Exhibit 10.6
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LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
KW-A, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
Dated as of July 17, 1998
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS..........................................................1
1.1 ADJUSTED CAPITAL ACCOUNT DEFICIT................................1
1.2 AFFILIATE.......................................................1
1.3 AGREEMENT.......................................................1
1.4 ARTICLES OF ORGANIZATION........................................1
1.5 AVAILABLE CASH FLOW.............................................2
1.6 BUSINESS OF THE LLC.............................................2
1.7 CAPITAL ACCOUNT.................................................2
1.8 CAPITAL CONTRIBUTION............................................2
1.9 CODE............................................................2
1.10 DEPRECIATION....................................................2
1.11 DISSOLUTION.....................................................2
1.12 ECONOMIC INTEREST...............................................2
1.13 FISCAL YEAR.....................................................2
1.14 LLC.............................................................2
1.15 LLC INTEREST....................................................2
1.16 LLC LOANS.......................................................3
1.17 LLC MINIMUM GAIN................................................3
1.18 MAJORITY IN INTEREST OF THE MEMBERS.............................3
1.19 MANAGER.........................................................3
1.20 MEMBER NONRECOURSE DEBT.........................................3
1.21 MEMBER NONRECOURSE DEBT MINIMUM GAIN............................3
1.22 MEMBER NONRECOURSE DEDUCTIONS...................................3
1.24 NET CAPITAL CONTRIBUTIONS.......................................4
1.25 NET PROFITS AND NET LOSS........................................4
1.26 PERCENTAGE INTEREST.............................................4
1.27 PERIOD OF DURATION..............................................5
1.28 PERSON..........................................................5
1.29 PRINCIPAL.......................................................5
1.30 PROPERTY........................................................5
1.31 REGULATIONS.....................................................5
1.32 RESERVES........................................................5
1.33 SECRETARY OF STATE..............................................5
1.34 STATUTE.........................................................5
1.35 VOTE............................................................5
ARTICLE 2 INTRODUCTORY MATTERS.................................................5
2.1 FORMATION OF LLC................................................6
2.2 NAME............................................................6
2.3 PRINCIPAL OFFICE................................................6
2.4 AGENT FOR SERVICE OF PROCESS....................................6
2.5 PERIOD OF DURATION..............................................6
2.6 BUSINESS AND PURPOSE OF THE LLC.................................6
ARTICLE 3 MEMBERS AND CAPITAL CONTRIBUTIONS....................................6
3.1 NAMES AND ADDRESSES OF INITIAL MEMBERS..........................6
3.2 CONTRIBUTIONS...................................................7
3.3 ADDITIONAL CONTRIBUTIONS........................................7
3.4 RIGHTS WITH RESPECT TO CAPITAL..................................7
3.5 GENERAL RULES FOR ADJUSTMEENT OF CAPITAL ACCOUNTS...............7
3.6 SPECIAL RULES WITH RESPECT TO CAPITAL ACCOUNTS..................8
3.7 TRANSFEREE'S CAPITAL ACCOUNT....................................8
ARTICLE 4 ALLOCATION OF PROFITS AND LOSSES.....................................8
4.1 ALLOCATION OF NET PROFITS AND LOSSES............................8
4.2 RESIDUAL ALLOCATIONS............................................9
4.3 QUALIFIED INCOME OFFSET.........................................9
4.4 MINIMUM GAIN CHARGEBACK.........................................9
4.5 MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK.................9
4.6 MEMBER NONRECOURSE DEDUCTIONS..................................10
4.7 SPECIAL ALLOCATIONS............................................10
4.8 FEES TO MEMBERS OR AFFILIATES..................................10
4.9 SECTION 704(c) ALLOCATION......................................10
ARTICLE 5 DISTRIBUTIONS.......................................................11
ARTICLE 6 RIGHTS, DUTIES, OBLIGATIONS AND COMPENSATION OF MANAGERS AND
OFFICERS..........................................................11
6.1 MANAGER........................................................11
6.2 CO-MANAGERS....................................................12
6.3 LIMITATIONS ON RIGHTS AND POWERS...............................13
6.4 COMPENSATION OF MANAGER........................................14
6.5 COMPENSATION OF MEMBERS........................................14
6.6 EXPENSE REIMBURSEMENT..........................................14
ARTICLE 7 MEMBERS' MEETINGS...................................................14
7.1 PLACE OF MEETINGS..............................................14
7.2 ANNUAL MEETINGS OF MEMBERS.....................................14
7.3 SPECIAL MEETINGS...............................................15
7.4 NOTICE OF MEETINGS.............................................15
7.5 VALIDATION OF MEMBERS' MEETINGS................................15
7.6 ACTIONS WITHOUT A MEETING......................................15
7.7 QUORUM AND EFFECT OF VOTE......................................16
ARTICLE 8 RESTRICTIONS ON TRANSFER OR CONVERSION OF LLC INTERESTS, ADDITIONAL
CAPITAL CONTRIBUTIONS;ADMISSION OF NEW MEMBERS....................16
8.1 TRANSFER OR ASSIGNMENT OF MEMBER'S INTEREST....................16
8.2 VOID TRANSFERS.................................................16
8.3 ADDITIONAL CAPITAL.............................................16
8.4 ADMISSION OF NEW MEMBERS.......................................17
ARTICLE 9 BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS..........................17
9.1 MAINTENANCE OF BOOKS AND RECORDS...............................17
9.2 ANNUAL ACCOUNTING..............................................18
9.3 INSPECTION AND AUDIT RIGHTS....................................18
9.4 RIGHTS OF MEMBERS AND NON-MEMBERS..............................18
9.5 BANK ACCOUNTS..................................................18
9.6 TAX MATTERS HANDLED BY MANAGERS................................18
9.7 FEDERAL INCOME TAX ELECTIONS MADE BY MANAGERS..................19
9.8 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS...................19
ARTICLE 10 TERMINATION AND DISSOLUTION.......................................19
10.1 DISSOLUTION....................................................19
10.2 STATEMENT OF INTENT TO DISSOLVE................................20
10.3 CONDUCT OF BUSINESS............................................20
10.4 DISTRIBUTION OF NET PROCEEDS...................................20
ARTICLE 11 INDEMNIFICATION OF THE MEMBERS, MANAGERS, AND THEIR AFFILIATES.....20
11.1 INDEMNIFICATION OF THE MEMBERS AND THEIR PRINCIPALS............20
11.2 EXPENSES.......................................................21
11.3 INDEMNIFICATION RIGHTS NONEXCLUSIVE............................21
11.4 ERRORS AND OMISSIONS INSURANCE.................................21
11.5 ASSETS OF THE LLC..............................................21
ARTICLE 12 AMENDMENTS.........................................................21
12.1 AMENDMENT, ETC. OF OPERATION AGREEMENT........................21
12.2 AMENDMENT, ETC. OF ARTICLES OF ORGANIZATION....................21
ARTICLE 13 MISCELLANEOUS PROVISIONS...........................................21
13.1 COUNTERPARTS...................................................21
13.2 SURVIVAL OF RIGHTS.............................................22
13.3 SEVERABILITY...................................................22
13.4 NOTIFICATION OR NOTICES........................................22
13.5 CONSTRUCTION...................................................22
13.6 SECTION HEADINGS...............................................22
13.7 GOVERNING LAW..................................................22
13.8 ADDITIONAL DOCUMENTS...........................................22
13.9 PRONOUNS AND PLURALS...........................................22
13.10 TIME OF THE ESSENCE............................................23
13.11 FURTHER ACTIONS................................................23
13.12 ARBITRATION OF DISPUTES........................................23
13.13 WAIVER OF JURY.................................................24
13.14 THIRD PARTY BENEFICIARIES......................................24
13.15 TAX ELECTIONS..................................................24
13.16 PARTITION......................................................24
13.17 ENTIRE AGREEMENT...............................................24
13.18 WAIVER.........................................................25
13.19 ATTORNEYS' FEES................................................25
13.20 CONFIDENTIALITY AND PRESS RELEASES.............................25
KW-A, LLC
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
This Limited Liability Company Operating Agreement (the "Agreement")
is made and entered into and effective as of July __, 1998, by and among ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(collectively, the "Members" and, individually, a "Member") with reference to
the recitals set forth below.
