VIEWS: 70 PAGES: 32 CATEGORY: Operating Agreement POSTED ON: 9/14/2011
Operating Agreement for A Manager Or Member Managed LLC suitable for operating companies investing in real property or other types of investment.
Operating Agreement for A Manager Or Member Managed LLC suitable for operating companies investing in real property or other types of investment.
OPERATING AGREEMENT OF (Name), LLC A (STATE) MANAGER-MANAGED LIMITED LIABILITY COMPANY THIS OPERATING AGREEMENT ("AGREEMENT") of (Name), LLC (the "Company), a limited liability company organized pursuant to the (State) Limited Company Act (the “Act”), is executed effective as of the (Date) by and between the Company and the persons executing this Agreement as Members. WITNESSETH WHEREAS, (Name) have organized a (State) Carolina Member-Managed Limited Liability Company pursuant to the applicable laws of the State of (State) Limited Liability Company Act through the filing of Articles of Organization effective (Date); WHEREAS, the undersigned Members and the Company have reached written agreement as to the affairs of the Company as outlined in this Operating Agreement; WHEREAS, the undersigned Members and the Company have reached agreement on the appointment of a Manager of the Company; WHEREAS, the undersigned Members and the Company have reached agreement as to the terms upon which a Membership Interest shall be purchased or redeemed by the Company and the Members and understand that any and all rights or restrictions pertaining thereto are representative of a bona fide business arrangement which is not a device to transfer property to the natural objects of the transferor's bounty for less than full and adequate consideration in money or money's worth and at the time of its creation, such rights or restrictions are comparable to similar arrangements entered into by persons in an arm's length transaction; WHEREAS, the undersigned Members intend that the Company be taxed for federal and state income tax purposes as a partnership and not as an association; WHEREAS, the undersigned Members desire to operate the Company in lawful business for which limited liability companies may be organized under the Act; WHEREAS, each party signing this Agreement understands that this Agreement contains legally binding provisions, has had the opportunity to consult with a lawyer, and has either consulted a lawyer or consciously decided not to consult a lawyer; and Page 1 of 32 NOW THEREFORE, based on the mutual promises and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree that the rights and obligations of the parties and the administration, operations, dissolution and termination of the Company shall be governed accordingly: ARTICLE I DEFINITIONS Certain terms used in this Agreement shall have the meanings (unless otherwise expressly provided in the Agreement) set forth in the attached Appendix A. ARTICLE II BACKGROUND INFORMATION ON COMPANY OPERATIONS A. Formation; Type of LLC Selected. The Company was formed upon the effective time of filing of the Articles of Organization of the Company by the Secretary of State. The parties to this Agreement acknowledge that the Company is a "Manager-Managed LLC", in which the Members of the Company are not necessarily Managers by virtue of their status as Members. B. Name of Company. The business and affairs of the Company shall be conducted under the name (Name), LLC. The name of the Company may be changed from time to time by amendment of the Articles of Organization. The Company may transact business under an assumed name by filing an assumed name certificate in the manner prescribed by the applicable laws of the State of (State) General Statutes. C. Registered Office and Registered Agent. The Company's registered office shall be (Address), and the name of its initial registered agent at such address shall be (Name). The registered agent of the Company shall forward to the Company at its last know address any notice, process, or demand that is served on the registered agent. D. Principal Office of Company. The principal office of the Company within the State of (State) initially shall be located at (Address). The Company may locate its principal office at any other place or places, as the Manager(s) may from time to time deem necessary or advisable. E. Term. Page 2 of 32 The Company shall continue in existence until the close of the Company's business on (Date), as specified in the Company's Articles of Organization, unless the Company is earlier dissolved and its affairs wound up in accordance with the provisions of this Agreement or the Act. If permitted by the Act, such term may be extended by a Majority in Interest of all Members. F. Purposes and Powers. 1. The Company may engage in any lawful business for which limited liability companies may be organized under the Act including, but not in any way limited to, the ability of the Company to invest its assets in lieu of making distributions. 2. The Company shall have the same powers as an individual to do any and all things necessary and convenient to carry out the business and affairs of the Company, including, without limitation, the powers listed in the applicable laws of the State of (State), The Company shall carry out the foregoing activities pursuant to the arrangements set forth in the Articles of Organization and this Agreement. G. Annual Report. The Company shall file with the Secretary of State an annual report setting forth the information required in the applicable State statutes. The annual report shall be delivered to the Secretary of State each year within sixty (60) days immediately following the last day of the month in which the Company was organized. The Manager of the Company shall ensure that the annual report is timely filed and that information listed therein is current H. Required Records. The Company shall maintain at its principal office (or such other location selected by the Manager) the records required to be maintained under the applicable State statutes, which shall include the following: (I) information regarding the status of the business and the financial condition of the Company; (2) promptly after becoming available, a copy of the Company's federal and state income tax returns for the year; (3) a current list of the name and last known business, residence, or mailing address of each Member; (4) a copy of the Articles of Organization and this Agreement, and any amendments thereto; and (5) information regarding the amount of cash and a description and statement of the agreed value of any other property or services contributed by each Member, and the property and services that each Member has agreed to contribute in the future, and the date on which each became a Member. I. Books of Account and Other Records. 1. The Company shall maintain the Company's books and records and shall determine all items of Income, Loss, Net Income and Net Loss in accordance with the method of accounting selected by the Members consistently applied. All of the records and books of account of the Company, in whatever form maintained, shall at all time be maintained as set Page 3 of 32 forth in this Agreement and shall be open to the inspection and examination of the Members as set forth in Paragraph J of ARTICLE III. 2. All expenses in connection with the keeping of the books and record of the Company and preparation of audited and unaudited financial statements required to implement the provisions of this Agreement or otherwise needed for the conduct of the Company's business shall be borne by Company as an ordinary expense of its business. J. Company Tax Return and Annual Statement. The Tax Manager shall cause the Company to file a Federal and State Income tax return and all other tax returns required to be filled by the Company for each fiscal year or part thereof, and shall provide to each person who at any time during the fiscal year was a Member with an annual statement (including a copy of Schedule K- I to Internal Revenue Service Form 1065) indicating such Member's share of the Company's income, loss, gain, expense and other items relevant for Federal and State Income tax purposes. Such annual statement may be audited or unaudited as required by the Managers. K. Bank Accounts. The bank account(s) of the Company shall be maintained in such banks or financial institutions approved by the Manager. The terms governing such accounts initially shall be determined by the Manager(s) and withdrawals from such bank accounts shall be made only by such parties as may be approved in a banking resolution adopted by the Company, with said resolution kept among the records required to be kept by the Company under the Act. ARTICLE III MEMBERSHIP A. Membership Interest In representation of ownership in the Company, Membership interest (as reflected by Membership Units) shall be issued in exchange for contributions of cash or property, in such amounts and percentages as may be determined by the terms and conditions of any Subscription Agreements accepted by the Company or as determined by the Members of the Company. The Company acting by and through its Manager is authorized but not obligated to issue Membership Units with Membership Certificates duly reflecting the signature of two Members, or one Member and a Manager. B. Issuance of Membership Interest 1. Initial Members. The names, addresses, capital contribution, and Membership Interest for each of the initial Members of the Company are reflected in Schedule I attached hereto and made a part hereof, with the initial Members and the Company having further executed Subscription Agreements and attached the same to this Agreement. Page 4 of 32 2. Subsequently Admitted Members. The Members will determine when and for what consideration the Company's records kept in accordance with the preceding Paragraph H of ARTICLE II shall state the value and the nature of the contribution received by Company and the amount of Membership Interest received in return by the Member. A Capital Contribution Agreement substantially similar in form to that which is attached as part of Schedule I shall be executed by any contributing Member and the Company, setting forth all of the terms and conditions for admission of the Member. Schedule I shall be amended by the Company as of the effectiveness of any transfer or subsequent issuance of any Membership Interest and kept with. 3. Certified Statements of Membership Interests. At the written request of a Member, the Manager shall provide a certified Statement of Membership Interest (according to the records of the Company), stating the amount of Membership Interest owned, as of the date the statement is provided. C. Assignment/Transferability. A Member may not voluntarily assign or transfer his/her/its Membership Interest, or any part thereof, without complying with the provisions set forth in ARTICLE IX. D. Admission of Members; Representative of Members. 