EXHIBIT 10(j)
OPERATING AGREEMENT
OF
HEALTHLINK, LTD.
a Nevada limited liability company
dated as of
March 4, 1997
among the Members of Healthlink, Ltd.
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS........................................................-2-
1.1 Affiliate...................................................-2-
1.2 Affiliate's Interest........................................-2-
1.3 Articles of Organization....................................-2-
1.4 Bankruptcy..................................................-2-
1.5 Bills of Sale and Assignment................................-2-
1.6 Business Day................................................-2-
1.7 Capital Account.............................................-2-
1.8 Capital Contribution........................................-3-
1.9 Cash Reserves...............................................-3-
1.10 Code........................................................-4-
1.11 Communications Equipment....................................-4-
1.12 Deadlock....................................................-4-
1.13 Distributable Cash..........................................-4-
1.14 Executive Committee.........................................-4-
1.15 Fiscal Year.................................................-4-
1.16 Interest....................................................-4-
1.17 Member......................................................-4-
1.18 Member Nonrecourse Debt.....................................-4-
1.19 Member Nonrecourse Deductions...............................-5-
1.20 Net Profits and Net Losses..................................-5-
1.21 Nonrecourse Deductions......................................-5-
1.22 Participation Percentage....................................-5-
1.23 Company Minimum Gain........................................-5-
1.24 Regulations.................................................-5-
1.25 Transfer....................................................-5-
ARTICLE II.
FORMATION OF LIMITED LIABILITY COMPANY.............................-6-
2.1 Formation...................................................-6-
ARTICLE III.
OFFICES............................................................-6-
3.1 Principal Office............................................-6-
ARTICLE IV.
PURPOSE............................................................-6-
4.1 Purpose.....................................................-6-
ARTICLE V.
CAPITAL....................................................................-6-
-i-
Page
----
5.1 Initial Capital.............................................-6-
5.2 Federal Income Tax Elections................................-6-
ARTICLE VI.
MEMBERS............................................................-7-
6.1 Powers......................................................-7-
6.2 Appointment of Executive Committee..........................-7-
6.3 Delegation of All Power and Authority to Executive
Committee...................................................-8-
6.4 Salaries to Members.........................................-8-
6.5 Bank Accounts...............................................-8-
6.6 Annual Meetings.............................................-8-
6.7 Annual Meetings, Notice.....................................-8-
6.8 Adjourned Meetings and Notice Thereof.......................-9-
6.9 Admission of New Members....................................-9-
ARTICLE VII.
TRANSFER OF MEMBERS AND AFFILIATES' INTERESTS......................-9-
7.1 General.....................................................-9-
7.2 No Right to Transfer Member's Interest Without
Unanimous Consent...........................................-9-
7.3 Restricted Transfer of Affiliate's Interest.................-9-
7.4 No Transfer Permitted Under Certain Circumstances..........-10-
7.5 No Transfer Permitted for Three (3) Years..................-10-
7.6 Right of First Refusal.....................................-10-
7.7 Representations and Warranties of the Members..............-11-
7.8 Transferee's Participation Percentage......................-12-
ARTICLE VIII.
MANAGEMENT........................................................-12-
8.1 Executive Committee........................................-12-
8.2 Unanimity Required for Action..............................-12-
8.3 Officers...................................................-13-
8.4 President..................................................-13-
8.5 Chief Financial Officer....................................-13-
8.6 Chairman...................................................-13-
8.7 Vice-Chairman..............................................-13-
8.8 Removal, Resignation and Vacancies.........................-13-
8.9 Executive Committee Meetings...............................-14-
8.10 Action by Written Consent..................................-14-
8.11 Deadlock; President Authorized to Break Deadlock...........-14-
8.12 President Not Authorized to Break Deadlock.................-14-
ARTICLE IX.
PROFITS AND LOSSES.........................................-15-
9.1 Allocation of Net Profits..................................-15-
9.2 Allocation of Net Losses...................................-15-
-ii-
Page
----
9.3 Allocation of Nonrecourse Deductions.......................-15-
9.4 Allocation of Tax Credits..................................-15-
9.5 Qualified Income Offset....................................-15-
9.6 Minimum Gain Chargeback....................................-15-
9.7 Member Nonrecourse Deductions..............................-15-
9.8 Allocations of Book Items..................................-16-
ARTICLE X.
DISTRIBUTIONS.....................................................-16-
10.1 Distribution of Distributable Cash.........................-16-
10.2 To Whom Distributions Are Made.............................-16-
ARTICLE XI.
ACCOUNTING AND RECORDS............................................-16-
11.1 Records and Accounting.....................................-16-
11.2 Access to Accounting Records...............................-16-
ARTICLE XII.
DISSOLUTION AND WINDING UP........................................-17-
12.1 Conditions of Dissolution..................................-17-
12.2 Winding Up.................................................-17-
12.3 Order of Payment of Liabilities Upon Dissolution...........-17-
12.4 Limitations on Payments Made in Dissolution................-17-
12.5 Certificates...............................................-17-
ARTICLE XIII.
INDEMNIFICATION...................................................-17-
13.1 Indemnity..................................................-18-
13.2 Indemnity for Actions By or In the Right of The
Company....................................................-18-
13.3 Indemnity If Successful....................................-18-
13.4 Expenses...................................................-19-
13.5 Advance Payment of Expenses................................-19-
ARTICLE XIV.
