Operating
Agreement
of
Sample, LLC
(Member Managed)
Pursuant to the STATE Limited Liability Company Act, 1993 PA 23, as
amended (the "Act"), NAMES ("collectively referred
to as “Members”), enter into this Operating Agreement ("Agreement")
on November 1,
2005. Each of the initial
Members will hold 33 1/3% of Company’s member interests.
The
parties agree as follows:
This
Operating Agreement is subject to the terms of the written agreement dated
September 23, 2003 attached as Exhibit A to this Operating Agreement and
incorporated herein.
1.11.1 Additional
Members. Additional
Members may be admitted only if: (a) all the existing Members unanimously
consent in writing; (b) the additional
Member agrees to be bound by the terms and conditions of this Agreement; and
(c) the additional Member makes the required contribution to capital as determined
by the existing Members. The additional
Member is considered to be a Member upon signing a counterpart of this
Agreement.
1.21.2 Limited
Liability. A Member is
not liable for the acts, debts or obligations of the Company.
1.31.3 Priorities. No Member
shall have priority over any other Member; provided, however, that loans
advanced by a Member to Company will be repaid prior to distributions.
1.41.4 Waiver
of Action for Partition. Each Member
irrevocably waives, during the term of the Company and during the period of its
liquidation following dissolution, any right to maintain an action for
partition of the Company's assets.
2.12.1 Management
Vested in Members. The business
and affairs of the Company shall be managed solely by the Members.
2.22.2 Voting
Rights of Members. Each Member
is entitled to vote in proportion to the Member's Percentage Interest in the
Company on all matters.
2.32.3 Consent
Required.
(a)(a) The
unanimous vote or written consent of all Members is required for the following:
(1) to admit an additional or substitute Member; (2) to merge the Company into
another entity; (3) to dissolve and liquidate the Company; (4) to amend the
Articles of Organization; (4) to amend this Agreement respecting interests in
net income and net losses, interests in capital of the Company, a capital call,
rights on dissolution, rights of allocation and distribution; (5) to increase
the liability of any Member; (6) an amendment of this Section; (7) to borrow
(or purchase items on credit for) more than $10,000; (8) to enter contracts
obligating Company to expend more than $10,000 in any one year; (9) for Company
to authorize additional required capital contributions; (10) for capital
purchases in excess of $10,000; (11) for initial employee compensation
determinations or subsequent compensation increases of more than 10%; (12) for
the acquisition or sale of, or lien on, any real property; (13) for hiring of
any construction contractors to make improvements to real property; (14) for
approval of any planned improvements of real property (including approval of
site plan).
(b)(b) The vote
of Members holding a majority of the Members' Percentage Interests is required
for all other actions of the Members.
2.42.4 Third
Parties. A person
dealing with the Company shall not be required to inquire into the authority of
a Member to take any action or to make any decision.
2.52.5 [INTENTIONALLY
OMITTED]
2.62.6 Bank
Account. Any of the Members shall have check signing authority
on behalf of Company. NAME (or his
agent) shall be responsible for keeping a record of all deposits and
withdrawals from Company’s bank accounts, and the Members agree to provide all
information needed to allow NAME to keep such record.
2.72.7 Officers. The Members
may, in their sole discretion, elect officers of the Company to conduct the day
to day affairs of the Company under the direction and supervision of the
Members. The officers elected by the
Members may consist of a President, a Secretary, and a Treasurer. The President
shall not exercise any power reserved to the Members pursuant to this Article
2. The Members initially elect Combs as the President of the Company. NAME shall initially serve as Secretary and
Treasurer. The Members may also
appoint such other officers and agents as they shall deem necessary for the
transaction of business of the Company.
An officer shall hold office for the term for which said officer is
elected or appointed and until said officer's successor is elected or appointed
and qualified, or until said officer's resignation or removal. Two or more offices may be held by the same
person, but an officer shall not execute, acknowledge or verify an instrument
in more than one capacity, if the instrument is required by law or this
Agreement to be executed and acknowledged or verified by two or more
officers. Company will provide for, or
reimburse officers for, officers incurring ordinary and necessary business expenses
incurred in the course of furthering Company’s business; provided, however,
that the expenditures incurred are deductible expenses pursuant to Section 162
of the Internal Revenue Code.
