LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF BIOBALANCE LLC
EXHIBIT
10.3
LIMITED
LIABILITY COMPANY
OF
BIOBALANCE
LLC
This
Limited Liability Company Operating Agreement of BioBalance LLC (the
“Company”),
a
limited liability company organized pursuant to the Delaware Limited Liability
Company Act, 6 Del. C Section 18-101 et seq., as amended from time to time
(the
“Act”),
is
entered into as of August 12, 2008, and shall be effective as of July 25, 2008,
among the parties hereto, as Members (as defined below).
WHEREAS,
the Company was formed pursuant to the provisions of the Act on July 24, 2008;
and
WHEREAS,
the Members desire to establish their respective rights and obligations in
respect of the business and operation of the Company;
NOW,
THEREFORE, in consideration of the premises and mutual covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree to enter into and organize the Company as follows:
ARTICLE
I
DEFINITIONS
For
purposes of this Agreement unless the context clearly indicates otherwise,
the
following terms shall have the following meanings:
“Act”
is
defined in the Preamble.
“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 Taxable Year, after giving effect
to the following adjustments:
(i) increase
such Capital Account by any amounts which such Member is obligated to contribute
to the Company (pursuant to the terms of this Agreement or otherwise) or is
deemed to be obligated to contribute to the Company pursuant to Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) 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).
“Affiliate”
means,
with respect to a specified Person, (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) any
Person owning or controlling ten percent (10%) or more of the outstanding voting
interests of such Person, (iii) any officer, director, member or general
partner of such Person or (iv) any Person who is an officer, director, general
partner, member, trustee, or holder of ten percent (10%) or more of the voting
interests of any Person described in clauses (i) through (iii) of this
sentence.
“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.
“Available
Cash”
means
the gross cash proceeds of the Company from any and all sources less the portion
thereof used to pay or establish reserves for all Company costs, expenses,
management fees, debt payments, capital improvements, replacements, and
contingencies, all as determined by the Company. “Available Cash” shall not be
reduced by depreciation, amortization, cost recovery deductions or similar
allowances, but shall be increased by any reductions of reserves previously
established pursuant to the first sentence of this definition.
“Bankruptcy”
means,
with respect to a Person, the occurrence of any of the following events:
(a) the filing by that Person of a petition commencing a voluntary case in
bankruptcy under applicable bankruptcy laws; (b) entry against that Person
of an order for relief under applicable bankruptcy laws; (c) written
admission by that Person of its inability to pay its debts as they mature,
or an
assignment by that Person for the benefit of creditors; or (d) appointment
of a receiver for the property or affairs of that Person.
“Business
Day”
means
each day of the calendar year other than a Saturday, Sunday or a day on which
commercial banks are required or authorized to close in the State of New
York.
“Capital
Account”
means
the account maintained for a Member determined in accordance with Article
III.
“Capital
Contribution”
means
the amount of money and fair market value of property contributed to the Company
by a Member whether as an initial Capital Contribution or as an additional
Capital Contribution.
“Certificate
of Formation"
means
the document filed with the Secretary of State of the State of Delaware and
through which the Company is formed and any duly authorized, executed and filed
amendments or restatements thereof.
“Code”
means
the Internal Revenue Code of 1986, as amended from time to time (or any
corresponding provisions of succeeding law).
“Company”
is
defined in the Preamble.
“Distribution”
means
transfer of property to a Member on account of a Membership Interest as
described in Article V.
"Indemnified
Person"
means
the Managing Member, any Affiliate of the Managing Member and any officer,
director, employee or agent of the foregoing.
“Managing
Member”
means
the Person designated to manage the Company pursuant to Section 8.1 of this
Agreement.
“Member”
means
each of the parties hereto who holds a Membership Interest.
"Member
Nonrecourse Deductions"
has the
meaning set forth in Regulations Section 1.704-2(i).
“Membership
Interest”
means
the rights of a Member in Distributions (liquidating or otherwise) and
allocations of the profits, losses, gains, deductions, and credits of the
Company.
“Net
Profits”
and
“Net
Loss”
means,
for each Taxable Year or other period, an amount equal to the Company’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:
(a) Any
income of the Company 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 loss; and
(b) Any
expenditures of the Company 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 Losses shall be subtracted from such taxable income or
loss.
“Non-Managing
Members”
means
the Members other than the Managing Member, and any third party (other than
the
Managing Member) who acquires Membership Interests from a Non-Managing Member
in
any transaction permitted under this Agreement.
“Percentage
Interest”
means,
with respect to any Member, the percentage interest of each Member set forth
on
Schedule A annexed hereto, as modified or supplemented from time to
time.
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“Person”
means
an individual, trust, estate, or any incorporated or unincorporated organization
permitted to be a member of a limited liability company under the laws of the
State of Delaware.
“Proceeding”
means
any administrative, judicial, or adversary proceeding, including, without
limitation, litigation, arbitration, administrative adjudication, mediation,
and
appeal or review of any of the foregoing.
“Property”
means
all of the assets of the Company, both tangible and intangible, or any portion
thereof.
“Regulations”
means,
except where the context indicates otherwise, the permanent, temporary,
proposed, or proposed and temporary regulations of the Department of the
Treasury under the Code, as such regulations may be lawfully changed from time
to time (including corresponding provisions of succeeding
regulations).
“Taxable
Year”
means
the taxable year of the Company as determined for federal income tax
purposes.
