Vertical - iNPI LLC Operating Agreement dated April 26, 2000
VERTICAL-inpi LLC
OPERATING AGREEMENT
April 26, 2000
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS
1.1 "Act"
1.2 "Adjusted Capital Account"
1.3 "Agreement"
1.4 "Capital Account"
1.5 "Capital Contribution"
1.6 "Certificate"
1.7 "Code"
1.8 "Dissolution Event"
1.9 "Distributable Cash"
1.10 "Economic Interest"
1.11 "Fiscal Year"
1.12 "LLC"
1.13 "LLC Business"
1.14 "Majority Interest"
1.15 [Intentional Deletion]
1.16 "Member"
1.17 "Membership Interest"
1.18 "Net Profits"
1.19 "Percentage Interest"
1.20 "Person"
1.21 "Supermajority in Interest"
1.22 "Tax Matters Partner"
1.23 "Technology"
1.24 "Treasury Regulations"
1.25 "Unreturned Additional Capital"
ARTICLE 2 ORGANIZATIONAL MATTERS
2.1 Formation
2.2 Name
2.3 Term
2.4 Office and Agent
2.5 Addresses of the Members
2.6 Purpose of Company
2.7 Joint Ventures
ARTICLE 3 CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions
3.2 Additional Capital Contributions
3.3 Capital Accounts
3.4 No Interest
3.5 Withdrawal of Capital
3.6 Percentage Interest
3.7 Percentage Interest Adjustment
ARTICLE 4 MEMBERS
4.1 Limited Liability
4.2 Admission of Additional Members
4.3 [Intentional Deletion]
4.4 Termination of Membership Interest
4.5 [Intentional Deletion]
4.6 Members Are Not Agents
4.7 Voting Rights
4.8 Major Decisions
4.9 Meetings of Members
4.9.1 Power to Call Meetings
4.9.2 Date, Time and Place of Meetings of Members
4.9.3 Required Notification of Meetings of Members
4.9.4 Record Dates
4.9.5 Voting by Members at Meeting
4.9.6 Quorum; Relative Weight of Votes of Members at Meeting
4.9.7 Telephone Participation by Member at Meeting
4.9.8 Appointment of Secretary for Meeting
4.9.9 Consent by Members in Lieu of Meeting
4.10 Other Business Activities
ARTICLE 5 MANAGEMENT AND CONTROL OF THE LLC
5.1 Management of the LLC
5.1.1 Executive Committee
5.1.2 Appointment of Representatives
5.1.3 Executive Committee Meetings
5.1.4 Members Have No Managerial Authority
5.2 Appointment of CEO
5.2.1 Appointment of CEO and COO
5.2.2 Duties of CEO and COO
5.2.3 Employment
5.2.4 Expenditures
5.2.5 [Intentional Deletion]
5.2.6 Removal, Resignation and Filling of Vacancy of
5.2.7 Acts of Officers as Conclusive Evidence of Authority
5.2.8 Liability of Officers
5.3 Consulting
5.4 Compensation of Members
5.5 Time Devoted to LLC
5.6 Contracts with Related Parties
5.7 Vertical as Consultant
5.7.1 Services
5.7.2 Specific Services
5.7.3 Fees
5.7.3 Fees
ARTICLE 6 ALLOCATIONS OF NET PROFITS AND NET LOSSES
6.1 Allocations of Net Profits and Net Losses
6.1.1 Allocation of Losses
6.1.2 Allocation of Profits - LLC Operations
6.1.3 Allocation of Profit - Sale of LLC Assets
6.2 Other Tax Allocation Provisions
6.2.1 Minimum Gain; Chargebacks
6.2.2 Qualified Income Offset
6.2.3 Nonrecourse Deductions
6.2.4 Partner Nonrecourse Deductions
6.2.5 Allocations for Tax Purposes
6.2.6 Curative Allocations
6.3 Code Section 704 (c) Allocations
6.4 Allocation of Net Profits and Losses and Distributions
in Respect of a Transferred Interest
ARTICLE 7 DISTRIBUTIONS
7.1 Distributions
7.2 Reduction of Capital Accounts
7.3 Form of Distribution
7.4 Restriction on Distributions
7.5 Return of Distributions
7.6 Withholding Tax of Foreign Members
ARTICLE 8 TRANSFER OR SALE OF LLC INTEREST; WITHDRAWAL
8.1 Nonassignability of LLC Interest
8.1.1 Consent Required
8.1.2 Permitted Transfers
8.1.3 Right of First Refusal
8.2 Obligations of Transferee
8.3 [Intentional Deletion]
8.4 Withdrawal by Member
8.4.1 Withdrawal
8.4.2 Failure to Elect
8.4.3 Purchase Price
8.4.4 Fair Market Value
8.4.5 Closing
8.4.6 Closing Adjustments
8.5 Noncompetition by Withdrawing Member
ARTICLE 9 ACCOUNTING, RECORDS, REPORTING BY MEMBERS
9.1 Books and Records
9.2 Delivery to Members and Inspection
9.3 Fiscal Year
9.4 Statement of Financial Condition
9.5 Bank Accounts
9.6 Accounting Policies
9.7 Tax Matters for the LLC Handled by CEO
as Tax Matters Partner
9.8 Preparation of Tax Returns
9.9 Tax Decisions Not Specified
9.10 Notice of Tax Audit
ARTICLE 10 DEFAULT AND DISSOLUTION
10.1 Events of Default
10.2 Causes of Dissolution
10.3 Election of Non-Defaulting Members
10.4 Dissolution and Termination of LLC
10.5 Final Accounting
10.6 Disposition of Books and Records
ARTICLE 11 INDEMNIFICATION AND INSURANCE
11.1 Indemnification of Agents
11.2 Insurance
11.3 Arbitration
ARTICLE 12 INVESTMENT REPRESENTATIONS
12.1 Acknowledgments
12.2 Representations and Warranties
ARTICLE 13 MISCELLANEOUS
13.1 Complete Agreement
13.2 Binding Effect
13.3 No Third Party Beneficiary
13.4 Not for Benefit of Creditors
13.5 Pronouns; Statutory References
13.6 Headings
13.7 References to this Agreement
13.8 Jurisdiction
13.9 Disputed Matters
13.10 Exhibits
13.11 Severability
13.12 Additional Documents and Acts
13.13 Notices
13.14 Amendments
13.15 No Interest in Company Property; Waiver
of Action for Partition
13.16 Multiple Counterparts
13.17 Attorney Fees
13.18 Remedies Cumulative
This OPERATING AGREEMENT (the "Agreement") is made as of April 26, 2000,
by and between iNetPurchasing, Inc., a Delaware corporation (hereinafter,
"iNPI"), and VERTICAL COMPUTER SYSTEMS, INC., a Delaware corporation
(hereinafter "Vertical") (each of which is a member and collectively, members)
with reference to the following facts:
A. On April 14, 2000, articles of organization for VERTICAL-iNPI LLC, a
limited liability company (the "LLC"), a limited liability LLC under the laws of
the State of Nevada, was filed with the Nevada Secretary of State; and
B. The parties desire to adopt and approve an operating agreement for the
LLC.
NOW, THEREFORE, the parties (are hereinafter sometimes collectively
referred to as the "Members" or individually as a "Member") by this Agreement
set forth the operating agreement for the LLC under the laws of the State of
Nevada upon the terms and subject to the conditions of this Agreement.
ARTICLE 1
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article 1 shall have the meanings set forth elsewhere in this Agreement):
1.1 "Act" shall mean the Nevada Revised Statutes (NRS), Chapter 86.
1.2 "Adjusted Capital Account" shall mean a Member's Capital Account after
crediting to such Capital Account any amount which the Member is deemed to be
obligated to restore pursuant to ▇▇.▇▇. 1.7042(g)(1) and 1.7042(g) (5) of the
Treasury Regulations and debiting to such Capital Account the amount (whether
made or reasonably expected to be made) of any adjustment, allocation and
distribution described in ss. 1.704(b)(2)(ii)(d)(4), (5) or (6) of the Treasury
Regulations. This definition of Adjusted Capital Account is intended to comply
with the provisions of ss. 1.7041(b)(2)(ii)(d) of the Treasury Regulations and
shall be interpreted consistently therewith.
1.3 "Agreement" shall mean this Operating Agreement and all schedules and
exhibits hereto, as originally executed and as amended from time to time.
1.4 "Capital Account" shall mean with respect to any member the capital
account which the LLC establishes and maintains for such Member pursuant to
Section 3.3.
1.5 "Capital Contribution" shall mean with respect to any Member the total
value of cash and the fair market value of property (net of liabilities secured
by such contributed property that the LLC is considered to assume or take
subject to under Code ss. 752) contributed to the LLC by such Member.
1.6 "Certificate" shall mean the Articles of Organization for the LLC
originally filed with the Nevada Secretary of State and as amended from time to
time.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the provisions of succeeding law.
1.8 "Dissolution Event" shall mean with respect to the Member one or more
of the following: the death, insanity, retirement, withdrawal., resignation,
expulsion, bankruptcy or dissolution, unless the Non-Defaulting Members consent
to continue the business of the LLC pursuant to Section 10.3.
1.9 "Distributable Cash" shall mean the amount of cash which the Executive
Committee deems available for distribution to the Members, taking into account
all debts, ,
liabilities, and obligations of the LLC then due and amounts which the Executive
Committee deems necessary to place into reserves for customary and usual claims
with respect to the LLC's business.
1.10 "Economic Interest" shall mean a Member's Interest in the LLC's Net
Profits, Net Losses, and distributions of the LLC's assets pursuant to this
Agreement and the Act, but shall not include any other rights of a Member,
including, without limitation, the right to vote or participate in the
management, or except as provided in ss. 86.241 of the Act, any right to
information concerning the business and affairs of LLC.
1.11 "Fiscal Year" shall mean the LLC's fiscal year, which shall be the
calendar year, or such other period as may be required or allowed by the Code.
1.12 "LLC" shall mean VERTICAL-iNPI LLC, a Nevada limited liability
company.
1.13 "LLC Business" shall mean the exploitation of iNPI's proprietary
technology for use in connection electronic commerce procurement services as to
(a) international, excluding the United States, public sector, and (b)
world-wide private sector, as granted in the License Agreement attached hereto
as Exhibit B.
1.14 "Majority Interest" shall mean Members owning greater than 51% of the
Percentage Interests.
1.15 [Intentional Deletion].
1.16 "Member" shall mean iNPI and Vertical, respectively, or their
successors, each of whom (a) is an initial signatory to this Agreement, has been
admitted to the LLC as a Member in accordance with the Certificate or this
Agreement or is an assignee who has become a Member in accordance with Article 8
and (b) has not been expelled or, if other than an individual, dissolved.