1. General Rule How to Become a Member. A Person becomes a Member of the Company by acquiring a Membership Interest from a Member or directly from the Company, but only if he/she/its is admitted to be a Member by the unanimous consent of all Members in accordance with the provisions of Paragraph C of ARTICLE IX. 2. Preconditions for Admission as Member. In addition to any other requirements for admission set forth in this Agreement, to be a Member, a Person must not lack capacity or be prohibited from being a Member and must expressly assent to the provisions of this Agreement in writing; however, if such Person fails to execute such document, he/she/its shall nevertheless be bound by this Agreement if then in effect. 3. Acquiring a Membership Interest from Company. In the case of a Person acquiring a Membership interest directly from the Company, the Person shall become a Member with respect to such Membership interest only with the unanimous consent of all Members, compliance with the provisions of Paragraph C of ARTICLE IX, and upon making the Capital Contributions specified in ARTICLE VII. 4. Acquiring a Membership Interest from a Member. A transferee of a Member‟s Membership Interest, or a portion thereof, shall become a Member only if admitted to be a Member pursuant to aforementioned provisions and the provisions of Paragraph C of ARTICLE IX. 5. Representative of Members who are Natural Persons. If a Member who is an individual is adjudged by a court of competent jurisdiction to be incompetent to manage his Page 5 of 32 person or his property, or if an individual Member dies, the Member's guardian, conservator, executor, administrator, or other legal representative may exercise all of the Member's rights for the purpose of administering his or her person or property, or settling his or her estate, including any authority the Member has under the terms of this Agreement to give a transferee the right to become a Member. 6. Representatives of Members Who Are Entities. If a Member is a corporation, trust, partnership, limited liability company or other entity is dissolved or terminated, the powers of that Member may be exercised by its legal representative for the purpose of liquidating, winding up, and making final distributions of the entity's assets to its owners, beneficiaries, or creditors. E. Ceasing to be a Member. If a Member ceases to be a Member of the Company by the terms of this Agreement, said Member automatically forfeits whatever management rights he/she/it has under the terms of this Agreement, if any. He/she/it shall retain the right to receive distributions and allocations with respect to his/her/its economic rights, unless such economic rights have been transferred by him/her/it or shall have been acquired from the Member upon the happening of an "event of withdrawal" (as defined below). In any event, a Member ceasing to be a Member by the terms of this Agreement shall not be released from his/her/its liability to the Company under the applicable statutes of the State of (State). Except as otherwise set forth in subparagraph 3, following, the mere pledge of, or granting of a security interest, lien, or encumbrance in or against, all or part of a Membership Interest of a Member shall not cause the Member to cease to be a Member or the secured party to have the power to exercise any right or powers of a Member. A Member ceases to be a Member of the Company upon the happening of any of the following "events of withdrawal". 1. The Member's removal as a Member in accordance with the provisions of Paragraph G. 2. The Member's: (a) assignment of that Member's Membership Interest for the benefit of creditors; (b) filing of a voluntary petition in bankruptcy; (c) being adjudicated a bankrupt or insolvent (or the Member has entered against him or her an order for relief in any bankruptcy or insolvency proceeding): (d) filing a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation; Page 6 of 32 (e) seeking consent to, or acquiescence in, the appointment of a trustee or receiver for, or liquidation of the Member or of all or any substantial part of Member's properties; or (f) filing of an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding described in this subparagraph. 3. The continuation of any proceeding against the Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, for 120 days after the commencement thereof, or the appointment of a trustee, receiver, or liquidator for the Member or all or any substantial part of the member's properties without the Member's agreement or acquiescence, which appointment is not stayed or verified within 120 days. 4. In the case of an individual Member, the Member's death or adjudication by a court of competent jurisdiction as incompetent to manage the Member's person or property. 5. In the case of a Member that is a partnership or another limited liability company, the dissolution and commencement of winding-up of the partnership or limited liability company. 6. In the case of a Member that is a corporation, the dissolution of the corporation or the revocation of its charter, or a transfer of fifty percent (50%) or more of its voting stock. 7. In the case of a Member who is acting as a Member by virtue of being a trustee of a trust, the termination of the trust (but the substitution of a new trustee shall not be treated as an event of withdrawal). 8. In the case of a Member that is an estate, the distribution by the fiduciary of the estate's entire Membership Interest in the Company. F. No Voluntary Withdrawals of Members. No Member shall have the power or right to voluntarily withdraw from the Company nor shall any Member have the right to receive a return of his/her/its capital contribution. G. Removal of Member Only by All Other Members. A Member may be removed only by the unanimous act of all other Members, but only if the Membership Interests of such other Members represent a Majority in Interest of all Membership Interests in the Company at that time. If a removal is to take place, the Member proposed for removal must be given no less than thirty (30) days written notice prior to the date of the meeting at which such removal will be acted upon by all other Members. H. Nature of Member's Interests. Page 7 of 32 The Membership Interest of each Member in the Company shall be intangible personal property for all purposes. Legal title to all Company assets shall he held in the name of the Company. Neither any Member nor a successor, representative, transferee nor assignee of such Member shall have any right, title or interest in or to any Company property or the right to partition any real or personal property owned by the Company. I. Unanimous Membership Approval or Consent for Certain Transactions/Events. The approval, agreement, or consent of all Members, shall be required to: (I) admit any Person as a Member; (2) merge the Company into or with, another limited liability company, foreign or domestic; or (3) amend or modify this Agreement or the Articles of Organization pursuant to Paragraph E of ARTICLE XI. J. Members' Access to Information; Records. 1. Subject to the procedures set forth in subparagraph 2, following, each Member shall have the right to obtain from the Company from time to time the records required to be maintained pursuant to Paragraph J shall be made, in writing, and must be made in good faith and for a proper purpose. The demand shall describe with reasonable particularity the purpose and the records or information desired. The Company shall have thirty (30) days from the receipt of a written demand to provide the information requested. Any reasonable expenses incurred in the production of such information shall be borne by the Member requesting such information. 2. Any demand for Company information and records made by a Member pursuant to the provisions of this Paragraph J shall be made, in writing, and must be made in good faith and for a proper purpose. The demand shall describe with reasonable particularity the purpose and the records or information desired. The Company shall have thirty (30) days from the receipt of a written demand to provide the information requested. Any reasonable expenses incurred in the production of such information shall be borne by the Member requesting such information. 