“Transfer”
As
a
noun, any voluntary or involuntary transfer, sale, or other disposition and,
as
a verb, voluntarily or involuntarily to sell, assign, transfer, grant, give
away, hypothecate, pledge or otherwise dispose of and shall include any transfer
by will, gift or intestate succession.
ARTICLE
II
FORMATION
2.1 Organization.
The
Company was formed as a Delaware limited liability company pursuant to the
provisions of the Act on July 24, 2008.
2.2 Name.
The
name of the Company is “BioBalance LLC”. All business of the Company shall be
conducted under the name “BioBalance LLC”. The Company shall hold all of its
Property in the name of the Company and not in the name of any
Member.
2.3 Term.
The
term of the Company commenced on the date of the formation of the Company in
accordance with and pursuant to the Act, and shall continue until the Company
is
dissolved in accordance with either the provisions of this Agreement or the
Act.
2.4 Registered
Agent and Office.
The
registered agent for service of process and the registered office shall be
that
Person and location reflected in the Certificate of Formation as filed in the
office of the Secretary of State of Delaware. The Managing Member may, from
time
to time, change the registered agent or office through appropriate filings
with
the Secretary of State. In the event the registered agent ceases to act as
such
for any reason or the registered office shall change, the Company shall promptly
designate a replacement registered agent or file a notice of change of address,
as the case may be.
2.5 Principal
Office.
The
principal office of the Company (“Principal
Office”)
shall
be located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other
place as may be determined by the Managing Member. The Company may also maintain
offices and places of business at such other place or places as the Managing
Member deems advisable.
2.6 Purpose.
The
Company was formed for the object and purpose of engaging in any lawful act
or
activity for which limited liability companies may be formed under the Act
and
engaging in any and all activities necessary or incidental to the
foregoing.
2.7 Statutory
Compliance.
The
Company shall exist under and be governed by, and this Agreement shall be
construed in accordance with, the applicable laws of the State of Delaware.
The
Managing Member may execute and file any duly authorized amendments to the
Certificate of Formation from time to time in a form prescribed by the Act.
The
Managing Member shall also cause to be made, on behalf of the Company, such
additional filings and recordings as the Managing Member shall deem necessary
or
advisable.
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2.8 Title
to Property.
All
real and personal property owned by the Company shall be owned by the Company
as
an entity and no Member shall have any ownership interest in such property
in
its individual name or right, and each Member’s interest in the Company shall be
deemed personal property for all purposes.
2.9 Activities.
The
Managing Member shall devote so much of its business time and efforts to the
furtherance of the business of the Company and performance of its
responsibilities under this Agreement as it shall reasonably deem
necessary.
ARTICLE
III
CONTRIBUTIONS
AND CAPITAL ACCOUNTS
3.1 Capital
Contributions and Percentage Interests.
The
names, addresses, Capital Contributions and Percentage Interests of the Members
are set forth on Schedule
A
annexed
hereto.
3.2 Maintenance
of Capital Accounts.
The
Company shall establish and maintain Capital Accounts for each Member and
assignee. Each Member’s Capital Account shall be increased by (i) the amount of
any money actually contributed by the Member to the capital of the Company,
(ii)
the fair market value of any property contributed by the Member, as determined
by the Managing Member at the time of contribution (net of liabilities assumed
by the Company or subject to which the Company takes such property), and (iii)
the Member’s share of Net Profits. Each Member’s Capital Account shall be
decreased by (i) the amount of any money actually distributed to the Member
from
the capital of the Company, (ii) the fair market value of any property
distributed to the Member, as determined by the Managing Member at the time
of
distribution (net of liabilities of the Company assumed by the Member or subject
to which the Member takes such property), and (iii) the Member’s share of Net
Loss.
In
the
event any Member Transfers any Membership 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 Membership
Interest.
The
foregoing provisions 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 and any amendment or successor provision thereto.
3.3 Additional
Capital Contributions.
Except
as otherwise provided herein, no Member shall be required to make any additional
Capital Contributions to the Company.
3.4 Other
Matters.
(a) Except
as
otherwise provided in this Agreement, no Member shall demand or receive a return
of his Capital Contributions or withdraw from the Company. No Member shall
have
the right to withdraw any part of his Capital Contributions from the Company
prior to its liquidation and termination, unless such withdrawal is permitted
under this Agreement.
(b) No
Member
shall receive any interest, salary, or drawing with respect to his Capital
Contributions or his Capital Account or for services rendered on behalf of
the
Company or otherwise in his capacity as a Member, except as otherwise provided
in this Agreement or determined by the Managing Member.
ARTICLE
IV
ALLOCATIONS
4.1 Allocation
of Net Profits and Net Losses of the Company. Except
as
otherwise provided in this Article IV, Net Profits and Net Losses of the Company
in each Taxable Year shall be allocated among the Members as
follows:
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(a) Net
Profits.
After
giving effect to any special allocations set forth in this Section, Net Profits
for any fiscal year shall be allocated in the following order and
priority:
(1) First,
to
each Member in an amount equal to the excess, if any, of the cumulative amount
of Net Losses previously allocated to such Member pursuant to Section 4.1(b)(i)
over the cumulative amount of Net Income previously allocated to such Member
pursuant to this Section 4.1(a)(1); and
(2) Second,
among the Members pro rata in accordance with their respective Percentage
Interests.
(b) Net
Losses.
