Form: Sample Florida LLC Operating Agreement

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OPERATING AGREEMENT

SAMPLE, LLC

THIS OPERATING AGREEMENT (this “Agreement”) is made and entered into as of [month] ___, 202_ by Sample LLC, a Florida limited liability company (the “Company”), and the Members listed on Schedule A attached hereto, as such schedule may be amended from time to time in accordance with the terms of this Agreement. The Members listed on Schedule A may be referred to herein individually as a “Member,” and collectively as the “Members.”

WHEREAS, the Members have formed a limited liability company pursuant to the laws of the State of Florida; and

WHEREAS, the Members desire to set forth their respective rights and obligations as Members of the Company to provide for the management of the Company and its affairs and for the conduct of the business of the Company.

NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members hereby agree as follows:

ARTICLE I

Definitions

As used in this Agreement, the following terms shall have the following meanings:

“Act” means the Revised Florida Limited Liability Company Act and any successor statute, as amended from time to time.

“Adjusted Capital Account Deficit” means, with respect to the Capital Account of any Member as of the end of any Fiscal Year, the amount by which the balance in such Capital Account is less than $0.00, after giving effect to the following adjustments:

(i) Each Member’s Capital Account shall be increased by the amount, if any, such Member is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c) or Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i); and

(ii) Each Member’s Capital Account shall be decreased by the amount of any of the items described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

“Affiliate” means, as applied to the Company or any other specified Person, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with the Company (or other specified Person) and shall also include (a) any Person who is an officer, director or manager of the Company or any direct or indirect subsidiary (or other specified Person) or, as applied to the Company, any Person who is the beneficial owner of at least 5% of the then outstanding Units of the Company (or other specified Person) and Family Members of any such Person, (b) any Person of which the Company (or other specified Person) or an Affiliate (as defined in clause (a) above) of the Company (or other specified Person) shall, directly or indirectly, beneficially own at least 10% of the outstanding equity interests of such Person, and (c) in the case of a specified Person who is an individual, any Family Member of such Person.

“Agreement” means this Operating Agreement of the Company as adopted and as amended from time to time in accordance with the terms of this Agreement.

“Articles of Organization” means the Articles of Organization of the Company as originally filed with the Secretary of State of the State of Florida on [month] ___, 202_.

“Board” or “Board of Managers” means the Company’s Board of Managers.

“Capital Account” shall have the meaning given to such term in Section 5.4.

“Capital Contribution” means the contributions to the capital of the Company made by a Member pursuant to this Agreement, as set forth on Schedule A attached hereto, as such schedule may be amended from time to time.

“Cause” shall mean a termination of an employee or Manager, by the Company because of any one of the following events: (i) breach of fiduciary duty to the Company; (ii) any act or omission which injures, or is likely to injure, the Company or the business reputation of the Company in any material respect; (iii) dishonesty, fraud, gross negligence, or misconduct in connection with duties to the Company; (iv) failure to: (a) follow the direction of any individual to whom employee or Manager reports, which failure is willful or intentional, (b) abide by the policies, procedures, and rules of the Company, after written notice and reasonable opportunity to cure, or (c) abide by laws applicable to employee or Manager’s capacity as an employee, executive, or officer of the Company, the breach of which injures, or is likely to injure, the Company in any material respect; or indictment for, conviction of, or entry of a plea of guilty or no contest to: (a) a felony, or (b) a crime involving moral turpitude.

“Class A Members” means Members holding Class A Units.

“Class A Unit” means a voting Unit designated on the date of issuance as a “Class A Unit,” having the rights, preferences and privileges set forth in this Agreement.

“Class B Members” means Members holding Class B Units.

“Class B Unit” means a non-voting Unit designated on the date of issuance as a “Class B Unit,” having the rights, preferences and privileges set forth in this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.

“Company” means Sample LLC, a Florida limited liability company.

“Company Assets” means all assets, whether tangible or intangible and whether real, personal or mixed, at any time owned by the Company.

“Conversion” means conversion of the Company from a limited liability company to a Florida, Delaware or other state corporation.

“Depreciation” means, for each Fiscal Year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such Fiscal Year, provided, however, that if the Gross Asset Value of an asset differs from its adjusted tax basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction with respect to such asset for such Fiscal Year bears to such beginning adjusted tax basis; and provided further, that if the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Board of Managers.

