like number of Membership
interests shall have been surrendered and canceled, except as herein provided with respect to
lost, stolen, or destroyed certificates.
5.7.3 Replacement of Lost, Stolen, or Destroyed Certificate. Any Member claiming
that his or her certificate of membership is lost, stolen, or destroyed may make an affidavit
or affirmation of that fact and request a new certificate. Upon the giving of an indemnity to
the Company that is satisfactory to a Majority in Interest of the Members, a new certificate
may be issued of the same tenor and representing the same Percentage Interest of membership
as was represented by the certificate alleged to be lost, stolen, or destroyed.
6. Management and Control of the Company.
6.1 Management of the Company. Subject to any voting rights hereunder or
mandated by the Act, the President of the Company shall be responsible for the day-to-day
affairs of the Company. Matters that, if the Company were a California corporation, would
require the approval or ratification of the board of directors of that corporation will
require the approval or ratification of at least three-fourth (3/4) of the Percentage
Interests of the Members.
6.2 Officers. If there is a conflict between the terms of this Section 6.2 and
the terms of the Xxxxxx Employment Agreement, the terms of the Xxxxxx Employment Agreement
shall govern and control.
6.2.1 Appointment of Officers.
6.2.1.1 If FNIS acquires a Membership Interest in the Company, then, during the Interim
Period and for so long as FNIS holds such Membership Interest, the Chief Executive Officer
(sometimes referred to herein as the “CEO”), the Chief Financial Officer and the Secretary of
the Company shall be the same person that generally holds such offices of the subsidiaries of
FNIS.
6.2.1.2 As described in, and subject to the terms of, the Xxxxxx Employment Agreement,
Xxxx Xxxxxx shall serve as President of the Company.
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6.2.1.3 During the Interim Period, the President of the Company, subject to the terms and
conditions of the Xxxxxx Employment Agreement, may, but is not obligated to, appoint such other
officers (e.g., Chief Operating Officer, Chief Technical Officer, Vice President) as the President
advisable, provided, however, that the President may not, without the approval of a Majority in
Interest of the Members, cause the Company to enter into a written employment agreement with any
such Person where that employment agreement has a term of more than one-year.
6.2.1.4 After the Interim Period, the Members may, but are not obligated to, appoint such other officers (e.g., Chief Operating Officer, Chief Technical Officer,
Vice President) as is deemed advisable by the vote of a Majority in Interest of the Members.
The officers shall serve at the pleasure of the Members, subject to all rights, if any, of an
officer under any contract of employment. Each officer shall be considered an at-will employee or
independent contractor, as applicable, unless the officer has a written contract of employment and
no such officer shall have a written employment agreement having a term of more than one-year
unless a Majority in Interest of the Members has approved that agreement. Any individual may hold
any number of offices. No officer need be a resident of the State of California or citizen of the
United States. If a Member is not an individual, such Member’s officers or members may serve as
officers of Company. The officers shall exercise such powers and perform such duties as specified
in this Agreement and as shall be determined from time to time by the Members.
6.2.2 Removal. Subject to the rights, if any, of an officer under contract of
employment, any officer may be removed at any time, either with or without cause, by the vote of at
least Majority in Interest of the Members.
6.2.3 Resignation. Any officer may resign at any time by giving written notice to the
Company and each Member. Any resignation shall take effect on the second (2nd) business
day after the mailing of the described notice to the Company; and, unless otherwise specified in
that notice, the acceptance of the resignation shall not be necessary to make it effective. Any
resignation is without prejudice to the rights, if any, of the Company under any contract to which
the officer is a party.
6.2.4 Vacancy. 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 that office.
6.2.5 Salaries of Officers. The officers described m Section 6.2.1.1 shall not receive
compensation from the Company for their services to the Company. Xxxx Xxxxxx shall receive a salary
for acting as President of the Company as is described in the Xxxxxx Employment Agreement. All
other salaries of all other officers and agents of the Company, if any, shall be fixed by the vote
of a Majority in Interest of the Members unless delegated to an officer or agent (e.g., as provided
in the Xxxxxx Employment Agreement).
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Agreement for Xxxxxx Quality, LLC
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6.2.6 Duties and Powers of the Chairperson. The Chairperson (or Chairman or
Chairwoman), if such an officer be appointed by the CEO and, shall, if present, preside at
meetings of the Members, and exercise and perform such other powers and duties as may be from
time to time assigned to him by vote as follows: as follows: (a) during the Interim Period,
by vote of at least three-fourth (3/4) of the Percentage Interests of the Members; and (b)
after the Interim Period, by vote of a Majority in Interest of the Members. If there is no
CEO and no COO, the Chairperson shall, in addition, have the powers and duties of the CEO as
described in Section 6.2.7.
6.2.7 Duties and Powers of the Chief Executive Officer. The Chief Executive
Officer, if such an officer be appointed, shall, subject to the control of a vote of a
Majority in Interest of the Members, have general supervision, direction and control over the
Company’s business and its officers, including such general powers and duties usually vested
in the office of a chief executive officer. Without limiting the generality of the foregoing,
the Chief Executive Officer shall have the following powers:
6.2.7.1 in the absence of a Chairperson or if there is no Chairperson, preside at meetings of the Members, and be ex officio a member of all
committees of the Company or the Members;
6.2.7.2 to call meetings of the Members to be held, subject to the limitations
prescribed by law or by this Operating Agreement, at such times and at such places as the CEO shall deem proper;
6.2.7.3 to execute proxies on behalf of the Company, to vote stock or other interests
owned by it in any other Person as the agent of the Company;
6.2.7.4 unless otherwise directed by the vote of a Majority in Interest of the Members
and subject to the control of such a vote of the Members, attend in person and, unless
prohibited by law, act and vote, on behalf of the Company, at all meetings of the owners of
any Person in which the Company owns an interest; and
6.2.7.5 subject to any other applicable restrictions herein, execute bonds, mortgages and other contracts requiring a seal, under the seal of Company, except
where required or permitted by law to be otherwise signed and executed, and except where the
signing and execution thereof shall be expressly delegated by agreement (e.g., an employment
agreement) or vote of a Majority in Interest of the Members to some other officer or agent of
Company.
6.2.7.6 to delegate in writing to the President of the Company any or all of the
foregoing, including such duties and responsibilities expressly set forth in the Xxxxxx
Employment Agreement.
6.2.8 Duties and Powers of the President. If there should be a President, he or
she shall be the general manager of the daily operations of the Company and shall have
Operating Agreement for Xxxxxx Quality, LLC
Page 14
general and active management of the operations and affairs of the Company, subject, however, to
the control of the Members and the powers granted to the Chief Executive Officer, if any. If no
Chief Executive Officer is elected or that office is vacant then the President shall have all of
the powers and duties of the Chief Executive Officer. In the absence or disability of the CEO, the
President shall perform all the duties of the CEO and shall for this purpose act within the CEO’s
scope of authority. The President may also be elected or appointed as the Chief Operating Officer
of the corporation.
6.2.9 Duties and Powers of the Chief Operating Officer. If there should
be a Chief Operating Officer (sometimes referred to for convenience as the “COO”), he or she
shall, in the case of the absence, disability or death of the Chief Executive Officer, Chairperson
and the President, exercise all the powers and perform all duties of the President. The Chief
Operating Officer shall have such other powers and perform such other duties as may be granted or
prescribed by this Operating Agreement, the vote of a Majority in Interest of the Members, the
Chief Executive Officer or the President in that order of priority should there be a conflict.
6.2.10 Duties and Powers of Chief Technical Officer. Should such an office be
established, the Chief Technical Officer would be primarily responsible for overseeing all
information technology functions, including information systems, computer operations, network
systems, data warehouse, telecommunications, enterprise wide systems, applications programming, and
systems programming (internal). The Chief Technical Officer shall have such other powers and
perform such other duties as may be granted or prescribed by this Operating Agreement, the vote of
a Majority in Interest of the Members, the Chief Executive Officer, the President and the COO in
that order of priority should there be a conflict.
6.2.11 Duties and Powers of Vice President. Should such an office (or offices) be
established, then, in case of the absence, disability, or death of the Chairperson, Chief Executive
Officer, the Chief Operating Officer, and the President, then the Vice President, or one of the
Vice Presidents, shall exercise all the powers and perform all duties of the President. If there
are more than one Vice President, the order in which the Vice Presidents shall succeed to the
powers and duties of the President shall be fixed by the CEO or the vote of a Majority in Interest
of the Members. The Vice President or Vice Presidents shall have such other powers and perform such
other duties as may be granted or prescribed by this Operating Agreement, the vote of a Majority in
Interest of the Members, the Chief Executive Officer, the President and the COO in that order of
priority should there be a conflict.
6.2.12 Duties and Powers of Secretary. The Secretary, should such an office be
established, shall attend all meetings of the Members, and shall record all the proceedings of the
meetings in a book to be kept for that purpose, and shall perform like duties for the standing
committees when required. The Secretary shall give, or cause to be given, notice of all meetings of
the Members and shall perform such other duties as may be prescribed by the Members. The Secretary
shall have custody of the seal of the Company (if applicable) and the Secretary shall have
authority to affix the same to any instrument requiring it, and when so affixed, it may be attested
by his or her signature. The Members may give general authority to any other officer to affix the
seal of Company and to attest the affixing by his or her signature.
Operating Agreement for Xxxxxx Quality, LLC
Page 15
The Secretary shall keep, or cause to be kept, at the principal executive office or at
the office of the Company’s transfer agent or registrar, as determined by resolution of the
Members, a register, or a duplicate register, showing the names of all Members and their
addresses, their Percentage Interests, the number and date of certificates issued for the
same, and the number and date of cancellation of every certificate surrendered for
cancellation. The Secretary shall also be responsible for the books and records (other than
the accounting-type books and records since they are within the purview of the chief
financial officer) and such other documents as may be required under the Act. The Secretary
shall perform such other duties and have such other authority as may be prescribed elsewhere
in this Agreement or from time to time by the vote of a Majority in Interest of the Members,
the Chief Executive Officer, the President and the COO in that order of priority should
there be a conflict. The Secretary shall have the general duties, powers and
responsibilities of a secretary of a corporation.
If the Members choose to appoint an Assistant Secretary or Assistant Secretaries, the
Assistant Secretaries, in the order of their seniority, in the absence, disability or
inability to act or inability to act of the Secretary, shall perform the duties and exercise
the powers of the Secretary, and shall perform such other duties as the Members may from
time to time prescribe.