After
giving effect to any special allocations set forth in this Section, Net Losses
shall be allocated between the Members in the following order and
priority:
(1) First,
to
each Member in an amount equal to the excess, if any, of the cumulative amount
of Net Profits previously allocated to such Member pursuant to Section 4.1(a)(2)
over the cumulative amount of Net Losses previously allocated to such Member
pursuant to this Section 4.1(b)(1), not to exceed, in the case of any Member,
an
allocation of Net Losses that would result in the Capital Account balance of
such Member being reduced below zero; and
(2) Thereafter,
the balance of such Net Losses shall be allocated pro rata to the Members in
accordance with their respective Percentage Interests.
4.2 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 Company 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 4.2 is intended to constitute a “qualified
income offset” within the meaning of Regulations Section
1.704-1(b)(2)(ii)(d)(3).
4.3 Member
Nonrecourse Deductions.
Any
Member Nonrecourse Deductions for a fiscal year or other period shall be
specially allocated to the Member who bears 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).
If more than one Member bears the economic risk of loss with respect to that
Member Nonrecourse Debt shall be allocated among the Members based upon the
ratio in which they bear the economic risk of loss.
4.4 Allocations
for Federal Income Tax Purposes.
The
Company's ordinary income and losses, capital gains and losses and other tax
items as determined for federal income tax purposes shall be allocated to the
Members in the same manner as the corresponding "book" items are allocated
pursuant to Section 4.1. Notwithstanding the foregoing sentence, federal income
tax items with respect to property contributed to the Company by a Member shall
be allocated among the Members in accordance with Section 704(c) of the Code
so
as to take into account the difference between the fair market value and the
tax
basis of such property to the contributing Member as of the date of its
contribution to the Company. Unless otherwise determined by the Members, any
allocations required by Code Section 704(c) shall be effectuated using the
traditional method described in Regulation Section 1.704-3(b). Allocations
pursuant to this Section 4.4 are solely for income tax purposes and shall not
effect or in any way be taken into account on determining a Member's Capital
Account or share of distributions.
4.5 Regulatory
Allocations.
The
allocations set forth in Sections 4.2 and 4.3 (the "Regulatory
Allocations")
are
intended to comply with certain requirements of the Regulations. It is the
intent of the Members that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of income or loss. Therefore, notwithstanding any
other provision of this Article IV (other than the Regulatory Allocations),
offsetting special allocations of Net Profits or Net Loss, shall be made in
whatever manner is appropriate so that, after such offsetting allocations are
made, each Member's Capital Account balance is, to the extent possible, equal
to
the Capital Account balance such Member would have had if the Regulatory
Allocations were not part of the Agreement.
ARTICLE
V
DISTRIBUTIONS
5.1 Distributions
of Available Cash.
Available Cash shall be distributed when determined by the Managing Member
to
and between the Members in proportion to their respective Percentage Interests.
Available Cash shall be distributed to the Members pro rata in proportion to
their respective Percentage Interests as and when required to enable the Members
to make estimated tax payments attributable to their respective distributive
shares of Net Profits, if any (“Tax
Distributions”).
Tax
Distributions shall be based on the highest marginal federal, state and local
individual tax rates in effect for the year in question.
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5.2 Distributions
Upon Liquidation.
Distributions made in conjunction with the final liquidation of the Company,
shall be applied or distributed as provided in Article XII.
5.3 Amounts
Withheld.
All
amounts withheld pursuant to the Code or any provision of any state or local
tax
law with respect to any payment, distribution or allocation to the Company
or
the Members shall be treated as amounts distributed to the Members pursuant
to
this Section for all purposes under this Agreement. The Company is authorized
to
withhold from distributions, or with respect to allocations, to the Members
and
to pay over to any federal, state, or local government any amounts required
to
be so withheld pursuant to the Code or any provisions of any other federal,
state or local law and shall allocate such amounts to the Members with respect
to which such amount was withheld.
ARTICLE
VI
RIGHTS
AND DUTIES OF MEMBERS
6.1 Liability
of Members.
No
Member shall be liable as such for the liabilities of the Company. The failure
of the Company to observe any formalities or requirements relating to the
exercise of its powers or management of its business or affairs under this
Agreement or the Act shall not be grounds for imposing personal liability on
the
Members for liabilities of the Company.
ARTICLE
VII
INDEMNIFICATION
7.1 Liability.
No
Indemnified Person shall be personally liable for the return of any
contributions made to the capital of the Company by the Members. No Indemnified
Person shall be liable to the Company or any Member for any act or omission
of
any other employee, broker or agent of the Company which results in losses
to
the Company due to the fraud, bad faith, willful misconduct or negligence,
provided that such employee, broker or agent was selected, engaged and retained
with reasonable care and, with regard to an employee, that such employee was
supervised with reasonable care.
7.2 Indemnification.
The
Company shall indemnify and hold any Indemnified Person harmless from and
against any loss, expense, damage or injury suffered or sustained by such
Indemnified Person to the fullest extent permitted by law for any loss, damage,
or claim incurred by such Indemnified Person by reason of any acts, omissions,
or alleged acts or omissions arising out of any activity performed or not
performed by such Indemnified Person, for or otherwise in connection with or
related to the Company, other than for such actions or omissions constituting
gross negligence or willful misconduct. This indemnification shall include,
but
not be limited to: (i) payment, as incurred, of reasonable attorneys' fees
and
other expenses incurred in settling any claim or threatened action, or incurred
in investigating, preparing for, or defending any legal proceeding up to and
including a final adjudication (including any fees and expenses incurred in
seeking indemnification), and (ii) the removal of any liens affecting the
property of an Indemnified Person (which liens shall be deemed a debt of the
Company to such Indemnified Person to be repaid in this Agreement). If for
any
reason (other than the gross negligence, actions or omissions taken in bad
faith, or willful misconduct of such Indemnified Person) the foregoing
indemnification is unavailable to any Indemnified Person, or is insufficient
to
hold it harmless, then the Company shall contribute to the amount paid or
payable by such Indemnified Person as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and such Indemnified
Person, on the other hand, or, if such allocation is not permitted by applicable
law, to reflect not only the relative benefits referred to above, but also
any
other relevant equitable considerations. The total obligation of the Company
to
all Indemnified Persons under this Section 7.2 shall be limited solely to the
assets of the Company.