3.13.1 Restriction
on Transfer. No Member
shall assign a membership interest: (a) if the assignment (i) would cause a
termination of the Company under the Internal Revenue Code of 1986 as amended
("IRC"), or (ii) would not comply with all applicable state
and federal securities laws and regulations; and (b) unless the assignee of the
membership interest provides the Company with the information and agreements
that the Members require in connection with the assignment. Any attempted assignment of a membership
interest in violation of this Article is void.
3.23.2 Right
of First Refusal. A membership
interest may not be transferred unless the membership is first offered to the
Company and the remaining Member(s) in accordance with the following terms and
conditions:
(a)(a) The
Member must notify the Company in writing that the Member intends or desires to
transfer the membership interest. The
notice must include the name of the proposed transferee, the terms of the
proposed transfer, and the consideration offered, if any, for the transfer of
the membership interest.
(b)(b) The
Company shall have 30 days after receipt of the written notice to determine
whether to buy the membership interest from the Member. If the Member has received a Bona Fide Offer
to buy the membership interest, the Company may purchase the membership
interest on the same terms and for the same consideration as the Bona Fide Offer. If the offer disclosed in the notice is not a
Bona Fide Offer received from a third party, the Company may purchase the
membership interest under the procedures described at Section 3.4. For purposes of this section, the term “Bona
Fide Offer” is an offer exceeding 85% of the fair market value from a purchaser
having the means to acquire the interest for cash.
(c)(c) If the
Company does not elect to buy the membership interest, the membership interest
shall be offered to the remaining Member(s) of the Company. Written notice of the offer (as set forth in
subsection (a) above) shall be furnished to the remaining Member(s),
who shall have 30 days after receipt of the written notice to determine whether
to buy the membership interest from the transferring Member. The price and terms shall be the same as
those provided to the Company in subsection (b) above. If
there is more than one remaining Member who elects to buy the membership
interest, the membership interest shall be divided among the electing Members
in proportion to their Percentage Interests.
(d)(d) If the
membership interest is not purchased by the Company or the remaining Member(s),
the membership interest may be transferred once free from the restrictions
contained in this Article. After the
transfer, this restriction shall attach to the membership interest transferred. The transferee shall have the rights of an
assignee unless admitted as a substitute Member under Section 3.7.
3.33.3 Exceptions. The
restrictions in Section 3.1 and the right of first refusal in Section 3.2 do not
apply to a voluntary transfer by a Member to a revocable living trust or family
limited liability company (of which the Member is the sole manager) established
by that Member or to a transfer to the personal representative of a deceased
Member's estate. Any membership interest
owned by a revocable living trust is considered to be owned by the Member who
established the living trust until that Member's death. A personal
representative of a deceased Member’s estate shall hold the membership
interest only as an assignee with the rights described at Section 3.6.
3.43.4 Call
Option. If a Member
attempts to transfer all or any portion of a membership interest in violation
of this Agreement, the Company shall have the option to purchase that Member’s
membership interest in accordance with the following terms and conditions:
(a)(a) This
option may be exercised by giving the Member whose interest is to be purchased
written notice of the exercise of the option.
Closing shall take place within 60 days after notice of the exercise of
the option is given.
(b)(b) The
purchase price for the interest shall be 80 percent of the Book Value as determined
under Section 3.5(b).
(c)(c) The
purchase price shall be paid as follows: (i)(i) 10 percent of the purchase price shall be paid by
cashier’s or certified check or by wire transfer at closing; and (ii)(ii) the balance of the purchase price shall be paid with
a promissory note from the Company providing for payment of principal and
interest in equal monthly installments amortized over a period of 10 years and
payable in full at the end of 10 years.
Interest shall accrue from the date of closing at the applicable federal
rate for notes of similar length. The
note may be prepaid without penalty.
3.53.5 Death
of a Member.