RECITALS
The Members have formed a limited liability company (hereinafter
called the "LLC") pursuant to the provisions of the (California) ▇▇▇▇▇▇▇-▇▇▇▇▇▇
Limited Liability Company Act as set forth in Title 2.5 (commencing with Section
17000) of the Corporations Code of the State of California (the "Statute").
In consideration of the covenants and the promises made herein, the
parties hereto hereby agree as follows.
ARTICLE 1
DEFINITIONS
1.1 ADJUSTED CAPITAL ACCOUNT DEFICIT. "Adjusted Capital Account
Deficit" means, with respect to any Member, the deficit balance, if any, in such
Member's Capital Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:
1.1.1 increase such Capital Account by any amounts which such
Member is obligated to contribute to the LLC (pursuant to the terms of
this Agreement or otherwise) or is deemed to be obligated to
contribute to the LLC pursuant to Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
1.1.2 reduce such Capital Account by the amount of the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
1.2 AFFILIATE. "Affiliate" means, when used with reference to a
specified Person, (i) the Principal of the Person, (ii) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(iii) any Person owning or controlling 10% or more of the outstanding voting
interests of such Person, and (iv) any relative or spouse of such Person.
1.3 AGREEMENT. "Agreement" means this Limited Liability Company
Operating Agreement, as originally executed and as amended from time to time, as
the context requires. Words such as "herein", "hereinafter", "hereto", "hereby"
and "hereunder", when used with reference to this Agreement, refer to this
Agreement as a whole, unless the context otherwise requires.
1.4 ARTICLES OF ORGANIZATION. "Articles of Organization" means the
articles of organization filed with the California Secretary of State for the
purpose of forming the LLC.
1.5 AVAILABLE CASH FLOW. "Available Cash Flow" means, with respect to
any Fiscal Year or other period, the sum of all cash receipts of the LLC from
any and all sources, less all cash disbursements (including loan repayments,
capital improvements and replacements) and a reasonable allowance for Reserves,
contingencies and anticipated obligations as determined by the Manager.
1.6 BUSINESS OF THE LLC. "Business of the LLC" shall have the meaning
set forth in Section 2.6 hereof.
1.7 CAPITAL ACCOUNT. "Capital Account" of a Member shall have the
meaning set forth in Section 3.5 hereof.
1.8 CAPITAL CONTRIBUTION. "Capital Contribution" shall have the
meaning set forth in Article 3 hereof.
1.9 CODE. "Code" means the Internal Revenue Code of 1986, as amended
(or any corresponding provision or provisions of any succeeding law).
1.10 DEPRECIATION. "Depreciation" means, for each Fiscal Year or other
period, an amount equal to the depreciation, amortization or other cost recovery
reduction allowable with respect to an asset for such Fiscal Year or other
period.
1.11 DISSOLUTION. "Dissolution" means (i) when used with reference to
the LLC, the earlier of (a) the date upon which the LLC is terminated under the
Statute, or any similar provision enacted in lieu thereof, or (b) the date upon
which the LLC ceases to be a going concern, and (ii) when used with reference to
any Member, the earlier of (a) the date upon which there is a Dissolution of the
LLC or (b) the date upon which such Member's entire interest in the LLC is
terminated by means of a distribution or series of distributions by the LLC to
such Member.
1.12 ECONOMIC INTEREST. "Economic Interest" means a Person's right to
share in the Net Profits, Net Loss or similar items of, and to receive
distributions from, the LLC, but does not include any other rights of a Member
including, without limitation, the right to vote or to participate in the
management of the LLC, or, except as provided in Section 9.4, any right to
information concerning the business and affairs of the LLC.
1.13 FISCAL YEAR. "Fiscal Year" means the period of January 1 to and
including December 31.
1.14 LLC. "LLC" means KW-A, LLC.
1.15 LLC INTEREST. "LLC Interest" or "Interest" means an ownership
interest in the LLC, which includes the Economic Interest, the right to vote or
participate in the management of the LLC, and the right to information
concerning the business and affairs of the LLC, as provided in this Agreement
and under the Statute.
1.16 LLC LOANS. "LLC Loans" shall refer to any loans or advances made
by any Member to the LLC at the Member's option, without obligation to so do, to
the extent the LLC does not have sufficient resources (assets, borrowings or
otherwise) to meet its LLC obligations. Such LLC Loans shall bear interest at
the rate agreed to between the Member and the Manager.
1.17 LLC MINIMUM GAIN. "LLC Minimum Gain" means the amount determined
by computing with respect to each nonrecourse liability of the LLC, the amount
of gain (of whatever character), if any, that would be realized by the LLC if it
disposed (in a taxable transaction) of the Property subject to such liability in
full satisfaction thereof, and by then aggregating the amounts so computed as
set forth in Regulations Section 1.704-2(d).
1.18 MAJORITY IN INTEREST OF THE MEMBERS. "Majority in Interest of the
Members," unless otherwise provided in the Agreement, means more than fifty
percent (50%) of the interests of the Members in the current profits of the LLC.
1.19 MANAGER. "Manager" means all the Members pursuant to Section 6.2
of this Agreement.
1.20 MEMBER NONRECOURSE DEBT. "Member Nonrecourse Debt" has the
meaning set forth in Regulations Section 1.704-2(b)(4).
1.21 MEMBER NONRECOURSE DEBT MINIMUM GAIN. "Member Nonrecourse Debt
Minimum Gain" means an amount, with respect to each Member Nonrecourse Debt,
equal to the LLC Minimum Gain that would result if such Member Nonrecourse Debt
were treated as a nonrecourse liability of the LLC, determined in accordance
with Regulations Sections 1.704-2(i)(2) and (3).
1.22 MEMBER NONRECOURSE DEDUCTIONS. "Member Nonrecourse Deductions"
has the meaning set forth in Regulations Section 1.704-2(1)(2). The amount of
Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a
Fiscal Year of the LLC equals the excess (if any) of the net increase (if any)
in the amount of Member Nonrecourse Debt Minimum Gain attributable to such
Member Nonrecourse Debt during that Fiscal Year over the aggregate amount of any
distributions during that Fiscal Year to the Member that bears (or is deemed to
bear) the economic loss for such Member Nonrecourse Debt to the extent such
distributions are from the proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Nonrecourse Debt Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(2).
1.23 MEMBER. "Member" means a Person who:
1.23.1 Has been admitted to the LLC as a member in accordance
with the Articles of Organization or this Agreement, or an assignee of
an Interest, other than an Economic Interest, who has become a Member
pursuant to Section 8.1.
1.23.2 Has not resigned, withdrawn or been expelled as a Member
or, if other than an individual, been dissolved.
Reference to a "Member" shall be to any one of the Members. Reference to an
"Initial Member" shall be to any one of the Members listed in Section 3.1.
1.24 NET CAPITAL CONTRIBUTIONS. "Net Capital Contributions" means the
aggregate of a Member's Capital Contributions over the aggregate distributions
theretofore made to such Member pursuant to Section 5.1.
1.25 NET PROFITS AND NET LOSS. "Net Profits" and "Net Loss" mean, for
each Fiscal Year or other period, an amount equal to the LLC's taxable income or
loss for such year or period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
1.25.1 Any income of the LLC that is exempt from Federal income
tax and not otherwise taken into account in computing Net Profits or
Net Loss shall be added to such taxable income or loss;
1.25.2 Any expenditures of the LLC described in Code Section
705(b)(2)(B) or treated as Code Section 705(b)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in computing Net Profits or Net Loss shall be
subtracted from such taxable income or loss;
1.25.3 Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for Federal income
tax purposes shall be computed by reference to the fair market value
of the Property disposed of, notwithstanding that the adjusted tax
basis of such Property differs from its fair market value;
1.25.4 In lieu of depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for
such Fiscal Year or other period, computed in accordance with the
subsection hereof entitled "Depreciation"; and
1.25.5 Notwithstanding any other provision of this subsection,
any items of income, gain, loss or deduction which are specifically
allocated shall not be taken into account in computing Net Profits or
Net Loss.