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ARTICLE
VIII
MANAGEMENT
8.1 Management
and Authority.
The
Company shall be managed by one or more designees of The BioBalance Corporation
(such designees referred to collectively as the “Managing
Member”).
The
Managing Member shall have such rights, duties and powers as are specified
in
this Agreement and the Act or as may be prescribed by the Members.
(a) General
Rights, Duties and Powers of the Managing Member.
The
Managing Member is the general manager of the Company, and shall have complete
and exclusive control over the management of the business of the
Company.
(b) Specific
Powers and Duties of the Managing Member.
In
addition to the general powers given to the Managing Member by law and by this
Agreement, except as expressly limited by the provisions of this Agreement,
the
Managing Member shall have the power to enter into, make, sign, seal, deliver
and perform all agreements, contracts, documents, instruments and other
undertakings and to engage in all activities and transactions as may be
necessary or desirable, in the sole discretion of the Managing Member, in order
to carry out the business of the Company, all on behalf of the Company,
including, without limitation, the following:
(i) to
admit
additional Non-Managing Members;
(ii) to
acquire, hold, sell, transfer, exchange, pledge and dispose of Property, and
exercise all rights, powers, privileges, and other incidents of ownership or
possession with respect thereto;
(iii) to
open,
maintain and close bank accounts and draw checks or other orders for the payment
of money;
(iv) to
otherwise deal in any manner with the Property; and
(v) to
make
such elections under the Code and Regulations and other relevant tax laws as
to
the treatment of items of Company income, gain, loss, deduction and credit;
including without limitation, elections referred to in Section 754 of the
Code.
8.2 Managing
Member's Standard of Care.
The
Managing Member's duty of care in the performance of its duties to the Company
and the other Members is limited to the performance of such duties in good
faith
and with that degree of care that an ordinarily prudent person in a like
position would use under similar circumstances. In performing such duties,
the
Managing Member shall be entitled to rely on information, opinions, reports
or
statements, including financial statements and other financial data, in each
case presented or prepared by (i) one or more agents or employees of the
Company, or (ii) counsel, public accountants or other Persons as to matters
that the Managing Member believes to be within such Person’s professional or
expert competence. Except as may be otherwise required by the Act, the Managing
Member shall not be personally liable to the Company or any Member for damages
for any act or omission taken or suffered by the Managing Member in connection
with this Agreement or the conduct of the business of the Company other than for
such acts or omissions constituting gross negligence or willful misconduct.
To
the fullest extent permitted by law, the Managing Member shall not owe any
fiduciary duty to the Members of the Company.
8.3 Reimbursement
of Expenses.
The
Managing Member shall be entitled to reimbursement from the Company for all
out-of-pocket costs and expenses incurred by it, in its reasonable discretion,
for or on behalf of the Company.
8.4 Officers.
The
Managing Member may from time to time appoint one or more officers of the
Company. Such officers shall serve on such terms and for such periods and shall
have such powers and duties as shall be specified by the Managing Member. The
Managing Member shall have the ability to remove officers with or without cause.
8.5 Approval
of Consulting Agreement.
The
Managing Member hereby confirms the approval by the Company of the Consulting
Agreement, of even date herewith, between the Company and The ▇▇▇▇▇▇▇ Group,
LLC
(the “Consulting
Agreement”).
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ARTICLE
IX
DISPOSITION
OF MEMBERSHIP INTERESTS
9.1 Transfers
of Membership Interests Restricted.
No
Member may Transfer all or a portion of such Member’s Membership Interest other
than in compliance with this Article IX. Any Transfer of all or any part of
the
Membership Interest of a Member in violation of the provisions of this Article
IX shall be null and void for all purposes. In addition, any Non-Managing Member
that is not an individual shall not transfer any ownership interest therein
without the prior written consent of the Managing Member.
9.2 Compliance
with Code.
Notwithstanding any provision of this Agreement to the contrary, no Transfer
shall be made if such Transfer, alone or when combined with other transactions,
would
result in the termination of the Company within the meaning of Section 708
of
the Code
or under
any other relevant section of the Code or any successor statute, or otherwise
adversely affect the classification of the Company for income tax purposes.
9.3 Compliance
with Securities Laws.
No
Transfer of any Membership Interest by a Non-Managing Member may be made without
an opinion of counsel satisfactory to the Company and the Managing Member that
such Transfer is subject to an effective registration under, or exempt from
the
registration requirements of, applicable State and Federal securities laws.
9.4 Instruments
of Assignment.
