OPERATING AGREEMENT OF LAYFIELD ENERGY, LLC DATED: DECEMBER 19, 2007
EXHIBIT
10.1
OF
▇▇▇▇▇▇▇▇
ENERGY, LLC
DATED: DECEMBER
19, 2007
OF
▇▇▇▇▇▇▇▇
ENERGY, LLC
THIS
OPERATING AGREEMENT (the “Agreement”), dated this 19th day of December 2007, is
adopted by and between all Members listed in Exhibit A to this
Agreement, and ▇▇▇▇▇▇▇▇ Energy, LLC, a Nevada limited liability company (the
“Company”).
ARTICLE
I. FORMATION
1.1 Organization. The
Members have
organized the Company as a Nevada limited liability company pursuant to the
provisions of the Act. The Members agree that it is in the best
interest of the Company to change its organizational status to a C-Corporation
before December 31, 2007 and that this Agreement shall remain in full force
and
effect until such change takes place. The Members agree that such
C-Corporation will follow as similar as possible a structure as established
in
this Operating Agreement.
THE
MEMBERSHIP INTEREST OF ANY MEMBER IN THE COMPANY IS SUBJECT TO THE RESTRICTIONS
ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH IN ARTICLE XI OF THIS
AGREEMENT. THE MEMBERSHIP INTERESTS HAVE BEEN ACQUIRED BY THE MEMBERS FOR
INVESTMENT ONLY AND HAVE NOT BEEN REGISTERED UNDER ANY STATE SECURITIES LAWS
OR
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE
MEMBERSHIP INTERESTS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF ARTICLE XI OF THIS
AGREEMENT.
1.2 Agreement;
Effect of Inconsistencies
with Act. For and in
consideration
of the mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
Members and the Company hereby agree to the terms and conditions of this
Agreement, as it may from time to time be amended according to its terms. It
is
the express intention of the parties that this Agreement shall be the sole
source of agreement of the parties, and, except to the extent a provision of
this Agreement expressly incorporates federal income tax rules by reference
to
sections of the Code or Regulations or is expressly prohibited or ineffective
under the Act, this Agreement shall govern, even when inconsistent with, or
different than, the provisions of the Act or any other law or rule. To the
extent any provision of this Agreement is prohibited or ineffective under the
Act, this Agreement shall be considered amended to the smallest degree possible
in order to make the Agreement effective under the Act. In the event the Act
is
subsequently amended or interpreted in such a way to make any provision of
this
Agreement that was formerly invalid valid, such provision shall be considered
to
be valid from the effective date of such interpretation or amendment. The
Members shall be entitled to rely on the provisions of this Agreement, and
the
Members shall not be liable to the Company for any action or refusal to act
taken in good faith reliance on the terms of this Agreement. The Members hereby
agree that the duties and obligations imposed on the Members as such shall
be
those set forth in this Agreement, which is intended to govern the relationship
between the Company and the Members, notwithstanding any provision of the Act
or
common law to the contrary.
1.3 Name.
The name of the Company
shall be as set forth in Exhibit A and all
business of the Company shall be conducted under that name with such variations
and changes as the Members deem necessary, but in any case, only to the extent
permitted by applicable law.
1.4 Term.
The term of the Company
shall be perpetual and shall not expire except in accordance with the provisions
of Article XI
of this Agreement and in accordance with the Act.
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1.5 Registered
Agent and Office.
The Company’s registered agent and the registered office shall be as set forth
in Exhibit A.
The Members may, from time to time, change the registered agent or office
through appropriate filings with the Nevada Secretary of State. In the event
the
registered agent ceases to act as such for any reason or the registered office
shall change, the Members shall promptly designate a replacement registered
agent or file a notice of change of address as the case may be.
1.6 Principal
Office. The
principal office of the Company shall be located as set forth in Exhibit A. The
Company may locate its place of business and registered office at any other
place or places, as the Members may from time to time deem
advisable.
ARTICLE
II. BUSINESS PURPOSE
2.1 The
purpose of the Company is to engage in any lawful act or activity for which
a
limited liability company may be formed under the Act.
ARTICLE
III. NAME AND ADDRESS OF INITIAL MEMBERS
3.1 The
names and addresses of the initial Members are as set forth in Exhibit
A.
ARTICLE
IV. MANAGEMENT
4.1 Management
-General. The
overall business and affairs of the Company shall be managed by the Managers,
working under direction and authority of the Board of Directors as set forth
in
Exhibit A (the
“Board”). Except
for situations or matters in which the approval of the Members
is expressly required by this Agreement or the non-waiveable provisions of
the
Act, the Managers shall manage and control the business affairs and properties
of the Company, make all decisions regarding those matters, and perform any
and
all other acts or activities customary or incident to the management of the
Company’s business. The Managers shall act in good faith and in a manner that
the Managers reasonably believe to be in the best interests of the Company
and
its Members. The Managers may delegate to any Person such powers and
responsibilities as the Managers may deem appropriate for the efficient
operation of the business of the Company. Such persons will include
co-Chief Executive Officers as described in Article 4.5. The name and
place of residence of each Manager is set forth in Exhibit
A. A vote of the Members holding a majority of the capital
interests in the Company, as set forth in Exhibit C, as amended
from time to time, shall elect so many Managers as the Members determine, but
no
fewer than three.
4.2 Management
Powers and
Responsibilities. Without limiting the generality of Section 4.1,
and
subject to any limitations in this Agreement, the Managers shall have the power
and authority, on behalf of the Company:
(a) to
open accounts in
the name of the Company with banks and other financial institutions, and
designate and remove from time to time, at the discretion of the Managers,
all
signatories on such bank accounts;
(b) to
execute on
behalf of the Company all instruments and documents including, without
limitation, checks, drafts, notes and other negotiable instruments, mortgages
or
deeds of trust, security agreements, financing statements, documents providing
for the acquisition, mortgage or disposition of the Company’s Property,
assignments, bills of sale, leases and any other instruments or documents
necessary to conduct the business of the Company;
(c)
to collect and receive all revenue, income and profits derived from the
operation of the Company’s business, and to disperse Company funds for Company
purposes to those Persons entitled to receive the same in accordance with this
Agreement;
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(d)
within the ordinary course of the Company’s business, to acquire, manage, hold,
lease sell, exchange and otherwise dispose of real, personal or mixed Property,
or interests therein, upon such terms and conditions as the Managers deem to
be
in the best interest of the Company;
(e)
to pay, on behalf of the Company, any organizational expenses incurred in the
organization of the Company;
(f)
to make all reasonable and necessary expenditures with respect to the Property
of the Company as the Managers deem to be in the best interest of the
Company;
(g)
to invest any Company funds temporarily in time deposits, short-term
governmental obligations, commercial paper or other investments;
(h)
to pay all taxes, licenses or assessments of whatever kind or nature imposed
upon or against the Company, and for such purposes to file such returns and
do
all such other acts or things as may be deemed necessary or advisable by the
Managers;
(i)
to purchase commercial general liability insurance and such other insurance
coverage as the Board shall determine to be necessary or desirable to insure
the
Members or to protect the Company’s assets;
(j)
to employ, engage or contract with Persons in the operation and management
of
the Company’s business;
(k)
to employ accountants, legal counsel, consultants or other experts to perform
services for the Company and to compensate them from Company funds;
(l)
to institute, prosecute, defend, settle, compromise and dismiss claims, lawsuits
or other judicial or administrative proceedings, involving an amount in
controversy of less than $50,000, brought by or on behalf of, or against the
Company or the Members in connection with activities arising out of, or
connected with, or incidental to this Agreement or the business of the Company;
provided, however, that the Managers shall provide to the Board each calendar
quarter or more often as requested by any Member, a description of any claim,
lawsuit or judicial or administrative proceeding where the amount in controversy
exceeds $10,000; and provided further that any Member may notify the Manager
of
a strategic interest in any claim, lawsuit or proceeding involving an amount
in
controversy of less than $50,000, in which case the institution, prosecution,
defense, settlement, compromise or dismissal of the claim, lawsuit or proceeding
and the engagement of legal counsel in connection therewith shall be subject
to
Section 4.6
below; and
(m) to
do and perform all other acts as may be necessary or appropriate to the conduct
of the Company’s business.