6.2.13 Duties and Powers of Chief Financial Officer. The Chief
Financial Officer, should such an office be established, 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, capital, Capital Accounts, Percentage Interests,
Membership Interests and Economic Interests. The books of account shall at all reasonable
times be open to inspection by any Member.
The Chief Financial Officer shall have the custody of the funds and securities of
Company, and shall keep full and accurate accounts of receipts and disbursements in books
belonging to Company, and shall deposit all moneys and other valuable effects in the name
and to the credit of Company in such depositories as may be designated by the Members.
The Chief Financial Officer shall disburse the funds of Company as required by this
Agreement, as directed by the vote of a Majority in Interest of the Members, or the CEO, in
that order of priority should there be a conflict, taking proper vouchers or receipts for
such disbursements, and shall render to the CEO and the Members, at their regular meetings
(if applicable), when the Members so require, or at a special meeting of the Members, an
account of all his or her transactions as treasurer and of the financial condition of
Company.
The Chief Financial Officer shall perform such other duties and shall have such other
responsibility and authority as may be prescribed by this Operating Agreement, the vote of a
Majority in Interest of the Members, the Chief Executive Officer, the President and the COO
in that order of priority should there be a conflict. The Chief Financial Officer shall have
the general duties, powers and responsibility of a chief financial officer of a corporation,
and shall be the chief financial and accounting officer of the Company.
Operating Agreement for Xxxxxx Quality, LLC
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If the Members choose to elect an Assistant Treasurer or Assistant Treasurers, the
Assistant Treasurers in the order of their seniority shall, in the absence, disability or
inability to act of the Chief Financial Officer, perform the duties and exercise the
powers of the Chief Financial Officer, and shall perform such other duties as the Members
shall from time to time prescribe.
6.2.14 Acts of Officers as Conclusive Evidence of Authority. Subject to any
other applicable restrictions herein, any note, mortgage, evidence of indebtedness,
contract, certificate, statement, conveyance, or other instrument in writing, and any
assignment or endorsement thereof, executed or entered into between the Company and any
other person, when signed by the Chairperson, the CEO, the President or any Vice President
and any Secretary, any Assistant Secretary, the Chief Financial Officer, or any Assistant
Treasurer of the Company, is not invalidated as to the Company by any lack of authority of
the signing officers in the absence of actual knowledge on the part of the other person
that the signing officers had no authority to execute the same.
6.2.15 Limited Liability. No person who is an officer shall be personally
liable under any judgment of a court, or in any other manner, for any debt, obligation, or
liability of the Company, whether that liability or obligation arises in contract, tort, or
otherwise, solely by reason of being an officer of the Company.
6.3 Manager(s). The Company shall, pursuant to this Agreement, initially be
managed by its Members. The Members, by the written consent of at least three-fourth (3/4)
of the Percentage Interests of the Members, may elect a manager, in which case the
Articles shall be amended as required by Corporations Code §§ 17150 and 17151.
6.4 Handling Funds. The bank accounts of the Company shall be maintained in
such banking institutions as are approved by the CEO and withdrawals shall be made only in
the regular course of Company business and as otherwise authorized in this Agreement.
6.5 General Fiduciary Duty. The Members covenant to take all actions which
may be necessary or appropriate (i) for the continuation of the Company’s valid existence
as a limited liability company under the laws of the State of California (and of each
other jurisdiction in which such existence is necessary to enable the Company to conduct
the business in which it is engaged) and (ii) for the accomplishment of the Company’s
purposes. The Members shall be under a fiduciary duty to conduct the affairs of the
Company in the best interests of the Company and of the Members, including the safekeeping
and use of all of the property of the Company and the use thereof for the exclusive
benefit of the Company.
6.6 Devotion of Time. Except as set forth in any employment agreement between
the Company and a Member, the Members shall devote to the Company such time as may be
necessary for the proper performance of their respective duties hereunder, but no Member
shall be required to devote full time to the performance of such duties.
6.7 Performance of Duties: Liability of Members. The Members shall perform
their respective duties hereunder in good faith, in a manner that each Member reasonably
believes to
Operating Agreement for Xxxxxx Quality, LLC
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be in the best interests of the Company and its other Members, and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like position would use under similar
circumstances.
In performing their respective duties, Members shall be entitled to rely on information,
opinions, reports, or statements, including financial statements and other financial data, of the
following persons or groups unless they have knowledge concerning the matter in question that
would cause such reliance to be unwarranted and provided that the Member acts in good faith and
after reasonable inquiry when the need therefor is indicated by the circumstances:
6.7.1 one or more officers, employees or other agents of the Company whom the Member
reasonably believes to be reliable and competent in the matters presented;
6.7.2 any attorney, independent accountant, or other person as to matters which the Member
reasonably believes to be within such person’s professional or expert competence; or
6.7.3 a committee upon which he does not serve, duly designated in accordance with a provision
of the Articles or this Agreement, as to matters within its designated authority, which committee
the Member reasonably believes to merit competence.
The foregoing list is not intended to be inclusive of all such information or persons upon which
the Members may rely.
6.8 Limited Liability. No person who is a Member and/or officer of the Company, shall
be personally liable under any judgment of a court, or in any other manner, for any debt,
obligation, or liability of the Company, whether that liability or obligation arises in contract,
tort, or otherwise, solely by reason of being a Member and/or officer of the Company.
6.9 Competing Activities. Each Member covenants that they will themselves, and they
will cause each of their Affiliates to, conduct on behalf of the Company all activities that
involve, directly or indirectly, the design, creation, marketing or selling of products or the
provision of services which are substantially similar to and directly competitive with those
products or services sold or provided by: (a) Xxxxxx Quality, immediately prior to the Effective
Date; or (b) the Company. Notwithstanding anything to the contrary in the preceding sentence, if
FNIS acquires a Membership Interest in the Company, then FNIS shall not be considered to have
violated that prior sentence so long as it does not take active action to direct or divert business
from Company another Affiliate of FNIS. Xxxxxx Quality and the Xxxxxx Trust each acknowledge that
FNIS has one or more Affiliates that currently directly compete with the Company and/or its
predecessor, Xxxxxx Quality. The parties intend that FNIS may allow such Affiliate(s) to compete
with the Company provided that FNIS does not actively direct or divert business from Company to
another Affiliate of FNIS.
6.9.1 FNIS and its Affiliates do not currently have on the market a collateral risk scoring
product or technology and Xxxxxx Quality and the Company have educated FNIS
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about certain aspects of that business. If FNIS becomes a Member of this Company, then by
doing so FNIS agrees that, if FNIS or an Affiliate of it develops a collateral risk scoring
product or technology that is ready to be marketed (e.g., licensed or sold), then: (a) the
Company shall have the first right to negotiate the terms upon which the Company shall
license or purchase that product or technology; and (b) (i) FNIS shall negotiate (or cause
its Affiliate to negotiate) in good faith with Company regarding the same; (ii) if FNIS (or
the applicable Affiliate) or the Company gives the other written notice they desire to
terminate negotiations about the license or sale, then the Company shall within five
business days of that notice send FNIS (or the applicable Affiliate) the last best written
offer of the Company to license or purchase the product or technology in question (the
“Last Best Offer”); and (iii) after termination of such negotiations as described in
the prior clause (ii), FNIS shall not (and it will cause its Affiliate to not) license or
sell the product or technology in question on terms materially more favorable to the
licensee or buyer than the terms described in the Last Best Offer.
6.10 Transactions between the Company and a Member. Subject to any limitations
set forth in this Agreement and with the prior approval of a Majority in Interest of the
Members after full disclosure of the Member’s involvement, a Member may lend money to and/or
transact other business with the Company so long as the loan or transaction is an
Arms-Length Transaction. Subject to that limitation and any other applicable law, such
Member has the same rights and obligations with respect thereto as a Person who is not a
Member.
7. Allocations of Net Income and Net Losses.
7.1 Allocations of Net Income and Net Loss.
7.1.1 Net Loss. Subject to Section 7.2, Net Loss for any fiscal year shall be allocated in the following order and priority:
7.1.1.1 Except as provided in Sections 7.1.1.2 and 7.1.1.3 below, Net Losses shall be
allocated to the Members in proportion to their Percentage Interest.
7.1.1.2 Except as provided in Section 7.1.1.3 below, to the extent Net Income has been
allocated pursuant to Sections 7.1.2.2 or 7.1.2.3 below, Net Losses shall be allocated (a)
first to offset any Net Income allocated pursuant to Section 7.1.2.3 below, and (b) next to
offset any Net Income allocated pursuant to Section 7.1.2.2 below (in each case in proportion
to the Member’s respective share of the Net Income so allocated). To the extent any
allocations of Net Income are offset pursuant to this Section 7.1.1.2, such allocations shall
be disregarded for purposes of computing subsequent allocations pursuant to this Section 7.
7.1.1.3 The Losses allocated pursuant to Sections 7.1.1.1 and 7.1.1.2 above shall be
made only to the extent that such loss allocations will not create an Adjusted Capital
Account Deficit for that Member in excess of an amount, if any, equal to such Member’s share
of Company Minimum Gain that would be realized on a foreclosure of the Company’s property.
Any loss not allocated to a Member because of the foregoing provision shall be allocated to
the other Members (to the extent the other Members are not limited in
Operating Agreement for Xxxxxx Quality, LLC
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respect of the allocation of losses under this Section 7.1.1.3). Any loss reallocated under this
Section 7.1.1.3 shall be taken into account in computing subsequent allocations of net income and
losses pursuant to this Section 7, so that the net amount of any item so allocated and the income
and losses allocated to which Member pursuant to this Section 7, to the extent possible, shall be
equal to the net amount that would have been allocated to each such Member pursuant to this
Section 7 if no reallocation of losses had occurred under this Section 7.1.1.3. This provision,
when used with the qualified income offset provisions in Section 7.2.5, is intended to (i) comply
with the alternative test for economic effect set forth in Treasury Regulations § 1.704-1 (b)(2)
and (ii) operate as a substitute for the deficit restoration requirement otherwise required in
order for allocations to have substantial economic effect.