Membership Interests acquired by any third party pursuant to the provisions
of
this Article IX, as well as Membership Interests of a deceased Non-Managing
Member or in the hands of a legal representative or distributees of a
Non-Managing Member, shall continue to be subject to the restrictions set forth
in this Article IX and elsewhere in this Agreement. No Transfer of all or any
part of a Membership Interest otherwise permitted under this Agreement shall
be
binding upon the Company unless and until a duly executed and acknowledged
counterpart of such assignment or instrument of transfer, in form and substance
satisfactory to the Company and the Managing Member, has been delivered to
the
Company.
9.5 Record
Ownership Conclusive.
Notwithstanding a any provision of this Agreement to the contrary, the Company
shall be entitled to treat the record holder of the Membership Interest of
a
Member as the absolute owner thereof, and shall incur no liability by reason
of
distributions made in good faith to such record holder, unless and until there
has been delivered to the Company the assignment or other instrument of transfer
and such other evidence as may be reasonably required by the Company to
establish to the satisfaction of the Company that an interest has been assigned
or transferred in accordance with this Agreement.
9.6 Permitted
Transfers.
Notwithstanding any provision contained herein to the contrary and subject
to
the provisions contained in this Article IX, on not less than ten (10) business
days prior written notice to the Company and to the other Members, a
Non-Managing Member who is an individual shall be permitted to transfer
Membership Interests (i) to any other Member, (ii) to a trust created for the
benefit of such Non-Managing Member or any of such Non-Managing Member’s
parents, siblings, spouse or children or the children of any siblings of the
Non-Managing Member, (iii) to a trust the settler of which is such Non-Managing
Member, or (iv) to an entity with respect to which the Non-Managing Member
exercises voting control at all times, provided that in all such instances
the
Non-Managing Member shall retain the sole right, if any, to vote such Membership
Interests. In addition, subject to Section 9.8 below, upon the death of a
Non-Managing Member who is an individual, the Membership Interests of such
deceased Non-Managing Member may be transferred to his personal representative,
executor or administrator of the deceased Non-Managing Member’s estate, as
applicable (“Executor”)
or
otherwise in accordance with applicable law, provided that the Executor,
transferee, heir, successor, assignee, and/or other distributee of such
Membership Interests, as the case may be, from the deceased Non-Managing Member
becomes a signatory to this Agreement and agrees to be bound by the terms
thereof.
9.7 Right
of First Refusal.
(a) Unless
otherwise consented to by the Members, no Member shall be permitted to transfer
its Membership Interests hereunder prior to July 25, 2009 (the
“Restricted
Period”).
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(b)
Following the expiration of the Restricted Period, in the event that a Member
(“Offering
Member”)
shall
desire to sell all or a portion of its Membership Interests and has received
from a third party which is not related to or affiliated with it (an
“Offeror”)
an
irrevocable and unconditional bona fide arms-length written offer (a
"Bona
Fide Offer")
for
the purchase of its Membership Interests (the "Offered
Interests"),
the
Offering Member shall promptly give a written notice (the "Sale
Notice")
to the
Company and the other Members (the “Remaining
Members”)
which
shall (i) state the nature and details of the sale transaction proposed to
be
effected; and (ii) be accompanied by a photocopy of the original executed Bona
Fide Offer, certified to be a true and correct copy thereof. Notwithstanding
the
foregoing, no transfer to any Competitor (as defined) shall be permitted
hereunder. For purposes of this Section, “Competitor”
shall
mean any person or entity then engaged in, or which proposes to engage in,
the
field of the development, manufacture, and/or sale of probiotic products or
other products performing functions similar to ProBactrix®.
(c) For
a
period of thirty (30) days from the giving of the Sale Notice (the "
Option Period"),
each
Remaining Member shall have an option to purchase all, and not less than all,
of
the Offered Interests, exercisable by a written notice (the “Remaining
Member’s Notice”)
from
such Remaining Member to the Offering Member and to the Company of the desire
of
such Remaining Member (each, an “Electing
Member”)
to
purchase all of Offered Interests on the terms specified in the Sale Notice.
Such Remaining Member’s Notice shall be accompanied by evidence reasonably
satisfactory to the Offeror that the Electing Member has sufficient cash on
hand, or evidence of a binding commitment from a reputable financial
institution, to fund the cash purchase price and consummate the transaction
described in the Sale Notice. If two or more Electing Members deliver a
Remaining Member’s Notice, then the Offered Interests shall be allocated among
the Electing Members ratably in accordance with their respective Percentage
Interests.
(d) If
the
Remaining Members elect to purchase all of the Offered Interests, the Offering
Member shall be obligated to sell, and the Electing Members shall be obligated
to purchase all of the Offered Interests specified in the Remaining Member’s
Notices at the price and upon the terms set forth in the Bona Fide Offer.
Pending (i) exercise by the Remaining Members of their respective options;
or
(ii) expiration, without exercise of the option, of the Option Period, the
Offering Member shall not accept, consummate or, except as specified herein,
otherwise act upon the Bona Fide Offer.
(e) If
the
Remaining Members do not elect to purchase all of the Offered Interests, or
if
they elect to purchase Offered Interests but do not timely close on the purchase
of the Offered Interests in accordance with the terms hereof (other than on
account of the default of the Offering Member), the Offering Member shall be
entitled to sell all (but not less than all) of such Offered Interests which
the
Remaining Members do not elect to purchase (or have elected to purchase, but
did
not timely do so) to the Offeror, in the manner, at the price and upon the
terms
specified in the Bona Fide Offer, provided such action is consummated (i) within
thirty (30) days from the last day of the Option Period and (ii) only with
the
Offeror who tendered the Bona Fide Offer. If such transaction specified in
the
Bona Fide Offer shall not have been so consummated within such thirty (30)-day
period, then the Offering Member shall not thereafter have the right to
consummate such transaction and its Membership Interests shall continue to
be
subject to the provisions of this Agreement in all respects as if the Sale
Notice had never been given.