1.17 "Membership Interest" shall mean a Member's entire interest in the
LLC including the Member's Economic Interest " the right to vote on matters as
outlined in this Agreement, Percentage Interest, Capital Account, and the right
to receive information concerning the business and affairs" of the LLC.
1.18 "Net Profits" and "Net Losses" shall mean for each Fiscal Year or
other period, an amount equal to the LLC's taxable income or tax loss for such
year or period, determined in accordance with Code ss. 703(a). For this purpose,
all items of income, gain, loss or deduction required to be stated separately
pursuant to Code ss. 703(a)(1) shall be included in taxable income or loss, with
the following adjustments:
1.18.1 Any income of, the LLC that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
shall be added to such taxable income or tax loss;
1.18.2 Any expenditures of the LLC described in Code ss.
705(a)(2)(B) or treated as Code Section expenditures pursuant to Treasury
Regulations ss. 1.7041(b)(2)(iv)(i), and not otherwise taken into account in
computing Net Profits or Net Losses, shall be subtracted from such taxable
income or tax loss;
1.18.3 If property other than cash has been contributed to the LLC
or the Capital Accounts of the Members have been adjusted pursuant to Treasury
Regulations ss. 1.7041(b)(2)(iv)(f), depreciation, amortization and gain or loss
with respect to assets of the LLC shall be computed in accordance with Treasury
Regulations ss. 1.7041(b)(2)(iv)(g); and
1.18.4 Notwithstanding any other provision of this Section 1.18, any
items of income, gain, loss or deduction which are specially allocated shall not
be taken into account in computing Net Profits and Net Losses.
1.19 "Percentage Interest" shall mean the percentage of a Member set forth
opposite the name of such Member in Section 3.7 hereto, as such percentage may
be adjusted from time to time pursuant to the terms of this Agreement. The sum
of the Members' Percentage Interests shall at all times be one hundred percent
(100%).
1.20 "Person" shall mean an individual, general partnership, limited
partnership, limited liability LLC, limited liability partnership, joint
venture, corporation, trust, estate, real estate investment trust association or
any other entity or organization.
1.21 "Supermajority in Interest" shall mean the vote of at least seventy
five percent (75%) of all Percentage Interest in the LLC.
1.22 "Tax Matters Partner" shall be the CEO or its successor as designated
pursuant to Section 9.7.
1.23 "Technology" shall mean iNPI's proprietary technology for use in
connection with (a) international, excluding the United States, public sector,
and (b) world-wide private sector, as granted in the License Agreement attached
hereto as Exhibit B.
1.24 "Treasury Regulations" shall, unless the context clearly indicates
otherwise, mean the regulations currently in force as final, temporary or
proposed that have been issued by the U.S. Department of Treasury pursuant to
its authority under the Code.
1.25 "Unreturned Additional Capital" with respect to a Member means, as of
any date of calculation, the aggregate amount of additional capital
contributions contributed by such Member, reduced by all distributions to such
Member with respect to such additional capital contributions pursuant, to
Section 3.2.
ARTICLE 2
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members formed a Nevada limited
liability LLC under the laws of the State of Nevada by filing the Certificate
with the Nevada Secretary of State. The rights and liabilities of the Members
shall be determined pursuant to the Act and this Agreement. To the extent that
the rights or obligations of any Member are different by reason of any provision
of this Agreement than they would be in the absence of such provision, this
Agreement shall, to the extent permitted by the Act, control.
2.2 Name. The name of the LLC shall be, "Vertical-iNPI LLC". The LLC
Business may be conducted under that name or, upon compliance with applicable
laws, any other name that the Executive Committee deems appropriate or
advisable. The CEO shall file any fictitious name certificates and similar
filings, and any amendments thereto, that the Executive Committee considers
appropriate or advisable.
2.3 Term. The term of this Agreement shall be coterminous with the period
of duration of the LLC provided in the LLC's Certificate, unless extended or
sooner terminated as hereinafter provided.
2.4 Office and Agent. The LLC shall continuously maintain an office of its
registered agent in the State of Nevada as required by the Act. The LLC also may
have such offices, anywhere within and without the State of Nevada, or the
business of the LLC may require. The registered agent shall be as stated in the
Certificate or as otherwise determined by the Executive Committee.
2.5 Addresses of the Members. The respective addresses of the Members of
the LLC are set forth on Exhibit A.
2.6 Purpose of LLC. The purpose of the LLC is to engage in the LLC
Business and in furtherance thereof, the LLC may engage in any lawful activity
for which a limited liability LLC may be organized under the Act. Any change in
the LLC Business shall require the affirmative vote or written consent of
Members holding a Supermajority in Interest.
2.7 Joint Ventures. The parties contemplate that the LLC will have the
opportunity to enter into joint ventures in countries throughout the World with
various Vertical-related entities
("Vertical Partners"). As partial consideration for Vertical's membership in the
LLC, Vertical Partners in Brazil, France, China, India and Australia shall have
the exclusive right of first refusal to enter into a Joint Ventures (on a 50-50%
basis) with the LLC.
In addition, Vertical shall give to the LLC ninety (90) days prior written
notice that Vertical or a Vertical Partner intends to exploit the Technology in
a specific country outside the United States. If prior to the receipt of such
notice, the LLC has not commenced exploitation of the technology in such
country, Vertical or such Vertical Partner shall have six (6) months from the
date given in the notice for the commencement of such efforts to exploit the
Technology (the "Exclusive Period") to (a) identify a qualified Vertical
Partner, reasonably acceptable to the LLC, and (b) enter into a memorandum of
understanding or letter of intent to sell the Technology to a governmental
entity in the specified country (a "Firm Commitment"), such sales to commence no
less than 180 days from the date of such Firm Commitment. During the Exclusive
Period (including any extensions thereof), Vertical or such Vertical Partner
shall have the exclusive right to exploit the Technology within the specified
country and the LLC shall not, independently, seek to exploit the Technology
within that country during the Exclusive Period.
ARTICLE 3
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTEREST
3.1 Initial Capital Contributions. Each member has contributed the
following initial capital contribution to the capital of the LLC:
iNPI $ 5,000
Vertical $ 100,000
---------
$ 105,000
3.2 Additional Capital Contributions. Subject to obtaining the approval of
the Members, as provided in Article 4.8, the LLC may authorize Additional
Contributions as provided below. Absent the LLC's authorization, no Member shall
be required or permitted to make Additional Contributions.
(1) If at any time the Executive Committee determines that the LLC's
financial resources are insufficient to meet the reasonable needs of the LLC's
business; provided, however that no additional capital contributions shall be
required unless and until the LLC has borrowed all funds under its then and
available credit, the Executive Committee may request Additional Contributions
sufficient to meet the need.
(2) The Executive Committee shall make the request by written notice
delivered to the Members. The notice shall specify the amount of the Additional
Contributions,
the uses to which they will be put, and a due date that is not less than thirty
(30) days after the date of the notice.
(3) Provided that approval of Supermajority in Interest has been
obtained as provided in Article 4.9, the Members shall make the Additional
Contributions on or before the due date specified in the notice in proportion to
their Percentage Interests as of the date of the notice.
(4) If a Supermajority in Interest does not approve an Additional
Capital Contribution request then the LLC shall offer members the right to loan
the amount requested by the CEO on a proportionate basis. The loans shall be for
one year at a ten percent interest.
Notwithstanding anything to the contrary contained in this Agreement, a
Member's obligation to make Additional Contributions extends only to the LLC and
may not be enforced by the LLC's creditors without the Member's written consent.
3.3 Capital Accounts. A Capital Account shall be maintained for each
Member in accordance with the capital account maintenance rules set forth in
Treasury Regulations ss. 1.7041(b)(2)(iv). Without limiting the generality of
the foregoing, a Member's Capital Account shall be increased by U) the amount of
money contributed by the Member to the LLC, (ii) the fair market value of
property contributed by the Member to the LLC as determined by the contributing
Member and the LLC (net of liabilities that the LLC is considered to assume or
take subject to pursuant to ss. 752 of the Code), and (iii) allocations to the
Member of Net Profits and other items of income and gain, including income and
gain exempt from tax ' but excluding items of income and gain described in
Treasury Regulations ss. 1.7041(b)(4)(i); and which shall be decreased by (w)
the amount of money distributed to the Member, (x) the fair market value of any
property distributed to the Member as determined by the distributee Member and
the LLC (net of any liabilities that such Member is considered to assume or take
subject to pursuant to ss. 752 of the Code), after adjusting each Member's
Capital Account by such Member's share of the unrealized income, gain, loss and
deduction inherent in such property and not previously reflected in such Capital
Account., as if the property had been sold for its then fair market value on the
date of distribution, (y) expenditures described, or treated under ss. 704(b) of
the Code as described, in ss. 705(a) (2)(B) of the Code, and (z) the Member I s
share of Net Losses and other items of loss and deduction, but excluding items
of loss or deduction described in Treasury Regulations ss. 1.7041(b)(4)W. The
Members' Capital Accounts shall be appropriately adjusted for income, gain, loss
and deduction as required by Treasury Regulations ss.1.7041(b)(2)(iv)(g)
(relating to allocations and adjustments resulting from the reflection of
property on the books of the LLC at book value, or a revaluation thereof, rather
that at adjusted tax basis). If a Member transfers all or a part of its
Membership Interest in accordance with this Agreement, such Member's Capital
Account attributable to the transferred Membership Interest shall carry over to
the new owner of such Membership Interest pursuant to Treasury Regulations
ss.1.7041(b)(2)(iv)(1).
3.4 No Interest. No Member shall be entitled to receive any interest on
its Capital Contributions.
3.5 Withdrawal of Capital. No member shall have the right to withdraw its
capital contributions, or to demand or receive the return of its capital
contributions, or any part thereof, except as otherwise expressly provided in
this Agreement. Neither the LLC or any member shall be personally liable or
responsible for the return of the capital contributions of the members, and any
such returns shall be made solely from the assets of the LLC.
3.6 Percentage Interests. The members have the following undivided
Percentage Interests in the LLC (individually a "Percentage Interest" and
jointly "Percentage Interests"):
iNPI 50%
Vertical 50%
3.7 Percentage Interest Adjustments. Unless agreed by all the members, no
adjustment to the Percentage Interest shall be made except as provided for in
this Agreement.
3.8 License Agreement. In addition to the initial capital contributions,
provided in 3.1, above, the Members shall, concurrently with the execution of
this Agreement, execute a License Agreement, in the form of Exhibit B.
ARTICLE 4
MEMBERS
4.1 Limited Liability. Except as required under the Act or as expressly
set forth in this Agreement, no Member shall be personally liable for any debt,
obligation, or liability of the LLC, whether that liability or obligation arises
in contract, tort, or otherwise.
