EXHIBIT 10.27.3
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
LIFE & DEATH, LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "AGREEMENT") is
entered into to be effective as of September 15, 2006 (the "EFFECTIVE DATE"), by
and between Blue Holdings, Inc. ("BLHL"), Alexandre Caugant ("CAUGANT") and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("NAOURI") (each of BLHL, Naouri and Caugant are referred to
herein individually as a "MEMBER", and collectively as the "MEMBER").
RECITALS:
A. The Members entered into that certain Joint Venture Agreement Term
Sheet dated as of September 15, 2006 (the "TERM SHEET"), and that certain
Membership Acquisition Agreement (the "MAQ"), dated to be effective as of
September 15, 2006, which set forth the terms and conditions upon which the BLHL
would acquire a membership interest in the Company and the rights, preferences,
privileges and restrictions of the Members of the Company following such
acquisition.
B. In accordance with the MAQ, the Members desire to supersede,
terminate and void AB INITIO the MAQ, and to enter into this Agreement to
govern, as of the Effective Date, the rights, preferences, privileges and
restrictions of the Members of the Company.
AGREEMENTS:
In consideration of the mutual promises herein contained and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Members hereby agree as follows:
ARTICLE 1
FORMATION OF LIMITED LIABILITY COMPANY
1.1 FORMATION. Life & Death, LLC (the "COMPANY") was formed under the
provisions of the ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Act, California Corporations Code
ss.ss.17000-17655 (the "ACT") by the filing of Articles of Organization with the
California Secretary of State on May 4, 2006, File Number 200612610025, as
amended by the filing on August 21, 2006 of a Certificate of Amendment, changing
the name of the Company to Life & Death, LLC. Except as herein otherwise
expressly provided, the rights and liabilities of the Members shall be as
provided in the Act, as it may be amended from time to time.
1.2 MAINTENANCE OF STATUS. The Members shall take such steps as are
necessary to maintain the Company's status as a limited liability company formed
under the laws of the State of California and its qualification to conduct
business in any jurisdiction where the Company does business and is required to
be qualified.
1.3 WAIVER OF RIGHT TO PARTITION. No Member shall, either directly or
indirectly, take any action to require partition of the Company or of any of its
assets or properties or cause the sale of any Company property, and,
notwithstanding any provision of law to the contrary, each Member (and his, her
or its legal representative, successor or assign) hereby irrevocably waives any
and all right to maintain any action for partition or to compel any sale with
respect to his, her or its Membership Interest, or with respect to any assets or
properties of the Company, except as expressly provided in this Agreement.
ARTICLE 2
NAME
The business of the Company shall be conducted under the name Life &
Death, LLC or such other name as the Manager may hereafter designate.
ARTICLE 3
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
3.1 "ACT" means the ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Limited Liability Company Act
(California Corporations Code ss.ss.17000-17655), as it may be amended from time
to time.
3.2 "ADDITIONAL CAPITAL" is defined in Section 7.1(b).
3.3 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant fiscal year of the Company, after giving effect to the
following adjustments: (i) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit to such
Capital Account the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital
Account Deficit is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
3.4 "AGREEMENT" means this Operating Agreement, as amended, modified or
supplemented from time to time.
3.5 "CAPITAL ACCOUNT" means, with respect to any Member, the amount of
money contributed by such Member to the capital of the Company, the aggregate
fair market value (as determined by the Manager) of all property contributed or
deemed contributed by such Member to the capital of the Company (net of
liabilities secured by such contributed property that the Company is considered
to assume or take subject to under Section 752 of the Code), the aggregate
amount of all Net Profits allocated to such Member, and any and all items of
gross income or gain specially allocated to such Member pursuant to Sections 9.3
and 9.4, and decreased by the amount of money distributed (or deemed
distributed) to such Member by the Company (exclusive of any guaranteed payment
within the meaning of Section 707(c) of the Code paid to such Member), the
aggregate fair market value (as determined by the Manager) of all property
distributed (or deemed distributed) to such Member by the Company (net of
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liabilities secured by such distributed property that such Member is considered
to assume or take subject to under Section 752 of the Code), the amount of any
Net Losses charged to such Member, and any and all losses and deductions
including, without limitation, any and all partnership and/or partner
"nonrecourse deductions" specially allocated to such Member pursuant to Sections
9.3 and 9.4. The foregoing Capital Account definition and the other provisions
of this Agreement relating to the maintenance of Capital Accounts are intended
to comply with Treasury Regulation Sections 1.704-1(b) and 1.704-2 and shall be
interpreted and applied in a manner consistent with such Regulations.
3.6 "CASH FLOW" means net profits determined under the Generally
Accepted Accounting Principles in the United States of America.
3.7 "CODE" means the Internal Revenue Code of 1986, as amended.
3.8 "COMPANY" means the limited liability company formed pursuant to
this Agreement by the parties hereto, as said company may from time to time be
constituted.
3.9 "MAJORITY IN INTEREST" means those Members owning or having voting
control over, in the aggregate, more than fifty percent (50%) of the Percentage
Interests, except where otherwise expressly provided in this Agreement.
3.10 "MANAGER" means the person designated as the manager of the
Company, as provided in Article 11.
3.11 "▇▇▇▇" means the "LIFE & DEATH" trademark, as well as any
variations thereof that the Company may elect to register.
3.12 "MEMBERS" means those persons executing this Agreement on the
signature page hereto, as well as those persons who hereafter are been admitted
to the Company as a member in accordance with Article 13.
