IBC-EMPYREAN, L.L.C.
OPERATING AGREEMENT
TABLE OF CONTENTS
Page
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1. Definitions 1
2. Formation and Name: Office; Purpose; Term 7
3. Members; Capital; Capital Accounts 8
4. Profit, Loss, and Distributions 9
5. Management: Rights, Powers, and Duties 12
6. Transfer of Interests and Withdrawals of Members 18
7. Dissolution, Liquidation, and Termination of the Company 20
8. Books, Records, Accounting, and Tax Elections 21
9. General Provisions 23
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INDEX OF EXHIBITS
Exhibit A Schedule of Capital Contributions
Exhibit B Trademark License Agreement from Empyrean to IBC-Empyrean
Exhibit C License Agreement from IBC to IBC-Empyrean
Exhibit D Trademark License Agreement from IBC to IBC-Empyrean
Exhibit E GEDA LOGO
Exhibit F Put Agreement
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IBC-EMPYREAN, L.L.C.
OPERATING AGREEMENT
This Operating Agreement is entered into as of August 9, 2000, by the
signatories hereto, who agree as follows.
1. DEFINITIONS
For purposes of this Agreement:
(a) ACT means the Delaware Limited Liability Company Act, as may be amended
from time to time.
(b) AFFILIATE of a party shall mean any entity which controls, is
controlled by or under common control with such party, and any joint venture
(whether a corporation, partnership or other form of entity) in which such party
has at least a one-third interest.
(c) AGREEMENT means this Operating Agreement, as amended or modified from
time to time.
(d) ATTORNEY-IN-FACT has the meaning contained in Section 5(i)(i).
(e) BOARD means the board of managers of the Company.
(f) BUG TRADEMARK shall mean the "GEDA LOGO", used by IBC, Empyrean and the
Company on all products based on the Formulation in the form attached hereto as
EXHIBIT E.
(g) BUSINESS PLAN means the annual business plan for the Company jointly
developed and unanimously approved by the Board, setting forth the objectives,
major business actions, marketing plan and strategies of the Company.
(h) CAPITAL ACCOUNT means the account maintained by the Company for each
Interest Holder in accordance with the following provisions:
(i) an Interest Holder's Capital Account will 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 in accordance with the provisions of Section 4; and
(ii) an Interest Holder's Capital Account will 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 (as defined herein) and any item in the nature of expenses or losses
specially allocated to the Interest Holder in accordance with the provisions of
Section 4.
(iii) In the event the Gross Asset Value of the Company assets is
adjusted, the Capital Accounts of the Members shall be adjusted to reflect the
aggregate net adjustment as if the Company recognized Profit and Loss equal to
the amount of such aggregate net adjustment and such Profit and Loss were
allocated to the Members pursuant to Section 4 of this Agreement.
(iv) If any Interest is transferred under the terms of this Agreement,
the Transferee will succeed to the Capital Account of the Transferor to the
extent the Capital Account is attributable to the transferred Interest. It is
intended that the Capital Accounts of all Interest Holders will be maintained in
compliance with the provisions of Regulation Section 1.704-l(b), and all
provisions of this Agreement relating to the maintenance of Capital Accounts
will be interpreted and applied in a manner consistent with that Regulation.
(i) CAPITAL CONTRIBUTION means the total amount of cash and Gross Asset
Value of any other assets contributed (or deemed contributed under Regulation
Section 1.704-l(b)(2)(iv)(d)) to the Company by a Member, net of liabilities
assumed or to which the assets are subject.
(j) CAPITAL COMMITMENT has the meaning contained in Section 3(a).
(k) CARRIED INTEREST means any equity or profit interest received by the
Company in any investments made by any Funds managed by the Company.
(l) CODE means the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law.
(m) CAPITAL CONTRIBUTION means the Capital Contributions made by the
Members to the Company under Section 3(a) and as set forth on attached EXHIBIT
A.
(n) COMPANY means the limited liability company formed in accordance with
this Agreement.
(o) CONDITIONS OF TRANSFER has the meaning contained in Section 6(b).
(p) DEPRECIATION means, for each fiscal year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the Federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis.
(q) EMPYREAN means Empyrean Biosciences, Inc., a Wyoming corporation.
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(r) ENTITY means any general partnership, limited partnership, corporation,
limited liability company, joint venture, trust, estate, business trust,
association, or other entity.
(s) EXECUTIVE STEERING COMMITTEE has the meaning contained in 5(b)(i).
(t) FISCAL QUARTER means each three (3) month period ending on March 31,
June 30, September 30 and December 31 of each calendar year.
(u) FORMULATION shall have the meaning assigned to such term in the License
Agreement from IBC to IBC-Empyrean.
(v) GROSS ASSET VALUE means, with respect to any asset of the Company, the
Company's adjusted basis for federal income tax purposes; provided, however,
that (a) the Gross Asset Value of any Company asset contributed by a Member to
the Company as a Capital Contribution or distributed to a Member by the Company
shall be the gross fair market value of such Company asset (computed without
taking into account Code Section 7701 (g)) as reasonably determined by the Board
as of the date of contribution or distribution, as the case may be; (b) the
Gross Asset Value of all Company assets shall be adjusted to equal their
respective gross fair market values, as reasonably determined by the Board, upon
the liquidation of the Company for federal income tax purposes (including a
deemed liquidation) pursuant to Code Section 708(b)(1)(B); (c) the Gross Asset
Value of all Company assets shall be adjusted to equal their respective gross
fair market values (taking into account Code Section 7701(g)), as reasonably
determined by the Board, as of (i) the date of the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than
a DE MINIMUS Capital Contribution to the Company, or (ii) upon the distribution
by the Company to a retiring or continuing Member of more than a de minimus
amount of Company property or money. At all times, the Gross Asset Values shall
be adjusted by Depreciation taken into account with respect to the Company's
assets for the purposes of computing Profit and Loss.
(w) INTEREST means a Person's share of the Profits and Losses of, and the
right to receive distributions from, the Company.
(x) INTEREST HOLDER means any Person who holds an Interest.
(Y) IBC means International Bioscience Corporation, a Florida corporation.
(z) IBC-EMPYREAN means IBC-Empyrean, L.L.C., a Delaware limited liability
company.
(aa) 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;
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(iii) the Member is adjudged bankrupt or insolvent or there is entered
against the Member an order for relief in any bankruptcy or insolvency
proceeding;
(iv) the Member files a petition or answer seeking the reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief for the Member under any statute, law, or regulation;
(v) the Member seeks, consents to, or acquiesces in the appointment of
a trustee for, receiver for, or liquidation of the Member or of all or any
substantial part of the Member's properties or assets;
(vi) 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 Subsections (i) through (v);
(vii) any proceeding against the Member seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any statute, law, or regulation, continues for ninety (90) calendar
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) calendar days or, if the appointment is
stayed, for ninety (90) calendar days after the expiration of the stay during
which period the appointment is not vacated;
(viii) 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;
(ix) if the Member is acting as a Member by virtue of being a trustee
of a trust, the termination of the trust;
(x) 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; or
(xi) if the Member is a corporation, the dissolution or liquidation of
the corporation or the revocation of its charter.