4.3 Members.
(a)
Liability. The liability of the Members shall be limited as provided under
the
laws of the Act.
(b) Power
to Bind the Company. Members that are not Managers shall take no part whatever
in the control, management, direction or operation of the Company’s affairs and
shall have no power to bind the Company. No Member or group of
Members acting in their individual capacity, separate and apart from action
as
Members of the Company pursuant to this Agreement, shall have the authority
to
bind the Company to any third party with respect to such matter. The
Managers may from time to time seek advice from the Members, but they need
not
accept such advice, and at all times the Managers shall have the exclusive
right
to control and manage the Company.
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(c)
No Member shall be an agent of any other Member of the Company solely by reason
of being a Member.
(d) Members
Who Are Not Individuals. Each Member who is an artificial entity or otherwise
not an individual hereby represents and warrants to the LLC and each Member
that
such Member is:
(i)
duly
incorporated or formed (as the case may be),
(ii)
validly existing and in good standing under the laws of the jurisdiction of
its
incorporation or formation, and
(iii)
has
full power and authority to execute and deliver this Agreement and to perform
its obligations hereunder.
(e)
Reimbursement. The Company shall reimburse Members for all reasonable direct
out-of-pocket expenses incurred by them in managing the Company.
4.4 Other
Activities by Managers and
Members. The duty of the Managers and Members to act on behalf of the
Company shall be non-exclusive. The Managers shall not be required to devote
full-time attention to the business of the Company and may have other business
interests and may engage in other activities in addition to those relating
to
the Company provided that the Managers will manage and operate the business
of
the Company separately from the Managers’ other business interests. Neither the
Company nor any Member shall have any right, by virtue of this Agreement, to
share or participate in such other investments or other activities of the
Managers or Members or to the income or proceeds derived therefrom.
4.5 CEO.
Subject to the approval
of the Board, the Managers shall appoint a CEO or co-CEOs of the Company who
shall be compensated by the Company. The initial co-CEOs shall serve in such
capacity until resignation or removal by action of a majority of the Board.
The
co-CEOs shall report to the Managers and shall supervise, administer and manage
the day-to-day business affairs of the Company. ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ shall be appointed co-CEOs upon execution of this
Agreement. The co- CEOs shall have the initial responsibilities
described below:
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Roles
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Co-CEOs
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Promotions
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Domestic
Sales
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Marketing
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Manufacturing
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Web
Strategy
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Product
Formulation
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Oversight
of Managers
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Corporate
Finance
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Assist
with Domestic Sales
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Accounting
& Operations
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International
Sales
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Assist
with International Sales
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Work
closely with ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Work
closely with ▇▇▇▇ ▇▇▇▇▇▇▇▇
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In
addition to such responsibilities, the co-CEOs such mutually agree to allocate
such other responsibilities between each of them including the
following:
(a)
effectuate this Agreement and the regulations and decisions of the Members
and
the Board of Directors;
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(b)
direct and supervise the day-to-day operations of the Company;
(c)
within parameters set by a majority vote of the Board, establish such charges
for services and products of the Company as may be necessary to provide adequate
income for the efficient operation of the Company;
(d)
within the budget established by the Board, set and adjust wages and rates
of
pay for all personnel of the Company and shall appoint, hire and dismiss all
personnel and regulate their hours of work;
(e)
set and adjust reimbursable rates and costs to be paid to the Members by the
Company when such Member or its staff is engaged in Company
business;
(f)
keep the Board, the Managers and Members advised in all matters pertaining
to
the day-to-day operations of the Company, the services rendered, the products
provided, operating income and expenses, the financial position of the Company,
and, to this end, the CEO shall prepare and submit a report to the Board at
each
regular meeting and at other times as may be directed by the Board;
(g) within
parameters set by the Managers, execute on behalf of the Company all instruments
and documents, including checks, drafts, notes and other negotiable instruments
and deposit the same into bank accounts approved by the Managers;
(h)
specifically refer all issues of a legal nature that arise in the operation
of
the Company’s business immediately to legal counsel approved by the Board, so as
not to compromise the position of the Company, Members or Board;
(i)
refer all claims potentially covered by the Company’s insurance policies so as
to not jeopardize insurance coverage on any such claims; and
(j)
do and perform all other authorized acts as may be approved by the Board and
as
are necessary or appropriate to the conduct of the Company’s
business.
4.6 Consultants.
The
Company shall hire or contract with such consultants as necessary to efficiently
operate the business.
4.7 Liability
for Certain Acts.
Each Manager shall exercise its business judgment in managing the business,
operations and affairs of the Company. Unless fraud, deceit, gross negligence,
willful or wanton misconduct, a wrongful taking by the Manager, or a breach
of
the Manager’s fiduciary duty, shall be proved by a non-appealable court order,
judgment, decree or decision, the Manager shall not be liable or obligated
to
the Company or Members for any mistake of fact or judgment or for the doing
of
any act or the failure to do any act by the Manager in conducting the business,
operations and affairs of the Company, which may cause or result in any loss
or
damage to the Company or its Members. The Manager does not, in any way,
guarantee the return of the Members’ Capital Contributions or a profit for the
Members from the operations of the Company. The Manager shall not be responsible
to any Members because of a loss of their investments or a loss in operations,
unless the loss shall have been the result of fraud, deceit, gross negligence,
willful or wanton misconduct, a wrongful taking by the Manager, or a breach
of
the Manager’s fiduciary duty, provided as set forth in this Section 4.6. The
Manager shall incur no liability to the Company or to any of the Members as
a
result of engaging in any other business or venture.
4.8 Resignation.
The Managers and
the CEO of the Company may resign at any time by giving written notice to the
Board. The resignation of the Manager or CEO shall take effect upon receipt
of
notice thereof or at such later time as shall be specified in such notice;
and,
unless otherwise specified therein, the acceptance of such resignation shall
not
be necessary to make it effective. The resignation of a Manager who is also
a
Member shall not affect the Manager’s rights as a Member and shall not
constitute a withdrawal of the Member.
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4.9 Removal.
The Managers may be
removed at any time by the affirmative vote of the Members holding no less
than
sixty-six percent (66%) of the Membership Interests of the Company. The CEO
may
be removed at any time upon the majority vote of the Board. The removal of
the
Manager who is also a Member shall not affect the Manager’s rights as a Member
and shall not constitute a withdrawal of the Member.
4.10 Compensation
of Manager. The
Managers shall be reimbursed all reasonable out-of-pocket expenses incurred
in
managing the Company and may be entitled to reasonable compensation for
rendering services commensurate with the value of such services.
ARTICLE
V. BOARD OF DIRECTORS
5.1 Number
and Tenure. The Board
shall initially consist of not less than three or more than five (5) persons
initially (each a “Director”). The names of the initial Directors are set forth
in Exhibit A.
The number of directors may be fixed or changed by a majority of the existing
Directors of the Board, subject to limitations imposed by
law. Subject to the limitations imposed by law or contained herein,
the business and affairs of the Company shall be managed and all corporate
powers shall be exercised by or under the ultimate direction of the
Board. Decisions of the Board shall be made by majority vote,
with each member of the Board exercising one vote. In order to constitute a
quorum, at least one representative of each Member must be present during Board
meetings. Directors need not be residents of the State of Nevada.
5.2 Chairman
of the Board. One of
the Directors serving on the Board shall serve as Chairperson. The Chairperson
shall preside over all Board meetings. In the event of a deadlock concerning
an
issue to be resolved by the Board, the Chairperson shall cast the deciding
vote. Initially, ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall serve as the
Chairperson.