3.13 "MEMBERSHIP INTEREST" means an ownership interest in the Company,
which includes a Member's share of the profits and losses of the Company, a
Member's right to receive distributions of the Company's assets, a Member's
right to vote or participate in the management of the Company as permitted in
this Agreement, and a Member's right to information concerning the business and
affairs of the Company, as provided in this Agreement and under the Act.
3.14 "MEMBER LOAN" is defined in Section 7.1(c).
3.15 "NET PROFITS" and "NET LOSSES". The terms "NET PROFITS" and "NET
LOSSES" mean, for each fiscal year or other period, an amount equal to the
Company's taxable income or loss, as the case may be, for such year or period,
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss and deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable income or
loss); provided, however, for purposes of computing such taxable income or loss,
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(i) such taxable income or loss shall be adjusted by any and all adjustments
required to be made in order to maintain Capital Account balances in compliance
with Treasury Regulation Section 1.704-1(b), and (ii) any and all items of gross
income, gain, loss and deduction including, without limitation, all partnership
and/or partner "nonrecourse deductions" specially allocated to any Member
pursuant to Sections 9.3 and 9.4 shall not be taken into account in calculating
such taxable income or loss.
3.16 "PERCENTAGE INTERESTS" means the Percentage Interests of the
Members set forth opposite their names on EXHIBIT A attached hereto.
3.17 "REGULATIONS" means the Treasury Regulations promulgated under the
Code.
3.18 "TRANSFER" shall mean any transfer, sale, assignment, gift, pledge
or other disposition or encumbrance.
ARTICLE 4
NATURE OF BUSINESS
4.1 BUSINESS PURPOSE. The business of the Company is to engage in (i)
the design, development, manufacture and wholesale distribution of apparel
bearing the "LIFE & DEATH" trademark, as well as any variations thereof that the
Company may elect to register, and (ii) any other activity for which limited
liability companies may be organized under the laws of the State of California.
4.2 NO ACCOUNTABILITY. The Members and their affiliates may conduct any
business or activity whatsoever without any accountability to the Company or to
any Member; provided, however, that nothing contained in this Article 4 shall
alter, modify, reduce or eliminate the requirements and obligations of the
Company and the Members expressly set forth in this Agreement. Each Member
understands that the other Members and their affiliates may be interested,
directly or indirectly, in various other such businesses and undertakings. The
creation of the Company and the assumption by each of the Members of his, her or
its duties hereunder shall be without prejudice to the respective rights of the
other Members and their affiliates to maintain such other interests and
activities and to receive and enjoy profits or compensation therefrom, and each
Member waives any rights he, she or it might otherwise have to share or
participate in such other interests or activities of the other Members and their
affiliates.
ARTICLE 5
TERM
The term of the Company shall commence on the date hereof and shall
continue in perpetuity, unless earlier terminated under the provisions of
Article 14.
ARTICLE ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
The principal business office of the Company shall be located at such
place as may be designated by the Manager from time to time.
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ARTICLE 7
CAPITAL AND CONTRIBUTIONS
7.1 NO REQUIRED CAPITAL.
(a) No Member shall be obligated to contribute any cash
or property to the capital of the Company, except as
agreed upon by such Member and the Manager.
Notwithstanding the foregoing, as an initial capital
contribution, and in consideration for their
respective initial Membership Interests in the
Company, the Members have contributed the cash set
forth on EXHIBIT A attached hereto and incorporated
herein by reference.
(b) The Members may, but shall not be required to,
contribute additional capital in the form of cash, as
set forth on EXHIBIT B, attached hereto and
incorporated herein by reference ("ADDITIONAL
CAPITAL"). In the event that the Manager determines
that Additional Capital is required, the Manager
shall provide written notice to each of the Members
as to the amount that is required, and each Member
shall be required to contribute its/his pro-rata
share within thirty (30) days from the date of such
notice. In the event that any Member is unable to
contribute Additional Capital, then no Member shall
be required to contribute Additional Capital; in
which case the Manager may obtain a loan from BLHL as
described in subsection (c) below. Under no
circumstances shall any Member's percentage interest
be diluted by its/his refusal or inability to
contribute Additional Capital under this provision.
(c) In the event that additional working capital is
needed, but the Members do not wish to contribute
Additional Capital or the Members have already
contributed Additional Capital up to the limits set
forth on Exhibit B, then any Member may, at its sole
discretion, make a loan to the Company, which such
loan shall be evidenced by a promissory note with
interest payable at prime plus 1% and shall contain
standard terms and conditions, all of which must be
approved by the Manager (each a "MEMBER LOAN").
7.2 LIMITED LIABILITY. Members shall not be liable to creditors of the
Company, and shall not be required to restore all or any portion of a deficit
balance in any such Member's Capital Account with the Company.
7.3 NO INTEREST ON CONTRIBUTION. No Member shall have the right to
receive interest on its/his capital contributions to the Company. 7.4 CAPITAL
ACCOUNTS. Capital Accounts shall be maintained for the Members in accordance
with Section 704(b) of the Code and the Regulations promulgated thereunder.
