Exhibit 10.2
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THE SECURITIES ISSUED PURSUANT TO OR REPRESENTED BY THIS
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
AND QUALIFICATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. SUCH SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, ASSIGNED,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED AND QUALIFIED UNDER APPLICABLE FEDERAL AND STATE SECURITIES
LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY,
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED. ANY TRANSFER OF
SUCH SECURITIES IS SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS SET
FORTH HEREIN.
SUCH SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR
OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
OPERATING AGREEMENT
FOR
XXXXXXXXXX.XXX, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
This Operating Agreement is made as of March 6, 2000, by and
among Xxxxxxx Manufacturing Co., Inc., a Delaware corporation ("Xxxxxxx"),
and Keymark Enterprises, Inc., an Illinois corporation ("Keymark"), with
reference to the following facts:
On March 6, 2000, Articles of Organization for the Company were
filed with the California Secretary of State. The Members and the
Directors desire to adopt and approve this Operating Agreement for the
Company.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein, the Members and Directors by this Agreement set forth
the Operating Agreement for the Company under the laws of the State of
California on the terms and subject to the conditions hereinafter
provided.
1. Definitions. When used in this Agreement, the following
capitalized terms have the following respective meanings:
1.1 "Act" means the Xxxxxxx-Xxxxxx Limited Liability
Company Act, California Corporations Code sections 17000 and following, as
the same may be amended from time to time.
1.2 "Affiliate" means, with reference to a specified
Person, any Person directly or indirectly controlling, controlled by or
under common control with the specified Person, any trust or foundation to
which the specified Person has made a majority of the grants, donations or
contributions received by that trust or foundation, a Person owning or
controlling ten percent or more of the outstanding voting securities of the
specified Person, a Person ten percent or more of whose outstanding voting
securities are owned or controlled by the specified Person, any officer,
director, manager, general partner or trustee of the specified Person, and
if the specified Person is an officer, director, manager, general partner
or trustee, any corporation, limited liability company, partnership or
trust for which the specified Person acts in any such capacity.
1.3 "Articles" means the Articles of Organization for the
Company filed or to be filed with the California Secretary of State, as the
same may be amended from time to time.
1.4 "Assignee" means the owner of an Economic Interest who
has not been admitted as a Member of the Company or has ceased to be a
Member in accordance with section 7.
1.5 "Bankruptcy" of a Director or a Member means the
occurrence of any of the following events: the Director or Member makes a
general assignment for the benefit of creditors or admits his, her or its
inability to pay his, her or its debts as they become due or an order for
relief is entered against the Director or Member under any chapter of the
United States Bankruptcy Code, as amended or superseded from time to time,
or the Director or Member is adjudicated a bankrupt or insolvent or
institutes any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt or similar proceeding relating to the Director or
Member under the laws of any jurisdiction or any such proceeding is
instituted against the Director or Member and remains undismissed for a
period of sixty days.
1.6 "Call Option" has the meaning ascribed to that term in
section 7.10.
1.7 "Capital Account" means:
1.7.1 The individual Capital Account that shall be
established and maintained for each Member in accordance with the following
provisions:
(a) To the Capital Account of a Member there
shall be credited such Member's Capital Contributions, such Member's share
of Profits, any items in the nature of income or gain that are specially
allocated thereto pursuant to subsection 6.2.1 and the amount of any
Company liabilities that are personally assumed by such Member or that are
secured by any Company property distributed to such Member with respect
thereto;
(b) From the Capital Account of a Member, there
shall be debited the amount of cash and the fair market value of any
Company property distributed to such Member pursuant to any provision of
this Agreement, such Member's share of Losses, any items in the nature of
expenses or losses that are specially allocated thereto pursuant to
subsection 6.2.1 and the amount of any liabilities of such Member that are
assumed by the Company or that are secured by any property contributed by
such Member to the Company with respect thereto; and
(c) In determining the amount of any liability,
there shall be taken into account Code section 752(c) and any other
applicable provisions of the Code and Regulations.
1.7.2 If any interest in the Company is transferred in
accordance with this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent that it relates to the transferred
interest.
1.7.3 The foregoing provisions and other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations section 1.704-1(b), and shall be interpreted and
applied in a manner consistent therewith. If the Directors determine that
it is prudent to modify the manner in which the Capital Accounts, or any
debits or credits thereto, are computed in order to comply with Regulations
section 1.704-1(b), the Directors may make such modification if it is not
likely to have a materially adverse effect on amounts distributable to any
Member pursuant hereto on the dissolution of the Company. The Directors
shall adjust the amounts debited or credited to Capital Accounts with
respect to any property contributed to the Company or distributed to a
Member and any liabilities secured by such contributed or distributed
property or assumed by the Company or Member in connection with such
contribution or distribution if the Directors determine that such
adjustments are necessary or appropriate under Regulations section 1.704-
1(b)(2)(iv). The Directors shall also make any appropriate modifications
if unanticipated events might cause this Agreement not to comply with
Regulations section 1.704-1(b), and the Directors shall make all elections
provided for under such Regulations.
1.8 "Capital Contribution" of a Member means the total
value of cash and the fair market value of property contributed to the
Company by that Member.
1.9 "Code" means the Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of succeeding
law).
1.10 "Company" means Xxxxxxxxxx.xxx, LLC, a California
limited liability company.
1.11 "Derivative Work" means a work that is based on one or
more pre-existing works, such as a revision, enhancement, modification,
translation, abridgement, condensation, expansion, or any other form in
which such pre-existing work may be recast, transformed or adapted, and
which, if prepared without authorization of the owner of the intellectual
property rights in such pre-existing work, including copyrights, patents,
trade secrets and other proprietary rights, would constitute infringement.
"Derivative Work" shall also include any compilation that incorporates such
pre-existing work.
1.12 "Dissolution Event" means, with respect to a Director,
one or more of the following: the death, insanity, resignation, removal or
Bankruptcy of that Director.
1.13 "Director" means a natural person initially appointed
or subsequently elected as a Director pursuant to section 5.4. A Director
need not be a Member, a resident of the State of California or a citizen of
the United States.
1.14 "Economic Interest" means a Member's or Assignee's
right to share in one or more of the Profits, Losses, or similar items of,
and to receive distributions from, the Company, pursuant to this Agreement
and the Act, but does not include any other rights of a Member, including,
without limitation, the right to vote or consent or participate in
management, or, except as provided in section 9.2, any right to information
concerning the business and affairs of the Company.
1.15 "Fiscal Year" means the period commencing on the date
the Company commences business or commencing on any subsequent January 1,
and ending on the succeeding December 31, or, if earlier, the date of
dissolution and termination of the Company.
1.16 "Keymark License" has the meaning ascribed to that term
in subsection 3.1.2.
1.17 "Keymark Technology" means the proprietary software
program for designing and engineering roof trusses and systems, walls,
floor systems, and take-offs for building construction, owned by Keymark
and described more fully in Exhibit A attached hereto, and all intellectual
property rights, including copyrights, patents, trade secrets and other
proprietary rights, that are embodied in or used in connection with the
Keymark Technology. Keymark also has an adaptation of the proprietary
software program for use with light gauge steel construction ("Keymark
Steel Technology"). The Keymark Steel Technology is included in the
Keymark Technology and accordingly is included within the scope of the
Keymark License, except that the Keymark License shall be non-exclusive to
the Company with respect to the Keymark Steel Technology. Keymark shall
have the continuing right to adapt and use the Keymark Technology,
including future modifications and improvements thereof developed by or for
the Company, for steel applications in both internet and non-internet
environments, and such right shall be exclusive to Keymark with respect to
non-internet applications and non-exclusive to Keymark with respect to
internet applications.
1.18 "License Agreement" means the License Agreement between
the Company and Keymark or an Affiliate of Keymark to which Keymark shall
have contributed the Keymark Technology, in substantially the form of
Exhibit B attached hereto.
1.19 "Majority in Interest" of the Members means Members
whose Percentage Interests, on the date of determination, aggregate more
than fifty percent of the Percentage Interests of all Members on that date.
1.20 "Member" means each Person who is an initial signatory
to this Agreement, is subsequently admitted to the Company as a Member in
accordance with this Agreement or is an Assignee that becomes a Member in
accordance with section 7 and who, in any such case, shall not have ceased
to be a Member.
1.21 "Membership Interest" of a Member means a Member's
entire interest in the Company, including, without limitation, the Member's
Economic Interest, the right to vote or consent or participate in the
management of the Company and any right to information concerning the
business and affairs of the Company provided hereby or by the Act.
1.22 "Option" and "Options" have the meanings ascribed to
those terms in section 7.10.
1.23 "Percentage Interest" of a Member means the percentage
set forth opposite the name of such Member under the heading "Percentage
Interest" in Exhibit A attached hereto, as such percentage may be changed
from time to time pursuant to this Agreement.
1.24 "Person" means a natural person, general partnership,
limited partnership, trust, estate, association, corporation, limited
liability company or other entity, whether domestic or foreign.
1.25 "Profits" and "Losses" mean, for each Fiscal Year or
other period, an amount equal to the Company's taxable income or loss for
such Fiscal Year or other period, determined in accordance with Code
section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code section
703(a)(1) shall be included in taxable income or loss), with the following
adjustments:
1.25.1 Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this section 1.25 shall be added to such
taxable income or loss;
1.25.2 Any expenditures of the Company described in
Code section 705(a)(2)(B) or treated as Code section 705(a)(2)(B)
expenditures pursuant to Regulations section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits and Losses pursuant to
this section 1.25 shall be subtracted from such taxable income or loss; and
1.25.3 Notwithstanding any other provision of this
section 1.25, any items that are specially allocated pursuant to subsection
6.2.1 or 6.2.2 shall not be taken into account in computing Profits and
Losses.
1.26 "Put Option" has the meaning ascribed to that term in
section 7.10.
1.27 "Regulations" means the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
1.28 "Securities Act" means the Securities Act of 1933, as
amended from time to time.
1.29 "Successor" of a Member means any transferee,
successor, assign or legal representative of that Member.
1.30 "Tax Matters Partner" means Xxxxxxx or its successor
designated pursuant to section 9.6.
1.31 "Transfer" means any sale, assignment, transfer,
encumbrance, pledge, hypothecation, gift or other disposition or
alienation, voluntarily, involuntarily, by operation of law or otherwise
(including, but not limited to, on death, Bankruptcy or divorce of a
Member), except a sale to the Company.
1.32 "Transferring Member" has the meaning ascribed to that
term in section 7.4.
2. Organizational Matters.
2.1 Formation. Pursuant to the Act, the Members hereby
agree to the formation and organization of the Company as a limited
liability company under the Act by the filing of the Articles with the
California Secretary of State and entering into this Agreement. The
Members agree that the Directors shall promptly cause the Articles to be
filed under the laws of each jurisdiction where such filing may be required
and shall cause to be filed any certificate of amendment or any additional,
supplemental or amended certificates, fictitious business name statements
and other documents as the Directors may deem necessary or advisable in
accordance herewith. The Company shall be deemed to have been formed on
and as of the date of the initial filing of the Articles with the
California Secretary of State. The rights, duties, obligations and
liabilities of the Members shall be determined pursuant to, and the
business, management and affairs of the Company shall be governed
exclusively by, this Agreement and the Act. If and to the extent that any
provision of this Agreement is inconsistent with any provision of the Act,
this Agreement shall govern to the extent permitted by the Act.
2.2 Name. The name of the Company shall be
"Xxxxxxxxxx.xxx, LLC." The business of the Company may be conducted under
that name or, on compliance with applicable laws, any other name that the
Directors deem appropriate or advisable.
2.3 Term. The term of the Company shall be deemed to
commence or to have commenced on the initial filing of the Articles with
the California Secretary of State and shall continue until dissolved as
provided in this Agreement.
2.4 Office and Agent. The Company shall continuously
maintain an office and registered agent in the State of California as
required by the Act. The principal office of the Company shall be at 0000
Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000-0000, or at such other
location as the Directors may determine. The registered agent shall be as
stated in the Articles or as otherwise determined by the Directors.
2.5 Purpose of Company. The purpose of the Company is to
engage in any lawful activity for which a limited liability company may be
organized under the Act. Without limiting the generality of the foregoing,
the Company is being formed in part for the specific purposes of designing,
developing and marketing software relating to internet-based building
design and engineering systems. In connection therewith, the Company will
use its best reasonable efforts to develop and maintain service centers for
the purpose of facilitating the conversion of design and engineering data
of customers and third parties into formats that are compatible with the
Company's systems. To these ends, the Company may enter into, make and
perform all contracts and other undertakings and engage in all activities
and transactions as the Directors or a duly authorized officer may consider
necessary to carry out the foregoing purposes. The parties hereto intend
that, at such time and on such terms as the Directors deem advisable and in
the Company's best interests, the Company or its successor may participate
directly or indirectly (through a Member other than Xxxxxxx or Keymark) in
an initial public offering of the securities of the Company or its
successor.
2.6 Addresses of Members and Directors. The respective
addresses of the Members and the Directors shall be set forth on Exhibit A.
Each Member or Director shall promptly notify the Company of any change in
his, her or its address set forth on Exhibit A.
2.7 Changes in Exhibit A. The Directors shall cause
Exhibit A to be revised from time to time to reflect changes in accordance
with this Agreement in the information set forth in Exhibit A.
3. Capital Contributions and Admission of Additional Members.
3.1 Initial Capital Contributions.
3.1.1 Capital Contributions. Each Member has
contributed, or shall have contributed not later than such time as the
Directors may fix, to the capital of the Company the aggregate amount set
forth opposite that Member's name on Exhibit A. If a contribution is
other than in cash, the agreed value of such Capital Contribution shall be
set forth in Exhibit A.
3.1.2 Keymark License.
(a) In lieu of a cash Capital Contribution,
Keymark agrees that Keymark or any Affiliate of Keymark to which Keymark
shall have contributed the Keymark Technology shall grant to the Company a
worldwide, royalty-free license (the "Keymark License") to use the Keymark
Technology, or any part thereof (solely in connection with the
establishment and operation of an internet-based business consisting of the
processing and/or distribution over the internet of data pertaining to
building design and engineering systems), to make, have made, use, sell,
offer for sale, import, improve, modify, copy, adopt, create Derivative
Works of, publicly display, publicly perform, publish, distribute and
otherwise transfer, components and materials relating to internet-based
building design and engineering systems, which may incorporate all or part
of the Keymark Technology. The Keymark License shall include the right of
the Company to grant sublicenses of the Keymark Technology or any part
thereof and to assign the Keymark License, in whole or in part, if the
Directors reasonably believe the same is in the best interests of the
Company, all without Keymark's consent. The Keymark License shall not
grant the Company any right to use the Keymark Technology in applications
for the non-internet environment, and Keymark retains all right, title and
interest in and to non-internet applications of the Keymark Technology,
including future modifications and improvements thereof developed by or for
the Company. The Keymark License shall be exclusive to the Company (except
as it applies to the Keymark Steel Technology, with respect to which the
Keymark License shall be non-exclusive to the Company) for as long as the
Company makes monthly payments to Keymark pursuant to section 3.3. If the
Company fails to timely make any such monthly payment with respect to any
of the 24 consecutive months commencing with February 2000, and such
failure is not remedied within ten days after written notice thereof from
Keymark to the Company, the Keymark License shall become non-exclusive.
