EXHIBIT 6.13
OPERATING AGREEMENT
OF
INFRASOL LLC
THIS OPERATING AGREEMENT (this "Agreement"), dated and effective as of July 31,
1998, is by and among TECHNOLOGY TRANSITION CORPORATION, a District of Columbia
corporation ("TTC'), and DCH TECHNOLOGY, INC., a Colorado corporation ("DCH"),
as Members.
RECITALS:
WHEREAS, TTC is engaged in, among other activities, project development and
commercialization services, as well as standards development and certification,
and desires to make its expertise available to the Company (as defined
hereinbelow) for as long as TTC owns 20% of the interests of the Company and for
a period of up to two years thereafter;
WHEREAS, DCH is engaged in, among other activities, the development and
application of hydrogen sensor technology and desires to make such technology,
applications, and resulting products available to the Company;
WHEREAS, TTC and DCH desire to form INFRASOL LLC (the "Company") as a limited
liability company under the laws of the State of Maryland for the purposes set
forth herein and, accordingly, desire to enter into this Agreement in order to
establish the manner in which the business and affairs of the Company shall be
managed and to determine their respective rights, duties and obligations with
respect to the Company.
NOW THEREFORE, the parties hereto agree that the operating agreement of INFRASOL
LLC shall be as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Capitalized terms that are not otherwise defined in the body of this Agreement
shall have the following meanings:
Available Cash: for any fiscal period, Available Cash to the Members, of
whatever source or nature, which the Board of Managers determines in the
exercise of its sole discretion is available for distribution and is not
necessary to pay expenses and obligations of the Company, to fund reasonable
reserves, or to make any other expenditure by the Company.
Board of Managers or Managers: the individuals selected by the Members in
accordance with this Agreement who have the continuing, exclusive authority,
pursuant to this Agreement, to manage the Company.
Capital Contribution: with respect to each Member, the total amount of cash, the
principal amount of any promissory note, or the agreed fair market value of any
property contributed by such Member (net of any liabilities assumed by the
Company and any liabilities to which such property is subject) in accordance
with this Agreement.
Capital Transaction: means the sale of all or substantially all of the assets of
the Company.
Code: the Internal Revenue Code of 1986, as amended from time to time, at the
time of reference thereto.
Fair Market Value: for any Unit means (a) the Fair Market Value of the Unit
agreed to by the selling Unit holder and the member having the right to purchase
such Unit; or (b) if the parties are unable to agree to the Fair Market Value
within 15 days after the notice giving rise to such sale, then the Fair Market
Value of the Unit shall be determined by the average of two appraisals of the
Company conducted as of the date of such notice by independent appraisers
generally recognized as experts in the valuation of business entities, with one
appraiser chosen by each of the selling Unit holder and the member having the
right to purchase, with the Company bearing the cost of the appraisals. The
appraisals shall take into account discounts for minority and nonvoting
interests or lack of marketability.
Invested Capital. means the amount of cash and the fair market value of assets
contributed to the Company by any Member reduced by any prior distribution of
Available Cash to such Member pursuant to Section 4. I.C(i).
Net Income and Net Loss: for any fiscal year means the net income or net loss of
the Company for federal income tax purposes for such year as determined by the
accountants for the Company without regard to any adjustments to basis pursuant
to Sections 734 or 743 of the Code, but subject to the following adjustments:
(i) Any income of the Company that is exempt from federal income tax shall be
added to such taxable income or loss.
(ii) Any expenditures of the Company described in Code Section 705(a)(2)(B),
or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury
Regulations (S)1.704- I (b)(2)(iv)(i), shall be subtracted from such taxable
income or loss.
(iii) If the fair market value on the date that an asset is contributed to the
Company (or if the basis of such asset for book purposes is adjusted under the
Treasury Regulations, such adjusted "book" basis) differs from its adjusted
basis for federal income tax purposes at the beginning of such year or other
period, in lieu of the depreciation, amortization and other cost recovery
deductions taken into account for computing such taxable income or loss, the
amount for depreciation, amortization and other cost recovery deductions shall
be equal to an amount which bears the same ratio to such beginning fair market
value (or adjusted "book" basis) as the federal income tax deduction for such
year or other period bears to such beginning adjusted tax basis.
(iv) If the value at which an asset is carried on the books of the Company
differs from its adjusted tax basis and gain or loss is recognized from a
disposition of such asset, the gain or loss shall be computed by reference to
the asset's "book" basis rather than its adjusted tax basis.
Officers: the persons elected by the Board of Managers to serve as officers of
the Company.
Percentage Interest: with respect to each Member, such Member's percentage of
certain specified rights, benefits, duties and obligations by virtue of being a
Member of the Company and holding Units in the Company as set forth on Schedule
A of this Agreement.
Substitute Member: any person who, in accordance with the provisions of this
Agreement, acquires Units in the Company by Transfer from an existing Member and
is admitted to the Company as a Substitute Member with respect to the Units so
acquired.
Transfer: means to endorse, sell, give, pledge, encumber, assign, transfer or
otherwise dispose of, voluntarily or involuntarily or by operation of law, the
subject right, interest, or document.
Unit(s): has the meaning set forth in Section 3.4. 3 -
ARTICLE II
----------
FORMATION; NAME; PRINCIPAL OFFICE;
----------------------------------
PURPOSE; TERM
-------------
Section 2.1 Formation.
The parties have formed INFRASOL LLC as a limited liability company under the
Maryland Limited Liability Company Act, MD. CORPS. & ASSNS CODE ▇▇▇., (S) 4A-101
et seq. (the "LLCAct").
Section 2.2 Principal Office and Resident Agent.
The present address of the principal office of the Company in the State of
Maryland is ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The name and
address of the resident agent of the Company in the State of Maryland is CSC-
Lawyers Incorporating Service Company, ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇. Said resident agent is a Maryland corporation.
Section 2.3 Purpose.