(bb) LICENSE AGREEMENT FROM IBC TO EMPYREAN shall mean that certain license
agreement dated as of August 9, 2000 between IBC and Empyrean relating to
commercialization of the Licensed Products.
(cc) LICENSE AGREEMENT FROM IBC TO IBC-EMPYREAN shall mean that certain
license agreement between IBC and IBC-Empyrean relating to the commercialization
of the Licensed Products in the Territory, in the form of EXHIBIT C attached
hereto.
(dd) LICENSED PRODUCTS shall have the meaning assigned to such term in the
License Agreement from IBC to IBC-Empyrean.
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(ee) MANAGER is a Person designated as such in Section 5(a).
(ff) MEMBER means each Person who acquires Membership Rights under this
Agreement and who signs this Agreement and each Person who subsequently is
admitted as a Member of the Company and signs a counterpart hereto.
(gg) MEMBERSHIP RIGHTS means all of the rights of a Member in the Company,
including a Member's: (i) Interest; (ii) right to inspect the Company's books
and records during normal business hours; and (iii) right to vote on any matters
on which Members have such right hereunder.
(hh) NEGATIVE CAPITAL ACCOUNT means a Capital Account with a balance of
less than zero.
(ii) NET CASH FLOW means all cash funds derived by the Company from any
source, including any additional Capital Contributions made by any Member under
Section 3(h), without reduction for any non-cash charges, but less cash funds
used to pay current expenses and liabilities of the Company and to pay or
establish reasonable reserves for future expenses, debt payments, capital
improvements, and replacements as determined by the Board. Net Cash Flow will be
increased by the reduction of any reserve previously established.
(jj) NEW PRODUCT DEVELOPMENT BOARD has the meaning contained in 5(c)(i).
(kk) OFFICERS has the meaning contained in Section 5(d).
(ll) PERCENTAGE means, as to a Member, the percentage that the Member's
Units bears to the total number of Units outstanding, and as to an Interest
Holder who is not a Member, the Percentage of the Member whose Interest has been
acquired by the Interest Holder, to the extent the Interest Holder has succeeded
to that Member's Interest.
(mm) PERSON means and includes any individual or Entity.
(nn) 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, including the receipt of dividends, distributions or proceeds from the
sale, exchange or other disposition of Carried Interests, 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)(l) will be included in
computing such taxable income or loss;
(ii) any tax-exempt income of the Company, not otherwise taken into
account in computing Profit or Loss, will be included in computing taxable
income or loss;
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(iii) any expenditures of the Company described in Code Section
705(a)(2)(B) (or treated as such pursuant to Regulation Section
1.704-l(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit
or Loss, will be subtracted from taxable income or loss;
(iv) gain or loss resulting from any taxable disposition of Company
property will be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding the fact that the Gross Asset 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 will be taken
into account Depreciation; and
(vi) in the event that an Additional Member is admitted, or there is a
redemption of the Units or Unit of any person (or interest therein), but more
than a de minimis amount in either case, the Board may determine to restate the
Gross Asset Value of the assets of the Company to equal their fair market value,
and the gain or loss resulting from this restatement will be taken into account
in determining Profit and Loss.
(oo) PUT AGREEMENT shall mean that certain Put Agreement dated as of August
9, 2000, between IBC and Empyrean, relating to the rights and obligations of IBC
or Empyrean in the event of a Change of Control (as such term is defined
therein) of the parties thereto, in the form attached hereto as EXHIBIT F.
(pp) REGULATION means the income tax regulations, including any temporary
regulations, from time to time promulgated under the Code.
(qq) REQUIREMENTS FOR SUBSTITUTION has the meaning contained in Section
6(d).
(rr) SECRETARY means the Secretary of State of Delaware.
(ss) TAX MATTERS PERSON has the meaning contained in Section 8(e).
(tt) TERRITORY means all the countries of the world, excluding the United
States and Brazil.
(uu) TRADEMARK AGREEMENT FROM EMPYREAN TO IBC-EMPYREAN shall mean that
certain trademark license agreement between Empyrean and IBC-Empyrean relating
to use of the Prevent-X trademark in the Territory, in the form of EXHIBIT B
attached hereto.
(vv) TRADEMARK AGREEMENT FROM IBC TO IBC-EMPYREAN shall mean that certain
trademark license agreement between IBC and IBC-Empyrean relating to the use of
the Bug trademark in the Territory, in the form of EXHIBIT D attached hereto.
(ww) TRANSFER means, when used as a noun, any voluntary sale,
hypothecation, pledge, assignment, attachment, conveyance or other transfer,
and, when used as a verb, means, voluntarily to sell, hypothecate, pledge,
assign, convey or otherwise transfer.
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(xx) TRANSFEREE has the meaning contained in Section 6(b).
(yy) TRANSFEROR has the meaning contained in Section 6(b).
(zz) UNIT means an interest in the Profit and Loss of the Company.
(aaa) UNPAID CONTRIBUTION has the meaning contained in Section 3(b)(ii).
(bbb) VALUATION GUIDELINES means in valuing the assets of the Company the
following guidelines will be used:
(i) Publicly traded securities that are listed on one or more
recognized securities exchanges will be valued at last sales prices on the date
of valuation or, if no sales occurred on such day, at the last bid prices
thereon;
(ii) Publicly traded securities that are traded only in the
over-the-counter market will be valued at the average of the last bid prices (or
in the case of securities listed on the NASDAQ National Market List, at the last
sales prices) on the date of valuation;
(iii) Publicly traded securities with restrictions on marketability
will be valued at an appropriate discount from its otherwise applicable market
price; and
(iv) All other investments will be valued initially at cost, with
subsequent adjustments to values which reflect, among other things, meaningful
third-party transactions in the private market, or to fair market value as
determined by the Board.
(ccc) VOLUNTARY WITHDRAWAL means a Member's disassociation with the Company
by means other than by a Transfer or an Involuntary Withdrawal.
2. FORMATION AND NAME: OFFICE; PURPOSE; TERM
(a) ORGANIZATION. On August 3, 2000, Xxxxxx Xxxxxx, acting for the benefit
of and at the request of the Board, executed the certificate of formation of the
Company and delivered it to the Secretary of State of Delaware in accordance
with and under the Act. The effective date of the filing is August 3, 2000.
(b) NAME OF THE COMPANY. The name of the Company will be "IBC-Empyrean,
L.L.C."
(c) PURPOSES. The purpose of the Company will be to commercialize the
Licensed Products and sell, market and distribute Licensed Products in the
Territory. In that regard, the Company may license third party distributors
throughout the Territory to sell, market and distribute Licensed Products. In
order to be able to undertake the Company's primary contemplated market
activities, on the date hereof, the Company shall enter into (i) the License
Agreement from IBC to IBC-Empyrean, (ii) the Trademark License Agreement from
IBC to IBC-Empyrean, (ii) the Trademark License Agreement from Empyrean to
IBC-Empyrean, and (iv) such other agreements as the signatories hereto
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unanimously determine to be necessary or useful. In addition, the Company may
transact any and all other lawful business for which a limited liability company
may be organized under Delaware law. The Company will have powers as are
necessary to or reasonably connected with the accomplishment of the foregoing
purposes.