7.1.2 Net Income. Subject to Section 7.2, Net Income for any fiscal year shall be allocated in the following order and priority;
7.1.2.1 First, to the Members until the cumulative Net Income allocated to such Member under
this Section 7.1.2.1 for all fiscal years of the Company equals the cumulative Net Losses allocated
to such Members pursuant to Section 7.1.1 for all prior periods in proportion to the Member’s
respective share of the Net Losses so allocated, and
7.1.2.2 Second, to Xxxxxx Quality and Xxxxxx Trust, proportionate to their respective
Percentage Interests, until the cumulative amounts allocated to them pursuant to this Section
7.1.2.2 is equal to the cumulative Preferred Return calculated through the end of the most recent
fiscal year;
7.1.2.3 the balance, if any, shall be allocated to the Members in proportion to their
respective Percentage Interests.
7.2 Special Allocations.
7.2.1 Minimum Gain Chargeback. If there is a net decrease in Company Minimum Gain
during any Fiscal Year, each Member shall be specially allocated items of Company income and gain
for such Fiscal Year (and, if necessary, in subsequent fiscal years) in an amount equal to the
portion of such Member’s share of the net decrease in Company Minimum Gain that is allocable to the
disposition of Company property subject to a Nonrecourse Liability, which share of such net
decrease shall be determined in accordance with Regulations § 1.704(g)(2). Allocations pursuant to
this Section 7.2.1 shall be made in proportion to the amounts required to be allocated to each
Member under this Section 7.2.1. The items to be so allocated shall be determined in accordance
with Regulations § 1.704-2(f). This Section 7.2.1 is intended to comply with the minimum gain
chargeback requirement contained in Regulations § 1.704-2(f) and shall be interpreted consistently
therewith.
7.2.2 Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt. If, during
any Fiscal Year, there is a net decrease in Company Minimum Gain attributable to a Member
Nonrecourse Debt, each member who has a share of the Company Minimum Gain attributable to such
Member Nonrecourse Debt (which share shall be determined
Operating Agreement for Xxxxxx Quality, LLC
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in accordance with Regulations § 1.704-2(i)(5)) shall be specially allocated items of
Company income and gain for such Fiscal Year (and, if necessary, in subsequent Fiscal Years)
in an amount equal to that portion of such Member Nonrecourse Debt (which share of such net
decrease shall be determined in accordance with Regulations §1.704-2(i)(4)). This Section
7.2.2 is intended to comply with the minimum gain chargeback requirement contained in
Regulations § 1.704-2(i)(4) and shall be interpreted consistently therewith.
7.2.3 Nonrecourse Deductions. Any nonrecourse deductions (as defined in
Regulations § 1.704-2(b)(l)) for any Fiscal Year or other period shall be allocated to the
Members in proportion to their Percentage Interests.
7.2.4 Member Nonrecourse Deductions. Those items of Company loss, deduction, or
Code § 705(a)(2)(B) expenditures which are attributable to Member Nonrecourse Debt for any
Fiscal Year or other period shall be specially allocated to the Member who bears the economic
risk of loss with respect to the Member Nonrecourse Debt to which such items are attributable
in accordance with Regulations § 1.704-2(i).
7.2.5 Qualified Income Offset. Notwithstanding Section 7.1, if a Member
unexpectedly receives any adjustments, allocations, or distributions described in Regulations
§§ 1.704-1 (b)(2)(ii)(d)(4), (5) or (6), or any other event creates a deficit balance in
such Member’s Capital Account in excess of such Member’s share of Company Minimum Gain, items
of Company income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate such excess deficit balance as quickly as possible. Any
special allocations of items of income and gain pursuant to this Section 7.2.5 shall be taken
into account in computing subsequent allocations of income and gain pursuant to this Section
7 so that the net amount of any item so allocated and the income, gain, and losses allocated
to each Member pursuant to this Section 7 to the extent possible, shall be equal to the net
amount that would have been allocated to each such Member pursuant to the provisions of this
Section 7 if such unexpected adjustments, allocations, or distributions had not occurred.
7.2.6 Recapture. In the event that the Company has taxable income that is
characterized as ordinary income under the recapture provisions of the Code, each Member’s
distributive share of taxable gain or loss from the sale of Company assets (to the extent
possible) shall include a proportionate share of this recapture income equal to that Member’s
prior share of prior cumulative depreciation deductions with respect to the assets which gave
rise to the recapture income.
7.2.7 Code Section 754 Adjustment. To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-l(b)(2)(iv)3(m)(2) or Treasury
Regulations Section 1.704-l(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as a result of a distribution to a Member in complete liquidation of his interest,
the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specifically allocated to the Members in accordance
with their interests
Operating Agreement for Xxxxxx Quality, LLC
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in the Company in the event Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or the
Members to whom such distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
7.2.8 Tax Allocations. Except for the allocations contained in Section
7.3, all income, gains, losses, deductions and credits of the Company shall be allocated for
federal, state and local income tax purposes in accordance with the allocations of Net Income and
Net Loss.
7.3 Code § 704(c) Allocations. Notwithstanding any other provision in this Section 7,
in accordance with Code § 704(c) and the Regulations promulgated thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes and its Gross Asset
Value on the date of contribution.
In the event the Gross Asset Value of any Company asset is adjusted due to a revaluation of
Company assets under Treasury Regulations Section 1.704(b)(2)(iv)(f), subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the Treasury Regulations thereunder.
Subject to any contrary provisions elsewhere in this Agreement, any elections or other
decisions relating to such allocations shall be made by the Members in any manner that reasonably
reflects the purpose and intention of this Agreement, with the Members vote on that determination
being made as follow: (a) during the Interim Period, by consent of at least three-fourth (3/4) of
the Percentage Interests of the Members; and (b) after the Interim Period, by consent of a
Majority in Interest of the Members.
Allocations pursuant to this Section 7.3 are solely for purposes of federal, state and local
taxes. As such, they shall not affect or in any way be taken into account in computing a Member’s
Capital Account or share of profits, losses, or other items of distributions pursuant to any
provision of this Agreement.
7.4 Allocation of Net Incomes and Losses and Distributions in Respect of a Transferred
Interest. If any Membership Interest is transferred, or is increased or decreased by reason of
the admission of a new Member or otherwise, during any fiscal year of the Company, each item of
income, gain, loss, deduction or credit of the Company for such fiscal year shall be assigned pro
rata to each day in the particular period of such fiscal year to which such item is attributable
(i.e., the day on or during which it is accrued or otherwise incurred) and the amount of each such
item so assigned to any such day shall be allocated to the Member based upon its respective
Interest at the close of such day.
Operating Agreement for Xxxxxx Quality, LLC
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Notwithstanding any provision above to the contrary, gain or loss of the Company realized in
connection with a sale or other disposition of any of the assets of the Company shall be allocated
solely to the parties owning Membership Interests as of the date such sale or other disposition
occurs.
7.5 Curative Allocations. The allocations set forth in Sections 7.2.1, 7.2.2, 7.2.5,
7.2.4 and 7.2.7 hereof and the allocations of Nonrecourse Deductions in Sections 7.1.1 and 7.2.3
(the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations.
It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss, or deduction pursuant to this Section 7.5. Therefore, notwithstanding
any other provision of this Section 7 (other than the Regulatory Allocations), there shall be made
such offsetting special allocations of Company income, gain, loss or deduction in whatever manner a
Majority in Interest of the Members determine appropriate so that, after such offsetting
allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to
the Capital Account balance such Member would have had if the Regulatory Allocations were not part
of the Agreement and all Company items were allocated pursuant to Section 7.1. In exercising their
discretion under this Section 7.5, the Members shall take into account future Regulatory
Allocations under Sections 7.2.1 and 7.2.2 that, although not yet made, are likely to offset
Regulatory Allocations made under Section 7.1 and Section 7.2.4.
7.6 Obligations of Members to Report Allocations. The Members are aware of the income
tax consequences of the allocations made by Section 7 and hereby agree to be bound by the
provisions of it in reporting their shares of Company income and loss for income tax purposes.
8. Distributions.
8.1 Minimum Distribution.
8.1.1 If the Company has allocated Net Income to any Member for a calendar year then, unless
the Members unanimously agree otherwise, the Company shall, on or before April 15 of the next
calendar year, make a cash distribution to such Member in an amount equal to:
8.1.1.1 One hundred percent (100%) of the Net Income for that calendar year allocated to the
Member pursuant to Section 7.1.2.2; and
8.1.1.2 Forty-six percent (46%) of the balance of the Net Income allocated to such Member.
8.1.2 If FNIS is a Member of the Company and the Company does not have sufficient
Distributable Cash to make the minimum distributions described in Section 8.1.1 above, then FNIS
shall, pursuant to an Arms-Length Agreement, loan the Company funds sufficient to make the minimum
distributions. Such loan shall be repaid prior to any
Operating Agreement for Xxxxxx Quality, LLC
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distributions of Distributable Cash to the Members over and above the minimum distributions
described in Section 8.1.1 above.
8.2 Distribution of Cash by the Company. Subject to applicable law and any provisions
contained elsewhere in this Agreement (including Section 8.1 above or Section 13 below),
Distributable Cash shall, unless the Members unanimously agree otherwise, be distributed in the
following order and priority:
8.2.1 First, to Xxxxxx Quality and Xxxxxx Trust until the cumulative cash distributions made
to such Members pursuant to Section 8.1.1.1 and this Section 8.2.1 for all fiscal years of the
Company equals the cumulative Net Income allocated to such Members pursuant to Section 7.1.2.2
above (net of any Net Losses charged back against that income pursuant to Section 7.1.1.2 above)
for all prior periods, in proportion to the Member’s respective share of the Net Income so
allocated.
8.2.2 The balance to the Members in the amounts necessary such that, after considering the
distributions pursuant to Section 8.1.1.2 above and this Section 8.2.2, the cumulative
distributions made to the Members pursuant to Section 8.1.1.2 above and this Section 8.2.2 are in
proportion to the Member’s respective Percentage Interests.
8.3 Form of Distribution. A Member, regardless of the nature of the Member’s Capital
Contribution, has no right to demand and receive any distribution from the Company in any form
other than money.
8.4 Other Distribution Limitations.
8.4.1 The Members intend to waive, to the fullest extent allowed by applicable law, the
provisions of § 17254 of the Corporations Code. To the extent, and only to the extent, some or all
of those provisions cannot be waived, then no distribution (whether it be of Distributable Cash or
otherwise) shall be made to any Member unless it complies with such portion(s) of Corporations Code
§ 17254 as cannot be waived.