The purposes for which the Company is formed and the business and objects to be
carried on and promoted by it are as follows:
(i) To develop technology solutions in connection with infrastructure
assessment, expansion, evolution, and safety applications, to own, use, license,
purchase, and sell related technology and technology rights, and to provide
other project and technology services;
(ii) To obtain financing for the ownership of the property and assets of the
Company and the operation of its business;
(iii) To do and perform all acts necessary or desirable to carry out any of
the foregoing purposes; and
(iv) To engage in any one or more businesses or transactions, or to acquire
all or any portion of any entity engaged in any one or more businesses or
transactions which the Board of Managers may from time to time authorize or
approve, whether or not related to the business described elsewhere in this
Section 2.3 or to any other business at the time or theretofore engaged in by
the Company.
The foregoing enumerated purposes shall be in addition to and not in limitation
of the general powers of limited liability companies under the LLC Act.
Section 2.4 Articles of Organization.
The Members have caused articles of organization of the Company (the "Articles
of Organization") to be executed by an authorized person (within the meaning of
Section 4A- 101(c) of the LLC Act) and filed for record with the Maryland State
Department of Assessments and Taxation (the "SDAT") before the date of this
Agreement. The Officers and Managers shall take all necessary action to maintain
the Company in good standing as a limited liability company under the LLC Act,
including (without limitation) the filing of any certificates of correction,
articles of amendment and such other applications and certificates as may be
necessary to protect the limited liability of the Members and to cause the
Company to comply with the applicable laws of any jurisdiction in which the
Company owns property or does business.
Section 2.5 Term.
The Company shall have perpetual existence beginning on the date that the
Articles of Organization are filed and received by the SDAT; provided, however,
that the Company may be dissolved in accordance with Section 8.1 of this
agreement.
Section 2.6 Liability of the Members
No Member shall be liable under a judgment, decree or order of a court, or in
any other manner for the debts or any other obligations or liabilities of the
Company solely by reason of being a Member of the Company. A Member shall be
liable only to make the contributions described in Section 3.1 hereof, and shall
not be required to lend any funds to the Company, or to make any other
contributions, assessments or payments to the Company.
Section 2.7 Classification of the Company for Tax Purposes
The Members hereby acknowledge their intention that the Company be classified,
for federal and state income tax purposes, as a partnership and not as an
association taxable as a corporation pursuant to Section 7701(a)(2) of the Code
and the Income Tax Regulations promulgated
thereunder (the "Treasury Regulations"). Each Member hereby covenants and agrees
that, without the consent of all other Members, he will not file on behalf of
the Company a Form 8832 to change the tax classification of the Company or take
any other action inconsistent with such intent.
ARTICLE III
-----------
MEMBERS; INTERESTS IN THE COMPANY;
----------------------------------
CAPITAL CONTRIBUTIONS
---------------------
Section 3.1 Members and capital contributions
A. The respective names, addresses for notice, number of Units, Capital
Contributions and Percentage Interests of the Members are as set forth in
Schedule A. Schedule A shall be amended from time to time to reflect any changes
to the information set forth therein.
B. Each Member (other than a Member who solely holds Class B Units, as defined
in Section 3.4), prior to or simultaneously with its execution and delivery of
this Agreement, has made its initial Capital Contribution to the Company in the
amount appearing next to its name in Schedule A, and (i) with respect to TTC, in
accordance with the terms of the form of promissory note attached hereto as
Exhibit I and (ii) with respect to DCH, in accordance with the provisions of
Section 7.1 below.
Section 3.2 Additional Capital Contributions.
A. Other than the capital contributions of the Members required under Section
3.1, no Member shall be required to make any further capital contributions to
the Company or to lend any funds to the Company.
B. The Board of Managers, on behalf of the Company, may from time to time seek
and accept from one or more Members selected by the Board of Managers additional
capital contributions of cash or in-kind contributions of property on such terms
and subject to such conditions as may be determined by the Board of Managers in
its sole discretion.
Section 3.3 Additional Members.
A. One or more persons may be admitted to the Company from time to time as
additional Members or as Substitute Members upon such terms and subject to such
conditions as may be determined by the Board of Managers.
B. In addition to any other requirements set forth in this Agreement, no
person shall be admitted to the Company as an additional or Substitute Member
unless and until such person has accepted and agreed to all the provisions of
this Agreement by executing a counterpart signature page hereto or an amendment
to this Agreement.
Section 3.4 Issuance and Classification of Units.
A. Each Member's ownership interest in the Company shall be represented by
units of membership interest (each, a "Unit," and in the plural, "Units"). An
unlimited number of Units are authorized. Units may, but need not be,
certificated. The Units shall be divided into two classes: "Class A Units" and
"Class B Units." Unless otherwise expressly provided in this Agreement to the
contrary, (i) all Units shall be classified as Class A Units; (ii) any reference
to "Units" shall include Class A Units and Class B Units; and (iii) any
reference to "Members" or a "Member" shall include the holders of Class A Units
and the holders of Class B Units, except as expressly limited by the terms of
the following Subsection 3.4(B). Each Member's share of the profits and losses
of the Company, right to receive distributions from the Company and voting
powers shall be in proportion to the number and class of Units held by that
Member.
B. The Class B Units are ownership interests in the Company that will be
granted pursuant to the INFRASOL LLC Equity Participation Plan (the "Plan"),
attached hereto as Exhibit 2, and which shall entitle the holder thereof only to
the rights and obligations expressly set forth in this Agreement. The Class B
Units are intended to constitute solely profits interests at and as of the time
of their issuance. The following is a description (which is qualified in its
entirety by the other provisions of this Agreement) of the particular
distinctions and limitations applicable to the Class B Units: (i) the Class B
Units shall be issued in accordance with the Plan and each recipient shall make
a Capital Contribution of Ten Dollars ($10.00) per Unit to the Company with
respect to the Class B Units issued to him or her; and (ii) except as may be
expressly provided in this Agreement or as required by the LLC Act, the holders
of Class B Units, in their capacities as such, shall not be entitled to
participate in the business and affairs of the Company or to vote on any matters
requiring the consent or approval of the Members. The Board of Managers is
hereby authorized to issue Class B Units pursuant to the Plan.