ARTICLE 8
DISTRIBUTIONS
8.1 DISTRIBUTIONS. For any fiscal year of the Company Cash Flow
shall be distributed by the Manager as follows:
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(a) First, fifty percent (50%) of the Cash Flow, if any, for each
fiscal year shall be retained by the Company for working
capital and reserves (provided that when the Manager
reasonably determines that any such working capital and/or
reserves are no longer necessary, then any such amounts shall
be distributed in accordance with the remaining provisions of
this Section 8.1);
(b) Second, thirty percent (30%) of the Cash Flow, if any, for
each fiscal year shall be used to repay the principal on any
outstanding Member Loan. If there are no outstanding Member
Loans, then the Cash Flow under this provision shall be
distributed to each of the Members, pro rata, to the extent of
any unreturned Additional Capital contribution of such Member
in excess of its/his initial capital contribution as set forth
on EXHIBIT A (provided that at such time as any such
unreturned capital contributions are reduced to zero (0) any
Cash Flow that would otherwise be distributed pursuant to this
Section 8.1(b) shall instead be distributed pursuant to
Section 8.1(c)); and
(c) Thereafter, any remaining Cash Flow shall be distributed to
the Members in proportion to their respective Percentage
Interests.
(d) Notwithstanding the foregoing, at any time the Manager
believes that sufficient Cash Flow exists to make a
distribution within the guidelines set forth in subsections
(a), (b) and (c) above, then the Manager may cause an interim
distribution, it being the intent of this subsection that the
Manager shall not be required to wait until the fiscal year
end to make distributions.
8.2 RETURN OF CAPITAL. No Member shall be entitled to a return of his,
her or its capital contribution except in accordance with this Article 8 or
Article 14.
8.3 WITHHOLDING. Any withholding tax required by law to be withheld by
the Company with respect to a Member shall be treated as a distribution to such
Member.
8.4 LIMITATION ON DISTRIBUTIONS. A Member may not receive a
distribution from the Company to the extent that, after giving effect to the
distribution, all liabilities of the Company, other than liability to Members on
account of their capital contributions, would exceed the fair value of the
Company's assets.
8.5 IN-KIND DISTRIBUTION. Assets of the Company (other than cash) shall
not be distributed in kind to the Members without the prior written approval of
the Manager.
ARTICLE 9
ALLOCATIONS OF PROFITS AND LOSSES
9.1 NET LOSSES. Net Losses of the Company for each fiscal year of the
Company (or part thereof) shall be allocated to the Members at the end of such
fiscal year (or part thereof) in proportion to their respective Percentage
Interests.
9.2 NET PROFITS. Net Profits of the Company for each fiscal year of the
Company (or part thereof) shall be allocated to the Members at the end of such
fiscal year (or part thereof) in proportion to their respective Percentage
Interests.
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9.3 SPECIAL ALLOCATIONS. Notwithstanding any other provision of this
Agreement, no Net Losses or items of expense, loss or deduction shall be
allocated to any Member to the extent such an allocation would cause or increase
such Member's Adjusted Capital Account Deficit and any such Net Losses and items
of expense, loss and deduction shall instead be allocated to the Members in
proportion to their respective "interests" in the Company as determined in
accordance with Treasury Regulation Section 1.704-1(b). In addition, items of
income and gain shall be specially allocated to the Members in accordance with
and to the extent required by the qualified income offset provisions set forth
in Treasury Regulation Section 1.704-1(b)(2)(ii)(d). Notwithstanding any other
provision in this Article IX, (i) any and all "partnership nonrecourse
deductions" (as defined in Treasury Regulation Section 1.704-2(b)(1)) of the
Company for any fiscal year or other period shall be allocated to the Members in
proportion to their respective Percentage Interests; (ii) any and all "partner
nonrecourse deductions" (as such term is defined in Treasury Regulation Section
1.704-2(i)(2)) attributable to any "partner nonrecourse debt" (as such term is
defined in Treasury Regulation Section 1.704-2(b)(4)) shall be allocated to the
Member that bears the "economic risk of loss" (as determined under Treasury
Regulation Section 1.752-2) for such "partner nonrecourse debt" in accordance
with Treasury Regulation Section 1.704-2(i)(l); (iii) each Member shall be
specially allocated items of Company income and gain in accordance with the
partnership minimum gain chargeback requirements set forth in Treasury
Regulation Sections 1.704-2(f) and 1.704-2(g); and (iv) each Member with a share
of minimum gain attributable to any "partner nonrecourse debt" shall be
specially allocated items of Company income and gain in accordance with the
partner minimum gain chargeback requirements of Treasury Regulation Sections
1.704-2(i)(4) and 1.704-2(i)(5). The Members' respective shares of the Company's
"excess nonrecourse liabilities" under Treasury Regulation Section 1.752-3(a)(3)
shall be allocated to the Members in proportion to their respective Percentage
Interests.
9.4 CURATIVE ALLOCATIONS. The allocations set forth in Section 9.3 (the
"REGULATORY ALLOCATIONS") are intended to comply with certain requirements of
the Treasury Regulations. It is the intent of the Members that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Section 9.4. Therefore,
notwithstanding any other provision of this Article 9 (other than the Regulatory
Allocations), the Manager is hereby authorized to make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner he
determines appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory Allocations
were not part of this Agreement and all Company items were allocated pursuant to
Sections 9.1 and 9.2. In exercising his discretion under this Section 9.4, the
Manager shall take into account future Regulatory Allocations under Section 9.3
but, although not yet made, are likely to offset other Regulatory Allocations
previously made under the provisions of Section 9.3.