(a)(a) [INTENTIONALLY
OMITTED]
(b)(b) The
purchase price of the deceased Member's interest is Book Value. "Book Value" means the Company's
total assets minus total liabilities, as shown on the Company's financial
statements using accounting principles consistently applied for the fiscal year
ending immediately prior to the year the written notice of transfer is received
by the Company times the deceased Member's Percentage Interest; provided,
however, that any real property held by Company will be valued at its fair
market value based on its best use. If
the parties to the transaction do not agree on the calculation of Book Value,
upon the demand of any party, the parties shall attempt to agree on the
selection of a certified public accountant to be hired for the purpose of
calculating Book Value, and whose determination is binding on all parties. If the parties are unable to agree on the
selection of a certified public accountant within 15 days after the demand, any
party may demand arbitration pursuant to Section 11.1. In order to value the real property, the
Company and the party holding the deceased Member’s interest will each select
an appraiser, who will then select a third appraiser, and the average of the
two closet appraisals will establish value.
3.63.6 Rights
of Assignee. Subject to
the other provisions of this Article, a Member may assign the Member's
membership interest in the Company in whole or in part. The assignment of a membership interest does
not entitle the assignee to participate in the management and affairs of the
Company or to become a Member. An
assignee is entitled to receive, to the extent assigned, the distributions to
which the assigning Member would otherwise be entitled.
3.73.7 Admission
of a Substitute Member. An assignee
of a membership interest is admitted as a substitute Member, having all the
rights and powers of the assigning Member only if: (a) the other Members
unanimously consent in writing; and (b) the assignee agrees to be bound by the
terms and conditions of this Agreement.
An assignee will be considered to be a substitute Member upon signing a
counterpart of this Agreement.
Article 44
Restrictions
on Withdrawal of Members
4.14.1 Withdrawal
of a Member. Except upon the transfer of a Member’s entire
interest under the provisions of Article 3, a Member may not withdraw from the
Company.
4.24.2 Wrongful
Withdrawal. A Member who
attempts to withdraw from the Company in violation of this Agreement is not
entitled to a liquidation distribution and is liable to the Company for all damages
caused by the wrongful withdrawal. The
Company may offset part or all of the damages against amounts to which the
former Member is otherwise entitled. At
its option, the Company may purchase the Member’s membership interest in
accordance with Section 3.4
Article 55
Meetings
5.15.1 Call
of Meeting. Members
holding at least twenty percent (20%) of the Percentage Interests may call a
meeting.
5.25.2 Notice
of Meeting. At least ten
(10) days, but no more than thirty (30) days, prior to the date fixed for a
meeting of the Members, written notice of the time, place and purposes of the
meeting shall be provided to each Member.
The business to be conducted at the meeting is limited to those matters
specified in the notice.
5.35.3 Waiver
of Notice. A Member may
waive notice of a meeting by facsimile or other writing. The waiver may be given to the Company
before, at, or after the meeting. A
Member who attends the meeting in person or by proxy has waived notice of the
meeting unless, at the commencement of the meeting, the Member states an
objection on the basis that the meeting is not lawfully called or convened.
5.45.4 Proxies. A Member may
vote by proxy executed in writing by the Member. The proxy shall be filed with the Company
before or at the time of the meeting. A
proxy shall not be valid after three months from the date of execution, unless
otherwise provided in the proxy.
5.55.5 Participation
in Meetings. Members may
participate in a meeting by a conference telephone or similar communication
equipment. All participants must be able
to hear each other, and shall be advised of the communication equipment. The names of the participants in the
conference shall be divulged to all participants. Participation in a meeting pursuant to this
procedure shall constitute presence in person at the meeting.
5.65.6 Other
Matters. At a meeting
of the Members, all matters that are not covered by this Agreement shall be
governed by the most recent edition of Roberts Rules of Order.
5.75.7 [INTENTIONALLY OMITTED]
Article 66
Capital
Contributions
6.16.1 Initial
Capital Contributions. The value of
the capital contributions of the Members, the percentage interest ("Percentage
Interest") of each Member in the total capital of the Company and the
total capital of the Company are set out in Schedule A, which shall be amended
to reflect additional capital contributions.