Section 3.5 Capital Accounts.
A. An individual capital account (the "Capital Account") shall be maintained
for each Member. The Capital Account of a Member shall consist of the Capital
Contribution made by such Member and shall be increased by (a) the amount of any
additional Capital Contributions by such Member and (b) the amount of all Net
Income (and any item thereof) allocated to such Member, and decreased by (c) the
amount of all distributions to such Member and (d) the amount of all Net Loss
(and any item thereof) allocated to such Member. The Capital Accounts shall be
determined, maintained and adjusted in accordance with the Code and the Treasury
Regulations promulgated thereunder, including the capital account maintenance
rules in Treasury Regulations (S)1.704-(1)(b)(2)(iv).
B. If any Member shall advance or lend any monies to the Company, the amount
of any such loan shall not increase the Member's Capital Account or affect in
any way its Units or its allocation of the profits, losses or distributions of
the Company.
Section 3.6 General Rules Relating to Capital of the Company.
A. No Member shall be personally liable for the return of the capital
contributions of the Members, or any portion thereof, it being expressly
understood that any such return of contributions shall be made solely from the
Company assets.
B. Except as expressly provided herein, no Member shall have the right to
withdraw or receive a return of all or any part of such Member's capital
contributions. No Member shall have any right to demand or receive property
(other than cash) in return of capital contributions.
ARTICLE IV
----------
ALLOCATIONS AND DISTRIBUTIONS
-----------------------------
Section 4.1 Distributions Prior to Dissolution and Termination.
A. Except as provided in Section 4.1.C, Prior to the dissolution and
termination of the Company, Available Cash shall be distributed at such times
and in such amounts as shall be determined by the Board of Managers in it sole
and absolute discretion as follows: (i) twenty percent (20%) to the persons (the
"Management Team") listed in Schedule B attached hereto, in such proportions as
set forth therein, and (ii) eighty percent (80%) to the Members in proportion to
the number of Units held by each Member.
B. Schedule B may be amended from time to time by the Board of Managers in its
sole and absolute discretion. With respect to any person whose name appears in
Schedule B, the Company, its Officers, and Directors shall have no liability
arising out of the deletion of such person's name from Schedule B or the
modification of such person's percentage of distributions as set forth therein,
and the appearance of any person's name in Schedule B and the designation of
such percentage shall create no right or presumption of membership in such
person in the Company or of employment in such person with the Company and no
right to, expectation of, or presumption regarding any distributions by the
Company with respect to such person, other than distributions in accordance with
the provisions of this Section 4.1. Notwithstanding any provision contained
herein to the contrary, to the extent the amount of distributions in any given
calendar year is insufficient to cover the tax liability of any Member arising
out of such person or entity's being a Member of the Company, the Board of
Managers shall cause the Company to distribute Available Cash to such Member to
make up the deficit.
C. Notwithstanding Section 4.1.A, if the Available Cash is produced by a
Capital Transaction, the eighty percent (80%) of Available Cash not distributed
to the Management Team listed on Schedule B shall be distributed as follows:
(i) First, to the holders of the Class A Units, in the amount of and in
proportion to their respective amounts of Invested Capital; and
(ii) Second, the balance, if any, to the Members, in proportion to the number
of Units held by each Member.
Section 4.2 Allocations of Profits and Losses.
Profits and losses for each fiscal year (or other portion thereof) of the
Company shall be allocated among the Members as set forth in Sections 4.2A and
4.2B.
A. Profits shall be allocated among the Members in the following order:
(i) First, to the Members, in the amount of and in proportion to the losses
previously allocated to such Members pursuant to Section 4.2.B(i) and not
previously reversed by an allocation of profits under this Section 4.2.A(i);
(ii) Second, the balance of profits, if any, to the Members, in proportion to
the number of Units held by each Member.
B. Loss shall be allocated among the Members in the following order:
(i) First, to the Members in proportion to and in the amount of their positive
Capital Account balances; and
(ii) Second, the balance of loss, if any, to the Members, in proportion to the
number of Units held by each Member.
Section 4.3 Allocation of Taxable Income and Taxable Loss.
A. Except as may be otherwise required under the Code or the applicable
Treasury Regulations, each item of taxable income, gain, loss, deduction,
preference or recapture entering into the computation of profits or losses
hereunder shall be allocated to each Member in the same proportion as profits or
losses are allocated.
B. In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members 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 initial fair market value (as used by the Company as the book value of
the property).
C. In the event the book value of any Company property is adjusted upon: (i)
acquisition of Units by any person in exchange for a Capital Contribution, (ii)
any non-pro rata distribution to Members of Company property other than cash, or
(iii) a termination of the Company for federal income tax purposes under Code
Section 708(b)(1)(B), subsequent allocation of income, gain, loss, and deduction
with respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its book value
in accordance with Code Section 704(c) and the Treasury Regulations thereunder,
using such method as may be determined by the Board of Directors.
D. Allocations pursuant to Section 4.3.B and 4.3.C 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 profits or
loss, other items, or distributions pursuant to any provision of this Agreement.
Section 4.4 Distributions Upon Dissolution and Termination.
Upon the dissolution and termination of the Company, the assets remaining after
satisfaction (whether by payment or by establishment of reserves therefor) of
creditors, including Members who are creditors, shall be distributed to the
Members in accordance with the positive balances in their respective Capital
Accounts, subject to the provisions of Section 8.2 below. If assets are to be
distributed in kind, the Members' Capital Accounts shall be appropriately
adjusted, in accordance with Section 4.2, before any such distribution to
reflect any profits and losses which would have been allocated if the property
distributed in kind had been sold for its fair market value (net of liabilities)
by the Company prior to dissolution.
Section 4.5 No Deficit Restoration Obligation.