8.4.2 The Members desire to waive the provisions of § 17255 of the Corporations Code to the
fullest extent allowed by law. To the extent, and only to the extent, such provisions cannot be
waived, then a Member who votes for a distribution in violation of this Agreement or the Act is
personally liable to the Company, for a period of four years following the distribution, for the
amount of the distribution that exceeds what could have been distributed without violating this
Agreement or the Act if it is established that the Member did not act in compliance with Section
8.4.1 or Section 13.5 of this Agreement. Any Member who is so liable shall be entitled to compel
contribution from each other Member who also is so liable.
8.5 Return of Distributions. Except for distributions made in violation of the Act or
this Agreement, no Member or Economic Interest Owner shall be obligated to return any distribution
to the Company or pay the amount of any distribution for the account of the Company or to any
creditor of the Company. The amount of any distribution returned to the
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Company by a Member or Economic Interest Owner or paid by a Member or Economic Interest Owner for
the account of the Company or to a creditor of the Company shall be added to the account or
accounts from which it was subtracted when it was distributed to the Member or Economic Interest
Owner and shall increase such Member’s Capital Account accordingly.
9. Transfers of Interests. During the Interim Period, no Member may Transfer any interest
in the Company to any Person other than as follows: (a) a Transfer to another Member; (b) a
Transfer by Xxxxxx Quality and/or the Xxxxxx Trust of a fifty-five percent (55%) Percentage
Interest to FNIS; (c) a Transfer by FNIS to an Affiliate of it so long as the Affiliate does not
design, create, market or sell products or services that are competitive to products or services
sold or provided by the Company; (d) a Transfer by Xxxxxx Quality to Xxxxxx, (e) a transfer by
Xxxxxx Quality or Xxxxxx to the Xxxxxx Family; and (f) a Transfer approved in writing by all
Members.
9.1 “Xxxxxx’x Family” is any Person who, at the time of the Transfer, is: (a) Xxxx Xxxxxx or
Xxxxxxxx Xxxxxx, (b) Xxxx Xxxxxx’x or Xxxxxxxx Xxxxxx’x, natural or adoptive lineal ancestors or
descendants, and trusts for his, her or their exclusive benefit; and/or (c) any Personal
Representative; provided, however, that in the case of clauses (a) and (b), Xxxx Xxxxxx retains
control over voting the Transferred Membership Interest. “Personal Representative” is the Person
who succeeds to any part of Xxxx Xxxxxx’x or Xxxxxxxx Xxxxxx’x estate as a result of his or her
death, legal incompetence, or Bankruptcy and any transferee of their beneficial interest from any
such Person.
10. Special Power of Attorney.
10.1 Attorney-in-Fact. Each Member grants the CEO of the Company a special power of
attorney irrevocably making, constituting, and appointing the CEO as the Members’
attorney-in-fact, with power and authority to act in its name and on its behalf to execute,
acknowledge, and swear to in the execution, acknowledgment, and filing of documents, including,
without limitation:
10.1.1 The Certificate and any amendment thereto, or any analogous document of any other State
required to be filed or that a Majority in Interest of the Members elect to file;
10.1.2 Any other instrument or document required to be filed by the Company under the laws of
any State or by any governmental agency, or that the CEO elects to file; and
10.1.3 Any instrument or document that may be required to effect the continuation of the
Company, the admission of an additional or substituted Member, or the dissolution and termination
of the Company (provided that the continuation, admission, or dissolution and termination are
according to the terms of this Agreement), or to reflect any adjustment in amount of the Member’s
Capital Contribution or reduction in the Member’s
Operating Agreement for Xxxxxx Quality, LLC
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Capital Accounts (provided such adjustments are otherwise allowed by the terms of this
Agreement).
10.2 Special Provisions. This special power of attorney (i) is a special power
of attorney coupled with an interest, (ii) is irrevocable, (iii) shall survive the granting
Member’s death or incapacity, and (iv) is limited to the matters stated in Section 10.
10.3 Signatures. The CEO may exercise the special power of attorney on behalf
of each Member by a facsimile or original signature of the CEO acting as an
attorney-in-fact for all the Members.
11. Consequences of Dissolution Event.
11.1 Dissolution Event. Upon the occurrence of any Dissolution Event, the
Company shall dissolve unless the remaining Members (“Remaining Members”) holding a
majority of the remaining Membership Interests consent within ninety (90) days of the
Dissolution Event to the continuation of the business of the Company. If the Remaining
Members consent to the continuation of the business of the Company, the Company and/or the
Remaining Members shall purchase, and the member whose actions or conduct resulted in the
Dissolution Event (“Former Member”) or such Former Member’s legal representative shall sell,
the Former Member’s Membership Interest (“Former Member’s Interest”) as provided in this
Section 11 to avoid dissolution of Company.
11.2 Purchase Price. The purchase price for the Former Member’s Interest shall
be the Capital Account balance of the Former Member as adjusted pursuant to Section 4.4
(i.e., after first booking to fair market value the Member’s share of the Company’s assets
to determine the Net Income or Net Loss that would have resulted if such asset were sold for
such value, with such Net Income or Net Loss shall then be allocated pursuant to Section 7);
provided, however, if the Dissolution Event results from a breach of this Agreement by the
Former Member, the purchase price shall be reduced by an amount equal to the damages
suffered by the Company or the Remaining Members as a result of such breach.
11.3 Notice of Intent to Purchase. Within thirty (30) days after the fair
market value of the Former Member’s Interest has been determined in accordance with Section
1.1, each Remaining Member desiring to purchase a portion of the Former Member’s Interest
shall notify the each other Member in writing of his or her interest. The failure of any
Remaining Member to submit a notice within the applicable period shall constitute an
election on the part of the Member not to purchase any of the Former Member’s Interest. Each
Remaining Member so electing to purchase shall be entitled to purchase a portion of the
Former Member’s Interest in the same proportion that the Percentage Interest of the
Remaining Member bears to the aggregate of the Percentage Interests of all of the Remaining
Members electing to purchase the Former Member’s Interest.
11.4 Election to Purchase Less Than All of the Former Member’s Interest. If any
Remaining Member elects to purchase none or less than all of his or her pro rata share of
the
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Former Member’s Interest, then the Remaining Members can elect to purchase more than their pro
rata share. If the Remaining Members fail to purchase the entire interest of the Former Member,
the Company shall purchase any remaining share of the Former Member’s Interest.
11.5 Payment of Purchase Price. The purchase price shall be paid by the Company or the
Remaining Members, as the case may be, by either of the following methods, each of which may be
selected separately by the Company or the Remaining Members:
11.5.1 the Company or the Remaining Members shall at the closing pay in cash the total
purchase price for the Former Member’s Interest; or
11.5.2 the Company or the Remaining Members shall pay at the closing twenty percent (20%) of
the purchase price in which case the balance of the purchase price shall then be paid in four equal
annual principal installments, plus accrued interest, and be payable each year on the anniversary
date of the closing. The unpaid principal balance shall accrue interest at the current applicable
federal rate as provided in the Code for the month in which the initial payment is made, but the
Company and the Remaining Members shall have the right to prepay in full or in part at any time
without penalty. The obligation to pay the balance due shall be evidenced by a promissory note, and
if purchased by a Remaining Member, secured by a pledge of the Membership Interest being purchased.
11.6 Closing of Purchase of Former Member’s Interest. The closing for the sale of a
Former Member’s Interest pursuant to this Section 11 shall be held at 10:00 a.m. at the principal
office of Company no later than sixty (60) days after the determination of the purchase price,
except that if the closing date falls on a Saturday, Sunday, or California legal holiday, then the
closing shall be held on the next succeeding business day. At the closing, the Former Member or
such Former Member’s legal representative shall deliver to the Company or the Remaining Members an
instrument of transfer (containing warranties of title and no encumbrances) conveying the Former
Member’s Interest. The Former Member or such Former Member’s legal representative, the Company and
the Remaining Members shall do all things and execute and deliver all papers as may be necessary
fully to consummate such sale and purchase in accordance with the terms and provisions of this
Agreement.
11.7 Purchase Terms Varied by Agreement. Nothing contained herein is intended to
prohibit Members from agreeing upon other terms and conditions for the purchase by the Company or
any Member of the Membership Interest of any Member in the Company desiring to retire, withdraw or
resign, in whole or m part, as a Member.
12. Accountings, Records, Reporting.
12.1 Books and Records. The books and records of the Company shall be kept, and the
financial position and the results of its operations recorded, for financial purposes in accordance
with GAAP and for tax purposes on the accrual method of accounting. The books and records of the
Company shall reflect all the Company transactions and shall be appropriate and adequate for the
Company’s business. The Company shall maintain at its principal office in California all of the
Operating Agreement for Xxxxxx Quality, LLC
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information required by § 17058 of the Corporations Code to be maintained there, which statute
currently requires that the following be so maintained:
12.1.1 A current list of the full name and last known business or residence address of each
Member and Economic Interest Owner set forth in alphabetical order, together with the Capital
Contributions, Capital Account and Percentage Interest of each Member and Economic Interest Owner;
12.1.2 A current list of the full name and business or residence address of each manager;
12.1.3 A copy of the Articles and any and all amendments thereto together with executed copies
of any powers of attorney pursuant to which the Articles or any amendments thereto have been
executed;
12.1.4 Copies of the Company’s federal, state, and local income tax or information returns and
reports, if any, for the six most recent taxable years;
12.1.5 A copy of this Agreement and any and all amendments thereto together with executed
copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have
been executed;
12.1.6 Copies of the financial statements of the Company, if any, for the six most recent
Fiscal Years; and
12.1.6.1 The Company’s books and records as they relate to the
internal affairs of the Company for at least the current and past four Fiscal Years.
12.2 Delivery to Members and Inspection.
12.2.1 Each Member, manager and Economic Interest Owner has the right, upon reasonable request
for purposes reasonably related to the interest of the Person as Member, manager or Economic
Interest Owner, (all of which purpose[s] shall be set forth in the written request) to:
12.2.1.1 inspect and copy during normal business hours any of the Company records described in
Sections 12.1.1 through 12.1.6.1; and
12.2.1.2 obtain from the Company, promptly after their becoming available, a copy of the
Company’s federal, state, and local income tax or information returns for each Fiscal Year.
12.2.2 As and only to the extent allowed by § 17106(i) of the Corporations Code, any request,
inspection or copying by a Member or Economic Interest Owner under this Section 12.2 may be made by
that Person or that Person’s agent or attorney.
Operating Agreement for Xxxxxx Quality, LLC
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12.3 Annual Statements.