Subsequent advances by a Member to Company shall be treated as loan
advances and not capital contributions, unless the Members unanimously agree
otherwise in writing; interest of 5% per annum shall accrue on such advances.
6.26.2 Percentage
Interest. A Member's
Percentage Interest is equal to the Member's percentage received in exchange
for his initial capital contribution as set forth on Schedule A.
6.36.3 Withdrawal
and Return of Capital. Except as
provided in this Agreement, no Member may withdraw any portion of the Member's
capital contribution or be entitled to a return of the Member's capital
contribution. No Member shall have any
personal liability for the repayment of the capital contribution of any other
Member.
6.46.4 Capital
Accounts. The Company
shall establish and maintain a capital account for each Member ("Capital
Account"). Each Capital Account
shall be: (a) increased by (i) the amount of any cash or the fair market value
of any property held by the Company (net of any liabilities secured by the
property which the Company assumes or takes subject to under IRC §752); and
(ii) the Member's share of net profits and of any separately allocated items of
income or gain; and (b) decreased by (i) any cash or the fair market value of
any property distributed to the Member (net of any liabilities secured by the
property which the Member assumes or takes subject to under IRC §752); and (ii)
the Member's share of net losses and of any separately allocated items of
deduction or loss. Allocation of items
of income, gain, deduction or loss shall reflect the difference between the
book value and tax cost basis of assets contributed by the Members.
6.56.5 Capital
Contribution Other than Cash. No Member
may make a contribution of property other than cash without the consent of the
remaining Members. Contributed property
shall be valued by the Company as of the date of its contribution.
6.66.6 Compliance
With IRC §704(b). The
provisions of this Article which relate to the maintenance of Capital Accounts
are intended and, if necessary, shall be modified to cause the allocations of
profits, losses, income, gain and credit pursuant to Article 7 to have substantial economic effect under IRC §704(b)
and the regulations promulgated under it.
This Agreement shall not be construed as creating a deficit restoration
obligation or otherwise personally obligate any Member to make a capital
contribution in excess of the initial contribution.
Article 77
Allocations
and Distributions
7.17.1 Allocation
of Profits and Loss. Except as
may be required by IRC §704(c) and Sections 7.3, 7.4, and 7.5, profits and losses shall be allocated among the
Members in proportion to their Percentage Interests.
7.27.2 [INTENTIONALLY OMITTED]
7.37.3 Company
Minimum Gain Chargeback. The minimum
gain chargeback provisions of Reg §1.704-2(f) shall apply. This provision is intended to comply with,
and shall be interpreted and applied in a manner consistent with Reg
§1.704-2(b) and (f).
7.47.4 Members
Minimum Gain Chargeback. The
nonrecourse debt minimum gain chargeback provisions of Reg §1.704-2(i)(4) shall
apply. This provision is intended to
comply with, and shall be interpreted and applied in a manner consistent with
Reg §1.704-2(i)(4) and (5).
7.57.5 Qualified
Income Offset. The qualified income offset provision of Reg
§1.704-1(b)(2)(ii)(d)(3) shall apply so that any Member who unexpectedly
receives an adjustment, allocation or distribution described in Reg
§1.704-1(b)(2)(ii)(d)(4), (5), or (6), shall be allocated items of income and
gain in an amount and manner sufficient to eliminate, to the extent required by
the regulations, the Member's Capital Account deficit. This provision is intended to comply with and
shall be interpreted and applied in a manner consistent with Reg
§1.704-1(b)(2)(ii)(d)(3), (4), (5) and (6).
7.67.6 Distributions. The Company
may make distributions to the Members, unless after giving effect to the
distribution: (a) the Company would not be able to pay its debts as they become
due in the usual course of business; (b) the Company's assets are less than its
total liabilities; or (c) the Company is indebted to any of the Members. The Company may base a determination that the
distribution is permissible on financial statements prepared on the basis of
accounting practices and principles that are reasonable in the circumstances,
on a fair valuation or any other method that is reasonable. Except as otherwise stated in this Agreement,
all distributions shall be made in proportion to the Members' Percentage
Interests.