No Member shall be obligated to contribute additional capital to the Company in
order to restore a deficit balance in such Member's Capital Account except to
the extent of a negative capital account caused by a Member's receipt of
distributions of Available Cash in excess of the profits allocated to such
Member net of the losses allocated to such Member, except to the extent that
such deficit Capital Account results from the Member's receipt of Available cash
in excess of the aggregate profits (reduced by aggregate losses) allocated to
such Member.
ARTICLE V
---------
MANAGEMENT OF BUSINESS AND AFFAIRS OF THE COMPANY
-------------------------------------------------
Section 5.1 Management of Business and Affairs of the Company.
A. The exclusive authority to manage, control and operate the Company shall be
vested in the Board of Managers of the Company, consisting of individuals who
need not be members and who are elected by the members as Managers in accordance
with the Articles of Organization and this Agreement. All powers of the Members
(except for those powers exclusively reserved for the Members under this
Agreement or the LLC Act) shall be exercised by or through the authority of the
Managers serving on the Board of Managers. The number of Managers of the Company
initially shall be two (2), which number may be increased or, if more than one
(1), decreased by action of the Board of Managers; provided that TTC and DCH
shall have the right to elect an equal number of Managers. Initially, each of
TTC and DCH will have the right to elect one (1) Manager. At any time and for
any reason, each of TTC or DCH may remove the Manager so elected by it and elect
a successor Manager with the reasonable concurrence of the other party. The
authority of the Board of Managers expressly includes (without limitation) the
authority to authorize or take any actions described in Section 4A-401 (d) of
the LLC Act without the requirement of any consent or vote of the Members. The
names of the Managers who will serve until their successors are elected and
qualified are ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (TTC Manager) and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (DCH Manager).
B. Notwithstanding the foregoing provisions of Section 5.1(A), and subject to
the oversight of the Board of Managers, the Officers of the Company (as set
forth in Section 5.3 below) shall have the day-to-day authority to manage,
control and operate the Company. By way of example and not by way of limitation
of the foregoing, the appropriate Officer or Officers are authorized to take the
following actions to the extent that such actions are necessary to permit such
Officer or Officers to carry on in the ordinary course the business of the
Company: (i) authorize the Company to incur expenses and make advances, subject
to any dollar limitation set by the Board of Managers; and (ii) take any other
action and make any other decision that is routine and incidental to the day-to-
day conduct of the business and affairs of the Company.
Section 5.2 Operations of the Board of Managers
For purposes of carrying out the business of the Board of Managers, the
following shall apply:
(i) Regular Meetings. Regular meetings of the Board of Managers may be held
at such time and at such place as shall from time to time be determined by
resolution of the Board of Managers. Notice of the time and place of regular
meetings shall be delivered to each Manager at least ten (10) days in advance of
such meetings.
(ii) Special Meetings. Special meetings of the Board of Managers may be
called by any Manager of the Company on three day's notice to each Manager,
either personally or by mail, fax, or telegram.
(iii) Quorum and Voting. At all meetings of the Board of Managers, all the
Managers (or a majority of all the Managers, if the number of Managers is
increased from two) then in office shah constitute a quorum for transaction of
business. All matters and decisions coming to the Board of Managers for
consideration shall require the approval of all Managers (or a majority of all
of the Managers, if the number of Managers is increased from two) at any duly
constituted meeting, and any action taken at any meeting at which there is a
quorum shall be the act of the Board of Managers, except as may be otherwise
specifically provided by this Agreement. If a quorum shall not be present at any
meeting of the Board of Managers, the Manager(s) present thereat may adjourn the
meeting.
(iv) Written Action. Unless otherwise restricted herein, any action required
or permitted to be taken at any meeting of the Board of Managers, or any
committee thereof, may be taken without a meeting if all Managers then in office
consent thereto in writing, and the writing or writings are filed with the
minutes or proceedings of the Board of Managers or committee.
(v) Participation in Meetings by Conference Telephone. Members of the Board
of Managers, or any committee designated by the Board of Managers, may
participate in a meeting of the Board of Managers, or any committee, by means of
a telephone conference call or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
(vi) Chairman of the Board of Managers. The Chairman of the Board of Managers
shall preside at all meetings and proceedings of the Board of Managers and of
the Members at which he or she shall be present. The Chairman of the Board of
Managers shall be an Officer designated by the Board of Managers as set forth
below in Section 5.3.
(vii) Proxies. Any Manager of the Board of Managers may grant a proxy to any
other Manager, or to any Officer, which proxy may be general (provided such
general proxy can only be for a specific meeting) or specific. All proxies must
be in writing.
(viii) Waiver of Notice. In the event that all of the members of the Board of
Managers are present at a meeting of the Board of Managers, and all such members
in writing waive notice of such meeting, then any action properly taken at such
meeting shall be the action of the Board of Managers, notwithstanding that
notice of such meeting under Sections 5.2.C(i) or (ii) shall not have been
provided.
Section 5.3. Officers.
A. The Board of Managers shall appoint Officers of the Company for the purpose
of managing, controlling, and operating the Company on a day-to-day basis. The
Officers shall be elected and shall have powers in accordance with the
following:
(i) Officers. The Officers of the Company shall include a Chairman of the
Board of Managers, President, Secretary and Treasurer. The Board of Managers may
also appoint one or more Vice Presidents, and one or more Assistant Secretaries
and Assistant Treasurers. Any number of offices may be held by the same person.
(ii) Succession. The Officers of the Company shall hold office until their
successors are chosen and qualified. Any Officer elected or appointed by the
Board of Managers may be removed at any time by the affirmative vote of all of
the Managers (or a majority of all the Managers, if the number of Managers is
increased from two). Any vacancy occurring in any office of the Company shall be
filled by the Board of Managers.
(iii) Authority. The Officers of the Company shall have such authority and
shall perform such duties as are customarily incident to their respective
offices, or as may be specified from time to time by the Board of Managers
regardless of whether such authority and duties are customarily incident to such
office.