(d) TERM. The term of the Company will begin upon the filing of the
certificate of formation of the Company in the Office of the Secretary and will
continue in existence until December 31, 2020, unless its existence is
terminated earlier under Section 7 of this Agreement.
(e) PRINCIPAL PLACE OF BUSINESS. The principal place of the Company's
business shall be determined by the Board of Managers.
(f) REGISTERED AGENT AND OFFICE. The Company's initial registered office
will be at the office of its registered agent at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000, and the name of its initial registered agent at this address
will be The Corporation Trust Company. The Board may change the registered
office and registered agent from time to time by filing the address of the new
registered office and the name of the new registered agent with the Secretary of
State of Delaware under the Act.
(g) MEMBERS. The name, present mailing address, taxpayer identification
number, and each Member's Percentage are set forth on attached EXHIBIT A, which
is part of this Agreement.
3. MEMBERS; CAPITAL; CAPITAL ACCOUNTS
(a) CAPITAL COMMITMENTS. Each Member's capital commitment is set forth
after its name on EXHIBIT A at the end of this Agreement (the "Capital
Commitment"). Each Member will make capital contributions in respect of its
Capital Commitment upon ninety (90) business days' written notice from the
Board. No Member is entitled to interest on its contribution of capital to the
Company.
(b) NO ADDITIONAL CAPITAL CONTRIBUTIONS; NO PERSONAL LIABILITY.
(i) No Member is required to contribute any capital to the Company in
excess of the amount set forth in attached EXHIBIT A for the Member and no
Member has any other personal liability for any obligation or liability of the
Company.
(ii) If a Member fails to pay when called all or any portion of any
Capital Contribution, subject to the approval of the Board to take such action,
the Board will request the non-defaulting Members to pay the unpaid amount of
the defaulting Member's Capital Contribution (the "Unpaid Contribution"). If the
Unpaid Contribution is contributed by any other Member, the defaulting Member's
Units will be reduced by fifty percent (50%) and these forfeited Units will be
allocated to each Member who makes up the Unpaid Contribution in proportion to
the Member's contribution of Unpaid Contribution to the total amount of
contributions of Unpaid Contribution by all Interest Holders. The Board will
amend EXHIBIT A accordingly. This remedy is in addition to any other remedies
allowed by law, in equity or by this Agreement.
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(c) NO INTEREST ON CAPITAL CONTRIBUTIONS. Interest Holders may not be paid
interest on their Capital Contributions.
(d) RETURN OF CAPITAL CONTRIBUTIONS. Except as otherwise specifically
provided in this Agreement, no Interest Holder has the right to receive the
return of any Capital Contribution.
(e) CAPITAL ACCOUNTS. A separate Capital Account will be maintained for
each Interest Holder.
(f) LOANS. Upon the approval of the Board, any Member may make or cause a
loan to be made to the Company in any amount on terms agreed to by the Board and
the Member.
(g) ADDITIONAL MEMBERS. Additional Persons may be admitted to the Company
as Members and Membership Rights and Units may be created and issued to those
Persons and to existing Members upon the prior approval of the Board and the
prior approval of at least eighty percent (80%) of the outstanding Units. The
Board will determine the terms and conditions at the time of admission and these
terms and conditions will be approved by the vote of at least eighty percent
(80%) of the outstanding Units. The terms of admission or issuance must specify
the applicable Percentages and may provide for the creation of different classes
or groups of Members having different rights, powers, and duties.
(h) REPRESENTATIONS AND WARRANTIES. Each Member, and in the case of an
Entity, the person(s) executing this Agreement on behalf of the Entity, hereby
represents and warrants to the Company and each other Member (which
representations and warranties will survive the execution and delivery of this
Agreement) that: (a) if the Member is an Entity, that it is duly organized,
validly existing, and in good standing under the laws of its state of
organization and that it has full organizational power to execute, deliver and
agree to this Agreement and to perform its obligations hereunder in accordance
with its terms; (b) that the Member is acquiring its Membership Rights in the
Company for the Member's own account as an investment and without an intent to
distribute the Membership Rights; and (c) the Member acknowledges that the
Membership Rights have not been registered under the Securities Act of 1933 or
any state securities laws, and may not be resold or transferred by the Member
without appropriate registration or the availability of an exemption from such
requirements.
4. PROFIT, LOSS, AND DISTRIBUTIONS
(a) DISTRIBUTIONS.
(i) The Company will distribute to the Interest Holders within
forty-five (45) days after the end of each Fiscal Quarter such percentage of the
Company's Net Cash Flow for each such Fiscal Quarter as shall be determined by
the Company's Board of Managers.
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(ii) The Company is authorized to withhold any amounts with respect to
any income, gain or profits allocated to any Member as required under the Code,
Regulations or any provision of applicable state and local income tax law. Any
amounts withheld shall be treated as amounts distributed to the Members pursuant
to this Section 4. To the extent any distributions under this Section 4(a)(ii)
exceed the amounts distributable to the Members under Section 4(a)(ii), any such
excess shall be deemed to be an advance to the Members receiving such excess
distributions.
(b) ALLOCATION OF PROFIT OR LOSS.
(i) PROFIT. Profit will be allocated as follows:
(1) first, to those Interest Holders who have received
allocations of Loss in prior periods, which have not been previously offset by
Profit Allocations, among them in accordance with the ratios in which they
shared such Losses, until the effect of such prior period Loss allocations has
been eliminated (beginning with the most recent Loss allocations) from their
Capital Account; and
(2) second, to the Interest Holders in proportion to their
Percentage.
(ii) LOSS. Loss will be allocated as follows:
(1) first, to those Interest Holders who have received
allocations of Profits in prior periods in excess of the amount of distributions
received by such Interest Holders and which have not previously been offset by
Loss allocations ("Undistributed Profits"), among them in accordance with the
ratios in which they shared these Undistributed Profits, until the effect of the
prior period Undistributed Profits allocations has been eliminated (beginning
with the most recent Profits allocations) from their Capital Accounts; and
(2) the balance of any Loss will be allocated among the Interest
Holders in proportion to their Percentage.
(iii) EXPENSE REIMBURSEMENT. For purposes of determining Profit and
Loss as herein provided, each Member and each Manager shall be entitled to a
reimbursement of all out-of-pocket expenses incurred by it or them respectively,
PROVIDED, HOWEVER, that any out-of-pocket expense in excess of $5,000 shall have
been approved prior to incurrence thereof by the unanimous consent of the
Managers, and that any such request for reimbursement shall be accompanied by
reasonable supporting documentation.
(c) REGULATORY ALLOCATIONS.