7.77.7 Liquidation. All
distributions in liquidation of the Company or of any Member's interest in the
Company shall be in an amount equal to the positive balance in the Member's
Capital Account as determined after all adjustments required by Treasury
Regulation §1.704-1.
7.87.8 Compliance
with Subchapter K. The
provisions of this Article which relate to allocations of tax items to Members
are intended and, if necessary, shall be modified to conform to the provisions
of the Internal Revenue Code and the Treasury Regulations which apply to Partners and Partnerships.
Article 88
[INTENTIONALLY OMITTED]
Article 99
Dissolution
and Winding Up
9.19.1 Dissolution
of the Company. The Company
is dissolved upon the first to occur of the following:
(a)(a) Unanimous
consent of the Members to dissolve and liquidate; or
(b)(b) The date
on which the Company is dissolved by operation of law or judicial decree.
9.29.2 Winding
Up and Distribution.
(a)(a) Upon the
dissolution of the Company, the remaining Member(s) shall within a reasonable
period of time wind up the business and affairs of the Company and file the
appropriate notice of dissolution. While
winding up the Company affairs, the Member(s) shall continue to exercise all of
the powers granted in this Agreement.
(b)(b) In connection
with the winding up, the Company's assets shall be disposed of in the following
order of priority:
(i)(i) To pay
the debts and liabilities of the Company and the expenses of winding up;
(ii)(ii) To set
up any reserve to be held in a special interest bearing account which the
Members deem reasonably necessary to meet the Company's obligations provided
that the balance of the reserve remaining after payment of those obligations
shall be distributed under subsection (iii);
(iii)(iii) The
balance of the assets, if any, shall be distributed to each of the Members in
an amount equal to the positive balance in the Member’s Capital Account as
determined by all adjustments required by Treasury Regulation §1.704-1.
9.39.3 Source
of Return of Capital. Upon
dissolution, a Member may look solely to the assets of the Company for the
return of the Member's capital contribution, and is entitled only to a cash
distribution in return for the Member's capital contribution. If the Company's assets remaining after the
payment or discharge of the Company's obligations are insufficient to return
the Member's capital contribution, the Member has no recourse against the
Company or any other Member.
Article 1010
Books and Records
10.110.1 Records
Kept. The Company
shall maintain at its registered office, the following records:
(a)(a) A current
list of the full name and last known address of each Member;
(b)(b) A copy of
the Articles of Organization and any amendments;
(c)(c) Copies
of the Company's federal, state and local tax returns and reports for the three most recent years;
(d)(d) Copies of
monthly accountings or financial statements of the Company for the three most
recent years;
(e)(e) Copies of
all operating agreements and amendments; and
(f)(f) Copies
of records that would enable a Member to determine each Member's share of the
Company's distributions and each Member's voting rights.
10.2 Reports. NAME shall
provide reports concerning the financial condition and results of operation of
the Company in the time, manner and form as reasonably appropriate. Such reports shall include a statement of
each Member's share of profits and other items of income, gain, loss, deduction
and credit.
10.3 Right to Information. Upon
reasonable written request and during ordinary business hours, a Member or a
Member's designated representative may inspect and copy, at the Member's
expense, any of the Company's records described in Section 10.1. Upon written
request of a Member, the Company shall mail to the Member a copy of the
Company's most recent annual financial statement and of its most recent
federal, state and local income tax returns and reports.
10.4 Tax Information. Information
relating to the Company that is reasonably necessary for the preparation of the
Members' Federal income tax returns shall be prepared at Company expense and
distributed to the Members within 75 days after the end of each fiscal year of
the Company.
Article 1111
General
11.111.1 Arbitration. If there is
a tie vote among the Members or any other matter under this Agreement is in
dispute, the matter shall be determined solely by arbitration. A Member shall initiate arbitration by
submitting to the Company written demand for arbitration. The parties shall attempt to agree on the
selection of a single arbitrator to be hired for the purpose of breaking the
tie or determining the other matter in dispute, whose determination shall be
binding on all parties. If the parties
are unable to agree on the selection of a single arbitrator within 15 days
after the demand, any party may demand that the tie be broken or the other
matter resolved under the commercial arbitration rules of the American
Arbitration Association. The arbitration
award is enforceable as a judgment of any court having proper
jurisdiction. The costs of arbitration
shall be paid by the Company. Each party
shall bear that party's own legal expenses.