1.26 PERCENTAGE INTEREST. The Initial Members' "Percentage Interests"
shall be in the following percentages:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 20%
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 20%
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 20%
▇▇▇▇▇ ▇▇▇▇▇▇▇ 20%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 20%
---
100%
1.27 PERIOD OF DURATION. "Period of Duration" shall have the meaning
set forth in Section 2.5 hereof
1.28 PERSON. "Person" means an individual, partnership, limited
partnership, corporation, trust, estate, association, limited liability company,
or other entity, whether domestic or foreign.
1.29 PRINCIPAL. "Principal" means the natural Person which is in
ultimate control of a Member.
1.30 PROPERTY. "Property" means all assets of the LLC, both tangible
and intangible, or any portion thereof.
1.31 REGULATIONS. "Regulations" means the federal income tax
regulations promulgated by the Treasury Department under the Code, as such
regulations may be amended from time to time. All references herein to a
specific section of the Regulations shall be deemed also to refer to any
corresponding provisions of succeeding Regulations.
1.32 RESERVES. "Reserves" means funds set aside from Capital
Contributions or gross cash revenues as reserves. Such Reserves shall be
maintained in amounts reasonably deemed sufficient by the Manager for working
capital and the payment of taxes, insurance, debt service, repairs, replacements
renewals, or other costs or expenses incident to the Business of the LLC, or in
the alternative, the Dissolution of the LLC.
1.33 SECRETARY OF STATE. "Secretary of State" shall mean the Secretary
of State of the State of California.
1.34 STATUTE. "Statute" shall mean the (California) ▇▇▇▇▇▇▇-▇▇▇▇▇▇
Limited Liability Company Act as set forth in Title 2.5 (commencing with Section
17000) of the Corporations Code of the State of California (or any corresponding
provision or provisions of any succeeding law).
1.35 VOTE. Except where superseded by another Section of this
Agreement, or required by the terms of the Statute, Code or applicable
Regulations thereunder, all decisions made by the LLC shall be approved by
fifty-one percent (51%) of the votes ("Vote") of the Members, wherein each
Member casts a number of votes equal to the Members Percentage Interest in the
LLC.
ARTICLE 2
INTRODUCTORY MATTERS
2.1 FORMATION OF LLC. The parties have formed the LLC pursuant to the
provisions of the Statute by filing, the Articles of Organization with the
Secretary of State.
2.2 NAME. The name of the LLC is "KW-A, LLC." The Members shall
operate the Business of the LLC under such name or use such other or additional
names as the Members may deem necessary or desirable provided that: (i) no such
name shall contain the words "bank," "insurance," "trust," "trustee,"
"Incorporated," "inc.," "corporation," "corp.," or any similar name or variation
thereof, (ii) the Members shall have reasonably determined, before use of any
such name, that the LLC is entitled to use such name and will not by reason of
such use infringe upon any rights of any other Person, or violate any applicable
laws or governmental regulations, and (iii) the Members shall register such name
under assumed or fictitious name statutes or similar laws of the states in which
the LLC operates.
2.3 PRINCIPAL OFFICE. The LLC shall maintain its principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or any other
location mutually agreed upon by the Members.
2.4 AGENT FOR SERVICE OF PROCESS. The name and address of the LLC's
agent for service of process is ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esq.
2.5 PERIOD OF DURATION. The period of duration of the LLC ("Period of
Duration") shall be thirty (30) years, commencing on the date of the filing of
the Articles of Organization with the California Secretary of State, unless the
LLC is terminated or dissolved sooner, in accordance with the provisions of this
Agreement.
2.6 BUSINESS AND PURPOSE OF THE LLC. The purpose of the LLC is to
engage in any lawful activities for which a LLC may be organized under the
Statute, including, but not limited to, real estate acquisition, development,
investment, property management, investment advisory services, and the provision
of executive management services in real estate related fields; provided that
the LLC shall not conduct any banking, insurance or trust company business.
ARTICLE 3
MEMBERS AND CAPITAL CONTRIBUTIONS
3.1 NAMES AND ADDRESSES OF INITIAL MEMBERS. The names and addresses of
the Initial Members are as follows:
3.1.1 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, an individual ("BS") whose address is
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
3.1.2 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual ("TW") whose address is ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
3.1.3 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual ("DL") whose address is ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
3.1.4 ▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual ("LB") whose address is ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
3.1.5 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual ("JP") whose address is ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
3.2 CONTRIBUTIONS. The Initial Members each shall contribute the sums
of $100.00.
3.3 ADDITIONAL CONTRIBUTIONS. Except as shall be expressly set forth
herein, no Member shall be required to (a) make any additional Capital
Contributions, (b) make any loan, or (c) cause to be loaned any money or other
assets to the LLC.
3.4 RIGHTS WITH RESPECT TO CAPITAL.
3.4.1 LLC CAPITAL. No Member shall have the right to withdraw, or
receive any return of, its Capital Contribution, and no Capital
Contribution may be returned in the form of property other than cash
except as specifically provided herein.
3.4.2 NO INTEREST ON CAPITAL CONTRIBUTIONS. Except as expressly
provided in this Agreement, no Capital Contribution of any Member
shall bear any interest or otherwise entitle the contributing Member
to any compensation for use of the contributed capital.
3.4.3 ESTABLISHMENT OF CAPITAL ACCOUNTS. A separate capital
account ("Capital Account") shall be maintained for each Member. For
book purposes, each Members Capital Account will be separated into a
contribution account and an income (loss) account and will be
maintained according to generally accepted accounting principles.
Sections 3.6 and 3.7 below describe the appropriate accounting
treatment for tax purposes of the Capital Accounts.
3.5 GENERAL RULES FOR ADJUSTMEENT OF CAPITAL ACCOUNTS. The Capital
Account of each Member shall be:
3.5.1 INCREASES. Increased by:
(i) Such Member's cash contributions;
(ii) The agreed fair market value of property contributed by
such Member (net of liabilities secured by such contributed
property that the LLC is considered to assume or take subject to
under Code Section 752);
(iii) All items of LLC income and gain (including income and
gain exempt from tax) allocated to such Member pursuant to
Article 4 or other provisions of this Agreement; and
3.5.2 DECREASES. Decreased by:
(i) The amount of cash distributed to such Member;
(ii) The agreed fair market value of all actual and deemed
distributions of property made to such Member pursuant to this
Agreement (net of liabilities secured by such distributed
property that the Member is considered to assume or take subject
to under Code Section 752);
(iii) All items of LLC deduction and loss allocated to such
Member pursuant to Article 4 or other provisions of this
Agreement.
3.6 SPECIAL RULES WITH RESPECT TO CAPITAL ACCOUNTS.
3.6.1 TIME OF ADJUSTMENT FOR CAPITAL CONTRIBUTIONS. For purposes
of computing the balance in a Member's Capital Account, no credit
shall be given for any Capital Contribution which such Member is to
make until such contribution is actually made. "Capital Contribution"
refers to the total amount of cash and the agreed fair market value
(net of liabilities) contributed to the LLC by that Member and any
subsequent contributions of cash and the agreed fair market value (net
of liabilities) of any other property subsequently contributed to the
LLC by that Member.
3.6.2 INTENT TO COMPLY WITH TREASURY REGULATIONS. The foregoing
provisions of Sections 3.6 and 3.7 and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Section 1.704-1 (b), and shall be
interpreted and applied in a manner consistent with such Regulations
Section. To the extent such provisions are inconsistent with such
Regulations Section or are incomplete with respect thereto, Capital
Accounts shall be maintained in accordance with such Regulations
Section.
3.7 TRANSFEREE'S CAPITAL ACCOUNT. In the event a Member, or the holder
of an Economic Interest, transfers an Interest in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Interest.