4.2 Admission of Additional Members. The Executive Committee with the
approval of the Members holding a Supermajority in Interest may admit to the LLC
additional Members. Any additional Members shall obtain Membership Interests and
will participate in the management, Net Profits, Net Losses, and distributions
of the LLC on such terms as are determined by the Executive Committee and
approved by the Members. Notwithstanding the foregoing, substitute members may
only be admitted in accordance with Article 8.
4.3 [Intentional Deletion].
4.4 Termination of Membership Interest. Upon the transfer of a Member's
Membership Interest in violation of this Agreement or the occurrence of a
Dissolution Event as
to such Member that does not result in the dissolution of the LLC, the CEO shall
terminate the Membership Interest of a Member.
4.5 [Intentional Deletion]
4.6 Members Are Not Agents. Pursuant to Section 5.1 and the Certificate,
the management of the LLC is vested in the Executive Committee and Officers. No
Member, acting solely in the capacity of a Member, is an agent of the LLC nor
can any Member in such capacity bind nor execute any instrument on behalf of the
LLC.
4.7 Voting Rights. Except as expressly provided in this Agreement or the
Certificate, Members shall have no voting, approval or consent rights. Members
shall have the right to approve or disapprove matters as specifically stated in
this Agreement by Members holding Majority Interest.
4.8 Major Decisions. No acts shall be taken, funds expended, decisions
made or obligations incurred by the LLC, the officers, the Executive Committee
(as hereinafter defined), or member with respect to a matter within the scope of
any of the major decisions enumerated below (the "Major Decisions"), unless and
until the same has been Approved by Supermajority in interest. The Major
Decisions shall include:
(a) Acquire or develop any new business or line of business;
(b) Borrow any money from a Member or accept or require capital
contributions from any Member, other than loans or capital contributions
permitted or contemplated pursuant to Section 3.2 above;
(c) Make any acquisition of or material investment in any Other
Entity (as hereinafter defined);
(d) Make any material and substantial change in the purposes of the
LLC or the charter of its business;
(e) Make a determination to surrender any permits, approvals or
licenses of the LLC or to dissolve the LLC;
(f) Admit any general partnership, limited partnership, corporation,
joint venture, trust, business trust, governmental agency, cooperative,
association, individual, business or other entity (collectively referred to as
"Other Entity") as a Member;
(g) Sell, transfer, convey, exchange, lease, encumber, pledge, or
otherwise dispose of all or substantially all, or the assets of the LLC;
(h) Merge, consolidate or combine the LLC into or with any Other
Entity;
(i) Guarantee by the LLC of, or the agreement of the LLC to be
responsible for, the indebtedness or obligations of any Other Entity;
(j) Make an expenditure or incur any obligation by or on behalf of
the LLC at any one time involving a sum in excess of Five Hundred Thousand and
00/100 U.S. Dollars (U.S. $500,000.00), including by any lease or installment
contract where the total amount of all future payments exceeds Five Hundred
Thousand and 00/100 U.S. Dollars (U.S. $500,000.00), except for expenditures
made and obligations incurred pursuant to and specifically set forth in a budget
previously Approved by the Majority Interest;
(k) Institute any legal action or proceeding, except as provided in
Section 13.9, below;
(l) Approve all other distributions to the Members under Section
7.1, above;
(m) Accelerate payment of any LLC debt;
(n) Authorize any new borrowing by the LLC with the exception of
trade payables incurred in the normal course of the LLC business;
(o) Any amendment of the Certificate or this Agreement;
(p) Increase the number of representatives to the Executive
Committee;
(q) Bankrupt the LLC;
(r) Compensation, benefits and employment agreements for officers;
(s) All exclusive contracts.
To the extent this or any other section of this Agreement or any law
requires the consent or approval of any or all the Members to any action or
matter, the consent or approval of the representatives to the CEO shall
constitute such Member's consent or approval to such action or matter.
4.9 Meetings of Members.
4.9.1 Power to Call Meetings. Meetings of the Members for any
purpose or purposes may be called upon written demand by the CEO or by a member
with at least twenty
percent (20%) of the Percentage Interest in LLC for the purpose of addressing
any matters on which the Members may vote.
4.9.2 Date, Time and Place of Meetings. Meetings of Members shall be
held at the principal executive office of LLC, or as otherwise selected by the
person or persons calling the meeting. If no other place is specified, meetings
shall be held at the principal executive office of the LLC.
4.9.3 Required Notification of Meetings of Members. The Executive
Committee shall deliver or mail written notice stating the date, time, and place
of any meeting of Members and a description of the purposes for which the
meeting is called, to each Member of record entitled to vote at the meeting, at
such address as appears in the records of LLC, such notice to be mailed at least
fifteen (15), but not more than sixty (60), days before the date and time of the
meeting. A Member may waive notice of any meeting, before or after the date of
the meeting, by delivering a signed waiver to LLC for inclusion in the minutes
of LLC. A Member's attendance at any meeting, in person or by proxy (a) waives
objection to lack of notice or defective notice of the meeting, unless the
Member at the beginning of the meeting objects to the transaction of business
because the meeting is not lawfully called or convened, and (b) waives objection
to consideration of particular matter at the meeting that is not within the
purpose described in the meeting notice, unless the Member objects to
considering the matter when it is presented.
4.9.4 Record Dates. Any Member holding more than ten percent (10%)
of the Percentage Interest in the LLC, may fix, in advance a record date to
determine the Members of record entitled to (1) notices of any meeting, (2)
vote, (3) receive any distributions, or (4) exercise any rights with respect to
any other lawful action, provided that such record date is not more than sixty
(60) days nor less than three (3) days prior to the date of the meeting and not
more than sixty (60) days prior to any other action. If no record date is fixed
(1) the record date for determining members entitled to notice of or to vote at
a meeting of Members shall be at the close of business on the business day next
preceding the date on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held, (2) the record date for determining Members entitled to give
consent to LLC action in writing without a meeting shall be the day on which the
first written consent is given; (3) the record date for determining members for
any other purpose shall be at the close of business on the day on which the CEO
adopts the resolution relating thereto, or the sixtieth (60th) day prior to the
date of the other action, whichever is later, and (4) the determination of
members of record entitled to notice of or to vote at a meeting of Members shall
apply to any adjournment of the meeting unless the Members who called the
meeting fix a new record date for the adjourned meeting, but the Members who
called the meeting shall fix a new record date if the meeting is adjourned for
more than forty-five (45) days from the date set forth the original meeting.
4.9.5 Voting by Members at Meeting. A Member may appoint a proxy to
vote or to otherwise act for the Member pursuant to a written appointment form
executed by the Member or the Member's duly authorized attorney-in-fact. An
appointment of a proxy is effective when received by the CEO of LLC. The general
proxy of a fiduciary is given the same effect as the general proxy of any other
Member. A proxy appointment is valid for eleven months unless otherwise
expressly stated in the appointment form.
4.9.6 Quorum; Relative Weight of Votes of Members at Meeting. At any
meeting of Members, each Member entitled to vote shall have a number of votes
equal to the percentage interest held by such Member. At any meeting of Members,
the presence of Members, in person or by proxy, entitled to cast over fifty
percent (50%) of the total votes of all Members entitled to vote at such meeting
constitutes a quorum. Action on a matter is Interest of the total number of
votes entitled to be cast by all Members in LLC entitled to vote at such meeting
or such other number as may be provided by law, the Articles or the Agreement
for the particular matter under consideration. Also, any assignee of a Member's
Shares in LLC shall not be entitled to vote or participate on any matters at any
meeting unless such assignee becomes a substitute member.
4.9.7 Telephone Participation by Member at Meeting. Any or all
Members may participate in any annual or special Member's meeting by, or through
the use of, any means of communication by which all Members participating may
simultaneously hear each other during the meeting. A Member so participating is
deemed to be present in person at the meeting.
4.9.8 Appointment of Secretary for Meeting. At the annual or special
Member's meeting, the CEO shall appoint a person to preside at the meeting and a
person to act as secretary of the meeting. The secretary of the meeting shall
prepare minutes of the meeting which shall be placed in the minute books of LLC.
4.9.9 Consent by Members in Lieu of Meeting.
(1) Any Action that may be taken at any meeting of the Members
may be taken without a meeting if a consent in writing, setting forth the action
so taken, is signed and delivered to the LLC within sixty (60) days of the
record date for the action by Members having not less than the minimum number of
votes that would be necessary to authorize or take that action at a meeting at
which all members entitled to vote thereon were present and voted.
(2) Unless the consents of all members entitled to vote have
been solicited in writing, (a) notice of any Member approval of an amendment to
the Articles of Organization or this Agreement, a dissolution of the LLC, or a
merger of the LLC without a meeting by less than unanimous written consent shall
be given at least ten (10) days before the meeting and prompt notice shall be
given of the taking of any other action
approved by members without a meeting by less than unanimous written consent, to
those members entitled to vote who have not consented in writing.
(3) Any member giving a written consent, or the Member's
proxyholder, may revoke the consent by a writing received by the LLC prior to
the time that written consents of Members having the minimum number of votes
that would be required to authorize the proposed action have been filed with the
LLC, but may not do so thereafter. The revocation is effective upon its receipt
at the principal executive office of the LLC.
4.10 Other Business Activities. The Members acknowledge and agree that the
creation of the LLC and the assumption by each of the Members of their duties
hereunder shall be without prejudice to their rights (or the rights of their
affiliates) to have such other interests and activities and to receive and enjoy
profits or compensation therefrom, so long as such other business or undertaking
is not competitive with LLC Business. Each Member waives any rights it might
otherwise have to share or participate in such other permitted interests or
activities of the other Member or its affiliates. The Members may engage in or
possess any interest in any other permitted business venture of any nature or
description.
ARTICLE 5
MANAGEMENT AND CONTROL OF THE LLC
5.1 Management of the LLC.
5.1.1 Executive Committee. The overall management and control of the
business and affairs of the LLC shall be vested in an executive committee (the
"Executive Committee"). Except as expressly provided herein to the contrary, all
decisions with respect to the management and control of the LLC that are
"Approved by the Executive Committee" (as hereinafter defined) shall be binding
on the LLC and each of the Members. The Executive Committee of the LLC shall be
comprised of seven (7) representatives, all of whom shall be voting
representatives.
5.1.2 Appointment of Representatives. Vertical and iNPI shall each
designate two (2) representatives. Vertical and iNPI each shall also designate
one (1) additional representative who is not an employee or officer of the
respective Members ("Outside Representative"). The Outside Representatives shall
appoint a single additional representative of their choosing ("Independent
Representative"). The Outside Representatives and the Independent Representative
shall serve in such capacities for a term of one (1) year.
