1
OPERATING AGREEMENT
OF
MILFAM LLC,
AN OHIO LIMITED LIABILITY COMPANY
This operating agreement is entered into as of December 10, 1996 by
Xxxxx X. Xxxxxx, III, the Irrevocable Trust U/A Xxxxxxxxx X. Xxxxxx dated March
26, 1991, and the Irrevocable Trust U/A Xxxxx X. Xxxxxx, III dated December 31,
1991.
RECITALS
The Company was established as an Ohio limited liability company
pursuant to articles of organization filed by Xxxxxx X. Xxxxxx and Xxxxxxx X.
Xxxxxxxxxx as the initial members. Xx. Xxxxxx and Xx. Xxxxxxxxxx have resigned
as members and the parties hereto have been admitted as members.
The parties have agreed to organize and operate a limited liability
company under the laws of the State of Ohio in accordance with the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the parties,
intending legally to be bound, agree as follows:
SECTION I
DEFINED TERMS
The following capitalized terms shall have the meanings specified in
this Section I. Other terms are defined in this Agreement, and, throughout this
Agreement, those terms shall have the meanings respectively ascribed to them.
"Act" means the Ohio Limited Liability Company Act, Chapter 1705 Ohio
Revised Code as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Interest
Holder, the deficit balance, if any, in the Interest Holder's Capital Account as
of the end of the relevant taxable year, after giving effect to the following
adjustments:
(i) the deficit shall be decreased by the amounts which the
Interest Holder is obligated to restore pursuant to
Section 4.4(b), or is deemed obligated to restore
pursuant to Regulation Section 1.704-1(b)(2)(ii)(c); and
(ii) the deficit shall be increased by the items described in
Regulation Section 1.704-1(b)(2)(ii)-(d)(4), (5), and
(6).
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"Agreement" means this Agreement, as amended from time to time.
"Capital Account" means the account to be maintained by the Company for
each Interest Holder in accordance with the following provisions:
(i) an Interest Holder's Capital Account shall be credited
with the Interest Holder's Capital Contributions, the
amount of any Company liabilities assumed by the
Interest Holder (or which are secured by Company
property distributed to the Interest Holder), the
Interest Holder's distributive share of Profit, and any
item in the nature of income or gain specially allocated
to the Interest Holder pursuant to the provisions of
Section IV (other than Section 4.3(c)); and
(ii) an Interest Holder's Capital Account shall be debited
with the amount of money and the fair market value of
any Company property distributed to the Interest Holder,
the amount of any liabilities of the Interest Holder
assumed by the Company (or which are secured by property
contributed by the Interest Holder to the Company), the
Interest Holder's distributive share of Loss, and any
item in the nature of expenses or losses specially
allocated to the Interest Holder pursuant to the
provisions of Section IV (other than Section 4.3(c)).
If any Membership Interest is transferred pursuant to the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent the Capital Account is attributable to the transferred Membership
Interest. If the book value of Company property is adjusted pursuant to Section
4.3(c), the Capital Account of each Membership Interest Holder shall be adjusted
to reflect the aggregate adjustment in the same manner as if the Company had
recognized gain or loss equal to the amount of such aggregate adjustment. It is
intended that the Capital Accounts of all Interest Holders shall be maintained
in compliance with the provisions of Regulation Section 1.704-1(b), and all
provisions of this Agreement relating to the maintenance of Capital Accounts
shall be interpreted and applied in a manner consistent with that Regulation.
"Capital Contribution" means the total amount of cash and the fair
market value of any other assets contributed (or deemed contributed under
Regulation Section 1.704-1(b)(2)(iv)(d)) to the Company by a Member, net of
liabilities assumed or to which the assets are subject.
"Cash Flow" means all cash funds derived from operations of the Company
(including interest received on reserves), without reduction for any non-cash
charges, but less cash funds used to pay current operating expenses and to pay
or establish reasonable reserves for future expenses, debt repayments, capital
improvements, and replacements as determined by the Manager. Cash Flow shall be
increased by the reduction of any reserve previously established.
"Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law.
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"Company" means the limited liability company formed in accordance with
this Agreement.
"Family Member" means Xxxxxxxxx Xxxx and any of her descendants and any
trusts for their benefit.
"Interest Holder" means any Person who holds a Membership Interest,
whether as a Member or an unadmitted assignee of a Member.
"Involuntary Transfer" means, with respect to any Interest Holder, the
transfer of any interest in the Company upon death, divorce, insolvency,
bankruptcy or other proceeding with respect to creditors.
"Involuntary Withdrawal" means, with respect to any Member, the
occurrence of any of the following events:
(i) the Member makes an assignment for the benefit of
creditors;
(ii) the Member files a voluntary petition of bankruptcy;
(iii) the Member is adjudged bankrupt or insolvent;
(iv) the Member files a petition or answer seeking for the
Member any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar
relief under any statute, law, or regulation;
(v) the Member files an answer or other pleading admitting
or failing to contest the material allegations of a
petition filed against the Member in any proceeding
described in Subsection (iv);
(vi) any proceeding against the Member seeking
reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any
statute, law, or regulation, continues for one hundred
twenty (120) days after the commencement thereof, or the
appointment of a trustee, receiver, or liquidator for
the Member or all or any substantial part of the
Member's properties without the Member's agreement or
acquiescence, which appointment is not vacated or stayed
for ninety (90) days or, if the appointment is stayed,
for ninety (90) days after the expiration of the stay
during which period the appointment is not vacated;
(vii) if the Member is an individual, the Member's death or
adjudication by a court of competent jurisdiction as
incompetent to manage the Member's person or property;
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(viii) if the Member is acting as a Member by virtue of being a
trustee of a trust, the termination of the trust;
(ix) if the Member is a partnership or another limited
liability company, the dissolution and commencement of
winding up of the partnership or limited liability
company;
(x) if the Member is a corporation, the dissolution of the
corporation or the revocation of its charter; or
(xi) if the Member is an estate, the distribution by the
fiduciary of the estate's entire interest in the limited
liability company.