If the Company fails to timely make any such monthly payment with respect
to any month after January 2002, and such failure is not remedied within
ten days after written notice thereof from Keymark to the Company, the
Keymark License shall terminate. This Agreement shall become effective
only upon the execution by Keymark and the Company of a License Agreement
that sets forth in detail the terms of the Keymark License, which License
Agreement shall be attached hereto as Exhibit B.
(b) Keymark agrees to transfer to the Company
(by license, assignment, contribution or otherwise), for no additional
consideration, all such additional rights in and to the Keymark Technology
for use in internet applications (except as otherwise noted below) as the
Directors shall request, upon a determination by the Directors, subject to
section 5.1.1, that such transfer is necessary in order for the Company to
obtain financing from third parties on suitable terms. Keymark also
agrees to transfer to the Company (by license, assignment, contribution or
otherwise), for no additional consideration, on such date and in such
manner as the Directors shall determine, subject to section 5.1.1, prior to
any sale of the Company or its successor or parent entity or the initial
public offering under the Securities Act of any securities of the Company
or its successor or a Member (other than Xxxxxxx and Keymark), all such
additional rights in and to the Keymark Technology for use in internet
applications (except as otherwise noted below) as the Directors conclude is
reasonably necessary in connection with such transaction. The Company
agrees that any such transfer shall be made on terms consistent with
Keymark's retaining exclusive rights in and to applications of the Keymark
Technology in the non-internet environment. The Keymark Steel Technology
shall not be included in the Keymark Technology that is transferred to the
Company pursuant to the first two sentences of this section 3.1(b), and
instead, concurrently with any such transfer, Keymark shall grant the
Company a worldwide, perpetual, irrevocable, royalty-free, non-exclusive
license to use the Keymark Steel Technology for applications in the
internet environment
(c) The parties contemplate that Keymark may
contribute the Keymark Technology to an Affiliate of Keymark, in which case
Keymark shall cause such Affiliate to grant the Keymark License to the
Company or transfer the Keymark Technology to the Company on the terms set
forth in sections 3.1.2(a) and (b).
3.2 Additional Capital Contributions by Members. No Member
shall be required to make any additional Capital Contribution. The
Directors, in accordance with section 5.1.1, may permit the Members to make
additional Capital Contributions from time to time in amounts and on terms
and conditions (including equitable adjustments in the Percentage
Interests) deemed appropriate by the Directors; provided that, except as
provided in section 3.4, if any Member is permitted to make an additional
Capital Contribution, all Members shall be permitted to make at the same
time additional Capital Contributions on the same terms and conditions in
proportion to their Percentage Interests.
3.3 Software Support, Maintenance and Development.
Beginning in February 2000, and continuing for the longer of 23 months
thereafter or as long as the monthly payments described in this section 3.3
are timely made, Keymark shall provide to the Company such software
support, maintenance and development services as the Directors may request
from time to time. Such maintenance services shall consist at a minimum
of Keymark's best efforts to promptly correct any defects, bugs or non-
conformities in any software developed by Keymark and used by the Company
or made available by the Company to its customers. All software developed
by Keymark pursuant to this Agreement that consists of modifications and
improvements to the Keymark Technology shall be deemed to be part of the
Keymark Technology. The Company shall pay Keymark an amount equal to
$100,000 per calendar month for the services described in this section 3.3,
which amount shall be paid in advance on the first day of each month
beginning on February 1, 2000, and shall be subject to all standard
deductions and withholding required by tax authorities. The Company shall
not be required to pay or reimburse Keymark any additional amount for any
expenses Keymark incurs in performing the services described above in this
section 3.3. The Company shall be responsible for establishing and
operating customer support centers throughout the country and training and
support of support center personnel (with Keymark providing software
support for such centers and personnel), and performing data entry, web
site development, and sales and marketing services. To the extent that
Keymark, with the Company's prior approval, incurs expenses, including but
not limited to personnel expenses, to perform functions that are the
Company's responsibility as described in this section 3.3, the Company will
reimburse Keymark for such reasonable and documented expenses, including
any equitably burdened payroll expense. After January 2001, the Company
may, at its option, discontinue the monthly $100,000 payments to Keymark,
in which event the Keymark License will continue but become non-exclusive.
Whether or not the Company continues the monthly payments after January
2001, however, Keymark will continue to be responsible, through January
2002, for the software support, maintenance and development services
described in the first two sentences of this section 3.3. Beginning on
February 1, 2002, the Keymark License and Keymark's software support,
maintenance and development obligations will continue only as long as the
Company continues to timely make the $100,000 monthly payments to Keymark
and will terminate if the Company fails to timely make any such payment and
such failure is not remedied within ten days after written notice thereof.
3.4 Key Employees. The Directors may, at any time or
times, cause the Company to grant to any employee of the Company whom the
Directors determine to be a key employee of the Company the right or option
to purchase or otherwise acquire an Economic Interest and to be admitted to
the Company as a Member, in each case on making such Capital Contribution
or no Capital Contribution, with such Percentage Interest and on such other
terms and conditions as the Directors may determine; provided that the
aggregate Percentage Interests of all such employees who do not make
corresponding Capital Contributions (that is, Capital Contributions in the
same proportion to the total net market value of the Company immediately
after such purchase or other acquisition, as such market value is
determined by the Directors, in their exclusive discretion, as their
Percentage Interests bear to 100 percent) shall not exceed five percent.
3.5 Additional Funds; Other Investors. If at any time or
from time to time the Directors determine that additional funds are needed
for the business of the Company, the Directors may cause the Company to (a)
sell assets of the Company, (b) borrow all or part of the amount needed
from one or more financial institutions, Members or others and encumber by
pledge or otherwise some or all of the assets of the Company to secure
repayment thereof, (c) invite Members to make additional Capital
Contributions of the amount needed and accept such Capital Contributions as
provided in section 3.2, or (d) admit additional Members on terms and
conditions approved by the Directors providing for Capital Contributions by
such additional Members constituting all or part of the amount needed. As
of the date of this Agreement, Xxxxxxx and Keymark anticipate that the
Company may solicit additional investments in the Company from developer-
builders and other Persons, in the Directors' exclusive discretion, and
admit such Persons as Members, although the Directors shall have no
obligation to do so. Except as provided in section 3.4, any Person
admitted to the Company as a Member shall make a Capital Contribution in an
amount determined by the Directors and pay such Capital Contribution in the
manner and at the time determined by the Directors. The Directors shall
assign any Person admitted as a Member a Percentage Interest equal to such
Person's Capital Contribution divided by the total net market value of the
Company at the time of such Capital Contribution, as determined by the
Directors in their exclusive discretion. Upon the admission of any
additional Member, the Percentage Interests of the existing Members shall
be reduced pro rata to reflect the Percentage Interest of the new Member;
that is, the Percentage Interest of each existing Member shall be reduced
by a percentage equal to the Percentage Interest of the new Member. As of
the date of this Agreement, Xxxxxxx and Keymark anticipate that additional
Members, if any, shall be admitted only on such terms as permit Xxxxxxx to
retain voting and management control of the Company.
3.6 Provisions Applicable in All Cases. Anything herein to
the contrary notwithstanding: (a) no Person shall be admitted to the
Company as a Member unless and until such Person shall have agreed in
writing (by signing a counterpart of this Agreement, or otherwise, as the
Directors may approve) to become a party to this Agreement and to assume
and perform all of the obligations and responsibilities of a Member
hereunder and shall have paid or delivered to the Company such Person's
agreed Capital Contribution, if any; (b) no admission of any Person as a
Member shall require any consent or approval of any other Member, as such;
(c) on the admission of any new Member pursuant to any provision of this
Agreement, the Directors shall cause appropriate adjustments to be made for
purposes of applying the accounting and allocation provisions of this
Agreement; (d) on any change in the Percentage Interest of any Member or
Assignee and on each admission of a new Member to the Company, pursuant to
any provision of this Agreement, the Percentage Interests of all other
Members and Assignees shall be adjusted proportionately so that the
Percentage Interests at all times total 100 percent.
3.7 Capital Accounts. The Company shall establish and
maintain an individual Capital Account for each Member in accordance with
section 1.7 and Regulations section 1.704-1(b).
3.8 No Withdrawal; No Interest. Except as specifically
provided in this Agreement or as approved by the Directors, (a) no Member
may withdraw such Member's Capital Contribution from the Company, and (b)
no Member shall be entitled to receive any interest, salary or drawing on
such Member's Capital Contributions or with respect to its Capital Account,
or for services rendered on behalf of the Company, or otherwise in its
capacity as a Member, except as specifically provided in the New Software
Technology Development and Marketing Agreement.
3.9 Company Records. On each contribution, distribution or
withdrawal of capital as contemplated by this Agreement, the Directors
shall cause the Company's records to reflect accurately such contribution,
distribution or withdrawal.
3.10 No Other Contributions. Without the consent of the
Directors, no Member shall contribute any funds or other property to the
capital of the Company except as expressly required or permitted by this
Agreement.
4. Members.
4.1 Limited Liability. Except as and to the extent
required under the Act notwithstanding this Agreement and except as
expressly provided in this Agreement, the debts, duties, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, duties, obligations and liabilities of the
Company, and no Member, Director or officer of the Company shall be
personally liable for any debt, duty, obligation or liability of the
Company solely by reason of being a Member, Director or officer of the
Company.
4.2 Meetings of Members. No regular, annual, special or
other meetings of Members are required to be held. If held, any such
meeting shall be noticed, held and conducted in the manner provided in the
Act; provided that (a) any such meeting shall be held at the Company's
principal executive office or at any other place selected by the Directors
and set forth in the notice of meeting, (b) a meeting shall be held only
when called by the Directors, and (c) the attendance of a Majority in
Interest of the Members represented in person or by proxy shall be
necessary to constitute a quorum at any meeting to consider a matter on
which Members may take action. Any action that may be taken at a meeting
of Members may be taken without a meeting by written consent as provided in
section 17104(i) of the Act.
4.3 Members Have No Managerial Authority. The Members, as
such, shall have no power to participate in the management of the Company
except as expressly authorized by this Agreement or the Articles and except
as and to the extent expressly required by the Act notwithstanding this
Agreement. Unless expressly and duly authorized in writing to do so by the
Directors, no Member, as such, shall have any power or authority to sign
for, bind or act on behalf of the Company in any way, to pledge the
Company's credit, or to render the Company liable for any purpose.
4.4 Voting Rights. Except as expressly provided in this
Agreement or the Articles, Members shall have no voting, approval or
consent rights.
4.5 Other Activities.
4.5.1 Insiders. Except as approved in advance by the
Directors, neither Keymark nor Xxxxxxx shall, or shall permit its
respective Affiliates to, and no employee of the Company shall, engage or
participate in any capacity in any business competitive with any business
or activity in which the Company is engaged or may be interested in
engaging; provided that nothing herein shall prohibit Keymark from engaging
in a business that applies the Keymark Technology in non-internet
environments or from engaging in any business involving the Keymark Steel
Technology, as long as Keymark keeps the Directors reasonably informed
regarding the activities and scope of any such business and new business.
4.5.2 Others. Except as provided in subsection 4.5.1,
any Member and such Member's Affiliates may engage in any activities,
whether or not related to the business of the Company, the Members
specifically recognizing that each of them and their Affiliates are engaged
in various businesses, both for their own accounts and for others, and such
Members may continue, or initiate further, such activities. Each Member
agrees that, except as provided in subsection 4.5.1, any Member and any
Affiliate of any Member (a) may engage in or possess an interest, direct or
indirect, in any business venture of any nature or description for his, her
or its own account, independently or with others, including, without
limitation, any business, industry or activity in which the Company may be
interested in engaging or may also be engaged and (b) may do so without any
obligation to report the same to the Company or any other Member or
Director or to afford the Company or any other Member any opportunity to
participate therein. Neither the Company nor any other Member shall have
any right in or to any such independent venture or activity or any revenues
or profits derived therefrom.
4.6 Waiver of Conflicts. Subject to any express
prohibition in this Agreement, the fact that any Member or Director, or any
Affiliate of any Member or Director, or a member of his or her family, is
employed by, or is directly or indirectly interested in or connected with,
any Person employed or engaged by the Company to render or perform a
service, or from whom the Company may make any purchase, or to whom the
Company may make any sale, or from or to whom the Company may obtain or
make any loan or enter into any contract or lease or other arrangement,
shall not prohibit the Company from engaging in any transaction with such
Member, Director or Person or create any additional duty of legal
justification by such Member, Director or Person, beyond that of an
unrelated party. Neither the Company nor any other Member or Director
shall have any right in or to any revenues or profits derived from such
transaction by such Member, Director, Affiliate or Person.
4.7 Expenses. The Company shall reimburse each Member and
such Member's Affiliates for the cost of goods and materials paid by such
Member or Affiliate and used for or by the Company. With respect to
Keymark, such reimbursement shall be in addition to any amounts the Company
pays to Keymark pursuant to section 3.3 for software support, maintenance
and development services. The Company shall also pay or reimburse each
Member and such Member's Affiliates for expenses incurred in the formation
and organization of the Company, including, without limitation, the
preparation of the Articles and this Agreement.
4.8 Costs of Special Services. Any costs incurred in
connection with special services requested by a Member will be required to
be paid by that Member. Such services would include, for example, those
that would benefit the Member but would not benefit the Company, such as a
special evaluation or financial accounting.