MISCELLANEOUS PROVISIONS..........................................-19-
14.1 Complete Agreement........................................-19-
14.2 Amendments.................................................-19-
14.3 Applicable Law.............................................-19-
14.4 Headings...................................................-19-
14.5 Severability...............................................-19-
14.6 Expenses...................................................-20-
14.7 Heirs, Successors and Assigns..............................-20-
14.8 Arbitration................................................-20-
14.9 Execution..................................................-20-
-iii-
Page
----
Signatures.................................................-20-
Exhibit "C"................................................-21-
-iv-
OPERATING AGREEMENT
OF
HEALTHLINK, LTD.
a Nevada limited liability company
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT ("Agreement") is
made and entered into as of March ____, 1997, by and between Response U.S.A.,
Inc., a Delaware Corporation ("Response") and BKR, Inc., a Nevada Corporation
("BKR") (collectively referred to as the "Members" or individually as a
"Member"), with reference to the following facts:
A. The Articles of Organization (the "Articles") for Healthlink,
Ltd. (the "Company"), a limited liability company under the laws of the State of
Nevada, were filed with the Nevada Secretary of State on February 13, 1997, (the
"Effective Date").
B. Response and BKR have entered into a Purchase Agreement of even
date herewith (the "Purchase Agreement").
C. Such Purchase Agreement provides for the purchase by Response of
a fifty percent (50%) undivided interest in the assets of BKR.
D. The remaining fifty percent (50%) undivided interest in the
assets of BKR (exclusive of the consideration received by BKR pursuant to the
Purchase Agreement) will be contributed to Healthlink by BKR.
E. As provided for in separate Bills of Sale and Assignment attached
as Exhibit A, Response is contributing its fifty percent (50%) undivided
interest and BKR is contributing its remaining fifty percent (50%) undivided
interest (exclusive of the consideration received by BKR pursuant to the
Purchase Agreement) in the assets to the capital of the Company in exchange for
equal membership interests. Additionally, BKR has agreed to loan to the Company
up to Five Hundred Thousand Dollars ($500,000.00) on commercially reasonable
terms pursuant to the terms and conditions of an Optional Advance Note, a copy
of which is attached hereto.
F. Response and BKR agree that the Company shall function by
centralized command and control of all Company-wide issues and by local
management of the operations of the manufacturing and distribution of the
Company products.
ARTICLE I.
-1-
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings set forth below:
1.1 Affiliate. "Affiliate" means a legal or natural Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with a Member or a Member's
constituent members, shareholders or partners; or a legal or natural Person that
directly, or indirectly through one or more intermediaries, owns or holds any
financial interest in a Member or a Member's constituent members, shareholders,
or partners.
1.2 Affiliate's Interest. "Affiliate's Interest" means the
interest of any Affiliate in a Member.
1.3 Articles of Organization. "Articles of Organization" means
the articles of organization filed with the Nevada Secretary of State on
February 13, 1997 for the purpose of forming the Company.
1.4 Bankruptcy. "Bankruptcy" means:
1.4.1 The commencement of any voluntary proceedings
under federal or state bankruptcy laws;
1.4.2 The failure to terminate any involuntary
proceeding under federal or state bankruptcy laws within thirty (30) days after
the commencement thereof;
1.4.3 A general assignment for the benefit of creditors;
or
1.4.4 The issuance of a charging order against the
interest of any person without the removal thereof within thirty (30) days after
issuance.
1.5 Bills of Sale and Assignment. "Bills of Sale and
Assignment" means bills of sale and assignment documenting the contribution of
certain assets by Response and BKR as capital to the Company, as attached as
Exhibit A.
1.6 Business Day. "Business Day" means Monday through Friday,
excluding Saturdays, Sundays, and any federal holidays.
1.7 Capital Account. "Capital Account" means each Member's
initial Capital Contribution. In addition, each Member's Capital Account shall
be:
-2-
1.7.1 Increased by:
1.7.1.1 The amount of any additional Capital
Contributions by such Member, including the amount of Company liabilities
assumed by such Member or secured by any Company property distributed by the
Company to such Member;
1.7.1.2 The fair market value of any property
contributed by such Member to the Company (net of liabilities secured by such
property which are considered to be assumed or taken "subject to" by the
Company); and
1.7.1.3 Items of book income and gain which are
allocated to such Member; and
1.7.2 Decreased by:
1.7.2.1 The amount of cash distributed to such
Member by the Company, including the amount of liabilities of such Member
assumed by the Company or secured by any property contributed by such Member to
the Company;
1.7.2.2 The fair market value of any property
distributed by the Company to such Member (net of liabilities secured by such
property which are considered to be assumed or taken "subject to" by such
Member);
1.7.2.3 Items of expense described in Section
705(a)(2)(B) of the Code allocated to such Member; and
1.7.2.4 Items of book loss and deduction which are
allocated to such Member.
1.7.3 The foregoing provisions are intended to comply
with Section 1.704-1(b) of the Regulations and shall be applied and interpreted
accordingly. The Capital Accounts shall be adjusted in order to reflect
allocations of depreciation, amortization, and gain and loss as computed for
book purposes. Upon the permitted transfer of any Member's interest in the
Company, the Capital Account of the transferor Member shall carry over to the
transferee Member.
1.8 Capital Contribution. "Capital Contribution" means any
money or property, or a promissory note or other binding obligation to
contribute money or property, including assets set forth in separate Bills of
Sale and Assignment attached as Exhibit A, or to render services as permitted by
law, which a Member contributes to the Company as capital in that Member's
capacity as a Member pursuant this Agreement, including an agreement as to
value.
1.9 Cash Reserves. "Cash Reserves" means such amounts as may
be reasonably estimated by the Executive Committee as defined in Section 6.2 of
this
-3-
Agreement for payment of costs, expenses and liabilities incident to the
business of the Company and for which the cash to make such payments will not,
in the reasonable opinion of the Executive Committee, be expected to be
available to the Company at or about the time such payments are required to be
made, and which therefore, in the reasonable opinion of the Executive Committee,
require that cash be set aside periodically to make such payments.
1.10 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
1.11 Communications Equipment. "Communications Equipment"
means conference telephones or similar communications equipment which enable all
users of such equipment to hear one another for the purposes of conducting a
telephonic meeting.
1.12 Deadlock. "Deadlock" means a tie vote of the Executive
Committee of the Company, as set forth in Section 6.2.