"Manager" is the Person designated as such in Section 5.1 and any
successors thereto. If there is more than one Manager, the term "Manager" shall
include all such persons as the context requires.
"Member" means each Person signing this Agreement and any Person who
subsequently is admitted as a Member of the Company.
"Member Loan Nonrecourse Deductions" means any Company deductions that
would be Nonrecourse Deductions if they were not attributable to a loan made or
guaranteed by a Member within the meaning of Regulation Section 1.704-2(i).
"Membership Interest" means an Interest Holder's share of the Profits
and Losses of, and the right to receive distributions from, the Company.
"Membership Rights" means all of the rights of a Member in the Company,
including a Member's: (i) Membership Interest; and (ii) the rights granted to
Members under this Agreement or under the Act.
"Minimum Gain" has the meaning set forth in Regulation Section
1.704-2(d). Minimum Gain shall be computed separately for each Interest Holder
in a manner consistent with the Regulations under Code Section 704(b).
"Negative Capital Account" means a Capital Account with a balance of
less than zero.
"Nonrecourse Deductions" has the meaning set forth in Regulation Section
1.704-2(b)(1). The amount of Nonrecourse Deductions for a taxable year of the
Company equals the net increase, if any, in the amount of Minimum Gain during
that taxable year, determined according to the provisions of Regulation Section
1.704-2(c).
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"Nonrecourse Liability" means any liability of the Company with respect
to which no Member has personal liability determined in accordance with Code
Section 752 and the Regulations promulgated thereunder.
"Percentage" means, (i) as to a Member, the percentage set forth after
the Member's name on Exhibit A, as amended from time to time, and (ii) as to an
Interest Holder who is not a Member, the Percentage of the Member whose
Membership Interest has been acquired by such Interest Holder, to the extent the
Interest Holder has succeeded to that Member's Membership Interest.
"Person" means and includes any individual, corporation, partnership,
association, limited liability company, trust, estate, or other entity.
"Positive Capital Account" means a Capital Account with a balance
greater than zero.
"Profit" and "Loss" means, for each taxable year of the Company (or
other period for which Profit or Loss must be computed) the Company's taxable
income or loss determined in accordance with Code Section 703(a), with the
following adjustments:
(i) all items of income, gain, loss, deduction, or credit
required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in computing taxable
income or loss; and
(ii) any tax-exempt income of the Company, not otherwise
taken into account in computing Profit or Loss, shall be
included in computing taxable income or loss; and
(iii) any expenditures of the Company described in Code
Section 705(a)(2)(B) (or treated as such pursuant to
Regulation Section 1.704-1(b)(2)(iv)(i)) and not
otherwise taken into account in computing Profit or
Loss, shall be subtracted from taxable income or loss;
and
(iv) gain or loss resulting from any taxable disposition of
Company property shall be computed by reference to the
adjusted book value of the property disposed of,
notwithstanding the fact that the adjusted book value
differs from the adjusted basis of the property for
federal income tax purposes; and
(v) in lieu of the depreciation, amortization, or cost
recovery deductions allowable in computing taxable
income or loss, there shall be taken into account the
depreciation computed based upon the adjusted book value
of the asset; and
(vi) notwithstanding any other provision of this definition,
any items which are specially allocated pursuant to
Section 4.3 hereof shall not be taken into account in
computing Profit or Loss.
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"Regulations" means the income tax regulations, including any temporary
regulations, from time to time promulgated under the Code.
"Secretary" means the Secretary of State of Ohio.
"Voluntary Transfer" means any voluntary sale, hypothecation, pledge,
assignment, attachment, or other voluntary transfer.
"Voluntary Withdrawal" means a Member's dissociation with the Company by
means other than a transfer or an Involuntary Withdrawal.
"Units" has the meaning set forth in Section 3.7.
SECTION II
FORMATION AND NAME: OFFICE; PURPOSE; TERM
2.1 Organization. The parties shall operate a limited liability
company pursuant to the Act and the provisions of this Agreement and, for that
purpose, have caused Articles of Organization to be executed and filed with the
Secretary.
2.2 Name of the Company. The name of the Company shall be "Milfam
LLC." The Company may do business under that name and under any other name or
names upon which the Manager selects. If the Company does business under a name
other than that set forth in its Articles of Organization, then the Company
shall file a fictitious name certificate as required by law.
2.3 Purpose. The Company is organized solely to serve as general
partner of a limited partnership that will purchase, acquire, buy, sell, own,
trade in, hold,and otherwise deal in securities, and to do any and all things
necessary, convenient, or incidental to such purpose.
2.4 Term. The term of the Company shall begin upon the filing of the
Articles of Organization with the Secretary and shall continue in existence
until December 31, 2050, unless its existence is sooner terminated pursuant to
Section VII of this Agreement.
2.5 Principal Office. The principal office of the Company in Ohio
shall be located at 2500 PNC Center, 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxx
00000 or at any other place that the Manager selects.
2.6 Statutory Agent. The name and address of the Company's statutory
agent in the State of Ohio shall be Xxxxxx X. Xxxxxx, 2500 PNC Center, 000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000.
2.7 Members. The name and present mailing address of each Member, as
well as the number of Units owned by each Member, are set forth on Exhibit A.