5.3 Committees
of the
Board. The Board may designate one or more committees to serve
at the pleasure of the Board. Each committee shall have and may exercise any
and
all powers as are conferred or authorized by the resolution appointing it.
The
Board shall have the power at any time to fill vacancies in, to change the
size
of membership of, and to discharge any committee.
5.4 Meetings.
The Board shall meet
on a quarterly basis, or more often as necessary, at a time and place to be
determined by the Members. Any Member, in its discretion, may call for a meeting
of the Board upon ten (10) business days prior written Notice to the Directors
and to all other Members.
5.5 Telephone
Meetings. Board
representatives may participate in Board meetings by means of telephone
conference or similar communications equipment, and such participation in a
telephone conference shall constitute presence in person at such
meeting.
5.6 Action
by Written Consent. Any
action required or permitted to be taken by the Board, either at a meeting
or
otherwise, may be taken without a meeting provided that all representatives
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board; and provided further that written notice
of
the action to be taken by written consent will be given to all Members at least
2 business days prior to the intended effectiveness of any such
action.
5.7 Minutes
of Meetings. The
decisions and resolutions of the Board will be reported in minutes, which will
state the date, time and place of the meeting (or the date of the written
consent in lieu of a meeting), the Board members present at a meeting, the
resolutions put to a vote (or the subject of a written consent) and the results
of such voting (or written consent). The minutes will be entered in a minute
book kept at the principal office of the Company and a copy of the minutes
will
be provided to each Member.
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5.8 Business
Plan. After
soliciting input from the Members, the CEO shall prepare and submit to the
Board
(no later than October 1 of each year) for approval by unanimous vote of the
Board an annual business plan (the “Business Plan”) for the succeeding year
consistent with the purpose of the Company as set forth in Section 2.1. The
Board shall review the draft Business Plan and offer any revisions thereto
as
promptly as commercially practicable after receipt and in any event prior to
December 1. At a minimum, the Business Plan shall contain:
(a)
the estimated receipts and expenditures (capital, operating and other) of the
Company in sufficient detail to provide an estimate of cash flow, capital
proceeds and other financial requirements of the Company for such
year;
(b)
information concerning the strategic direction of the Company;
(c)
strategic and tactical marketing plans and initiatives;
(d)
plans and initiatives to solicit new customers and accounts, and to retain
existing customers and accounts;
(e)
information on an overall Company basis respecting material proposed changes
to
the Company’s employee salaries, benefits and policies; and
(f)
such other information or other matters necessary or desirable in order to
inform the Board of the Company’s business and to enable the Board to make an
informed decision with respect to approval of such Business Plan.
After
the
final Business Plan has been approved by unanimous vote of the Board, the
Managers shall implement the Business Plan. If the Board is not able to agree
on
a Business Plan for any year, then, until such time as the Board agrees on
the
Business Plan for such year, the Business Plan for the previous year shall
continue to apply to the business and affairs of the Company.
5.9 Dividends.
The
Board reserves
the right to distribute earnings to the extent the Company is able based on
the
Company’s growth plans.
ARTICLE
VI. RIGHTS AND DUTIES OF THE MEMBERS
6.1 Liability
of Members. Each
Member’s liability shall be limited as set forth in the Act and other applicable
law. A Member will not personally be liable for any debts or losses of the
Company beyond the Member’s respective Capital Contributions, except as
otherwise provided herein or required by law.
6.2 Indemnification.
The Company
shall indemnify the Members, and their respective agents for all costs, losses,
liabilities, and damages paid or accrued in connection with the business of
the
Company, to the fullest extent provided or allowed by the laws of the State
of
Nevada. In addition, upon written request, the Company may advance costs of
defense of any legal proceeding to the Members or any other agent, prior to
the
conclusion of the matter and as such costs are incurred.
6.3 Business
Opportunities. Each
Member and all affiliates of such Member may have other business interests
and
may engage in other activities in addition to those relating to the Company,
including interests in or taking actions on behalf of one or more entities
engaged in activities of a similar nature to or in competition with the Company
or any joint venture, partnership or other entity in which the Company has
a
direct or indirect interest. Each Member agrees that each other
Member and any affiliate thereof may own, operate, engage in, invest in or
possess an interest in any other business venture or ventures of any nature
or
description, independently or with others, whether or not the same is
competitive with the purposes of the Company, and neither the Company nor the
other Members shall have any rights by virtue of this Agreement in and to said
independent ventures or to the income or profits derived therefrom. No Member
or
affiliate thereof or any of them shall be obligated to present any particular
investment or business opportunity to the Company even if such opportunity
is of
a character which, if presented to the Company, could be taken by the Company,
and each of them shall have the right to take for its own account or for any
other person or entity, or to recommend to others any such particular investment
or business opportunity.
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6.4
Company Books. In
accordance with Section 9.1 herein,
the Chief Executive Manager shall maintain and preserve, during the term of
the
Company and for three (3) years after dissolution, all accounts, books and
relevant Company records. Upon reasonable request, each Member shall have the
right, during ordinary business hours, to inspect and copy such Company
documents at the requesting Member’s expense.
6.5 Voting.
Except as otherwise
provided in this Agreement, each Member shall have one vote for each one percent
of the Member’s Membership Interest outstanding. Therefore, the total individual
votes for all Members available to be cast at any one time will be one hundred
(100). Fractional interests shall be rounded to the nearest whole percentage
point for voting purposes, A majority vote consisting of over 50% will be
required.
6.6 Priority
and Return of
Capital. Except as may be expressly provided elsewhere in this Agreement,
no Member shall have priority over any other Member, either as to the return
of
Capital Contributions or as to Net Profits, Net Losses or Distributions;
provided, however, that this Section 6.6 shall not
apply to operating and other loans (as distinguished from Capital Contributions
and Member loans) which a Member has made to the Company or to another
Member.
6.7 Pledge
Restriction. Each
Member agrees that no Member shall be permitted to pledge their Membership
Interest as collateral for any loan or financial obligation without the vote
or
consent of holders of eighty-five percent (85%) of the Membership Interests
in
the Company.
ARTICLE
VII. CONTRIBUTIONS
7.1 Initial
Contributions. The
initial Members shall make the Initial Capital Contributions described on Exhibit B at the time
and on the terms specified on Exhibit B and shall
perform that Member’s Commitment. The value of the Initial Capital Contributions
shall be as set forth on Exhibit B. No
interest shall accrue on any Initial Capital Contribution and the Members shall
not have the right to withdraw or be repaid any Initial Capital Contribution
except as provided in this Agreement.
7.2 Additional
Capital
Contributions.
(a)
No Member shall be responsible for, or obligated to provide for, capital
requirements and expenses of the Company in excess of their Initial Capital
Contribution.
(b)
Upon the vote of Members holding eighty-five percent (85%) of the Membership
Interests of the Company, the Manager may request Additional Capital
Contributions from each Member by way of written notice stating the amount
of
additional funds required, the purpose therefore, and the date upon which
Additional Capital Contributions may be made by each Member. Each Member shall
have the right to make their pro rata share of the Additional Capital
Contribution in accordance with their Membership Interest at the time specified
in such notice. If any Member does not make the full amount of their share
of a
requested Additional Capital Contribution within ten (10) days after the
expiration of the time specified in such notice, the Manager shall send a
written notice to each Member specifying the amount not contributed (the
“Non-Contribution Notice”). Each Member shall have the right to make the
Additional Capital Contribution requested from the non-contributing Member
on a
pro rata basis in accordance with their Membership Interests or as they
otherwise agree by sending a written notice to the Managers within (5) days
of
the Member’s receipt of the Non-Contribution Notice indicating the Member’s
interest to contribute a portion of the non-contributing Member’s Additional
Capital Contribution (the “Portion Notice”). The value of the Membership
Interest for the Additional Capital Contribution made by a Member shall be
based
on the lower of the Company’s Net Book Value or its fair market value as
reasonably determined by the Board in its sole discretion immediately preceding
the Additional Capital Contribution. If the Board determines that the Company
needs additional funds, but determines not to request Additional Capital
Contributions, the Board may cause the Company to borrow such funds from any
Person, including any Member, upon such terms and conditions as may be agreed
to
at the time. No such loan to the Company from a Member shall be deemed to
constitute a Capital Contribution to the Company and shall not increase the
Capital Account of the Member making the loan.