“Designated Purchaser” shall have the meaning for such term set forth in Section 7.3(a).

“Disinterested” means, with respect to a Manager or Member and with respect to a particular transaction or other undertaking, a Manager or Member who: (i) is not a party to that undertaking, (ii) has no material financial interest in any Person that is a party to that undertaking and (iii) is not related by blood or marriage to any Person who either is a party to that undertaking or has a material financial interest in any Person that is a party to that undertaking.

“Fair Market Value” means the fair market value of the Units as determined by the Board of Managers in good faith after taking into consideration all facts which it deems appropriate and in accordance with applicable statutory and regulatory guidelines.

“Family Member” means as applied to any individual, such individual’s spouse, children (including stepchildren or adopted children), grandchildren, parents or siblings thereof, and any trust or estate planning vehicle created for the primary benefit of any one or more of them.

“Fiscal Year” means the Company’s fiscal year, which shall be the calendar year.

“Gross Asset Value” means, with respect to any asset, such asset’s adjusted basis for federal income tax purposes, except as follows:

(i) the Gross Asset Value of any asset contributed by a Member to the Company shall initially be the fair market value of such asset on the date of the contribution, as determined by a Majority in Interest of the Members and the contributing Member.

(ii) for purposes of adjusting the Capital Accounts of Members to reflect increases or decreases in the value of the Company upon the occasions listed in Section 5.4(b), the Gross Asset Value of all Company Assets shall be adjusted to equal their respective fair market values, as determined by a Majority in Interest of the Members; and

(iii) the Gross Asset Value of any asset distributed by the Company to a Member shall be the fair market value of such asset on the date of distribution, as determined by the Board of Managers.

If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraph (i) or paragraph (ii) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken with respect to such asset for purposes of computing Profits and Losses.

“Gross Profit” means the net sales of the Company minus cost of goods sold for the Fiscal Year prior to the year in which the contemplated transaction occurs.

“Incentive Plan” shall have the meaning for such term set forth in Section 2.10.

“Indemnitee” shall have the meaning for such term set forth in Section 8.2(a).

“Majority in Interest” means a combination of any Members who, in the aggregate, own more than fifty percent (50%) of the outstanding Class A Units.

“Manager” means any member of the Board.

“Member” means any Person executing this Agreement as of the date of this Agreement as a member of the Company or any Person hereafter admitted to the Company as a member as provided in this Agreement (each in the capacity as a member of the Company), but does not include any Person who has ceased to be a member of the Company. The names of the Members shall be listed on Schedule A attached hereto, as such schedule may be amended from time to time by the Company.

“Notice Period” shall have the meaning for such term set forth in Section 7.4(b).

“Notice of Proposed Issuance” shall have the meaning for such term set forth in Section 7.4(a).

“Notice of Proposed Sale” shall have the meaning for such term set forth in Section 7.3(a).

“Offered Units” shall have the meaning for such term set forth in Section 7.3(a).

“Offered New Units” shall have the meaning for such term set forth in Section 7.4(a).

“Percentage Interest” means, with respect to any Person as of any time, the number of Units such Person holds relative to the number of total outstanding Units with respect to Units held by all Persons.

“Person” means and includes any individual, partnership, limited liability company, trust, estate, corporation, custodian, trustee, executor, administrator, nominee or entity in a representative capacity.

“Profits” and “Losses” means, for each Fiscal Year, an amount equal to the Company’s taxable income or loss for such Fiscal Year determined in accordance with Section 703(a) of the Code (but including in taxable income or loss, for this purpose, all items of income, gains, loss, deduction or credit required to be stated separately pursuant to Section 703(a)(1) of the Code), with the following adjustments:

(i) any income of the Company exempt from federal income tax and not otherwise taken into account in computing Profits or Losses, pursuant to this definition shall be added to such taxable income or loss;

(ii) any expenditures of the Company described in Section 705(a)(2)(B) of the Code (or treated as expenditures described in Section 705(a)(2)(B) of the Code pursuant to Treasury Regulation Section 1.704‑1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profits or Losses, pursuant to this definition shall be subtracted from such taxable income or loss;

(iii) in the event the Gross Asset Value of any Company asset is adjusted in accordance with paragraph (ii) or paragraph (iii) of the definition of “Gross Asset Value” above, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses;

(iv) gain or loss resulting from any disposition of any asset of the Company with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value; and

(v) in lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year or other period, computed in accordance with the definition of “Depreciation” above.