1.13 Distributable Cash. "Distributable Cash" means for any
period such portion of the cash in the Company's bank accounts that, in the
reasonable exercise of discretion by the Executive Committee, is available for
distribution to the Members after a reasonable provision has been made for Cash
Reserves.
1.14 Executive Committee. "Executive Committee" shall be those
persons who are appointed as members of the Executive Committee pursuant to
Section 6.2 of this Agreement. Members of the Executive Committee shall not be
compensated for their actions as members of the Executive Committee. Such
committee is the Manager of the Company as defined in Section 8.1 of this
Agreement.
1.15 Fiscal Year. "Fiscal Year" means the calendar year.
1.16 Interest. "Interest" shall mean an interest of a Member
in the Company.
1.17 Member. "Member" means any person or entity admitted to
the Company as a Member in accordance with this Agreement, or a person or entity
who has been admitted as a Member pursuant to applicable law. The initial
Members are Response and BKR. Additional Members may subsequently be admitted
upon terms deemed reasonable by the Executive Committee.
1.18 Member Nonrecourse Debt. "Member Nonrecourse Debt" shall
have the meaning ascribed to the term "Partner Nonrecourse Debt" in Treasury
Regulations Section 1.704-2(b)(4).
-4-
1.19 Member Nonrecourse Deductions. "Member Nonrecourse
Deductions" shall mean items of Company loss, deduction, or Code Section
705(a)(1)(B) expenditures which are attributed to Member Nonrecourse Debt.
1.20 Net Profits and Net Losses. "Net Profits" and "Net
Losses" mean the net profits and net losses, respectively, of the Company as
determined by the Company's accountants on the basis of the accounting method
selected by the Executive Committee at the close of the Company's Fiscal Year
and in accordance with federal income tax principles consistently applied, and
as set forth on the information return filed by the Company for federal income
tax purposes. Net Profits and Net Losses shall not include Nonrecourse
Deductions or Member Nonrecourse Deductions.
1.21 Nonrecourse Deductions. "Nonrecourse Deductions" shall
have the meaning set forth in Treasury Regulations Section 1.704-2(b)(1).
1.22 Participation Percentage. "Participation Percentage" of a
Member means the following percentages, as may be adjusted from time to time,
pursuant to this Agreement:
Response 50%
BKR 50%
The Participation Percentage of a Member shall be equal to the amount of a
Member's Capital Contribution divided by the total of all Members' Capital
Contributions.
1.23 Company Minimum Gain. "Company Minimum Gain" means
"partnership minimum gain," as defined in the Regulations promulgated under
Section 704(b) of the Code.
1.24 Regulations. "Regulations" shall mean the Income Tax
Regulations promulgated under the Code, including Temporary and Proposed
Regulations, as such Regulations may be amended from time to time, including
corresponding provisions of succeeding Regulations.
1.25 Transfer. "Transfer" means any gift, sale, transfer,
assignment, hypothecation, pledge, encumbrance or any other disposition, whether
voluntary or involuntary, by operation of law or otherwise, including, without
limitation, any Transfer occurring upon or by virtue of the bankruptcy or
insolvency of a Member or Affiliate; the appointment of a receiver, trustee or
conservator or guardian for a Member or its property or an Affiliate or its
property; or pursuant to the will of a Member or Affiliate or the laws of
descent and distribution in the event of a Member's death or Affiliate's death;
or pursuant to court order in the event of divorce, marital dissolution, legal
separation or similar proceedings; or pursuant to any loan or security agreement
under which any of the Member's Interests or Affiliate's Interests are pledged
or otherwise serve as collateral, as well as the Transfer of any such Member's
Interest or Affiliate's Interest in the event recourse is made to such
collateral. The term "Transfer" shall include any transfer by any
-5-
constituent member of any Member such that the individuals who are the ultimate
beneficial owners of the Member and Affiliates shall not be changed without
consent of the Members. "Transfer" shall not include any transfer of interests
in a Member or Affiliate to another owner of the same legal entity, nor the
transfer of an individual's interest in a Member or Affiliate to a grantor trust
of which such individual is a settlor and a beneficiary who maintains a
controlling interest.
ARTICLE II.
FORMATION OF LIMITED LIABILITY COMPANY
2.1 Formation. The Members formed Healthlink, Ltd., a Nevada limited
liability company, by filing of Articles of Organization with the Nevada
Secretary of State as of the Effective Date. The Members hereby adopt this
Agreement as their Operating Agreement.
ARTICLE III.
OFFICES
3.1 Principal Office. The principal office Healthlink, Ltd. (the
"Company") shall be at 0000 Xxxxxx Xxxxxx Xxxxxxx, 0xx Xxxxx, Xxx Xxxxx, Xxxxxx,
00000. The Members may change said principal office at any time from one
location to another in the State of Nevada.
ARTICLE IV.
PURPOSE
4.1 Purpose. The purpose of the Company shall be to engage in the
manufacture, sale and monitoring of personal emergency response systems and any
lawful business activity except banking, insurance or trust.
ARTICLE V.
CAPITAL
5.1 Initial Capital. Response and BKR hereby contribute, pursuant to
the Bills of Sale and Assignments attached as Exhibit A, all of their respective
interests in the assets. The initial capital of the Company shall be the sums of
cash or the agreed fair market value of the property (or combination of cash and
property) contributed to the Company by the Members in such amounts or value as
is set out opposite the name of each of the Members on Exhibit C, attached
hereto and incorporated herein by this reference, which shall be amended from
time to time by the Executive Committee to reflect a current list of the names
and addresses of each current Member. A permitted Transfer of any membership
Interests shall not be effective until it has been recorded in the records of
the Company.