12.3.1 To the extent required by § 17106(e) of the Corporations Code, the Company shall cause
to be prepared at least annually, at Company expense, information relating to the Company that is
necessary for the preparation of the Member’s federal and state income tax returns. The Company
shall send or cause to be sent to each Member or Economic Interest Owner within 90 days after the
end of each taxable year such information as is necessary to complete federal and state income tax
or information returns, and, a copy of the Company’s federal, state, and local income tax or
information returns for that year.
12.3.2 The Company shall, at such times as is required by law, cause to be filed with the
California Secretary of State the statement required under California Corporations Code § 17060.
12.4 Filings. The Members, at Company expense, shall cause the income tax returns for
the Company to be prepared and timely filed with the appropriate authorities. The Members, at
Company expense, shall also cause to be prepared and timely filed, with appropriate federal and
state regulatory and administrative bodies, amendments to, or restatements of, the Articles and all
reports required to be filed by the Company with those entities under the Act or other then current
applicable laws, rules, and regulations. If the Company is required by the Act to execute or file
any document and, after demand, fails to do so within a reasonable period of time or refuses to do
so, any officer or Member may prepare, execute and file that document with the California Secretary
of State.
12.5 Tax Matters for the Company Handled by Tax Matters Partner. Subject to Section
12.6 below, the Members, by the vote of a Majority in Interest, shall from time to time cause the
Company to make such tax elections as they deem to be in the best interests of the Company and the
Members. For so long as FNIS is a Member, it shall be designated as “Tax Matters Partner” (as
defined in Code § 6231) and will serve as such so long as he is a Member, unless said designation
is changed by the affirmative vote or written consent of a Majority in Interest of the Members. The
Tax Matters Partners is authorized to act (at the Company’s expense) in connection with all
examination of the Company’s affairs by tax authorities, including resulting judicial and
administrative proceedings and to expend the Company funds for professional services and costs
associated therewith. The “Tax Matters Partner” shall oversee the Company tax affairs in the
overall best interests of the Company.
12.6 Code § 754 Election. Any Member has the right and authority to make any election,
if permitted by applicable law, to adjust the basis of Company property pursuant to Code Sections
754, 734(b) and 743(b), or comparable provisions of state or local law, in connection with
transfers of interests in the Company and Company distributions.
Operating Agreement for Xxxxxx Quality, LLC
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13. Dissolution and Winding Up.
13.1 Dissolution. The Company shall be dissolved, its assets shall be disposed
of, and its affairs wound upon the first to occur of the following:
13.1.1 the happening of any Dissolution Event;
13.1.2 the entry of a decree of judicial dissolution pursuant to § 17351 of the
Corporations Code; or
13.1.3 the vote or written consent of: (a) for so long as Xxxxxx Quality or Xxxxxx Trust
are Members, all of the Members; and (b) at any other time, by vote of a Majority in Interest
of the Members.
13.2 Certificate of Dissolution. As soon as possible following the occurrence of
any of the events specified in Section 13.1, the Members shall execute a Certificate of
Dissolution in such form as shall be prescribed by the California Secretary of State and file
the Certificate as required by the Act.
13.3 Winding Up. Upon the occurrence of any event specified in Section 13.1, the
Company 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 Members, or a Person
designated by a Majority in Interest of the Members, shall be responsible for overseeing the
winding up and liquidation of Company, shall take full account of the liabilities of Company
and assets, shall either cause its assets to be sold or distributed, and if sold (as promptly
as is consistent with obtaining the fair market value thereof), shall cause the proceeds, to
the extent sufficient, to be applied and distributed as provided in Section 13.5. The Persons
winding up the affairs of the Company 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 Company. The Members or other Person winding upon the affairs of the Company shall be
entitled to reasonable compensation for such services.
13.4 Distributions in Kind. Any non-cash asset distributed to one or more
Members shall first be valued at its fair market value to determine the Net Income or Net
Loss that would have resulted if such asset were sold for such value, such Net Income or Net
Loss shall then be allocated pursuant to Section 7, and the Members’ Capital Accounts shall
be adjusted to reflect such allocations. The amount distributed and charged to the Capital
Account of each Member receiving an interest in such distributed asset shall be the fair
market value of such interest (net of any liability secured by such asset that such Member
assumes or takes subject to). The fair market value of such asset shall be determined by the
Member receiving the asset; provided, however, in the latter case, if Members holding a
Majority in Interest object (ignoring the Percentage Interest of the Member receiving the
asset), the valuation shall be made by an independent appraiser (any such appraiser must be
recognized as an expert in valuing the type of asset involved) selected by said Majority in
Interest. The Member objecting to the valuation shall pay for the appraisal unless the
appraisal indicates a mid-range, value for the asset(s) in question that is, in the
aggregate, ten
Operating Agreement for Xxxxxx Quality, LLC
Page 30
percent (10%) or more above or below the contested value, in which case the Member setting
the value shall pay for the appraisal.
13.5 Order of Payments Upon Dissolution. Within a reasonable period of time
after the occurrence of any one of the events described in Section 13.1, the Company’s assets
and/or the proceeds from the sale of illiquid assets, shall, to the extent sufficient
therefor, shall be applied and distributed in the following order:
13.5.1 First, to the payment and discharge (or the adequate provision for payment and
discharge) of all of the Company’s debts and liabilities to creditors other than Members;
13.5.2 Second, to the payment and discharge of all of the Company’s debts and
liabilities to Members; and
13.5.3 The balance to each Member in accordance with their respective Capital Accounts,
after giving effect to all contributions, distributions, and allocations for all periods,
until each Member’s Capital Account is reduced to zero.
13.6 Payment of Liabilities. The payment of a debt or liability, whether the
whereabouts of the creditor is known or unknown, has been adequately provided for upon
dissolution of the Company if the payment has been provided for by either of the following
means:
13.6.1 Payment thereof has been assumed or guaranteed in good faith by one or more
financially responsible persons or by the United States government or any agency thereof, and
the provision, including the financial responsibility of the Person, was determined in good
faith and with reasonable care by the Members to be adequate at the time of any distribution
of the assets pursuant to this Section.
13.6.2 The amount of the debt or liability has been deposited as provided in § 2008 of
the California Corporations Code.
This Section 13.6 shall not prescribe the exclusive means of making adequate provision
for debts and liabilities.
13.7 Compliance with Regulations. All payments to the Members upon the winding
up and dissolution of the Company shall be strictly in accordance with the positive capital
account balance limitation and other requirements of Regulations § 1.704-1.
13.8 Limitations on Payments Made in Dissolution. Except as otherwise
specifically provided in this Agreement, each Member shall only be entitled to look to the
assets of Company for the return of his or her positive Capital Account balance and shall
have no recourse for his or her Capital Contribution and/or share of Net Incomes (upon
dissolution or otherwise) against any other Member except as expressly provided in Section
14.
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13.9 Certificate of Cancellation. The Person or Members who filed the Certificate of
Dissolution shall cause to be filed in the office of, and on a form prescribed by, the California
Secretary of State, a certificate of cancellation of the Articles upon the completion of the
winding up of the affairs of the Company.
13.10 No Action for Dissolution. Except as expressly permitted in this Agreement, no
Member shall take any voluntary action that directly causes the dissolution of the Company (whether
the dissolution is under this Section 13 or otherwise). The Members acknowledge that irreparable
damage would be done to the goodwill and reputation of the Company if any Member should bring an
action in court to dissolve the Company under circumstances where dissolution is not required by
Section 13.1. This Agreement has been drawn carefully to provide fair treatment of all parties and
equitable payment in liquidation. Accordingly, except where the Members have failed to liquidate
the Company as required by this Section 13, each Member hereby waives and renounces his or her
right to initiate legal action to seek the appointment of a receiver or trustee to liquidate the
Company or to seek a decree of judicial dissolution of the Company on the ground that (a) it is not
reasonably practicable to carry on the business of the Company in conformity with the Act or this
Agreement, or (b) dissolution is reasonably necessary for the protection of the rights or interests
of the complaining Member. Damages for breach of this Section 13.10 shall be monetary damages only
(and not specific performance), and the damages may be offset against distributions by the Company
to which such Member would otherwise be entitled.
14. Indemnification and Insurance.
14.1 Definitions. For purposes of this Section 14, the following definitions shall
apply:
14.1.1 “Expenses” shall include, without limitation, attorneys’ fees, disbursements and
retainers, court costs, transcript costs, fees of accountants, experts and witnesses, travel
expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery
service fees, and all other expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to
be a witness or other participant in a Proceeding.
14.1.2 “Proceeding” includes any action, suit, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing or other proceeding, whether civil, criminal,
administrative or investigative in nature, except a proceeding initiated by a Person pursuant to
Section 14.10.2 of this Agreement to enforce such Person’s rights under this Agreement.
14.2 Indemnification of Members and Officers.
14.2.1 The Company shall indemnify any Member or officer of the
Company who was or is a party or is threatened to be made a party to, or otherwise becomes
involved in, any Proceeding (other than a Proceeding by or in the right of the Company) by reason
of the fact that such Member or officer of the Company is or was an agent of the Company, against
all Expenses, amounts paid in settlement, judgments, fines, penalties and
Operating Agreement for Xxxxxx Quality, LLC
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ERISA excise taxes actually and reasonably incurred by or levied against such manager or officer
in connection with such Proceeding if it is determined as provided in Section 14.4 or by a court
of competent jurisdiction that such Member or officer acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the Company and, with
respect to any criminal Proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any Proceeding, whether by judgment, order, settlement or conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption
that a Member or officer of the Company did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the Company or, with respect
to any criminal Proceeding, that a Member or officer had reasonable cause to believe that his or
her conduct was unlawful.
14.2.2. The Company shall indemnify any Member or officer of the
Company who was or is a party or is threatened to be made a party to, or otherwise becomes
involved in, any Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that such Member or officer is or was an agent of the Company only against
Expenses actually and reasonably incurred by such Member or officer in connection with such
Proceeding if it is determined as provided in Section 14.4 or by a court of competent jurisdiction
that such Member or officer acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Company, except that no indemnification shall be
made with respect to any claim, issue or matter as to which such Member or officer shall have been
adjudged liable to the Company unless and only to the extent that the court in which such
Proceeding was brought (or other court of competent jurisdiction) shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances of the case, such
Member or officer is fairly and reasonably entitled to indemnification for such Expenses which
such court shall deem proper.