3. Nothing herein shall prohibit the Company from maintaining its records in other than written form if the form is capable of conversation into written form within a reasonable time. 4. Nothing herein shall render any Member or other Person liable for the debts and obligations of the Company for failing to keep or maintain the records or information subject to inspection herein. Page 8 of 32 ARTICLE IV MEETINGS OF MEMBERS A. Annual Meetings of Members. An annual meeting of the Members shall be held prior to the end of the fiscal year, at the principal office of the Company or at such other time and place within or without the State of (State) as shall be designated by the Members from time to time and stated in the notice of the meeting. The purposes of the annual meeting need not be enumerated in the notice of such meeting. B. Regular Meetings and Special Meetings of Members. Regular meetings may be called at the discretion of the Manager, but shall not be called more frequently than two (2) meetings per month. Members will be given not less than 7 days notice of a Regular Meeting which notice may be given by electronic mail. Special meetings of the Members maybe called by the holders of not less than forty percent (40%) of all of the Membership Interest (as reflected by Membership Units) issued by the Company or by the Manager. Business transacted at all special meetings shall be confined to the purpose or purposes stated in the notice. C. Notice of Meetings of Members. Written notice stating the place, day and hour of the annual meeting, and additionally in the case of a special meeting, stating the principal office of the Company as the location and the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) days nor more than sixty (60) days before the date of the meeting, to each Member of record entitled to vote at such meeting. D. Record Date. For the purpose of determining Members entitled to notice of any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any distribution, or to make a determination of Members for any other purpose, the date on which notice of the meeting is mailed or the date on which such distribution is declared, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Paragraph, such determination shall apply to any adjournment thereof. E. Quorum. A Majority in interest of all Members entitled to vote at a Meeting shall constitute a quorum at all meetings of the Members, except as otherwise provided by law or this Agreement. Once a quorum is present at a meeting of the Members, the subsequent withdrawal from the Page 9 of 32 meeting of any Member prior to adjournment or the refusal of any Member to vote shall not affect the presence of a quorum at the meeting. If, however, such quorum shall not be present at the opening of any meeting of the Members, the Members entitled to vote at such meeting shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the holders of the requisite amount of Membership interest shall be present or represented. F. Actions of Members. Except for matters listed in Paragraph I of ARTICLE III, preceding, and any other matter for which the affirmative vote of the holders of a greater portion of the Membership Interests is required by the Act or this Agreement, the act of the Members shall be the affirmative vote of a Majority in Interest of the Members represented at the meeting who are entitled to vote. All actions of the Members entitled to vote and provided for herein may be taken by written consent without a meeting. Any such action which may he taken by the Members without a meeting shall be effective only if the consents are in writing, set forth the action so taken, and are signed by all Members eligible to vote on such action. Members may participate in any meeting of the Members by means of a conference telephone or similar communications equipment provided all persons participating in the meeting can hear one another, and such participation in a meeting shall constitute presence in person at the meeting. G. List of Members Entitled to Vote. The Manager shall make, at least ten, (10) days before each meeting of Members, a complete list of the Members entitled to vote at such meeting, or any adjournment of such meeting, arranged in alphabetical order, with the address of and the amount of Membership Interest held by each, which list, for a period often (10) days prior to such meeting, shall be kept on file at the principal office of the Company and shall be subject to inspection by any Member at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection of any Member during the whole time of the meeting. However, failure to comply with the requirements of this paragraph G shall not affect the validity of any otherwise valid action taken at such meeting. H. Registered Members. The Company shall be entitled to treat the holder of record of any Membership Interest as the holder in fact of such Membership Interest for all purposes, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such Membership Interest on the part of any other person, whether or not it shall have express or other notice of such claim or interest, except as expressly provided by this Agreement or the laws of (State). Page 10 of 32 ARTICLE V MANAGEMENT OF THE COMPANY A. Management Vested in Manager (s); Selection of a Manager. Except as otherwise may be provided by this Agreement, the Articles of Organization, or the Act, decisions with respect to the management of the business and affairs of the Company shall be made by action of the Manager (or if more than one, by Majority of the Manager(s) taken at a meeting or evidenced by a written consent in lieu thereof executed by a Majority of the Manager (s). The Company shall be managed by a Manager, initially L. Ted Prosser who shall serve until and unless removed by the Member (s) or until and unless he resigns from this position in accordance with the terms of this Article. The Manager shall be a Member, unless no Member shall be able to serve. The Manager (s) may delegate responsibility for the day-to-day management of the Company to any individual Manager or Person retained by the Manager (s) who shall have and exercise on behalf of the Company all powers and rights necessary or convenient to carryout such management responsibilities. B. Removal; Withdrawal of a Manager. 1. Removal. If any one or more of the following events occurs with respect to a Manager, the Members may remove such Manager by the action of a Majority in Interest of the Members and elect a new Manager by the action of a Majority in Interest of the Members: (a) The Manager (s) willful or intentional violation or reckless disregard of he Manager's duties to the Company; or (b) Any event that, if the Manager were a Member, would be deemed an event of withdrawal (as defined in ARTICLE III) with respect to such Manager. 2. Withdrawal. The Manager may voluntarily resign by providing written notice to all Members, with such voluntary withdrawal taking effect thirty (30) days after the date the Manager gives such notice to all Members, or at a later date stated in the notice of withdrawal. The Manager shall be deemed to have involuntarily withdrawn as Manager of the Company if any of the "events of withdrawal" identified in Paragraph E of Article III occur with respect to such Manager and notice of such event is made know to each Member, with said withdrawal effective immediately upon such notice, or later as may be agreed by all of the Members who are not Managers. Page 11 of 32 C. Interim Management. Upon the effective date of the removal or withdrawal of the Manager, Company shall he managed by a Member selected by a Majority in Interest of all Members (other than the Manager), who shall serve as Manager until the Members choose a replacement Manager in accordance with the terms of the following Paragraph D of this Article. D. Replacement Manager. The Members shall elect a replacement Manager at a regular or special meeting of the Members. A Majority in Interest of all Members other than the Manager shall be required to elect a replacement Manager. Once elected, the replacement Manager shall serve as Manager, with all of the powers and duties of the initial Manager. E. Signature Authority; Binding the Company. The Manager shall have signatory authority to bind the Company and is an agent of the Company for the purpose of its business, and the act of every Manager, including execution in the name of the Company of any instrument for apparently carrying on in the usual way the business of the Company, binds the Company, unless the Manager so acting has, in fact, no authority to act for the Company in the particular matter and the person with whom the Manager has knowledge of the fact that the Manager has no such authority. An act of a Manager that is not apparently for carrying on the usual course of the business of the Company does not bind the Company unless authorized in fact or ratified by the Members of the Company. F. General Powers of Manager. The Manager shall have full, exclusive, and complete discretion, powers, and authority, subject in all cases to the other provisions of this Agreement and the requirements of applicable law, to manage, control, administer, and operate the business and affairs of the Company for the purposes herein stated; to delegate responsibility for the day-to-day management of the Company to any individual Manager or Person retained by the Managers who shall have and exercise on behalf of the Company all powers and rights necessary or convenient to carry out such management responsibilities; and to make all decisions affecting such business and affairs, including, without limitation, for Company purposes, the power to: (a) Sell, dispose, trade, or exchange Company assets in the ordinary course of the Company's business so long as the value of the asset not exceed $5,000.00; (b) Enter into agreements and contracts and to give receipts, releases