The following persons are hereby designated as the representatives of the
respective Members, said representatives to serve at the pleasure of and at the
sole discretion of the designating Member:
Member Designated Representatives
------ --------------------------
iNPI
Vertical
Each representative to the Executive Committee shall be fully authorized
to provide any consent or approval which may be required hereunder of the
Executive Committee. When the phrases "Approved by the Executive Committee" or
"Approval of the Executive Committee" are used in this Agreement, such phrases
shall mean approval by a majority o the representatives on the Executive
Committee who shall have been designated pursuant to this Section 5.1.2. In the
event of any need for approval or other action by the Executive Committee, the
representative is notified of the need for such approval or other action;
provided, however, that failure of such representative to respond within thirty
(30) days of notice of such need shall be deemed approval.
5.1.3 Executive Committee Meetings.
(a) The Executive Committee may conduct meetings in person or
by conference telephone. In all matters presented to the Executive Committee for
decision or approval, each representative appointed by a Member shall have one
vote. Unless otherwise unanimously agreed upon in writing by the Members, four
(4) representatives shall be necessary to constitute quorum for the transaction
of any business and, subject to the requirements under Section 5.1.5 below, the
Executive Committee may make any decision, take any action, or grant any
approval (including without limitation the approval of any "Working Capital
Financing," which shall be defined as any borrowing secured solely by the LLC's
(i) accounts receivable, up to a maximum of eighty percent (80%) of face value
of such receivables and/or (ii) inventory, up to a maximum of fifty percent
(50%) of the value thereof) by the affirmative vote of a majority of the votes
held by the voting representatives present in person or by conference telephone
at a meeting duly called or with respect to which notice has been waived (in
writing or by participation in such meeting) and at which a quorum is present.
(b) Any action which may be taken at any meeting of the
Executive Committee may be taken without a meeting, without prior notice and
without a vote, if a consent in writing setting forth the action to be taken
shall be signed by voting each representative.
(c) Meetings may be called by any representative to the
Executive Committee. All meetings of the Executive Committee shall be held upon
notice given to all
representatives at east three (3) days in advance of the date of the meeting.
Such notices may be given as provided in Section 13.13 below or by telephone.
(d) Whenever notice is required to be given to any
representative with respect to a meeting of the Executive Committee, waiver
thereof signed by the representative entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
representative at a meeting of the Executive Committee (personally or by
conference telephone) shall also constitute a waiver of notice of such meeting.
5.1.4 Members Have No Managerial Authority. The Members shall have
no power to participate in the management of the LLC except as expressly
authorized by this Agreement or the Certificate and except as expressly required
by the Act. Unless expressly and duly authorized in writing to do so by the
Executive Committee, no Member shall have any power or authority to bind or act
on behalf of the LLC in any way, to pledge its credit, or to render it liable
for any purpose.
5.2 Appointment of CEO and COO; Duties of CEO and COO.
5.2.1 Appointment of CEO and COO. The LLC shall have a CEO and a
COO, who shall be unpaid employees, until such time as the Executive Committee
establishes a salary therefore, of the LLC and whose appointment shall in all
instances be approved by the Executive Committee as provided in Section 5.1.3(k)
above. The initial CEO shall be ▇▇▇▇▇▇▇ ▇▇▇▇ and the initial COO shall be ▇▇▇▇▇
▇▇▇▇▇ who shall act in such capacity until removed or replaced pursuant to
Section 5.1.3(k) above. The CEO, shall be responsible for the implementation of
the decisions of the Executive Committee, and the COO shall be responsible for
conducting the ordinary and usual business and affairs of the LLC, subject to
the supervision of the CEO, as more fully set forth in this Section 5.2. The
Executive Committee shall require that the CEO, and the CEO shall require that
the COO, at all times conform to policies and programs established by the
Executive Committee, and the scope of the CEO and COO's authority shall bind the
Members and the LLC when within the scope of their authority. The CEO shall at
all times be subject to the direction of the Executive Committee and shall keep
the Executive Committee informed as to all material matters of concern not in
the ordinary course of business.
5.2.2 Duties of the CEO and the COO. The CEO, at the expense of and
on behalf of the LLC, shall implement or cause to the implemented all decisions
approved by the Executive Committee and delegated to the CEO, who shall conduct
or cause the COO to conduct the ordinary and usual business and affairs of the
LLC in accordance with, and as limited by, this Agreement, including the
following:
(a) Management and supervision of the Business;
(b) Protection and preservation of the right, title and
interest of the LLC in all LLC property and assets;
(c) Negotiation, entering into and supervision of the
performance of contracts incident to the conduct of the LLC business in the
ordinary course:
(d) Hiring and firing LLC employees;
(e) Keeping of all books of account and other records of the
LLC in accordance with the terms of this Agreement, and maintenance of all funds
generated by or relating to the LLC or to the LLC's bank account;
(f) Preparation and delivery to each of the Members of monthly
financial statements with respect to the business and affairs of the
Partnership;
(g) Payment of all taxes, assessments, debts and other
obligations of the Partnership, including the costs of operation, maintenance
and repair of the Partnership property and assets;
(h) When Approved by the Executive Committee pursuant to this
Agreement, making of distributions periodically to the Members in accordance
with the provisions of this Agreement;
(i) Operation, maintenance, repair, and other management of
the LLC property and assets;
(j) Preparation of a budget for approval by the Members, at
least thirty (30) days prior to the beginning of each fiscal year, setting forth
the estimated receipts and expenditures (capital, operating and other) of the
LLC for the period covered by the budget;
(k) Performance of other normal business functions and other
operations and management of the business and affairs of the LLC in accordance
with and as limited by this Agreement; and
(l) Performance of other obligations provided elsewhere in
this Agreement to be performed by the CEO and/or COO.
5.2.3 Employment. The CEO and COO shall not be paid an annual salary
until such salary and the terms and conditions of their respective employment is
established by the Executive Committee.
5.2.4 Expenditures. The CEO and the COO shall not, without prior
Approval of the Executive Committee, exceed by more than fifteen percent (15%)
in any general category specified in the budget Approved by the Executive
Committee in contracting for any goods or services purchased on behalf of the
LLC. Any variance form the budget shall be reported monthly by the CEO and the
COO to the Executive Committee.
5.2.5 [Intentional Deletion]
5.2.6 Removal, Resignation, and, Filling of Vacancy of Officers.
Subject to the rights, if any, of an officer under a contract of employment, any
officer may be removed, either with or without cause, by the Executive Committee
at any time. Any officer may resign at any time by giving written notice to the
LLC. Any resignation shall take effect at the date of the receipt of that notice
or at any later time specified in that notice and, unless otherwise specified in
that notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
LLC under any contract to which the officer is a party. A vacancy in any office
because of death, resignation, removal, disqualification or any other cause may
be filled only by the Executive Committee.
5.2.7 Acts of Officers as Conclusive Evidence of Authority. Any
note, mortgage, evidence of indebtedness, contract, certificate, statement,
conveyance, or other instrument in writing, and any assignment or endorsement
thereof, executed or entered into between the LLC and any other Person, when
signed by an officer of the LLC, is not invalidated as to the LLC by any lack of
authority of the signing officer in the absence of actual knowledge on the part
of the other Person that the signing officer had no authority to execute the
same.
5.2.8 Liability of 0fficers. No person who is an officer of the LLC
shall be personally liable under any judgment of a court, or in any other
manner, for any debt, obligation, or liability of the LLC, whether that
liability or obligation arises in contract, tort, or otherwise, solely by reason
of being an officer of the LLC.
5.3 Consulting. Subject to the authority of the Executive Committee as set
forth in Section 5.1.1 hereof, the Executive Committee shall have the right to
engage Consultants on behalf of the LLC. The Consultants shall render to the LLC
such advice and services in connection with the Business as the Executive
Committee may reasonably request from time to time. In performing the consulting
services called for by this Section 5.3, each of the Consultants shall act as an
independent contractor with the right to exercise his or her independent
judgment as to the time, place and manner of performing his or her duties
hereunder and otherwise carrying out the provisions of this Section 5.3.
5.4 Compensation of Members. Except as may be expressly provided for
herein or hereafter approved by the Executive Committee, no payment will be made
by the LLC to either
Member for the services of such Member or any member, shareholder, director or
employee of such Member.
5.5 Time Devoted to LLC. No Member as a Member be required to devote its
full time and attention to the business and activities of the LLC as a Member,
but each Member shall devote such time as is reasonably necessary to carry out
the provisions of this Agreement.
5.6 Contracts with Related Parties. With the exception of the employment
and consulting arrangements described in Sections 5.2 and 5.7 hereof, the
Officers of the LLC shall not knowingly enter into any agreement or other
arrangement for the furnishing to or by the LLC of goods or services with any
person related to or affiliated with any Member or Officer or the LLC, unless
such agreement or arrangement has been Approved by the Supermajority in Interest
after the nature of the relationship or affiliation has been disclosed. By way
of definition of the phrase "related to or affiliated with," for the purposes of
this Section 5.7, the following Persons shall be deemed to be "related to or
affiliated with" a Member or Officer.
(a) Any Person who owns directly or indirectly more than ten
percent (10%) of the issued and outstanding stock of, or more than ten percent
(10%) of the beneficial interest in any Member or Officer.
(b) Any Person in which any Member or Officer owns directly or
indirectly more than ten percent (10%) of the issued and outstanding stock, or
more than ten percent (10%) of the issued and outstanding stock, or more than
ten percent (10%) of the beneficial interest in such Person;
(c) Any Person affiliated with any Member or Officer or the
Persons described in (a) and (b) above; and
(d) Any agent, officer, director, trustee, employee or partner
of any Member or Officer or any Person described in (a) through (c) above.
5.7 Vertical as Consultant. Subject to the authority of the Executive
Committee as set forth in Section 5.1.2 hereof, Vertical shall serve as a
Consultant to the LLC.
5.7.1 Services. Vertical shall render to the LLC advice and services
regarding the financial, distribution, sales and marketing aspects of the
business and such other advice and services and technology in connection with
the business as the Executive Committee may reasonably request from time to
time. In performing the consulting services called for by this Section 5.7, the
Consultant and its employees shall act as an independent contractor with the
right to exercise its independent judgement as to the time, place, and manner of
performing his duties hereunder and otherwise carrying out the provisions of the
Section 5.7.
5.7.2 Specific Services. Specific services performed by Vertical for
the LLC include the following:
(a) All financial services including preparation of monthly
financials.
(b) Section 5.2.2 b, e, f, g, h, i, j, in conjunction with
CEO.
(c) Technology transfer of applicable technology or services
that Vertical possesses in order to enhance or compliment the LLC offerings.
5.7.3 Fees. Vertical shall be entitled to be paid services provided
to the LLC as a consultant and charge only for its direct costs, without any
allocation of Vertical overhead.