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SECTION III
MEMBERS; CAPITAL; CAPITAL ACCOUNTS
3.1 Initial Capital Contributions. Within a reasonable time
following the execution of this Agreement, the Members shall contribute to the
Company cash or other property having a value in the amounts set forth opposite
their respective names on Exhibit A.
3.2 Additional Capital Contributions. No Member shall be required to
contribute any additional capital to the Company, and no Member shall have any
personal liability for any obligation of the Company.
3.3 No Interest on Capital Contributions. Interest Holders shall not
be paid interest on their Capital Contributions.
3.4 Return of Capital Contributions. Except as otherwise provided in
this Agreement, no Interest Holder shall have the right to receive the return of
any Capital Contribution.
3.5 Form of Return of Capital. If an Interest Holder is entitled to
receive a return of a Capital Contribution, the Interest Holder shall not have
the right to receive anything but cash in return of the Interest Holder's
Capital Contribution.
3.6 Capital Accounts. A separate Capital Account shall be maintained
for each Interest Holder.
3.7 Units. Ownership rights in the Company will be reflected in
Units. Subject to limitations on voting rights imposed by this Agreement, each
Unit has equal governance rights with every other Unit and, in matters subject
to a vote of the Members, each Unit carries with it the right to one vote.
Except as otherwise provided herein, each Unit has equal rights with every other
Unit with respect to sharing of Profits and Losses and with respect to
distributions. The Manager will determine when and for what consideration the
Company will issue Units, and, subject to any limitations imposed by this
Agreement, the Manager will determine how many Units may be issued. For each
Member, the records of the Company will state the value and nature of the
contribution received by the Company and the number of Units received in return
by the Member. The Company initially will have 100,000 Units.
3.8 Loans. Any Member may, at any time, make a loan to the Company
in any amount and on those terms upon which the Company and the Member agree.
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SECTION IV
PROFIT, LOSS AND DISTRIBUTIONS
4.1 Allocations of Profit or Loss.
(a) Allocation to Manager. While Xxxxx X. Xxxxxx, III serves
as Manager of the Company, he shall be allocated an amount equal to the sum of
any guaranteed payment paid to the Company pursuant to Section 3.8 of the
respective Partnership Agreements of Milfam I L.P. and Milfam II L.P and any
profit allocated to the Company pursuant to Sections 4.1(a)(2)(i) and (ii) of
such agreements.
(b) Remaining Profit or Loss. After giving effect to the
special allocations set forth in Sections 4.1(a) and 4.3, for any taxable year
of the Company, Profit or Loss shall be allocated to the Interest Holders in
proportion to their Units.
4.2 Distributions
(a) Cash Flow. Cash Flow for each taxable year of the
Company shall be distributed first to Xxxxx X. Xxxxxx, III while he serves as
Manager of the Company in an amount sufficient to cause cumulative Cash Flow
distributed to him pursuant to this sentence to equal the cumulative Profits
allocated to him pursuant to Section 4.1(a). The balance of any Cash Flow shall
be distributed to the Interest Holders in proportion to their Units at such time
and in such amounts as are determined by the Manager, in his sole discretion.
(b) Distribution on Termination. On termination of the
Company, assets shall be distributed and applied by the Company in the following
order and priority:
(i) to the payment of all expenses of the Company
incident to winding up; then
(ii) to the payment of debts and liabilities of the
Company then due and outstanding (including all
debts due to any Interest Holder); then
(iii) to the establishment of any reserves which the
Manager deems necessary for liabilities or
obligations of the Company; then
(iv) the balance shall be distributed to the Interest
Holders in accordance with their respective
Capital Account balances.
4.3 Regulatory Allocations.
(a) Qualified Income Offset. No Interest Holder shall be
allocated Losses or deductions if the allocation causes an Interest Holder to
have an Adjusted Capital Account Deficit. If an Interest Holder receives (1) an
allocation of Loss or deduction (or item thereof) or (2) any
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distribution, which causes the Interest Holder to have an Adjusted Capital
Account Deficit at the end of any taxable year, then all items of income and
gain of the Company (consisting of a pro rata portion of each item of Company
income, including gross income and gain) for that taxable year shall be
allocated to that Interest Holder, before any other allocation is made of
Company items for that taxable year, in the amount and in proportions required
to eliminate the excess as quickly as possible. This Section 4.3(a) is intended
to comply with, and shall be interpreted consistently with, the "qualified
income offset" provisions of the Regulations promulgated under Code Section
704(b).
(b) Minimum Gain Chargeback. Except as set forth in
Regulation Section 1.704-2(f)(2), (3), and (4), if, during any taxable year,
there is a net decrease in Minimum Gain, each Interest Holder, prior to any
other allocation pursuant to this Section IV, shall be specially allocated items
of gross income and gain for such taxable year (and, if necessary, subsequent
taxable years) in an amount equal to that Interest Holder's share of the net
decrease of Minimum Gain, computed in accordance with Regulation Section
1.704-2(g). Allocations of gross income and gain pursuant to this Section 4.3(b)
shall be made first from gain recognized from the disposition of Company assets
subject to non-recourse liabilities (within the meaning of the Regulations
promulgated under Code Section 752), to the extent of the Minimum Gain
attributable to those assets, and thereafter, from a pro rata portion of the
Company's other items of income and gain for the taxable year. It is the intent
of the parties hereto that any allocation pursuant to this Section 4.3(b) shall
constitute a "minimum gain chargeback" under Regulation Section 1.704-2(f).
(c) Contributed Property and Book-ups. In accordance with
Code Section 704(c) and the Regulations thereunder, as well as Regulation
Section 1.704-l(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect
to any property contributed (or deemed contributed) to the Company shall, solely
for tax purposes, be allocated among the Interest Holders so as to take account
of any variation between the adjusted basis of the property to the Company for
federal income tax purposes and its fair market value at the date of
contribution (or deemed contribution). If the adjusted book value of any Company
asset is adjusted as provided herein, subsequent allocations of income, gain,
loss, and deduction with respect to the asset shall take account of any
variation between the adjusted basis of the asset for federal income tax
purposes and its adjusted book value in the manner required under Code Section
704(c) and the Regulations thereunder.