(f) The
closing of a purchase by the Remaining Members pursuant to this Section 9.7
(the
"Closing
Date")
shall
take place thirty (30) days after the giving of the Remaining Members
Notice.
(g) On
the
Closing Date, the Offering Member shall deliver to the Electing Members the
certificate or certificates, if any, representing the Offered Interests, duly
endorsed for transfer with all requisite transfer tax paid and stamps affixed.
If the Offered Interests are evidenced by book-entry notation, then appropriate
book-entry transfers shall be made as of the Closing Date. The Electing Members
may require the delivery to them on the applicable Closing Date of such consents
to transfer, tax waivers and releases of liens and certificates and opinions
of
counsel, as may be reasonably appropriate in connection with the transfer of
any
of the Offered Interests. On such Closing Date, all right, title and interest
in
the Offered Interests being sold shall be conveyed to the Electing Members,
and
the Offering Member shall thereafter cease to be, and shall have no rights,
as a
Member with respect to such Offered Interests.
(h) If
the
date upon which any action is required to be taken under this Agreement shall
fall on a Saturday, Sunday or legal holiday, then such act shall be performed
on
the next succeeding business day.
9
9.8 Death
of a Non-Managing Member.
(a)
Upon
the
death of a Non-Managing Member (the “Deceased
Non-Managing Member”),
the
Company shall have the option, but not the obligation, to purchase the
Membership Interests of the Deceased Non-Managing Member at a price equal to
the
Fair Market Value of the Membership Interests (as defined below), exercisable by
a written notice from the Company to the Deceased Non-Managing Member's Executor
of the Company's desire to purchase as provided in this Section, which notice
shall be delivered no later than ninety (90) days from the date of death of
the
Deceased Non-Managing Member. If the Non-Managing Members unanimously agree,
then the Company may, at its own expense (and provided that the Non-Managing
Members are insurable), carry policies of insurance on the lives of the
Non-Managing Members in such amounts (“Life
Policies”),
as
the Non-Managing Members deem necessary to purchase the Membership interests
of
a Deceased Non-Managing Member.
(b) “Fair
Market Value”
shall
mean the price that a willing purchaser would pay and a willing seller would
accept for the Membership Interests being transferred under this Section as
of
the proposed date of transfer, both purchaser and seller being fully informed
of
the relevant facts and neither being under a compulsion to purchase or sell.
If
not agreed upon by the Company and the Executor of the Deceased Non-Managing
Member, then Fair Market Value shall be determined by an independent and
qualified appraiser jointly selected by the parties, and shall be binding on
the
parties. All costs of any appraisal shall be paid equally by the Company and
the
estate of the Deceased Non-Managing Member.
(c) The
closing of a purchase by the Company pursuant to this Section 9.8 (the
"Closing
Date")
shall
take place thirty (30) days after the expiration of the 90-day period provided
in Section 9.8(a), above. The purchase price shall be paid by delivery of the
Company’s non-negotiable promissory note which shall provide that the unpaid
principal balance thereof shall bear interest at the Prime Rate (as defined
below), payable in thirty six (36) equal monthly principal installments,
together with interest accrued thereon, with the first payment being due and
payable on the first day of the month following the Closing Date. “Prime
Rate”
as
of
any date shall mean the rate of interest set forth as the “Prime Rate” as
published by The
Wall Street Journal
in its
daily “Money Rates” column on such date Notwithstanding the foregoing, however,
all proceeds of the Life Policies payable upon the death of the Deceased
Non-Managing Member shall be paid to fund the purchase of the Deceased
Non-Managing Member’s Membership Interest as and when received.
ARTICLE
X
ACCOUNTING
AND RECORDS; CERTAIN TAX MATTERS
10.1 Records
to be Maintained.
(a) The
Company shall maintain at its Principal Office separate books of account for
the
Company which shall reflect a true and accurate record of all costs and expenses
incurred, all charges made, all credits made and received, and all income
derived in connection with the operation of the Company business in accordance
with generally accepted accounting principles consistently applied and, to
the
extent inconsistent therewith, in accordance with this Agreement. Each Member
shall, at his sole expense, have the right, or reasonable notice, to examine,
copy, and audit the Company’s books and records during normal business
hours.
(b) The
Company shall maintain the following records at its Principal
Office:
(i) A
current
list of the full name and last known business address of each
Member;
(ii) A
copy of
the Certificate of Formation and all amendments thereto;
(iii) Copies
of
the Company’s income tax returns and reports for the three most recent Taxable
Years;
(iv) Copies
of
this Agreement and any admission agreement, including all amendments thereto;
and
(v) Any
audited financial statements of the Company.
10.2 Reports.
The
Company shall be responsible for the preparation of financial reports of the
Company and the coordination of financial matters of the Company with the
Company’s accountants. The Company shall provide the Members, not less
frequently than annually, with financial statements of the Company that may
be
unaudited, including a balance sheet and related statements of income and
retained earnings and changes in financial position. Each Non-Managing Member
will also be furnished with adequate information necessary for the preparation
of its federal income tax return, including a copy of Form K-1.
10
10.3 Tax
Returns; Information.