and discharges so long as the value does not exceed $5,000.00; (c) Purchase liability and other insurance to protect the Company's properties and business, but the Members shall agree by majority vote on the limits; Page 12 of 32 (d) Borrow money for and on behalf of the Company, and, in connection therewith, execute and deliver instruments authorizing the confession of judgment against the Company, but not in an amount of more than $1,000.00; (e) Execute or modify leases with respect to any part or all of the assets of the Company so long as the value does not exceed $5,000.00; (f) Make any and all expenditures which the Manager, in his or her sole discretion, deems necessary or appropriate in connection with the management of the affairs of the Company and the carrying out of its obligations, and responsibilities under this Agreement, including, without limitation, all legal, accounting, and other related expenses incurred in connection with the organization and financing and operation of all the Company, but no payment or bill can be paid in excess of $1,000.00 without approval by majority vote of the Members. Furthermore, the Manager shall not sign checks greater than $1,000.00 without approval by majority vote of the Members; and (g) Invest and reinvest Company reserves in short-term instruments or money market funds. Notwithstanding anything to the contrary in this Agreement, the Manager shall not undertake any of the following without approval by majority vote of the Members: (a) Any Capital Transaction; or (b) Any other act requiring the approval or consent of the Members. G. Member Decisions to Undertake Projects. Notwithstanding any other provision of this Operating Agreement that may be construed to the contrary, the Members understand and agree that the undertaking and/or sponsorship of alternative energy projects (“Projects”) is the principle goal and purpose of the Company. The Members, therefore, further agree that an affirmative vote at a regular or special meeting of the Members is required before any Project can be undertaken or funded in any manner. An affirmative vote for these purposes is defined to be the vote of at least five (5) members in favor at a duly-called meeting at which at lease seven (7) are present in person or by telephone conference. ARTICLE VI LIMITATION OF LIABILITY AND INDEMNIFICATION OF MANAGERS A. Limitation of Liability. No Manager of the Company shall be liable to the Company or its Members for monetary damages for an act or omission in such person's capacity as a Manager, except as provided in the Page 13 of 32 Act for (i) acts or omissions which the Manager knew at the time of the acts or omissions were clearly in conflict with the interest of the Company, or (ii) any transaction from which the Manager derived an improper personal benefit. B. Indemnification. The Company shall indemnify the Manager to the fullest extent permitted or required by the Act, as amended from time to time, and the Company may advance expenses incurred by the Manager upon the approval of the Members and the receipt by the Company of an undertaking by such Manager to reimburse the Company unless it shall ultimately be determined that such Manager is entitled to be indemnified by the Company against such expenses. The Company may also indemnify its employees and other representatives or agents up to the fullest extent permitted under the Act or other applicable law, provided that the indemnification in each situation is in writing and is first approved by Members owning a Majority in Interest of all Membership Interest at a meeting of the Members C. Other Rights. The indemnification provided by this Agreement shall: (i) be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any statute, agreement, vote of Members or otherwise, both as to action in official capacities and as to action in another capacity while holding such office; (ii) continue as to a person who ceases to be a Member; (iii) inure to the benefit of the estate, heirs, executors, administrators or other successors of an indemnity, and (iv) not be deemed to create any rights for the benefit of any other person or entity. ARTICLE VII CONTRIBUTIONS TO CAPITAL AND CAPITAL ACCOUNTS LOANS A. Capital Contributions; Loans. 1. Each initial Member agrees to contribute cash to the Company in the amount set forth as the Initial Capital Contribution of such Member on Schedule I and the Subscription Agreements attached thereto. 2. If the Manager determines at any time (or from time to time ) that the Initial Capital Contributions are insufficient to carry out the purposes of the Company, then the Manager shall first take reasonable efforts to borrow against the Company's assets If these efforts are unsuccessful, then the Manager shall give notice to each Member and request that the Members make additional contributions to the capital of the Company. If a Majority in Interest of all the Members approve such request, then each of the Members shall be obligated to make such additional contributions within the time period approved by the Majority (each as "Additional Capital Contribution") to the Company ratably in accordance with Interest of all the Members entitled to vote. If any Member fails to fulfill any commitment to contribute Page 14 of 32 additional capital (the "Defaulting Member"), the Members may elect to allow the remaining Members (the "Lending Members") to contribute to the Company, pro rata by Membership Interest, such Additional Capital Contribution. All amounts contributed by the Lending Members shall be considered a loan to the Defaulting Member, payable in equal annual principle installments, with simple interest at an annual rate equal to the applicable federal rate then in effect such that a sufficient amount of interest will be charged with respect to such loan so as to avoid the imputation of Interest. In addition, until all of such loans are repaid by the Defaulting Member, all distributions from the Company which would have been paid to the Defaulting Member shall be paid to the Lending Members, applied first to interest, then to principle of all such loans 3. Except as set forth above, no Member shall be required to contribute any additional capital to the Company. 4. No Member shall be paid interest on any Capital Contribution to the Company. 5. In addition to the loans to the Defaulting Member provided for in this Paragraph, upon approval of the terms thereof by the Members, any Member may make a loan to the Company upon commercially reasonable terms, provided such terms do not result in adverse tax consequences under the Code and applicable Treasury Regulations. Loans by a Member to the Company shall not be considered Capital Contributions. B. Capital Accounts. 1. The Company shall maintain a separate Capital Account for each Member pursuant to the principles of Paragraph B and Treasury Regulation Section 1.704-l(b)(a2)(iv). The initial Capital Account of each Member shall be the Initial Contribution of such Member. The Capital account should he increased by (i) the amount of the subsequent Capital Contributions of such Member to the Company under Paragraph A of this ARTICLE and (ii) such Member's allocable share of Net Income pursuant to Paragraph A of Article VIII. Such Capital Account shall be decreased by (i) the amount of cash distributed to the Member by the Company pursuant to Paragraph B of Article VIII and (ii) such Member‟s allocable share of Net Loss pursuant to Paragraph A of ARTICLE VIII. 2. The provisions of this Paragraph B and other portions of this Agreement relating to the proper maintenance of Capital Accounts are designed to comply with requirements of Treasury Regulation Section 1.704-1(b). The Members intend that such provisions be interpreted and applied in a manner consistent with such Treasury Regulations. The Members are authorized to modify the manner in which the Capital Accounts are maintained if the Members determine that such modification (i) is required or prudent to comply with the Treasury Regulation and (ii) is not likely to have a material effect on the amounts distributable to any Member upon the dissolution of the Company. Page 15 of 32 C. Withdrawal or Reduction of Member's Contributions to Capital. 1. No Member shall have the right to withdraw all or any part of his/her/its Capital Contribution or to receive any return on any portion of his/her/its Capital Contribution, except as may be otherwise specifically provided in this Agreement. Under circumstances involving a return of any Capital Contribution, a Member may, but shall not have an absolute right to, receive property other than cash. 2. No Member shall have priority over any other Member, either as to the return of Capital Contributions or as to Net Income, Net Losses, or distributions; provided that this subsection shall not apply to a loan (as distinguished from Capital Contributions) which a Member has made to the Company. D. Liability of Members. Notwithstanding any other provision in this Agreement, the liability of each Non-Managing Member for the debts, liabilities and obligations of the Company shall, in any event, and as between the parties to this Agreement, be limited to and not exceed the aggregate "Ceiling Amount" applicable to each Non-Managing Member. The initial Ceiling Amount applicable to each Non-Managing Member is set forth in Schedule III attached hereto. Said Ceiling Amount may be amended by the unanimous agreement of all Members and said adjustments in the Ceiling Amounts shall be reflected in an addendum to Schedule Ill executed by all of the Members. Except as otherwise expressly provided herein, no Member shall be required to contribute to the capital of, or loan any funds to, the Company. ARTICLE VIII ALLOCATIONS DISTRIBUTIONS ELECTIONS AND OTHER TAX MATTERS A. Allocations. 