(d) Code Section 754 Adjustment. To the extent an adjustment
to the tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulation Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of the
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 basis), and the gain or loss shall be specially allocated to the
Interest Holders in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to that Section of the
Regulations.
(e) Nonrecourse Deductions. Nonrecourse Deductions for a
taxable year or other period shall be specially allocated among the Interest
Holders in proportion to their Units.
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(f) Member Loan Nonrecourse Deductions. Any Member Loan
Nonrecourse Deduction for any taxable year or other period shall be specially
allocated to the Interest Holder who bears the risk of loss with respect to the
loan to which the Member Loan Nonrecourse Deduction is attributable in
accordance with Regulation Section 1.704-2(b).
(g) Withholding. All amounts required to be withheld
pursuant to Code Section 1446 or any other provision of federal, state, or local
tax law shall be treated as amounts actually distributed to the affected
Interest Holders for all purposes under this Agreement.
4.4 Liquidation and Dissolution.
(a) If the Company is liquidated, the assets of the Company
shall be distributed to the Interest Holders in accordance with the balances in
their respective Capital Accounts, after taking into account the allocations of
Profit or Loss pursuant to Section 4.1, if any, and distributions, if any, of
cash or property, if any, pursuant to Sections 4.2.
(b) No Interest Holder shall be obligated to restore a
Negative Capital Account.
4.5 General.
(a) Timing of Distributions. Except as otherwise provided in
this Agreement, the timing and amount of all distributions shall be determined
by the Manager.
(b) Distributions in Kind. If any assets of the Company are
distributed in kind to the Interest Holders, those assets shall be valued on the
basis of their fair market value, and any Interest Holder entitled to any
interest in those assets shall receive that interest as a tenant-in-common with
all other Interest Holders so entitled. Unless the Manager otherwise agrees, the
fair market value of the assets shall be determined by an independent appraiser
who shall be selected by the Manager. The Profit or Loss for each unsold asset
shall be determined as if the asset had been sold at its fair market value, and
the Profit or Loss shall be allocated as provided in Section 4.1 and shall be
properly credited or charged to the Capital Accounts of the Interest Holders
prior to the distribution of the assets in liquidation pursuant to Section 4.4.
(c) Timing of Allocations. All Profit and Loss shall be
allocated, and all distributions shall be made, to the Persons shown on the
records of the Company to have been Interest Holders as of the last day of the
taxable year for which the allocation or distribution is to be made.
Notwithstanding the foregoing, unless the Company's taxable year is separated
into segments, if there is a Transfer or an Involuntary Withdrawal during the
taxable year, the Profit and Loss shall be allocated between the original
Interest Holder and the successor on the basis of the number of days each was an
Interest Holder during the taxable year; provided, however, the Company's
taxable year shall be segregated into two or more segments in order to account
for Profit, Loss, or proceeds attributable to any extraordinary non-recurring
items of the Company.
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(d) Amendments. The Manager is authorized, upon the advice
of the Company's tax counsel, to amend this Article IV to comply with the Code
and the Regulations promulgated under Code Section 704(b); provided, however,
that no amendment shall materially affect distributions to an Interest Holder
without the Interest Holder's prior written consent.
SECTION V
MANAGEMENT: RIGHTS, POWERS, AND DUTIES
5.1 Management.
(a) Manager. The Company shall be managed by one or more
Managers. The number of Managers shall be determined periodically by the Members
owning 75 percent or more of the Units. The Company initially will have one
Manager. Xxxxx X. Xxxxxx, III is hereby designated to serve as the initial
Manager. At such time as he is unable or unwilling to serve as Manager,
Xxxxxxxxx Xxxx will designate one or more banks or trust companies authorized to
do business under the laws of any state or under the National Bank Act of the
United States to serve as Manager.
(b) General Powers. The Manager shall have full, exclusive,
and complete discretion, power, and authority, subject in all cases to the other
provisions of this Agreement and the requirements of applicable law, to manage,
control, administer, and operate the business and affairs of the Company for the
purposes herein stated, and to make all decisions affecting such business and
affairs, including without limitation, for Company purposes, the power to:
(i) acquire by purchase, exchange, lease, or
otherwise, any real or personal property,
tangible or intangible;
(ii) construct, operate, maintain, finance, and
improve, and to own, sell, convey, assign,
mortgage, or lease any real estate and any
personal property;
(iii) sell, dispose, trade, or exchange assets;
(iv) enter into agreements and contracts and to give
receipts, releases, and discharges;
(v) purchase liability and other insurance to
protect properties and business;
(vi) borrow money for and on behalf of the Company,
on a secured or unsecured basis, and, in
connection therewith, execute and deliver
instruments authorizing the confession of
judgment against the Company.