Notwithstanding the foregoing, all items of income, gain, loss, deduction or credit that are specifically allocated pursuant to Sections 6.1(c) and 6.1(e)(i)-(vii) shall be excluded from the computation of Profits and Losses.

“Proportionate Share” shall have the meaning for such term set forth in Section 7.4(c).

“Proposed Transferee” shall have the meaning for such term set forth in Section 7.3.

“Purchaser” shall have the meaning for such term set forth in Section 7.3(a).

“Qualified IPO” means a fully underwritten, firm commitment public offering of the Company’s common stock (after a Conversion) pursuant to an effective registration statement under the Securities Act pursuant to which the gross proceeds to the Company are at least Twenty Million Dollars ($20,000,000).

“Regulatory Allocations” has the meaning set forth in Section 6.1(e)(vii).

“Sale of the Company” means one or a series of related transactions, events or occurrences resulting in: (i) the sale, lease, exchange or other transfer of all or substantially all of the assets of the Company; or (ii) merger, consolidation, reorganization, recapitalization, master lease, or other business transfer or combination of the Company, as a result of which the Members of the Company prior to such transaction no longer hold the right to vote more than fifty percent (50%) of the voting power of the outstanding voting securities of the Company

“Tag Offer” shall have the meaning for such term set forth in Section 7.6.

“Transfer” means any sale, assignment, transfer, exchange, mortgage, pledge, grant of a security interest, or other disposition or encumbrance (including, without limitation, by operation of law), or the acts thereof.

“Transferring Member” shall have the meaning for such term set forth in Section 7.3.

“Unit” means a unit of interest of a Member in the Company at any particular time, including without limitation, Class A Units and Class B Units, representing rights to distributions (liquidating or otherwise), allocations, information, and to vote, consent or approve, if any.

ARTICLE II

Organization

2.1 Name and Formation. The name of the Company shall be “Sample” and all Company business shall be conducted in such name or such other names that comply with applicable law as the Board of Managers may select from time to time. The Company was formed on [month] ____, 202_ pursuant to the Act.

2.2 Principal Place of Business. The principal office of the Company shall initially be 123 Street Sunshine, FL 32111 or such other place within or without the State of Florida as may be determined from time to time by the Board of Managers.

2.3 Registered Office and Registered Agent. The Company’s registered agent and office shall be [name] at [__________]. The Company may change its registered agent or registered office to any other in the State of Florida as may be determined from time to time by the Board of Managers in accordance with the Act.

2.4 Term. The Company shall continue in existence for the period fixed in the Articles of Organization, unless the Company is earlier dissolved in accordance with the provisions of this Agreement or the Act.

2.5 Purposes and Powers. The purpose and character of the business of the Company shall be to engage in any business or activity which may be legally permitted under the Act, as determined pursuant to this Agreement. Subject to the Articles of Organization and the terms and conditions of this Agreement, the Company shall have the power and authority to do all such acts and things as may be necessary, desirable, expedient, convenient for, or incidental to the furtherance and accomplishment of the foregoing objectives and purposes and for the protection and benefit of the Company.

2.6 No State Law Partnership. The Members intend that the Company shall not be a partnership or joint venture, and that no Member shall be a partner or joint venturer of any other Member with respect to the business of the Company, for any purposes other than federal, state and local tax purposes, and this Agreement shall not be construed to suggest otherwise.

2.7 Authority of Members. Except as otherwise provided in this Agreement, no Member shall have the authority or power to act for or on behalf of the Company, to do any act that would be binding on the Company or to incur any expenditures, debts, liabilities or obligations on behalf of the Company. All decisions or actions of the Members allowed, permitted or required under this Agreement or the Act shall be made by action of the Majority in Interest, unless pursuant to this Agreement, the Act or other applicable law a greater number or percentage is required.