5.2 Federal Income Tax Elections. The Company and its subsidiaries
shall make all elections for federal income tax purposes, including but not
limited to an election,
-6-
pursuant to Code Section 754, to adjust the basis of the Company's assets under
Code Sections 734 or 743. In the event an election pursuant to Code Section 754
is made by the Company, upon the adjustment to the basis of the Company's
assets, the Members' Capital Accounts shall be adjusted in accordance with the
requirements of Regulation Section 1.704-1(b)(2)(iv)(m).
ARTICLE VI.
MEMBERS
6.1 Powers. Subject to the provisions of the Articles of
Organization, this Operating Agreement and the provisions of the Act, all powers
shall be exercised by or under the authority of, and the business and affairs of
the Company shall be controlled by, the Members. All actions of the Members are
taken by the Members in proportion to their Participation Percentage at the time
of the action taken. Except as otherwise provided in this Agreement, an action
by the Members shall require a vote of the Members at a meeting, in person or by
proxy, or an action by written consent. Without prejudice to such general
powers, but subject to the same limitations, it is hereby expressly declared
that the Members shall have the following powers only upon unanimous vote or
consent (as applicable):
6.1.1 To select and remove all members of the Executive
Committee (which is the Manager of the Company), of the Company; prescribe such
powers and duties for them as may be consistent with law, with the Articles of
Organization or this Operating Agreement; fix their compensation; and require
from them security for faithful service.
6.1.2 To conduct, manage and control the affairs and business
of the Company, and to make such rules and regulations therefor consistent with
the law, with the Articles of Organization or this Operating Agreement.
6.1.3 To change the principal office of this Company from one
location to another within Nevada; to fix and locate from time to time one or
more subsidiary offices of the Company; and to designate any place within or
without the State of Nevada for the holding of any Members meeting or meetings.
6.1.4 To borrow money and incur indebtedness for the purpose
of the Company, and to cause to be executed and delivered therefor, in the
Company name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidence of debt and securities.
6.1.5 To appoint an Executive Committee and other committees,
and to delegate to the Executive Committee any of the powers and authority of
the Members in the management of the business and affairs of the Company.
6.2 Appointment of Executive Committee. The Members hereby appoint
an Executive Committee. The initial Executive Committee shall consist of the
following four
-7-
(4) individuals, two (2) selected by Response and two selected by BKR, who shall
serve until their resignation or replacement. The two (2) members of the
Executive Committee selected by Response shall be Xxxxxxx X. Xxxxxx and Xxxxxx
Xxxxxxx. The two (2) members of the Executive Committee selected by BKR shall be
Xxxx Xxxxxxxxx and Xxxxxxx X. Xxxxxxxx. The designation of any other individual
to serve as a member of the Executive Committee shall require consent of all
Members, which consent shall not be unreasonably withheld. Pending filling of a
vacancy, the remaining individual serving on the Executive Committee at the
request of a Member shall have the right to cast two (2) votes.
6.3 Delegation of All Power and Authority to Executive Committee.
The Members agree to delegate to the Executive Committee all powers and
authority of the Members in the management of the business and affairs of the
Company.
6.4 Salaries to Members. The Company shall not have the authority to
pay to any Member a salary for said Member's services to the Company except by
unanimous written consent or vote of the Executive Committee. It is understood
that should a salary be authorized by the Executive Committee, such salary paid
to any Member under the provisions of this Section 6.4 shall be considered as an
operating expense of the Company and shall be deducted as an expense item in
determining the net profits and net losses of the Company.
6.5 Bank Accounts. From time to time, the Executive Committee may
designate a person or persons, whether such persons be Members or not, to open
and maintain one or more bank accounts; rent safety deposit boxes or vaults;
sign checks, written directions or other instruments to withdraw all or any part
of the funds belonging to the Company and on deposit in any savings account or
checking account; negotiate and purchase certificates of deposit, obtain access
to the company safety deposit box or boxes; and, generally, sign such forms on
behalf of the Company as may be required to conduct the banking activities of
the Company.
6.6 Annual Meetings. The annual meeting of the Members shall be held
on the first Tuesday in February, beginning with the year 1998 or on such other
date and time as the Members shall specify in writing. Annual meetings may be
conducted by use of Communications Equipment. Should said day fall on a legal
holiday, then any such annual meeting of Members shall be held at the same time
and place on the next day which is not a legal holiday.
6.7 Annual Meetings, Notice. Written notice of each annual meeting
signed by the Members, or by such other person or persons as the Members shall
designate, shall be given to each Member entitled to vote at the meeting, either
personally or by mail or other means of written communication, charges prepaid,
addressed to such Member at his address appearing on the books of the Company or
given by him to the Company for the purpose of notice. If a Member gives no
address, notice shall be deemed to have been given him if sent by mail or other
means of written communication addressed to the place where the principal office
of the Company is situated. All such notices shall be sent to each Member
entitled thereto not less than ten (10) nor more than sixty (60)
-8-
calendar days before each annual meeting, and shall specify the place, the day
and the hour of such meeting.
6.8 Adjourned Meetings and Notice Thereof. Any Members meeting may
be adjourned from time to time by unanimous vote, by those present in person or
represented by proxy, but in the absence of a quorum no other business may be
transacted at any such meeting. Other than by announcement at the meeting at
which such adjournment is taken, it shall not be necessary to give any notice of
an adjournment or of the business to be transacted at an adjourned meeting.
6.9 Admission of New Members. New Members may be admitted to
membership in the Company with the unanimous vote or consent of the existing
Members. A new Member must agree to be bound by the terms and provisions of the
Articles of Organization and this Operating Agreement, as amended, and upon
admission the new Member shall have all rights and duties of a Member of this
Company.
ARTICLE VII.
TRANSFER OF MEMBERS AND AFFILIATES' INTERESTS
7.1 General. Each Member's Interest and Affiliate's Interest in the
Member is personal property. Except as otherwise provided in this Operating
Agreement, the Transfer of a Member's Interest or Affiliate's Interest in the
Member is prohibited unless expressly permitted herein.