The
Company shall arrange for the preparation of all income and other tax returns
of
the Company and shall cause the same to be filed in a timely manner. The Company
shall furnish to each Member a copy of each such return, together with any
schedules or other information each Member may require in connection with such
Member’s own tax affairs.
10.4 Tax
Matters Member.
The
Managing Member is specifically authorized to act as the Tax Matters Member
under the Code and in any similar capacity under state or local
law.
ARTICLE
XI
WITHDRAWALS;
ACTION FOR PARTITION; BREACHES
11.1 Waiver
of Partition.
No
Member shall, either directly or indirectly, take any action to require
partition, file a ▇▇▇▇ for Company accounting or appraisement of the Company
or
of any of its assets or properties or cause the sale of any Company property
and, notwithstanding any provisions of applicable law to the contrary, each
Member (and each of such Member’s legal representatives, successors, or assigns)
hereby irrevocably waives any and all rights it may have to maintain any action
for partition or to compel any sale with respect to its Membership Interest,
or
with respect to any assets or properties of the Company, except as expressly
provided in this Agreement.
11.2 Covenant
Not to Withdraw or Dissolve.
Except
as otherwise provided in this Agreement, each Member hereby covenants and agrees
that the Members have entered into this Agreement based on their mutual
expectation that all Members will continue as Members and carry out the duties
and obligations undertaken by them hereunder and that, except as otherwise
expressly required or permitted hereby, each Member hereby covenants and agrees
not to, without the prior written consent of the Managing Member, (a) take
any
action to file a certificate of dissolution or its equivalent with respect
to
itself, (b) take any action that would cause voluntary bankruptcy of such
Member, (c) withdraw or attempt to withdraw from the Company, (d) exercise
any
power under the Act to dissolve the Company, (e) Transfer all or any portion
of
its Membership Interest in the Company except as expressly permitted hereunder,
(f) petition for judicial dissolution of the Company, or (g) demand a return
of
such Member’s contributions or profits (or a bond or other security for the
return of such contributions or profits).
ARTICLE
XII
DISSOLUTION
AND WINDING UP
12.1 Dissolution;
Liquidating Events.
The
Company shall be dissolved and its affairs wound up upon the first to occur
of
the following events:
(a) the
written consent of the Managing Member;
(b) the
sale
of all or substantially all of the assets of the Company without any
contemplated reinvestment of proceeds following such sale, as determined by
the
Managing Member; or
(c) the
entry
of a decree of judicial dissolution under Section 18-802 of the
Act.
Notwithstanding
the foregoing, the dissolution of the Company during the one-year period
commencing on the date of this Agreement shall require the unanimous written
consent of the Members.
12.2 Effect
of Dissolution.
Upon
dissolution, the Company shall cease carrying on as distinguished from the
winding up of the Company business, but the Company shall not be terminated,
and
shall continue until the winding up of the affairs of the Company is completed
in accordance with the Act.
12.3 Liquidating
Agent.
The
liquidation of the Company shall be conducted and supervised by the Managing
Member or the Managing Member’s designee (the "Liquidating Agent"). The
Liquidating Agent hereby is authorized and empowered to execute any and all
documents and to take any and all actions necessary or desirable to effectuate
the dissolution and liquidation of the Company in accordance with this
Agreement. Promptly after the termination of the Company, the Liquidating Agent
shall cause to be prepared and furnished to the Members a statement setting
forth the assets and liabilities of the Company as of the date of termination.
The Liquidating Agent, to the extent practicable, shall liquidate the assets
of
the Company as promptly as possible, but in an orderly and businesslike manner
so as not to involve undue sacrifice. Neither the Managing Member nor the
Liquidating Agent will be personally liable for the return of the capital
contributions of the Non-Managing Members, it being expressly understood that
such returns will be repayable only from the Company's assets.
11
12.4 Distribution
of Assets on Dissolution.
Upon
the winding up of the Company, the Company’s assets shall be distributed in the
following order of priority, after giving effect to all distributions made
under
Article V hereof and after establishing such reserves as the Liquidating Agent
shall deem necessary or appropriate:
(a) to
creditors, including Members who are creditors, in satisfaction of the Company's
liabilities;
(b) to
Members in accordance with positive Capital Account balances, taking into
account all Capital Account adjustments for the Company’s Taxable Year in which
the liquidation occurs until all capital accounts are reduced to zero, and
thereafter in accordance with the Members’ Percentage Interests. Liquidation
proceeds shall be paid within 60 days of the end of the Company’s Taxable Year
or, if later, within 90 days after the date of liquidation. Such distributions
shall be in cash or property (which need not be distributed proportionately)
or
partly in both, as determined by the Managing Member.
12.5 Winding
Up and Certificate of Cancellation.
The
winding up of the Company shall be completed when all debts of the Company
have
been paid and discharged or reasonably adequate provision therefor has been
made, and all of the remaining assets of the Company have been distributed
to
the Members in accordance with the provisions of the Act.
ARTICLE
XIII
MISCELLANEOUS
PROVISIONS
13.1 Entire
Agreement.
This
Agreement represents the entire agreement among the parties hereto with respect
to the subject matter hereof.
13.2 Loans
by Members.
Loans
by Members to the Company shall be made voluntarily and only upon such terms
and
conditions as the Managing Member may determine.
13.3 No
Partnership Intended for Nontax Purposes.
The
Members have formed the Company under the Act, and expressly do not intend
hereby to form a partnership under any partnership or limited partnership act.