9.5 DIFFERING TAX BASIS; TAX ALLOCATION. Depreciation and/or cost
recovery deductions and gain or loss with respect to each item of property
treated as contributed to the capital of the Company shall be allocated among
the Members for federal income tax purposes in accordance with the principles of
Section 704(c) of the Code and the Treasury Regulations promulgated thereunder,
and for state income tax purposes in accordance with comparable provisions of
the California Revenue & Taxation Code, as amended, and the regulations
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promulgated thereunder, so as to take into account the variation, if any,
between the adjusted tax basis of such property and its book value (as
determined for purposes of the maintenance of Capital Accounts in accordance
with this Agreement and Treasury Regulation Section 1.704-1(b)(2)(iv)(g)).
9.6 ELECTION; ALLOCATIONS BETWEEN TRANSFEROR AND TRANSFEREE. Upon the
death of a Member, the transfer of the Membership Interest of any Member or the
distribution of any property of the Company to a Member, the Company may file,
in the reasonable discretion of the Manager, an election in accordance with
applicable Treasury Regulations, to cause the basis of the Company property to
be adjusted for federal income tax purposes as provided by Sections 734 and 743
of the Code. Upon the transfer of all or any part of the Interest of a Member as
hereinabove provided, Net Profits and Net Losses shall be allocated between the
transferor and transferee on the basis of the computation method which is
determined in the reasonable discretion of the Manager to be in the best
interests of the Company, provided such method is in conformity with the methods
prescribed by Section 706 of the Code and Treasury Regulation Section
1.706-1(c)(2)(ii).
ARTICLE 10
BOOKS AND RECORDS; TAX MATTERS PARTNER
10.1 BOOKS. There shall be maintained and kept at all times during the
continuation of the Company proper and usual books of account which shall
accurately reflect the condition of the Company and shall account for all
matters concerning the management thereof, and which books shall be maintained
and kept at the principal office of the Company or at such other place or places
as the Manager may from time to time determine. The Company's books and records
shall be maintained on the basis selected by the Manager.
10.2 FISCAL YEAR. The fiscal year of the Company shall end on December
31 of each year.
10.3 TAX MATTERS PARTNER. The "tax matters partner" of the Company
within the meaning of Code section 6231(a)(7) shall be Naouri.
ARTICLE 11
MANAGEMENT; VOTING AND
CONTROL RIGHTS OF MEMBERS
11.1 THE MANAGER. The business of the Company shall be managed by the
"Manager". The initial Manager of the Company shall be Naouri. Each of the
initial and subsequent Managers shall serve until he or she resigns, is removed
for cause by a Majority in Interest of the Members, dies or becomes
incapacitated, in which case a Majority in Interest of the Members may, at their
election, designate a successor Manager, who shall serve at as a Manager until
he, she or it resigns, dies, becomes incapacitated, dissolves, becomes bankrupt
or is removed for cause by a Majority in Interest of the Members.
11.2 MANAGEMENT POWERS AND DUTIES. The Manager shall have the general
supervision, direction, and control of the business of the Company, and the
general powers and duties of management typically vested in the board of
directors and president of a corporation, including, but not limited to, the
right to enter into and carry out contracts of all kinds; to employ employees,
agents, consultants and advisors on behalf of the Company; to lend or borrow
money and to issue evidences of indebtedness; to bring and defend actions in law
or at equity; and to buy, own, manage, sell, lease, mortgage, pledge or
otherwise acquire or dispose of the Company property. Without limiting the
generality of this Section 11.2, the Manager shall have the power and authority,
subject to the limitations of the Act and any limitations set forth elsewhere
herein:
(a) To acquire, sell, transfer, exchange, lease or dispose of
property, or any portion thereof, from or to any person as the
Manager may determine, and the fact that a Member or a Manager
is directly or indirectly affiliated or connected with any
such person shall not prohibit the Manager from dealing with
that person;
(b) To borrow money for the Company from banks, other lending
institutions, the Members, the Manager or any other persons on
such terms as the Manager deems appropriate, and in connection
therewith, to hypothecate, encumber and grant security
interests in the assets of the Company to secure repayment of
the borrowed sums;
(c) To purchase liability and other insurance to protect the
property and business of the Company;
(d) To hold and own any Company real and personal properties in
the name of the Company;
(e) To invest any funds of the Company temporarily (by way of
example but not limitation) in time deposits, short-term
governmental obligations, commercial paper or other
investments;
(f) To execute on behalf of the Company all instruments and
documents, including, without limitation, checks, drafts,
notes and other negotiable instruments, mortgages or deeds of
trust, security agreements, financing statements, documents
providing for the acquisition, mortgage or disposition of
property of the Company, assignments, bills of sale, leases,
partnership or limited liability company agreements, and any
other instruments or documents necessary or appropriate, in
the opinion of the Manager, to the business of the Company;
(g) To employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate
them from Company funds;
(h) To retain and compensate employees and agents generally, and
to define their duties;
(i) To effectuate a merger of the Company with any other limited
liability company, a corporation or a general or limited
partnership;
(j) To enter into any and all other agreements on behalf of the
Company, with any other person for any purpose necessary or
appropriate to the conduct of the business of the Company;
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(k) To adopt and implement annual budgets relating to the
operations of the Company;
(l) To pay reimbursement from the Company of all expenses of the
Company reasonably incurred on behalf of the Company; and
(m) To do and perform all other acts as may be necessary or
appropriate to the conduct of the business of the Company.
11.3 MAJORITY VOTE REQUIRED. In the event there is more than one
Manager, all actions taken and all decisions made by the Managers shall be by
majority vote.