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7.3 Capital
Accounts.
(a)
The Managers shall maintain separate Capital Accounts for each Member. Each
Member’s Capital Account will be increased by (1) the amount of money
contributed by such Member to the Company, including Additional Capital
Contributions; (2) the value, as agreed by the Board, of Property contributed
by
such Member to the Company (net of liabilities secured by such contributed
Property that the Company is considered to assume or take subject to under
Section 752 of the Code); and (3) the amount of Net Profits allocated to such
Member. Each Member’s Capital Account will be decreased by (1) the amount of
money distributed to such Member by the Company; (2) the value, agreed by the
Board, of Property distributed to such Member by the Company (net of liabilities
secured by such distributed Property that such Member is considered to assume
or
take subject to under Section 752 of the Code); and (3) the amount of Net Losses
allocated to such Member.
(b)
In the event of a permitted sale or exchange of a Membership Interest in the
Company pursuant to the terms of this Agreement, the Capital Account of the
transferor shall become the Capital Account of the transferee to the extent
it
relates to the transferred Membership Interest.
(c)
The manner in which Capital Accounts are to be maintained pursuant to this
Section 7.3 is
intended to comply with the requirements of Code Section 704(b) and the
Regulations promulgated thereunder and this Agreement shall be considered
amended to the smallest degree possible in order to comply with Code Section
704(b) and the Regulations thereunder.
(d)
Upon liquidation of the Company (or any Member’s Membership Interest),
liquidating distributions shall be made pursuant to Section 8.3(c).
Liquidation proceeds will be paid as reasonably determined by the
Manager.
ARTICLE
VIII. ACCOUNTING METHOD, ALLOCATIONS, DISTRIBUTIONS
8.1 Method
of Accounting. The Net
Profits and/or Net Losses of the Company shall be determined in accordance
with
accounting principles applied on a consistent basis under the method of
accounting as set forth in Exhibit
A.
8.2 Allocations.
(a)
Net Profits and credits earned by the Company for each Fiscal Year attributable
to the operations of the Company shall be allocated to the Members in accordance
with the Membership Interest identified in Exhibit C and shall
be credited to each Member’s Capital Account (exclusive of credits) in
accordance with the following:
10
(i)
First, if the Capital Account of any Member has a negative balance,
Net Profits shall be credited to each Member having a negative Capital Account
balance in an amount equal to the negative Capital Account balance, in the
ratio
that the Member’s negative Capital Account balance bears to the aggregate
negative Capital Account balances of the Members having negative Capital Account
balances;
(ii)
Second, if previous cumulative Net Losses have been incurred, Net Profits will
be allocated pro rata in proportion to the amount of cumulative Net Losses
allocated to each Member; and
(iii)
Thereafter, to all Members pro rata in proportion to their relative Membership
Interest in effect as of the effective date of the allocation, except that
for
any Fiscal Year which has any changes in the Membership Interests, the
allocation will be calculated using the per share per day method as provided
for
in the Code.
(b)
After giving effect to the allocations provided for in the provisions of this
Agreement covering special allocations and curative losses, all Net Losses
of
the Company for each Fiscal Year shall be allocated first to the Members in
an
amount equal to the Net Profits previously credited to the Members (and not
previously reduced by this Section) and second to all Members and shall be
charged to the Members’ Capital Accounts pro rata in proportion to their
relative Membership Interest in effect as of the effective date of the
allocation, except that for any Fiscal Year which has any changes in the
Membership Interests, the allocation will be calculated using the per share
per
day method as provided for in the Code. Notwithstanding the foregoing, in no
event shall any such loss be allocated to a Member, to the extent that it would
result in such Member having a negative Capital Account balance, if any other
Member has a positive Capital Account balance. The foregoing reallocation of
losses to a Member with a positive Capital Account balance shall remain in
effect only until all Members have Capital Account balances of zero. If all
Members have Capital Account balances of zero and any Member has made a loan
to
the Company which remains outstanding at the end of any Fiscal Year, net losses
shall be allocated first, on a pro rata basis, to each Member whose loan remains
outstanding up to the aggregate amount of the loan balance.
8.3
Distributions.
(a)
Except as provided in Section 8.3(d) and
except as required in Section 8.3(a)(iii),
distributions of Distributable Cash attributable to operations of the Company
shall be made at such time as determined by the Board and which is not, in
the
reasonable opinion of the Board, necessary to conduct the Company’s business.
Except as expressly provided herein, no Member shall have priority over any
other Member, either as to distributions or the return of Capital Contributions
other than what is provided by this Section 8.3. All
amounts withheld pursuant to the Code or any provisions of state or local tax
law with respect to any payment or distribution to the Members from the Company
shall be treated as amounts distributed to the relevant Member or Members
pursuant to this Section 8.3. All
distributions of Distributable Cash attributable to operations of the Company
shall be made as follows, unless otherwise agreed to by the
Members:
(i)
First, if cumulative Net Profits from inception of the Company exist at the
end
of any calendar year, to the Members, in proportion to their Membership
Interests;
(ii) Second,
to all Members pro rata to the amount of Net Profits allocated to the Members
per Section 8.2
net of the distribution made in Section
8.3(a)(i);
11
(iii) Third,
to all Members pro rata in proportion to the sums of their respective Initial
Capital Contributions and any Additional Capital Contributions, until the full
amount of all Initial and Additional Capital Contributions shall have been
returned to all Members; and
(iv) Thereafter,
to all Members pro rata in proportion to the relative Membership Interest they
hold, in effect as of the effective date of the distribution.
(b)
Except as expressly provided in Section 8.3(a) or as
a result of the application of Section 8.4, no
distributions which are disproportionate to a Member’s Membership Interest are
permitted without the approval of Members holding eighty-five percent (85%)
of
the Membership Interests, and then, only after the Members take into
consideration the potential future impact on Sections 8.2 and
8.3
and concluding their consideration with a written summary of the Members’
decision.
(c)
In the event of the liquidation of the Company, distributions to Members shall
be made, after the allocations described in Section 8.2 and to
the extent such distributions were not previously made pursuant to Section 8.3(a), on a
pro rata basis to all Members based on the Membership Interest they hold, in
effect as of the effective date of the distribution.
(d)
No distribution shall be declared and paid unless, after the distribution is
made, the book value of the assets of the Company is in excess of all
liabilities of the Company, except liabilities to Members on account of their
contributions. For any kind of distribution, a Member, irrespective of the
nature of their Capital Contribution, has the right to demand and receive only
cash as compared to demanding the distribution of any specific asset of the
Company.
8.4 Special
Allocations.
(a)
Except as otherwise provided in this Agreement, special allocations will be
made
as permitted and/or required by the Code.
(b)
Items of income, gain, loss, deduction, credit and tax preference for state
and
local income tax purposes shall be allocated to and among the Members in a
manner consistent with the allocation of such items for federal income tax
purposes in accordance with the foregoing provisions of this Article
VIII.