1. General Rules on Allocating Profits or Losses Subject to the provisions of Paragraph A(2), following, the net income or net profit or net less of the Company for the fiscal year, if any, shall he allocated to each Member based on such Member's Membership interest, prorated for any fractional part of an applicable fiscal year of the Company. For purposes of this Agreement, "net income" or "net profit" or "net loss" shall be determined in accordance with the cash method of accounting, consistently applied, and in accordance with the regulations promulgated under Section 704 of the Code. 2. Special Allocations. The following special allocations shall be made in the following order and priority to the extent applicable: (a) Minimum Gain Charge Back. Notwithstanding any other provision of this Article, if there is a net decrease in the Company minimum gain during any fiscal year or any other period, prior to any other allocation pursuant hereto, each Member shall be specifically allocated items of Company income and gain for Page 16 of 32 such fiscal year (and, if necessary, subsequent years) in an amount and manner provided by Treasury Regulations Section 1704-2(i). The items to be allocated shall be determined in accordance with Treasury Regulations Section 1.704-2. (b) Qualified Income Offset. Any Member who unexpectedly receives an adjustment, allocation, or distribution described in Treasury Regulation Section 1.704-1(h) 2(ii)(d)(4), (5) or (6) that causes or increases a negative balance in his capital account (in excess of any amount that Member is obligated to restore) shall be allocated items of income and gain sufficient to eliminate such excess or negative balance caused thereby, as quickly as possible, to the extent provided by such Treasury Regulation. (c) Gross Income Allocation. In the event any Member has a deficit capital account balance at the end of the Company fiscal year which is in excess of the sum of (i) the amount such Member is obligated to restore pursuant to any provision of this Agreement and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of the Treasury Regulation Sections l.704-29g)(l) and l.704-2(i)(5), each such Member shall be specifically allocate items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this subsection shall he made only if and to the extent that such Member would have a deficit capital account balance in excess of such sum after all other allocations provided for in this ARTICLE have been made as if this subsection were not in this Agreement. (d) Section 704(b) Limitation. Notwithstanding any other provision of this Agreement to the contrary, no allocation of any item of income or loss shall be made to a Member if such allocation would not have "economic effect" pursuant to Treasury Regulation Section 1.704- I(b)(2)(ii) or otherwise be in accordance with his interest in the Company within the meaning of Treasury Regulation Sections 1.704-1 (b)(3) and 1.704-2. To the extent an allocation cannot be made to a Member due to the application of this subsection d., such allocation shall be made to the other Member or Members entitled to receive such allocation hereunder. (e) Curative Allocations. Any allocations of items of income, gain, or loss pursuant to the proceeding subsections (a) - (d) hereof shall be taken into account in computing subsequent allocations pursuant to this ARTICLE, so that the net amount of any items so allocated and the income, losses, and other items allocated to each Member pursuant to this ARTICLE shall, to the extent permitted by applicable Treasury Regulations, be equal to the net amount that would have been allocated to each Member had not allocations ever been made pursuant to the preceding subsection, (a) - (d). (f) Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and deduction Page 17 of 32 with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated amount the Members so as to take account of any variation between the adjusted basis of such property to the Company for Federal income tax purposes and its fair market value at the time of its contribution. Allocations pursuant to this subsection 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 Member's capital account or share of income, losses, other items, or distributions, pursuant to any provision of this Agreement. B. Interim Distributions. Before making any discretionary distributions of cash, Manager may, in his sole discretion, prefer to pay down any of the Company's debts. If Manager is satisfied that distributions need not be utilized to pay down Company's debts and except as to matter provided in Paragraph C of this ARTICLE, Manager may distribute Distributable Cash and other property at such times and in such amounts as he/she/they shall determine. All interim distributions of Distributable cash or other property shall be allocated to the Members in proportion to the economic rights held by such Member(s) or other Person(s) holding such rights associated with a Member's Membership interests. For any Membership Interest not owned by the same Person for the entire fiscal year, such allocation will be prorated C. Limitation Upon Distributions. No distribution shall he declared and paid if such distribution would cause the Company to violate any limitation on distributions provided in the Act. D. Allocations for Tax Purposes. Except as otherwise provided herein, each item of Income, Net Income, or Net Loss of the Company shall be allocated to the Members in the same manner as such allocations are made for book purposes pursuant to Paragraph A of this ARTICLE. In the event of a transfer of, or other change in, an interest in the Company during a fiscal year, each item of taxable income and loss shall be prorated in accordance with Section 706 of the Code, using any convention permitted by law and selected by the Members. E. Tax Status, Elections and Modifications to Allocations. 1. Notwithstanding any provision contained in this Agreement to the contrary, solely for federal income tax purposes, each of the Members hereby recognizes that the Company will be subject to all provisions of Subchapter K of the Code; provided, however, that the filling of all required returns thereunder, and pursuant to state law, shall not be construed to extend the purposes of the Company or expand the obligations or liabilities of the Members. 2. The Manager(s) may cause the Company to elect pursuant to Section 754 of the Code and the Treasury Regulations to adjust the basis of the Company assets as provided by Section 743 or 734 of the Code and the Treasury Regulations thereunder. The Company shall Page 18 of 32 make such election for Federal income tax purposes as may be determined by the Manager(s) acting in their sole and absolute discretion. 3. With this Agreement, all Members agree that they shall prepare and execute any amendments to this Agreement determined by the Manager(s) to be necessary for the Company to comply with the provisions of Treasury Regulations Sections 1.704-1(h), 1.704-1(c) and 1.704-2 upon the happening of any of the following events: (i) incurring any liability which constitutes a "nonrecourse liability" as defined in Treasury Regulation Section 1.704-2(b)(3) or a "partner nonrecourse liability" as defined in Treasury Regulation Section 1.704-2(b)(4); (ii) a constructive termination of the Company pursuant to the Code Section 708(b)(l)(B); or (iii) the contribution or distribution of any property, other than cash, to or by the Company. F. Tax Matters Partner. For the purposes of this Agreement, the Manager may designate one Member as the "Tax Matters Partner" for federal income tax purposes in accordance with the provisions of Code Section 623 l(a)(7) and Treasury Regulations promulgated thereunder. The Tax Matters Partner is authorized and required to represent the Company in connection with all examinations of the Company's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. The Tax Matters Partner shall have the final decision-making authority with respect to all Federal income tax matters involving the Company. The Members agree to cooperate with the Tax Matters Partner and to do or refrain from doing any or all things reasonably required by the Tax Matters Partner to conduct such proceedings. Any direct out-of-pocket expenses incurred by the Tax Matters Partner in carrying out the Tax Matters Partner's obligations hereunder shall he allocated to and charged to the Company as an expense of the Company for which the Tax Matters Partner shall be reimbursed. The Tax Matters Partner will be L. Ted Prosser ARTICLE IX TRANSFERABILITY OF MEMBERSHIP INTERESTS; ADMISSION OF MEMBERS; BUY-SELL AGREEMENT A. Transferability of Membership Interest -- General Rules. 1. General Prohibition Against Any Transfer. A Member shall not at any time offer to or 'Transfer" (as defined in ARTICLE I) all or any part of his/her/its Membership Interest except in accordance with the conditions and limitations set forth in this ARTICLE. 2. Transferability of Management Rights. A Member's management rights (if any) may not be transferred. 3. Transfers of Membership Interest. A transferee of all or part of a Member's Membership Interest shall have only the rights, powers and privileges set out in Paragraph B of this ARTICLE or as otherwise provided by law and shall not become a Member of the Company except as provided in Paragraph C of this ARTICLE; unless said transfers of Membership Page 19 of 32 Interest or assignment of Membership interest is to a corporation or partnership controlled in part or fully by current founding member. 