11.4 RELIANCE ON A MANAGER'S SIGNATURE. Every contract, deed, mortgage,
lease and other instrument executed by the Manager shall be conclusive evidence
in favor of every person or entity relying thereon or claiming thereunder that,
at the time of the delivery thereof, (i) the Company was in existence, (ii)
neither this Agreement nor the Articles of Organization had been amended in any
manner so as to restrict the delegation of authority to the Manager as provided
herein and (iii) such action was duly approved by the Manager.
11.5 MANAGER'S RIGHT TO APPOINT OFFICERS. The Manager may appoint a
president, secretary, chief financial officer and such other officers of the
Company as appropriate, each of whom shall hold office for such period, have
such authority and perform such duties as the Manager determines.
11.6 BANK ACCOUNTS. The funds of the Company shall be deposited in such
bank account or accounts, or invested in such interest-bearing or non-interest
bearing investments, as shall be designated by the Manager.
11.7 RELIANCE UPON ADVISORS. The Manager may consult with legal counsel
chosen by them and any act or omission suffered or taken by them on behalf of
the Company or in furtherance of the interests of the Company in good faith in
reliance upon and in accordance with the advice of such counsel shall be full
justification for any such act or omission and the Manager shall be fully
protected in so acting or omitting to act, provided such counsel was chosen with
reasonable care.
11.8 DEVOTION OF TIME; NON-EXCLUSIVITY. No Manager or officer shall be
obligated to devote all of his, her or its time or business efforts to the
affairs of the Company, but shall devote such time, effort and skill as he, she
or it deems appropriate for the operation of the Company and the performance of
his, her or its obligations.
11.9 COMPENSATION; ADMINISTRATIVE EXPENSES. The Manager shall be
entitled to receive reasonable compensation for services rendered by him or her
in the management of the Company's business; and each officer shall be
compensated in such manner as the Manager reasonably determines. The Company
shall provide the Manager with (or, at the Manager's election, reimburse the
Manager for) reasonable office space, personnel, equipment, supplies and other
administrative and management support that may be necessary or appropriate in
connection with the operation of the business of the Company.
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11.10 LIMITED LIABILITY. No Manager or officer shall be personally
liable under any judgment of a court, or in any other manner, for any debt,
obligation or liability of the Company, whether that liability or obligation
arises in contract, tort or otherwise, solely by reason of being a Manager or
officer, provided that such person acted in good faith and in a manner that was
believed to be in the best interests of the Company. No Manager or officer shall
be liable to the Company or to any Member for any loss or damage sustained by
the Company or any Member, unless the loss or damage shall have been the result
of fraud, deceit, gross negligence, reckless or intentional misconduct, or a
knowing violation of law by the Manager or officer.
11.11 LIMITATION ON MEMBERS' AUTHORITY. No Member shall be an agent of
the Company solely by virtue of being a Member; and no Member shall have
authority to act for or on behalf of the Company solely by virtue of being a
Member, except as may be otherwise expressly provided in this Agreement.
ARTICLE 12
TRANSFER OF MEMBERSHIP INTEREST
12.1 TRANSFER RESTRICTIONS. Until such time that the Members have each
been fully reimbursed for any working capital contribution contributed above
its/his initial capital contribution, and any outstanding Member Loans have been
fully repaid, no Member shall be entitled to Transfer any portion of his
Membership Interest. Any attempted Transfer of any Membership Interest to any
person that is made in violation of the foregoing shall be invalid and shall not
be reflected on the Company's books.
12.2 TRANSFERS BY BEQUEST, INCAPACITATION, BANKRUPTCY. In the event
that a Member dies, becomes incapacitated or becomes the subject of a proceeding
under the U.S. Bankruptcy Code or similar proceeding that has not been dismissed
within ninety (90) days of its commencement (the "INCAPACITATED MEMBER"), the
other Members shall have the right, pro-rata, to purchase such Incapacitated
Member's Membership Interest in the Company at a price equal to the book value
of such Membership Interest.
ARTICLE 13
ADMISSION OF NEW MEMBERS;
AMENDMENT TO OPERATING AGREEMENT
AND ARTICLES OF ORGANIZATION
13.1 ADMISSION OF MEMBERS. New members may be admitted to the Company only upon
the consent of the Majority in Interest of the Members. Any new members shall be
admitted upon such terms and conditions as may be determined by the Majority in
Interset of the Members, consistent with this Agreement, the Company's Articles
of Organization and any applicable provision of law or rule of a governmental
agency or self-regulating organization which has jurisdiction over the business
of the Company.
13.2 AMENDMENTS. This Agreement and the Articles of Organization may
not be amended in whole or in part except upon the written consent of the
Manager and a Majority in Interest of the Members; provided, however, that no
amendment which has a materially adverse effect on a Member shall be effective
hereunder without the consent of such Member. Notwithstanding anything contained
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herein to the contrary, the Manager may amend this Agreement without any vote,
consent, approval, authorization or other action of any Member (provided that
notice of such amendment is given to all Members) to (a) add to the duties or
obligations of the Manager or surrender any right or power granted to the
Manager in this Agreement for the benefit of the Members; (b) cure any
ambiguity, correct or supplement any provision in this Agreement that may be
inconsistent with any other provision in this Agreement, or make any other
provisions with respect to matters or questions arising under this Agreement
that will not be inconsistent with the intent of this Agreement; (c) reflect the
withdrawal, addition or substitution of Members; (d) elect for the Company to be
bound by any successor statute to the Act governing limited liability companies
if, in the opinion of the Manager, the amendment does not have a materially
adverse effect on the Members or the Company; (e) conform this Agreement to
changes in the Act or interpretations thereof which the Manager believes, in his
or her exclusive discretion, appropriate, necessary or desirable if, in the
Manager's reasonable opinion, such amendment does not have a materially adverse
effect on the Members or the Company; (f) change the name of the Company; (g)
conform the profit and loss allocation provisions to any applicable requirements
of Federal or state law which the Manager, in his or her exclusive discretion,
believes appropriate, necessary or desirable if, in the Manager's reasonable
opinion, such amendment does not have a materially adverse effect on the Members
or the Company; and (h) make any change which, in the exclusive discretion of
the Manager, is advisable to qualify or to continue the qualification of the
Company as a limited liability company under the laws of the State of
California.