B. The names of the Officers initially serving the Company, who shall serve
until their successors are duly elected by the Board of Managers and qualified,
and the capacities in which they will serve are as follows:
Name Office(s)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Chairman of the Board
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Secretary
▇▇▇▇▇ ▇▇▇▇▇▇ Treasurer
Section 5.4 No Participation of Members in the Business and Affairs of the
Company.
No Member, in its capacity as such, shall have any authority or right to act for
or bind the Company or to participate in or have any control over Company or its
business, except for (i) such rights to consent to or approve of the actions and
decisions of the Board of Managers as are expressly
provided for in this Agreement, in the Articles of Organization, or under the
LLC Act and (ii) such authority to act for and bind the Company as the Board of
Managers may, from time to time and in the exercise of its sole discretion,
delegate to such Member in writing.
Section 5.5 Noncompetition; Other Businesses of Members.
No Member (including any affiliate of the Company that is controlled by any
Member) shall compete with the business of the Company and the Company shall not
compete with the business of any Member or with such affiliates. Except as set
forth in the preceding sentence and except as may otherwise be agreed in
writing, any Member and any such affiliate of any Member may engage in or
possess an interest in other business ventures of any nature or description
independently or with others, and neither the Company nor any Member shall have
any rights in or to such independent ventures or the income or profits derived
therefrom, and such activities shall not be construed as a breach of any duty of
loyalty or other duty to the other Members or the Company.
Section 5.6 Dealings with Affiliates.
The Company may acquire property from or lease or sell property to, borrow money
from or lend money to, enter into any agreement or contract with, or reimburse
for reasonable out-of-pocket expenses incurred in connection with the business
of the Company, any (i) Member or (ii) affiliate of a Member, on such terms and
conditions as the Board of Managers shall determine to be appropriate. The
Company's entry into the agreements with the Members set forth in Article VII is
hereby specifically authorized.
Section 5.7 Mediation.
A. If a Management Deadlock (as that term is defined in Section 5.8) occurs,
(i) the Managers shall use their good-faith efforts to resolve the dispute by
participating in non-binding mediation on the terms set forth in this Section
5.7 and (ii) no Member shall have the right to invoke the mandatory buy-sell
procedures of Section 5.8 (the "Buy-Sell Procedures") before the end of the
thirty (30) day mediation period provided in this Section 5.7.
B. Any Manager may initiate (the "Initiating Manager") the dispute resolution
procedures of this Section 5.7 by delivering written notice to the other
Manager(s) (singularly or collectively, the "Responding Manager") describing the
decision on which the Managers have not taken action, which written notice shall
include a brief summary of the decision, the differences between the Managers
with respect to the decision, and the material facts regarding the steps that
have been taken by the Managers to resolve their differences. Within ten (10)
days after the receipt of such notice, the Responding Manager shall identify in
writing three (3) individuals with knowledge and experience in businesses
similar to the business of the Company, each of whom would be willing to serve
as a mediator in resolving the dispute. Except as agreed by the Managers in
writing, (i) the mediation shall be held in Washington, DC, or at another
location agreed to by the parties; (ii) the mediator shall be an individual
selected by the Initiating Manager from the list of names submitted by the
Responding Manager or, if none of the individuals identified by the Responding
Manager is acceptable to the Initiating Manager, by Endispute, Inc., or by any
other third-party dispute
resolution service that is mutually agreed to by the Managers; (iii) the cost of
the mediation shall be bome by the Company; and (iv) the mediation shall be
concluded within thirty (30) days after the Responding Manager has delivered the
list of names in writing to the Initiating Manager. If the Managers are unable,
despite their good-faith efforts, to agree upon an acceptable mediator or to
resolve the Management Deadlock within the thirty (30) day mediation period, any
Member may invoke the Buy-Sell Procedures of Section 5.8.
Section 5.8 Mandatory Buy-Sell Procedures.
A. The Buy-Sell Procedures may be initiated by any Member upon the
occurrence of a Management Deadlock. A "Management Deadlock" shall be deemed to
have occurred if (x) a Manager brings an issue to the Board of Managers to be
voted on within ten (10) days after its introduction and a resolution of the
issue is not obtained because a majority of Managers cannot agree or because one
or two of the Managers refuse(s) to vote on the issue; and (y) the same issue is
brought to the Board of Managers on one additional occasion and, on such
occasion, no resolution of the issue is obtained. The Member initiating the Buy-
Sell Procedures shall be referred to herein as the "Offering Member" and the
Member(s) other than the Offering Member shall be referred to herein as the
"Offeree Member."
B. In order to initiate the Buy-Sell Procedures, the Offering Member shall
deliver written notice (the "Buy-Sell Notice") to the Offeree Member stating
that the Offering Member intends to initiate the Buy-Sell Procedures and the
amount that the Offering Member is willing to pay as the purchase price for all
of the Offeree Member's Units (the "Offer Price"). Upon receipt of the Buy-Sell
Notice, the Offeree Member shall have the option either:
(i) To elect to sell all of its Units to the Offering Member for an amount
equal to the Offer Price (with the Offer Price to be divided among the Offeree
Members in proportion to their respective Percentage Interests if more than one
Offeree Member); or
(ii) To elect to purchase all of the Units of the Offering Member for an
amount equal to the Offer Price.
C. The Offeree Member shall have sixty (60) days from the date of the Buy-
Sell Notice to notify the Offering Member of its election hereunder. If the
Offerce Member fails to notify the Offering Member of its election within said
sixty (60) days, then, as of the day following the expiration of such 90-day
period, the Offeree Member shall be conclusively deemed to have elected to sell
all, but not less than all, of its Units to the Offering Member at the Offer
Price.
D. If, following an election by the Offeree Member to purchase all of the
Units of the Offering Member 'or to sell all of its Units to the Offering
Member, such purchase does not close due to the fault of the Member obligated to
sell its Units, from and after the date fixed for such closing, the defaulting
Member shall have no further rights or interests under this Agreement or in the
Company other than to receive the purchase price required hereunder.