14.3 Successful Defense. Notwithstanding any other provision of this Agreement, to the
extent that a Member or officer of the Company has been successful on the merits or otherwise in
defense of any Proceeding referred to in Section 14.2, or in defense of any claim, issue or matter
therein, such manager or officer shall be indemnified against Expenses actually and reasonably
incurred in connection therewith.
14.4 Determination of Conduct. Any indemnification under Section 14.2 (unless ordered
by a court as referred to in such Section) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Member or officer of the Company is
proper in the circumstances because such Member or officer has met the applicable standard of
conduct set forth in Section 14.2. Such determination shall be made by the Members by a vote of a
majority-in-interest of Members, whether or not constituting a quorum, who were not parties to such
Proceeding.
14.5 Payment of Expenses in Advance. Expenses incurred by a Member or officer of the
Company in connection with a Proceeding shall be paid by the Company in advance of the final
disposition of such Proceeding upon receipt of a written undertaking by or on behalf of such Member
or officer to repay such amount if it shall ultimately be determined that such Member or
Operating Agreement for Xxxxxx Quality, LLC
Page 33
officer is not entitled to be indemnified by the Company as authorized in this Section 14, with
such undertaking being secured by the Member’s entire interest in the Company, if applicable.
14.6 Indemnification of Other Agents. The Company may, but shall not be obligated to,
indemnify any Person (other than a Member or officer of the Company) who was or is a party or is
threatened to be made a party to, or otherwise becomes involved in, any Proceeding (including any
Proceeding by or in the right of the Company) by reason of the fact that such Person is or was an
agent of the Company (including Members who are not officers of the Company), against all Expenses,
amounts paid in settlement, judgments, fines, penalties and ERISA excise taxes actually and
reasonably incurred by such Person in connection with such Proceeding under the same circumstances
and to the same extent as is provided for or permitted in this Section 14 with respect to a Member
or officer of the Company.
14.7 Indemnity Not Exclusive. The indemnification and advancement of Expenses provided
by, or granted pursuant to, the provisions of this Section 14, shall not be deemed exclusive of any
other rights to which any Person seeking indemnification or advancement of Expenses may be entitled
under any agreement, vote of Members, or otherwise, both as to action in such Person’s capacity as
an agent of the Company and as to action in another capacity while serving as an agent. All rights
to indemnification under this Section 14 shall be deemed to be provided by a contract between the
Company and each Member and officer, if any, of the Company who serves in such capacity at any time
while this Agreement and relevant provisions of the Act and other applicable law, if any are in
effect. Any repeal or modification hereof or thereof shall not affect any such rights then
existing.
14.8 Insurance. The Company shall have the power to purchase and maintain insurance on
behalf of any Person who is or was an agent of the Company against any liability asserted against
such Person and incurred by such Person in any such capacity, or arising out of such Person’s
status as an agent, whether or not the Company would have the power to indemnify such Person
against such liability under the provisions of this Section 14 or of Corporations Code § 17155. in
the event a person shall receive payment from any insurance carrier or from the plaintiff in any
action against such Person with respect to indemnified amounts after payment on account of all or
part of such indemnified amounts having been made by the Company pursuant to this Section 14, such
Person shall reimburse the Company for the amount, if any, by which the sum of such payment by such
insurance carrier or such plaintiff and payments by the Company to such Person exceed such
indemnified amounts; provided, however, that such portions, if any, of such insurance proceeds that
are required to be reimbursed to the insurance carrier under the terms of its insurance policy
shall not be deemed to be payments to such Person hereunder. In addition, upon payment of
indemnified amounts under the terms and conditions of this Agreement, the Company shall be
subrogated to such Person’s rights against any insurance carrier with respect to such indemnified
amounts (to the extent permitted under such insurance policies). Such right of subrogation shall be
terminated upon receipt by the Company of the amount to be reimbursed by such Person pursuant to
the first sentence of this Section 14.8.
Operating Agreement for Xxxxxx Quality, LLC
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14.9 Heirs, Executors and Administrators. The indemnification and advancement
of Expenses provided by, or granted pursuant to, this Section 14 shall, unless otherwise
provided when authorized or ratified, continue as to a Person who has ceased to be an agent
of the Company and shall inure to the benefit of such Person’s heirs, executors and
administrators.
14.10 Right to Indemnification Upon Application.
14.10.1 Any indemnification or advance under Section 14.2 or Section 14.5 shall be
made promptly, and in no event later than sixty (60) days, after the Company’s receipt of
the written request of a Member or officer of the Company therefor, unless, in the case of
an indemnification, a determination shall have been made as provided in Section 14.4 that
such Member or officer has not met the relevant standard for indemnification set forth in
Section 14.2.
14.10.2 The right of a Person to indemnification or an advance of Expenses as provided
by this Section 14 shall be enforceable in any court of competent jurisdiction. Neither the
failure by the Members of the Company or its independent legal counsel to have made a
determination that indemnification or an advance is proper in the circumstances, nor any
actual determination by the Members of the Company or its independent legal counsel that
indemnification or an advance is not proper, shall be a defense to the action or create a
presumption that the relevant standard of conduct has not been met. In any such action, the
Person seeking indemnification or advancement of Expenses shall be entitled to recover from
the Company any and all expenses of the types described in the definition of Expenses in
Section 14.1.1 of this Agreement actually and reasonably incurred by such Person in such
action, but only if he or she prevails therein.
14.11 Limitations on Indemnification. No payments pursuant to this Agreement
shall be made by the Company:
14.11.1 To indemnify or advance funds to any Person with respect to a Proceeding
initiated or brought voluntarily by such Person and not by way of defense, except as
provided in Section 14.10.2 with respect to a Proceeding brought to establish or enforce a
right to indemnification under this Agreement, otherwise than as required under California
law, but indemnification or advancement of Expenses may be provided by the Company in
specific cases if a determination is made in the manner provided in Section 14.4 that it is
appropriate; or
14.11.2 If a court of competent jurisdiction finally determines that any
indemnification or advance of Expenses hereunder is unlawful.
14.12 Partial Indemnification. If a Person is entitled under any provision of
this Section 14 to indemnification by the Company for a portion of Expenses, amounts paid
in settlement, judgments, fines, penalties incurred by such Person in any Proceeding but
not, however, for the total amount thereof, the Company shall nevertheless indemnify such
Person for the portion of such Expenses, amounts paid in settlement, judgments, fines,
penalties or ERISA excise taxes to which such Person is entitled.
Operating Agreement for Xxxxxx Quality, LLC
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15. Investment Representations. Each Member hereby represents and warrants to, and agrees
with the other Members, and the Company as follows:
15.1 Preexisting Relationship or Experience. (i) He or she has a preexisting personal
or business relationship with the Company or one or more of its officers, other Members or control
persons or (ii) by reason of his or her business or financial experience, or by reason of the
business or financial experience of his or her financial advisor who is unaffiliated with and who
is not compensated, directly or indirectly, by the Company or any affiliate or selling agent of the
Company, he or she is capable of evaluating the risks and merits of an investment in the Membership
Interest and of protecting his or her own interests in connection with this investment.
15.2 No Advertising. He or she has not seen, received, been presented with, or been
solicited by any leaflet, public promotional meeting, newspaper or magazine article or
advertisement, radio or television advertisement, or any other form of advertising or general
solicitation with respect to the sale of the Membership Interest.
15.3 Investment Intent. He or she is acquiring the Membership Interest for investment
purposes for his or her own account only and not with a view to or for sale in connection with any
distribution of all or any part of the Membership Interest. No other person will have any direct or
indirect beneficial interest in or right to the Membership Interest.
15.4 Accredited Investor. He or she is an “accredited investor” as defined in Rule
501(c) promulgated by the Securities and Exchange Commission (the “SEC”).
15.5 Residency. He or she is a resident of the state of California.
15.6 Economic Risk. He or she is financially able to bear the economic risk of an
investment in the Membership Interest, including the total loss thereof.
15.7 No Registration of Membership Interest. He or she acknowledges that the
Membership interest has not been registered under the Securities Act of 1933, as amended (the
“Securities Act”), or qualified under the California Corporate Securities Law of 1968, as amended,
or any other applicable blue sky laws in reliance, in part, on her representations, warranties, and
agreements herein.
15.8 Membership Interest in Restricted Security. He or she understands that the
Membership Interest is a “restricted security” under the Securities Act in that the Membership
Interest will be acquired from the Company in a transaction not involving a public offering, and
that the Membership Interest may be resold without registration under the Securities Act only in
certain limited circumstances and that otherwise the Membership Interest must be held indefinitely.
In this connection, he or she understands the resale limitations imposed by the Securities Act and
is familiar with SEC Rule 144, as presently in effect, and the conditions which must be met in
order for that Rule to be available for resale of “restricted securities,” including the
requirement that the securities must be held for at least two years after purchase thereof from the
Company prior to
Operating Agreement for Xxxxxx Quality, LLC
Page 36
resale (three years in the absence of publicly available information about the Company) and the
condition that there be available to the public current information about the Company under
certain circumstances. He or she understands that the Company has not made such information
available to the public and has no present plans to do so.
15.9 No Obligation to Register. He or she represents, warrants, and agrees that the
Company is under no obligation to register or qualify the Membership Interest under the Securities
Act or under any state securities law, or to assist him or her in complying with any exemption from
registration and qualification.
15.10 No Disposition in Violation of Law. Without limiting the representations set
forth above, he or she will not make any disposition of all or any part of the Membership Interest
which will result in the violation by her or by the Company of the Securities Act, the California
Corporate Securities Law of 1968, or any other applicable securities laws. Without limiting the
foregoing, he or she agrees not to make any disposition of all or any part of the Membership
Interest unless and until:
15.10.1 There is then in effect a registration statement under the Securities Act covering
such proposed disposition and such disposition is made in accordance with such registration
statement and any applicable requirements of state securities laws; or
15.10.2 (i) He or she has notified the Company of the proposed disposition and has furnished
the Company with a detailed statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company she has furnished the Company with a written
opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require
registration of any securities under the Securities Act or the consent of or a permit from
appropriate authorities under any applicable state securities law.
15.11 Legends. He or she understands that the certificates (if any) evidencing the
Membership Interest may bear one or all of the following legends:
15.11.1 “THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR
HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION
IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS FURTHER SUBJECT TO
OTHER RESTRICTIONS, TERMS, AND CONDITIONS WHICH ARE SET FORTH HEREIN.”