7.2 No Right to Transfer Member's Interest Without Unanimous
Consent. In the event that the prohibition on transfer as set forth in Section
7.5 is violated, or at any other time all of the members of the Executive
Committee do not approve of a proposed Transfer or assignment by unanimous
written consent, the transferee of the Member's Interest has no right to
participate in the management of the business and affairs of the Company or to
become a Member.
The transferee shall be only entitled to receive the share of
profits or other compensation by way of income and the return of Capital
Contributions, to which the transferring Member would otherwise be entitled. If
the Transfer is approved by all the members of the Executive Committee by
unanimous written consent, the transferee has all the rights and powers and is
subject to all the restrictions and liabilities of his assignor, and has the
right to participate in the management of the business and affairs of the
Company and becomes a substituted Member.
7.3 Restricted Transfer of Affiliate's Interest. At any time after
the execution of this Agreement, each Member shall ensure that any Affiliate's
interests in any Affiliate of any Member listed in Schedule 7.3 shall not be
transferred to any other person, natural or legal, who is not listed in Schedule
7.3 without the prior written consent of the Executive Committee.
-9-
7.3.1 The Members shall enter into separate agreements,
attached as Exhibit E, with their respective Affiliates as listed in Schedule
7.3, prohibiting the Transfer of all Affiliate's interest to any other person,
natural or legal, who is not listed in Schedule 7.3 without the prior written
consent of the Executive Committee. Such Agreements shall provide that the
transferee of the Affiliate's interest has no right to participate in the
management of the business and affairs of the Member or to become a Member
without the prior written consent of the Executive Committee.
7.3.2 No offering of any interest pursuant to any provision of
Section 7.3 shall be made without the prior written opinion of Company counsel
that such offering or transfer is in accordance with this Agreement and all
applicable laws.
7.4 No Transfer Permitted Under Certain Circumstances. A Member
shall not Transfer all or any part of its Interest, if such Transfer would cause
the termination of the Company for federal income tax purposes or would violate
any applicable federal or state securities laws.
7.5 No Transfer Permitted for Three (3) Years. Except as otherwise
permitted under Section 7.3, no Member shall, until three (3) years following
the execution of this Agreement, Transfer all or any part of its Interest to a
person, natural or legal, who is not a Member of the Company at the time of
transfer. However, in the event that Response USA, Inc. shall receive a public
tender offer for its shares of stock the prohibition on transfer shall be waived
so as to allow the successful conclusion of such public tender offer.
7.6 Right of First Refusal. After the three (3) year prohibition on
Transfer as set forth in Section 7.5 has expired, notwithstanding any provision
in this Agreement, no Member shall Transfer all or any portion of its Interest,
or any right therein, to any person in any manner whatsoever, whether
voluntarily or by operation of law or otherwise, unless that Member shall have
first given written notice to the Executive Committee of its intent to do so in
accordance with Section 7.6.2 hereof. Said notice (the "Refusal Notice") shall
name the proposed transferee and specify the Interest to be transferred, the
requested cash price for the Interest and all other material terms of the
proposed Transfer.
7.6.1 Following the receipt of the Refusal Notice, the
Executive Committee shall determine the Interest specified therein to be
purchased by the Company in accordance with this Section 7.6, if any. Unless the
Executive Committee intends for the Company to purchase all of the Interest
specified in the Refusal Notice, by written notice to the non-transferring
Members (which shall be given seven (7) Business Days after the receipt of the
Refusal Notice by the Executive Committee), the Executive Committee shall offer
the non-transferring Members the opportunity to purchase any of the Interest
which the Executive Committee does not intend for the Company to purchase.
Within seven (7) Business Days following that notice from the Executive
Committee, each non-transferring Member who so desires shall give an election
notice ("Election Notice") to the Executive Committee. To exercise the option
under this Section 7.6, the Executive Committee shall, within fourteen (14)
Business Days after the giving of the Refusal Notice, give written notice
-10-
to the transferring Member stating that all, but not less than all, of the
Interest specified in the Refusal Notice is being purchased by the Company
and/or non-transferring Members.
7.6.2 Upon expiration of the period specified above for
exercise of the right of first refusal by the Company and the non-transferring
Members, or if the total Interest specified by the Company and the
non-transferring Members is less than the Interest specified in the Refusal
Notice, then all, but not a portion, of such Interest may be Transferred at any
time within twenty-eight (28) Business Days following the expiration of the
period specified in Section 7.6 to the proposed transferee, at a price and on
terms no more favorable to the transferee than those specified in the Refusal
Notice. Any later proposed Transfer may be made (if otherwise permissible) only
by again following the procedures specified in this Section 7.6.
7.6.3 In the case of any purchase by the Company or the non-
transferring Members pursuant to this Section 7.6, the purchase price and terms
for the Interest shall be the cash price and terms for the Interest specified in
the Refusal Notice. The closing of any purchase of any Interest by the Company
or the non-transferring Members shall be held at a time specified by the
Executive Committee.
7.7 Representations and Warranties of the Members. Each of the
Members represents and warrants to the Company and the other Members with
respect to itself as follows:
7.7.1 Such Member is the lawful owner of and has the full
right, power and authority to sell, transfer, and deliver the separate assets,
as set forth next to its name in Exhibit C to the Company. The sale, transfer
and delivery of such separate assets in accordance therewith will transfer good
and marketable title thereto, free and clear of all liens, encumbrances, claims
or rights of third parties of every kind and nature whatsoever, subject only to
the provisions of this Agreement and the Purchase Agreement.
7.7.2 There are no existing options, warrants, calls, liens or
commitments on the part of any of the assets set forth in Exhibit C, that will
not be terminated concurrently with the execution of this Agreement.
7.7.3 Such Member has the right and power to enter into this
Agreement, and when this Agreement has been fully executed and delivered, it
constitutes the valid and binding obligation of such Member. No consent of any
person not a party to this Agreement, and no consent of any governmental
authority, is required to be obtained on the part of such Member in connection
with or resulting from the execution or performance of this Agreement.