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(vii) execute or modify leases and options;
(viii) prepay, in whole or in part, refinance, amend,
modify, or extend any mortgages or deeds of
trust which may affect any asset and in
connection therewith to execute for and on
behalf of the Company any extensions, renewals,
or modifications of such mortgages or deeds of
trust;
(ix) execute any and all other instruments and
documents which may be necessary or in the
opinion of the Manager desirable to carry out
the intent and purpose of this Agreement,
including, but not limited to, documents whose
operation and effect extend beyond the term of
the Company;
(x) make any and all expenditures which the Manager
deems necessary or appropriate in connection
with the management of the affairs of the
Company and the carrying out of its obligations
and responsibilities under this Agreement,
including, without limitation, all legal,
accounting, and other related expenses incurred
in connection with the organization and
financing and operation of the Company;
(xi) enter into any kind of activity necessary to, in
connection with, or incidental to, the
accomplishment of the purposes of the Company;
(xii) invest and reinvest Company reserves in
short-term instruments or money market funds;
(xiii) purchase, invest and reinvest, retain, operate
and sell any business interest, whether
organized as a sole proprietorship, partnership,
trust, limited liability company or other type
of entity, for such time and in such manner as
the Manager may deem advisable;
(xiv) employ legal counsel, investment counsel and
other agents in any manner in connection with
the administration of the assets of the Company
and to pay such compensation and expenses in
connection therewith as the Manager deems
reasonable under the circumstances; and
(xv) employ officers, managers, employees or agents
as the Manager may deem advisable in its
management of the Company's business;
(c) Limitation on Authority of Manager. If there is more
than one Manager, decisions of the Managers will require the approval of a
majority of the Managers. While Xxxxx X. Xxxxxx, III serves as manager, he shall
have complete control over all of the affairs of the Company
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and need not seek the consent or approval of any Member with respect to any
action. Any Manager who serves after him shall not undertake any of the
following without the approval of the Members:
(i) the sale of substantially all of the assets of
the Company;
(ii) admitting additional Members to the Company;
(iii) issuing additional Units;
(iv) hiring of a professional manager to run the
Company or a significant part of the Company;
(v) determining the compensation to be paid to the
Manager; or
(vi) engaging in business in any jurisdiction which
does not provide for the registration of limited
liability companies.
(d) Limitation on Authority of Members.
(i) No Member is an agent of the Company solely by
virtue of being a Member, and no Member has
authority to act for the Company solely by
virtue of being a Member.
(ii) This Section 5.1 supersedes any authority
granted to the Members pursuant to Section
1705.25(A) of the Act. Any Member who takes any
action or binds the Company in violation of this
Section 5.1 shall be solely responsible for any
loss and expense incurred by the Company as a
result of the unauthorized action and shall
indemnify and hold the Company harmless with
respect to the loss or expense.
(e) Removal of Manager. Xxxxx X. Xxxxxx, III may not be
removed as Manager except for cause. The Members may remove any other Manager
for cause. For cause means the occurrence of any of the following conditions:
(i) the Manager commits a felonious criminal act;
(ii) the Manager's continuous and uninterrupted
inability for a period of two months or more to
perform the duties required under this Agreement
by reason of accident, illness or disease;
(iii) taking an action with reckless disregard for the
best interest of the Company; or
(vi) an intentional breach of this Agreement.
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In addition to removing a Manager for reasons set forth above, any Manager,
other than Xxxxx X. Xxxxxx, III, may be removed for continued unsatisfactory
performance. To remove a Manager on such basis, Members owning 75% or more of
the Units held by Members (exclusive of the Units owned by the Manager) must
state in writing the basis for the Manager's unsatisfactory performance. The
Manager will be given a 90-day period within which to have his performance
deemed satisfactory. If, at the close of such 90-day period, Members owning 75%
or more of the Units held by Members (exclusive of Units owned by the Manager)
still deem the Manager's performance unsatisfactory, the Manager may be removed.
A new Manager will be appointed by Xxxxxxxxx Xxxx or her legal representative
while she is still alive, and, after her death, by Members owning a majority of
the Units held by Members.
5.2 Meetings of and Voting by Members.
(a) Voting. Any Member holding Units will be entitled to
vote such Units.
(b) Meetings. A meeting of the Members may be called at any
time by the Manager or by those Members entitled to vote holding at least
fifty-one percent (51%) of the Units held by Members. Meetings of Members shall
be held at the Company's principal place of business or at any other place
designated by the Person calling the meeting. Not less than ten (3) nor more
than ninety (90) days before each meeting, the Person calling the meeting shall
give written notice of the meeting to each Member entitled to vote at the
meeting. The notice shall state the time, place, and purpose of the meeting.
Notwithstanding the foregoing provisions, each Member who is entitled to notice
waives notice if before or after the meeting the Member signs a waiver of the
notice which is filed with the records of Members' meetings, or is present at
the meeting in person or by proxy. Unless this Agreement provides otherwise, at
a meeting of Members, the presence in person or by proxy of Members holding not
less than a majority of the Units then held by Members entitled to vote
constitutes a quorum. Subject to any limitations set forth in this Agreement, a
Member entitled to vote may vote either in person or by written proxy signed by
the Member or by his duly authorized attorney in fact.
(c) Required Vote. Except as otherwise provided in this
Agreement, wherever this Agreement requires the approval of Members, the
affirmative vote of Members holding or entitled to vote a majority or more of
the Units for which votes may be cast shall be required to approve the matter.
(d) Written Consent. In lieu of holding a meeting, the
Members entitled to vote may take action by a written instrument indicating the
consent of Members holding or entitled to vote a majority or more of the Units
for which votes may be cast.
5.3 Personal Services.
(a) Required Services. No Member shall be required to
perform services for the Company solely by virtue of being a Member. Unless
approved by the Manager, no Member shall
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perform services for the Company or be entitled to compensation for services
performed for the Company.
(b) Compensation. The Manager shall be entitled to
reasonable compensation for services performed for the Company as set forth
above. In addition, the Manager shall be entitled to reimbursement for expenses
reasonably incurred in connection with the activities of the Company.
5.4 Duties of Parties.
(a) Time Commitment. The Manager shall devote such time to
the business and affairs of the Company as is necessary to carry out the
Manager's duties set forth in this Agreement.