ARTICLE 14
DISSOLUTION OF THE COMPANY
14.1 EVENTS OF DISSOLUTION. The Company shall be dissolved on the
earlier of the following events:
(a) The agreement of a Majority in Interest of the Members to
dissolve;
(b) The sale or liquidation of substantially all the assets of the
Company;
(c) The expiration of the term of the Company; or
(d) As otherwise provided by the Act.
14.2 RIGHTS TO ▇▇▇▇. In the event that the Company is dissolved and the
▇▇▇▇ is no longer being exploited by the Company, or in the event that the
Members determine to dissolve the Company and distribute its assets, then each
Member shall have the opportunity to purchase the ▇▇▇▇ at its then fair market
value.
14.3 APPLICATION OF PROCEEDS. The assets of the Company on winding-up
shall be applied first to the expenses of the winding-up, liquidation and
dissolution, second, to creditors, in order of priority as provided by law,
third, to establish a reserve for any conditional, contingent or unmatured
liabilities of the Company and thereafter distributed to the Members pro rata in
accordance with their respective positive Capital Accounts.
11
14.4 NEGATIVE CAPITAL ACCOUNTS. If any Member has a deficit balance in
his, her or its Capital Account (after giving effect to all contributions,
distributions and allocations for all fiscal years, including the fiscal year
during which such liquidation occurs), such Member shall have no obligation to
make any contribution to the capital of the Company with respect to such
deficit, and such deficit shall not be considered a debt owed to the Company or
to any other person for any purpose whatsoever.
14.5 NO LIABILITY. No Member shall be personally liable for any debts,
liabilities or obligations of the Company, whether to the Company, any Member or
to the creditors of the Company, beyond the amount contributed by such Member to
the capital of the Company, such Member's share of the accumulated but
undistributed profits of the Company, if any, and the amount of any distribution
(including the return of any capital contribution) made to such Member required
to be returned to the Company pursuant to the Act. Each Member shall look solely
to the assets of the Company for all distributions with respect to the Company
and for the return of his, her or its capital contribution and shall have no
recourse therefore against any other Member. The Members shall not have any
right to demand or receive property other than cash upon dissolution and
termination of the Company; and, except as provided in this Article 14 upon
dissolution and termination of the Company, the Members shall not have any right
to demand, at any time, the return of their capital contributions to the
Company.
ARTICLE 15
LIABILITY AND INDEMNIFICATION
15.1 LIMITATION ON LIABILITY. No Member, Manager, officer, employee or
agent of the Company, a Member or a Manager shall be liable to the Company or
any other Member or Manager for any expenses, damages or losses arising out of
the performance of his, her or its duties for the Company other than those
expenses, damages or losses directly attributable to such person not acting in
good faith and in a manner that he, she or it reasonably believed to be in or
not opposed to the best interests of the Company or attributable to such
person's breach of his, her or its duty of loyalty to the Company.
15.2 INDEMNIFICATION. The Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in the right of
the Company or by any Member) by reason of the fact that he, she or it is or was
a Member, Manager, employee or agent of the Company, a Member or a Manager
against expenses (including attorneys' fees) judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the fullest extent permitted under California law.
ARTICLE 16
MISCELLANEOUS
16.1 DISPUTED RESOLUTION. Any controversy or dispute arising out of or
relating to (a) this Agreement (including the interpretation of any of the
provisions hereof), (b) the parties' rights under the Act, whether arising in
contract, tort or any other legal theory, or (c) the action or inaction of any
Member, Manager or officer, and whether based on federal, state or local statute
12
or common law and regardless of the identities of any other defendants, other
than requests for immediate equitable relief (a "DISPUTE"), then such Dispute
shall be settled by agreement, mediation or arbitration in accordance with
EXHIBIT C hereto. No action at law or in equity based upon any claim arising out
of or related to this Agreement shall be instituted in any court by any Member
except (i) an action to compel arbitration pursuant to this Section 16.1 or (ii)
an action to enforce an award obtained in an arbitration proceeding in
accordance with this Section 16.1.
16.2 ENTIRE AGREEMENT. Except as herein provided, this Agreement
constitutes the entire agreement between the parties relating to the subject
matter hereof. It supersedes any prior agreement or under-standings between them
relating to the subject matter hereof, and it may not be modified or amended in
any manner other than as set forth herein. For purposes of clarity, the Joint
Venture Agreement Term Sheet is hereby terminated and deemed null and void AB
INITIO.
16.3 GOVERNING LAW. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of California.
16.4 BINDING AGREEMENT. Except as herein otherwise specifically
provided, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, heirs, administrators,
executors, successors and assigns.
16.5 CAPTIONS. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit or extend the scope or
intent of this Agreement or any provision thereof. All pronouns shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person (which term, for purposes of this Agreement, shall include
individuals and entities) may require in the context thereof.