5.8 INPI as Consultant. Subject to the authority of the Executive
Committee, as set forth in Section 5.1.2 hereof, iNPi shall serve as a
Consultant to the LLC.
5.8.1 Services. iNPI shall render to the LLC technology and services
for Internet based e-commerce and e-procurement enabling services to the LLC
client base and such other services and technology in connection with the
business, as the Executive Committee may reasonably request from time to time.
In performing the consulting services called for by this Section 5.8, the
Consultant and its employees shall act as an independent contractor with the
right to exercise its independent judgment as to the time, place, and manner of
performing his duties hereunder and otherwise carrying out the provisions of the
Section 5.8.
5.8.2 Specific Services. Specific services performed by iNPI for the
LLC include the following:
(d) All technical and application services for the e-commerce
and e-procurement enabling of LLC client
(e) Section 5.2.2 b, e, f, g, h, i, j, in conjunction with
CEO.
(f) Use of applicable technology or services that iNPi
possesses in order to enhance or compliment the LLC offerings.
5.8.3 Fees. iNPI shall be entitled to be paid services provided to
the LLC as a consultant and charge only for its direct costs, without any
allocation of iNPI's overhead.
ARTICLE 6
ALLOCATIONS OF NET PROFITS AND NET LOSSES
6.1 Allocations Of Net Profits And Net Losses.
6.1.1 Allocation of Losses. LLC losses for any year (including both
losses from operations and from the sale of all or substantially all the LLC
assets) shall be allocated to the Members as follows:
(a) Losses shall be allocated in proportion to, and in an
amount equal to the Members' Percentage Interest, until iNPi's Capital Account
has been reduced to zero.
(b) Next, losses shall be allocated 100% to Vertical until its
Capital Accounts has been reduced to zero.
(c) Any remaining losses shall be allocated in proportion to
an and in an amount equal to the Members Percentage Interest.
6.1.2 Allocation of Profit - LLC Operations. Any profits from LLC
operations (as distinguished from profits from the sale of all or substantially
all of the LLC assets) shall be allocated as follows:
(a) Profits shall first be allocated so as to recoup LLC
losses, with any losses under Section 6.1.1(c) being recouped first, then losses
under Section 6.1.1(b) and then losses under Section 6.1.1(a).
(b) Any remaining profits shall be allocated in proportion to,
an in an amount equal to the Members Percentage Interest.
6.1.3 Allocation of Profit - Sale of LLC Assets. Profits resulting
from the sale of all or substantially all the LLC assets (as distinguished from
profits from operations) shall be allocated as follows:
(a) To the extent that there have been losses previously
allocated to the Members under Section 6.1.2 above, which have not theretofore
been recouped under Section 6.1.2(a) above, then profits shall be allocated so
as to recoup such losses.
(b) Any remaining profits in proportion to, and in an amount
equal to the Members' Percentage Interest.
6.2 Other Tax Allocation Provisions. Notwithstanding any other provision
of this Article 6, the following allocations shall be made:
6.2.1 Minimum Gain; Chargebacks. If there is a net decrease in
either LLC Minimum Gain or minimum gain attributable to a Member Nonrecourse
Debt during a LLC taxable year, each Member shall be allocated items of income
and gain in accordance with the requirements of ss. ss. 1.7042(9)(2) and
1.7042(i)(5) of the Treasury Regulations. "LLC Minimum Gain" means LLC minimum
gain computed in accordance with the principles of ss. 1.7042(d) of the Treasury
Regulations.
6.2.2 Qualified Income Offset. If any Member unexpectedly receives
an adjustment, allocation, or distribution described in ss. 1.7041(b)(2)(ii)(d)(
4), (5), or (6) of the Treasury Regulations, then items of LLC income and gain
shall be specially allocated to the Member in an amount and manner sufficient to
comply with the Qualified Income Offset requirements of ss. 1.7041(b)(2)(ii)(d)
of the Treasury Regulations.
6.2.3 Nonrecourse Deduction. Any "Nonrecourse Deductions" as defined
in Treasury Regulations ss. 1.7042(c) for any Fiscal year or other period shall
be specially allocated as items of loss in the manner provided in Treasury
Regulations ss. 1.7042(j)(1)(ii).
6.2.4 Partner Nonrecourse Deduction. Any "Partner Nonrecourse
Deductions" as defined in Treasury Regulations ss. 1.7042(i)(2) for any Fiscal
year or other period shall be specially allocated to the Member who bears the
economic risk of loss (within the meaning of Treasury Regulations ss. 1.7522)
with respect to the nonrecourse debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations ss.
1.7042(i).
6.2.5 Allocations for Tax Purposes. All items of income, gain and
loss for Federal and state income tax purposes shall be allocated in accordance
with the corresponding "book" income, gain and loss, and in compliance with ss.
704(c) of the Code.
6.2.6 Curative Allocations. Any special allocations of items of
income and gain pursuant to this Section 6.2 shall be taken into account in
computing subsequent allocations of income and gain pursuant to this Article 6
so that the net amount of any item so allocated and the income, gain, and losses
allocated to each Member pursuant to this Article 6 to the extent 'possible,
shall be equal to the net amount that would have been allocated to each such
Member pursuant to the provisions of this. Section 6.2 'if such unexpected
adjustments, allocations, or distributions had not occurred.
6.3 Code ss. 704(c) Allocation. Notwithstanding any other provision in
this Article 6, in accordance with Code ss. 704(c) and the Treasury Regulations
promulgated thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the LLC 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 LLC for federal income tax purposes
and its fair market value on the date of contribution. Allocations pursuant to
this Section 6.3 are solely for purposes of federal, state and local taxes. As
such, they shall not affect or in any way be taken
into account in computing a Member's Capital Account or share of Net Profits,
Net Losses, or other items of distributions pursuant to any provision of this
Agreement.
6.4 Allocation of Net Profits and Losses and Distributions in Respect of a
Transferred Interest. If any Membership Interest is transferred, or is increased
or decreased by reason of the admission of a new Member or otherwise, during any
Fiscal Year of income, gain, loss, deduction for such Fiscal Year allocable, and
Distributable Cash which is distributable, to the holder of the Membership
Interest for the then Fiscal Year shall be allocated and distributed based on a
method consistent with ss. 706(d) of the Code. For the purpose of accounting
convenience and simplicity, the LLC may treat a transfer of, or an increase or
decrease in, a Membership Interest which occurs at any time during a
semi-monthly period (commencing with the semi-monthly period including the date
hereof) as having been consummated on the last day of such semi-monthly period,
regardless of when during such semi-monthly period such transfer, increase, of
decrease actually occurs (sales and dispositions made during the first fifteen
(15) days of any month will be deemed to have been made on the 15th day of the
month). Notwithstanding any provision above to the contrary, gain or loss of the
LLC realized connection with a sale or other disposition of any of assets of the
LLC shall be allocated solely to the parties owning Membership Interests as of
the date such sale or other disposition occurs.
ARTICLE 7
DISTRIBUTIONS
7.1 Distributions. Unless otherwise mutually agreed by the Members no
later than the fifteenth day of the fourth month following the end of the LLC's
fiscal year the LLC shall distribute to the Members in proportion to their
respective Percentage Interest at the end of such fiscal year, cash in an amount
equal to forty percent (40%) of the LLC's prior year's net earnings as
determined for U.S. federal income tax purposes. All other distributions shall
be made to the Members in accordance with their Percentage Interests as the same
shall exist from time to time at such intervals and in such amounts as approved
by the Supermajority in Interest pursuant to Section 4.8.
7.2 Reduction of Capital Accounts. Any distribution to a Member pursuant
to this Section 7, shall reduce the amount of such Member's Capital account in
accordance with Section 3.3, above, but no adjustment in the Percentage Interest
of any Member shall be made on account of any such distribution.
7.3 Form of Distribution. A Member, regardless of the nature of the
Member's Capital Contribution, has no right to demand and receive any
distribution from the LLC in any form other than money. No Member may be
compelled to accept from the LLC a distribution of any asset in kind in lieu of
a proportionate distribution of money being made to other Members.
Except upon a dissolution and the winding up of the LLC, no Member may be
compelled to accept a distribution of any asset in kind.
7.4 Restriction on Distributions. No distribution shall be made if, after
giving effect to the distribution: (i) the LLC would not be able to pay its
debts as they become due in the usual course of business or (ii) the LLC's total
assets would be less than the sum of its total liabilities plus, unless this
Agreement provides otherwise, the amount that would be needed, if the LLC were
to be dissolved at the time of the distribution, to satisfy the preferential
rights of other Members, if any, upon dissolution that are superior to the
rights of the 'Member receiving the distribution.
7.5 Return of Distributions. Except for distributions made in violation of
the Act or this Agreement, no Member or Economic Interest Owner shall be
obligated to return any distribution to the LLC or pay the amount of any
distribution for the account of the LLC or to any creditor of the LLC.
7.6 Withholding Tax of Foreign Members. Notwithstanding any other
provision in the Agreement to the contrary, with respect to any foreign Member,
the Executive Committee shall withhold and pay over to the Internal Revenue
Service, pursuant to ss.ss.1441, 1442, 1445 or 1446 of the Code, and to the
applicable state taxing authority pursuant to any such corresponding withholding
tax provisions then in effect, at such times as required by such provisions,
such amounts as the LLC is required to withhold under such provisions, as from
time to time in effect, on account of such foreign Member's distributive share
of the LLC's items of gross income, income or gain which are subject to
withholding tax pursuant to such provisions. Any amount of withholding taxes
withheld and paid over by the CEO with respect to a foreign Member's
distributive share of the LLC is gross income shall be deemed to be a
distribution or payment to such foreign Member, reduce the amount otherwise
distributable to such foreign Member pursuant to this Agreement and reduce the
Capital Account of such, foreign Member. To the extent the CEO determines that
the LLC does not have adequate funds to pay the amount of any withholding tax
obligation, the CEO shall give written notice the Member to whom such
withholding obligation is attributable that such Member is required to
contribute the amount of the required withholding. Such Member shall have three
(3) business days from the date such notice is given to contribute the amount of
such withholding tax obligation. To the extent a Member fails to make such
contribution and the LLC pays the amount of such withholding, any amount paid by
the LLC shall be deemed to be a loan, by the LLC to such Member and shall not be
deemed to be a distribution to such Member. The amount of any payment deemed to
be a loan made to any Member, plus interest on such amount from the date of such
payment until such amount is repaid to the LLC at an interest rate equal to ten
percent (10%) per annum, shall be repaid to the LLC by W deduction from any cash
or noncash distributions made to such Member pursuant to this Agreement, (ii) a
reduction in such Member's Capital Account, or (iii) earlier payment of such
amounts and ,interest by such Member to the LLC, in each case as determined by
the CEO.