5. Management and Control of the Company.
5.1 Management of the Company by Directors.
5.1.1 In General. The Directors acting as such shall
be deemed to be the "managers" of the Company, as that term is defined in
section 17001(w) of the Act. Subject only to provisions of the Articles
and this Agreement relating to matters required to be approved by the
Members, the business, property and affairs of the Company shall be managed
and all powers of the Company shall be exercised exclusively, by or under
the direction of the Directors, acting as a board of directors by the vote
or consent of a majority of the Directors; provided that, subject to
subsection 5.1.2, only such Directors, officers of the Company or other
Persons as are designated by the Directors shall have authority to endorse
checks, drafts and other evidences of indebtedness made payable to the
order of the Company, to sign checks, drafts and other instruments
obligating the Company to pay money, and to sign contracts and obligations
on behalf of the Company; and provided further that the consent of the both
the Director elected by Keymark and the Directors elected by Xxxxxxx shall
be required to (a) appoint the President of the Company, (b) approve the
terms of any debt or equity financing for the Company, including any
capital contributions by existing or new Members, (c) approve the terms of
any sale of the Company or its successor or parent entity, or any initial
public offering of the securities of the Company or its successor or Member
(other than Xxxxxxx or Keymark), and (d) approve the terms of any transfer
of the Keymark Technology to the Company pursuant to section 3.1(b). The
Directors may delegate any such authority to any Person, as the Directors
consider advisable. Any and all rights, powers, authority and discretion
of the Directors under this Agreement or the Act shall be exercisable by
the Directors, acting as a board of directors, in their absolute and
exclusive discretion, and the Directors are authorized and empowered to
grant or give any consent, approval or authorization, make any
determination or do or perform any other act or thing conditionally or
unconditionally, arbitrarily, or inconsistently in varying or similar
circumstances, without any accountability to the Company or any Member,
except only as otherwise specifically and expressly provided in this
Agreement or provided by the Act notwithstanding this Agreement.
5.1.2 Limitations. Notwithstanding any provision of
this Agreement to the contrary, the Directors shall not, without the
written consent of a Majority in Interest of the Members, have authority
hereunder to cause the Company (a) to sell, exchange or otherwise dispose
of all or substantially all of the Company's assets as part of a single
transaction or plan, except in the orderly liquidation and winding up of
the business of the Company on its duly authorized dissolution, or (b) to
be merged with another limited liability company or a limited partnership,
corporation or general partnership.
5.2 Duties of Directors.
5.2.1 Matters to Be Addressed. The Directors shall
consider and act on any matter specified in this Agreement for their
consideration or action and any matter submitted to them by any officer of
the Company, other than any matter expressly reserved hereby for
consideration or action by all or a Majority in Interest of the Members or
any class or group of Members; provided that the Directors may delegate to
any officer or officers of the Company any power or authority reserved to
the Directors in this Agreement.
5.2.2 Binding Effect. Any vote, consent or other
action of the Directors that is authorized by this Agreement shall, in the
absence of fraud and bad faith, be final, binding and conclusive on all
Members for all purposes.
5.2.3 Fiduciary Duty. Each Director and each Person
appointed to serve as an officer of the Company from time to time shall
perform his or her duties hereunder in good faith, in a manner that he or
she believes to be in the best interests of the Company and the Members
generally and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances. Each Director shall have fiduciary duties to the Company
and the Members of like tenor to the fiduciary duties of a director of a
California corporation to his or her corporation and its shareholders, and
each Person appointed to serve as an officer of the Company shall have
fiduciary duties to the Company and the Members of like tenor to the
fiduciary duties of an officer of a California corporation to his or her
corporation and its shareholders.
5.3 Number. The authorized number of Directors
shall not be fewer than three or more than nine. The exact authorized
number of Directors shall be fixed from time to time within those limits by
the vote or consent of the Directors or a Majority in Interest of the
Members; provided that no reduction in the authorized number of Directors
shall reduce that number to a number that is fewer than the number of
Persons then serving as Directors. Subject to the foregoing provisions for
changing the authorized number of Directors, the authorized number of
Directors is initially fixed at three.
5.4 Election. Two Directors shall be elected by Xxxxxxx,
and one Director shall be elected by Keymark. At such time, if any, as
more than three Directors are authorized, each Director in excess of three
shall be elected by a Majority in Interest of the Members (without
cumulative voting). Each Director shall be elected at each meeting of the
Members called for that purpose, to hold office until the next meeting of
Members called for that purpose. Each Director, including a Director
elected to fill a vacancy, shall hold office until the next such meeting
and until a successor is elected and qualifies. Initially, the Directors
shall be Xxxxxx X Xxxxxxxxx and Xxxxxxx X. Xxxxxx (who shall be deemed to
have been elected by Xxxxxxx) and Xxxxx Xxxxxxx (who shall be deemed to
have been elected by Keymark).
5.5 Vacancies. A vacancy or vacancies in the office of
Director shall be deemed to exist in the event of the death, resignation or
removal of any Director or in the event of an increase in the authorized
number of Directors as provided in section 5.3 Such vacancies may be
filled by a majority of the Directors then in office, whether or not less
than a quorum, or by a sole remaining Director. A Majority in Interest of
the Members may elect a Director at any time to fill any vacancy not filled
by the Directors. If, after the filling of any vacancy by the Directors,
the Directors then in office who have been elected by a Majority in
Interest of the Members (other than the Directors elected by Xxxxxxx and
Keymark, as provided in the first sentence of section 5.4) shall constitute
less than a majority of the Directors then in office and not elected by
Xxxxxxx and Keymark, one or more Members representing ten percent or more
of the aggregate Percentage Interests held by Members may call a meeting of
Members to elect all of the Directors (other than such Directors elected by
Xxxxxxx and Keymark). The term of office of any Director shall terminate
on election of such Director's successor as provided in this Agreement.
5.6 Resignation and Removal. A Director may resign as such
at any time by notice to the remaining Directors, without prejudice to the
rights, if any, of the Company under any contract to which the resigning
Director is a party. The resignation of any Director shall take effect on
receipt of the notice or at such later time as shall be specified in the
notice, and, unless otherwise specified in the notice, acceptance of the
resignation shall not be necessary to make it effective. Any one or more
Directors (other than the Directors elected by Xxxxxxx and Keymark, as
provided in the first sentence of section 5.4) may be removed (with or
without cause) from office at any time by a Majority in Interest of the
Members and shall be deemed to have been removed on the happening of a
Dissolution Event with respect to such Director. The resignation or
removal of a Director shall not affect that Director's rights or
obligations, if any, as a Member and shall not constitute such Director's
withdrawal as a Member.
5.7 Meetings.
5.7.1 Regular Meetings. Regular meetings of the
Directors shall be held at least quarterly, without call, on such date and
at such time and place as they may fix. No notice of regular meetings of
the Directors need be given; provided that notice of any change in the time
or place of a regular meeting shall be given to all of the Directors in the
same manner as notice for special meetings of the Directors.
5.7.2 Special Meeting; Notice. A special meeting of
the Directors for any purpose or purposes may be called at any time by any
Director. Notice of the time and place of a special meeting shall be
delivered in the manner provided in section 14 or by telephone. In case
such notice is mailed, it shall be deposited with the United States Postal
Service as first class mail at least four days prior to the time of the
holding of the meeting. In case such notice is telegraphed or sent by
facsimile or e-mail, it shall be delivered to a common carrier for
transmission to the Director or actually transmitted by the Person giving
the notice by electronic means to the Director at least forty-eight hours
prior to the time of the holding of the meeting. In case such notice is
delivered personally or by telephone, it shall be so delivered at least
twenty-four hours prior to the time of the holding of the meeting. Any
notice given personally or by telephone may be communicated either to the
Director or to a Person at the office of the Director whom the Person
giving the notice has reason to believe will promptly communicate it to the
Director. Such deposit in the mail, delivery to a common carrier,
transmission by electronic means or delivery, personally or by telephone,
as above provided, shall be due, legal and personal notice to such
Director. The notice need not specify the purpose of the meeting.
5.7.3 Waiver of Notice. Notice of a meeting need not
be given to any Director who signs a waiver of notice or a consent to
holding the meeting or an approval of the minutes thereof, whether before
or after the meeting, or who attends the meeting without protesting in
writing, prior thereto or at its commencement, the lack of notice to such
Director. All such waivers, consents and approvals shall be filed with the
Company's records or made a part of the minutes of the meeting.
5.7.4 Adjourned Meeting. A majority of the Directors
present, whether or not a quorum is present, may adjourn any meeting to
another time and place. If the meeting is adjourned for more than twenty-
four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the Directors who were
not present at the time of the adjournment.
5.7.5 Telephone Meetings. Directors may participate
in a meeting through use of conference telephone or similar communications
equipment, so long as all Directors participating in such meeting can hear
one another. Participation in a meeting pursuant to this paragraph
constitutes presence in person at such meeting.
5.7.6 Quorum. A majority of the number of Persons
serving as Directors constitutes a quorum of the Directors for the
transaction of business. Every act or decision done or made by a majority
of the Directors present at a meeting duly held at which a quorum is
present is the act of the Directors, unless a greater number is required by
this Agreement. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of Directors,
if any action taken is approved by at least a majority of the required
quorum for such meeting.
5.7.7 Action without a Meeting. Any action required
or permitted to be taken by the Directors may be taken without a meeting,
if a majority of the Directors shall individually or collectively consent
in writing to such action. Such written consent or consents shall be filed
with the minutes of the proceedings of the Directors. Such action by
written consent shall have the same force and effect as a vote of a
majority of the Directors at a meeting at which a quorum is present.
5.8 Devotion of Time. A Director is not obligated to
devote all of his or her time or business efforts to the affairs of the
Company, but shall devote to the business and affairs of the Company such
time, effort and skill as he or she reasonably deems appropriate.
5.9 Competing Activities. No Director shall, or shall
permit any of that Director's agents or employees to, engage or participate
in, independently or with others, any business activity of any type or
description that might be the same as or similar to the Company's business
or that might be in direct or indirect competition with the Company;
provided that the foregoing shall apply to Keymark's designated director
and such director's agents and employees only with respect to business
activities that might compete directly with the Company by use of internet-
based applications of the Keymark Technology. A Director shall present any
investment or business opportunity to the Company that is of a character
that could be taken by the Company, but if the Directors decline to cause
the Company to pursue such opportunity, or do not determine to cause the
Company to pursue such opportunity within thirty days of its presentation
to the Company, the Director presenting such opportunity shall have no
further duty or obligation to the Company with respect to such opportunity
and shall have the right to hold or take such opportunity for that
Director's own account and to recommend such opportunity to Persons other
than the Company. The Members acknowledge that any Director and that
Director's agents, employees and Affiliates may own or manage other
businesses, and, except as provided in the first sentence of this section
5.9, the Members hereby waive any and all rights and claims that they may
otherwise have against any Director and that Director's agents, employees
and Affiliates as a result of any of such activities.
5.10 Transactions between Company and Directors.
Notwithstanding that it may constitute a conflict of interest, the
Directors may, and may cause their respective Affiliates to, engage in any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service, or the
establishment of any salary or other compensation or other terms of
employment) with the Company, so long as such transaction is not expressly
prohibited by this Agreement, and so long as the terms and conditions of
such transaction, on an overall basis, are fair and reasonable to the
Company and are at least as favorable to the Company as those that are
generally available from Persons capable of similarly performing them and
in similar transactions between parties operating at arm's length.
5.11Expenses. The Company shall reimburse each Director and
his or her Affiliates for the cost of goods and materials paid by such
Director and used for or by the Company. With respect to Keymark, such
reimbursement shall be in addition to any amounts the Company pays to
Keymark pursuant to section 3.3 for software support, maintenance and
development services. The Company shall also pay or reimburse each
Director and his or her Affiliates for expenses incurred in the formation
and organization of the Company, including, without limitation, the
preparation of the Articles and this Agreement.
5.12 Officers.
5.12.1 Appointment of Officers. The Directors may
appoint one or more officers at any time. The officers of the Company, if
deemed necessary by the Directors, may include a president, one or more
vice presidents, a secretary, one or more assistant secretaries, a chief
financial officer, one or more deputy financial officers and such other
officers as the Directors may designate. The officers, if any, shall serve
at the pleasure of the Directors, subject to all rights, if any, of an
officer under any contract of employment. Any natural person, including a
Member or Director or any Affiliate of a Member or Director, may hold any
number of offices. No officer need be a Member, a resident of the State of
California or a citizen of the United States. The officers shall exercise
such powers and perform such duties as are specified in this Agreement and
as shall be determined from time to time by the Directors. Generally, each
officer shall have the authority, powers, duties and responsibilities
usually vested in like titled officers of a California corporation and
shall perform such other duties and have such other responsibilities,
authority and powers as the Directors may from time to time prescribe.
5.12.2 Removal, Resignation and Filling of Vacancy of
Officers. Subject to the rights, if any, of an officer under a contract of
employment, any officer may be removed, with or without cause, by the
Directors at any time. Any officer may resign at any time by notice to the
Company, and the resignation shall take effect on receipt of such notice by
the Directors or at a later time specified in such notice. Unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Company under any contract to which
the officer is a party. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause may be filled in
the manner prescribed in this Agreement for regular appointments to that
office.
5.12.3 Salaries of Officers. The salaries of officers
and agents of the Company shall be fixed by the Directors.
5.12.4 President. The president, if any, shall be the
chief executive officer of the Company and shall, subject to the control
and supervision of the Directors, be responsible for the day-to-day
management of the business of the Company and shall see that all orders and
resolutions of the Directors are carried into effect. Anything herein to
the contrary notwithstanding, no Person shall be appointed as the president
without the approval of both the Director elected by Keymark, if any, and a
majority of the Directors.
5.12.5 Vice President. The vice president, if any, or
if there shall be more than one, the vice presidents in the order
determined by the Directors, shall, in the absence or disability of the
president, perform the duties and exercise the powers of the president.
5.12.6 Secretary. The secretary, if any, shall attend
all meetings of the Directors and the Members and shall record all the
proceedings of such meetings in a book to be kept for that purpose, and
shall perform like duties for the standing committees, if any, when
required. The secretary, if any, shall give, or cause to be given, notice
of all meetings of the Members. The secretary, if any, shall keep, or
cause to be kept, at the principal executive office of the Company, a
register, or a duplicate register, showing the names of all Members and
their addresses, Capital Contributions and Percentage Interests.
5.12.7 Chief Financial Officer. The chief financial
officer, if any, shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Company, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
and Economic Interests. The books of account shall at all times be open to
inspection by the Directors. The chief financial officer, if any, shall
deposit all moneys and other valuable effects in the name and to the credit
of the Company in such depositories as may be designated by the Directors.
5.12.8 Acts of Officers as Conclusive Evidence of
Authority. Any note, mortgage, evidence of indebtedness, contract,
certificate, statement, conveyance or other instrument in writing, and any
assignment or endorsement thereof, executed or entered into between the
Company and any other Person, when signed by the president, any vice
president, the secretary or the chief financial officer of the Company, is
not invalidated as to the Company by any lack of authority of the signing
officer in the absence of actual knowledge on the part of the other Person
that the signing officer had no authority to execute the same.
5.13 Limited Liability. No Director and no Person serving
as an officer of the Company shall be personally liable under any judgment
of a court, or in any other manner, for any debt, duty, obligation or
liability of the Company, whether arising in contract, tort or otherwise,
solely by reason of being a Director or an officer of the Company.