ARTICLE 4
ALLOCATION OF PROFITS AND LOSSES
4.1 ALLOCATION OF NET PROFITS AND LOSSES. Except as otherwise provided
in this Article 4, Net Profits and Net Loss of the LLC in each Fiscal Year shall
be allocated among the Members as follows:
4.1.1 NET PROFITS. Net Profits shall be allocated among the
Members as follows:
(i) first, to each of the Members until the cumulative Net
Profits allocated to such Member pursuant to this Section 4.1.1
is equal to the cumulative Net Loss allocated to the Member
pursuant to Section 4.1.2 for any prior period; and
(ii) thereafter, to the Members in accordance with their
Percentage Interests.
4.1.2 ALLOCATION OF NET LOSS. Except as otherwise provided in
this Article 4, Net Loss shall be allocated among the Members as
follows:
(i) first, to offset any Net Profits allocated pursuant to
Section 4.1.1(i) hereof, and then to offset any Net Profits
allocated pursuant to Section 4.1.1 (ii) hereof (in each case pro
rata in proportion to their shares of Net Profits being offset);
(ii) second, in proportion to the positive balances, if any,
in the Members' respective Capital Accounts, until such balances
are reduced to zero; and
(iii) third, to the Members, pro rata, in accordance with
their Percentage Interests; provided, however, that if, and to
the extent that the allocation of Net Loss in this manner would
cause a Member to have an Adjusted Capital Account Deficit at the
end of the Fiscal Year, then such Net Loss shall instead be
allocated to the Member who has the largest Percentage Interest.
4.2 RESIDUAL ALLOCATIONS. Except as otherwise provided in this
Agreement all items of LLC income, gain, loss, deduction, and any other
allocations not otherwise provided for shall be divided among the Members in the
same proportions as they share Net Profits or Net Losses, as the case may be,
for the Fiscal Year.
4.3 QUALIFIED INCOME OFFSET. If any Member unexpectedly receives any
adjustments, allocation or distributions described in clauses (4), (5) or (6) of
Regulations Section 1.704-1 (b)(2)(ii)(d), items of LLC income shall be
specially allocated to such Member in an amount and manner sufficient to
eliminate the Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible. This Section 4.3 is
intended to constitute a "qualified income offset" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(d)(3).
4.4 MINIMUM GAIN CHARGEBACK. If there is a net decrease in LLC Minimum
Gain during a Fiscal Year, each Member will be allocated, before any other
allocation under this Article 4, items of income and gain for such Fiscal Year
(and if necessary, subsequent years) in proportion to and to the extent of an
amount equal to such Member's share of the net decrease in LLC Minimum Gain
determined in accordance with Regulations Section 1.704-2(g)(2). This Section
4.4 is intended to comply with, and shall be interpreted consistently with, the
"minimum gain chargeback" provisions of Regulations Section 1.704-2(f).
4.5 MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. Notwithstanding
any other provision of this Article 4, but except Section 4.4, if there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member
Nonrecourse Debt during any Fiscal Year of the LLC, each Member who has a share
of the Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of LLC income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(i)(4). This Section
4.5 is intended to comply with a minimum gain chargeback requirement of that
Section of the Regulations and shall be interpreted consistently therewith.
4.6 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions
for any Fiscal Year or other period shall be specially allocated to the Member
who bears (or is deemed to bear) the economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(2).
4.7 SPECIAL ALLOCATIONS. Any special allocations of items of Net
Profits pursuant to Sections 4.4, 4.5 and 4.6 shall be taken into account in
computing subsequent allocations of Net Profits pursuant to Section 4.1, so that
the net amount of any items so allocated and the gain, loss and any other item
allocated to each Member pursuant to Section 4.1 shall, to the extent possible,
be equal to the net amount that would have been allocated to each such Member
pursuant to the provisions of this Article if such special allocations had not
occurred.
4.8 FEES TO MEMBERS OR AFFILIATES. Notwithstanding the provisions of
Section 4.1, in the event that any fees, interest, or other amounts paid to any
Member or any Affiliate thereof pursuant to this Agreement or any other
agreement between the LLC and any Member or Affiliate thereof providing for the
payment of such amount, and deducted by the LLC in reliance on Section 707(a)
and/or 707(c) of the Code, are disallowed as deductions to the LLC on its
federal income tax return and are treated as LLC distributions, then
4.8.1 the Net Profits or Net Loss, as the case may be, for the Fiscal
Year in which such fees, interest, or other amounts were paid shall be
increased or decreased, as the case may be, by the amount of such fees,
interest, or other amounts that are treated as LLC distributions; and
4.8.2 there shall be allocated to the Member to which (or to whose
Affiliate) such fees, interest, or other amounts were paid, prior to the
allocations pursuant to Section 4.1, an amount of gross income for the
Fiscal Year equal to the amount of such fees, interest, or other amounts
that are treated as LLC distributions.
4.9 SECTION 704(c) ALLOCATION. Any item of income, gain, loss, and
deduction with respect to any property (other than cash) that has been
contributed by a Member to the capital of the LLC and which is required or
permitted to be allocated to such Member for income tax purposes under Section
704(c) of the Code so as to take into account the variation between the tax
basis of such property and its fair market value at the time of its contribution
shall be allocated to such Member solely for income tax purposes in the manner
so required or permitted.
ARTICLE 5
DISTRIBUTIONS
5.1 AVAILABLE CASH FLOW. Available Cash Flow of the LLC shall be
distributed to the Members in accordance with the following priority and
agreements:
5.1.1 FIRST. Pro rata among the Members, in the ratio of the principal
loan balances outstanding, until all of the accrued but unpaid interest on
all LLC Loans, if any, has been paid, and then the principal amounts
thereof.
5.1.2 SECOND. To the Members, pari passu, on a pro rata basis, until
all Net Capital Contributions are reduced to zero.
5.1.3 THIRD. To the Members in accordance with their applicable
Percentage Interests as of the time of such distribution.
ARTICLE 6
RIGHTS, DUTIES, OBLIGATIONS AND COMPENSATION
OF MANAGERS AND OFFICERS
6.1 MANAGER. The Manager shall have such rights, duties and powers as
are specified in this Agreement, or conferred upon the Manager by Vote of the
Members.
6.1.1 DUTIES OF THE MANAGER. The Manager is the general manager and
chief executive officer of the LLC and has, subject to the control of the
Members, general supervision, direction, and control of the business of the
LLC. The Manager shall preside at all meetings of the Members. The Manager
shall have the general powers and duties of management typically vested in
the office of president of a corporation, and such other powers and duties
as may be prescribed by the Members. Until the Members shall have elected
more than one Manager for the LLC, the term "Manager" as used in this
Agreement, but other than Section 6.2, shall mean the Person who alone has
the powers and duties specified in this Section 6.1.1.
6.1.2 ELECTION. Each Manager of the LLC shall be chosen annually by
the Vote of the Members. In voting for Managers, each Member shall have a
number of votes equal to its Percentage Interest in the LLC. The candidate
for each Manager position who obtains the majority of Member votes cast
shall succeed to that Manager position. Each Manager shall hold office
until the Manager resigns or shall be removed or otherwise disqualified to
serve, or the Manager's successor is elected and qualified.
6.1.3 SUBORDINATE OFFICERS. The Members may appoint a secretary, a
chief financial officer, and such other officers of the LLC as the Business
of the LLC may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in this
Agreement, or as the Members determine.
6.1.4 REMOVAL AND RESIGNATION. Any Manager or other officer of the LLC
may be removed, with or without cause, by the Vote of the Members. Any
Manager or other officer of the LLC may resign at any time without
prejudice to any rights of the LLC under any contract to which the Manager
or other officer of the LLC is a party, by giving written notice to the
Members, or to the Manager, as applicable. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time
specified therein; and unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
6.1.5 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled
by a Vote of the Members through the appointment of a successor officer who
shall hold the office for the unexpired term.