(b) Outside Ventures. Except as otherwise expressly provided
in Section 5.4(c), nothing in this Agreement shall be deemed to restrict in any
way the rights of any Member to conduct any other business or activity
whatsoever, and the Member shall not be accountable to the Company or to any
Member with respect to that business or activity even if the business or
activity competes with the Company's business. The organization of the Company
shall be without prejudice to the respective rights of the Members to maintain,
expand, or diversify such other interests and activities and to receive and
enjoy profits or compensation therefrom. Each Member waives any rights the
Member might otherwise have to share or participate in such other interests or
activities of any other Member.
(c) Arm's Length Dealings. Each Member understands and
acknowledges that the conduct of the Company's business may involve business
dealings and undertakings with Members. In any of those cases, those dealings
and undertakings shall be at arm's length and on commercially reasonable terms.
5.5 Liability and Indemnification.
(a) Standard Imposed. The Manager shall not be liable,
responsible, or accountable, in damages or otherwise, to any Member or to the
Company for any act performed by the Manager within the scope of the authority
conferred on the Manager by this Agreement, except as provided in Section
1705.29(D) of the Act.
(b) Right to Indemnity. The Company shall indemnify the
Manager for any act performed by the Manager within the scope of the authority
conferred on the Manager by this Agreement unless the act is proved by clear and
convincing evidence to have been undertaken with deliberate intent to cause
injury to the Company, with reckless disregard for the best interest of the
Company, or to be an intentional breach of this Agreement.
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16
5.6 Power of Attorney.
(a) Grant of Power. Each Member constitutes and appoints the
Manager as the Member's true and lawful attorney-in-fact ("Attorney-in-Fact"),
and in the Member's name, place and stead, to make, execute, sign, acknowledge,
and file:
(i) Articles of Organization or any amendment
thereto, which has been approved as provided in
this Agreement;
(ii) all documents (including amendments to articles
of organization) which the Attorney-in-Fact
deems appropriate to reflect any amendment,
change, or modification of this Agreement;
(iii) any and all other certificates or other
instruments required to be filed by the Company
under the laws of the State of Ohio or of any
other state or jurisdiction, including, without
limitation, any certificate or other instruments
necessary in order for the Company to continue
to qualify as a limited liability company under
the laws of the State of Ohio;
(iv) one or more fictitious or trade name
certificates; and
(v) all documents which may be required to dissolve
and terminate the Company and to cancel its
Articles of Organization.
(b) Irrevocability. The foregoing power of attorney is
irrevocable and is coupled with an interest, and, to the extent permitted by
applicable law, shall survive the death or disability of a Member. It also shall
survive the Involuntary or Voluntary Transfer of an Interest, except that if the
transferee is approved for admission as a Member, this power of attorney shall
survive the delivery of the assignment for the sole purpose of enabling the
Attorney-in-Fact to execute, acknowledge, and file any documents needed to
effectuate the substitution. Each Member shall be bound by any representations
made by the Attorney-in-Fact acting in good faith pursuant to this power of
attorney, and each Member hereby waives any and all defenses which may be
available to contest, negate, or disaffirm the action of the Attorney-in-Fact
taken in good faith under this power of attorney.
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SECTION VI
TRANSFER OF INTERESTS AND WITHDRAWALS OF MEMBERS
6.1 Transfers.
(a) General Restriction. No Person may make any transfer,
either a Voluntary Transfer, Involuntary Transfer, or otherwise, of all or any
portion of or any interest or rights in the Person's Membership Rights or
Membership Interest unless the following conditions ("Conditions of Transfer")
are satisfied:
(i) The transfer will not require registration of
Membership Interests or Membership Rights under
any federal or state securities laws;
(ii) The transferee agrees to be bound by the terms
of Section VI of this Agreement.
(iii) the transfer will not result in the termination
of the Company pursuant to Code Section 708; and
(iv) the transferor complies with the right of first
refusal provisions set forth in Section 6.1(d).
(b) Permitted Transfer. If the Conditions of Transfer are
satisfied, then a Member or Interest Holder may transfer all or any portion of
that Person's Membership Interest. Without receiving the consent of Members
owning at least 75% of the Units, exclusive of Units held by the Transferors,
the transfer of a Membership Interest pursuant to this Section 6.1 shall not
result in the transfer of any of the transferor's other Membership Rights, if
any, and the transferee of the Membership Interest shall have no right to: (i)
become a Member; (ii) exercise any Membership Rights other than those
specifically pertaining to the ownership of a Membership Interest; or (iii) act
as an agent of the Company.
(c) Consent to Restriction. Each Member hereby acknowledges
the reasonableness of the prohibition contained in this Section 6.1 in view of
the purposes of the Company and the relationship of the Members. The transfer of
any Membership Rights or Membership Interests in violation of the prohibition
contained in this Section 6.1 shall be deemed invalid, null and void, and of no
force or effect. Any Person to whom Membership Rights are attempted to be
transferred in violation of this Section shall not be entitled to vote on
matters coming before the Members, participate in the management of the Company,
act as an agent of the Company, receive distributions from the Company, or have
any other rights in or with respect to the Membership Rights.
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(d) Right of First Refusal.
(i) If:
(A) an Interest Holder (a "Transferor")
intends to transfer all or any portion
of, or any interest or rights in a
Membership Interest either to a bona
fide third party purchaser or pursuant
to an Involuntary Transfer, or,
(B) an Interest Holder is a spouse of a
Family Member, and the Interest Holder
and such Family Member are divorced,
the Transferor shall so notify the Company (the
"Transfer Notice"). The Transfer Notice shall
describe the terms upon which the Membership
Interest is to be transferred or that the
Interest Holder and the Family Member are
getting a divorce. The Company shall have the
option (the "Company Option") to purchase all of
the Membership Interest to be transferred on the
terms proposed by a bona fide third party
purchaser. With respect to an Involuntary
Transfer or divorce, the Company also shall have
the option to purchase all of the Membership
Interest that is subject to the Involuntary
Transfer or that is owned by the Member who is
getting divorced, for a price equal to the fair
market value of the Membership Interest as
determined by an independent appraiser, taking
into account adjustments for lack of
marketability, lack of control and any other
adjustments that may apply (the "Purchase
Price").