-11-
7.8 Transferee's Participation Percentage. In the event a transferee
acquires all or part of the Interest of an existing Member or Members, the
transferee's Participation Percentage shall be adjusted, as set forth in Section
1.25 of this Agreement.
ARTICLE VIII.
MANAGEMENT
8.1 Executive Committee. The Members agree that the business of the
Company shall be managed by an Executive Committee composed of the two (2)
persons appointed by Response and the two (2) persons appointed by BKR, as
specified in Section 6.2. The Executive Committee is the "Manager" of the
Company. Except as otherwise provided in this Agreement, the Executive Committee
shall act by majority vote or by written consent of a majority of the members of
the Executive Committee who are voting or acting by written consent.
8.2 Unanimity Required for Action. Only upon unanimous vote or by
unanimous written consent of those Members entitled to vote and voting, the
Executive Committee shall have the right, power or authority to do any act,
including but not limited to, the following:
8.2.1 expend or use any Company money or property except upon
the account of and for the benefit of the Company;
8.2.2 mortgage or lease the entire property comprising the
Company's operations, pledge, or otherwise dispose of all, or substantially all,
of the assets of the Company, other than in the ordinary course of business;
8.2.3 pledge any of the Company's credit or property for other
than Company purposes;
8.2.4 compromise, settle or release any debt due the Company
except upon full payment thereof or except in the ordinary course of business;
8.2.5 assign the Company's property in trust for creditors or
on the assignee's promise to pay the debts of the Company;
8.2.6 confess a judgment against the Company, the Company's
property, or any of the Members;
8.2.7 dispose of any of the goodwill of the Company business;
8.2.8 submit a Company claim or liability to arbitration;
8.2.9 admit new Members to the Company;
8.2.10 determine the amount, if any of distributable cash;
-12-
8.2.11 make a call for additional Capital Contributions; or
8.2.12 appoint any "Senior Officer" of the Company, which is
any officer listed in Section 8.3.1, a Chief Operating Officer, a Chief
Financial Officer, a President or any other officer the Executive Committee so
unanimously designates.
8.2.13 do any other act which would make it impossible to
carry on the ordinary business of the Company.
8.3 Officers. The Executive Committee may, from time to time, elect
a Chief Executive Officer, a Managing Director, a Chairman, a Vice-Chairman, a
President, a Chief Operating Officer, a Chief Financial Officer, a Secretary,
Vice-Presidents and such other officers and confer upon them such duties,
authority and titles as the business of the Company may require.
8.3.1 The Executive Committee hereby appoints the following
individuals to hold Senior Officer positions until such individual shall resign
or shall be removed or otherwise disqualified to serve:
8.3.1.1 As President of the Company, Xxxx Xxxxxxxxx;
8.3.1.2 As Chief Executive Officer of the Company,
Xxxxxxx X. Xxxxxx;
8.3.1.3 As Chairman of the Company, Xxxxxxx X. Xxxxxxxx;
and
8.3.1.4 As Vice-Chairman of the Company, Xxxxxx Xxxxxxx.
8.4 President. The President shall report to the Executive Committee
and shall have ultimate responsibility for the management of the Company,
including hiring and firing of employees, day to day operations, and the
manufacture and sale of the Company's products and such other duties as the
Executive Committee may determine.
8.5 Chief Executive Officer. The Chief Executive Officer shall
report to the Executive Committee and have such duties as the Executive
Committee shall direct.
8.6 Chairman. The Chairman shall have the responsibility of
presiding over all Scheduled Meetings, Annual Meetings and Executive Committee
Meetings and other responsibilities as the Executive Committee may determine
from time to time.
8.7 Vice-Chairman. The Vice-Chairman shall have the responsibilities
as the Executive Committee may determine from time to time.
8.8 Removal, Resignation and Vacancies. By unanimous vote, the
Executive Committee may remove any Officer, either with or without cause, in
accordance
-13-
with the terms of this Agreement. Any member of the Executive Committee or
Officer may resign at any time by giving written notice to the Executive
Committee. Any such resignation shall take effect at the date of the receipt of
such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
8.9 Executive Committee Meetings. Any member of the Executive
Committee may call an Executive Committee meeting ("Executive Committee
Meeting") for any purpose by giving written notice (by mail or by facsimile) to
all members of the Executive Committee ten (10) Business Days prior to the date
of the meeting ("Meeting Date"). Notice of an Executive Committee Meeting shall
specify, in addition to the place, day and hour of such Executive Committee
Meeting, the purpose or purposes for which the Executive Committee Meeting is
called. Executive Committee Meetings may also be conducted by Communications
Equipment.
8.9.1 At any time up to the convening of the Executive
Committee Meeting, any member of the Executive Committee may postpone the date
of the meeting one time for up to ten (10) Business Days from the originally
scheduled Executive Committee Meeting Date, provided that written notice is
given to all members of the Executive Committee.
8.9.2 For any convened Executive Committee Meeting, the
presence of one (1) Executive Committee member holding the written proxy of
another member of the Executive Committee shall constitute a quorum for the
transaction of business.
8.9.3 A Member not present at an Executive Committee Meeting
may cast its vote by proxy provided that the proxy holder attends the Executive
Committee Meeting.
8.10 Action by Written Consent. Any action may be taken by the
members of the Executive Committee without a meeting, if authorized by the
unanimous written consent of the members of the Executive Committee. In no
instance where action is authorized by written consent, need a meeting of the
Executive Committee be called or noticed. However, a copy of the action taken by
written consent must be immediately sent to all members of the Executive
Committee and placed in the Company's records.
8.11 Deadlock; President Authorized to Break Deadlock. In the event
of a Deadlock, the President shall be authorized to cast the deciding vote to
break the deadlock on all operational issues listed in Schedule 8.12 and such
other issues as the Executive Committee may unanimously determine from time to
time.