ARTICLE
IX. RECORDS, TAX MATTERS, BANKING
9.1 Books
and Records. The
Managers, at the expense of the Company, shall maintain the following books
and
records at the Company’s principal office:
(a)
A list of the full name and the last known street address of each Member, both
past and present;
(b)
A copy of the Articles of Organization for the Company, and all amendments
thereto;
(c)
Copies of the currently effective Agreement and all amendments thereto, copies
of any prior Agreement no longer in effect, and copies of any writings permitted
or required with respect to a Member’s obligation to contribute cash, Property,
or services;
(d)
Copies of the Company’s federal, state and local income tax returns and reports
(or the portions of the returns of others showing the taxable income deductions,
gain, loss, and credits of the Company), if any, for the three most recent
years;
12
(e)
Copies of the financial statements of the Company, if any, for the three (3)
most recent years;
(f)
Minutes of every meeting of the Board or the Members;
(g)
Any written consents obtained from Members or the Board for actions taken by
the
CEO or actions taken by the Members or the Board of Directors without a meeting;
and
(h)
If not set forth in this Agreement, a writing or other data compilation from
which information can be obtained through retrieval devices into a reasonably
usable form setting forth the following:
(i)
The amount of cash and a description and statement of the agreed value of the
other Property or services contributed by the Members and which the Members
have
agreed to contribute;
(i)
The times at which or events on the happening of which any additional
Commitments agreed to be made by the Members are to be made;
(ii)
Any right of a Member to receive, or of the Company to make, distributions
to a
Member which include a return of all or any part of the Member’s Capital
Contribution or distributions in kind; and
(iii) Any
events upon the happening of which the Company is to be dissolved and its
affairs wound up.
9.2 Bank
Accounts. All funds of
the Company shall be deposited in the name of the Company in an account or
accounts maintained with such bank or banks selected by the Managers. Checks
shall be drawn upon the Company account or accounts only for the purposes of
the
Company and shall be signed by authorized Persons on behalf of the
Company.
ARTICLE
X. SECURITIES LAWS MATTERS
10.1 Representations.
Each Member,
by executing this Agreement, hereby represents and warrants to the Company
and
to each Member that such Member:
(a)
Is aware that the acquisition of their Membership Interest in the Company has
not been registered under the Securities Act of 1933, as amended, or registered
or qualified under the securities laws of any state;
(b)
Is acquiring the Membership Interest in their own name and solely for their
own
account (or for a trust account if a trustee) and not for the account of any
other person;
(c)
Is acquiring their Membership Interest for the purpose of investment only,
and
not with a view to or for sale in connection with any distribution of such
Membership Interest;
(d)
Understands that any Disposition of their Membership Interest is limited by
this
Agreement and in any event may not be effected unless the Disposition is
registered and qualified under applicable securities laws, or is eligible for
an
exemption from registration and qualification, and, except as expressly provided
otherwise herein, that no understanding has been made with regard to registering
or qualifying such Membership Interest in the future;
(e)
Understands that any certificate or other document which evidences their
Membership Interest in the Company may bear one or more restrictive legends
stating that the Membership Interest evidenced therein has not been registered
under the Securities Act of 1933, as amended or qualified under any securities
laws;
13
(f)
Is capable of evaluating, through their own knowledge and experience in
financial and business matters, the merits and risks of this investment and
of
protecting their own interest in connection with this investment;
(g)
Is able to bear the economic risk of the loss of their Membership
Interest;
(h)
Has not seen or received any advertisement or general solicitation with respect
to the sale of the Membership Interest;
(i)
Acknowledges that the Company has given him the opportunity to obtain any
information and ask questions concerning the Company, Membership Interest in
the
Company, and their investment, and to the extent that he or she availed himself
or herself of that opportunity, he or she has received from the Company
satisfactory information and answers; and
(j)
Acknowledges that the Company and each Member are relying on the foregoing
representations.
10.2 Compliance
with Securities Laws and
Other State and Federal Law. Notwithstanding the other provisions of this
Article X,
no
Member may transfer their Membership Interest in the Company unless such Member
provides to the remaining Members such evidence and assurances as the remaining
Members, may reasonably request, including but not limited to an opinion of
counsel satisfactory to the Members that the transfer of such Membership
Interest:
(a)
Shall not cause a termination of the Company under any applicable federal or
state law;
(b)
Shall not violate any applicable state or federal securities laws;
and
(c)
Shall be accomplished in compliance with the registration requirements of all
applicable state and federal securities law or pursuant to an applicable
exemption there from, and that all such filings or other actions necessary
to
effect any such transaction have been undertaken or will have been undertaken
prior to, or concurrent with, the transfer.
ARTICLE
XI. ADMISSION OF ADDITIONAL MEMBERS AND MEMBERSHIP INTEREST
TRANSFERS
11.1 Admission
of Additional
Members. The Members, by unanimous written consent may admit Additional
Members and determine the Capital Contributions and/or Commitments and the
corresponding allocated Membership Interest of such Additional Members. As
a
condition of admission, any Additional Member shall agree to be subject to
all
the terms and conditions of this Agreement by signing the original Agreement
maintained by the Company.
11.2 Disposition.
The Membership
Interest of any Member is transferable either voluntarily or by operation of
law, subject to the provisions of this Article XI. Upon a
transfer of a Member’s Membership Interest in compliance with this Article XI, the
transferee shall be admitted as an Additional Member without further action
at
the time the transfer is completed, subject to the condition of admission
required by Section
11.1.
11.3 General
Restrictions on
Transfers.
14
(a)
Except as otherwise provided in this Agreement, no Member may, without the
written consent of all Members, Dispose of a Membership Interest in the Company.
For purposes of this Agreement, a transfer of a Membership Interest in the
Company shall include any Disposition of all or a portion of a Membership
Interest in the Company. Any purported Disposition or gift of all or a portion
of a Membership Interest made in violation of this Agreement shall be void
as
against the Company and the other Member, and the transferring or gifting Member
shall indemnify and hold the Company and the other Member harmless from and
against any and all loss, damage or expense (including, without limitation,
tax
liabilities or loss of tax benefits) incurred or suffered by the Company or
other Member and arising directly or indirectly as a result of any Disposition
or gift, or purported Disposition or gift, in violation of this Article
XI.
(b)
Notwithstanding anything in this Agreement to the contrary, a Disposition shall
be void if, in the opinion of counsel to the Company, the Disposition
would:
(i) Cause
a termination of the Company under any applicable federal or state law or deemed
termination of the Company under any applicable federal or state income tax
law;
or
(ii) Not
be accomplished in compliance with the registration requirements of all
applicable state and federal securities laws or pursuant to an applicable
exemption there from.
11.4 Right
of First
Refusal.
(a)
In the event that a Member (“Selling Member”) desires to Dispose of all (but not
less than all) of its Membership Interest (the “Offered Interest”) to any Person
other than a current Member (the “Offeror”), the proposed Disposition shall not
be permitted unless the Selling Member shall afford the Company and the other
Members a right of first refusal pursuant to this Section
11.4.
(b)
Before Disposing of its Offered Interest in the Company, the Selling Member
must
provide to the Company and other Members at least thirty (30) days (the “Notice
Period”) prior written notice (the “Disposition Notice”) of its intention to
Dispose the Offered Interest. In the Disposition Notice, the Selling Member
shall specify: (i) the price at which the Offered Interest is proposed to be
sold or transferred (the “Offering Price”), which may not consist of
consideration other than cash and/or promissory notes, (ii) the portion of
their
Membership Interest to be sold, (iii) the identity of the proposed Offeror
or
transferee, and (iv) any other material terms of the proposed
Disposition.
(c)
The Managers may elect, on behalf of the Company, within the first five (5)
days
of the Notice Period, to purchase the Offered Interest to be disposed of by
the
Selling Member at the Offering Price. The terms and conditions of the purchase
by the Company shall be the terms and conditions of the proposed Disposition
as
set forth in the Disposition Notice. If the Company elects not to purchase
the
Offered Interest, the Company shall notify each non-selling Member. The notice
shall state that the Company did not exercise its option to purchase the Offered
Interest.
(d)
If the Company elects not to purchase the Offered Interest, the Offered
Interest, may be purchased by the non-selling Member on the same terms and
at
the same price available to the Company. The non-selling Member must give
written notice to the Disposing Selling Member of the exercise of their option
to purchase the Offered Interest before the expiration of the Notice Period.