ARTICLE 8
SALE OR TRANSFER OF LLC INTEREST; WITHDRAWAL
8.1 Nonassignability of LLC Interest.
8.1.1 Consent Required. No Member may sell assign, transfer,
encumber or otherwise dispose of (collectively called "transfer"), except with
the prior written consent of the other Members, which may be withheld by any
Member at such Member's sole and absolute discretion, or as otherwise expressly
permitted pursuant to the terms of this Agreement, all or any portion of its
right, title or interest in the LLC ("LLC Interest"), for three (3) years from
the date hereof, and any attempt to do so shall be void and the LLC shall not
recognize any transfer of any Membership Interest unless each and all of the
conditions hereof affecting such Membership Interest and the transfer thereof
shall have been complied with. Any sale, assignment or other disposition of any
part or all of the stock or other incident of ownership of a member, which shall
result in a change in fifty percent (50%) or more of the voting control of such
member from the date hereof, shall be deemed a transfer under this Subsection
8.8.1 and, therefore, prohibited without the prior written consent of the other
Members. The giving of such consent in any one or more instances will not limit
or waive the need for such consent in any other or subsequent instances.
8.1.2 Permitted Transfers by Member. Notwithstanding the provisions
of Subsection 8.1.1 above, without the consent of the other Members, any Member
may transfer its Membership Interest to its parent corporation or any sister or
subsidiary corporation; provided, however, that such transfer does not abrogate
the purposes and intent of this Agreement.
8.1.3 Right of First Refusal.
(a) Transfers after the initial three (3) year period provided
in Subsection 8.1.1, Members (the "Offering Member") may transfer their LLC
Interest to a Member or any third party, but must give the other LLC Member(s)
(the "Offered Member") 45 days prior written notice of (i) its desire to
transfer, (ii) the name of the third party, and the terms and conditions of the
offer to acquire the LLC Interest, and (iii) information about the third party.
(b) Within 30 days of receiving such notice of the Offered
Member may (i) accept the transfer to the third party, or (ii) provide written
notice to the Offering Member and the CEO of the Offered Member's intention to
exercise its right of first refusal to acquire the Offering Member's LLC
Interest on the same terms and conditions applicable to the Offering Member. The
Offered Member shall have 30 days from the date of said notice to consummate the
acquisition. Any failure by the Offered Member to provide such
notice of its intention to exercise its right of first refusal hereunder shall
be deemed approval of the transfer to the third party.
8.2 Obligations of Transferee. In the event any Member transfers its
Membership Interest (including any transfers made pursuant to Subsection 8.1.2
above), no such transfer shall be made or shall be effective to make such
transferee a Member or entitle such transferee to any benefits or rights
hereunder until the proposed transferee agrees in writing to assume and be bound
by all of the obligations of the transferor and be subject to all the
restrictions to which the transferor is subject under the terms of this
Agreement.
8.3 [Intentional Deletion]
8.4 Withdrawal by a Member.
8.4.1 Withdrawal. Any Member (the "Withdrawing Member") may, at any
time following the third anniversary of the effective date hereof, withdraw from
the LLC by giving advance written notice of not less than ninety (90) days to
the other Members (the "Non-Withdrawing Member"). In the event of such
withdrawal, the Non- Withdrawing Member shall have the right to purchase the
entire (but not less than the entire) interest in the LLC ("LLC Interest") of
the Withdrawing Member under terms and conditions set forth in Section 8.4.4
below. The exercise of the aforesaid right by the Non-Withdrawing Member shall
be made by giving written notice to the Withdrawing Member within thirty (30)
days after receipt of the Withdrawing Member's notice of intent to withdraw.
8.4.2 Failure to Elect. If the Non Withdrawing Member fails to make
the election provided for in Section 8.4.1 within such thirty (30) day period,
the LLC shall dissolve pursuant to Section 10 below.
8.4.3 Purchase Price. The purchase price ("Purchase Price") of the
Withdrawing Member's Interest purchased pursuant to Section 8.4.1 shall be an
amount equal to eighty percent (80%) of the fair market value of such Membership
Interest determined under Section 8.4.4 below and adjusted as provided in
Section 8.4.6 below.
8.4.4 Fair Market Value. If the parties are unable to agree mutually
on such fair market value, it shall be determined by any independent valuation
firm (including, but not limited to, a national public accounting firm other
than the Accountants) approved by the Executive Committee; provided, however,
that the appointment by the Executive Committee of an independent valuation firm
which is not a "Big Five" accounting firm shall be subject to the approval of
Withdrawing Member. If the parties are unable to agree on the appointment of an
independent valuation firm in accordance with the preceding provision, the
appointment of such firm shall be determined by arbitration in accordance with
Section 13 hereof. In making its determination, such valuation firm shall take
into account (i) the Capital Account of the Member
whose interest is being valued, (ii) the fair market value of all LLC assets,
including goodwill, (iii) the amount of profit or loss which would be allocable
to such Member under Section 6 hereof if all LLC assets were sold at their fair
market value, and (iv) the debts and liabilities of the LLC including contingent
liabilities as well as those reflected on the books of the LLC. Any
determination by such valuation firm under this Section 8.4.4 shall be binding
the conclusive as if the matter were arbitrated by the Members in accordance
with Section 14 below. Each of the Members and the LLC shall cooperate with and
make available to the valuation firm applicable records and documents o the LLC
to expedite the determination of the Purchase Price.
8.4.5 Closing. The closing of the purchase of the Membership
Interest pursuant to Section 10.3.1 shall take place at the principal office of
the LLC at such date and time as may be agreed upon by the Members which shall
be no later than thirty (30) days after the determination of the purchase price
of LLC Membership Interest pursuant to Section 8.4.3 above; provided, however,
either Member may postpone the closing for the minimum necessary period or
periods to satisfy any conditions to the closing, but in no even exceeding an
aggregate of thirty (30) additional days, by written notice to the other party.
Unless otherwise unanimously agreed by the Members the terms and conditions of
payment of the purchase price of the Membership Interest to the withdrawing
Member shall be as follows:
(a) One-fourth (1/4) of the purchase price, together with
interest as hereinafter provided, shall be paid at the closing.
(b) A second one-fourth (1/4) of the purchase price, together
with interest as hereinafter provided, shall be paid within twelve (12) months
of the date of purchase.
(c) A third one-fourth (1/4) of the purchase price, together
with interest as hereinafter provided shall be paid within twenty-four (24)
months of the date of purchase.
(d) The balance of the purchase price, together with interest
as hereinafter provided, shall be paid within thirty-six (36) months of the date
of purchase.
(e) Interest shall be payable on the principal balance owing
at a rate equal to the prime rate of interest, as established by Citibank or
Bank of America, whichever is lower plus 1%.
(f) Notwithstanding the foregoing, the balance of the purchase
for the LLC Interest, together with any accrued interest, shall in any event be
paid within ninety (90) days of any termination of the LLC if a termination
shall occur subsequent to the sale of the Membership Interest.
(g) The non-Withdrawing Members shall indemnify and hold the
Withdrawing Member harmless for any and all debts of the LLC.
(h) The Non-Withdrawing Members may and shall be authorized to
withhold from any installment of the purchase price all amounts owed to the LLC
by the Withdrawing Member.
At the closing, the Member selling its Membership Interest shall execute
and deliver such assignments and other instruments as may be necessary or
desirable in the reasonable opinion of the Member(s) purchasing such Interest
(the "Purchasing Members") to transfer and assign the Membership Interest, and
the Purchasing Member(s) shall execute such mortgages, security agreements,
financing statements and other instruments as may be necessary or desirable in
the reasonable opinion of the Selling Member to perfect a security interest in
the assets of the LLC. The Purchasing Member shall be the true and lawful
attorney-in-fact of the Selling Member to effect the transfer and assignment of
the Membership Interest and to sign, certify under oath and acknowledge a
Dissolution Statement to reflect the sale and to perform all acts and to execute
all other instruments which may be required in connection with the sale of the
Membership Interest. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and shall survive the transfer
by a Member of its Membership Interest.
8.4.6 Closing Adjustments. At the closing of the purchase of a
Membership Interest the Purchase Price to be paid for such Membership Interest
shall be adjusted as provided in this Section 8.3.7. There shall be determined,
as of the closing date, (a) the aggregate amount of all additional capital
contributions made by Withdrawing Member pursuant to Section 2.3 between the
date of which the Purchase Price for such Membership Interest was established
and the date of the closing and any other increase in the Capital Account of
Withdrawing Member during such period, determined pursuant to Section 3, and (b)
the aggregate amount of all distributions, whether of capital or otherwise, made
to Withdrawing Member during such period pursuant to Section 3 and any other
decrease in the Capital Account of Withdrawing Member during such period,
determined pursuant to Section 3. If the amount determined under (a) exceeds the
amount determined under (b), the Purchase Price shall be increased by an amount
equal to such excess; if the amount determined under (b) exceeds the amount
determined under (a), the Purchase Price shall be decreased by an amount equal
to such excess. Withdrawing Member shall transfer its Membership Interest free
and clear of any liens, encumbrances, security interests, charges or any
interests of any third party granted or placed thereon by withdrawing Member
(but subject to any liens, encumbrances, security interests, charges or any
interests of any third party granted or placed thereon by the LLC) and shall
execute or cause to be executed any and all documents required to fully transfer
such Membership Interest to Non-Withdrawing Member including, but not limited
to, any documents necessary to evidence such transfer, and all documents
required to release any interest of any party who may claim an interest in
Withdrawing Member's Membership Interest. Any monetary default by Withdrawing
Member may be cured out of the proceeds from such sale at the closing. If
Withdrawing Member disputes
the fact or amount of any monetary default claimed by the LLC, then any disputed
amount shall be deposited in a dual signature account (one representative of
Withdrawing Member and one representative of the LLC) and the dispute shall be
submitted to arbitration in accordance with Section 14 hereof. The amount placed
in such account shall be distributed with the final award of the arbitrator.
After the closing date, Withdrawing Member shall have no further rights to any
distributions or LLC profits attributable to any period or event following the
closing date and all such rights shall vest in Non Withdrawing Member.
8.5 Noncompetition by Withdrawing Member. Neither Withdrawing Member, nor
any of its agents, officers, directors, in any LLC business (as defined herein),
employees, shareholders or affiliates shall engage, directly or indirectly, in
the United States, for a period of two (2) years following a closing described
in either Section 8.4.6 above.
ARTICLE 9
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
9.1 Books and Records. The LLC shall keep and maintain accurate books and
records of the LLC, which shall be maintained under an accrual basis method of
accounting in accordance with generally accepted accounting principles
consistently applied.