As an alterative to arbitration, the parties may mutually agree to hire
an attorney or accountant, who has no involvement or relationship with any
party, to resolve the matter and that person’s decision will be final.
11.211.2 Proper
Notices. All notices
and other communications required or permitted under this Agreement shall be
deemed to have been given if stated in writing and mailed, postage paid,
transmitted by facsimile, personally delivered or delivered by a commercial
delivery service, to the Company at its principal office and to the Members at
the address listed on Schedule A, or to any other address of which the party
has given written notice.
11.311.3 Applicable
Law. The
validity, construction and performance of this Agreement shall be governed by
the laws of STATE.
11.411.4 Integration. This
Agreement is the entire agreement between the parties as to its subject
matter.
11.511.5 Amendments. Any
amendment, modification or waiver of this Agreement must be in writing and
signed by the requisite number of Members.
11.611.6 Severability. If any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be unenforceable, this Agreement shall continue in full force
and effect without the provision.
11.711.7 Benefit. This
Agreement is binding upon and inures to the benefit of the parties and their
personal representatives, successors and permitted assigns.
11.811.8 Captions. Captions
contained in this Agreement are for reference and in no way define, limit or
extend the Agreement or the intent of any of its provisions.
11.911.9 Counterpart. This
Agreement may be executed in counterparts, each of which is enforceable against
the party executing it. All of the
counterparts shall constitute one instrument.
11.1011.10 Rights
and Remedies. The rights
and remedies provided by this Agreement are cumulative.
11.1111.11 Creditors. None of the
provisions of this Agreement shall be for the benefit of or enforceable by any
creditor of the Company or the creditor of any Member.
Article 1212
Conflicts
of Interest
12.112.1 Company
Counsel. The parties
acknowledge that Foster Zack & Lowe
P.C. has prepared this Agreement and represents NAME. The firm identified in this section is
referred to as “Counsel.”
12.212.2 Conflicts
of Interest. Each Member
was advised by Counsel that a conflict of interest exists among the Members’
individual interests and that they should seek the advice of independent
counsel. Each Member has had the
opportunity to seek the advice of independent counsel and has elected to do so
without influence from any other party.
12.312.3 Waiver. Each party
to this Agreement has the information necessary to make an informed decision
regarding this Agreement. Each party to
this Agreement waives all claims against Counsel regarding any possible
conflict of interest regarding this Agreement and its preparation.
Article 1313
Single
Member
13.113.1 Single
Member. If at any
time the Company has only one Member, the following provisions shall
apply:
(a)(a) The
Member may transfer all or any portion of the Member’s interest to one or more
transferees in one transaction (whether by assignment, intestacy, will or
otherwise). The provisions of Article 3
shall attach to all membership interests immediately after that transaction.
(b)(b) All
profits and losses will be allocated to the Member. Articles 6 and 7 and any other Section in
this Agreement that refers to the provisions of Subchapter K of the IRC or the
Regulations promulgated under Subchapter K that apply to Partners and Partnerships will not be applicable.
(c)(c) This Agreement will not fall within the
statutory definition of an “operating agreement”. However, it is the intent of the parties that
this Agreement be subject to the requirements of the Act that deal with
“operating agreements” and therefore, to the extent applicable, those
provisions are incorporated by reference.
Article 14
[INTENTIONALLY
OMITTED]
Article 15
[INTENTIONALLY
OMITTED]
Article 16
[INTENTIONALLY
OMITTED]
The
parties executed this Agreement on the date stated on the first page.
MEMBERS,
Individually and on Behalf of
Sample,
LLC
Partner
#1
Partner
#2
_____________________________________
Partner
#3
Schedule A
List of Members and Capital Contributions
Name and Address Capital
Contribution Percentage
Interest
Partner #1 $1 33
1/3 %
Partner #2 $1 33
1/3 %
Partner #3 $1 33
1/3 %