Alternatively, each non-selling Member may within the same 30-day period, notify
the Manager of its desire to participate in the sale of that Member’s Membership
Interest on the terms set forth in the Disposition Notice.
(e)
If neither the Company nor the non-selling Member shall have elected to purchase
the entire Offered Interest covered by the Disposition Notice as provided in
the
foregoing subsections of this Section 11.4, the
Selling Member may sell to Persons other than the Company and the non-selling
Member, provided that any Disposition must be made on the terms and conditions
and to the party specified in the Disposition Notice.
15
(f)
Unless otherwise agreed, the closing of any sale of a Membership Interest shall
take place at the Company’s principal office. Once transferred, the Membership
Interest shall be subject to all of the terms and conditions of this Agreement,
and any third party purchaser shall agree to be bound by the terms and
conditions of the Agreement as a condition concurrent with the transfer of
the
Membership Interest by signing the original Agreement maintained by the
Company.
11.5 Failure
to Fully Exercise Options;
Co-Sale.
(a)
If the Company and the non-selling Members do not exercise their options to
purchase the Offered Interest within the period described in this Agreement
(the
“Option Period”), then all options of the Company and the non-selling Members to
purchase the Offered Interest, whether exercised or not, shall terminate, but
each Member which has, pursuant to Section 11.4,
expressed a desire to sell its Membership Interests in the transaction (a
“Participating Member”), shall be entitled to do so pursuant to this Section.
The Company shall promptly, on expiration of the Option Period, notify the
Selling Member of the Participating Members wishing to sell. The Selling Member
shall use commercially reasonable efforts to interest the Offeror in purchasing,
in addition to the Offered Interest, the Membership Interests of the
Participating Members. If the Offeror does not wish to purchase, in addition
to
the Offered Interest, the Membership Interests made available by the
Participating Members, then each Participating Member and the Selling Member
shall be entitled to sell, at the price and on the terms and conditions set
forth in the Disposition Notice, a portion of the Membership Interests being
sold to the Offeror, in the same proportion as such Selling Member or
Participating Member’s ownership of Membership Interests bears to the aggregate
Membership Interests owned by the Selling Member and the Participating Members.
The transaction contemplated by the Disposition Notice shall be consummated
not
later than sixty (60) days after the expiration of the Option
Period.
(b)
The proceeds of any sale made by the Selling Member without compliance with
the
provisions of this Section 11.5 shall be
deemed to be held in constructive trust in such amount as would have been due
the Participating Members if the Selling Member had complied with this
Agreement.
11.6 Drag
Along
Rights.
(a)
In the event that an offer is made to all the Members of the Company which
provides for the acquisition (either by way of a purchase, amalgamation,
arrangement, corporate reorganization or other means of a merger or acquisition)
by a Qualified Offeror (as defined below), of all (but not less than all) of
the
then outstanding Membership Interests upon the same terms and conditions
(including price, if applicable) to all the Members; and the third party offer
has been irrevocably accepted by Members in respect of not less than sixty-six
and two thirds percent (66 2/3%) of the then issued and outstanding Membership
Interests held by all Members, then any Member who has not accepted the offer
(an “Objecting Member”) shall, subject to the provisions of this Section 11.6, be
deemed to have done so upon being notified by such Qualified Offeror of the
names of Members who have irrevocably accepted such offer and the number of
Membership Interests in respect of which they have accepted the offer, provided
that any Selling Member who has accepted such third party offer in respect
of
its Membership Interests has first complied with Section 11.4 of this
Agreement. For purposes hereof, a “Qualified Offeror” shall be deemed a Person
which (a) has no affiliation with, is not directly or indirectly materially
owned or controlled by, does not directly or indirectly materially own or
control, and has no interlocking directors with, a Member; (b) is not a material
customer, supplier, distributor or creditor of or to a Member or an Affiliate
thereof; and (c) has not engaged, is not currently engaged, and to such Member’s
knowledge has no present intention to engage, in any material transaction with
a
Member within one year before or after the date such offer is
made.
16
11.7 Termination
of Transfer
Restrictions. The restrictions on the transfer of Membership Interests
set forth in this Article XI shall
terminate upon the earlier of the following events:
(a)
The sale of all or substantially all of the assets or business of the Company,
by merger, sale of assets or otherwise (except a merger or consolidation in
which the holders of Membership Interests of the Company immediately prior
to
such merger or consolidation continue to hold immediately following such merger
or consolidation at least 80% by voting power of the Membership Interests of
the
surviving corporation); or
(b)
The closing of the Company’s IPO.
11.8 Insolvency.
Upon the
insolvency, as hereinafter defined, of any Member, the Company, or if the
Company declines, any Member on a pro rata basis may, within ninety (90) days
after such insolvency, elect to purchase the Membership Interest of the
insolvent Member. The purchase price shall be the reasonable fair market value
of the Company, as determined by the Board in their sole discretion, multiplied
by the Membership Interest to be purchased, and adjusted for usual and customary
discounts for lack of marketability and minority interest. Any liabilities
or
indebtedness of the insolvent Member to the Company or any other Member shall
be
paid by the insolvent Member at the closing. A Member shall be deemed to have
become insolvent for purposes of this Section 11.8 if any
of the following events shall occur:
(a)
Said Member shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for himself under the present or any future
federal bankruptcy act or any other present or future applicable federal, state
or other statute or law relating to bankruptcy, insolvency or other relief
for
debtors, or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver, conservator or liquidator of said Member or of all or any
substantial part of their properties or their Membership Interest in the Company
(the phrase “acquiesce in the appointment” being deemed to include, without
limitation, failure to file a petition or motion to vacate or to discharge
any
order, judgment or decree providing for such appointment within ten (10) days
after such appointment); or
(b)
A court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed against said Member seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or future applicable federal, state or other statute
or
law relating to bankruptcy, insolvency or other relief for debtors, and said
Member shall acquiesce in the entry of such order, judgment or decree (the
phrase “acquiesce in the appointment” being deemed to include, without
limitation, failure to file a petition or motion to vacate or to discharge
any
order, judgment or decree within ten (10) days after the entry of such order,
judgment or decree), or such order, judgment or decree shall remain unvacated
and unstayed for an aggregate of ninety (90) days (whether or not consecutive)
from the date of entry thereof, or any trustee, receiver, conservator or
liquidator of said Member or all or any substantial part of their Property
or
their Membership Interest in said Company shall be appointed without the consent
or acquiescence of said Member or such appointment shall remain unvacated and
unstayed for an aggregate of ninety (90) days (whether or not consecutive);
or
(c)
Said Member shall admit in writing of their inability to pay their debts as
they
mature; or
(d) Said
Member shall give notice to any governmental body of insolvency or pending
insolvency; or
(e)
Said Member shall make an assignment of their pro rata share of the assets
and
profits of the Company for the benefit of creditors or take any other similar
action for the protection or benefit of creditors.
17
ARTICLE
XII. DISSOLUTION AND WINDING UP
12.1 Dissolution.
The Company shall
be dissolved and its affairs wound up upon the affirmative vote of Members
whose
capital interest, as defined in Exhibit C, exceeds
75% or upon any other event causing dissolution of a Limited Liability Company
under the Act.
12.2 Effect
of Dissolution. Upon
dissolution, the Company shall cease carrying on its normal business operations.
However, the Company will not be terminated until the winding up of the affairs
of the Company is completed and the Articles of Dissolution have been filed
with
the Nevada Secretary of State in accordance with the Act. Upon
dissolution, the Company shall continue for the purpose of prosecuting and
defending suits, actions, proceedings and claims of any kind or nature by or
against it and of enabling it gradually to settle and close its business, to
collect and discharge its obligations, to dispose of and convey its property,
and to distribute its assets, but not for the purpose of continuing the business
for which it was established.