5.14 Buy-Out of Noncontributing Member. Any Member other
than Keymark who shall not have made a Capital Contribution that is, as a
percentage of the total net market value of the Company as determined by
the Directors at the time that such Member is admitted to the Company,
equal to or greater than such Member's Percentage Interest, may be required
by the Directors to withdraw from the Company as a Member, with or without
cause, for any reason or no reason, at any time, effective at any time
specified by the Directors; provided that no Member may be required so to
withdraw more than five years after such Member is first admitted to the
Company as a Member. In any such event, the withdrawing Person's
Percentage Interest shall be reduced to zero, and the Percentage Interests
of the other Members and Assignees shall be increased proportionately, so
that all Percentage Interests continue to total 100 percent. From and
after any such withdrawal, neither the Company nor any other Member shall
have any further obligation to the withdrawn Person, and the withdrawn
Person shall have no further rights under this Agreement, except that the
Company shall promptly distribute to the withdrawn Person an amount in cash
equal to such Person's Capital Account at the beginning of the Fiscal Year
during which such withdrawal is effective after being adjusted as provided
in section 6.2; provided that such distribution shall be subject to the
provisions of sections 6.4, 6.5, 6.7, 6.8 and 6.9, and if the Company
cannot make such distribution at that time in accordance with those
provisions, the Company's obligation to make such distribution shall be
deferred until such time as it is able to do so in accordance with those
provisions, whereupon it shall make such distribution, without interest;
and provided further that the Directors may adopt and implement such other
or additional plans, procedures and programs for the payment or provision
of other benefits to employees of the Company that are Members on their
being required by the Directors to withdraw as Members.
5.15 Administrative Services. Beginning on the date of this
Agreement and continuing for the first three full months after such date,
Xxxxxxx shall provide to the Company such employee benefits, accounting,
finance, billing, purchasing and other administrative services and sales
and marketing services as the Directors may request from time to time.
The Company shall pay Xxxxxxx an amount equal to $5,000 per month for such
services, which amount shall be paid in advance on the first day of each
month and shall be subject to all standard deductions and withholding
required by tax authorities. If this Agreement is made as of a date other
than the first day of a month, such amount shall be pro-rated for the first
partial month. At the end of such three-month period, this arrangement
shall terminate unless the Directors elect, in their exclusive discretion,
to continue it, in which case it shall continue for such additional period
and on such terms as Xxxxxxx and the Directors shall approve.
6. Allocations of Profits and Losses; Distributions and Withdrawals.
6.1 Allocations. Profits and Losses shall be allocated
each Fiscal Year to the Members and Assignees as follows:
6.1.1 Losses. All Losses for each Fiscal Year shall
be allocated to the Members in proportion to the Capital Account balances
of the Members and, once all such Capital Account balances have been
reduced to zero, then in proportion to Percentage Interests.
6.1.2 Profits. All Profits for each Fiscal Year shall
be allocated first to any Members that theretofore shall have been
allocated Losses, in proportion to and to the extent of the amount by which
such Losses theretofore respectively allocated to such Members shall exceed
all Profits theretofore respectively allocated to such Members under this
clause, and then to the Members in proportion to their Percentage
Interests.
6.2 Special Capital Account Allocations. Notwithstanding
anything in section 6.1 to the contrary, the following special allocations
shall be made in allocating Profits and Losses:
6.2.1 Section 704 Allocations. Any special
allocations necessary to comply with the requirements in section 704 of the
Code and the corresponding Regulations, including the qualified income
offset and minimum gain chargeback provisions contained therein, shall be
made.
6.2.2 Tax Allocations. Notwithstanding any provision
in this section 6 to the contrary, in accordance with Code section 704(c)
and the Regulations promulgated thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members and
Assignees to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its fair
market value on the date of contribution. Allocations pursuant to this
subsection 6.2.2 are solely for purposes of federal, state and local taxes
and shall not affect, or in any way be taken into account in computing, any
Capital Account or share of Profits, Losses or other items of any Member or
Assignee, or distributions to any Member or Assignee, pursuant to any
provision of this Agreement.
6.2.3 Other Allocation Rules.
(a) Generally, all Profits and Losses shall be
allocated among the Members and Assignees as provided in section 6.1 and
this section 6.2. If Members are admitted to the Company on different
dates during any Fiscal Year, the Profits or Losses allocated among the
Members and Assignees for each such Fiscal Year shall be allocated in
proportion to their respective Capital Accounts from time to time during
such Fiscal Year in accordance with Code section 706, using any convention
permitted by law and selected by the Directors.
(b) For purposes of determining the Profits,
Losses or any other items allocable to any period, Profits, Losses and any
such other items shall be determined on a daily, monthly or other basis, as
determined by the Directors, using any permissible method under Code
section 706 and the Regulations thereunder.
(c) The Members and Assignees acknowledge that
they are aware of the income tax consequences of the allocations made by
section 6.1 and this section 6.2 and hereby agree to be bound by section
6.1 and this section 6.2 in reporting their shares of Profits and Losses
for income tax purposes.
(d) Notwithstanding any of the foregoing
provisions to the contrary, if taxable gain to be allocated includes income
resulting from the sale or disposition of Company property or property of a
limited partnership, limited liability company or joint venture in which
the Company owns an interest that is treated as ordinary income, such gain
so treated as ordinary income shall be allocated to and reported by each
Member and Assignee in proportion to allocations to that Member or Assignee
of the items that shall have given rise to such ordinary income, and the
Company shall keep records of such allocations. In the event of the
subsequent admission of any new Member, any item that would constitute
"unrealized receivables" under Code section 751 and the Regulations
thereunder shall not be shared by the newly admitted Members, but rather
shall remain allocated to existing Members and Assignees.
6.2.4 Provisional Allocation. If any amount claimed
by the Company to constitute a deductible expense in any Fiscal Year is
treated by any federal, state or local taxing authority as a payment made
to a Member in such Member's capacity as a Member of the Company for income
tax purposes, with regard to such authority, items of income and gain of
the Company for such Fiscal Year shall first be allocated to such Member to
the extent of such payment.
6.3 Valuation. The value of the assets and liabilities of
the Company shall be determined by the Directors in good faith, and such
determination shall be conclusive and binding on all of the Members and all
parties claiming through or under them.
6.4 Distributions. Subject to applicable law and any
limitations elsewhere in this Agreement (including, without limitation,
section 6.5), the Directors shall determine the amount and timing of all
distributions by the Company and whether such distributions will be in cash
or in kind or partly in cash and partly in kind. Except as otherwise
provided herein, all distributions shall be made in proportion to the
respective Percentage Interests of the Members and Assignees on the date of
the distribution. All such distributions shall be made only to the Persons
who, according to the books and records of the Company, are the owners of
the Economic Interests in respect of which such distributions are made on
the date of distribution. None of the Company, the Directors or the
Members shall incur any liability for making distributions in accordance
with this section 6.4.
6.5 Form of Distribution. No Member or Assignee has the
right to demand and receive any distribution from the Company in any form
other than money; provided that on dissolution of the Company prior to the
sale of the Company or its successor or parent entity and prior to the
initial public offering under the Securities Act of any securities of the
Company or its successor or a Member (other than Xxxxxxx or Keymark),
Keymark shall be entitled to distribution in kind, to the extent consistent
with section 6.4, of all Company software developed by Keymark for the
Company pursuant to section 3.3 of this Agreement. No Member or Assignee
may be compelled to accept from the Company a distribution of any asset in
kind in lieu of a proportionate distribution of money being made to other
Members or Assignees except on the dissolution and winding up of the
Company.
6.6 Capital Withdrawals by Members. No Member or Assignee
shall have any right or power at any time to withdraw all or any part of
such Member's or Assignee's Capital Account, except with the consent of the
Directors.
6.7 Withholding. Each Member and Assignee acknowledges and
agrees that the Company may be required to deduct and withhold tax or to
fulfill other obligations of such Member or Assignee on any allocation,
withdrawal or distribution under section 5.14, this section 6 or section 7.
All amounts withheld with respect to any withdrawal or distribution to a
Member or Assignee shall be treated as amounts withdrawn or distributed to
such Member or Assignee for all purposes under this Agreement as of the
effective date of the related withdrawal or distribution.
6.8 Restriction on Distributions and Withdrawals. No
distribution or withdrawal shall be made if and to the extent prohibited by
the Act notwithstanding this Agreement.
6.9 Return of Distributions. Except for distributions made
in violation of the Act or this Agreement, no Member or Assignee shall be
obligated to return any distribution to the Company or pay the amount of
any distribution for the account of the Company or to any creditor of the
Company. The amount of any distribution returned to the Company by a
Member or Assignee or paid by a Member or Assignee for the account of the
Company or to a creditor of the Company shall be added to the account or
accounts from which it was subtracted when it shall have been distributed
to the Member or Assignee.
7. Transfer and Assignment of Interests; Repurchases in Certain
Events.
7.1 Transfer and Assignment of Interests. Except as
provided in section 7.4 and 7.10, no Member shall Transfer all or any part
of a Membership Interest except with the prior consent of the Directors.
Any attempted or purported Transfer in violation of this section 7 shall be
void. After the consummation of any Transfer of a Membership Interest, the
Membership Interest so Transferred shall continue to be subject to the
terms and conditions of this Agreement, and any further Transfers shall
comply with all terms and conditions of this Agreement.
7.2 Further Restrictions on Transfer of Interests. In
addition to other restrictions in this Agreement, no Member shall Transfer
any Membership Interest or any interest in any Membership Interest (a)
without compliance with section 12, and (b) if the Membership Interest or
interest to be Transferred, when added to all other Membership Interests
Transferred in the preceding twelve months, would cause the termination of
the Company under the Code.
7.3 Substitution of Members. A Transferee of a Membership
Interest shall have the right to become a substitute Member only if (a) the
requirements of sections 7.1, 7.2 and 7.4 are met, (b) such Transferee
executes an instrument satisfactory to the Directors accepting and adopting
the terms and conditions of this Agreement and (c) such Transferee pays any
reasonable expenses in connection with that Transferee's admission as a new
Member. The admission of a substitute Member shall not result in the
release from any liability of the Person who shall have assigned the
Membership Interest.
7.4 Right of First Refusal. Without limiting any rights or
obligations under any other provision of this section 7, each time a Member
proposes to Transfer any interest in the Company other than pursuant to
section 7.10, such Member (the "Transferring Member") shall first offer
such interest to the Company in accordance with this section 7.4; provided,
however, that if the Transferring Member is Xxxxxxx, Xxxxxxx shall first
offer such interest to Keymark in accordance with this section 7.4, and if
the Transferring Member is Keymark, Keymark shall first offer such interest
to Xxxxxxx in accordance with this section 7.4, and if Keymark or Xxxxxxx,
as the case may be, declines to purchase such interest in accordance with
this section 7.4, the Transferring Member shall then offer such interest to
the Company in accordance with this section 7.4. Notwithstanding the
foregoing, Xxxxxxx shall be entitled to transfer portions of its Membership
Interest without complying with the provisions of this section 7.4,
provided that the aggregate Percentage Interest of the Membership Interests
so transferred does not at any time exceed 15% of the total Percentage
Interests in the Company. Notwithstanding the foregoing, Keymark shall be
entitled to transfer to its key employees and consultants portions of its
Membership Interest without complying with the provisions of this section
7.4, provided that the aggregate Percentage Interest of the Membership
Interests so transferred does not at any time exceed 10% of the total
Percentage Interests in the Company.
7.4.1 Sale Notice. The Transferring Member shall
deliver a notice (the "Sale Notice") to the Company stating (a) the
Transferring Member's bona fide intention to make such Transfer, (b) the
name and address of the proposed transferee, (c) the interest to be
transferred, (d) the purchase price, terms of payment and other terms and
conditions of the proposed Transfer and (e) whether the proposed transferee
is related to or affiliated with the Transferring Member, including but not
limited to, as an Affiliate.
7.4.2 Election. Within thirty days after delivery of
the Sale Notice, the Directors on behalf of the Company shall notify the
Transferring Member of the Company's election to purchase or not to
purchase all (but not less than all) of the interest being so transferred
at the price and on the terms stated in the Sale Notice; provided that, if
the Transfer is for no consideration or consideration other than cash or
cash equivalents, the Sale Notice shall so state and the purchase price
shall be an amount equal to the Capital Account balance of the Transferring
Member insofar as it relates to the interest being transferred. The
failure of the Directors to give such notice within such thirty-day period
shall constitute an election by the Directors not to purchase such
interest, but shall not constitute the prior consent of the Directors
required by section 7.1.
7.4.3 onsummation. On the election of the Company to
purchase the interest specified in the Sale Notice, the Directors shall
cause the Company to pay the purchase price as provided in subsection 7.4.2
on the other terms and conditions stated in the Sale Notice. On any
purchase by the Company under this section 7.4, the consideration to be
paid shall be paid to the Transferring Member or such Member's Successor,
if any. If the Transferring Member shall have died, the decedent's
Successor shall apply for and obtain any necessary court approval or
confirmation of the sale pursuant to this section 7.4 and, notwithstanding
any other provision of this Agreement to the contrary, if such court
approval is necessary to authorize the sale, the other rights and
obligations of all parties under this section 7.4 shall be postponed until
such approval is obtained. On the Company's exercise of its option under
this section 7.4, the Company and the Transferring Member or the
Transferring Member's Successor shall do all things and execute and deliver
all papers as may be necessary to consummate fully such purchase and sale
in accordance with this Agreement.
7.4.4 Nonexercise. If the Company elects not to
purchase all of the interest specified in the Sale Notice, the Transferring
Member may Transfer all of such interest to the transferee named in the
Sale Notice on exactly the terms and conditions specified in the Sale
Notice, within thirty days after the expiration of the Company's right to
purchase such interest; provided that the requirements of section 7.1, 7.2
and 7.3 shall have been fully satisfied. If such interest is not so
transferred within such time, any other or subsequent Transfer of such
interest by such Transferring Member shall be subject to this section 7 as
if no Sale Notice had ever been given.
7.4.5 Assignments. Any of the foregoing provisions of
this section 7.4 to the contrary notwithstanding, the Company may, pursuant
to the authority of the Directors, within the thirty-day period specified
in subsection 7.4.2, assign the Company's rights and delegate its duties
under this section 7.4 to any Person, in which event, such Person shall
thereupon be substituted for the Company for all purposes of this section
7.4.