The Members do not intend to be partners one to another, or partners as to
any
third party. To the extent any Member, by word or action, represents to another
person that any other Member is a partner or that the Company is a partnership,
the Member making such wrongful representation shall be liable to any other
Member who incurs personal liability by reason of such wrongful
representation.
13.4 Rights
of Creditors and Third Parties under Agreement.
This
Agreement is entered into among the Company and the Members for the exclusive
benefit of the Company, its Members, and their permitted successors and assigns.
This Agreement is expressly not intended for the benefit of any creditor of
the
Company or any other Person. Except and only to the extent provided by
applicable statute, no such creditor or third party shall have any rights under
this Agreement or any agreement between this Company and any Member with respect
to any Capital Contribution or otherwise.
13.5 Competing
Business Activities.
Except
as otherwise set forth in the Consulting Agreement, which shall supersede the
provisions of this Section 13.5 to the extent inconsistent therewith, each
Member, including the Managing Member, may engage in, invest in, participate
in,
or otherwise enter into, any other businesses arrangements of every nature
and
description, now or hereafter existing, individually or with others including
other Members, whether or not such businesses or professions compete directly
with the Company and the pursuit of any such venture, even if competitive with
the business of the Company, shall not be deemed wrongful or improper. Subject
to the foregoing, (a) neither the Company nor any other Member shall have any
rights in or to any such business arrangements or the income or profits
therefrom, even if such opportunity is of a character that, if presented to
the
Company, could be taken by the Company, and the Members shall have the right
to
take for their own accounts (individually or as a partner or fiduciary) or
to
recommend to others any such particular investment or other opportunity, and
(b)
no Member, including the Managing Member, shall be obligated to afford to the
Company any business opportunity.
12
13.6 Notices.
Any
notice, payment, demand, or communication required or permitted to be given
by
any provision of this Agreement shall be in writing and sent by overnight
courier, or by telephone or facsimile, if such telephone conversation or
facsimile is followed by a hard copy of the telephone conversation or facsimiled
communication sent by overnight courier, charges prepaid, addressed as reflected
in the books and records of the Company or to such other address as such Person
may from time to time specify by notice to the Company. Any such notice shall
be
deemed to be delivered, given, and received as of the date so
delivered.
13.7 Binding
Effect.
Except
as otherwise provided in this Agreement, every covenant, term and provision
of
this Agreement shall be binding upon and inure to the benefit of the Members
and
their respective permitted successors, transferees and assigns.
13.8 Construction.
Every
covenant, term, and provision of this Agreement shall be construed simply
according to its fair meaning and not strictly for or against any Member. The
terms of this Agreement are intended to embody the economic relationship among
the Members and shall not be subject to modification without the consent of
all
of the Members.
13.9 Headings.
Section
and other headings contained in this Agreement are for reference purposes only
and are not intended to describe, interpret, define, or limit the scope, extent,
or intent of this Agreement or any provision hereof.
13.10 Severability.
Every
provision of this Agreement is intended to be severable. If any term or
provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement.
13.11 Incorporation
by Reference.
Each
agreement, instrument, schedule or exhibit attached to this Agreement and/or
referred to herein is incorporated in this Agreement by reference and made
a
part hereof as if fully set forth herein.
13.12 Further
Action.
Each
Member agrees to perform all further acts and execute, acknowledge, and deliver
any documents which may be reasonably necessary, appropriate, or desirable
to
carry out the provisions of this Agreement.
13.13 Variation
of Pronouns.
All
pronouns and any variations thereof shall be deemed to refer to masculine,
feminine, or neuter, singular or plural, as the identity of the person or
persons may require.
13.14 Governing
Law.
The
laws of the State of Delaware (without reference to its choice of laws
principles) shall govern the validity of this Agreement, the construction of
its
terms, and the interpretation of the rights and duties of the
Members.
13.15 Counterpart
Execution.
This
Agreement may be executed in any number of counterparts with the same effect
as
if all of the Members had signed the same document. All counterparts shall
be
construed together and shall constitute one agreement.
13.16 Amendment
of Operating Agreement.
This
Agreement may be amended by action of the Managing Member without the consent
or
approval of any Non-Managing Member if: (i) the amendment
is solely for the purpose of clarification and does not change the substance
of
the Agreement; or (ii) in the opinion of the Company's counsel, the amendment
is
necessary or appropriate to satisfy requirements of the Code with respect to
the
Company or of any applicable securities or other legal requirements and the
amendment does not adversely affect the interests of the Non-Managing Members.
No other amendment to this Agreement may be made without the written consent
of
the Managing Member and all of the Non-Managing Members.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
13
IN
WITNESS WHEREOF, this Limited Liability Company Agreement has been executed
and
delivered as of the date first above written.
|
MANAGING
MEMBER:
|
|
THE
BIOBALANCE CORPORATION
|
|
By:
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
Title:
Chief Executive Officer
|
|
NON-MANAGING
MEMBER:
|
|
/s/▇▇▇▇
▇▇▇▇▇▇▇▇
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇
|
[SIGNATURE
PAGE – BIOBALANCE LLC OPERATING AGREEMENT]
14
SCHEDULE
A
OPERATING
AGREEMENT OF BBAL LLC
|
Members
|
Capital
Contribution
|
Percentage
Interest
|
Address
|
|||
|
The
BioBalance Corporation
|
The
intellectual property of The BioBalance Corporation, valued at
$628,056.
|
66-2/3%
|
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
|||
|
▇▇▇▇
▇▇▇▇▇▇▇▇
|
0
|
33-1/3%
|
▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇
|
15