12.3 Distribution
of Assets on
Dissolution. Upon the winding up of the Company, the Company Property
shall be distributed:
(a)
To creditors, including any Member if it is a creditor, to the extent permitted
by law, in satisfaction of Company liabilities;
(b)
To all the Members, considering that such distribution may be in cash or
Property or partly in both, as determined by the pro rata interest of each
of
the Members.
12.4 Winding
Up and Articles of
Dissolution. The winding up of the Company shall be completed when all
debts, liabilities and obligations of the Company have been paid and discharged
or reasonably adequate provision therefore has been made, and all of the
remaining Property and assets of the Company have been distributed to the
Members. Upon the completion of winding up of the Company, Articles of
Dissolution shall be executed and filed with the Nevada Secretary of State
in
accordance with the Act.
ARTICLE
XIII. PROTECTION OF CONFIDENTIAL INFORMATION
13.1 Protection
of Confidential
Information. Without the express prior written approval of all Members,
each Member agrees to hold in strict confidence and not to disclose to any
Person any Confidential Information (whether during the term of the Company
or
after termination of the Member’s association with the Company).
13.2 Exceptions.
Notwithstanding
the limitation in Section 13.1 above,
no Member shall be deemed to be in breach of this Article XIII if it
discloses Confidential Information (a) in the course of any legal or regulatory
proceeding pursuant to a lawful demand or if such disclosure is otherwise
required by law; provided, that if a Member receives such demand or otherwise
believes it is compelled by law to disclose Confidential Information sought
by
such demand or requirement, such Member shall give notice to the Company and
all
other Members so as to afford the Company and/or the other Member(s) an
opportunity to contest the demand or legal requirement, or (b) to a prospective
purchaser that requires such Confidential Information in order to evaluate
whether or not to acquire a Membership Interest pursuant to the terms of this
Agreement; provided, that such prospective purchaser is obligated by a
confidentiality agreement with terms concerning the disclosure and use of
Confidential Information at least as restrictive as those herein, and such
Member obtains the prior written consent of the other Member, which consent
shall not be unreasonably withheld or delayed.
18
13.3 Use
of Confidential Information.
Each Member agrees to use Confidential Information to perform its
obligations and functions under this Agreement only and for no other purposes.
Notwithstanding the foregoing, information that is developed or otherwise in
the
possession of a Member and subsequently transmitted or contributed by such
Member to the Company shall (unless otherwise agreed by such Member) continue
to
be the Property of such Member and may (unless otherwise agreed by such Member)
continue to be used by such Member in the conduct of its business.
13.4 Return
of Confidential
Information. At the dissolution of the Company or earlier termination of
a Member’s Membership Interest, (a) any Confidential Information that has been
received or acquired will remain subject to the terms of this Article XIII for a
period of seven (7) years, and (b) any documents containing Confidential
Information shall either be destroyed by the Receiving Party or returned to
the
Company or the Disclosing Party, upon request.
13.5 Access
to Confidential
Information. Each Member shall use its reasonable best efforts to
restrict access to the Confidential Information within its organization only
to
those employees, officers and directors, and advisors (“Recipients”) who have a
clear need to know the same for the purpose of this Agreement and operation
of
the Company, provided that the Receiving Party advises the Recipients of their
obligations under this Article XIII and
guarantees the adherence of such Recipients to the terms of this Article
XIII.
13.6 Proprietary
Nature of Information.
Any and all Confidential Information disclosed is proprietary and the
Disclosing Party reserves full rights to the Confidential Information, remains
the sole owner of the Confidential Information and does not assign to the
Receiving Party any rights to the Confidential Information.
13.7 Company-Developed
Technology.
(a)
The Members agree that in the event the Company, independently or in combination
with a Member, conceives of any new idea, invention or discovery, excluding
any
Improvement on Technology licensed to the Company (“Company Intellectual
Property”), shall be owned by the Company and the Members shall cooperate and do
those things as may be required to vest in the Company as its sole Property
all
its Company Intellectual Property.
(b)
Each Member shall disclose promptly and fully to the Company all inventions,
improvements or discoveries made, conceived, developed, or first reduced to
practice by the Member, either solely or in collaboration with others, during
the period of the Member’s association with the Company in any capacity that
relate to:
(i) Any
products, research or business of the Company or to tasks assigned to the Member
by or on behalf of the Company;
(ii) Any
process, method, apparatus or article useful in connection with the manufacture
or development of such products;
(iii) Anything
done on the time or with the facilities of the Company; or
(iv) Any
invention and discovery that relates directly or indirectly to the present
or
prospective business of the Company.
(c) Each
Member shall assist and cooperate (at the expense of the Company) with the
Company in any controversy or legal or administrative proceedings involving
or
relation to Company Intellectual Property or the registration or protections
that might be issued.
19
ARTICLE
XIV. AMENDMENT
14.1 This
Agreement may be amended or modified from time to time only by a written
instrument adopted and executed by the Members. No Member shall have any vested
rights in this Agreement, which may not be modified through an amendment to
this
Agreement.
ARTICLE
XV. MISCELLANEOUS PROVISIONS
15.1 Entire
Agreement. This
Agreement represents the entire agreement between the Members and the
Company.
15.2 Rights
of Creditors and Third Parties
under Operating Agreement. This Agreement is entered into between the
Company and the Members for the exclusive benefit of the Company, its Members,
and their successors and assignees. 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 the Company
and the Members with respect to any Capital Contribution or
otherwise.
15.3 Notices.
Any and all notices,
designations, consents, offers, acceptances, or any other communication provided
for herein shall be shall be in writing and shall be considered effective when
delivered, if by personal delivery, upon receipt, if sent by facsimile, which
facsimile has been telephonically confirmed, between the hours of 9:00 a.m.
and
5:00 p.m. local time of the recipient, on a business day, upon delivery, or
if
not, at 9:00 a.m., local time on the next business day, or upon first attempted
delivery after mailing by certified mail, return receipt requested, postage
prepaid, addressed to the Member’s and/or Company’s address as it appears in the
Company’s records, as appropriate.
Copies
of
any and all notices made pursuant to this Agreement shall be
delivered:
▇▇▇▇▇▇▇
Business Law
Attention:
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
15.4 Execution
of Additional
Instruments. Each Member hereby agrees to execute such other and further
statements of interest and holdings, designations, powers of attorney and other
instruments necessary to comply with any laws, rules or
regulations.
15.5 Construction.
Whenever the
singular number is used in this Agreement and when required by the context,
the
same shall include the plural, and the masculine gender shall include the
feminine and neuter genders and vice versa.
15.6 Headings.
The headings in this
Agreement are inserted for convenience only and are in no way intended to
describe, interpret, define, or limit the scope, extent or intent of this
Agreement or any provision hereof.
15.7 Waivers.
The failure of any
party to seek redress for violation of or to insist upon the strict performance
of any covenant or condition of this Agreement shall not prevent a subsequent
act, which would have originally constituted a violation, from having the effect
of an original violation.
15.8 Rights
and Remedies
Cumulative. The rights and remedies provided by this Agreement are
cumulative and the use of any one right or remedy by any party shall not
preclude or waive the right to use any or all other remedies. Said rights and
remedies are given in addition to any other rights and parties may have by
law,
statute, ordinance or otherwise.
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15.9 Severability.
If any provision
of this Agreement or the application thereof to any person or circumstance
shall
be invalid, illegal or unenforceable to any extent, the remainder of this
Agreement and the application thereof shall not be affected and shall be
enforceable to the fullest extent permitted by law.
15.10 Heirs,
Successors and Assigns.
Each and all of the covenants, terms, provisions and agreements herein contained
shall be binding upon and inure to the benefit of the parties hereto and, to
the
extent permitted by this Agreement, their respective heirs, legal
representatives, successors and assigns.
15.11 Counterparts.
This Agreement
may be executed in counterparts, each of which shall be deemed an original
but
all of which shall constitute one and the same instrument.