E. The closing of the sale of a Member's Units pursuant to this Section 5.8
shall be held at the principal office of the Company, or at such other place as
agreed to in writing by the parties, and shall occur within ninety (90) days
following the date on which the selling Member becomes bound
to sell and the purchasing Member become bound to purchase such Units pursuant
to this Section 5.8.
Section 5.9 Indemnification.
A. The Company shall indemnify (i) its Managers and Officers to the fullest
extent permitted or authorized by the laws of the State of Maryland now or
hereafter in force applied as if the Company were a Maryland corporation,
including (without limitation) the advance of expenses under the procedures and
to the full extent permitted by law, and (ii) other employees and agents of the
Company to such extent as shall be authorized by the Board of Managers and is
permitted by law. The foregoing rights of indemnification shall not be exclusive
of any other rights to which those seeking indemnification may be entitled. The
Board of Managers may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
arnend from time to time such resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be permitted by
law. No amendment of the Articles of Organization or this Agreement or repeal of
any of the provisions thereof shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal. The indemnification shall be payable solely
from the assets of the Company and no Member shall have any personal or
corporate liability therefor.
B. To the fullest extent permitted by Maryland statutory or decisional law,
as amended or interpreted, no Manager or Officer of the Company shall be
personally liable to the Company or any Members for money damages. No amendment
of the Articles of Organization or this Operating Agreement, or repeal of any of
their respective provisions, shall limit or eliminate the limitation on
liability provided to Managers and Officers hereunder with respect to any act or
omission occurring prior to such amendment or repeal.
ARTICLE VI
----------
TRANSFERABILITY OF UNITS
------------------------
Section 6.1 Transfer of Units.
No Member shall Transfer all or any part of such Member's Units, except upon
receiving the prior written consent of the Board of Managers and each other
Member, which consent may be withheld for any reason, or otherwise in accordance
with the terms of this Agreement.
Section 6.2 Right of First Refusal; Tag-Along and Drag- Along.
If any Member (in this capacity, a "Selling Member") desires to engage in a
Transfer of all or any portion of its Units (the " Transferable Units") by any
means whatsoever, he shall first comply with the following:
A. Notice. The Selling Member shall give written notice (the "Selling
Member Is Notice") to the other Member(s), (singularly and collectively, the "
Offeree Member") stating the date thereof, the number of Transferable Units, the
percentage of the total number of Units owned by the Selling
Member represented by the Transferable Units (the "Applicable Percentage"), and
the ten-ns and conditions of the proposed Transfer including, without
limitation, the name and address of the proposed transferee, and the price, if
any, per Transferable Units (the "Notice Price") offered by the proposed
transferee.
B. Right of Purchase; Tag-Along. The Offeree Member shall have the right
and option to:
(i) purchase all or any of the Transferable Units or
(ii) require the proposed transferee to purchase no greater than the
Applicable Percentage of the Offeree Member's Units ("tag-along rights")
on the same terms as the proposed Transfer, subject to Section 6.2(E) below. The
Offeree Member's option may be exercised only in writing delivered to the
Selling Member within fifteen (15) days after the date of the Selling Member's
Notice, stating the number of Transferable Units which the Offeree Member
desires to purchase (if proceeding under B(i) of this paragraph) or the number
of the Offeree Member's Units that the Offeree Member desires to sell (if
proceeding under B(ii) of this paragraph). Any Transfer of Units under this
Section 6.2(B) shall be consummated within ninety (90) days after the date of
the Selling Member's Notice.
C. Sale to Proposed Transferee. If all of the Transferable Units are not
purchased by the Offeree Member or if the Offeree Member has not exercised its
tag-along rights, then the Selling Member may take either or both of the
following actions:
(i) transfer such unpurchased Transferable Units to the proposed transferee
(ii) require the Offeree Member to tender to the proposed transferee the
Applicable Percentage of the Offeree Member's Units
all on terms not more favorable to the proposed transferee than those described
to the Offeree Member in the Selling Member's Notice and subject to the
remaining provisions of this Agreement; provided, however, that the proposed
transferee shall become a party to this Agreement.
D. Re-offer on Failure to Sell. If the Selling Member fails to consummate a
Transfer to the proposed transferee on the terms and conditions set forth in the
Selling Member's Notice within ninety (90) days after the date of the Selling
Member's Notice, then no Transfer of Transferable Shares may be made thereafter
to the proposed transferee or to any other transferee without again complying
with the provisions of this Section 6.2.
E. Purchase Price; Sale Price. The per Unit purchase price for any Units
purchased by the Offeree Member under this Section 6.2 shall be equal to the
lesser of. (i) the per Unit Fair Market Value multiplied by ninety percent
(90%); and (ii) if the proposed Transfer is a sale, the Notice Price. The per
Unit sale price for any Units sold by the Offeree Member under this Section 6.2
shall be equal to the greater of. (i) the per Unit Fair Market Value; and (ii)
if the proposed Transfer is a sale, the Notice Price.
Section 6.3 Option Upon Involuntary Transfer.
If any Units are transferred by operation of law to any person other than a
Member, or if (a) any Member shall be adjudicated as bankrupt or make an
assignment for the benefit of creditors; (b) bankruptcy proceedings in which a
Member is alleged to be insolvent or unable to pay its debts as they mature are
instituted by or against it, and the Member consents thereto or admits in
writing the material allegations of the petitions filed in those proceedings;
(c) a Member's Units are attached; (d) any judgment is obtained in any legal or
equitable proceeding against a Member and the sale of its Units is contemplated
or threatened under legal process as a result of that judgment; (e) any
execution process is issued against a Member's Units; or (f) any other form of
legal proceeding or process is instituted by which a Member's Units may be sold
or transferred voluntarily or involuntarily and the same remains undismissed for
sixty (60) days, then such transfer or event shall be deemed to be the giving of
a Selling Member's Notice under Section 6.2(A) hereof, whereupon the Offeree
Member may purchase such Units or exercise tag- along rights upon the same terms
as set forth in Section 6.2.