(i) Notwithstanding anything herein to the contrary, the provisions of
the applicable Regulations under Code Section 704 dealing with "qualified income
offsets," "nonrecourse deductions," "partner nonrecourse debt," "minimum gain"
and "partner nonrecourse debt minimum gain" as those terms are defined in the
Regulations, are incorporated into this Agreement, and allocations of items of
income, gain, loss and deduction shall be made in accordance with the applicable
provisions of the Regulations
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(ii) The provisions of this Section 4(c)(i) (collectively, the
"Regulatory Provisions") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
allocations pursuant to the Regulatory Provisions shall be offset either with
other allocations pursuant to the Regulatory Provisions or, if necessary, with
curative allocations of other items of income, gain, loss or deduction pursuant
to this Section 4(c)(ii). Therefore, notwithstanding any other provision of this
Agreement, other than the Regulatory Provisions, allocations pursuant to the
Regulatory Provisions shall be taken into account in allocating other items of
income, gain, expense or loss among the Members so that, to the extent possible,
the net amount of such allocations of other items and the allocations pursuant
to the Regulatory Provisions to each Member are equal to the net amount that
would have been allocated to such Member is the Regulatory Provisions were not
part of this Agreement
(d) LIQUIDATION AND DISSOLUTION.
(i) If the Company is liquidated, the remaining assets of the Company
will be distributed to the Interest Holders in accordance with the positive
balances in their respective Capital Accounts, after taking into account the
allocations of Profit or Loss under this Section 4.
(ii) No Interest Holder is obligated to restore a Negative Capital
Account.
(e) GENERAL.
(i) Except as otherwise specifically provided in this Agreement, the
timing and amount of all distributions will be determined by the Board.
(ii) If any assets of the Company are distributed in kind to the
Interest Holders, those assets will be valued by the Board in accordance with
the Valuation Guidelines, and any Interest Holder entitled to any interest in
those assets will receive that interest as a tenant-in-common with all other
entitled Interest Holders. Unless the Members otherwise agree, the fair market
value of the assets will be determined by an independent appraiser who will be
selected by the Board. The Profit or Loss for each unsold asset will be
determined as if the asset had been sold at its fair market value, and the
Profit or Loss will be allocated as provided in this Section 4 and will be
properly credited or charged to the Capital Accounts of the Interest Holders
prior to the distribution of the assets in liquidation under Section 4(d).
(iii) All Profit and Loss will be allocated, and all distributions
will 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, if there is a
Transfer or an Involuntary Withdrawal during the taxable year, the Profit and
Loss will 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 will be segregated into two
or more segments in order to account for Profit, Loss, or proceeds attributable
to any extraordinary, nonrecurring items of the Company, or otherwise as
required by Code Section 706 and the regulations thereunder.
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(iv) The Board is hereby authorized, upon the advice of the Company's
tax counsel, to amend this Section 4 to comply with the Code and the Regulations
promulgated under Code Section 704(b); provided, however, that no amendment will
materially affect distributions to an Interest Holder without the Interest
Holder's prior written consent.
(f) SECTION 704(C) ALLOCATION.
(i) Any item of income, gain, loss and deduction with respect to any
property (other than cash) that has been contributed by a Member to the capital
of the Company and which is required or permitted to be allocated to such Member
for income tax purposes under Code Section 704(c) so as to take into account the
variation between the tax basis of such property and its Gross Asset Value at
the time of its contribution shall be allocated to such Member solely for income
tax purposes in the manner so required to permitted.
(ii) If, under Regulations Section 1.704-1(b)(2)(iv)(f), Company
property that has been revalued is properly reflected in the Capital Accounts
and on the books of the Company at a Gross Asset Value that differs from the
adjusted tax basis of such property, then depreciation, depletion, amortization
and gain or loss with respect to such property shall be shared among the Members
in a manner that takes account of the variation between the adjusted tax basis
and Gross Asset Value of property contributed to the Company are taken into
account (as provided in the preceding paragraph) in determining the Member's
share of tax items under Code Section 704(c).
(iii) Allocations pursuant to this Section 4(f) are solely for the
purposes of federal, state and local taxes. As such, they shall not affect or in
any way be taken into account in computing a Member's Capital Account or share
of profits, losses or other items of distributions pursuant to any provision of
this Agreement.
(g) DIVISION AMONG MEMBERS AND INTEREST HOLDERS. Except as otherwise
provided herein, all Profits, Losses and distributions to the Member(s) and
Interest Holder(s) will be divided among them in proportion to their Units.
5. MANAGEMENT: RIGHTS, POWERS, AND DUTIES
(a) MANAGEMENT.
(i) BOARD OF MANAGERS. The Company will be managed by the Board. The
Board will consist of six (6) Managers; three Managers to be appointed by IBC
and three Managers to be appointed by Empyrean. The Managers will serve at the
request of IBC and Empyrean and IBC and Empyrean will have the right to replace
each of the three Managers they were entitled to appoint without the approval of
the Board; provided, however, that any successor to the original appointees
shall be either the Chairman of the Board, Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer of Empyrean or IBC, as the case may
be. Initially, the Board will consist of Xxxxxxxx X. Xxxx, Xxxxxxx X. Xxxxxxx,
Xxxxxxx X. Xxxxx, Xxxx Xxxxx xx Xxxxx, Xxxxx Xxxxxxxxxx, M.D. and Xxxxxx
Xxxxxxx. A quorum of the Board shall be composed of all six Managers.
12
(1) The Board will 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,
whether or not in the ordinary course of such business and affairs, and to
perform any and all other acts or activities customary or incident to the
management of the Company's business, including, without limitation, the making
of any distributions to the Members.
(2) The Board may meet at the principal offices of the Company or
at any other place as may be agreed upon from time to time by the Board at any
time as may be determined by the Board or upon the request of any Manager or the
President upon ten (10) days' notice to all the Managers. Meetings may be held
by telephone. The Board will cause written minutes to be prepared of all actions
taken by the Board and will cause a copy thereof to be delivered to each Manager
within fifteen (15) days after the meeting.
(3) No action may be taken at a meeting of the Board unless a
majority of the Managers is present at such meeting.
(4) Each Manager is entitled to cast one vote with respect to any
decision made by the Board, except with respect to a determination to seek
indemnification under Section 5(h), in which event a Manager seeking
indemnification may not vote with respect to his or her indemnification. Any
action to be taken by the Board requires an affirmative vote of a majority of
the Managers. Approval or action by the Board constitutes approval or action by
the Company and is binding on the Members.
(5) The Board will first attempt to settle and vote on each and
every matter presented to it respecting the management of the affairs of the
Company in good faith. In the event the business of the Company is suffering or
is threatened with irreparable injury because the Board is so divided respecting
the management of the affairs of the Company that the required vote for action
by the Board cannot be obtained within thirty (30) days from the date such vote
is first presented to the Board, the Members and the Board hereby agree to
submit and have such divided vote decided by final and binding arbitration
conducted in a mutually agreed location by one neutral arbitrator, in accordance
with the then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). A judgment may be entered in any court having competent
jurisdiction. The arbitrator will not have the power to award any consequential
or punitive damages. The arbitrator will not have the power to order pre-hearing
discovery of documents or the taking of depositions, but may compel attendance
of witnesses and the production of documents at the hearing. This Section will
be governed and enforced under the Federal Arbitration Act, 9 U.S.C. Sections 1
to 16.