7.5 Transfer to Hold Co. At such time as the Directors may
specify, each of Keymark and Xxxxxxx shall Transfer a portion of its
Membership Interest to a corporation that the Directors may cause the
Company to organize ("Hold Co."). Such portion so transferred by each of
them shall be equivalent to a ten percent Percentage Interest and shall
include the Transfer of the equivalent portion of such Member's Capital
Account balance at the time of such Transfer. Hold Co. shall thereupon be
substituted for Keymark and Xxxxxxx as Members with respect to the portions
of their Membership Interests so Transferred. Such Transfers shall be
effected in exchange for common stock issued by Hold Co. on its initial
organization and Keymark and Xxxxxxx shall thereupon receive equal numbers
of shares of such common stock. Such Transfers shall not be limited by or
subject to any provision of sections 7.1 through 7.4, except for clause (b)
of section 7.2, clause (b) of the first sentence of section 7.3 and the
second sentence of section 7.3, all of which shall apply to the Transfers
under this section 7.5.
7.6 Effective Date of Permitted Transfers. Any permitted
Transfer of all or any portion of a Membership Interest other than pursuant
to section 7.10 shall be effective as of midnight of the last day of the
calendar month following the date on which the applicable requirements of
either sections 7.1, 7.2, 7.3 and 7.4 or section 7.5, as the case may be,
shall have been met. Any Transferee of a Membership Interest shall take
and hold such Membership Interest subject to the restrictions on Transfer
imposed by this Agreement.
7.7 Rights of Legal Representatives. Subject to the
foregoing provisions of this section 7, (a) if a Member who is a natural
person dies or is adjudged by a court of competent jurisdiction to be
incompetent to manage such Member's person or property, such Member's
executor, administrator, guardian, conservator or other legal
representative may exercise all of such Member's rights for the purpose of
settling such Member's estate or administering such Member's property,
including any power such Member has under the Articles or this Agreement to
give an Assignee the right to become a Member, and (b) if a Member is a
corporation, trust or other entity and is dissolved or terminated, the
powers of that Member may be exercised by its legal representative or
Successor.
7.8 No Effect to Transfers in Violation of Agreement. Any
attempted or purported Transfer of a Membership Interest without compliance
with all provisions of this Agreement shall be void and of no effect,
except only as and to the extent otherwise expressly required by applicable
law.
7.9 Transfer of Economic Interest Only. On and
contemporaneously with any Transfer (whether arising out of an attempted
charge on a Member's Economic Interest by operation of law, judicial
process, a foreclosure by a creditor of the Member or otherwise) of an
Economic Interest that does not at the same time Transfer the other rights
associated with the Membership Interest transferred by that Member
(including, without limitation, the rights of that Member to vote, consent
or participate in the management of the business, property and affairs of
the Company), the Company shall purchase from that Member or Successor, and
that Member or Successor shall sell to the Company, for a purchase price of
$100, all remaining rights and interests retained by that Member or
Successor that immediately before the Transfer shall have been associated
with the transferred Economic Interest. Each Member acknowledges and
agrees that the right of the Company to purchase such remaining rights and
interests is reasonable under the circumstances existing as of the date
hereof and represents a bona fide, good faith attempt to determine the fair
market value of the interests retained by the transferring Member.
7.10 Xxxxxxx Purchase/Keymark Sale Option.
7.10.1 Call Option and Put Option. If by the fifth
anniversary of the date of this Agreement, the Company or its successor or
parent entity has not been sold and an initial public offering under the
Securities Act of any securities of the Company or its successor or a
Member (other than Keymark or Xxxxxxx) has not occurred, then Xxxxxxx shall
have the option (the "Call Option") to purchase from Keymark all (but not
less than all) of Keymark's Membership Interest, and Keymark shall have the
option (the "Put Option") to cause Xxxxxxx to purchase all (but not less
than all) of Keymark's Membership Interest. Each of the Call Option and
the Put Option is sometimes referred to herein as an "Option," and
collectively they are sometimes referred to as the "Options." Each Option
shall be exercisable on the terms set forth below.
7.10.2 Exercise of Option. To exercise the Call
Option, Xxxxxxx shall deliver written notice of exercise to Keymark within
the thirty days beginning on the fifth anniversary of this Agreement. To
exercise the Put Option, Keymark shall deliver written notice of exercise
to Xxxxxxx within such thirty-day exercise period. Upon delivery of notice
of exercise of one Option, the other Option shall terminate. If neither
Option is exercised within the thirty-day exercise period, both Options
shall terminate.
7.10.3 Exercise Price. The exercise price for either
Option shall be the fair market value of Keymark's Membership Interest on
the date of the notice of exercise, determined as follows. Within ten
days following the date the notice of exercise is delivered, each of
Xxxxxxx and Keymark shall designate one individual to serve as an
appraiser. Within thirty days after being notified of and accepting his
or her designation, each such appraiser shall deliver to the Company,
Xxxxxxx and Keymark a written determination of the fair market value of
Keymark's Membership Interest as of the date of the notice of exercise,
together with the appraiser's opinion and the considerations on which such
opinion is based. The appraised value of Keymark's Membership Interest
shall be determined based on Keymark's Percentage Interest of the
enterprise value of the entire Company and shall not be reduced by
discounts based on Keymark's lack of control or the illiquidity of
Keymark's Membership Interest. If the higher of the two appraisals is no
more than ten percent greater than the lower appraisal, then the average of
the two appraisals shall be deemed to be the fair market value of Keymark's
Membership Interest for the purpose of this section 7.10. If the higher
appraisal is more than ten percent higher than the lower appraisal, then
the two appraisers shall jointly appoint a third appraiser (the
"Independent Appraiser"). The Independent Appraiser shall be an investment
banker, appraiser or certified public accountant who is neither affiliated
with nor has had any prior business relationship with Xxxxxxx, Keymark or
the Company and who is experienced in evaluating closely held businesses.
The first two appraisals shall not be disclosed to the Independent
Appraiser. Within thirty days after being notified of and accepting his
or her appointment as Independent Appraiser, the Independent Appraiser
shall deliver to the Company, Xxxxxxx and Keymark a written determination
of the fair market value of Keymark's Membership Interest as of the date of
the notice of exercise, together with the Independent Appraiser's opinion
and the considerations on which such opinion is based. If the Independent
Appraiser's appraisal falls between the first two appraisals, then the
average of the Independent Appraiser's appraisal and the nearer of the
first two appraisals shall be deemed to be the fair market value of
Keymark's Membership Interest as of the date of the notice of exercise. If
the Independent Appraiser's appraisal does not fall between the first two
appraisals, then the nearer of the first two appraisals to the Independent
Appraiser's appraisal shall be deemed to be the fair market value of
Keymark's Membership Interest. The determination of the fair market value
of Keymark's Membership Interest pursuant to this subsection 7.10.3 shall
be final, binding and conclusive. Each of Keymark and Xxxxxxx shall pay
the fees and expenses of the appraiser designated by such party, and one-
half of the fees and expenses of the Independent Appraiser.
7.10.4 Effective Date of Transfer. The transfer of
Keymark's Membership Interest from Keymark to Xxxxxxx pursuant to the
exercise of either Option shall be deemed to have occurred as of the date
of the notice of exercise of such Option, notwithstanding that the exercise
price of such Option shall not have been determined and the exercise price
shall not have been paid as of that date. Therefore, all of Keymark's
rights as a Member of the Company shall terminate as of the date as of
which either Option is exercised.
7.10.5 Payment of Exercise Price. Xxxxxxx shall pay
the exercise price to Keymark or its legal representative within thirty
days following the final determination of the exercise price pursuant to
subsection 7.10.3. At least twenty percent of the exercise price shall be
paid in cash, with the remainder evidenced by a promissory note secured by
Keymark's Membership Interest and having such terms as are mutually
agreeable to Xxxxxxx and Keymark. On the exercise of either Option,
Xxxxxxx and Keymark shall do all things and execute and deliver all papers
as may be necessary to consummate fully such exercise in accordance with
this Agreement.
8. Consequences of Dissolution Event. On the occurrence of a
Dissolution Event with respect to a sole remaining Director, the Company
shall dissolve unless a Majority in Interest of the Members consent within
ninety days of the Dissolution Event to the continuation of the business of
the Company. The death, insanity, disability, withdrawal, resignation,
expulsion, dissolution or Bankruptcy of a Member, or any event that
terminates a Member's Membership Interest, shall not cause the Company to
dissolve unless such Member is the sole remaining Director and such event
is a Dissolution Event.
9. Accounting, Records, Reporting by Members.
9.1 Books and Records. The Directors shall cause to be
maintained complete and accurate accounts in proper books of all
transactions of or on behalf of the Company and shall cause to be entered
therein a full and accurate account of all transactions on behalf of the
Company. The Company's books and accounting records shall be kept in
accordance with generally accepted accounting principles (which shall be
consistently applied throughout each accounting period). The Company shall
maintain at its office in the State of California all of the following:
9.1.1 A current list of the full name and last known
business or residence address of each Member, Director and Assignee set
forth in alphabetical order, together with the Capital Contributions,
Capital Account balance and Percentage Interest of each Member or Assignee;
9.1.2 A copy of the Articles and any and all
amendments thereto, together with executed copies of any powers of attorney
pursuant to which the Articles or any amendments thereto shall have been
executed;
9.1.3 Copies of the Company's federal, state and local
income tax or information returns and reports, if any, for the six most
recent taxable years;
9.1.4 A copy of this Agreement and any and all
amendments hereto, together with executed copies of any powers of attorney
pursuant to which this Agreement or any amendments hereto shall have been
executed;
9.1.5 Copies of the financial statements of the
Company, if any, for the six most recent Fiscal Years; and
The Company's books and records as they relate to the internal affairs of
the Company for at least the current and past four Fiscal Years.
9.2 Delivery to Members and Inspection. On the request of
any Member or Assignee for purposes reasonably related to the interest of
that Person as a Member or Assignee, the Directors shall promptly cause to
be delivered to the requesting Member or Assignee, at the expense of the
Company, a copy of the information required to be maintained by subsections
9.1.1, 9.1.3 and 9.1.4. Each Member, Director or Assignee has the right,
on reasonable request for purposes reasonably related to the interest of
the Person as a Member, Director or Assignee to: (a) inspect and copy
during normal business hours any of the Company's records described in
subsections 9.1.1 through 9.1.6; and (b) obtain from the Directors promptly
after their becoming available, copies of the Company's federal, state and
local income tax or information returns for each Fiscal Year. Any request,
inspection or copying by a Member or Assignee under this section 9.2 may be
made by that Member or Assignee or that Member's or Assignee's agent or
attorney.
9.3 Accountings. As soon as is reasonably practicable after
the close of each Fiscal Year, and in any event within ninety days after the
end of such Fiscal Year, the Directors shall make or cause to be made a full
and accurate inventory and accounting of the affairs of the Company as of
the close of that Fiscal Year and shall prepare or cause to be prepared a
balance sheet as at the end of such Fiscal Year, a profit and loss statement
for that Fiscal Year and a statement of Members' equity showing the
respective Capital Accounts of the Members as of the close of such Fiscal
Year and the distributions, if any, to Members during such Fiscal Year, and
any other statements and information necessary for a complete and fair
presentation of the financial condition of the Company, all of which the
Directors shall furnish to each Member. In addition, the Directors shall
furnish to each Member information regarding the Company necessary for such
Member to complete such Member's federal and state income tax returns. The
Directors shall also furnish copies of the Company's federal and state
income tax or information returns to any Member requesting the same. On
such accounting being made, Profits and Losses during such Fiscal Year shall
be ascertained and credited or debited, as the case may be, in the books of
account of the Company to the respective Members as herein provided. All
decisions as to accounting matters, except as otherwise specifically set
forth herein, shall be made by the Directors. The Directors may rely on the
advice of accountants whether such decisions are in accordance with the
accounting principles employed by the Company.
9.4 Filings. The Directors shall cause the income tax or
information returns for the Company to be prepared and timely filed with the
appropriate authorities. The Directors shall also cause to be prepared and
timely filed with appropriate federal and state regulatory and
administrative bodies amendments to, or restatements of, the Articles and
all reports required to be filed by the Company with those entities under
the Act or other applicable laws, rules and regulations. The Company shall
cause to be filed at least annually with the California Secretary of State
the statement required under section 17060 of the Act. If the Directors are
required by the Act to execute or file any document and fail, after demand,
to do so within a reasonable time or refuse to do so, any Member may
prepare, execute and file that document with the California Secretary of
State.
9.5 Bank and Brokerage Accounts. The Directors shall
maintain the funds of the Company in one or more separate bank or securities
brokerage accounts in the name of the Company, and shall not permit the
funds of the Company to be commingled in any fashion with the funds of any
other Person.
9.6 Tax Matters Partner. The Directors may remove and
replace the Tax Matters Partner at any time or times. The Directors shall
from time to time cause the Company to make such tax elections as they deem
to be in the interests of the Company and the Members generally. The Tax
Matters Partner, as defined in Code section 6231, shall represent the
Company (at the Company's expense) in connection with all examinations of
the Company's affairs by tax authorities, including resulting judicial and
administrative proceedings, and shall expend Company funds for professional
services and costs associated therewith.
10 Dissolution and Winding Up.
10.1 Dissolution. The Company shall be dissolved, its assets
shall be disposed of, and its affairs shall be wound up on the first to
occur of (a) the vote or consent of a Majority in Interest of the Members to
dissolve the Company, (b) the entry of a decree of judicial dissolution
pursuant to section 17351 of the Act, (c) the occurrence of a Dissolution
Event with respect to a sole remaining Director, unless a Majority in
Interest of the Members consent within ninety days of such occurrence to
continue the business of the Company, and (d) the determination by the
Directors, in their exclusive discretion, that a sale of the Company or its
successor or parent entity, or an initial public offering of the securities
of the Company or its successor or a Member (other than Xxxxxxx or Keymark),
on acceptable terms is not feasible within an acceptable time frame.
10.2 Certificate of Dissolution. As soon as practicable
after the occurrence of an event specified in section 10.1, the Directors
or, if none, the Members conducting the winding up of the affairs of the
Company, shall execute or cause to be executed a Certificate of Dissolution
in such form as shall be prescribed by the California Secretary of State and
file such Certificate as required by the Act.
10.3 Winding Up. On the occurrence of an event specified in
section 10.1, the Company shall continue solely for the purpose of winding
up its affairs in an orderly manner, liquidating its assets and satisfying
the claims of its creditors. The Directors or, if there is no remaining
Director, a Person or Persons designated by the consent of a Majority in
Interest of the Members (the "Liquidating Person") shall be responsible for
overseeing the winding up and liquidation of Company, shall take full
account of the assets and liabilities of Company, shall cause such assets to
be sold or distributed, and shall cause the proceeds therefrom, to the
extent sufficient therefor, to be applied and distributed as provided in
section 10.5. The Directors or the Liquidating Person shall give notice of
the commencement of winding up by mail to all known creditors and claimants
whose addresses appear on the records of the Company. The Directors or the
Liquidating Person shall be entitled to reasonable compensation for such
services.