4. Transfers Not Made In Accordance with Agreement. Any transfer not made in accordance with the conditions and limitations set forth in this ARTICLE and otherwise in this Agreement shall be null and void, B. Rights of a Transferee. Unless and until admitted as a Member of the Company in accordance with Paragraph C of this ARTICLE, the transferee of a Membership Interest shall not be entitled to any of the rights, powers, or privileges of a Member, except that the transferee shall be entitled to receive the distributions and allocations associated with the transfer of his/her/its Membership interest; provided that the Company has received notice of the assignment and has duly noted the assignment in its records. The transferee derives his/her/its rights exclusively through the Member/assignor. Any transferee in receipt of economic rights takes the assignment subject to any claims or offsets the Company may have against the Member/assignor. C. Admission of Transferee as Member. A transferee of a Membership interest may be admitted as a Member of the Company upon furnishing to the Company the following: 1. The written consent of all Members to admit the transferee as a Member; 2. The transferee's consent to become a Member and acceptance, in a form satisfactory to all Members of all the terms and conditions of this Agreement; 3. Payment by the transferee of such reasonable expenses as the Company may incur in connection with the transferee's admission as a Member; and 4. At the election of the Manager, receipt by the Company of an opinion of counsel, satisfactory in form and substance to all Members that such admission will not: (i) violate any Federal or applicable state securities law; (ii) prevent the Company from being taxed as a partnership for Federal income tax purposes; or (iii) otherwise adversely affect the Company or its Members. D. Consequences of Transfer of Membership Interest. In the event of his/her/its transfer of part of his/her/its Membership interest, the Member shall remain a Member of the Company to the extent of-his/her/its retained Membership Interest. A Member ceases to be a Member of the Company upon the transfer of all of his/her/its Membership Interest. Page 20 of 32 E. Buy-Sell Agreement; Value of Membership Interest. If a Member ceases to he a Member in accordance with the terms of Paragraph E of Article III, preceding, prior to the expiration of the term of the Company: (a) If the Company is dissolved pursuant to ARTICLE X, the Member shall be entitled to participate in the winding up of the Company to the same extent as any other Member except that any distributions and allocations to which the Member would have been entitled shall be reduced by any consequential, economic damages sustained by the Company as a result of the dissolution and winding up. (b) If the Company is continued pursuant to the procedures set forth in Paragraph B(l)(c) of ARTICLE X, the Member shall be entitled to the "Fair Value" of his/her/its Membership Interest (as defined in subsections (c) - (e), following) as of the date of withdrawal. (c) The Fair Value shall be the price agreed to by the Company and the Member or his successor (the “Selling Member”) in good faith negotiations. (d) In the event the Company and the Selling Member are unable to agree upon a Fair Value within thirty (30) days, then the Fair Value shall be determined by a qualified appraiser. The qualified appraiser shall be mutually selected by the Company and the Selling Member within ten (10) days following the expiration of the thirty (30) day period described above. In the event the Company and the Selling Member are unable to agree on a qualified appraiser within such ten (10) day period, each shall select a qualified appraiser and those two appraisers shall meet and attempt to agree on an appraised value. If, within thirty (30) days of these two appraisers being appointed, they are not able to agree on an appraised value, those two appraisers shall pick a third appraiser to appraise the Fair Value. The third appraiser shall then determine the Fair Value. The costs of the appraisal shall be paid by the Company. (e) "Fair Value" shall be the fair market value of the Company as a whole times the Member‟s percentage of owner membership interest in the Company (and, if applicable, reduced by any damages to the Company or its Members as a result of the withdrawing Member's breach of this Agreement), to be paid over a period not to exceed five (5) years, in such installments as the remaining Members shall determine (but not less frequently than annually), and with interest on each such installment at the applicable federal rate in effect (under Code Section 1274 or similar section) on the event of withdrawal. (f) The Company may from time to time purchase policies of insurance on the lives of Key Members. Upon the death of any Member resulting in life insurance Page 21 of 32 proceeds payable to the Company, the Company shall use the proceeds from that policy (net of any expenses in obtaining the proceeds or any taxes due by the Company as a result of the receipt of the insurance proceeds) within 120 days of the receipt of the proceeds, to make any necessary payment required by this paragraph E. Any additional funds due to the deceased Member‟s estate or heirs shall be payable over a period determined by the Company (but not to exceed five (5) years) in such installments as the Company shall determine (but not less frequently than annually), and with interest on each such installment at the applicable federal rate in effect (under Code Section 1274 or similar section) at the time of the Member‟s death. The Company, may, at its election, prepay all or part of the sums due hereunder without penalty at any time. ARTICLE X DISSOLUTION AND TERMINATION A. General Prohibition Against Withdrawal; Consequences. Except as otherwise provided in this Agreement, no Member shall at any time withdraw from the Company or withdraw any amount of his/her/its Capital Account or Capital Interest. Any Member withdrawing in contravention of this Paragraph A shall indemnify, defend, and hold harmless the Company and all other Members (other than a Member who is, at the time of such withdrawal, in default under this Agreement) from and against any losses, expenses, judgments, fines, settlements, damages, or taxes suffered or incurred by the Company or any other Member arising out of or resulting from such withdrawal. Damages related herein shall be monetary damages only (and not specific performance) and such damages may be offset against distributions by the Company to which the withdrawing Member would otherwise be entitled. B. Dissolution. 1. The Company shall be dissolved upon the first of the following to occur. (a) When the period fixed for the duration of the Company in the Articles of Organization shall expire; (b) Upon the election to dissolve the Company by all of the Members. (c) Upon the election to dissolve the Company by all remaining Members after an event of withdrawal (as defined in Paragraph E of ARTICLE III of this Agreement) occurs with respect to any Member; (d) The entry of a decree of judicial dissolution or the issuance of a certificate for administrative dissolution under the Act. 2. Upon dissolution of the Company: (a) the business and affairs of the Company shall terminate; and (b) the Manager (or if one does not exist, all Members or the legal Page 22 of 32 representative or successor to the Members whose event of withdrawal has resulted in dissolution, or some other Member, or legal representative or successor thereof) shall wind-up the Company's affairs by, as promptly as reasonably possible following the dissolution so as to obtain the fair market value for the Company's assets, collecting the Company's assets, disposing of the Company's properties that will not be distributed in kind to its Members, discharging or making provision for discharging its liabilities, and distributing the remaining assets as provided in the applicable state statutes. 3. Dissolution of the Company shall be effective as of the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until there has been a winding-up of the Company's business affairs and the assets have been distributed as provided in this ARTICLE. 4. Upon Dissolution of the Company, the Members may cause any part or all of the assets of the Company to be sold in such manner as the Members shall determine in an effort to obtain the best prices for such assets; provided, however, that the Members may distribute assets of the Company in kind to the Members to the extent practicable. C. Articles of Dissolution, Notice of Dissolution to Creditors. Upon the dissolution and commencement of the winding-up of the Company, the Members shall cause Articles of Dissolution to be executed on behalf of the Company and filed with the Secretary of State. Notice of the dissolution shall be brought to the attention of creditors in accordance with the provisions set forth in the applicable statutes of the State of (State). The Members shall execute, acknowledge, and file any and all other instruments necessary or appropriate to reflect the dissolution of the Company. D. Distribution of Assets Upon Dissolution. In settling accounts after dissolution, the assets of the Company shall be paid in the following order: 1. First, to creditors, in the order of priority as provided by law, including Members who are also creditors of the Company; 2. Second, an amount equal to the then remaining credit balance in the Capital Accounts of the Members shall be distributed to the Members in proportion to the amount of such balances; and 3. Third, any remainder shall be distributed to the Members of the Company, in proportion to their Membership