16.6 VALIDITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement, or the application of
such provision to any person or circumstances shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected hereby.
16.7 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned Members executed this Agreement to
be effective as of the date first set forth above.
Members: BLUE HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------
Its: CFO
--------------------------
/s/ Alexandre Caugant
-------------------------------
Alexandre Caugant
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
13
EXHIBIT A
INITIAL CAPITAL CONTRIBUTIONS
Cash/Property Contribution Membership/
Name of Member Contributed Dollar ($) Value Percentage Interest
Blue Holdings, Inc. Cash $186,142.73 50.00%
Alexandre Caugant Cash $93,071.36 25.00%
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Cash $93,071.37 25.00%
TOTAL $372,285.46 100.00%
EXHIBIT B
ADDITIONAL CAPITAL CONTRIBUTIONS
Cash/Property Contribution Membership/
Name of Member Contributed Dollar ($) Value Percentage Interest
Blue Holdings, Inc. Cash $63,857.27 50.00%
Alexandre Caugant Cash $31,928.64 25.00%
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Cash $31,928.63 25.00%
TOTAL $127,714.54 100.00%
EXHIBIT C
ARBITRATION PROVISIONS
1. RULES; JURISDICTION. Any Dispute that has not been resolved by
agreement of the parties or by mediation, as provided in Section 16.1 of the
Agreement, shall be settled by arbitration that must be conducted in the County
of Los Angeles, California, and, except as herein specifically stated, in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA Rules") then in effect (but not under the auspices of the
AAA), and subject to the provisions of Title 9 of Part 3 of the California Code
of Civil Procedure or any successor ▇▇▇▇▇▇▇ ("▇▇▇▇▇ ▇"). To the extent the AAA
Rules conflict with, or are supplemented by, the provisions of Title 9, the
provisions of Title 9 shall govern and be applicable. However, in all events the
arbitration provisions provided herein shall govern over any conflicting rules
that may now or hereafter be contained in either the AAA Rules or Title 9. Any
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction of the subject matter thereof. The arbitrators shall have
the authority to grant any equitable and legal remedies that would be available
in any judicial proceeding instituted to resolve a Dispute. The parties hereby
submit to the in personam jurisdiction of the Superior Court of the State of
California for the County of Los Angeles and the United States District Court
for the Central District of California for purposes of confirming or enforcing
an arbitral award, including without limitation an award of equitable relief,
and entering judgment thereon. The parties hereto waive any and all objections
that they may have as to jurisdiction or venue in any of the above courts.
2. COMPENSATION OF ARBITRATORS. Any such arbitration shall be conducted
before a panel of three arbitrators who shall be compensated for their services
at a rate to be determined by the parties, but based upon reasonable and
customary hourly or daily consulting rates for the neutral arbitrator in the
event the parties are not able to agree upon the arbitrators' rate of
compensation.
3. SELECTION OF ARBITRATORS. The AAA Rules for the selection of such an
arbitrator shall be followed, except that the selection shall be a partner or
principal of a nationally recognized firm of independent certified public
accountants from the management advisory services department (or comparable
department or group) of such firm.
4. PAYMENT OF COSTS. Each party hereby agrees to pay one half the costs
of the compensation of the arbitrators, the costs of transcripts and all other
expenses of the arbitration proceedings; provided, however, that the prevailing
party in any arbitration, which shall be determined by the arbitrators, shall be
entitled to an award of attorneys' fees and costs, and the arbitrators' fees and
costs, and all other costs of the arbitration shall be paid by the losing party.
5. EVIDENCE; DISCOVERY. All testimony of witnesses at any arbitration
proceeding held pursuant to these provisions shall be taken under oath, and
under the rules of evidence as set forth under the Evidence Code of California
and judicial interpretations thereunder. The parties shall be entitled to
conduct discovery proceedings in accordance with the provisions of Section
1283.05 of the California Code of Civil Procedure.
6. BURDEN OF PROOF; BASIS OF DECISION. For any claim submitted to
arbitration, the burden of proof shall be as it would be if the claim were
litigated in a judicial proceedings except where otherwise specifically provided
in the Agreement to which this is attached, and the decision shall be based on
the application of California law (as determined from statutes, court decisions,
and other recognized authorities) to the facts found by the arbitrators.
7. JUDGMENT. Upon the conclusion of any arbitration proceedings
hereunder, the arbitrators shall render findings of fact and conclusions of law
and a written opinion setting forth the basis and reasons for any decision
reached by them and shall deliver such documents to each party to the Agreement
along with a signed copy of the award in accordance with Section 1283.6 of Title
9.
8. TERMS OF ARBITRATION. The arbitrators chosen in accordance with
these provisions shall not have the power to alter, amend or otherwise affect
the terms of these arbitration provisions or the provisions of the Agreement.
9. EXCLUSIVE REMEDY. Except as specifically provided in this EXHIBIT B
or in the Agreement to which it is attached, arbitration shall be the sole and
exclusive remedy of the parties for any Dispute.
10. ARBITRATION CONFIDENTIAL. Neither party will disclose the existence
of any arbitration proceedings hereunder, nor the outcome thereof, except: (a)
insofar as such disclosure is reasonably necessary to carry out and make
effective the terms of this Agreement, including without limitation, pleadings
or other documents filed seeking entry of judgment upon an award of the
arbitrators; (b) insofar as a party hereto is required by law to respond to any
demand for information from any court, governmental entity, or governmental
agency, or as may be required by federal or state securities laws; (c) insofar
as disclosure is necessary to be made to a party's independent accountants for
tax or audit purposes; (d) insofar as disclosure is necessary to be made to a
party's attorneys for purposes of rendering advice or services relating to this
Agreement; and (e) insofar as the panics may mutually agree in writing.