15.11.2 Any legend required by applicable state securities laws.
Operating Agreement for Xxxxxx Quality, LLC
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15.12 Investment Risk. He or she acknowledges that the Membership Interest is a
speculative investment which involves a substantial degree of risk of loss by him or her of his or
her entire investment in the Company, that he or she understands and takes full cognizance of the
risk factors related to the purchase of the Membership Interest, and that the Company is newly
organized and has no financial or operating history.
15.13 Investment Experience. He or she is an experienced investor in unregistered and
restricted securities of limited liability companies and are speculative and high-risk ventures.
15.14 Restrictions on Transfer ability. He or she acknowledges that there are
substantial restrictions on the transferability of the Membership Interest pursuant to this
Agreement, that there is no public market for the Membership Interest and none is expected to
develop, and that, accordingly, it may not be possible for him or her to liquidate his or her
investment in the Company.
15.15 Information Reviewed. He or she has received and reviewed all information he or
she considers necessary or appropriate for deciding whether to purchase the Membership Interest. He
or she has had an opportunity to ask questions and receive answers from the Company, the other
Members and employees regarding the terms and conditions of purchase of the Membership Interest and
regarding the business, financial affairs, and other aspects of the Company and has further had the
opportunity to obtain all information (to the extent the Company possesses or can acquire such
information without unreasonable effort or expense) which he or she deems necessary to evaluate the
investment and to verify the accuracy of information otherwise provided to him or her.
15.16 No Representations By Company. Neither any Member, any agent or employee of the
Company or of any Member, or any other Person has at any time expressly or implicitly represented,
guaranteed, or warranted to him or her that he or she may freely transfer the Membership Interest,
that a percentage of profit and/or amount or type of consideration will be realized as a result of
an investment in the Membership Interest that past performance or experience on the part of the
Member or their Affiliates or any other person in any way indicates the predictable results of the
ownership of the Membership Interest or of the overall Company business, that any cash
distributions from Company 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 Company.
15.17 Consultation with Attorney. He or she has been advised to consult with his or
her own attorney regarding all legal matters concerning an investment in the Company and the tax
consequences of participating in the Company, and has done so, to the extent he or she considers
necessary.
15.18 Tax Consequences. He or she acknowledges that the tax consequences to his or her
of investing in the Company will depend on his or her particular circumstances, and neither the
Company, the Members, nor the partners, shareholders, members, managers, agents, officers,
directors, employees, Affiliates, or consultants of any of them will be responsible or liable for
the
Operating Agreement for Xxxxxx Quality, LLC
Page 38
tax consequences to him or her own advisers with respect to the tax consequences of this
investment.
15.19 No Assurance of Tax Benefits. He or she acknowledges that there can be no
assurance that the Code or the Regulations will be amended or interpreted in the future in such a
manner so as to deprive the Company and the Members of some or all of the tax benefits they might
now receive, nor that some of the deductions claimed by the Company or the allocations of items of
income, gain, loss, deduction, or credit among the Members may not be challenged by the Internal
Revenue Service.
15.20 Indemnity. He or she shall indemnify and hold harmless the Company, each and
every other Member, and any officers, directors, shareholders, managers, members, employees,
partners, agents, attorneys, registered representatives, and control persons of any such entity who
was or is a party or is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason
of or arising from any misrepresentation or misstatement of facts or omission to represent or state
facts made by him or her including, without limitation, the information in this Agreement, against
losses, liabilities, and expenses of the Company, each and every other Member, and any officers,
directors, shareholders, managers, members, employees, partners, attorneys, accountants, agents,
registered representatives, and control persons of any such Person (including attorneys’ fees,
judgments, fines, and amounts paid in settlement, payable as incurred) incurred by such Person in
connection with such action, suit, proceeding, or the like.
16. Mediation of Disputes.
16.1 Agreement to Use Procedure. The Members have entered into this Agreement in good
faith and in the belief that it is mutually advantageous to them. It is with that same spirit of
cooperation that they pledge to attempt to resolve any dispute amicably toward the objective of
avoiding litigation. Accordingly, the Members agree if any dispute arises between them relating to
this Agreement (the “Dispute”), they will first utilize the procedures specified in this Section
16 (the “Procedure ”)before any Additional Proceedings. The Procedure shall be used in connection
with any alleged breach of this Agreement as well as any deadlock in voting or disagreement
regarding the operations of the Company.
16.2 Initiation of Procedure. The Member seeking to initiate the Procedure (the
“Initiating Member”) will give written notice to the other Member(s). The notice must describe in
general terms the nature of the Dispute and the Initiating Member’s claim for relief. Additionally,
the notice must identify one or more individuals with authority to settle the Dispute on the
Initiating Member’s behalf. The Members receiving the notice (collectively, the “Responding Member”
whether one or more) will have five business days within which to designate by written notice to
the Initiating Member, one or more individuals with authority to settle the dispute on the
Responding Member’s behalf. The individuals so designated will be known as the “Authorized
Individuals.” The Responding Member may authorize himself or herself as an Authorized Individual.
The Initiating Member and the Responding Member will collectively be referred to as the “Disputing
Members” or individually “Disputing Member.”
Operating Agreement for Xxxxxx Quality, LLC
Page 39
16.3 Direct Negotiations. The Authorized Individuals may investigate the Dispute as
they deem appropriate. But they agree to promptly, and in no event later than 30 days from the date
of the Initiating Member’s written notice, meet to discuss the Dispute’s resolution. The Authorized
Individuals will meet at the times and places and with the frequency as they may agree. If the
Dispute has not been resolved within 30 days from their initial meeting date, the Disputing Members
will cease direct negotiations and will submit the Dispute to mediation in accordance with the
following procedure.
16.4 Mediator Selection. The Authorized Individuals will have five business days from
the date they cease direct negotiations to submit to each other a written list of acceptable
qualified attorney-mediators not affiliated with any Member. Within five days from the date the
list is received, the Authorized Individuals will rank the mediators in numerical order of
preference and exchange the rankings. If one or more names are on both lists, the highest-ranking
person will be designated as the mediator. If no mediator has been selected under this procedure,
the Disputing Members agree jointly to request a State or Federal District Judge of their choosing
to supply within ten business days a list of potential qualified attorney-mediators. If they cannot
agree upon a State or Federal Judge, the Local Administrative Judge for the county in which the
Partnership’s principal office is located may supply the list. Within five business days from the
date the list is received, the Authorized Individuals will again rank the proposed mediators in
numerical order of preference and will simultaneously exchange the list and will select as the
mediator the individual receiving the highest combined ranking. If the mediator is not available to
serve, they will proceed to contact the mediator who was next highest in ranking until they are
able to select a mediator.
16.5 Mediation Time and Place. In consultation with the mediator selected, the
Authorized Individuals will promptly designate a mutually convenient time and place for the
mediation. Unless circumstances require otherwise, the time for mediation may not be later than 45
days after selecting the mediator.
16.6 Information Exchange. If any Disputing Member to this Agreement has substantial
need for information in another Disputing Member’s possession in order to prepare for the
mediation, all Disputing Members will attempt in good faith to agree to procedures to expeditiously
exchange the information, with the mediator’s help if required.
16.7 Summary of Views. At least seven days before the first scheduled mediation
session, each Disputing Member will deliver to the mediator and to the other Disputing Members a
concise written summary (no more than ten pages) of its views on the matter in Dispute and the
other matters required by the mediator. The mediator may also request that a confidential issue
paper be submitted by each Disputing Member to him or her.
16.8 Parties to be Represented. In the mediation, each Disputing Member will be
represented by an Authorized Individual and may be represented by counsel. In addition, each
Disputing Member may, with the mediator’s permission, bring the additional Persons as needed to
respond to questions, contribute information, and participate in the negotiations.
Operating Agreement for Xxxxxx Quality, LLC
Page 40
16.9 Conduct of Mediation.
16.9.1 Mediation Format. The Mediator will determine the format for the meetings. The
format must be designed to assure that:
16.9.1.1 both the mediator and the Authorized Individuals have an
opportunity to hear an oral presentation of each Disputing Member’s views on the matter in dispute;
and
16.9.1.2 the authorized parties attempt to negotiate to resolve the
matter in dispute, with or without the assistance of counsel or others, but with the mediator’s
assistance.
16.9.2 Commitment to Participate in Mediation in Good Faith. To this end, the mediator
is authorized to conduct both joint meetings and separate private caucuses with the Disputing
Members. The mediation session will be private. The mediator will keep confidential all information
learned in private caucus with any Disputing Member unless specifically authorized by the Disputing
Member to disclose the information to the other Disputing Member. The Disputing Members commit to
participate in the proceedings in good faith with the intention of resolving the Dispute if at all
possible.
16.10 Termination of Procedure.
16.10.1 Procedure to Terminate Mediation. The Disputing Members agree to participate
in the mediation procedure to its conclusion. The mediation will be terminated by:
16.10.1.1 executing a settlement agreement by the Disputing Members;
16.10.1.2 declaring to the mediator that the mediation is terminated; or
16.10.1.3 a Disputing Member declaring in writing that the mediation process is terminated
when one half-day’s mediation session is concluded.
16.10.2 If Dispute Is Not Resolved. Even if the mediation is terminated without the
Dispute’s resolution, the Disputing Members agree not to terminate negotiations and not to commence
any Additional Proceedings before five days following the mediation expire. Any Disputing Member
may, however, commence Additional Proceedings within the five-day period if the Dispute could be
barred by any applicable statute of limitations.
16.11 Additional Proceedings. The parties agree to participate in good faith in the
ADR to its conclusion. If the Disputing Members are not successful in resolving the dispute through
the ADR, then the Disputing Members agree that the dispute will be settled as otherwise allowed by
law (“Additional Proceedings”).
Operating Agreement for Xxxxxx Quality, LLC
Page 41
16.12 Mediation Fees; Disqualification. The mediator’s fees and expenses will be
shared equally by the Disputing Members. The mediator will be disqualified as a witness,
consultant, expert, or counsel for any Disputing Member with respect to the Dispute and any related
matters.
16.13 Confidentiality. Mediation is a compromise negotiation for purposes of Federal
and State Rules of Evidence and constitutes privileged communication under California law. The
entire mediation process is confidential, and no stenographic, visual, or audio record will be
made. All conduct, statements, promises, offers, views, and opinions, whether oral or written, made
in the mediation’s course by any Disputing Member, their agents, employees, representatives or
other invitees and by the mediator are confidential and will, in addition and where appropriate, be
deemed privileged. The conduct, statements, promises, offers, views, and opinions will not be
discoverable or admissible for any purpose, including impeachment, in any litigation or other
proceeding involving the parties. It will not be disclosed to anyone not any Partner’s agent,
employee, expert, witness, or representative. Evidence otherwise discoverable or admissible is not,
however, excluded from discovery or admission as a result of its use in mediation.