(6) Any action to be taken by the Board may be taken without a
meeting if consents in writing setting forth the action so taken are signed by
all Managers.
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(ii) LIMITATION ON AUTHORITY OF MEMBERS.
(1) 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.
(2) This Section 5(a)(ii)(2) supersedes any authority granted to
the Members under the Act. Any Member who takes any action or binds the Company
in violation of this Section will be solely responsible for any loss, cost, and
expense incurred by the Company (including, without limitation, reasonable
attorneys' fees) as a result of the unauthorized action and that Member will
indemnify and hold the Company and its officers harmless with respect to all
loss, cost, or expense.
(b) EXECUTIVE STEERING COMMITTEE.
(i) Subject to the approval of a Business Plan by the Board, the Board
may appoint an executive steering committee (the "Executive Steering Committee")
to manage, control, administer and operate the following business and affairs of
the Company: (1) all sales, marketing and distribution of the Licensed Products
in the Territory; (2) licensing of all third-party distributors; (3) production
scheduling; and (4) financial and administrative functions as delineated in the
Business Plan. In addition, the Executive Steering Committee shall be
responsible for the following business and activities, if any, of the Company:
(1) all research and development; (2) product improvement; (3) manufacturing
facility approvals; (4) clinical trials; (5) product testing; (6) quality
control; (7) lot tracking of the products; (8) label claims; (9) product
registration; and (10) regulatory approvals.
(c) NEW PRODUCT DEVELOPMENT BOARD.
(i) Development of all new products shall be managed, controlled,
administered and operated by the new product development board (the "New Product
Development Board") to be appointed by the Board. The New Product Development
Board shall consist of four (4) members to include two (2) medical/scientific
personnel of IBC and two (2) marketing personnel of Empyrean, in accordance with
mutually agreed upon criteria which will take into account both scientific and
marketing issues. In the event the Company does not desire to distribute and
market a product developed by IBC, IBC may independently market and distribute
such product at its own expense.
(d) OFFICERS.
(i) APPOINTMENT OF OFFICERS BY THE BOARD. The Board may appoint one or
more officers of the Company ("Officers") and may delegate to these Officers the
day-to-day ordinary and usual business and affairs of the Company, consistent
with the terms hereof. The terms of employment of these Officers may be governed
by employment contracts or similar documents with the Officers. In addition, the
Officers will have the responsibility of implementing the decisions of the Board
and Members and making all of those decisions specially delegated to the
Officers by the Board. Notwithstanding anything contained herein to the
14
contrary, unless specifically delegated to the Officers under this Agreement or
in accordance with an instruction from the Board from time to time, all decision
making authority is reserved for the Board. The acts of the Officers will bind
the Members and the Company when these acts are within the scope of the
Officers' authority as provided in this Agreement. The Officers are subject to
the direction of the Board at all times and will keep the Board informed about
all material matters relating to the Company.
(ii) TENURE. Each Officer will hold office from the date of
appointment until removed by the Board or until such Officer will resign.
(iii) RESIGNATION AND REMOVAL. Any Officer may resign at any time by
giving written notice to the Board, and, unless otherwise specified therein, the
acceptance of such resignation will not be necessary to make it effective. Any
Officer may be removed at any time by the Board, with or without cause.
(iv) SALARIES. The salaries of the Officers will be fixed from time to
time by the Board.
(v) INDEMNIFICATION OF OFFICERS. To the maximum extent permitted under
the Act and any other applicable law, the Company will indemnify the Officers
and make advances for reasonable expenses.
(vi) REMOVAL. Any one or more of the Officers may be removed at any
time, with or without cause, by the Board, subject to the terms of any
employment agreements that the Officers may have with the Company. The removal
of an Officer who is also a Member will not affect such person's rights as a
Member and will not constitute a termination of a Member.
(vii) OFFICERS.
(1) CO-CHAIRMEN. The Co-Chairmen will preside at all meetings of
the Board and the Members, and will exercise and perform any other duties as
assigned by the Board. Xxxxxxxx X. Xxxx and Xxxx Xxxxx xx Xxxxx initially will
be the Co-Chairmen of the Board.
(2) OTHER OFFICERS. The Company may, at the discretion of the
Board, appoint additional Officers including, without limitation, a President, a
Chief Financial Officer, one or more Vice-Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. One
person may hold two or more offices. When the incumbent of an office is unable
to perform its duties, or where there is not an incumbent of an office, the
duties of the Officer will be performed by the person specified by the Board.
(e) VOTE OF THE MEMBERS. The Company may not take any of the following
actions without the approval of one hundred percent (100%) of the outstanding
Units:
(i) sell, convey, or otherwise dispose of all or substantially all of
its property or business or merge into or consolidate with any other entity or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company is disposed of;
15
(ii) dissolve, liquidate or wind up the activities of the Company;
(iii) acquire any other business;
(iv) change the nature of the Company's business;
(v) alter or change the rights, preferences or privileges of the
Units;
(vi) increase or decrease the total number of Units outstanding;
(vii) authorize or issue, or obligate itself to issue, any additional
security;
(viii) amend this Agreement;
(ix) change the number of managers or composition of the Board.
(f) PERSONAL SERVICES. No Member is required to perform services for the
Company solely by virtue of being a Member. Unless approved by the Board, no
Member may perform services for the Company or be entitled to compensation for
services performed for the Company.
(g) DUTIES OF PARTIES.
(i) The Board will devote time to the business and affairs of the
Company necessary to carry out the Board's duties set forth in this Agreement.
(ii) Except as otherwise expressly provided in Section 5(e), nothing
in this Agreement may be deemed to restrict in any way the rights of any Member,
or of any Affiliate of any Member, to conduct any other business or activity
whatsoever, and no Member is 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, so long as such business or activity is not a
microbicide product that is the same as a Licensed Product. The organization of
the Company will be without prejudice to any Member's respective rights (or the
rights of any Member's respective Affiliates) to maintain, expand, or diversify
other interests and activities and to receive and enjoy these profits or
compensation. Each Member waives any rights the Member may otherwise have to
share or participate in other interests or activities of any other Member or
that Member's Affiliates.
(iii) Each Member understands and acknowledges that the conduct of the
Company's business may involve business dealings and undertakings with Members
and their Affiliates. In any of those cases, those dealings and undertakings
will be at arm's length and on commercially reasonable terms.
16
(h) LIABILITY AND INDEMNIFICATION.
(i) The Board, the members of the Advisory Board, and the Officers are
not liable, responsible, or accountable, in damages or otherwise, to any Member
or to the Company for any act performed by such Person within the scope of the
authority conferred on such Person by this Agreement, except for fraud, gross
negligence, or an intentional breach of this Agreement.