Section 6.4 Effect of Bankruptcy, Dissolution or Termination of a Member.
The bankruptcy, dissolution, liquidation or termination of a Member shall not
cause the termination or dissolution of the Company and the business of the
Company shall continue. Except as otherwise provided in this Article 6, (i) upon
any such occurrence, the trustee, receiver, executor, administrator, committee
or conservator of such Member shall have all the rights of such Member for the
purpose of settling or managing its estate or property; and (ii) the Transfer by
such trustee, receiver, executor, administrator, committee or conservator of any
Member of any Units shall be subject to all of the restrictions hereunder to
which such Transfer would have been subject if such Transfer had been made by
such bankrupt, dissolved, liquidated or terminated Member.
ARTICLE VII
-----------
ADDITIONAL REPRESENTATIONS, COVENANTS AND UNDERSTANDINGS
--------------------------------------------------------
Section 7.1 DCH's Initial Capital Contribution.
DCH represents and warrants that all of the shares of common stock of DCH that
comprise the initial Capital Contribution of DCH (the "Shares") were validly
issued and are fully paid and nonassessable and are being issued to the Company
pursuant to one or more valid exemptions from registration under the Securities
Act of 1933 (the "Securities Act") and pursuant to similar state exemptions from
state registration requirements (collectively, the "Securities Laws"); that DCH
has made all filings, if any, required by the Securities Laws in connection with
the issuance of the Shares; and that DCH is not subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. The
Company represents and warrants that it is acquiring the Shares for its account
for investment and not with a view to any public resale or other distribution
thereof, and that it has received, or has had access to, all information which
it considers necessary or advisable to enable it to make a decision concerning
its acceptance of the Shares.
Section 7.2 Piggyback and Demand Registration Rights.
A. If DCH at any time proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (other than offerings pursuant to
employee plans, or noncash offerings in connection with a proposed acquisition,
exchange offer, recapitalization or similar transaction), DCH will give written
notice thereof to the Company not less than 30 days prior to the filing of its
registration statement and will, at DCH's sole expense, include in such
registration all Shares with respect to which the Company requests in writing to
be so included within 20 days after the receipt of DCH's notice. If such
registration is subject to underwriter cutbacks, then the Shares that the
Company proposes to sell shall be included in such registration in preference to
all other securities of DCH.
B. At any time after the first anniversary of the date of this Agreement,
the Company may request DCH to register under the Securities Act all or any
portion of the Shares held by the Company for sale in the manner specified in
such notice. Following receipt of any notice under this Section 7.2(B), the
Company shall use its best efforts to register under the Securities Act, for
public sale in accordance with the method of disposition specified in such
notice from the Company, the number of Shares specified in such notice. If such
method of disposition shall be an underwritten public offering, the Company may
designate the managing underwriter of such offering, subject to the approval of
the Company, which approval shall not be unreasonably withheld or delayed. DCH
shall be obligated to register Shares pursuant to this Section 7.2(B) on two
occasions only, provided, however, that such obligation shall be deemed
satisfied only when a registration statement covering all Shares specified in
notices received as aforesaid, for sale in accordance with the method of
disposition specified by the Company, shall have become effective and, if such
method of disposition is a firm commitment underwritten public offering, all
such Shares shall have been sold thereto. Except for registration statements on
Form ▇-▇, ▇-▇ or any successor thereto, DCH will not file with the Securities
and Exchange Commission any other registration statement with respect to its
common stock, whether for its own account or that of other stockholders, from
the date of receipt of a notice from the Company pursuant to this Section 7.2(B)
until the completion of the period of distribution of the registration
contemplated thereby.
Section 7.3 Payment for Services.
Until determined otherwise by the Board of Managers, the Company will have no
employees. Services provided by the Members to the Company will be billed on an
hourly rate in accordance with any terms and subject to any conditions adopted
by the Board of Managers and agreed to by the respective Members (in their
capacities not as Members but as the other parties to such agreements). Except
as explicitly provided in this Agreement, no Member or Manager, in its capacity
as such, shall receive any fee, salary, reimbursement, or other compensation or
remuneration for serving as a Member or Manager.
ARTICLE VIII
------------
DISSOLUTION OF THE COMPANY
--------------------------
Section 8.1 Dissolution
A. The Company shall be dissolved upon the occurrence of any of the
following events:
(i) the election by all of the Members holding Class A Units to dissolve and
terminate the Company; or
(ii) the election by the Board of Managers to dissolve and terminate the
Company.
B. The Company shall not be dissolved upon the occurrence, with respect to
any Member, of any of the events specified under Section 4A-606 of the LLC Act.
Section 8.2 Liquidation and Termination.
A. Upon the dissolution of the Company, the Officers and Managers of the
Company shall cause the Company to liquidate by converting the assets of the
Company to cash or its equivalent and arranging for the affairs of the Company
to be wound up with reasonable speed but with a view towards obtaining -fair
value for Company assets, and, after satisfaction (whether by payment or by
establishment of reserves therefor) of creditors, including Members who are
creditors, shall distribute the remaining assets to and among the Members, in
accordance with the provisions of Section 4.4 hereof.
B . Each Member shall look solely to the assets of the Company for all
distributions with respect to the Company and such Member's capital contribution
thereto and share of profits, gains and losses thereof and shall have no
recourse therefor (upon dissolution or otherwise) against any other Member,
except to the extent of such Member's obligation to restore a deficit Capital
Account balance pursuant to Section 4.5 hereof.
ARTICLE IX
----------
BOOKS AND RECORDS; ACCOUNTING TAX ELECTIONS, ETC.
-------------------------------------------------
Section 9.1 Books, Records and Reports.