9.2 Delivery to Members and Inspection. Upon the request of any Member or
Economic Interest Owner for purposes reasonably related to' the interest of that
Person as a Member or Economic Interest Owner, the Executive Committee shall
promptly deliver to the requesting Member or Economic Interest Owner, or permit
such Person to inspect during normal business hours, at the expense of the LLC,
any information which such Person may reasonably request.
9.3 Fiscal Year. The fiscal year of the LLC shall end on December 31 of
each year.
9.4 Statements of Financial Condition. At the end of each fiscal year of
the LLC, the independent accountants for the LLC (the "Accountants"), which
shall be a "Big Five" accounting firm Approved by Majority Interest, will render
an opinion, based on generally accepted accounting principles consistently
applied, on the financial statements of the LLC. The Accountants will also
prepare and deliver to the Members so-called "Information Returns" indicating
the profits and losses of the LLC and the allocation thereof to the Members.
9.5 Bank Accounts. The CEO shall maintain the funds of the LLC in one or
more separate bank accounts in the name of the LLC, and shall not permit the
funds of the LLC to be commingled in any fashion with the funds of any other
Person. The bank account shall require two signatures.
9.6 Accounting Policies. All accounting policies for the LLC (other than
those specifically provided for in other sections of this Agreement) shall be
Approved by the Majority Interest.
9.7 Tax Matters for the LLC handled by CEO as Tax Matters Partner. The CEO
shall have the right to make all elections for the LLC provided for in the Code,
including, but not limited to, the elections provided for in ss. 754 of the
Code. Any Member may make a written request to the CEO that the LLC make an
election under ss. 754 of the Code, and the CEO will not unreasonably withhold
or delay its consent to such request, and upon its consent, shall cause the LLC
to make such an election in a timely fashion; provided, however, that any member
who is a transferee of an Membership Interest shall bear all accounting and
other out of pocket expenses arising as a result of such election as it relates
to the Membership Interest so transferred. The Tax Matters Partner, as defined
in Code ss. 6231, shall represent the LLC (at the LLC's expense) in connection
with all examinations of the LLC's affairs by tax authorities, including
resulting judicial and administrative proceedings, and shall expend the LLC
funds for professional services and costs associated therewith. The Tax Matters
Partner shall oversee the LLC tax affairs in the overall best interests of the
LLC. If for any reason the Tax Matters Partner can no longer serve in that
capacity or ceases to be a member or the CEO, Members holding a Majority
Interest may designate another Person to be Tax Matters Partner.
9.8 Preparation of Tax Returns. Federal, state and local income tax
returns of the LLC shall be prepared by the Accountants. Copies of all tax
returns of the LLC shall be furnished for review and approval by each of the
Members at least fifteen (15) days prior to the statutory date for filing,
including extensions thereof, if any. If either Member or the CEO shall fail to
approve any such return, an application for extension of time to file shall be
timely filed by the Accountants.
9.9 Tax Decisions Not Specified. Tax decisions and elections for the LLC
not provided for herein shall be Approved Majority Interest.
9.10 Notice of Tax Audit. Prompt notice shall be given to the Members upon
receipt of notice that the Internal Revenue Service or the Nevada Department of
Taxation intents to examine LLC income tax returns for any year.
ARTICLE 10
DEFAULT AND DISSOLUTION
10.1 Events of Default. The occurrence of any of the following events
shall constitute an event of default ("Event of Default") hereunder on the part
of the Member with respect to who such event occurs, if within thirty (30) days
following notice of such default from the other
Members, the Member in default fails to pay such monies, or in the case of
non-monetary defaults, fails to commence substantial efforts to cure such
default or thereafter fails within a reasonable time to prosecute to completion
with diligence and continuity the curing of such default; provided, however,
that the occurrence of any of the events described in subparagraphs (d) through
(h) below shall constitute an Event of Default immediately upon such occurrence
without any requirement of notice, passage of time or opportunity to cure,
except as specifically set forth in any such subparagraph:
(a) The failure by a Member to make any additional capital
contribution to the LLC as required pursuant to Section 3.2 above.
(b) The violation by a Member of any of the restrictions set
forth in Article 8 above upon the right of a Member to transfer its Membership
Interest.
(c) The failure of a Member's transferee to assume in writing
and agree to be bound by all of the transferring member's obligations, as
provided in Section 8.2 above.
(d) The filing by a Member of a petition in bankruptcy, or the
adjudication of a Member as a bankrupt.
(e) The institution by a Member of a creditor of such Member
of a proceeding under any section or chapter of the federal Bankruptcy Code for
the reorganization or rearrangement of such Member's financial affairs.
(f) The appointment of a receiver, custodian, trustee or like
officer, to take possession of the assets of a Member if the pendency of such
receivership would have a materially adverse effect upon the performance by the
Member of its obligations under this Agreement, which receivership remains
undischarged for a period of thirty (30) days from the date of its imposition.
(g) A general assignment by a Member for the benefit of its
creditors.
(h) Corporate dissolution or merger of a member without the
prior written notification of the other Members; or
(i) Material default in the performance of or material failure
to comply with any other agreements, obligations or undertakings of a Member
contained in this Agreement.
10.2 Causes of Dissolution. The LLC shall be dissolved and terminated upon
the earlier happening of the following:
(a) An Event of Default has occurred as described in Section 10.1
the non-defaulting Members elect to dissolve the LLC as provided in Section 10.3
hereof;
(b) The sale or other disposition of all or substantially all of the
assets and properties of the LLC; or
(c) The Members mutually agree to dissolve and terminate the LLC.
10.3 Election of Non-Defaulting Members.
10.3.1 Purchase of Defaulting Member Interest. Upon the occurrence
of an Event of Default described in Sections 10.1 (a) through (i) with respect
to any Member (the "Defaulting Member"), the other Member (the "Non-Defaulting
Members") shall have the right to acquire the Membership Interest of the
Defaulting Member in proportion to the Non-Defaulting Members respective
Membership interests for a price equal to eighty percent (80%) of the purchase
price determined in accordance with the procedures set forth in Subsection 8.4.3
above, and subject to adjustment as provided in Subsection 8.4.6 above. To
exercise such right, the Non-Defaulting Members shall notify the Defaulting
Member within thirty (30) days following the occurrence of an applicable Event
of Default of their election to acquire the Defaulting member's Membership
Interest. In the event that one or two of the Non-Defaulting Members decline to
exercise its (or their) right hereunder, the remaining Non-Defaulting Member (or
Member's) shall have an additional ten (10) days to notify the Defaulting Member
of its (or their) intention to exercise such right with respect to the
Defaulting Member's entire Membership Interest.
10.3.2 Closing. The closing of the purchase shall take place as
provided in Subsection 8.4.5 above; provided that upon the closing of such
purchase the Non-Defaulting Members may elect to offset against the purchase
price the amount of any loss, damage or injury the amount of which has been
established by a final non-appealable judgment, caused by the default of the
Defaulting Member.
10.3.3 Election to Dissolve. If the Non-Defaulting Members do not
elect to acquire the entire interest of the Defaulting member as set forth in
Subsection 10.3.1 above, the Non-Defaulting members may elect to dissolve and
terminate the LLC within thirty (30) days following the occurrence of an Event
of Default by written notice to the Defaulting member. The right to the
Defaulting Member's Membership Interest as set forth in this Section 10.3 shall
continue until such Non-Defaulting Members elect to exercise their right to
dissolve and terminate the LLC as provided in this Subsection 10.3.3.
10.4 Dissolution and Termination of LLC.
10.4.1 Procedure and Distribution. Upon the dissolution of the LLC,
the CEO shall proceed to liquidate the assets of the LLC, which may be by the
sale of all or substantially
all of the assets of the LLC in a single transaction or a related series of
transactions (subject to the prior Approval of the Executive Committee as
provided in Subsection 4.8(g) above) and wind up its affairs and the proceeds of
such liquidation shall be applied and distributed in the following order of
priority:
(a) To the expenses of liquidation;
(b) To the repayment of the debts and liabilities of the LLC,
excluding any debts or liabilities owing to a Member;
(c) To the establishment of any reserves which the Executive
Committee deems necessary for any contingent or unforeseen liabilities of the
LLC, or of the Members, arising out of or in connection with the LLC;
(d) To the repayment of the liabilities of the LLC owning to
any Member, including any additional capital contributions on which interest is
payable pursuant to Section 3.2 above;
(e) To any Member whose capital account as a fraction of the
total of all Member capital accounts exceeds such Member's Percentage Interest
in the LLC in the amount necessary to reduce its capital account so that as a
fraction of the total of all members capital accounts it equals such Member's
Percentage Interest in the LLC; and
(f) Any remaining proceeds, including any reserves when no
longer required or so much thereof as shall remain, shall be allocated and
distributed to the Members in accordance with their Percentage Interests.
10.4.2 Negative Capital Account. If upon dissolution and termination
of the LLC, the performance of the LLC results in an overall loss, each of the
Members shall be obligated to restore any deficit in its Capital Account.
Liability for such loss shall continue after termination of the LLC with respect
to any claims which may be made against the Members by reason of the business or
operations of the LLC.
10.4.3 Time Period of Liquidation. A reasonable time shall be
allowed for the orderly liquidation of the assets of the LLC and the payment of
the liabilities of the LLC in order to minimize the normal loss attendant upon a
liquidation.
10.4.4 Non-Cash Assets. If in the opinion of the Executive Committee
a complete liquidation of the assets of the LLC would involve substantial losses
or would be impractical under the circumstances, the CEO shall liquidate that
portion of the assets of the LLC necessary to pay the obligations of the LLC
described in Subsection 10.4.1(a) through (e) above the remaining assets will be
distributed to the Members proportionately to their right to receive
the assets of the LLC on an equitable basis reflecting the net fair market value
of the assets so distributed, which net fair market value shall be determined by
the Members.
10.5 Final Accounting. After the affairs and business of the LLC are wound
up and the LLC is dissolved and terminated, final accounting shall be made by
the Accountants.
10.6 Disposition of Books and Records. Upon the dissolution and
termination of the LLC, all originals of books and records of the LLC,
including, without limitation, all financial records, vouchers, canceled checks
and bank statements, shall be delivered to CEO. Unless otherwise unanimously
approved in writing by Members, CEO shall retain such books and records for a
period of not less than six (6) years and shall make such books and records
available during normal business hours to Members for inspection and copying
upon reasonable notice. In the event any Member (the "former Member") for any
reason ceases, as provided herein, to be a Member at any time prior to
dissolution and termination of the LLC and the LLC (or business of the LLC in
substantially the same form) is continued without the Former Member, the other
Members (the "Remaining Members") agree that the books and records of the LLC up
to the date of the termination of the Former Members interest shall be
maintained by the Remaining Members, their successors and assigns, for a period
of not less than six (6) years thereafter; provided, however, that if there is
an audit or threat of audit, such books and records shall be retained until the
audit is completed and any tax liability finally determined. Such books and
records shall be available for inspection, examination and copying by the former
Member upon reasonable notice.