(ii) The Company will indemnify the Board (and each of its managers,
officers, shareholders, employees and agents), the members of the Advisory
Board, the Officers and each Member for any and all losses, liabilities,
damages, judgments, amounts paid in settlement, costs and expenses (including,
without limitation, attorneys' fees) to which any Person may actually incur or
become subject in connection with any threatened, pending or completed action,
suit, or proceeding to which any of them was or is made a party or threatened to
be made a party by reason of the direct or indirect association by them with the
Company or in connection with any involvement with any portfolio company (to the
extent not indemnified by such portfolio company) as and to the fullest extent
permitted by the Act and applicable law, provided the Person seeking
indemnification was not grossly negligent or engaged in willful malfeasance or
in intentional breach of this Agreement. Whenever any indemnification has been
paid to or expenses advanced to any such Person, this occurrence will be
reported to the Members prior to or with the next notice of a meeting of
Members.
(iii) The Company shall obtain liability insurance for all Managers
and Officers. All Members shall bear the costs of such insurance equally.
(i) POWER OF ATTORNEY.
(i) GRANT OF POWER. Each Member hereby constitutes and appoints each
member of the Board 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, deliver, and file:
(1) the Certificate of Formation of the Company;
(2) all documents (including amendments to the Certificate of
Formation) that the Attorney-in-Fact deems appropriate to reflect any amendment,
change, or modification of this Agreement;
(3) any and all other certificates or other instruments required
to be filed by the Company under the laws of the State of Delaware 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 Delaware;
(4) one or more applications to use an assumed name; and
(5) all documents that may be required to dissolve and terminate
the Company and to cancel its Certificate of Formation.
17
(ii) IRREVOCABILITY. The foregoing power of attorney is irrevocable
and is coupled with an interest, and, to the fullest extent permitted by
applicable law, will survive the death or disability of a Member. It will
also survive the Transfer of an Interest, except that if the Transferee is
approved for admission as a Member, this power of attorney will 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 will 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.
6. TRANSFER OF INTERESTS AND WITHDRAWALS OF MEMBERS
(a) RESTRICTIONS ON TRANSFER. The Members have agreed that it is not
desirable that any Person Transfer any of its Units, Membership Rights or
Interest to non-Member Persons because of the Members' desire to ensure
continuity of ownership of the Company. No Person shall sell or otherwise
Transfer all or any portion of or any interest or rights in such Person's Units,
Membership Rights or Interest without the majority approval of the remaining
non-transferring Members. The Members agree that the foregoing Transfer
restriction is necessary for the operation of the Company's business, is
reasonable in view of the Company's purpose and the relationship of the Members,
and may be specifically enforced by the Company or any of its Members.
(b) CONDITIONS OF TRANSFERS. Subject to Section 6(a) above and subject to
any restrictions on transferability required by law (including the Securities
Act of 1933, as amended, any state securities or "Blue Sky" law and the rules
promulgated thereunder) if any Person ("Transferor") Transfers to any other
Person ("Transferee") all or any portion of or any interest or rights in such
Person's Membership Rights or Interest, the following conditions ("Conditions of
Transfer") must be satisfied:
(i) The Transfer may not require registration of Interests or
Membership Rights under any federal or state securities laws;
(ii) The Transferee shall deliver to the Board an unqualified opinion
of counsel in form and substance satisfactory to counsel designated by the
Board, that neither the Transfer nor any offering in connection therewith
violates any provision of any federal or state securities law;
(iii) The Transferee shall execute a statement that the Membership
Rights or Interest are being acquired for investment purposes and not with a
view to distribution, fractionalization or resale;
(iv) The Transferee shall deliver to the Company a written instrument
agreeing to be bound by the terms of this Agreement;
18
(v) The Board shall receive a favorable opinion of counsel in form and
substance satisfactory to counsel designated by the Board that the Transfer will
not result in the termination of the Company under the Act;
(vi) The Transfer will not result in the Company being subject to the
Investment Company Act of 1940, as amended; and
(vii) The Transferor or the Transferee shall deliver the following
information to the Company: (1) the Transferee's taxpayer identification number;
and (2) the Transferee's initial tax basis in the Transferred Interest.
(c) STATUS OF TRANSFEREE. Subject to Section 6(a) above, if the Conditions
of Transfer are satisfied, then a Member or Interest Holder may Transfer all or
any portion of that Person's Interest. Unless the Transferee is admitted as a
substitute Member under Section 6(d), the Transfer of an Interest under Section
6(b) may not result, however, in the Transfer of any of the Transferor's other
Membership Rights, if any, and the Transferee of the Interest has no right to:
(i) become a Member; (ii) exercise any Membership Rights other than those
specifically pertaining to the ownership of an Interest; (iii) act as an agent
of the Company; (iv) inspect the Company's books and records; (v) receive an
accounting of Company financial affairs; or (vi) otherwise take part in the
Company's business or exercise the rights of a Member under this Agreement. If
the Transfer is of all Membership Rights and the conditions set forth in Section
6(d) are satisfied, the Transferee will succeed to all Membership Rights of a
Member who Transfers such Membership Rights.
(d) REQUIREMENTS FOR SUBSTITUTION. Subject to Section 6(a), no Transferee
of a Member's Membership Rights under Section 6(c) will have the right to become
a Member unless and until all of the following conditions ("Requirements for
Substitution") are satisfied:
(i) The admission is approved by the Board;
(ii) A duly executed and acknowledged written instrument of transfer
approved by the Board has been filed with the Company setting forth (1) the
intention of the Transferee to be admitted as a Member; (2) the notice address
of the Transferee and the Transferee's taxpayer identification number; and (3)
the number of Units transferred to the Transferee;
(iii) Each of the opinions of counsel specified in Section 6(b);
(iv) Written acceptance and adoption by the Transferee of the
provisions of this Agreement;
(v) The Transferee's completion of a purchaser qualification
questionnaire or similar document which will enable counsel for the Company to
determine whether such proposed substitution is consistent with the requirements
of a private placement exemption from registration under the Securities Act of
1933 and relevant state law; and
19
(vi) A transfer fee has been paid to the Company sufficient to cover
all costs and expenses in connection with the transfer and admission, including,
but not limited to, reasonable attorneys' fees incurred in connection with the
legal opinions referred to in Section 6(b).
(e) TRANSFERS IN VIOLATION. The Transfer of any Membership Rights or
Interests in violation of the prohibitions contained in this Section 6 will 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 6
will not be entitled to exercise any rights or powers of a Member, but will be
entitled, to the maximum extent permitted by the Act, to share in the Profits
and Losses and to receive distributions from the Company to the extent that the
Transferor was entitled to share in such items.
(f) VOLUNTARY WITHDRAWAL. Without the Board's prior consent, no Member will
have the right or power to make a Voluntary Withdrawal from the Company and any
Member who makes a Voluntary Withdrawal will be in intentional breach of this
Agreement. No Member who will Voluntary Withdrawal will be entitled to receive,
in liquidation of such Member's Interest, under the Act or otherwise, the fair
value of the Member's Interest on the date of Voluntary Withdrawal or any other
distribution whatsoever.