10.4 Distributions in Kind. Any noncash assets distributed
to the Members shall first be valued at their fair market value to determine
the Profit or Loss that would have resulted if such assets were sold for
such value, pursuant to section 6.3. Such Profit or Loss shall then be
allocated pursuant to section 6, and the Members' Capital Accounts shall be
adjusted to reflect such allocations. The amount distributed and charged
against the Capital Account of each Member receiving an interest in a
distributed asset shall be the fair market value of such interest (net of
any liability secured by such asset that such Member assumes or takes
subject to). The fair market value of such asset shall be determined by the
Directors or the Liquidating Person, or if any Member objects, by an
independent appraiser (and any such appraiser must be recognized as an
expert in valuing the type of asset involved) selected by the Directors or
the Liquidating Person and approved by a Majority in Interest of the
Members.
10.5 Order of Payment of Liabilities on Dissolution. After a
determination that all known debts and liabilities of the Company in the
process of winding up, including, without limitation, debts and liabilities
to Members who are creditors of the Company, shall have been paid or
adequately provided for, the remaining assets shall be distributed to the
Members in proportion to their positive Capital Account balances, after
taking into account income and loss allocations for the Company's taxable
year during which liquidation occurs. The payment of a debt or liability,
whether the whereabouts of the creditor is known or unknown, shall have been
adequately provided for if payment thereof shall have been assumed or
guaranteed in good faith by one or more financially responsible Persons or
by the United States government or any agency thereof, and the provision,
including the financial responsibility of the Person, shall have been
determined in good faith and with reasonable care by the Members or
Directors to be adequate at the time of any distribution of the assets
pursuant to this section 10.5. This section 10.5 shall not prescribe the
exclusive means of making adequate provision for debts and liabilities.
10.6 Compliance with Regulations. All payments to the
Members on the winding up and dissolution of Company shall be strictly in
accordance with the positive capital account balance limitation and other
requirements of Regulations section 1.704-1(b)(2)(ii)(d).
10.7 Limitations on Payments. Except as otherwise
specifically provided in this Agreement, each Member shall look solely to
the assets of Company for the return of such Member's positive Capital
Account balance and shall have no recourse for such Member's Capital
Contribution or share of Profits (on dissolution or otherwise) against any
other Member.
10.8 Certificate of Cancellation. The Directors or Members
who file the Certificate of Dissolution shall cause to be filed in the
office of, and on a form prescribed by, the California Secretary of State, a
certificate of cancellation of the Articles on the completion of the winding
up of the affairs of the Company.
10.9 No Action for Dissolution. Except as expressly
permitted by this Agreement, no Member, as such, shall take any voluntary
action with the purpose or effect of dissolving the Company. The Members
acknowledge that irreparable damage would be done to the goodwill and
reputation of the Company if any Member should initiate or seek to maintain
an action to dissolve the Company under circumstances where dissolution is
not required by section 10.1. This Agreement has been drawn carefully to
provide fair treatment of all parties and equitable payment in liquidation
of the Economic Interests. Accordingly, except in the case that the Company
is not liquidated as required by this section 10, each Member hereby waives
and renounces such Member's right to initiate or maintain any legal action
or arbitration for the appointment of a receiver or trustee to liquidate the
Company, for a decree of judicial dissolution of the Company or for
partition, whether on the ground that it is not reasonably practicable to
carry on the business of the Company in conformity with the Articles or this
Agreement or the ground that dissolution is reasonably necessary for the
protection of the rights or interests of the complaining Member or any other
grounds. Damages for breach of this section 10.9 may be offset against
distributions by the Company to which such Member would otherwise be
entitled.
11. Indemnification and Insurance.
11.1 Indemnity and Limitation of Liability. Each Director or
other Person acting on behalf of the Company pursuant to authority delegated
by the Directors (each, an "Indemnified Person"), (a) shall be held
harmless, defended and indemnified by the Company from and against any
claim, liability, loss, damage or expense (including, without limitation,
all attorneys' fees and expenses, expert witness fees and expenses and costs
of investigation) suffered or incurred by an Indemnified Person by virtue of
any action of such Indemnified Person as or on behalf of a Director or the
Company in connection with the Company's activities and in substantial
compliance with this Agreement, and (b) shall not be liable to the Company,
the Directors or any Member for any claim, liability, loss, damage or
expense; provided that, if such claim, liability, loss, damage or expense
arises out of any action or inaction of any such Indemnified Person, such
Indemnified Person must have reasonably believed at the time of such action
or inaction that such action or inaction was in the best interests of the
Company and such action or inaction must not have constituted fraud, deceit,
gross negligence, recklessness or intentional misconduct by such Indemnified
Person; and provided further that such indemnification or amounts
recoverable under the foregoing agreement to hold harmless shall only be
recoverable out of the assets of the Company, and no Director or Member
shall be personally liable therefor. The Company shall advance funds for
attorneys' fees and expenses, expert witnesses' fees and expenses and other
costs incurred by an Indemnified Person in connection with any such claim,
liability, loss, damage or expense if the following conditions are
satisfied: (i) the legal action relates to the performance of duties or
services for the Company by such Indemnified Person; and (ii) the
Indemnified Person that is requesting such advance undertakes to repay, and
provides security satisfactory to the Company for the repayment of, the
advanced funds to the Company in cases in which that Indemnified Person
would not be entitled to indemnification under this section 11.1. The
rights granted under this section 11.1 shall not be affected by, and shall
survive, any dissolution or termination of the Company and the death,
disability, incapacity, resignation, withdrawal, insolvency or dissolution
of any Director or Member.
11.2 Insurance. The Company shall have the power to purchase
and maintain insurance on behalf of any Person who is or was a Director or
an agent of the Company or the Directors against any liability asserted
against such Person and incurred by such Person in any such capacity, or
arising out of such Person's status as a Director or an agent of the
Company, whether or not the Company would have the power to indemnify such
Person against such liability under section 11.1 or under applicable law.
12 Investment Representations. Each Member hereby
represents and warrants to, and agrees with, the Directors, the other
Members and the Company, with respect to such Member and the Membership
Interest of such Member, as follows:
12.1 No Advertising. The offer to sell the Membership
Interest was directly communicated to the Member by the Company in a manner
that the Member was able to ask questions of and receive answers from the
Company concerning the terms and conditions of such transaction. At no time
was the Member presented with or solicited by any leaflet, public
promotional material, newspaper, magazine, radio or television article or
advertisement, or any other form of advertising or general solicitation.
12.2 Investment Intent. The Membership Interest is being
purchased by the Member and not by any other Person, with the Member's own
funds and not with the funds of any other Person, and for the account of the
Member, not as a nominee or agent and not for the account of any other
Person. No other Person has or will have any interest, beneficial or
otherwise, in the Membership Interest. The Member is purchasing the
Membership Interest for investment for an indefinite period, not with a view
to the sale or distribution of any part or all thereof by public or private
sale or other disposition. The Member has no intention of selling, granting
any participation in or otherwise distributing or disposing of the
Membership Interest or any interest therein. The Member does not intend to
subdivide the Member's purchase of the Membership Interest with any Person.
12.3 Accredited Investor. The Member is an "accredited
investor" as defined in Rule 501 promulgated by the Securities and Exchange
Commission under the Securities Act.
12.4 Economic Risk. Understanding that investment in the
Membership Interest is highly speculative, the Member is able to bear the
economic risk of such investment, including the total loss thereof, for an
indefinite period.
12.5 No Registration of Membership Interests. The Member
understands that the Membership Interest has not been registered under the
Securities Act, or registered or qualified under any other securities law,
on the grounds, among others, that no distribution or public offering of
Membership Interests is to be effected and that Membership Interests are
being issued by the Company in transactions that do not involve any public
offering within the meaning of section 4(2) of the Securities Act, under the
rules and regulations of the Securities and Exchange Commission thereunder
and under comparable exemptive provisions of other applicable securities
laws, rules and regulations. The Member understands that the Company is
relying in part on the Member's representations as set forth herein for
purposes of claiming such exemptions and that the basis for such exemptions
may not be present if, notwithstanding the Member's representations, the
Member has in mind merely acquiring the Membership Interest for resale on
the occurrence or nonoccurrence of some predetermined event. The Member has
no such intention.
12.6 Membership Interest Is Restricted Security. The Member
understands that the Membership Interest is a "restricted security" under
the Securities Act and, accordingly, that the Membership Interest must be
held indefinitely unless it is subsequently registered under the Securities
Act and registered or qualified under any other applicable securities law
or exemptions from such registration and qualification are available. The
Member understands that the Company is under no obligation so to register
or qualify the Membership Interest under the Securities Act or under any
other securities law, or to comply with the Regulation A or any other
exemption under the Securities Act or any other law. The Member
understands that Rule 144 is not available for any sale of the Membership
Interest and will not be available for a substantial period of time.
12.7 Company May Refuse to Transfer. If, in the opinion of
counsel for the Company, the Member at any time hereafter acts in a manner
inconsistent with such Member's representations, warranties and agreements
in this Agreement, the Company may, without limiting any other remedy or
relief available to the Company, refuse to Transfer the Member's Membership
Interest until such time as counsel for the Company is of the opinion that
such Transfer will not require registration of any Membership Interest
under the Securities Act or registration or qualification of any Membership
Interest under any other securities law. The Member understands and agrees
that the Company may refuse to acknowledge or permit any disposition that
is not in all respects in compliance with this Agreement and that the
Company intends to make an appropriate notation in its records to that
effect.
12.8 No Disposition in Violation of Law. Without limiting
the representations set forth herein, and without limiting section 7, the
Member shall not Transfer any Membership Interest or any interest therein,
or receive any consideration therefor, unless and until, prior to any
proposed Transfer, the Member shall comply with all requirements and
conditions in this Agreement and:
(a) a registration statement on Form S-1 under the
Securities Act (or any other form appropriate for the purpose under the
Securities Act or any form replacing any such form) with respect to the
Membership Interest or any part thereof proposed to be so disposed of shall
be then effective, and such disposition shall have been appropriately
registered or qualified in accordance with any other applicable securities
law; or
(b) (1) the Member shall have furnished the Company
with a detailed explanation of the proposed disposition; (2) the Member
shall have furnished the Company with an opinion of the Member's counsel in
form and substance satisfactory to the Company to the effect that the
proposed Transfer (i) complies with applicable provisions of the Securities
Act and any other securities laws and will not require registration of the
Member's Membership Interest or any part thereof under the Securities Act
or registration or qualification thereof under any other securities law,
and (ii) except as otherwise permitted by section 7, will not result in the
termination of the Company for federal income tax purposes; and (3) counsel
for the Company shall have concurred in such opinion and the Directors
shall have advised the Member of such concurrence.
12.9 Legends. The Member understands and agrees that any
instrument or certificate representing or relating to the Membership
Interest may bear such legends as the Directors may consider necessary or
advisable to facilitate compliance with the Securities Act and any other
securities law, including, without limitation, legends stating that the
Membership Interest has not been registered under the Securities Act and
setting forth the limitations on dispositions imposed by this Agreement.
12.10 Investment Experience. The Member, either alone or
with the Member's professional advisers who are unaffiliated with, have no
equity interest in and are not compensated by the Company or a Director or
any affiliate or selling agent of the Company or a Director, directly or
indirectly, has such knowledge and experience in financial and business
matters that the Member is capable of evaluating the merits and risks of an
investment in the Membership Interest and has the capacity to protect the
Member's own interests in connection with the Member's investment in the
Membership Interest.
12.11 Information Reviewed. The Member has received and
reviewed all information the Member considers necessary or appropriate for
deciding whether to acquire the Membership Interest. The Member has
carefully reviewed all such information and is thoroughly familiar with the
existing and proposed management, business, operations, properties and
financial condition of the Company and has discussed with the Directors any
questions the Member may have had with respect thereto. The Member
understands:
(a) the risks involved in this offering, including the
speculative nature of the investment;
(b) the financial hazards involved in this offering,
including the risk of losing the Member's entire investment;
(c) the lack of liquidity and restrictions on
Transfers of the Membership Interest; and
(d) the tax consequences of this investment.
The Member has consulted with the Member's own legal, accounting, tax,
investment and other advisers with respect to the tax treatment of an
investment by the Member in the Membership Interest and the merits and
risks of an investment in the Membership Interest.
12.12 No Representations. No Director, no agent or employee
of the Company or of a Director, and no other Person has at any time
expressly or implicitly represented, guaranteed or warranted to the Member
that the Member may freely Transfer the Membership Interest, that a
percentage of profit or amount or type of consideration will be realized as
a result of an investment in the Membership Interest, that past performance
or experience on the part of the Member or the Member's Affiliates or any
other Person in any way indicates the predictable results of the ownership
of the Membership Interest or of the overall Company business, that any
cash distributions from the Company will be made to the Members by any
specific date or will be made at all or that any tax benefits will accrue
as a result of an investment in the Company.
12.13 Authority. This Agreement constitutes a legal, valid
and binding agreement of the Member, enforceable against the Member in
accordance with its terms. The Member, if not a natural person, is
empowered and duly authorized to enter into this Agreement under every
applicable governing document, partnership agreement, operating agreement,
trust instrument, pension plan, charter, certificate or articles of
incorporation, bylaw provision or the like. The Person, if any, signing
this Agreement on behalf of the Member is empowered and duly authorized to
do so by the governing document, partnership agreement, operating
agreement, trust instrument, pension plan, charter, certificate or articles
of incorporation, bylaw provision, board of directors or stockholder
resolution or the like.
12.14 Indemnification. The Member hereby agrees to
indemnify and defend the Company, the Directors and their respective
Affiliates, employees, agents, partners, members, shareholders, officers
and directors and hold them harmless from and against any and all claims,
liabilities, damages, costs and expenses (including, without limitation,
court costs and attorneys' fees and expenses) suffered or incurred on
account of or arising out of:
(a) any breach of or inaccuracy in the Member's
representations, warranties or agreements herein, including, without
limitation, the defense of any claim based on any allegation of fact
inconsistent with any of such representations, warranties or agreements;
(b) any Transfer of the Membership Interest contrary
to any of such representations, warranties or agreements; or
(c) any action, suit or proceeding based on (i) a
claim that any of such representations, warranties or agreements were
inaccurate or misleading or otherwise cause for obtaining damages or
redress under the Securities Act or any other securities law, or (ii) any
Transfer of any part or all of the Membership Interest.