Interest. E. Distribution in Kind. If any assets of the Company are distributed in kind, such assets shall be distributed to the Members entitled thereto as tenants-in-common in the same proportions as the Members would Page 23 of 32 have been entitled to cash distributions had such property been sold for cash and the net proceeds thereof distributed to the Members. If distributions in kind are made to the Members upon dissolution and liquidation of the Company, the Capital Account balances of such Members shall be adjusted to reflect the Members' allocable share of gain or loss, which would have resulted if the distributed property had been sold at its fair market value. ARTICLE XI MISCELLANEOUS PROVISIONS A. Completing Business. Except as otherwise expressly provided in this Agreement or the Act, neither the Members nor the Manager, nor any of their shareholders, directors, officers, employees, partners, agents, family members or affiliates, shall be prohibited or restricted in any way from investing in or conducting, either directly or indirectly, business of any nature whatsoever, including the ownership and operation of business or properties similar to or in the same geographical area as those operated or held by the Company. Except as otherwise provided in this Agreement or the Act, any investment in or conduct of any such business by any such Person or entity shall not give rise to any claim for an accounting by any Member or the Company or any right, any interest therein or the profits therefrom. B. Member Representations and Agreements. Notwithstanding anything contained in this Agreement to the contrary, each Member hereby represents and warrants to the Company and to every other Member that: (a) the Membership Interest of such Member is acquired for investment purposes only, for the Member's own account, and not with a view to or in connection with any distribution, re-offer, resale or other disposition not in compliance with the Federal Securities Act of 1933, as amended, and the rules and regulations thereunder ("the 1933 Act") and applicable state securities laws; (b) he or she understands that his or her Membership interest in the Company has not been registered under the 1933 Act or the securities law of any jurisdiction in reliance upon exemptions contained in those laws; (c) such Member, alone or together with the Member‟s representatives, possesses such expertise, knowledge and sophistication in financial and business matters generally, and in the type of transactions in which the Company proposes to engage in particular, that the Member is capable of evaluating the merits and economic risks of acquiring and holding the Membership Interest and the Member is able to bear all such economic risks now and in the future; (d) such Member has had access to all of the information with respect to the Membership Interest acquired by the Member under this Agreement that the Member deems necessary to make a complete evaluation thereof and has had the opportunity to question other Members concerning such Membership Interest; (e) such Member's decision to acquire the Membership Interest for investment has been solely based upon the evaluation by the Member; (f) such Member is aware that the Member must bear the economic risk of an investment in the Company for an indefinite period of time because Membership Interests have not been registered under the 1933 Act or under the securities laws of various states and, therefore, cannot be sold unless such Page 24 of 32 Membership Interests are subsequently registered under the 1933 Act and any applicable state securities laws or an exemption from registration is available: (g) such Member is aware that only the Company can take action to register Membership Interests under the 1933 Act or under the securities laws of various states and the Company is under no such obligation and does not purpose to attempt to do so; (h) such Member is aware that this Agreement places restrictions on the ability of a Member to sell, transfer, assign, mortgage, hypothecate or otherwise encumber the Member's Membership Interest; (i) such Member agrees that the Member will truthfully and completely answer all questions, and make all covenants, that the Company may, contemporaneously or hereafter, ask or demand for the purpose of establishing compliance with the 1933 Act and applicable state securities laws: and (j) if that Member is an organization, that it is duly organized, validly existing, and in good standing under the laws of its state of organization and that it has full organization power and authority to execute and agree to this Agreement and to perform its obligation hereunder. C. Notice. 1. All notices, demands or requests provided for or permitted to be given pursuant to this Agreement must be in writing and addressed to the Member to whom the notice, demand or request is intended to be given at such Member's address set forth in Schedule I to this Agreement (unless the Company's records reveal a different address for such Member), or in the case of the Company, to its principal place of business. A Member may change his or her address by notice in writing to the Company, addressed to the Manager(s) and to each other Member given in accordance with this section. 2. All notices, demands and requests to be sent to any Member pursuant to this Agreement shall be deemed to have been properly given or delivered if addressed to such person at the address as it appears on the Company records and (i) personally served, (ii) deposited for next day delivery by Federal Express, or other similar overnight courier services. (iii) deposited in the United States mail, prepaid and registered or certified with return receipt requested, (iv) transmitted via telecopier or other similar device to the attention of such person with receipt acknowledged, or (v) otherwise deposited in the United States mail, first class, postage prepaid, in an envelope addressed to said Member at his/her/its last know address. 3. All notices, demands and requests so given shall be deemed received: (i) when actually received, if personally delivered, deposited for next day delivery with an overnight courier or telecopier, or mailed by first class United States mail, or (ii) as indicated upon the return receipt if deposited in the United States mail with return receipt requested. 4. The Members shall have the right from time to time, and at any time during the term of this Agreement, to change their respective addresses by delivering to the other parties written notice of such change in the manner prescribed in subparagraph 2 of this Paragraph, above. 5. All distributions to any Member shall be made in person or at the address to which notices are sent unless otherwise specified in writing by any such Member. Page 25 of 32 D. No Action for Partition. No Member shall have any right to maintain any action for partition with respect to the property, real or personal, of the Company. E. Amendments; Additional Documents. This Agreement or the Articles of Organization may only be amended or modified by a written Agreement approved of and executed by all of the Members; provided, however, that each party hereto agrees to execute and acknowledge all documents and writings which the Manager may deem necessary or expedient to the achievement of the Company's purposes. F. References to Law. All references to Statutes, Code Sections, Treasury Regulations, and other laws shall include subsequent amendments made to the law referenced in this Agreement and any corresponding provisions of succeeding law unless such amendments or corresponding provisions in the law are contrary to the intent of the parties to this Agreement. To the extent that the undersigned initial Members desire at the time of execution of this Agreement to preserve partnership tax treatment under federal and state income tax laws and to otherwise benefit from the flexible provisions provided under Subchapter K, the parties desire at all times to preserve the right to amend the Operating Agreement to appropriately reflect any change in the law affecting the tax classification of the Company. G. Governing Law. This Agreement is made in (City, County and State), and the rights and obligations of the Members hereunder shall be interpreted, construed and enforced in accordance with the procedural and substantive laws of the State of (State) without giving effect to the conflict of laws and provisions thereof. H. Entire Agreement. This Agreement, including all schedules to this Agreement, as amended from time to time in accordance with the terms of this Agreement, contains the entire agreement among the parties relative to the subject matter thereof. I. Waiver. No consent or waiver, express or implied, by any Member to or for any breach or default by any other Member in the performance by such other Member of his/her/its obligations under this Agreement shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other Member of the same or any other obligations of such other Member under this Agreement. Failure on the part of any Member in default, regardless of how long such failure continues, shall not constitute a waiver by such Member of his/her/its rights hereunder. Page 26 of 32 J. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, only that portion of the Agreement causing said invalidity or unenforceability shall be excised or disregarded from this Agreement, and the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not he affected thereby, and the intent of this Agreement shall be enforced to the greatest extent permitted by law. K. Binding Agreement. Subject to the restrictions on transferability set forth in this Agreement, this Agreement shall inure to the benefit of and be binding upon the undersigned Members and their respective legal representatives, successor, and assigns. L. Tense and Gender. Unless the context clearly indicates otherwise, the singular shall include the plural and vice versa. Whenever the masculine, feminine or neuter gender is used inappropriately in this Agreement, this Agreement shall be read as if the appropriate gender were used. M. Captions. Captions are included solely for the convenience of reference and if there is any conflict between captions and the text of this Agreement, the text shall control. N. Benefits of Agreement. Nothing in this Agreement expressed or implied, is intended or shall be construed to give to any creditor of the Company, or any creditor of any Member, or any other person or entity whatsoever, other than the Members and the Company, any legal or equitable right, remedy or claim under or in respect to this Agreement or any covenant, condition or provisions herein contained, and such provisions are and shall be held to be for the sole and exclusive benefits of the Members and the Company. 0. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original for all purposes and all of which when taken together shall constitute a single instrument. Executed signature pages to any instrument may be detached and affixed to a single instrument, which single instrument with multiple executed signature pages affixed thereto constitutes the original instrument. All of these counterpart instruments shall be read as though one and they shall have the same force and effect as if all of the parties had executed a single signature page. Provided, however, the loss, destruction, or other disappearance of any one or more of the original counterparts of this Agreement shall not affect its validity in any manner. Page 27 of 32 IN WITNESS WHEREOF, the undersigned, being the Members of the Company as of the date of this Agreement, (Date), mutually consenting to the admissibility of the others as Members, have caused this Agreement to be duly adopted by the Company on (Date) and do hereby assume and agree to be bound by and to perform all of the terms and provisions set forth in this Agreement. MEMBERS: _________________ _________________________________ (SEAL) Date (Name) _________________________________ (SEAL) (Name) _________________________________ (SEAL) (Name) _________________________________ (SEAL) (Name) _________________________________ (SEAL) (Name) _________________________________ (SEAL) (Name) _________________________________ (SEAL) (Name) _________________________________ (SEAL) (Name) _________________________________ (SEAL) (Name) Page 28 of 32 EXHIBIT A Member Capital Investment (Name), Member $(Amount) (Name), Member $(Amount) (Name), Member $(Amount) (Name), Member $(Amount) (Name), Member $(Amount) (Name), Member/Manager $(Amount) (Name), Member $(Amount) (Name), Member $(Amount) (Name), Member $(Amount) Membership Interest and Member Allocation Ratio (Name), Member (%) (Name), Member (%) (Name), Member (%) (Name), Member (%) (Name), Member (%) (Name), Member/Manager (%) (Name), Member (%) (Name), Member (%) (Name), Member (%) Page 29 of 32 APPENDIX A 1. "Act" means the (State) Limited Liability Company Act (Applicable laws of the (State) General Statutes), as the same may be amended from time to time and any corresponding provisions of succeeding law. 2. "Adjusted Capital Account” means, with respect to a Member, the balance in such Member's Capital Account at the end of the relevant fiscal year, as determined in accordance with Treasury Regulation 1,704- I (b)(2)(iv). 3. “Articles of Organization” means the Articles of Organization of the Company filed with the Secretary of State, as amended or restated from time to time. 4. "Capital Account” means for each Member the account established pursuant to Paragraph B of ARTICLE VII of this Agreement and maintained in accordance with the provisions of this Agreement. 5. "Capital Contribution” means any contribution to the capital of the Company in cash or property by a Member whenever made. 6. "Capital interest” means the right of any Member to be paid the amount in that Member's Capital Account. 7. "Code" means the Internal Revenue Code of 1986, as amended from time to time (and any corresponding provisions of succeeding law). 8. "Distributable Cash” means, with respect to the Company for a period of time, all funds of the Company on hand or in bank accounts of the Company as, in the discretion of the Members, is available for distribution to the Members after provision has been made for (i) payment of all operating expenses of the Company as such time, (ii) payment of all outstanding and unpaid current obligations of the Company as of such time, and (iii) such reserved as the Members or the Manager deem necessary or appropriate for Company operations. 9. "Fiscal Year” means the calendar year. 10. "Income” means, for each fiscal year or other period, each item of income and gain as determined, recognized and classified for federal income tax purposes, provided that any income or gain that is exempt from federal income tax shall be included as if it were and item of taxable income. 11. "Initial Capital Contribution” means the initial contribution to the capital of the Company made by a Member pursuant to Paragraph A.1.ARTICLE VII of this Agreement. 12. "Loss" means, for each fiscal year or other period, each item of loss or deduction as determined, recognized and classified for federal income lax purposes, increased by (I) Page 30 of 32 expenditures described in §705(a)(2)(B) of the Code, (ii) expenditures contemplated by 4 709 of the Code (except for amounts with respect to which an election is properly made under 4 709(h) of the Code) and (iii) expenditures resulting in a deduction for a loss incurred in connection with the sale or exchange of Company property that is disallowed to the company under § 267(a)(l) or §707(b) of the Code. 13. „Majority in Interest” means with respect to any referenced group of Members, a combination of any of such Members who, in the aggregate, own more than fifty percent (50%) of the Membership Interest entitled to vote to give their consent on such matter(s) and which are owned by all of such referenced group of Members. 14. “Manager-Managed LLC” means a limited liability company in which all Members by virtue of their status as Members are not necessarily Managers of the Company 15. “Member” means each Person designated as a Member of the Company on Schedule I hereto, or any additional Member admitted as a Member of the Company in accordance with ARTICLE 111 and ARTICLE IX. “Members” refers to such Persons as a group. 16. “Membership Interest” means all of a Member‟s rights in the Company, which shall include unless otherwise set forth at the time of issuance: (1) a Member‟s “economic rights” (i.e., the Member‟s share of the profits, losses, gains. Deductions, and credits of the Company, the right to receive distributions of the Company‟s assets, and a Member‟s Capital Interest); (2) a Member‟s “voting rights”, if any‟ and (3) a Member‟s “management rights” (i.e., a Member‟s right to have access to certain Company information, and any right to participate in management of the Company) as provided in the Act and this Agreement. 17. “Net Income” and “Net Loss” means, respectively, for each fiscal year or other relevant period, (I) the excess of the Income for such period over the Loss for such period, and (ii) the excess of the Net Loss for a fiscal year or the relevant period shall be computed by excluding from such computation any Income specially allocated under Paragraph A of ARTICLE VIII. 18. “Person” means an individual, a trust, and estate, or a domestic corporation, a foreign corporation, a professional corporation, a partnership, a limited partnership, a limited liability company, a foreign liability company, an unincorporated association, or another entity. 19. “Secretary of State” means the Secretary of State of (State). 20. “Transfer” means with respect to all or any part of, a Membership Interest, any sale, assignment, gift, exchange, or other inter vivos disposition of such Membership Interest, and also means any testamentary disposition of such Membership Interest. In addition, Transfer shall mean incident to any divorce, marital property settlement, equitable distribution of marital property or similar state law, or any transfer pursuant to applicable community property, quasi-community property or similar state law. However, a transfer made to a trust that is wholly revocable by the transferor shall not be a Transfer for purposes of this Agreement provided that a majority in interest of the Members have reviewed the terms of the trust agreement for qualification as a wholly revocable grantor trust and are satisfied that the trust may he a Member Page 31 of 32 of the limited liability company, provided that any subsequent Transfer by the trustee of such trust shall in any event be deemed to have been made by the trust grantor. 21. “Transferee” means the transferee of a Membership Interest pursuant to the conditions and limitations set forth in ARTICLE IX of this Agreement who is entitled to receive, to the extent transferred, only the economic rights to which the transferor would be entitled but for the transfer. Until elected and admitted as a Member, such transferee shall not have any other rights of Membership. 22. “Treasury regulations” means the Income Tax Regulations and Temporary Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). Page 32 of 32
Pages to are hidden for
"Operating Agreement for A Manager Or Member Managed LLC"Please download to view full document