6.2 CO-MANAGERS. If at any time during the Period of Duration, the
Members by Vote shall determine to have more than one Manager, the Managers
shall be elected pursuant to the provisions of Section 6.1.2 and shall be
subject to removal pursuant to the provisions of Section 6.1.4. Each Manager
shall also have the right to resign provided in Section 6.1.4, and any vacancy
in a Manager position shall be filled pursuant to the provisions of Section
6.1.5. The following provisions of this Section 6.2 shall govern the manner in
which the Managers shall manage the Business of the LLC if the Members have
elected more than one Manager.
6.2.1 The Managers shall share in the duties described in Section
6.1.1.
6.2.2 Meetings of the Managers shall be held at the principal office
of the LLC, unless some other place is designated in the notice of the
meeting. Any Manager may participate in a meeting through use of a
conference telephone or similar communication equipment so long as all
Managers participating in such a meeting can hear one another. Accurate
minutes of any meeting of the Managers shall be maintained by the officer
designated by the Managers for that purpose.
6.2.3 Regular meetings of the Managers shall be held immediately
following the adjournment of the annual meeting, of the Members at which
the Managers are elected. No notice need be given of such regular meetings.
6.2.4 Special meetings of the Managers for any purpose may be called
at any time by any Manager. At least forty-eight (48) hours notice of the
time and place of a special meeting of the Managers shall be delivered
personally to the Managers or personally communicated to them by an officer
of the LLC by telephone, telegraph or facsimile. If the notice is sent to a
Manager by letter, it shall be addressed to him at his last known business
address as it is shown on the records of the LLC. In case such notice is
mailed, it shall be deposited in the United States mail, first-class
postage, prepaid, in the place in which the principal office of the LLC is
located at least four (4) days prior to the time of the holding of the
meeting. Such mailing, telegraphing, telephoning or delivery as above
provided shall be considered due, legal and personal notice to such
Manager.
6.2.5 With respect to a special meeting which has not been duly called
or noticed pursuant to the provisions of Section 6.2.4, all transactions
carried out at the meeting are as valid as if had at a meeting regularly
called and noticed if: (i) all Managers are present at the meeting, and
sign a written consent to the holding of such meeting, or (ii) if a
majority of the Managers are present and if those not present sign a waiver
of notice of such meeting or a consent to holding the meeting, or an
approval of the minutes thereof, whether prior to or after the holding of
such meeting, which waiver, consent or approval shall be filed with the
other records of the LLC, or (iii) if a Manager attends a meeting without
notice and does not protest prior to the meeting or at its commencement
that notice was not given to him or her.
6.2.6 Any action required or permitted to be taken by the Managers may
be taken without a meeting and will have the same force and effect as if
taken by a vote of Managers at a meeting, properly called and noticed, if
authorized by a writing signed individually or collectively by all, but not
less than all, the Managers. Such consent shall be filed with the records
of the LLC.
6.2.7 A majority of the total number of incumbent Managers shall be
necessary to constitute a quorum for the transaction of business at any
meeting of the Managers, and, except as otherwise provided in this
Agreement or by the Statute, the action of a majority of the Managers
present at any meeting at which there is a quorum, when duly assembled, is
valid. A meeting at which a quorum is initially present may continue to
transact business, notwithstanding the withdrawal of Managers, if any
action taken is approved by a majority of the required quorum for such
meeting.
6.3 LIMITATIONS ON RIGHTS AND POWERS. Except by the unanimous
agreement of the Members which is evidenced in a writing, neither the Manager
nor any other officer of the LLC shall have authority to:
6.3.1 Enter into or commit to any agreement, contract, commitment or
obligation on behalf of the LLC obligating any Member or Principal to find
additional capital, to make or guarantee a loan or to increase its personal
liability either to the LLC or to third parties;
6.3.2 Receive or permit any Member or Principal to receive any fee or
rebate, or to participate in any reciprocal business arrangements that
would have the effect of circumventing any of the provisions hereof;
6.3.3 Materially alter the Business of the LLC or deviate from any
approved business plan of the LLC as set forth in this Agreement;
6.3.4 Permit or cause the LLC to place title to any Property in the
name of a nominee;
6.3.5 Permit the LLC's funds to be commingled with the funds of any
other Person;
6.3.6 Do any act in contravention of this Agreement;
6.3.7 Do any act which would make it impossible to carry on the
Business of the LLC;
6.3.8 Confess a judgment against the LLC;
6.3.9 Possess Property, or assign rights in specific Property, for
other than a LLC purpose;
6.3.10 Admit any person as a Member, except as otherwise provided in
this Agreement;
6.3.11 Sell, lease, pledge, hypothecate, or grant a security interest
in any Property, except in the ordinary course of business;
6.3.12 Attempt to dissolve or withdraw from the LLC; and
6.3.13 Invest or reinvest any proceeds from the operation of the LLC,
or the sale, refinancing or other disposition of any Property.
6.4 COMPENSATION OF MANAGER. The LLC shall pay to the Manager such
salary and other benefits as shall be approved from time to time by Vote of the
Members. The LLC shall reimburse the Manager for any expense paid by the Manager
that properly is to be borne by the LLC.
6.5 COMPENSATION OF MEMBERS. Except as expressly permitted by this
Agreement or any other written agreement, the LLC shall pay no compensation to
any Member or any Principal of any Member for their services to the LLC.
6.6 EXPENSE REIMBURSEMENT. The LLC shall reimburse the Members for any
expense paid by them that properly is to be borne by the LLC, as approved from
time to time by the Manager.
ARTICLE 7
MEMBERS' MEETINGS
7.1 PLACE OF MEETINGS. Meetings of the Members shall be held at the
principal office of the LLC, unless some other appropriate and convenient
location, either within or without the state where the Articles of Organization
were filed, shall be designated for that purpose from time to time by the
Manager.
7.2 ANNUAL MEETINGS OF MEMBERS. An annual meeting of the Members shall
be held, each year, on the anniversary of the date of this Agreement, at 10:00
a.m. If this day shall be a legal holiday, then the meeting shall be held on the
next succeeding business day, at the same time. At the annual meeting, the
Members shall elect the Manager (or Managers) and transact such other business
as may be properly brought before the meeting.
7.3 SPECIAL MEETINGS. Special meetings of the Members may be called at
any time by the Manager or by one or more Members holding in the aggregate more
than ten percent (10%) of the Percentage Interests. Upon receipt of a written
request, which request may be mailed or delivered personally to the Manager, by
any Person entitled to call a special meeting of Members, the Manager shall
cause notice to be given to the Members that a meeting will be held at a time
requested by the Person or Persons calling the meeting, which time for the
meeting shall be not less than ten (10) nor more than sixty (60) days after the
receipt of such request. If such notice is not given within twenty (20) days
after receipt of such request, the Persons calling the meeting may give notice
thereof in the manner provided by this Agreement.
7.4 NOTICE OF MEETINGS. Except as provided for in Section 7.3 for
special meetings, notice of meetings shall be given to the Members in writing
not less than ten (10) nor more than sixty (60) days before the date of the
meeting by the Manager. Notices for regular and special meetings shall be given
personally, by mail, or by facsimile, and shall be sent to each Member's last
known business address appearing on the books of the LLC. Such notice shall be
deemed given at the time it is delivered personally, or deposited in the mail,
or sent by facsimile. Notice of any meeting of Members shall specify the place,
the day and the hour of the meeting, and (i) in case of a special meeting, the
general nature of the business to be transacted, or (ii) in the case of an
annual meeting, those matters which the Manager, at the date of mailing, intends
to present for action by the Members.
7.5 VALIDATION OF MEMBERS' MEETINGS. The transactions of a meeting of
Members which was not called or noticed pursuant to the provisions of Section
7.3 or 7.4 shall be valid as though transacted at a meeting duly held after
regular call and notice, if Members holding in the aggregate fifty-one percent
(51 %) or more of the Percentage Interests are present, and if, either before or
after the meeting, each of the Members entitled to vote but not present (whether
in person or by proxy, as that term is used in the Statute) at the meeting,
signs a written waiver of notice, or a consent to the holding of such meeting,
or an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the records of the LLC. Attendance shall constitute a waiver
of notice, unless objection shall be made.