ARTICLE 11
INDEMNIFICATION AND INSURANCE
11.1 Indemnification of Agents. For the purposes of this Section 11.1,
"agent" shall mean any Person who was or is (i) a Member, (ii) an Affiliate of a
Member, (iii) any member, officer, shareholder, director, attorney, agent,
representative or employee of a Member or their Affiliates, or (iv) an officer
of the LLC; "proceeding" means any threatened, pending or completed claim,
demand, action or proceeding, whether civil, criminal, administrative,
legislative or investigative; and "expenses" includes without limitation
attorneys' fees and any expenses of establishing a right to indemnification
under this Section 11.1. Except as expressly provided in this Section 11.1, the
LLC shall, to the fullest and broadest extent permitted by the laws of the State
of Nevada, indemnify and hold harmless each agent against losses, damages,
liabilities or expenses, of any kind or nature, incurred by it in connection
with; or while acting (or omitting to act) on behalf of, the LLC. Without
limiting the generality of the foregoing, the LLC hereby agrees to indemnify
each agent, and to save and hold him or it harmless, from and in respect of (x)
all fees, costs and expenses incurred in connection with or resulting from any
demand, claim, actions or proceeding against such agent or the LLC which arises
out of or in any
way relates to the LLC or its properties, business or affairs, and (y) all such
demands, claims, actions and proceedings and any losses or damages resulting
therefrom., including judgments, fines and amounts paid in settlement or
compromise of any such demand, claim, action or proceeding; provided, however,
that this indemnity shall not extend to conduct by an agent proved to constitute
actual fraud or willful malfeasance. Unless the CEO otherwise determines, the
LLC shall pay the expenses incurred by any agent in connection with any
proceeding in advance of the final disposition of such proceeding, upon receipt
by the LLC of an undertaking of such agent to repay such payment if there shall
be a final adjudication or determination that such agent is not entitled to
indemnification as provided herein.
11.2 Insurance. The LLC shall have the power to purchase and maintain
insurance, on behalf of any Person who is or was an agent of the LLC against any
liability asserted against such Person and incurred by such Person in any such
capacity, or arising out of such Person's status as an agent, whether or not the
LLC would have the power to indemnify such Person against such liability under
the provisions of Section 11.1 or under applicable law.
11.3 Arbitration.
ANY ACTION TO ENFORCE OR INTERPRET THIS AGREEMENT, OR TO RESOLVE DISPUTES WITH
RESPECT TO THIS AGREEMENT AS BETWEEN THE COMPANY AND A MEMBER, OR BETWEEN OR
AMONG THE MEMBERS, SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. ARBITRATION SHALL BE THE EXCLUSIVE
DISPUTE RESOLUTION PROCESS IN THE STATE OF CALIFORNIA, BUT ARBITRATION SHALL BE
A NONEXCLUSIVE PROCESS ELSEWHERE. ANY PARTY MAY COMMENCE ARBITRATION BY SENDING
A WRITTEN DEMAND FOR ARBITRATION TO THE OTHER PARTIES. SUCH DEMAND SHALL SET
FORTH THE NATURE OF THE MATTER TO BE RESOLVED BY ARBITRATION. THE EXECUTIVE
COMMITTEE SHALL SELECT THE PLACE OF ARBITRATION. THE SUBSTANTIVE LAW OF THE
STATE OF CALIFORNIA SHALL BE APPLIED BY THE ARBITRATOR TO THE RESOLUTION OF THE
DISPUTE, WITH THE EXCEPTION THAT THE ARBITRATOR IS NOT EMPOWERED TO MAKE AN
AWARD OF EXEMPLARY OR PUNITIVE DAMAGES. THE PARTIES SHALL SHARE EQUALLY ALL
INITIAL COSTS OF ARBITRATION. THE PREVAILING PARTY SHALL BE ENTITLED TO
REIMBURSEMENT OF ATTORNEY FEES, COSTS, AND EXPENSES INCURRED IN CONNECTION WITH
THE ARBITRATION. ALL DECISIONS OF THE ARBITRATOR SHALL BE FINAL, BINDING AND
CONCLUSIVE ON ALL PARTIES. JUDGMENT MAY BE ENTERED UPON ANY SUCH DECISION IN
ACCORDANCE WITH APPLICABLE LAW IN ANY COURT HAVING JURISDICTION THEREOF. THE
ARBITRATOR (IF PERMITTED UNDER APPLICABLE LAW) OR SUCH COURT MAY ISSUE A WRIT OF
EXECUTION TO ENFORCE THE ARBITRATOR'S DECISION.
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ARTICLE 12
INVESTMENT REPRESENTATIONS
12.1 Acknowledgments. Each Member acknowledges that:
12.1.1 its Membership Interest has not been registered under the
Securities Act; and
12.1.2 it must bear the economic risk of its investment in its
Membership Interest for an indefinite period of time because its Membership
Interest has not been registered under the Securities Act and, therefore, cannot
be sold unless it is subsequently registered under the Securities Act or an
exemption from such registration is available.
12.2 Representations and Warranties. Each Member represents and warrants
to and agrees with the LLC that:
12.2.1 it is acquiring its Membership Interest for investment
purposes only, for its own account and not as nominee or agent for any other
Person, and not with a view to the sale or distribution of any or all thereof;
12.2.2 it has no present intention of selling, granting a
participation in, or otherwise distributing the same;
12.2.3 it understands that its Membership Interest is not being
registered under the Securities Act in reliance upon an exemption which is in
part predicated on the representations, warranties and agreements made by it in
this Section 12.1; and
12.2.4 that it is an "accredited investor" within the meaning of
Regulation D under the Securities Act and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in its Membership Interest and is able to bear the
economic risk of that investment.
ARTICLE 13
MISCELLANEOUS
13.1 Complete Agreement. This Agreement and the Certificate constitute the
complete and exclusive statement of agreement among the Members and the
Executive Committee with respect to the subject matter herein and therein and
replace and supersede all prior written and
oral agreements or statements by and among the Members and the CEO or, any of
them. No representation, statement, condition or warranty not contained in this
Agreement or the Certificate will be binding on the Members or have any force or
effect whatsoever. To the extent that any provision of the Certificate conflict
with any provision of this Agreement, the Certificate shall control.
13.2 Binding Effect. Subject to the provisions of this Agreement relating
to transferability, this Agreement will be binding upon and inure to the benefit
of the Members, and their respective successors and assigns.
13.3 No Third Party Beneficiary. This Agreement is made solely and
specifically among and for the benefit of the parties hereto and their
respective successors and assigns, and no other person shall have any rights,
interest, or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
13.4 Not for Benefit of Creditors. The provisions of this Agreement are
intended only for the regulation of relations among Members and the Company.
This Agreement is not intended for the benefit of any creditor who is not a
Member and does not grant any rights to or confer any benefits on any creditor
who is not a Member or any other person who is not a Member.
13.5 Pronouns; Statutory References. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine, or neuter, singular
or plural, as the context in which they are used may require. Any reference to
the Code, the Treasury Regulations, the Act, or other statutes or laws will
include all amendments, modifications, or replacements of the specific sections
and provisions concerned.
13.6 Headings. All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
13.7 References to this Agreement. Numbered or lettered articles, sections
and subsections herein contained refer to articles, sections and subsections of
this Agreement unless otherwise expressly stated.
13.8 Jurisdiction. Each Member hereby consents to the exclusive
jurisdiction of the state and federal courts sitting in California in any action
on a Claim arising out of, under or in connection with this Agreement or the
transactions contemplated by this Agreement, provided such claim is not required
to be arbitrated pursuant to Section 13.9. Each Member further agrees that
personal jurisdiction over it may be effected by service of process by
registered or certified mail addressed as provided in Section 13.13 of this
Agreement, and that when so made shall be as if served upon it personally within
the State of California.
13.9 Disputed Matters. Except as otherwise provided in this Agreement, any
controversy or dispute arising out of this Agreement, the interpretation of any
of the provisions hereof, or the action or inaction of any Member or the
Executive Committee hereunder shall be submitted to arbitration in Los Angeles,
California under the commercial arbitration rules then obtaining of the American
Arbitration Association. Any award or decision obtained from any such
arbitration proceeding shall be final and binding on the parties, and judgment
upon any award thus obtained may be entered in any court having jurisdiction
thereof. 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
(a) an action to compel arbitration pursuant to this Section 13.9 or (b) an
action to enforce an award obtained in an arbitration proceeding in accordance
with this Section 13.9.
13.10 Exhibits. All Exhibits attached to this Agreement are incorporated
and shall be treated as if set forth herein.
13.11 Severability. If any provision of this Agreement or the application
of such provision to any person or circumstance 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
thereby.
13.12 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions, and conditions of this Agreement and the transactions
contemplated hereby.
13.13 Notices. Any notice to be given or to be served upon the LLC or any
party hereto in connection with this Agreement must be in writing (which may
include facsimile) and will be deemed to have been given and received when
delivered to the address specified by the party to receive the notice. Such
notices will be given to a Member or the Executive Committee at the address
specified in Exhibit A hereto. Any party may, at any time by giving five (5)
days' prior written notice to the other parties, designate any other address in
substitution of the foregoing address to which such notice will be given.
13.14 Amendments. All amendments to this Agreement must be in writing and
signed by all of the Members.
13.15 No Interest in the LLC Property; Waiver of Action for Partition. No
Member or Economic Interest Owner has any interest in specific property of the
LLC. Without limiting the foregoing, each Member and Economic Interest Owner
irrevocably waives during the term of the LLC any right that it may have to
maintain any action for partition with respect to the property of the LLC.
13.16 Multiple Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
13.17 Attorney Fees. In the event that any dispute between the LLC and the
Members or among the Members should result in litigation or arbitration, the
prevailing party in such dispute shall be entitled to recover from the other
party all reasonable fees, costs and expenses of enforcing any right of the
prevailing party, including without limitation, reasonable attorneys' fees and
expenses.
13.18 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
IN WITNESS WHEREOF, all of the Members of LLC, a Nevada liability company,
have executed this Agreement, effective as of the date written above.
iNETPURCHASING, INC.
By______________________________________
▇▇▇▇▇ ▇▇▇▇▇, its President
VERTICAL COMPUTER SYSTEMS, INC.
By______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇, its President
EXHIBIT A
Members' Addresses:
VERTICAL COMPUTER SYSTEMS, INC. iNETPURCHASING, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Atten: President Atten: President