13 Legal Counsel. Each Member acknowledges and understands
that this Agreement and related documents have been prepared by counsel for
Xxxxxxx and that such counsel has not represented or been engaged to
provide services to the Company or any other Member. Such Member
acknowledges and understands that such counsel or other counsel may
hereafter be engaged by the Company or by the Directors to provide legal
services and representation as the Directors may determine, and in such
event, such counsel or other counsel may concurrently represent one or more
of the Members, the Directors and the Company, and the Directors may
execute on behalf of the Company and the Members any consent to such
concurrent representation that such counsel or other counsel may request
pursuant to the applicable rules of professional conduct for lawyers. Each
Member acknowledges and understands that counsel for the Company or any
other Member does not represent any Member in the absence of a clear and
explicit agreement to that effect between such Member and such counsel, and
in the absence of such agreement, such counsel shall owe no duties to any
Member. Each Member agrees that in the event of any dispute between any of
the Members and the Company, or between any of the Members or the Company,
on the one hand, and a Director or any of his or her Affiliates represented
by counsel for the Company, on the other hand, counsel for the Company may
represent the Company or the Directors or such Affiliates, or both, in such
dispute to the extent permitted by such rules, and such Member hereby
consents to such representation. Each Member further acknowledges that
counsel for Xxxxxxx has not represented the interest of any Member other
than Xxxxxxx in the preparation and negotiation of this Agreement and that,
while communications with such counsel concerning the Company, the
Directors and the Members may be confidential with respect to third
parties, such Member has no expectation that such communications are
confidential with respect to other Members. Each Member represents and
warrants that such Member has consulted with such Member's own counsel
regarding this Agreement, to the extent that such Member considered
advisable or appropriate.
14 Notices. Except as otherwise expressly provided herein, any
notice, consent, authorization or other communication to be given hereunder
shall be in writing and shall be deemed duly given and received when
delivered personally, when transmitted by facsimile, one business day after
being deposited for next-day delivery with a nationally recognized
overnight delivery service, or three business days after being mailed by
first class mail, charges and postage prepaid, properly addressed to the
party to receive such notice at the last address or facsimile number
furnished for such purpose by the party to whom notice is directed.
15 Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Agreement, or the application of such provision to
Persons or circumstances other than those to which it is held to be invalid
or unenforceable, shall not be affected thereby.
16 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
California.
17 Binding Effect. Subject to section 7, this Agreement shall
bind and inure to the benefit of the parties and their respective
Successors.
18 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19 Entire Agreement. This Agreement (which includes the
exhibits hereto) contains the entire agreement of the parties and
supersedes all prior or contemporaneous written or oral negotiations,
correspondence, understandings and agreements between or among the parties,
regarding the subject matter hereof.
20 Further Assurances. Each Member shall provide such further
information with respect to that Member and any of its beneficial owners as
the Company may request, and shall do or perform such acts and things and
execute and deliver such other and further certificates, instruments and
other documents, as may be necessary and proper to implement, complete and
perfect the transactions contemplated by this Agreement.
21 Headings; Gender; Number; References. The headings of the
sections hereof are solely for convenience of reference and are not part of
this Agreement. As used herein, each gender includes each other gender,
and the singular includes the plural and vice versa, as the context may
require. All references to sections and subsections are intended to refer
to sections and subsections of this Agreement, except as otherwise
indicated.
22 Arbitration. THE MEMBERS AND THE DIRECTORS WAIVE THEIR
RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING ANY RIGHT TO A JURY TRIAL. The
Members and the Directors agree that in the event of any dispute between or
among any of them or any of their Affiliates arising out of, relating to or
in connection with this Agreement or the Company or its organization,
formation, business or management, such dispute shall be resolved
exclusively by arbitration to be conducted only in the county and state of
the principal office of the Company at the time of such dispute in
accordance with the rules of JAMS ("JAMS") applying the laws of California.
The Members and the Directors agree that such arbitration shall be
conducted by a retired judge, that discovery shall be permitted as required
by the rules of JAMS, that the arbitration award shall include factual
findings and conclusions of law, and that no punitive damages shall be
awarded. The Members and the Directors understand that any party's right
to appeal or to seek modification of any ruling or award of the arbitrator
is severely limited. Any award rendered by the arbitrator shall be final
and binding, and judgment may be entered on it in any court of competent
jurisdiction in the county and state of the principal office of the Company
at the time such award is rendered or as otherwise provided by law.
23 Parties in Interest. Except as expressly provided in the
Act, nothing in this Agreement shall confer any rights or remedies under or
by reason of this Agreement on any Person other than the Members and the
Directors and their respective Successors nor shall anything in this
Agreement relieve or discharge the obligation or liability of any third
Person to any party to this Agreement, nor shall any provision give any
third Person any right of subrogation or action over or against any party
to this Agreement.
24 Amendments. All amendments to this Agreement or the
Articles shall be in writing, approved by the Directors and signed or
otherwise adopted or approved in writing by a Majority in Interest of the
Members.
25 Attorneys' Fees. If any dispute between or among any of the
Company, the Members and the Directors or any of their respective
Affiliates should result in litigation or arbitration, the prevailing party
or parties in such dispute shall be entitled to recover from the other
party or parties all reasonable fees, costs and expenses of enforcing any
right of the prevailing party or parties, including, without limitation,
reasonable attorneys' fees and expenses, all of which shall be deemed to
have accrued on the commencement of such action and shall be paid whether
or not such action is prosecuted to judgment. Any arbitration award,
judgment or order entered in such action shall contain a specific provision
providing for the recovery of attorneys' fees and costs incurred in
enforcing such award or judgment and an award of prejudgment interest from
the date of the breach at the maximum rate allowed by law. For the
purposes of this section 25, (a) attorneys' fees shall include, without
limitation, fees incurred in postaward or postjudgment motions, contempt
proceedings, garnishment, levy, and debtor and third party examinations,
discovery, and bankruptcy litigation, and (b) prevailing party shall mean
the party that is determined in the arbitration or proceeding to have
prevailed or who prevails by dismissal, default or otherwise.
26 Power of Attorney. Each Member irrevocably constitutes and
appoints each Director, with full power of substitution and resubstitution,
such Member's true and lawful attorney, for such Member and in such
Member's name, place and stead, and for such Member's use and benefit, to
sign, execute, deliver, certify, acknowledge, swear to, file, record and
publish (a) the Articles and any amendment thereto or to this Agreement as
provided herein, (b) any other certificates, instruments, agreements and
documents necessary to qualify or continue the Company as a limited
liability company that is taxed as a partnership in the states or other
jurisdictions where the Directors deem necessary or desirable, (c) all
conveyances, assignments, documents of transfer or other instruments and
documents necessary to effect the assignment of an interest in the Company,
the substitution of a Member or the dissolution and termination of the
Company in accordance with this Agreement and (d) all filings and
submissions pursuant to any applicable law, regulation, rule, order, decree
or judgment which, in the reasonable opinion of the Directors, may be
necessary or advisable in connection with the business of the Company;
provided that such action shall be in accordance with this Agreement and
authorized by the Directors. The power of attorney granted herein is
coupled with an interest, shall be irrevocable, shall survive the death,
disability or incapacity of any Person, shall be deemed given by each and
every assignee and successor of each Member and may be exercised by any
Director by listing, or attaching a list of, any or all of the names of the
Members and signing such amendments, certificates, instruments and other
documents with the single signature of such Director as attorney-in-fact
for all of the persons whose names are so listed.
27 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any Person may
be lawfully entitled.
IN WITNESS WHEREOF, this Operating Agreement has been duly
executed by or on behalf of the parties hereto as of the date first above
written.
XXXXXXX MANUFACTURING CO., INC.
By: /s/XXXXXX X XXXXXXXXX
----------------------------------
Xxxxxx X Xxxxxxxxx, President
KEYMARK ENTERPRISES, INC.
By: /s/XXXXX XXXXXXX
----------------------------------
Xxxxx Xxxxxxx, President
EXHIBIT A
XXXXXXXXXX.XXX, LLC
NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS, AGREED VALUES AND
PERCENTAGE INTERESTS OF MEMBERS AS OF March 6, 2000
Agreed Value of
Capital Noncash Capital Percentage
Member Address Contributions Contributions Interest
------------- ----------------------- --------------- --------------- ----------
Xxxxxxx 0000 Xxxxxx Xxxxx, $3,000,000 60.0%
Manufacturing Xxxxx 000, Xxxxxxxxxx,
Xx., Xxx. XX 00000-0000
Keymark Keymark $0 40.0%
Enterprises, License
Inc.
EXHIBIT B
LICENSE AGREEMENT
This License Agreement (the "Agreement") is made and entered into as
of March 6, 2000 (the "Effective Date"), by and between Xxxxxxxxxx.xxx, a
California limited liability company (the "Company"), and Keymark
Enterprises, Inc., an Illinois corporation ("Keymark"), with reference to
the following facts:
RECITALS
A. Keymark has developed and owns a proprietary software program
for designing and engineering roof trusses and systems, walls, floor
systems, and take-offs for building construction (the "Keymark
Technology"). The Keymark Technology includes specialized software
programs developed pursuant to specifications of Xxxxxxx Manufacturing
Co., Inc., a Dealware corporation ("Xxxxxxx"), under the First Amended and
Restated Software Development and Marketing Agreement dated as of May 1,
1997, between Keymark and Xxxxxxx (the "Development Agreement").
B. Keymark has the right to grant licenses of the Keymark
Technology, and the Company desires to obtain a license to the Keymark
Technology on the terms and conditions herein. The Keymark Technology is
defined in the LLC Agreement and described in more detail in Exhibit A
hereto.
C. Keymark is a Member of the Company and, as contemplated by the
Company's LLC Operating Agreement dated as of March 6, 2000 (the "LLC
Agreement"), to which this Agreement is attached as Exhibit B. Keymark
desires to make a capital contribution to the Company in the form of a
license to the Company of the Keymark Technology.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions herein, the parties agree as follows:
1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein have the meanings ascribed to them in the LLC
Agreement. For the purposes of this Agreement, the following words and
phrases have the following meanings:
1.1 Change in Control of a corporation means:
(a) a consolidation or merger with any other Person, in
which all voting securities of such corporation outstanding immediately
prior thereto represent (either by remaining outstanding or being
converted into voting securities of the surviving corporation) less than
fifty percent of the voting power of such corporation or the surviving
entity outstanding immediately thereafter;
(b) the sale or disposition by such corporation (in one
transaction or a series of related transactions) of all or substantially
all of its assets;
(c) the approval by the stockholders of such corporation
of a plan of liquidation or dissolution;
(d) the acquisition, directly or indirectly, by any Person
(other than a trustee or other fiduciary holding securities under an
employee benefit plan of such corporation or an entity that is owned
directly or indirectly by the stockholders of such corporation in
substantially the same proportions as their ownership of stock of such
corporation) of voting securities of such corporation representing more
than fifty percent of the voting power of such corporation; or
(e) any share exchange, extraordinary dividend,
acquisition, disposition or recapitalization (or series of related
transactions of such nature, other than a merger or consolidation) in
which the holders of voting securities of such corporation immediately
before such event own less than fifty percent of the voting power of such
corporation or any successor entity immediately thereafter.
1.2 Company Business means the business of designing,
developing and marketing an internet-based building design and engineering
service.
1.3 Effective Date means the date first written above.
1.4 Force Majeure Event means any decree of a Governmental
Authority, natural disaster, such as storms, floods or earthquakes, other
acts of God, fires, explosions, riots, war or civil disturbances, strikes
or other labor unrest, governmental actions or regulations, delays in
transportation, or inability to obtain necessary labor, governmental
permits, supplies or manufacturing facilities, which in any such case
would delay or preclude either Party from performing its obligations under
this Agreement.
1.5 Governmental Authority means any court, public or private
arbitral tribunal, administrative agency, commission or other governmental
or regulatory authority or agency.
1.6 Intellectual Property or IP means patents, patent
applications, patent rights, utility models, inventions (whether
patentable or not), trademarks, trademark applications, trademark rights,
service marks, business marks, trade names, brand names, all other names
and slogans embodying business or product good will, copyright
registrations, copyrights (including those in computer programs),
software, including all source code and object code, development
documentation, circuit board layouts, printed circuit boards or cards or
logic diagrams or schematics, programming tools, drawings, specifications
and data, trade secrets, know-how, mask works, industrial designs,
blueprints, formulae, processes and technical information, and
documentation thereof and any rights under licenses to any of the
foregoing, whether or not subject to statutory registration or protection.
1.7 License is defined in section 2.1.
1.8 Party means the Company or Keymark, excluding their
Affiliates.
1.9 Person means any natural person, corporation, partnership,
trust, joint venture, limited liability company or other entity.
2. Grant of License.
2.1 License of Keymark Technology to the Company. Subject to
the terms and conditions in this Agreement, Keymark hereby grants to the
Company a worldwide, royalty-free license and right (the "License") to use
the Keymark Technology to develop, make, have made, use, sell, offer for
sale, import, improve, modify, copy, adopt, create Derivative Works of,
publicly display, publicly perform, publish, distribute and otherwise
transfer, components and materials relating to the Company Business, which
components and materials may incorporate all or part of the Keymark
Technology, and to use the Keymark Technology for all other purposes
concerning the Company Business. The License further includes the
Company's right and license to grant sublicenses of the Keymark Technology
to any other Person, provided that such sublicenses shall terminate
concurrently with the License unless Keymark's express written consent is
obtained, and to disclose and make available to sublicensees the Keymark
Technology to enable such sublicensees to develop, make, have made, use,
sell, offer for sale, import, improve, modify, copy, adopt, create
Derivative Works of, publicly display, publicly perform, publish,
distribute and otherwise transfer, components and materials relating to
the Company Business.
2.2 Restriction on Scope. The License applies only to
applications of the Keymark Technology in the internet environment and
does not grant the Company any license or right to use the Keymark
Technology in applications for the non-internet environment.
2.3 Exclusivity. The License is exclusive to the Company
except with respect to the Keymark Steel Technology, with respect to which
the License is non-exclusive to the Company; provided that if the Company
fails to make any monthly payment to Keymark in accordance with section
3.3 of the LLC Agreement with respect to any of the twenty-four
consecutive months commencing with February 2000, and such failure is not
remedied within ten days after written notice thereof from Keymark to the
Company, the License shall become non-exclusive for all applications, both
in the internet and the non-internet environments, and otherwise shall
continue in effect unchanged.
2.4 Sublicenses. The Company's right to grant sublicenses to
third Persons pursuant to the License, and the right to determine the
terms and conditions thereof, shall be exercisable by the Company at the
Company's sole and exclusive discretion without the need for any further
or additional consent or approval of Keymark. Any such sublicense shall
terminate concurrently with the License unless Keymark's prior written
approval is obtained.
2.5 Title. Title to the Keymark Technology shall remain in the
name of Keymark, except as otherwise provided in section 3.1 of the LLC
Agreement.