7.6 ACTIONS WITHOUT A MEETING.
7.6.1 Any action which may be taken at any annual or special meeting
of Members may be taken without a meeting and without prior notice if a
consent in writing, setting forth the action so taken, shall be signed by
Members holding in the aggregate the number of votes equal to or greater
than the Vote, unless a lesser vote is provided for by this Agreement or
the Statute; provided, however, that any action which by the terms of this
Agreement or by the Statute is required to be taken pursuant to a greater
vote of the Members may only be taken by a written consent which has been
signed by Members holding the requisite number of votes.
7.6.2 Unless the consents of all Members have been given in writing,
notice of any approval made by the Members without a meeting by less than
unanimous written consent shall be given at least ten (10) days before the
consummation of the action authorized by such approval. Any Member giving a
written consent may revoke the consent by a writing received by the LLC
prior to the time that written consents of Members required to authorize
the proposed action have been filed with the LLC. Such revocation is
effective upon its receipt by the LLC.
7.7 QUORUM AND EFFECT OF VOTE. Each Member shall have a number of
votes equal to the Percentage Interest held by such Member, provided that if,
pursuant to the Statute or the terms of this Agreement, a Member is not entitled
to vote on a specific matter, then such Member's number of votes and Percentage
Interest shall not be considered for purposes of determining whether a quorum is
present, or whether approval by Vote of the Members has been obtained, in
respect of such specific matter. Members holding an aggregate of fifty-one
percent (51 %) or more of the Percentage Interests shall constitute a quorum at
all meetings of the Members for the transaction of business, and the Vote of
Members shall be required to approve any action, unless a greater vote is
required or a lesser vote is provided for by this Agreement or by the Statute.
ARTICLE 8
RESTRICTIONS ON TRANSFER OR CONVERSION
OF LLC INTERESTS, ADDITIONAL CAPITAL CONTRIBUTIONS;
ADMISSION OF NEW MEMBERS
8.1 TRANSFER OR ASSIGNMENT OF MEMBER'S INTEREST. The Interest of each
Member and the Economic Interest of a Person who is not a Member constitutes
personal property of the Member or Economic Interest holder. Each Member and
each Economic Interest holder has no interest in the Property.
8.1.1 A Member's Interest or an Economic Interest may be transferred
or assigned only as provided in this Agreement.
8.1.2 No transfer, hypothecation, encumbrance or assignment
("Transfer") of a Member's Interest, or any part thereof, in the LLC will
be valid without the consent of a Majority in Interest of the Members,
other than the Member proposing to dispose of its Interest.
8.1.3 A Transfer of an Economic Interest may be done without the
consent of the other Members or of the Manager. Any holder of an Economic
Interest shall have no right to participate in the management of the
business and affairs of the LLC or to become a Member thereof.
8.2 VOID TRANSFERS. Any Transfer of an Interest which does not satisfy
the requirement of Section 8.1.2 shall only effect a Transfer of an Economic
Interest, and the transferring Member shall continue to be obligated under each
and every provision of this Agreement.
8.3 ADDITIONAL CAPITAL. During the Period of Duration, each of the
Members shall be required to make additional Capital Contributions to the LLC if
such additional Capital Contributions are approved by Members holding in the
aggregate, seventy-five percent (75%) or more of the Percentage Interests.
8.3.1 Each Member shall be obligated to contribute an amount of
additional capital equal to such Member's Percentage Interest times the
total Capital Contribution amount required of all Members.
8.3.2 The Members' Percentage Interests shall be adjusted to recognize
any Members failure to make the required additional Capital Contribution.
8.3.3 Any Member who fails to contribute some or all of the required
additional capital shall be in default of this Agreement and shall have no
right to participate in the management of the business and affairs of the
LLC, but such Member shall not forfeit its rights to distributions and Net
Profits and Net Loss allocations.
8.4 ADMISSION OF NEW MEMBERS. A new Member may be admitted into the
LLC only upon the consent of a Majority in Interest of the Members.
8.4.1 The amount of Capital Contribution which must be made by a new
Member shall be determined by the vote of all existing Members.
8.4.2 A new Member shall not be deemed admitted into the LLC until the
Capital Contribution required of such Person shall have been made and such
Person has become a party to this Agreement.
ARTICLE 9
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
9.1 MAINTENANCE OF BOOKS AND RECORDS. The LLC shall cause books and
records of the LLC to be maintained in accordance with generally accepted
accounting principles, and shall give reports to the Members in accordance with
prudent business practices and the Statute. There shall be kept at the principal
office of the LLC, as well as at the office of record of the LLC specified in
Section 2.4, if different, the following LLC documents:
9.1.1 A current list of the full name and last known business or
residence address of each Member and of each holder of an Economic Interest
in the LLC set forth in alphabetical order, together with the Capital
Contributions and share in Net Profits and Net Loss of each Member and
holder of an Economic Interest;
9.1.2 A current list of the full name and business or residence
address of each Manager;
9.1.3 A copy of the Articles of Organization and any amendments
thereto, together with any powers of attorney pursuant to which the
Articles of Organization and any amendments thereto were executed;
9.1.4 Copies of the LLC's federal, state and local income tax or
information returns and reports, if any, for the six most recent Fiscal
Years;
9.1.5 A copy of this Agreement and any amendments thereto, together
with any powers of attorney pursuant to which this Agreement and any
amendments thereto were executed;
9.1.6 Copies of the financial statements of the LLC, if any, for the
six most recent Fiscal Years;
9.1.7 The LLC's books and records as they relate to the internal
affairs of the LLC for at least the current and past four Fiscal Years;
9.1.8 Originals or copies of all minutes, actions by written consent,
consents to action and waivers of notice to Members and Member Votes,
actions and consents; and
9.1.9 Any other information required to be maintained by the LLC
pursuant to the Statute.
9.2 ANNUAL ACCOUNTING. Within 120 days after the close of each Fiscal
Year of the LLC, the LLC shall (i) cause to be prepared and submitted to each
Member a balance sheet and income statement for the preceding Fiscal Year of the
LLC (or portion thereof) in conformity with generally accepted accounting
principles and (ii) provide to the Members all information necessary for them to
complete federal and state tax returns.
9.3 INSPECTION AND AUDIT RIGHTS. Each Member and each holder of an
Economic Interest in the LLC who is not a Member has the right upon reasonable
request, for purposes reasonably related to the interest of that Person, to
inspect and copy during normal business hours any of the ▇▇▇ ▇▇▇▇▇ and records
required to be maintained in accordance with Section 9.1. Such right may be
exercised by the Person or by that Person's agent or attorney. Any Member may
require a review and/or audit of the books, records and reports of the LLC. The
determination of the Manager as to adjustments to the financial reports, books,
records and returns of the LLC, in the absence of fraud or gross negligence,
shall be final and binding upon the LLC and all of the Members.
9.4 RIGHTS OF MEMBERS AND NON-MEMBERS. Upon the request of a Member or
a holder of an Economic Interest who is not a Member, for purposes reasonably
related to the interest of that Person, the Manager shall promptly deliver to
the Member or holder of an Economic Interest, at the expense of the LLC, a copy
of this Agreement and a copy of the information listed in Sections 9.1.1, 9.1.2
and 9.1.4 of this Agreement.
9.5 BANK ACCOUNTS. The bank accounts of the LLC shall be maintained in
such banking institutions as the Manager shall determine.
9.6 TAX MATTERS HANDLED BY MANAGERS. One of the Managers who is also a
Member, or in the event no Manager is a Member, a Member or an officer of a
corporate Member, shall be designated as "Tax Matters Partner" (as defined in
Code section 6231), to 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 to expend LLC funds for
professional services and costs associated therewith. In its capacity as "Tax
Matters Partner," the designated Person shall oversee the LLC tax affairs in the
overall best interests of the LLC. Unless the Members designate another to be
"Tax Matters Partner," the Manager shall be the "Tax Matters Partner," provided
that Person is a Member or an officer of a corporate Member.