17. Miscellaneous.
17.1 Complete Agreement. This Agreement and the Articles constitute the complete and
exclusive statement of agreement among the Members with respect to the subject matter herein and
therein and replace and supersede all prior written and oral agreements or statements by and among
the Members or any of them. No representation, statement, condition or warranty not contained in
this Agreement or the Articles will be binding on the Members or have any force or effect
whatsoever.
17.2 Binding Effect. Subject to the provisions of this Agreement relating to
transferability, this Agreement will be binding upon and inure to the benefit of the Members, and
their respective successors and assigns.
17.3 Parties in Interest. Except as expressly provided in the Act, nothing in this
Agreement shall confer any rights or remedies under or by reason of this Agreement on any Persons
other than the Members and their respective successors and assigns nor shall anything in this
Agreement relieve or discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third person any right of subrogation or action over or
against any party to this Agreement.
17.4 Pronouns; Statutory References. All pronouns and all variations thereof shall be
deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which
they are used may require. Any reference to the Code, the Regulations, the Act, Corporations Code
or other statutes or laws will include all amendments, modifications, or replacements of the
specific sections and provisions concerned.
Operating Agreement for Xxxxxx Quality, LLC
Page 42
17.5 Headings. All headings herein are inserted only for convenience and ease of
reference and are not to be considered in the construction or interpretation of any provision
of this Agreement.
17.6 Interpretation. In the event any claim is made by any Member relating to
any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or
persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at
the request of a particular Member or his or her counsel.
17.7 References to this Agreement. Numbered or lettered articles, sections and
subsections herein contained refer to articles, sections and subsections of this Agreement
unless otherwise expressly stated.
17.8 Jurisdiction. Each Member hereby consents to the exclusive jurisdiction of
the state and federal courts sitting in San Diego, California in any action on a claim
arising out of, under or in connection with this Agreement or the transactions contemplated
by this Agreement. Each Member further agrees that personal jurisdiction over him or her
maybe effected by service of process by registered or certified mail addressed as provided in
Section 17.12 of this Agreement, and that when so made shall be as if served upon him or her
personally within the State of California.
17.9 Exhibits. All Exhibits attached to this Agreement are incorporated and
shall be treated as if set forth herein.
17.10 Severability. If any provision of this Agreement or the application of
such provision to any person or circumstance shall be held invalid, the remainder of this
Agreement or the application of such provision to persons or circumstances other than those
to which it is held invalid shall not be affected thereby.
17.11 Additional Documents and Acts. Each Member agrees to execute and deliver
such additional documents and instruments and to perform such additional acts as may be
necessary or appropriate to effectuate, carry out and perform all of the terms, provisions,
and conditions of this Agreement and the transactions contemplated hereby.
17.12 Notices. Any notice to be given or to be served upon the Company or any
party hereto in connection with this Agreement must be in writing (which may include
facsimile) and will be deemed to have been given and received when delivered to the address
specified by the party to receive the notice. Such notices will be given to a Member at the
address specified in Exhibit A hereto. Any party may, at any time by giving five (5)
days’ prior written notice to the other parties, designate any other address in substitution
of the foregoing address to which such notice will be given.
17.13 Amendments. All amendments to this Agreement will be in writing and signed
by all of the Members; provided, however, that any voting provision that relates to a matter
in which
Operating Agreement for Xxxxxx Quality, LLC
Page 43
the vote required to approve or reject the item, is more than said percentage, then the amendment
must be approved by that greater vote percentage.
17.14 Reliance on Authority of Person Signing Agreement. If a Member is not a natural
person, neither the Company nor any Member will (a) be required to determine the authority of the
individual signing this Agreement to make any commitment or undertaking on behalf of such entity or
to determine any fact or circumstance bearing upon the existence of the authority of such
individual or (b) be responsible for the application or distribution of proceeds paid or credited
to individuals signing this Agreement on behalf of such entity.
17.15 Waiver of Action for Partition. No Member or Economic Interest Owner has any
interest in specific property of the Company. Without limiting the foregoing, each Member and
Economic Interest Owner irrevocably waives during the term of the Company any right that he or she
may have to maintain any action for partition with respect to the property of the Company.
17.16 Multiple Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall constitute one and
the same instrument.
17.17 Attorney Fees. In the event that any dispute between the Company and the Members
or among the members should result in litigation or arbitration, the prevailing party in such
dispute shall be entitled to recover from the other party all reasonable fees, costs and expenses
of enforcing any right of the prevailing party, including without limitation, reasonable attorneys’
fees and expenses.
17.18 Time is of the Essence. All dates and times in this Agreement are of the
essence.
17.19 Governing Law. The laws of the State of California shall govern the validity of
this Agreement, the construction of its terms, and the interpretation of the rights and duties of
the Members.
17.20 Remedies Cumulative. The remedies under this Agreement are cumulative and shall
not exclude any other remedies to which any person may be lawfully entitled.
(the balance of this page is intentionally blank)
(the signature page follows)
(the signature page follows)
Operating Agreement for Xxxxxx Quality, LLC
Page 44
IN WITNESS WHEREOF, the Members of Xxxxxx Quality, LLC, a California limited liability
company, have executed this Agreement, effective as of the Effective Date.
Xxxxxx Family Trust dated April 4, 1997, Trust 3 |
||||
5/28/02 | /s/ Xxxxxxx X. Xxxxxx | |||
Date | By: Xxxxxxx X. Xxxxxx, Co-trustee | |||
5/28/02 | /s/ Xxxxxxxx Xxxxxx | |||
Date | By: Xxxxxxxx Xxxxxx, Co-trustee | |||
Xxxxxx Quality Loan Services, a California corporation |
||||
5/28/02 | /s/ Xxxx Xxxxxx | |||
Date | By: Xxxx Xxxxxx | |||
Its: President | ||||
Operating Agreement for Xxxxxx Quality, LLC
Page 45
EXHIBIT A
to
Operating Agreement for Xxxxxx Quality, LLC
to
Operating Agreement for Xxxxxx Quality, LLC
MEMBER’S
|
INITIAL | CAPITAL | CONTRIBUTION; |
PERCENTAGE INTERESTS AND ADDRESSES
Member’s Capital | Member’s | |||||||||
Member’s Name | Member’s Address | Contribution | Percentage Interest | |||||||
Xxxxxxx X. Xxxxxx
and Xxxxxxxx
Xxxxxx, as Trustees
of the Xxxxxx
Family Trust dated
April 4, 1997,
Trust 3
|
0000 Xxxxxxxxx Xxxx., Xxxxxxxx XX 00000 | $ | 150,000 | 1 | % | |||||
Xxxxxx Quality Loan
Services, a
California
corporation
|
0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxx, XX 00000 | See Note 1 | 99 | % |
Note 1: | The assets described on Schedule 1. |
Members
Xxxxxx Family Trust dated
April 4, 1997, Trust 3 |
||||
5/28/02 | /s/ Xxxxxxx X. Xxxxxx | |||
Date | By: Xxxxxxx X. Xxxxxx, Co-trustee | |||
5/28/02 | /s/ Xxxxxxxx Xxxxxx | |||
Date | By: Xxxxxxxx Xxxxxx, Co-trustee | |||
Xxxxxx Quality Loan Services, a California corporation |
||||
5/28/02 | /s/ Xxxx Xxxxxx | |||
Date | By: Xxxx Xxxxxx | |||
Its: President | ||||
This Exhibit or a copy of it should be prepared and signed by the Members each time an
additional Capital Contribution is made to the Company and/or each time a transfer of a Membership
Interest is made by Members in order to keep Membership Interests up to date for voting and
distribution purposes. Each revised Exhibit should be attached to this Agreement and made available
for inspection by each Member.
Exhibit A to Xxxxxx Quality, LLC Operating Agreement
Member’s Initial Capital Contribution; Percentage Interests and Addresses
ASSIGNMENT
OF 55% LLC MEMBERSHIP INTEREST
For value received, receipt and sufficiency of which is acknowledged, the undersigned hereby
sells, assigns and transfers to Fidelity National Information Services, Inc., a Delaware
corporation (“FNIS”), a fifty-five percent (55%) membership interest and percentage interest in
and to Xxxxxx Quality, LLC, a California limited liability company (the “LLC”).
The undersigned hereby appoints the Secretary of Xxxxxx Quality as Attorney to transfer the
said membership and percentage interest on the books of Xxxxxx Quality, with full power of
substitution in the premises. This Assignment of LLC Membership Interest is signed pursuant to a
Membership Purchase Agreement by and between the undersigned, its sole shareholder, and FNIS.
Xxxxxx Quality Loan Services, a California corporation |
||||
5/28/02 | /s/ Xxxxxxx X. Xxxxxx | |||
Date | By: Xxxxxxx X. Xxxxxx | |||
Its: President | ||||
AGREEMENT
TO BE BOUND TO OPERATING AGREEMENT
By its signature below, the undersigned acknowledges delivery of the foregoing Assignment of
LLC Membership Interest and agrees to be bound to the Operating Agreement for Xxxxxx Quality, LLC,
a copy of which is attached hereto as Exhibit A (the “Operating Agreement”), to the same
extent as if it were a signatory thereto.
Fidelity National Information Solutions, Inc. a Delaware corporation |
||||
By: | ||||
Date | Its: | |||
ACKNOWLEDGEMENT
OF ADMISSION TO XXXXXX QUALITY, LLC
The undersigned approve the admission of FNIS as a member of Xxxxxx Quality, LLC, holding a
fifty-five percent Percentage Interest (as that term is defined in the Operating Agreement) in
that LLC, and acknowledge that FNIS is now a member of that LLC.
5/28/02 | /s/ Xxxxxxx X. Xxxxxx | |||
Date | Xxxxxxx X. Xxxxxx, as President of Xxxxxx | |||
Corporation, as President of Xxxxxx LLC, and as Co-Trustee of the Xxxxxx Family Trust date April 4, 1997, Trust 3 (each separately) | ||||
5/28/02 | /s/ Xxxxxxxx Xxxxxx | |||
Date | Xxxxxxxx Xxxxxx, as Co-Trustee of the Xxxxxx Family Trust dated April 4, 1997, Trust 3 | |||