2.6 Acknowledgement of Consideration. Keymark hereby
represents, warrants and agrees that the Company's issuance of Membership
Interests to Keymark constitutes good and valuable consideration, the
adequacy and sufficiency of which are hereby acknowledged, for the rights,
licenses, agreements and other covenants granted or included in this
Agreement, and further acknowledges that it is in the best interests of
Keymark to enter into this Agreement.
3. Obligations and Rights of Keymark.
3.1 Additional Development. Except for proprietary development
or changes made pursuant to restriction in other agreements, Keymark
agrees promptly to disclose and make available to the Company any IP
relating to, derived from or based on the Keymark Technology, including,
but not limited to, any modifications or improvements thereto, developed,
discovered or acquired by Keymark during the term of this Agreement,
either alone or with the participation of the Company, and agrees that all
such IP shall become subject to the License, without further compensation
to Keymark of any kind, whether in the form of fee, royalty or equity
participation, or otherwise.
3.2 Maintenance of IP Rights. Keymark shall secure, maintain
and defend, at its own expense, all IP rights (such as patents,
copyrights and trademarks) relating to the Keymark Technology during the
term of this Agreement.
3.3 Source Code. Keymark shall provide the Company with one
copy of the source code of the Keymark Technology upon execution of this
Agreement. During the term of this Agreement, Keymark shall promptly
provide the Company with one copy of the source code of all
modifications, improvements and Derivative Works of the Keymark
Technology. The Company agrees that such source code shall be
confidential information of Keymark, subject to section 5. In lieu of
providing source code to the Company as required by this section 3.3,
Keymark may deposit such source code with an escrow agent acceptable to
the Company pursuant to a source code escrow agreement the terms of which
have been agreed to by Keymark and the Company.
4. Representations and Warranties.
4.1 Authority. Keymark represents and warrants to the Company
that (a) Keymark has the power and authority to enter into and perform its
obligations under this Agreement, (b) the signatory hereto on Keymark's
behalf is authorized to execute this Agreement and bind Keymark to the
terms and conditions of this Agreement, and (c) this Agreement is the
legal, valid and binding agreement of Keymark, enforceable against Keymark
in accordance with its terms.
4.2 Rights to Keymark Technology. Keymark represents and
warrants that it has, and will have at all times while this Agreement is
in effect, good title to the Keymark Technology and the full power and
right to grant the License and other rights to the Company contemplated in
this Agreement in accordance with the terms hereof. Keymark represents
and warrants that to its best knowledge as of the Effective Date or, if
later, the date it furnishes such Keymark Technology to the Company, (a)
none of the Keymark Technology that it uses or allows the Company to use
in connection with this Agreement infringes the IP rights or other
proprietary rights of any other Person, and (b) all registrations or
patents that Keymark holds with respect to the Keymark Technology are
valid and enforceable.
4.3 No Conflict with Rights of Third Persons. To the best
knowledge of Keymark as of the Effective Date, the execution, delivery and
performance of this Agreement by Keymark will not violate the rights of
any other Person, violate, conflict with or constitute a default under or
a breach of any agreement with any Person, require the consent or approval
of any other Person, or result in the creation of any right that may
adversely affect the Company, the Company Business or the Company's use of
the License. Keymark represents and warrants that it does not have any
knowledge of any pending or threatened claims, suits, challenges or
similar legal actions relating to the Keymark Technology and agrees that
Keymark will promptly notify the Company if Keymark becomes aware of any
such claim, suit, challenge, or similar action. Keymark represents,
warrants and agrees that it has not used and shall not use any IP of any
other Person that is not available for use by Keymark in accordance with
the terms and conditions of this Agreement without such other Person's
prior approval.
4.4 Employees. All current and future officers, employees and
consultants of Keymark have signed or will be required to sign and deliver
to Keymark agreements regarding the nondisclosure of confidential
information and assigning such individual's rights to inventions,
innovations, copyrights and other IP to Keymark before such individual
gains access to any confidential information of the Company, or works on
development projects pursuant to this Agreement or the LLC Agreement.
4.5 Inconsistent Grants of Rights. Keymark has not granted and
shall not grant any rights to any other Person that would conflict or be
inconsistent with the rights granted by Keymark to the Company by this
Agreement.
5. Term and Termination.
5.1 Term. This Agreement shall become effective on the
Effective Date and shall continue in effect until terminated by a Party in
accordance with this section 5.
5.2 Termination.
(a) Either Party may terminate this Agreement immediately
by written notice to the other Party on the occurrence of any of the
following events:
(i) any material breach or default by the other
Party; provided that the nonbreaching Party shall have notified the
breaching Party specifying the nature of the breach or default and within
thirty days after the breaching Party's receipt of such notice, such
breach or default has not been remedied and the Parties have not agreed to
a plan for curing the breach or default; and provided further that in the
case of a breach of section 5, the foregoing cure period shall not apply,
and the nonbreaching Party may terminate this Agreement immediately on
notice to the breaching Party; or
(ii) if the other Party is adjudicated a bankrupt,
becomes insolvent or has a receiver of its assets or property appointed
because of insolvency, makes a general assignment for the benefit of
creditors, institutes any proceeding for the reorganization of its
affairs, or if any such proceeding is instituted against such other Party
and not dismissed within ninety days; or
(iii) if the other Party ceases to do business or
otherwise terminates its business operations.
(b) The Company may terminate this Agreement at any time
with or without cause on thirty days' notice to Keymark.
(c) The Company may terminate this Agreement at any time
immediately on notice to Keymark if Keymark undergoes a Change in Control.
(d) Keymark may terminate this Agreement if the Company
fails to make any monthly payment due to Keymark pursuant to section 3.3
of the LLC Agreement with respect to any month after January 2002, and
such failure is not remedied within ten days after written notice thereof
from Keymark to the Company.
5.3 Effects of Termination. Except for those representations,
warranties and covenants that expressly survive the termination of this
Agreement, all licenses and rights granted herein and all obligations of
the Parties hereunder shall terminate on the effective date of termination
of this Agreement; provided that the termination of this Agreement shall
not release either Party from any liability that at the time of
termination has already accrued to the other Party or that thereafter may
accrue in respect of any act or omission prior to termination or from any
obligation that is expressly stated herein to survive termination. The
rights and obligations provided in sections 2.6, 4, 5, 6, and 7 shall not
be affected by, and shall survive, any termination of this Agreement. On
termination or expiration of this Agreement, each Party shall immediately
return to the other Party all confidential information of the other Party
in its possession. The termination rights provided in this Agreement shall
be in addition to and not in lieu of any other rights and remedies, whether
at law or in equity, available to the terminating Party.
6. Indemnification.
6.1 General Indemnification. Each Party (the "Indemnitor")
shall indemnify and hold harmless the other Party and such other Party's
Affiliates, customers and suppliers (each, an "Indemnitee") from and
against any and all losses, liabilities, costs, expenses, judgments,
assessments, penalties, damages, deficiencies, suits, settlements,
actions, claims, proceedings, demands or causes of action, including but
not limited to reasonable attorneys' fees and expenses, expert witnesses'
fees and expenses and court costs and costs of appeal ("Claims") that were
caused by, or arose as a result of, with respect to or in connection with
any of the following:
(a) Any inaccuracy in any representation or warranty or any
breach of any representation, warranty or covenant of the Indemnitor under
this Agreement, or any certificate, agreement, instrument or other
document delivered pursuant to this Agreement; or
(b) Any failure of the Indemnitor duly to perform or
observe any term, provision, covenant, or agreement to be performed or
observed by such Indemnitor pursuant to this Agreement, and any
certificate, agreement, instrument or other document entered into or
delivered pursuant to this Agreement; provided that the Indemnitee shall
not be entitled to indemnification under this section 7.1 with respect to
any Claim that is based on or arises out of or is caused by any willful
misconduct, negligence or fraudulent act or omission of the Indemnitee.
6.2 IP Indemnification. Keymark shall indemnify and hold
harmless the Company and the Company's Affiliates, customers and suppliers
(each, an "Indemnitee") from and against any Claim resulting from alleged
infringement of an IP right relating to the Keymark Technology that
Keymark provided to the Indemnitee or other Persons under this Agreement;
provided that Keymark's obligations under this section 6.2 are conditioned
on the Indemnitee's agreement that if any of such IP that Keymark provided
is likely to become the subject of a Claim, the Indemnitee will permit
Keymark, at Keymark's option and expense within thirty days of notifying
the Indemnitee of such likelihood, either to procure the right for the
Indemnitee to continue using such IP, or to replace or modify such IP so
that it becomes non-infringing; and provided further that Keymark shall
not have any indemnification obligation under this section 6.2 with
respect to a Claim to the extent that (a) the Indemnitee continues
allegedly infringing activity after being notified thereof or being
informed of modifications that would have avoided the alleged
infringement, or (b) the Indemnitee's use of the Keymark Technology is not
strictly in accordance with the License granted hereunder. For purposes
of sections 6.3 and 6.4 as they relate to Claims under this section 6.2,
"Indemnitor" shall mean Keymark.
6.3 Notification and Control of Defense or Settlement.
(a) The Indemnitee shall notify the Indemnitor in writing
of any Claim for which the Indemnitor may be responsible under this
Agreement, within ten days of receiving notice of such Claim, and shall
furnish to the Indemnitor a copy of all correspondence relating to such
Claim (and shall promptly furnish to the Indemnitor all subsequent
correspondence relating to such Claim).
(b) The Indemnitor may choose whether to defend or settle
any Claim, and the Indemnitee shall cooperate with the Indemnitor (at the
Indemnitor's expense) in every reasonable way to facilitate such defense
or settlement. At the Indemnitee's request, the Indemnitor shall give the
Indemnitee, at the Indemnitee's expense, the opportunity to participate
with the Indemnitor in the defense or settlement of such claim; provided
that the Indemnitor shall control any such defense or settlement.
6.4 Forfeiture of Indemnification. Any indemnification
pursuant to section 6.1 or section 6.2 shall not apply (a) if the
Indemnitee fails to give the Indemnitor notice of any Claim it receives
within ten days of receiving such Claim and such failure materially
prejudices the Indemnitor, (b) unless the Indemnitor is given the
opportunity to solely control the defense of such Claim, or (c) with
respect to amounts in settlement of a Claim, unless the Indemnitor
approves such settlement, which approval shall not be unreasonably
withheld.
7. Miscellaneous.
7.1 Governing Law and Venue. This Agreement shall be governed
by and construed and interpreted in accordance with the laws of the State
of California, without reference to any choice of law principles of such
State. With respect to any suit, action or other proceeding arising out of
this Agreement, the Parties (a) expressly waive any right they may have to
a jury trial and agree that any such proceeding shall be tried by a judge
without a jury, (b) agree to non-exclusive personal jurisdiction and venue
of the United States District Court for the Northern District of
California (and any California State Court within that District) for that
purpose, and (c) appoint the persons set forth in Section 7.5 as their
respective agents for service of process in such jurisdiction.
7.2 Entire Agreement. This Agreement, together with the LLC
Agreement, contains the entire agreement of the Parties regarding the
activities described herein and therein and supersedes all prior
negotiations, correspondence, understandings and agreements between the
Parties regarding the subject matter hereof and thereof.
7.3 Relationship of the Parties. None of Keymark's employees,
consultants, contractors, agents or Affiliates are agents, employees,
partners or joint venturers of the Company for any purpose whatsoever,
nor shall they represent to the contrary, either expressly, implicitly, by
appearance or otherwise; nor shall they make any warranties or
representations on the Company's behalf, or assume or create any
obligation on the Company's behalf.
7.4 No Third-Party Beneficiaries. Except as otherwise provided
in this Agreement, the provisions of this Agreement are for the benefit of
the Parties and not for any other Person.
7.5 Notices. Notices required or permitted hereunder shall be
in writing and shall be deemed duly given and received (a) when delivered
personally; (b) when sent by confirmed facsimile; (c) five days after
having been sent by first class mail, postage prepaid; or (d) one business
day after deposit for next day delivery with a commercial overnight
carrier with tracking capabilities and confirmation of receipt or United
States Express Mail, with written verification of receipt. Receipt shall
be rebuttably presumed in accordance with the foregoing sentence if the
communication is addressed as follows:
If to the Company: Xxx Xxxxxxxxx
Xxxxxxxxxx.xxx, LLC.
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000-0000
with a copy to:
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
If to Keymark: Xxxxx Xxxxxxx
Keymark Enterprises, Inc.
0000 Xxxxxxxxxx Xxxxx, #000
Xxxxxxx, Xxxxxxxx 00000
or to such other address or addressee as a Party may hereafter specify by
notice to the other.
7.6 Amendment; Waiver. This Agreement may be amended, changed,
waived, discharged or terminated only by an instrument in writing signed
by an officer of the Party against which enforcement thereof is sought.
Any waiver of any term or condition of this Agreement or any breach hereof
shall not operate as a waiver of any other such term or condition or
breach, nor shall any failure to enforce any provision hereof operate as a
waiver of such provision or of any other provision hereof.
7.7 Attorneys' Fees. In the event of any controversy, claim or
dispute between the Parties arising out of or relating to this Agreement,
or the alleged breach thereof, the prevailing Party shall, in addition to
any other relief or award, be entitled to recover its attorneys' fees and
all of the costs incurred in connection therewith.
7.8 Construction. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be invalid
under applicable law, such provision shall be ineffective only to the
extent of such invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement, unless the
Agreement, so construed, fails to meet the essential business purposes of
the Parties as manifested by this Agreement.
7.9 Successors. This Agreement and its terms and conditions
shall bind and inure to the benefit of the respective successors and
assigns of the Parties; provided that Keymark may not assign its rights or
delegate its obligations under this Agreement either as a whole or in
part without the prior written consent of the Company, except that no such
consent shall be required for an assignment by Keymark to one or more of
its wholly owned Affiliates. Any attempted assignment in violation of
this section 7.9 shall be void.
7.10 Counterparts. This Agreement may be executed by the
Parties in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
7.11 Heading and References. The headings and captions used in
this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.
executed this Agreement effective as of the date first written above.
XXXXXXXXXX.XXX, LLC. KEYMARK ENTERPRISES, INC.
By: /s/Xxxxxx X Xxxxxxxxx By: /s/Xxxxx Xxxxxxx
---------------------------- ----------------------------
Title: Director Title: President
------------------------- -------------------------
Date: March 9, 2000 Date: March 9, 2000
-------------------------- --------------------------
By: /s/Xxxxx Xxxxxx
----------------------------
Title: Director
-------------------------
Date: March 9, 2000
--------------------------
EXHIBIT A
DESCRIPTION OF KEYMARK TECHNOLOGY
The following brochures describe the Keymark Technology:
KeyBuild Brochure Form F-KBSPEC 12/99
KeyLat Brochure