9.7 FEDERAL INCOME TAX ELECTIONS MADE BY MANAGERS. The Manager on
behalf of the LLC may make all elections for federal income tax purposes,
including but not limited to, the following:
9.7.1 USE OF ACCELERATED DEPRECIATION METHODS. To the extent permitted
by applicable law and regulations, the LLC may elect to use an accelerated
depreciation method on any depreciable unit of the assets of the LLC; and
9.7.2 ADJUSTMENT OF BASIS OF ASSETS. In case of a transfer of all or
part of the Interest of any Member, the LLC may elect, pursuant to code
Sections 734, 743, and 754 of the Code to adjust the basis of the assets of
the LLC.
9.7.3 ACCOUNTING METHOD. For financial reporting purposes, the books
and records of the LLC shall be kept on the accrual method of accounting
applied in a consistent manner and shall reflect all transactions of the
LLC and be appropriate and adequate for the purposes of the LLC.
9.8 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are
aware of the income tax consequences of the allocations made by this Agreement
and hereby agree to be bound by the provisions of this Section 9.8 in reporting
their shares of the LLC income and loss for income tax purposes.
ARTICLE 10
TERMINATION AND DISSOLUTION
10.1 DISSOLUTION. The LLC shall be dissolved upon the occurrence of
any of the following events:
10.1.1 When the Period of Duration of the LLC expires;
10.1.2 The written approval by a Majority in interest of the Members
to dissolve the LLC;
10.1.3 The death, withdrawal, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of any other event which
terminates the Member's continued membership in the LLC, unless the
business of the LLC is continued by the unanimous vote of all remaining
Members within ninety (90) days of the happening of that event.
10.2 STATEMENT OF INTENT TO DISSOLVE. As soon as possible after the
occurrence of any of the events specified in Section 10.1 above, the LLC shall
execute a Statement of Intent to Dissolve in such form as prescribed by the
Secretary of State.
10.3 CONDUCT OF BUSINESS. Upon the filing of the Statement of Intent
to Dissolve with the Secretary of State, the LLC shall cease to carry on its
business, except insofar as may be necessary for the winding up of its business,
but the LLC's separate existence shall continue until the Articles of
Dissolution have been filed with the Secretary of State or until a decree
dissolving the LLC has been entered by a court of competent jurisdiction.
10.4 DISTRIBUTION OF NET PROCEEDS. The Members shall continue to
divide Net Profits and Losses and Available Cash Flow during the winding-up
period in the same manner and the same priorities as provided for in Articles 4
and 5 hereof. The proceeds from the liquidation of Property shall be applied in
the following order:
10.4.1 To the payment of creditors, in the order of priority as
provided by law, except to Members on account of their contributions;
10.4.2 To the payment of loans or advances that may have been made by
any of the Members or their Principals for working capital or other
requirements of the LLC;
10.4.3 To the Members in accordance with the positive balances in
their Capital Accounts after adjustments for all allocations of Net Profits
and Net Loss.
Where the distribution pursuant to this Section 10.4 consists both of
cash (or cash equivalents) and non-cash assets, the cash (or cash equivalents)
shall first be distributed, in a descending order, to fully satisfy each
category starting with the most preferred category above. In the case of
non-cash assets, the distribution values are to be based on the fair market
value thereof as determined in good faith by the liquidator, and the shortest
maturity portion of such non-cash assets (e.g., notes or other indebtedness)
shall, to the extent such non-cash assets are readily divisible, be distributed,
in a descending order, to fully satisfy each category above, starting with the
most preferred category.
ARTICLE 11
INDEMNIFICATION OF THE MEMBERS, MANAGERS,
AND THEIR AFFILIATES
11.1 INDEMNIFICATION OF THE MEMBERS AND THEIR PRINCIPALS. The LLC
shall indemnify and hold harmless the Members, the Managers, their Affiliates
and their respective officers, directors, employees, agents and Principals
(individually, an "Indemnitee") from and against any and all losses, claims,
demands, costs, damages, liabilities, joint and several, expenses of any nature
(including reasonable attorneys' fees and disbursements), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, whether civil, criminal, administrative or investigative,
in which the Indemnitee was involved or may be involved, or threatened to be
involved, as a party or otherwise, arising out of or incidental to the Business
of the LLC, excluding liabilities to any Member, regardless of whether the
Indemnitee continues to be a Member, an Affiliate, or an officer, director,
employee, agent or Principal of the Member at the time any such liability or
expense is paid or incurred, to the fullest extent permitted by the Statute and
all other applicable laws.
11.2 EXPENSES. Expenses incurred by an Indemnitee in defending any
claim, demand, action, suit or proceeding subject to Section 11.1 shall, from
time to time, be advanced by the LLC prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the LLC of an
undertaking by or on behalf of the Indemnitee to repay such amount if it shall
be determined that such Person is not entitled to be indemnified as authorized
in Section 11.1.
11.3 INDEMNIFICATION RIGHTS NON-EXCLUSIVE. The indemnification
provided by Section 11.1 shall be in addition to any other rights to which those
indemnified may be entitled under any agreement, vote of the Members, as a
matter of law or equity or otherwise, both as to action in the Indemnitee's
capacity as a Member, as an Affiliate or as an officer, director, employee,
agent or Principal of a Member and as to any action in another capacity, and
shall continue as to an Indemnitee who has ceased to serve in such capacity and
shall inure to the benefit of the heirs, successors, assigns and administrators
of the Indemnitee.
11.4 ERRORS AND OMISSIONS INSURANCE. The LLC may purchase and maintain
insurance, at the LLC's expense, on behalf of the Members and such other Persons
as the Members shall determine, against any liability that may be asserted
against, or any expense that may be incurred by, such Person in connection with
the activities of the LLC and/or the Members' acts or omissions as the Members
of the LLC regardless of whether the LLC would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
11.5 ASSETS OF THE LLC. Any indemnification under Section 11.1 shall
be satisfied solely out of the assets of the LLC. No Member shall be subject to
personal liability or required to fund or to cause to be funded any obligation
by reason of these indemnification provisions.
ARTICLE 12
AMENDMENTS
12.1 AMENDMENT, ETC. OF OPERATION AGREEMENT. This Agreement may be
adopted, altered, amended, or repealed and a new operating agreement may be
adopted by a Majority In Interest of the Members.
12.2 AMENDMENT, ETC. OF ARTICLES OF ORGANIZATION. Notwithstanding any
provision to the contrary in the Articles of Organization or this Agreement, in
no event shall the Articles of Organization be amended without the vote of
Members representing a Majority In Interest of the Members.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one Agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
are not signatory to the original or the same counterpart.
13.2 SURVIVAL OF RIGHTS. This Agreement shall be binding upon, and, as
to permitted or accepted successors, transferees and assigns, inure to the
benefit of the Members and the LLC and their respective heirs, legatees, legal
representatives, successors, transferees and assigns, in all cases whether by
the laws of descent and distribution, merger, reverse merger, consolidation,
sale of assets, other sale, operation of law or otherwise.
13.3 SEVERABILITY. In the event any Section, or any sentence within
any Section, is declared by a court of competent jurisdiction to be void or
unenforceable, such sentence or Section shall be deemed severed from the
remainder of this Agreement and the balance of this Agreement shall remain in
full force and effect.
13.4 NOTIFICATION OR NOTICES. Except for notices to be given under
Articles 6 and 7 for purposes of meetings of Managers and meetings of Members,
any notice or other communication required or permitted hereunder shall be in
writing and shall be deemed to have been given if personally delivered,
transmitted by facsimile (with mechanical confirmation of transmission), or
deposited in the United States mail, registered or certified, postage prepaid,
addressed to the parties' addresses set forth below. Notices given in the manner
provided for in this Section 13.4 shall be deemed effective on the third day
following deposit in the mail or on the day of transmission or delivery if given
by facsimile or by hand. Notices must be addressed to the parties hereto at the
following addresses, unless the same shall have been changed by notice in
accordance herewith:
13.5 CONSTRUCTION. The language in all parts of this Agreement shall
be in all cases construed simply according to its fair meaning and not strictly
for or against any of the Members.