A. The Company shall keep correct and complete books and records of its
accounts and transactions and minutes of the proceedings of its Members and
Board of Managers and of any executive or other committee when exercising any of
the powers of the Board of Managers. The books and records of the Company may be
in written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. Minutes shall be recorded in
written form, but may be maintained in the form of a reproduction. The original
or a certified copy of this Operating Agreement shall be kept at the principal
office of the Company. The books and records of the Company shall be maintained
by the Secretary of the Company and shall be available for examination by any
Member, or its duly authorized representatives, during regular business hours.
B. The President or chief financial officer shall prepare or cause to be
prepared and shall furnish to the Members within ninety (90) days of the end of
each fiscal year (i) a balance sheet and report of the receipts, disbursements,
profits or Loss of the Company, and each Member's share of such items for the
fiscal year, and (ii) information sufficient for the Members to report their
respective
shares of the profits and losses of the Company for income tax purposes. The
cost of such financial and tax reports shall be an expense of the Company.
Section 9.2 Bank Accounts Checks, Drafts, Etc.
The bank accounts of the Company shall be maintained in accounts in the name of
and under the tax identification number for the Company in such banking
institutions as the Board of Managers or the appropriate officers shall
determine. All checks, drafts and orders for the payment of money, notes and
other evidences of indebtedness, issued in the name of the Company, shall be
signed by such Officers or other persons as may be authorized by the Board of
Managers from time to time.
Section 9.3 Fiscal Year; Methods of Accounting.
The fiscal year of the Company shall be the year ending December 3 1, unless
otherwise determined by the Board of Managers. The method of accounting to be
used in keeping the books of the Company shall be determined by the Board of
Managers in accordance with applicable law.
Section 9.4 Tax Matters Member.
The Board of Managers shall designate, in accordance with the provisions of the
Code, one of the Members to act as the "Tax Matters Partner" of the Company for
federal income tax purposes. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall serve initially as the Tax
Matters Partner of the Company.
ARTICLE X
---------
GENERAL PROVISIONS
------------------
Section 10.1 Binding Provisions.
The covenants and agreements contained herein shall be binding upon and inure to
the benefit of the heirs, personal representatives, successors and assigns of
the respective parties hereto.
Section 10.2 Separability of Provisions.
Each provision of this Agreement shall be considered separable and if for any
reason any provision or provisions herein are determined to be invalid and
contrary to any existing or future law, such invalidity shall not impair the
operation of or affect any other provisions of this Agreement.
Section 10.3 Rules of Construction.
Unless the context clearly indicates to the contrary, the following rules apply
to the construction of this Agreement: (i) references to the singular include
the plural, and references to the plural include the singular; (ii) words of the
masculine gender include correlative words of the feminine and neuter genders;
(iii) the headings or captions used in this Agreement are for convenience of
reference and do not constitute a part of this Agreement, nor affect its
meaning, construction, or effect; (iv) references to a person include any
individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or agency or political subdivision thereof; (v) any
reference in this Agreement to a particular "Article," "Section" or other
subdivision shall be to such Article, Section or subdivision of this Agreement
unless the context shall otherwise require; (vi) any use of the word "including"
in this Agreement shall not be construed as limiting the phrase so modified to
the particular items or actions enumerated; and (vii) when any reference is made
in this document or any of the schedules or exhibits attached to the Agreement,
it shall mean this Agreement, together with all other schedules and exhibits
attached hereto, as though one document.
Section 10.4 Entire Agreement; Amendments.
A. This Agreement constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof.
B. This Agreement and the Articles of Organization may be modified or
amended only pursuant to a written amendment adopted by the Board of Managers
and approved by Members holding a majority of the Units; provided, however, no
amendment shall be effective with respect to any Member without the prior
written consent of such Member if the effect of the amendment would be to
increase the capital contributions required to be made by the Member or
otherwise to increase the liabilities of the Member. Once an amendment to this
Agreement and/or the Articles of Organization has been adopted, the proper
Officers of the Company shall authorize the preparation and filing, if
necessary, of a written amendment to this Agreement and/or the Articles of
Organization, as applicable.
Section 10.5 Applicable Law.
This Agreement shall be construed and enforced in accordance with the laws of
the State of Maryland, without regard to conflict of law principles.
Section 10.6 Counterparts.
This Agreement may be executed in several counterparts and all so executed shall
constitute one agreement binding on all parties hereto, notwithstanding that all
the parties have not signed the original or the same counterpart. Any
counterpart hereof signed by a party against whom enforcement of this Agreement
is sought shall be admissible into evidence as an original hereof to prove the
contents hereof.
IN WITNESS WHEREOF, the parties have executed the Operating Agreement of
INFRASOL LLC on the year and date first above written.
WITNESS/ATTEST: MEMBERS:
TECHNOLOGY TRANSITION CORPORATION
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
DCH TECHNOLOGY, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President
List of Schedules and Exhibits
Schedule A Names, Capital Contributions, and Percentage Interests of Members
Schedule B Management Team
Exhibit I TTC Promissory Note
Exhibit 2 INFRASOL LLC Non-Qualifed Option Plan
OPERATING AGREEMENT
OF
INFRASOL LLC
Names, Capital Contributions and Percentage Interests of Members
Schedule A
Initial Capital
Contributions for Percentage Class and Number
Name Class A Units Interest of Units
Technology Transition Promissory Note in the 50.0% 80 Class A Units
Corporation principal amount of
$ 60,000
DCH Technology, Inc. 40,000 shares of the 50.0% 80 Class A Units
Common stock of DCH
Valued at $60,000
TOTALS $120,000 100.0% 160 Class A Units
Forty (40 ) Class B Units have been reserved for issuance pursuant to the terms
of the INFRASOL LLC Non-Qualifed Option Plan.
OPERATING AGREEMENT OF INFRASOL LLC
Management Team
Schedule B
Name Percent of 20% Distribution
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 25%
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 25%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 25%
▇▇▇▇▇ ▇▇▇▇▇▇ 25%