(g) INVOLUNTARY WITHDRAWAL. Immediately upon the occurrence of an
Involuntary Withdrawal, the successor of the withdrawn Member will thereupon
become an Interest Holder but will not become a Member, unless the Requirements
for Substitution are satisfied. The successor Interest Holder will have all the
rights of an Interest Holder but neither the predecessor nor the successor
Interest Holder will be entitled to receive in liquidation of the Interest,
pursuant the Act, the fair market value of the Member's Interest as of the date
the Member involuntarily withdrew from the Company.
(h) CHANGE OF CONTROL. In the event of any Change of Control (as such term
is defined in the Put Agreement attached hereto as EXHIBIT F) of either IBC or
Empyrean, the party not subject to such Change of Control, being either IBC or
Empyrean, as the case may be, shall have the right, subject to the terms of the
Put Agreement, to sell their shares to the party subject to such Change of
Control or to a third party upon the terms and conditions as described therein.
7. DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY
(a) EVENTS OF DISSOLUTION. The Company will be dissolved upon the happening
of any of the following events:
(i) When the period fixed for its duration in Section 2(d) has
expired;
(ii) Upon the sale of all or substantially all of the assets of the
Company and the distribution of the Net Cash Flow under Section 4(a);
(iii) Upon written notice of the Board; provided, however, the
Involuntary Withdrawal or Voluntary Withdrawal of a Member will not cause the
dissolution of the Company under the Act and the business of the Company will
continue until the Company is dissolved upon the happening of one of the above
events; or
20
(iv) Upon the approval of the Members under Section 5(e)(ii).
(b) PROCEDURE FOR WINDING UP AND DISSOLUTION. If the Company is dissolved,
the Board will wind up its affairs. On winding up of the Company, (i) the assets
of the Company will, to the maximum extent practicable, be reduced to cash, and
such cash shall be distributed, first, to pay the expenses and fees of winding
up the business of the Company incurred by the Board (including, without
limitation, reasonable attorneys' fees), then 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(d). In the event the Company has assets that are not reduced to cash, the
Interest Holders will initially attempt to agree between themselves as to how
any such assets shall be distributed. In the event the Interest Holders are not
able to come to agreement with respect to such distributions, the issue shall be
submitted to arbitration in accordance with the provisions of Section 9(m)
hereof.
(c) FILING OF CERTIFICATE OF DISSOLUTION. If the Company is dissolved, the
Board will promptly file a Certificate of Dissolution (the "Certificate") with
the Secretary. If there is no Board, then the Certificate will be filed by the
remaining Members; if there are no remaining Members, the Certificate will be
filed by the last Person to be a Member; if there is neither a Board, remaining
Members, or a Person who last was a Member, the Certificate will be filed by the
legal or personal representatives of the Person who last was a Member.
8. BOOKS, RECORDS, ACCOUNTING, AND TAX ELECTIONS
(a) BANK ACCOUNTS. All funds of the Company will be deposited in a bank
account or accounts maintained in the Company's name. The Board will 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.
(b) BOOKS AND RECORDS.
(i) The Board will 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
will include, but not be limited to, complete and accurate information regarding
the state of the business and financial condition of the Company, a copy of the
Certificate of Formation and this Agreement and all amendments to the
Certificate of Formation and this Agreement; a current list of the names, the
last known business, residence, or mailing addresses, the Capital Contributions,
and the dates of initial membership of all Members; and the Company's federal,
state or local tax returns.
(ii) The books and records will be maintained in accordance with sound
accounting practices and will be available at the Company's principal office for
examination by any Member or the Member's duly authorized representative at any
and all reasonable times during normal business hours.
21
(iii) Each Member will promptly 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.
(c) ANNUAL ACCOUNTING PERIOD. The annual accounting period of the Company
will be its taxable year. The Company's taxable year will be selected by the
Board, subject to the requirements and limitations of the Code.
(d) REPORTS. Within ninety (90) days after the end of each taxable year of
the Company, the Board will cause to be sent to each Person who was a Member at
any time during the accounting year then ended: (i) audited annual financial
statements of the Company, to be prepared by the accountant then currently
retained by the Board to conduct the Company's annual audits, in accordance with
standards issued by the American Institute of Certified Public Accountants; and
(ii) a report summarizing the investments and operations of the Company. In
addition, within ninety (90) days after the end of each taxable year of the
Company, the Board will cause to be sent to each Person who was an Interest
Holder at any time during the taxable year then ended, that tax information
concerning the Company which is necessary for preparing the Interest Holder's
income tax returns for that year. Within forty-five (45) days after the end of
each Fiscal Quarter, the Board will cause to be sent to each Person who was an
Interest Holder at any time during the Fiscal Quarter, an unaudited quarterly
Company financial report showing each Interest Holder's Capital Account and any
additions thereto or subtractions therefrom. Within twenty (20) days after the
end of each month, the Board will cause to be sent to each Person who was a
Member at the end of such month unaudited monthly operating statements of the
Company.
(e) TAX MATTERS PERSON. A Member selected by the Board will be the
Company's "tax matters person" ("Tax Matters Person") for purposes of Section
6221 et seq. of the Code. The Tax Matters Person will have all powers and
responsibilities provided in Code Section 6221, et seq. or such other provisions
as may become applicable to limited liability companies. The Tax Matters Person
will keep all Members reasonably informed of all notices from government taxing
authorities which may come to the attention of the Tax Matters Person. The
Company will pay and be responsible for all reasonable third-party costs and
expenses incurred by the Tax Matters Person in performing those duties. A Member
will be responsible for any and all costs and expenses 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 Person may not compromise any dispute with the Internal Revenue Service
without the approval of a majority of the Units. Initially, Empyrean shall be
the Tax Matters Person.
(f) TAX ELECTIONS. The Board will have the authority to make all Company
elections permitted under the Code, including, without limitation, elections of
methods of depreciation and elections under Code Section 754. The decision to
make or not make an election will be at the Board's sole and absolute
discretion.
22
(g) TITLE TO COMPANY PROPERTY.
(i) Except as provided in Section 8(g)(ii) all real and personal
property and assets acquired by the Company will be acquired and held by the
Company in its name until distributed to the Members in accordance with the
terms hereof.
(ii) The Board may direct that legal title to all or any portion of
the Company's property and assets be acquired or held in a name other than the
Company's name. Without limiting the foregoing, the Board may cause title to be
acquired and held in its name or in the names of trustees, nominees, or straw
parties for the Company. It is expressly understood and agreed that the manner
of holding title to the Company's property (or any part thereof) is solely for
the convenience of the Company, and all of that property will be treated as
Company property.
9. GENERAL PROVISIONS
(a) ASSURANCES. Each Member will execute all certificates and other
documents and will do all filing, recording, publishing and other acts as the
Board reasonably 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 and assets of the Company.