(ii) The Company Option shall be and remain
irrevocable for a period (the "Company Option
Period") ending at 11:59 P.M. local time at the
Company's principal office on the thirtieth
(30th) Day following the date the Transfer
Notice is given to the Company.
(iii) At any time during the Company Option Period,
the Company may elect to exercise the Company
Option by giving written notice of its election
to the Transferor. The Transferor shall not be
deemed a Member for the purpose of voting on
whether the Company shall elect to exercise the
Company Option.
(iv) If the Company chooses to exercise the Company
Option, the Company's notice of its election
shall fix a closing date for the purchase, which
shall not be earlier than five (5) days after
the date of the notice of election or more than
thirty (30) days after the expiration of the
Company Option Period.
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19
(v) If the Company chooses to exercise the Company
Option, the Purchase Price shall be paid, at the
Company's election, in cash at closing or in up
to 48 equal monthly installments with interest
at the applicable federal rate in effect as of
the date of closing. In the latter case, payment
will be secured by the Membership Interest
purchased.
(vi) If the Company fails to exercise the Company
Option, the other Members will have the option
to acquire the Membership Interest in the same
proportions as the Units that the acquiring
Member owns bears to the total number of Units
owned by the Members who desire to acquire
Membership Interest that is the subject of the
transfer, or in such other proportions as the
Members may agree (the"Member Option"). The
terms of the Member Option will be the same as
the terms of the Company Option.
(vii) The Member Option shall be and remain
irrevocable for a period (the "Member Option
Period") ending at 11:59 P.M. local time at the
Company's principal office on the thirtieth
(30th) Day following the date the Company Option
Period expires.
(viii) If a Member chooses to exercise the Member
Option, the Purchase Price shall be paid, at the
election of the Member, in cash at closing or in
up to 48 equal monthly installments with
interest at the applicable federal rate in
effect as of the date of closing. In the latter
case, payment will be secured by the Membership
Interest purchased.
(ix) If the Members fails to exercise the Member
Option, the Transferor shall be permitted to
offer and sell for a period of ninety (90) days
(the "Free Transfer Period") after the
expiration of the Member Option Period on the
terms set forth in the notice or at a price not
less than the Purchase Price. If the Transferor
does not Transfer the Membership Interest within
the Free Transfer Period, the Transferor's right
to Transfer the Membership Interest pursuant to
this Section shall terminate.
(x) Any Transfer of the Transferor Interest made
after the last day of the Free Transfer Period
or without strict compliance with the terms,
provisions, and conditions of this Section and
other terms, provisions, and conditions of this
Agreement, shall be null, void and of no force
or effect.
6.2 Voluntary Withdrawal. No Member shall have the right or power to
Voluntarily Withdraw from the Company.
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20
6.3 Involuntary Withdrawal. Immediately upon the occurrence of an
Involuntary Withdrawal, the successor of the withdrawn Member shall thereupon
become an Interest Holder but shall not become a Member. The interest held will
be subject to the option rights set forth in Section 6.1.
SECTION VII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
7.1 Events of Dissolution. The Company shall be dissolved upon the
happening of any of the following events:
(a) when the period fixed for its duration in Section 2.4
has expired;
(b) upon the written agreement of Members owning 75% or more
of the Units; or
(c) upon the death, insanity, bankruptcy, retirement,
resignation,or expulsion of any Member, unless remaining Members owning a
majority of the Units owned by remaining Members elect to continue the business
of the Company pursuant to the terms of this Agreement within 120 days after the
occurrence of such event.
7.2 Procedure for Winding Up and Dissolution. If the Company is
dissolved, the Manager shall wind up its affairs. On winding up of the Company,
the assets of the Company shall be distributed, first, to creditors of the
Company, including Interest Holders who are creditors, in satisfaction of the
liabilities of the Company, and then to the Interest Holders in accordance with
Section 4.4 of this Agreement.
7.3 Filing of Certificate of Dissolution. If the Company is
dissolved, the Manager shall promptly file a Certificate of Dissolution with the
Secretary. If there is no Manager, then the Certificate of Dissolution shall be
filed by the remaining Members; if there are no remaining Members, the
Certificate shall be filed by the last Person to be a Member; if there is
neither a Manager, remaining Members, or a Person who last was a Member, the
Certificate shall be filed by the legal or personal representatives of the
Person who last was a Member.
SECTION VIII
BOOKS, RECORDS, ACCOUNTING, AND TAX ELECTIONS
8.1 Bank Accounts. All funds of the Company shall be deposited in a
bank account or accounts maintained in the Company's name. The Manager shall
determine the institution or institutions at which the accounts will be opened
and maintained, the types of accounts, and the Persons who will have authority
with respect to the accounts and the funds therein.
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21
8.2 Books and Records.
(a) Records Kept. The Manager shall keep or cause to be kept
complete and accurate books and records of the Company and supporting
documentation of the transactions with respect to the conduct of the Company's
business. The records shall include, but not be limited to, financial statements
of the Company for the three most recent fiscal years, a copy of the Articles of
Organization and operating agreement, together with any relevant powers of
attorney, information regarding the amount of cash or agreed value of property
or services contributed, or agreed to be contributed in the future, by each
Member, the respective rights of the Company and each Member regarding the
return of contributions, and the Company's federal, state, or local tax returns.