8.12 President Not Authorized to Break Deadlock. Notwithstanding any
of the foregoing, in no event shall the President be authorized to cast the
deciding vote in the
-14-
event of Deadlock, unless the Executive Committee expressly authorizes the
President to do so by unanimous vote or consent; or if the issue is expressly
listed in Schedule 8.12.
ARTICLE IX.
PROFITS AND LOSSES
9.1 Allocation of Net Profits. Net Profits for each Fiscal Year
shall be allocated to the Members in accordance with their respective
Participation Percentages.
9.2 Allocation of Net Losses. Net Losses for each Fiscal Year shall
be allocated to the Members in accordance with their respective Participation
Percentages.
9.3 Allocation of Nonrecourse Deductions. Nonrecourse Deductions for
each Fiscal Year shall be allocated to the Members in accordance with their
respective Participation Percentages.
9.4 Allocation of Tax Credits. Except as may otherwise be required
by law, any tax credits to which the Company may be entitled shall be allocated
to the Members in accordance with their respective Participation Percentages.
9.5 Qualified Income Offset. If any Member unexpectedly receives an
adjustment, allocation or distribution described in Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, any deficit in said Member's Capital
Account as quickly as possible. The Member's Capital Account, as of the end of
the relevant Fiscal Year, shall take into account the adjustments described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), any amount of any
deficit Capital Account balance which the Member is obligated to restore and any
amount of any deficit Capital Account balance which the Member is deemed
obligated to restore pursuant to the Regulations promulgated under Section
704(b) of the Code.
9.6 Minimum Gain Chargeback. Prior to any allocation hereunder, if
there is a net decrease in the Company Minimum Gain during a Company taxable
year, each Member shall be allocated items of income and gain in accordance with
the Regulations promulgated under Section 704(b) of the Code and its
requirements for a "minimum gain chargeback." If there is a net decrease in
minimum gain attributable to debt associated with Member Nonrecourse Deductions,
income and gain shall be allocated to the Members in accordance with the
Regulations.
9.7 Member Nonrecourse Deductions. Those items of Company loss,
deduction or Code Section 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
Treasury Regulations Section 1.704-2(I).
-15-
9.8 Allocations of Book Items. All items of book income, gain, loss
and deduction shall be allocated among the Members in the same percentage that
Net Profits and Net Losses are allocated for the same Fiscal Year, or as
otherwise provided by the Regulations promulgated under Section 704(b) of the
Code.
ARTICLE X.
DISTRIBUTIONS
10.1 Distribution of Distributable Cash. Distributable Cash shall be
distributed to the Members within ninety (90) days after the end of each Fiscal
Year in proportion to their respective Participation Percentages only upon the
unanimous written consent or vote of the Executive Committee. Notwithstanding
the foregoing, Distributable Cash in an amount equal to fifty percent (50%) of
the net taxable income allocated among the Members shall be distributed to the
Members in proportion to their respective Participation Percentages, but only if
all known and anticipated operating expenses have been provided for.
10.2 To Whom Distributions Are Made. Unless named in this Agreement
or unless admitted as a Member as provided in this Agreement, no person or
entity shall be considered a Member in the Company. Any distribution by the
Company to the person shown on the Company records as a Member, or to such
Member's legal representatives, or to a named assignee of the right to receive
distributions, shall acquit the Company and the Members of all liability to any
other person who may be interested in such distribution by reason of an
assignment by a Member or for any other reason.
ARTICLE XI.
ACCOUNTING AND RECORDS
11.1 Records and Accounting. The books and records of the Company
shall be kept, and the financial position and the results of it operations
recorded, in accordance with the accounting methods elected to be followed by
the Company for federal income tax purposes. The books and records of the
Company shall reflect all Company transactions and shall be appropriate and
adequate for the Company's business. The fiscal year of the Company for
financial reporting and for federal income tax purposes shall be the calendar
year.
11.2 Access to Accounting Records. All books and records of the
Company shall be maintained at any office of the Company or at the Company's
principal place of business, or as determined from time to time by the Company.
Each Member, and the Member's duly authorized representative, shall have access
to them at such office of the Company, and the right to inspect and copy them at
reasonable times.
-16-
ARTICLE XII.
DISSOLUTION AND WINDING UP
12.1 Conditions of Dissolution. The Company shall dissolve upon the
occurrence of any of the following events:
12.1.1 Upon the happening of any event of dissolution
specified in the Articles of Organization of the Company;
12.1.2 Upon the entry of a decree of judicial dissolution;
12.1.3 Upon the unanimous vote of the Executive Committee;
12.1.4 Upon the occurrence of the death, withdrawal,
resignation, retirement, insanity, Bankruptcy or dissolution of any member of
the Executive Committee, unless by majority vote the remaining members of the
Executive Committee agree to continue the business of the Company within ninety
(90) days after such event; or
12.1.5 Upon the sale of all or substantially all of the assets
of Company.
12.2 Winding Up. Upon the dissolution of the Company, the Company's
assets shall be disposed of and its affairs wound up. The Company shall give
written notice of the commencement of the dissolution to all of its known
creditors.
12.3 Order of Payment of Liabilities Upon Dissolution. After
determining that all the known debts and liabilities of the Company have been
paid or adequately provided for, the remaining assets shall be distributed to
the Members in accordance with their positive Capital Account balances, after
taking into account income and loss allocations for the Company's taxable year
during which liquidation occurs.
12.4 Limitations on Payments Made in Dissolution. Except as
otherwise specifically provided in this Agreement, each Member shall be entitled
to look only to the assets of the Company for the return of that Member's
positive Capital Account balance, and shall have no recourse for that Member's
Capital Contribution and/or share of Net Profits against any other Member.
12.5 Certificates. The Company shall file with the Nevada Secretary
of State a Certificate of Dissolution upon the dissolution of the Company, and a
Certificate of Cancellation upon the completion of the winding up of the
Company's affairs.