(b) 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 (i) delivered personally, (ii) sent
by certified or registered U.S. mail, postage prepaid, return receipt requested,
(iii) sent by recognized overnight delivery service, or (iv) sent by facsimile
transmittal. 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 delivered
personally will be deemed given only when acknowledged in writing by the person
to whom it is delivered. A notice that is sent by mail will be deemed given five
(5) business days after it is mailed. A notice sent by recognized overnight
delivery service will be deemed given when received or refused. A notice sent by
facsimile will be deemed given when sent, provided notice by personal delivery
or overnight delivery service is effective the day following such facsimile
transmission. 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. All notices to IBC and
Empyrean shall be sent to:
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As to IBC:
Ms. Xxxx Xxxxx xx Xxxxx
International Bioscience Corporation
000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxxx Point Building
East Tower, Suite 000
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
With a copy to:
Xx. Xxxxxx X. Xxxx, Esq.
Holtzman, Krinzman, Equels & Furia
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
As to Empyrean:
Xx. Xxxxxxx X. Xxxxxxx
Empyrean Bioscience, Inc.
00000 Xxxxxxxx Xxxx Xxxx, Xxxxx X
Xxxxxxxxx, Xxxx 00000
With a copy to:
Xx. Xxxxxxx X. Xxxxxxxx, Esq.
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
(c) 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) is entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act that would constitute a
breach or (ii) compelling the performance of any obligation which, if not
performed, would constitute a breach.
(d) COMPLETE AGREEMENT. This Agreement is the sole and complete statement
of the Members of their rights and obligations with respect to the subject
matter hereof. This Agreement is an integrated agreement and replaces and
supersedes any and all previous obligations and agreements between the Members.
The Members hereto recognize and agree that no representations or warranties
have been made except as set forth in this Agreement. Except as may otherwise be
expressly provided herein, by signing this Agreement the Members expressly
release each other from any and all existing obligations that pre-date this
Agreement as if such obligations have been fully performed and satisfied.
24
(e) APPLICABLE LAW. All questions concerning the construction, validity,
and interpretation of this Agreement and the performance of the obligations
imposed by this Agreement will be governed and enforced by the internal law, not
the law of conflicts, of the State of Delaware.
(f) SECTION TITLES. This Agreement's headings are inserted as a matter of
convenience only, and do not define, limit, or describe the scope of this
Agreement or the intent of its provisions.
(g) 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.
(h) JURISDICTION AND VENUE. Subject to subsection (m) below, any action or
proceeding in any way, manner or respect arising out of this agreement or
arising from any dispute or controversy arising in connection with this
Agreement, will be litigated only in the courts having situs within Miami-Dade
County or Palm Beach County in the State of Florida, and each member consents
and submits to the jurisdiction of any state or federal court located within
such county and state with respect to any such proceeding. Each maker hereby
waives any right such maker may have to transfer or change the venue of any
action or litigation brought in accordance with this section.
(i) TERMS. Common nouns and pronouns will be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the Person
may in the context require.
(j) SEPARABILITY OF PROVISIONS. Each provision of this Agreement is
considered separable; and if, for any reason, any provision or provisions herein
are determined to be invalid and contrary to any existing or future law, this
invalidity will not impair the operation of or affect those portions of this
Agreement which are valid.
(k) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will 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 will be deemed a signature to, and may be appended to, any
other counterpart.
(l) PARTITION. To the furthest extent permitted by law, each Member
irrevocably waives any right that the Member may have to maintain any action for
partition with respect to Company property or assets.
(m) ARBITRATION.
(i) The parties will first attempt to settle each and every dispute,
controversy or claim, whether based in contract, tort, statute, fraud,
misrepresentation, or any other legal theory, arising out of or relating to this
Agreement ("Dispute(s)"), through good faith negotiations. Except for any
25
actions brought for wrongful termination or to seek termination of this
Agreement, any Dispute not resolved within 30 days or such other period as the
parties mutually agree in writing, will be then settled by final and binding
arbitration conducted in a mutually agreed location by one neutral arbitrator,
in accordance with this Section 9(m) and with the then current Commercial
Arbitration Rules of the AAA. Any dispute arbitrated in accordance with the
terms of this agreement shall be conducted in Miami-Dade County or Palm Beach
County, Florida by one neutral arbitrator. Each party will bear its own expenses
and the parties will equally share the filing and other administrative fees of
the AAA and the expenses of the arbitrator. An award may be confirmed and
judgment entered in any court having competent jurisdiction. The arbitrator will
not have the power to award any consequential or punitive damages. The
arbitrability of any Dispute, including those as to the enforceability of this
Section, the applicability of statutes of limitations and questions of issue
preclusion, will be determined solely by the arbitrator. This Section will be
governed and enforced under the Federal Arbitration Act, 9 U.S.C. Sections 1 to
16. The local law of the State of Delaware, except its laws or arbitration and
choice of laws, will apply to all substantive matters pertaining to this
Agreement. Any party may seek a temporary injunction in a court of competent
jurisdiction to the limited extent necessary to preserve the status quo during
the pendency of final resolution of a Dispute in accordance with this Section.
The statute(s) of limitation applicable to any Dispute will be tolled upon
initiation of the Dispute resolution procedures under this Section and will
remain tolled until the Dispute is resolved under this Section.
26
IN WITNESS WHEREOF, the parties hereto do hereby sign, enter into and
acknowledge this Agreement on the date first written above.
MEMBERS
INTERNATIONAL BIOSCIENCE
CORPORATION
By:
-------------------------------------
Title:
----------------------------------
EMPYREAN BIOSCIENCE, INC.
By:
-------------------------------------
Title:
----------------------------------
COMPANY
IBC-EMPREAN LLC
FOR IBC By:
-------------------------------------
Title:
----------------------------------
FOR EMPYREAN By:
-------------------------------------
Title:
----------------------------------
27
IBC-EMPYREAN, L.L.C.
OPERATING AGREEMENT
EXHIBIT A
LIST OF MEMBERS, CAPITAL, NUMBER OF UNITS AND PERCENTAGES
COMMON MEMBERS:
PERCENTAGE
INTEREST
NAME, ADDRESS AND TAXPAYER CAPITAL NUMBER (FULLY
IDENTIFICATION COMMITMENT OF UNITS DILUTED)
-------------------------- ---------- -------- --------
Empyrean Bioscience, Inc. The execution and 50 50%
00000 Xxxxxxxx Xxxx Xxxx, Xxxxx X delivery of the
Xxxxxxxxx, Xxxx 00000 Trademark License
Agreement from
Empyrean to
IBC-Empyrean
International Bioscience Corporation The execution and 50 50%
000 Xxxxx Xxxxxxx Xxxxx delivery of the
Xxxxxxxx Point Building (i) License
Xxxx Xxxxx, Xxxxx 000 Agreement from IBC
Xxxx Xxxx Xxxxx, Xxxxxxx 00000 to IBC-Empyrean,
and (ii) the
Trademark License
Agreement from IBC
to IBC-Empyrean
TOTAL 100 100%
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