(b) Accounting Method. The books and records shall be
maintained in accordance with sound accounting practices and shall be available
at the Company's principal office for examination by any Member or by Member's
duly authorized representative at any and all reasonable times during normal
business hours.
(c) Reimbursement. Each Member shall reimburse the Company
for all costs and expenses incurred by the Company in connection with the
Member's inspection and copying of the Company's books and records.
8.3 Annual Accounting Period. The annual accounting period of the
Company shall be its taxable year. The Company's taxable year shall be selected
by the Manager, subject to the requirements and limitations of the Code.
8.4 Reports. As soon as practicable after the end of each taxable
year of the Company, the Manager shall cause to be sent to each Person who was a
Member at any time during the accounting year then ended that tax information
concerning the Company which is necessary for preparing the Interest Holder's
income tax returns for that year. At the request of any Member, and at the
Member's expense, the Manager shall cause an audit of the Company's books and
records to be prepared by independent accountants for the period requested by
the Member.
8.5 Tax Matters Partner. Xxxxx X. Xxxxxx, III shall be the Company's
tax matters partner ("Tax Matters Partner"). The Tax Matters Partner shall have
all powers and responsibilities provided in Code Section 6221, et seq. The Tax
Matters Partner shall keep all Members informed of all notices from government
taxing authorities that may come to the attention of the Tax Matters Partner.
The Company shall pay and be responsible for all reasonable third-party costs
and expenses incurred by the Tax Matters Partner in performing those duties. A
Member shall be responsible for any costs incurred by the Member with respect to
any tax audit or tax-related administrative or judicial proceeding against any
Member, even though it relates to the Company. The Tax Matters Partner may not
compromise any dispute with the Internal Revenue Service without the approval of
the Members.
8.6 Tax Elections. The Manager shall have the authority to make all
Company elections permitted under the Code, including, without limitation,
elections of methods of depreciation and
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22
elections under Code Section 754. The decision to make or not make an election
shall be at the sole and absolute discretion of the Manager.
SECTION IX
GENERAL PROVISIONS
9.1 Assurances. Each Member shall execute all certificates and other
documents and shall do all such filing, recording, publishing, and other acts as
the Manager deems appropriate to comply with the requirements of law for the
formation and operation of the Company and to comply with any laws, rules, and
regulations relating to the acquisition, operation, or holding of the property
of the Company.
9.2 Notifications. Any notice, demand, consent, election, offer,
approval, request, or other communication (collectively a "notice") required or
permitted under this Agreement must be in writing and either delivered
personally, telecopied or sent by certified or registered mail, postage prepaid,
return receipt requested. A notice must be addressed to an Interest Holder at
the Interest Holder's last known address on the records of the Company. A notice
to the Company must be addressed to the Company's principal office. A notice
that is sent by mail will be deemed given three (3) business days after it is
mailed. Any party may designate, by notice to all of the others, substitute
addresses or addressees for notices; and, thereafter, notices are to be directed
to those substitute addresses or addressees.
9.3 Specific Performance. The parties recognize that irreparable
injury will result from a breach of any provision of this Agreement and that
money damages will be inadequate to fully remedy the injury. Accordingly, in the
event of a breach or threatened breach of one or more of the provisions of this
Agreement, any party who may be injured (in addition to any other remedies which
may be available to that party) shall be entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach or (ii) compelling the performance of any obligation which, if not
performed, would constitute a breach.
9.4 Complete Agreement. This Agreement constitutes the complete and
exclusive statement of the agreement among the Members. It supersedes all prior
written and oral statements, including any prior representation, statement,
condition, or warranty. Except as expressly provided otherwise herein, this
Agreement may not be amended without the written consent of all of the Members.
9.5 Applicable Law. All questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement shall be governed by the internal law, not
the law of conflicts, of the State of Ohio.
9.6 Section Titles. The headings herein are inserted as a matter of
convenience only and do not define, limit or describe the scope of this
Agreement or the intent of the provisions hereof.
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9.7 Binding Provisions. This Agreement is binding upon, and inures
to the benefit of, the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors, and permitted
assigns.
9.8 Jurisdiction and Venue. Any suit involving any dispute or matter
arising under this Agreement may only be brought in the courts of the State of
Ohio. All Members hereby consent to the exercise of personal jurisdiction by any
such court with respect to any such proceeding.
9.9 Terms. Common nouns and pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular, and plural, as the identity of the Person
may in the context require.
9.10 Severability of Provisions. Each provision of this Agreement
shall be considered severable; and if, for any reason, any provision or
provisions herein are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
9.11 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which, when taken together, constitute one and the same document. The signature
of any party to any counterpart shall be deemed a signature to, and may be
appended to, any other counterpart.
IN WITNESS WHEREOF, the parties have executed, or caused this Agreement
to be executed, under seal, as of the date set forth hereinabove.
/s/ Xxxxx X. Xxxxxx, III
---------------------------
Xxxxx X. Xxxxxx, III
Irrevocable Trust U/A Xxxxxxxxx X. Xxxxxx dated
March 26, 1991
By: /s/ Xxxxx X. Xxxxxx, III
-----------------------------------------------
Irrevocable Trust U/A Xxxxx X. Xxxxxx, III dated
December 31, 1991
By: /s/ Xxxxx X. Xxxxxx, III
----------------------------------------------
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RESIGNATION
The undersigned hereby resign as Members of Milfam LLC effective as of
the time of the admission as Members of the parties to the foregoing Agreement.
Date: December 12, 1996 /s/ Xxxxxxx X. Xxxxxxxxxx
----------------- -----------------------------------------------
Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxx
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