ARTICLE XIII.
INDEMNIFICATION
-17-
13.1 Indemnity. This Company does hereby indemnify any person 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, except an action by or in the right of the Company, by reason
of the fact that the person is or was a Member, member of the Executive
Committee, an officer, employee or agent of this Company, or is or was serving
at the request of this Company as a member, Member of the Executive Committee,
officer, employee or agent of another limited liability company or corporation,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
the action, suit or proceeding if the person acted in good faith and in a manner
which the person reasonably believed to be in or not opposed to the best
interests of this Company, and, with respect to a criminal action or proceeding,
had no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in or not opposed to the best
interest of this Company, and that, with respect to any criminal action or
proceeding, the person had reasonable cause to believe that the person's conduct
was unlawful.
13.2 Indemnity for Actions By or In the Right of The Company. This
Company does hereby indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of this Company to procure a judgment in its favor by reason of the
fact that the person is or was a Member, member of the Executive Committee, an
officer, employee or agent of this Company, or is or was serving at the request
of this Company as a Member, member of the Executive Committee, officer,
employee or agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees actually and reasonably
incurred by the person in connection with the defense or settlement of the
actions or suit if the person acted in good faith and in a manner which the
person reasonably believed to be in or not opposed to the best interests of this
Company. Indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to this Company or for
amounts paid in settlement to this Company, unless and only to the extent that
the court in which the action or suit was brought, or other court of competent
jurisdiction, determines upon application that in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
13.3 Indemnity If Successful. To the extent that a Member, a member
of the Executive Committee, officer, employee or agent of this Company has been
successful on the merits or otherwise in defense of any action, suit or
proceeding, or in defense of any claim, issue or matter therein, this Company
does hereby indemnify such person or entity against expenses, including
attorneys' fees, actually and reasonably incurred by the person in connection
with the defense.
-18-
13.4 Expenses. Any indemnification must be made by this Company only
as authorized in the specific case upon a determination that indemnification of
the Member, the member of the Executive Committee, officer, employee or agent is
proper in the circumstances. The determination must be made:
13.4.1 By the Executive Committee unanimously; or
13.4.2 If a unanimous decision cannot be obtained, by written
opinion of independent legal counsel.
13.5 Advance Payment of Expenses. The expenses of Members and the
Executive Committee incurred in defending a civil or criminal action, suit or
proceeding shall be paid by this Company as they are incurred and in advance of
the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the Member or a member of the Executive Committee
to repay the amount, if it is ultimately determined by a court of competent
jurisdiction that the person is not entitled to be indemnified by this Company.
The provisions of this subsection do not affect any rights to advancement of
expenses to which personnel other than Members or members of the Executive
Committee may be entitled under any contract or otherwise by law.
ARTICLE XIV.
MISCELLANEOUS PROVISIONS
14.1 Complete Agreement. This Operating Agreement, and the Articles
of Organization, constitute the complete and exclusive statement of the
Agreement among the Members with respect to the subject matter contained
therein. This Agreement and the Articles replace and supersede all prior
agreements by and among the Members or any of them. This Agreement and the
Articles supersede all prior written and oral statements, and no representation,
statement, or condition or warranty not contained in this Agreement or the
Articles will be binding on the Members or of any force and effect whatsoever.
14.2 Amendments. This Operating Agreement may be amended by the
Members only at a special or annual meeting of the Members, not by written
consent, and only if the notice of the intention to amend the Operating
Agreement was contained in the notice of the meeting, or such notice of a
meeting is waived by all Members.
14.3 Applicable Law. This Operating Agreement, and its application,
shall be governed exclusively by its terms and by the laws of the State of
Nevada.
14.4 Headings. The headings in this Operating Agreement are inserted
for convenience only and are in no way intended to describe, interpret, define
or limit the scope, extent or intent of this Operating Agreement or any
provisions contained herein.
14.5 Severability. If any provision of this Operating Agreement or
the application thereof to any person or circumstance shall be deemed invalid,
illegal or
-19-
unenforceable to any extent, the remainder of this Operating Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
14.6 Expenses. If any litigation or other proceeding is commenced in
connection with or related to this Agreement, the prevailing party shall be
entitled to recover from the losing party all of the incidental costs and
reasonable attorneys' fees, whether or not a final judgment is rendered.
14.7 Heirs, Successors and Assigns. Each and all of the covenants,
terms, provisions and agreements contained in this Operating Agreement shall be
binding upon and inure to the benefit of the existing Members, all new and
substituted Members, and their respective heirs, legal representatives,
successors and assigns.
14.8 Arbitration. Any dispute arising out of or relating to this
Agreement that cannot be settled by good faith negotiation between the parties
will be submitted to final and binding arbitration before a retired Judge
pursuant to the Commercial Rules of the American Arbitration Association. This
dispute resolution shall not be construed to permit an arbitrator to make any
business decisions which are the responsibility or under the authority of the
Executive Committee.
14.9 Execution. This Agreement may be executed in counterparts, and
by facsimile signatures when so executed each counterpart shall be deemed to be
an original, and said counterparts together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Operating Agreement was adopted by a
unanimous vote of all the Members of this Company at the organizational meeting
thereof held as of March _____, 1997.
"MEMBERS"
RESPONSE U.S.A., INC., BKR, INC.,
a Delaware Corporation a Nevada Corporation
By: By:
------------------------------ ---------------------
Name: Xxxxxxx X. Xxxxxx Name: Xxxx Xxxxxxxxx
Title: President Title: President
By: By:
------------------------------ ---------------------
Name: Xxxxxx Xxxxxxx Name: Xxxxx Xxxxxxxxx
Title: Chief Operating Officer Title: Secretary
-20-
EXHIBIT "C"
NAME PERCENTAGE
Response USA, Inc. 50%
BKR, Inc. 50%
-21-