11. NOTICE; LANGUAGE. Notice of arbitration sent to the other party by
using the following means shall be deemed good and sufficient notice of service:
Notices shall be in writing, shall be sent by certified or registered air mail
with postage prepaid, return receipt requested, or by hand delivery. Such
communications shall be deemed given and received upon delivery, if hand
delivered; or within five (5) days of mailing, if sent by certified or
registered mail. Notices to any Member shall be sent to such Member's last known
business address appearing on the books of the Company.
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
LIFE & DEATH, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
EFFECTIVE AS OF SEPTEMBER 15, 2006
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 FORMATION OF LIMITED LIABILITY COMPANY.......................2
1.1 Formation....................................................2
1.2 Articles of Organization.....................................
1.3 Maintenance of Status........................................2
1.4 Waiver of Right to Partition.................................3
ARTICLE 2 NAME.........................................................3
ARTICLE 3 DEFINITIONS..................................................3
3.1 "Act"........................................................4
3.2 "Adjusted Capital Account Deficit"...........................4
3.3 "Agreement"..................................................4
3.4 "Capital Account"............................................4
3.5 "Cash Flow" .................................................5
3.6 "Code".......................................................6
3.7 "Company"....................................................6
3.8 "Majority in Interest".......................................6
3.9 "Manager"....................................................6
3.10 "▇▇▇▇".......................................................6
3.11 "Members"....................................................6
3.12 "Membership Interest"........................................6
3.13 Net Profits and Net Losses...................................7
3.14 "Percentage Interests........................................7
3.15 "Regulations"................................................8
3.16 "Transfer"...................................................8
ARTICLE 4 NATURE OF BUSINESS...........................................8
4.1 Business Purpose.............................................8
4.2 No Accountability............................................8
ARTICLE 5 TERM.........................................................9
ARTICLE ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ OF BUSINESS..................................9
ARTICLE 7 CAPITAL AND CONTRIBUTIONS....................................9
7.1 No Required Capital..........................................9
7.2 Limited Liability...........................................11
7.3 No Interest on Contribution.................................11
7.4 Capital Accounts............................................11
ARTICLE 8 DISTRIBUTIONS...............................................11
8.1 Distributions...............................................11
8.2 Advance Distribution of Profits.............................
8.3 Return of Capital...........................................13
i
8.4 Withholding.................................................13
8.5 Limitation on Distributions.................................13
8.6 In-Kind Distribution........................................13
ARTICLE 9 ALLOCATIONS OF PROFITS AND LOSSES...........................13
9.1 Net Losses..................................................13
9.2 Net Profits.................................................14
9.3 Special Allocations.........................................14
9.4 Curative Allocations........................................15
9.5 Differing Tax Basis; Tax Allocation.........................16
9.6 Election; Allocations between Transferor and Transferee.....16
ARTICLE 10 BOOKS AND RECORDS; TAX MATTERS PARTNER......................17
10.1 Books.......................................................17
10.2 Fiscal Year.................................................17
10.3 Tax Matters Partner.........................................18
ARTICLE 11 MANAGEMENT; VOTING AND CONTROL RIGHTS OF MEMBERS............18
11.1 The Manager.................................................18
11.2 Management Powers...........................................18
11.3 Majority Vote Required......................................21
11.4 Reliance on a Manager's Signature...........................21
11.5 Manager's Right to Appoint Officers.........................22
11.6 Manager's Right to Issue Membership Interests...............D.
11.7 Bank Accounts...............................................22
11.8 Reliance Upon Advisors......................................22
11.9 Devotion of Time; Non-exclusivity...........................22
11.10 Compensation; Administrative Expenses.......................22
11.11 Limited Liability...........................................23
11.12 Limitation on Members' Authority............................23
ARTICLE 12 TRANSFER OF MEMBERSHIP INTEREST.............................24
12.1 Transfer Restrictions.......................................24
12.2 Transfers by Bequest, Incapacitation, Bankruptcy............24
12.3 Transfer between Members....................................24
ARTICLE 13 ADMISSION OF NEW MEMBERS; AMENDMENT TO OPERATING AGREEMENT
AND ARTICLES OF ORGANIZATION................................25
13.1 Admission of Members........................................25
13.2 Amendments..................................................25
ARTICLE 14 DISSOLUTION OF THE COMPANY..................................27
14.1 Events of Dissolution.......................................27
14.2 Rights to ▇▇▇▇..............................................27
ii
14.3 Application of Proceeds.....................................27
14.4 Negative Capital Accounts...................................28
14.5 No Liability................................................28
ARTICLE 15 LIABILITY AND INDEMNIFICATION...............................29
15.1 Limitation on Liability.....................................29
15.2 Indemnification.............................................29
ARTICLE 16 MISCELLANEOUS...............................................30
16.1 Disputed Resolution.........................................30
16.2 Entire Agreement............................................30
16.3 Governing Law...............................................31
16.4 Binding Agreement...........................................31
16.5 Captions....................................................31
16.6 Validity....................................................31
16.7 Counterparts................................................32
EXHIBIT A.........INITIAL CAPITAL CONTRIBUTIONS
EXHIBIT B.........ARBITRATION PROVISIONS
iii