ARTICLE
XVI. DEFINITIONS
16.1 For
purposes of this Agreement, unless the context clearly indicates otherwise,
the
following terms shall have the following meanings:
(a)
“Act” means the Nevada
Revised Statues, as amended from time to time.
(b)
“Additional Capital
Contributions” means contributions
made based
on the Manager’s determination that additional funds are required for operation
of the Company, including capital expenditures and debt service.
(c)
“Additional Member”
means a Member other
than the initial Members listed in Exhibit A who has
acquired a Membership Interest in the Company.
(d)
“Affiliate” means any
corporation or other entity which controls, is controlled by, or is under common
control with a Party. A corporation or other entity shall be regarded as in
control of another corporation or entity if it owns or directly or indirectly
controls more than fifty percent (50%) of the voting stock or other ownership
interest of the other corporation or entity, or if it possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of the corporation or other entity or the power to elect or appoint
more than fifty percent (50%) of the members of the governing body of the
corporation or other entity.
(e)
“Agreement” means this
Operating Agreement including all amendments adopted in accordance with this
Operating Agreement and the Act.
(f)
“Articles” or “Articles
of Organization”
means the Articles of Organization of the Company as properly adopted
and
amended from time to time by the Members and filed with the Nevada Secretary
of
State.
(g)
“Board” or “Board
of Directors” means the
board established pursuant to Section 5.1 of this
Agreement.
(h)
“Business Plan” means
the business plan of the Company to be prepared by the Manager under the
direction of and subject to the approval of the Board as described in Section 5.8 of this
Agreement.
(i)
“Capital Account” means
as of any given date, the Capital Contribution to the Company by a Member as
adjusted up to the date in question.
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(j)
“Capital Contribution”
means a Member’s Initial Capital
Contribution as provided in Section 7.1 of this
Agreement and any Additional Capital Contribution made by any Member as provided
in Section 7.2
of this Agreement.
(k)
“Code” means the
Internal Revenue Code of 1986, as amended from time to time. All references
herein to a section of the Code shall include any corresponding provision or
provisions of succeeding law.
(l)
“Commitment” means the
obligation of a Member to make a Capital Contribution in the
future.
(m) “Company
Property” means any
Property owned by the Company.
(n) “Confidential
Information”
means, without limitation, any and all information, technical knowledge,
know-how, business plans, pricing strategies, market designs, trade secrets,
product specification, product compositions, data, drawings, sketches, flow
sheets, manufacturing processes, quality control specification, communications
of a sensitive or private nature relating to or useful in connection with the
design, construction and/or operation of any of the Members’ facilities or
business, and information that may be learned or acquired during a due diligence
examination of a Member and its books, records and other assets or during any
negotiation or discussion concerning the subject of this Agreement.
(o)
“Contribution” means any
contribution of Property made by or on behalf of a Member as consideration
for a
Membership Interest.
(p)
“Disposition” or “Dispose”
means as it
relates to the
Membership Interest of any Member, any sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation, or other transfer, absolute or as
security or encumbrance (including dispositions by operation of
law).
(q)
“Distributable Cash”
means all cash, revenues
and funds received by the Company from Company
operations, less the sum of the following to the extent paid or set aside by
the
Company: (i) all principal and interest payments on indebtedness of the Company
and all other sums paid to lenders; (ii) all cash expenditures incurred incident
to the normal operation of the Company’s business; (iii) such cash Reserves as
the Members deem reasonably necessary to the proper operation of the Company’s
business; and (iv) such amounts as may be required to satisfy conditions imposed
by lenders or other creditors.
(r)
“Distribution” means a
transfer of Property to a Member on account of a Membership Interest as
described in Article
VIII.
(s)
Reserved.
(t)
“Fiscal Year” means the
calendar year ending on December 31 of any year.
(u) “Initial
Capital Contribution”
means the Capital Contribution agreed to be made by the Members as
described in Section
7.1.
(v) “IPO”
means
the initial public
offering of Membership Interests, or equity securities into which such Member
Interests are converted or for which such Membership Interests are exchanged,
pursuant to an effective registration statement under the United States
Securities Act of 1933, as amended, or pursuant to the foreign equivalent
thereof, resulting in the Company, or the successor entity to the Company as
the
case may be, becoming listed on a public securities exchange.
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(w) “Manager”
or
“Managers”
means
the person described in Section 4.1 or any
other person or entity that succeeds him in that capacity. The initial Managers
shall be identified on Exhibit A to this
Agreement. References to the Manager as him, her, it, itself, or other like
references shall also, where the context so requires, be deemed to include
the
masculine or feminine reference, as the case may be.
(x)
“Member” means the
Members executing this Agreement, any transferee of a Member, or any Additional
Member. At any time there is more than one Member, the term “Member” shall mean
all Members, and any action that may be taken under this Agreement by the
Members may be taken by any Member, provided that any dispute with respect
to
any action shall be decided by the Members holding eighty-five percent (85%)
of
the Membership Interests of the Company.
(y) “Membership”
means
all of the
rights of Members including the right to share in Net Profits, Net Losses and
Distributions and the right to participate in certain management decisions
of
the Company as identified in this Agreement.
(z)
“Membership Interest”
means the term used
to indicate a Member’s ownership percentage of the
Company. The initial Membership Interest of each Member is set forth on Exhibit C
hereof.
(aa) “Net
Book Value” means at any
point in time, the sum of all the assets and liabilities of the Company as
recorded in the general ledger.
(bb)
“Net Losses” means
for each Fiscal Year, the losses and deductions of the Company determined in
accordance with accounting principles consistently applied from year to year
employed under the method of accounting identified in the Agreement, and as
reported, separately or in the aggregate, as appropriate, on the Company’s
information tax return filed for federal income tax purposes, plus any
expenditures described in the Code.
(cc) “Net
Profits” means for each
Fiscal Year, the income and gains of the Company determined in accordance with
accounting principles consistently applied from year to year employed under
the
method of accounting identified in the Agreement, and as reported, separately
or
in the aggregate, as appropriate, on the Company’s information tax return filed
for federal income tax purposes, plus any income described in the
Code.
(dd) “Person”
means
an individual,
trust, estate, firm, corporation, partnership, limited liability company,
association or other legal entity.
(ee) “CEO”
means
the Chief Executive
Officer of the Company to be appointed by the Manager under the direction and
approval of the Board as described in Section 4.5 of this
Agreement.
(ff) “Property”
means
any property,
real or personal, tangible or intangible (including goodwill), including money
and any legal or equitable interest in such property, but excluding services
and
promises to perform services in the future.
(gg) This
section reserved.
(hh) “Regulations”
means
the
regulation promulgated or issued by the Treasury Department under the
Code.
(ii) “Reserves”
means
funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by the Manager for working capital,
to
pay taxes, insurance, debt service or other costs or expenses incident to the
ownership or operation of the Company’s business or as may be required to
satisfy conditions imposed by lenders or other creditors.
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(jj)
“Tax Matters Partner”
means the Person designated
to be the Tax Matters Partner in accordance with
Section 9.2 of
this Agreement.
(SIGNATURE
PAGE
FOLLOWS)
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IN
WITNESS WHEREOF, this Operating Agreement of ▇▇▇▇▇▇▇▇ Energy, LLC has been
signed and is effective as of December 19, 2007.
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COMPANY:
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▇▇▇▇▇▇▇▇
Energy, LLC, a Nevada Limited Liability Company
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By:
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/s/
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, Co-Chief Executive Manager
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MEMBERS:
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/s/
▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇,
Inc.
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By:
▇▇▇▇ ▇▇▇▇▇▇▇▇, Co-Chief Executive Manager
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/s/
▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇
▇▇▇▇▇▇▇▇, Manager
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/s/
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Baywood
International, Inc.
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By:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Co-Chief Executive Manager
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