13.6 SECTION HEADINGS. The captions of the Articles or Sections in
this Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any of the provisions hereof, shall not be
deemed part of this Agreement and shall not be used in construing or
interpreting this Agreement.
13.7 GOVERNING LAW. This Agreement shall be construed according to the
laws of the State of California.
13.8 ADDITIONAL DOCUMENTS. Each Member, upon the request of another
Member, agrees to perform all further acts and execute, acknowledge and deliver
all documents which may be reasonably necessary, appropriate or desirable to
carry out the provisions of this Agreement, including but not limited to
acknowledging before a notary public any signature heretofore or hereafter made
by a Member.
13.9 PRONOUNS AND PLURALS. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine and neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
13.10 TIME OF THE ESSENCE. Except as otherwise provided herein, time
is of the essence in connection with each and every provision of this Agreement.
13.11 FURTHER ACTIONS. Each of the Members agrees to execute,
acknowledge and deliver such additional documents, and take such further
actions, as may reasonably be required from time to time to carry out each of
the provisions, and the intent of this Agreement, and every agreement or
document relating hereto, or entered into in connection herewith.
13.12 ARBITRATION OF DISPUTES. ANY MEMBER HERETO MAY REQUIRE THE
ARBITRATION OF ANY DISPUTE ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
ANY RELATED AGREEMENT. SUCH MEMBER MAY INITIATE AND REQUIRE ARBITRATION BY
GIVING NOTICE TO THE OTHER PARTIES SPECIFYING THE MATTER TO BE ARBITRATED. IF
LEGAL ACTION IS ALREADY PENDING ON ANY MATTER CONCERNING WHICH THE NOTICE IS
GIVEN, THE NOTICE SHALL NOT BE EFFECTIVE UNLESS GIVEN BY THE DEFENDANT THEREIN
AND GIVEN BEFORE THE EXPIRATION OF TWENTY (20) DAYS AFTER SERVICE OF PROCESS ON
THE PERSON GIVING THE NOTICE. EXCEPT AS PROVIDED TO THE CONTRARY IN THESE
PROVISIONS ON ARBITRATION, THE ARBITRATION SHALL BE IN CONFORMITY WITH AND
SUBJECT TO APPLICABLE RULES AND PROCEDURES OF THE AMERICAN ARBITRATION
ASSOCIATION (OR ANY SUCCESSOR THERETO). IF THE AMERICAN ARBITRATION ASSOCIATION
IS NOT THEN IN EXISTENCE AND THERE IS NO SUCCESSOR, OR IF FOR ANY REASON THE
AMERICAN ARBITRATION ASSOCIATION FAILS OR REFUSES TO ACT, THE ARBITRATION SHALL
BE IN CONFORMITY WITH AND SUBJECT TO THE PROVISIONS OF APPLICABLE CALIFORNIA
STATUTES (IF ANY) RELATING TO ARBITRATION AT THE TIME OF THE NOTICE. THE
ARBITRATORS SHALL BE BOUND BY THIS AGREEMENT AND ALL RELATED AGREEMENTS.
PLEADINGS IN ANY ACTION PENDING ON THE SAME MATTER SHALL, IF ARBITRATION IS
REQUIRED AS AFORESAID, BE DEEMED AMENDED TO LIMIT THE ISSUES TO THOSE
CONTEMPLATED BY THE RULES PRESCRIBED ABOVE. EACH MEMBER SHALL PAY THE COSTS OF
ARBITRATION, INCLUDING ARBITRATOR'S FEES, AS AWARDED BY THE ARBITRATOR(S). THE
NUMBER AND SELECTION OF ARBITRATOR(S) SHALL BE IN ACCORDANCE WITH THE RULES
PRESCRIBED ABOVE, EXCEPT THAT (i) EACH ARBITRATOR SELECTED SHALL BE NEUTRAL AND
FAMILIAR WITH THE PRINCIPAL SUBJECT MATTER OF THE ISSUES TO BE ARBITRATED, SUCH
AS, BY WAY OF EXAMPLE, REAL ESTATE DEVELOPMENT, OR REAL ESTATE MANAGEMENT, OR
SUCH OTHER SUBJECT MATTER AS MAY BE AT ISSUE, (ii) THE TESTIMONY OF WITNESSES
SHALL BE GIVEN UNDER OATH, AND (iii) DEPOSITIONS AND OTHER DISCOVERY MAY BE
ORDERED BY THE ARBITRATOR(S).
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES
PROVISION DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY
INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE
ARBITRATION OF DISPUTES PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER
AGREEING TO THIS PROVISION YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY
OF THE APPLICABLE STATE STATUTE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS
VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION TO
NEUTRAL ARBITRATION.
13.13 WAIVER OF JURY. WITH RESPECT TO ANY DISPUTE ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, AS TO WHICH NO MEMBER
INVOKES THE RIGHT TO ARBITRATION HEREINABOVE PROVIDED, OR AS TO WHICH LEGAL
ACTION NEVERTHELESS OCCURS, EACH MEMBER HEREBY IRREVOCABLY WAIVES ALL RIGHTS IT
MAY HAVE TO DEMAND A JURY TRIAL. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY THE MEMBERS AND EACH MEMBER ACKNOWLEDGES THAT NONE OF THE
OTHER MEMBERS NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES HAS MADE ANY
REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. THE MEMBERS EACH FURTHER ACKNOWLEDGE THAT IT HAS
BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPPESENTED) IN THE SIGNING
OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL. THE MEMBERS EACH FURTHER ACKNOWLEDGES THAT IT HAS READ
AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
13.14 THIRD PARTY BENEFICIARIES. There are no third party
beneficiaries of this Agreement except (i) Affiliates and Principals of the
Members and (ii) any other Persons as may be entitled to the benefits of Article
11.1 hereof.
13.15 TAX ELECTIONS. The Manager, in his sole discretion, shall cause
the LLC to make or not make all elections required or permitted to be made for
income tax purposes.
13.16 PARTITION. The Members agree that the Property that the LLC may
own or have an interest in is not suitable for partition. Each of the Members
hereby irrevocably waives any and all rights that it may have to maintain any
action for partition of any Property the LLC may at any time have an interest
in.
13.17 ENTIRE AGREEMENT. This Agreement and the Articles of
Organization constitute the entire agreement of the Members with respect to, and
supersedes all prior written and oral agreements, understandings and
negotiations with respect to, the subject matter hereof.
13.18 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
13.19 ATTORNEYS' FEES. In the event of any litigation, arbitration or
other dispute arising as a result of or by reason of this Agreement, the
prevailing party in any such litigation, arbitration or other dispute shall be
entitled to, in addition to any other damages assessed, its reasonable
attorneys' fees, and all other costs and expenses incurred in connection with
settling or resolving such dispute. The attorneys' fees which the prevailing
party is entitled to recover shall include fees for prosecuting or defending any
appeal and shall be awarded for any supplemental proceedings until the final
judgment is satisfied in full. In addition to the foregoing award of attorneys'
fees to the prevailing party, the prevailing party in any lawsuit or arbitration
procedure on this Agreement shall be entitled to its reasonable attorneys' fees
incurred in any post judgment proceedings to collect or enforce the judgment.
This attorneys' fees provision is separate and several and shall survive the
merger of this Agreement into any judgment.
13.20 CONFIDENTIALITY AND PRESS RELEASES. The Members and their
respective Affiliates and Principals hereby agree that it is in all of their
best interests to keep this Agreement and the Business of the LLC and all
information concerning such business confidential. Such parties each agree that
they will not take any action nor conduct themselves in any fashion, including
giving press releases or granting interviews, that would disclose to third
parties unrelated to the LLC or the Business of the LLC any aspect of the LLC or
the Business of the LLC without the unanimous prior written approval of all
Members. To the extent such prior approval is given, it may be conditioned upon
approval of the text of any press release or the scope of any intended
interview.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this
Agreement as of the date first written above.
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