2.8 Voting Rights. Each holder of Class A Units shall be entitled to one (1) vote for each Class A Unit held. All decisions or actions of the Members allowed, permitted or required under this Agreement or the Act shall be made by action of the Members holding Class A Units constituting a Majority in Interest and voting as a single class, unless pursuant to this Agreement, the Act or other applicable law a greater number or percentage or separate class vote is required. A Member may vote in person or may authorize another person or persons to vote or act for him or her by written proxy executed by the Member or his or her authorized agent and delivered to any officer of the Company. Class B Units are non-voting Units and holders of Class B Units shall not be entitled to vote on any matter which is brought before a meeting of the Members of the Company for vote, unless otherwise provided by the Act.

2.9 Authorized Units. The Company shall have two (2) classes of Units, consisting of Class A Voting Units and Class B Nonvoting Units. No Units or other interests purporting to confer any rights in the Company shall be issued unless they have been authorized for issuance by the Board and in accordance with the terms of this Agreement.

2.10 Incentive Units.

(a) Incentive Unit Plan. The Board of Managers may adopt an Equity Incentive Plan (the “Incentive Unit Plan”) for the purposes of granting Class B Units, whether capital units or profits interests (“Incentive Units”), to, among others, employees, managers, consultants and service providers of the Company. In addition to the grant of Incentive Units, the Company may grant options to purchase such units, provided such options comply with or are otherwise exempt from Section 409A of the Code. The Board of Managers shall have the power and authority to issue such number of Incentive Units under the Incentive Unit Plan as the Board of Managers may determine. Incentive Units issued under the Incentive Unit Plan shall be subject to the vesting restrictions and forfeiture restrictions determined by the Board of Managers. Each recipient of Incentive Units shall, as a condition of issuance, (a) waive any and all statutory or contractual appraisal and dissenter’s rights with respect to such Incentive Units, and (b) agree to be bound by the terms and provisions of this Agreement and execute a counterpart of this Agreement and any other documentation requested by the Board of Managers or the Administrator (as defined in the Incentive Unit Plan). So long as the granting of Incentive Units complies with the provisions of this Section 2.10, the Administrator shall have the power and authority to (1) issue and grant Incentive Units, (2) determine the terms and conditions of the grants, (3) enter into award agreements with the recipients of Incentive Units evidencing the grants, (4) otherwise administer the Incentive Unit Plan and (5) exercise the repurchase rights of the Company with respect to the Incentive Units (provided that any determination of fair market value that either constitutes or impacts the determination of the repurchase price shall be made by the Board of Managers). In the event that the Internal Revenue Service issues any additional guidance concerning the taxation of Units issued to, among others, employees, consultants and other service providers of the Company after the execution of this Agreement, the Board of Managers is hereby authorized to take any action required by such guidance, including the filing of tax elections thereunder, the making of forfeiture allocations and the adoption of additional provisions to this Agreement that are binding on the Company under the Act, to achieve the same tax treatment for such units as is applicable on the date of execution of this Agreement

(b) Profits Interests. The Company may issue, under the Incentive Plan or otherwise, Incentive Units from time to time that are intended to be treated as profits interests within the meaning of Revenue Procedure 93 27 as clarified by Revenue Procedure 2001-43 for federal income tax purposes (or pursuant to any subsequent authority). None of the Members who are issued such profits interests shall make Capital Contributions in connection with the acquisition of such Incentive Units and the Company shall treat such Members as holding profits interests for all purposes of this Agreement. At the time any Incentive Units are issued that are intended to be treated as profits interests after the date hereof, the Board, or an advisor approved by the Board, shall first make a reasonable determination regarding the value of the Company and, notwithstanding anything contained in Article VI to the contrary, such profit interests shall only be entitled to share in the future distributions, allocations of income and value increases of the Company after the date of issuance of such Incentive Units. In addition, the grant documentation shall designate that (i) such Incentive Units are being issued as profits interests, (ii) such Incentive Units shall only be entitled to future distributions, allocations of income and value increases of the Company after the date of issuance of such Incentive Units and (iii) any allocations or distributions with respect to such Incentive Units shall be adjusted as necessary to ensure that such Incentive Units are treated as profits interests.

2.11 Liability to Third Parties. No Member in his, her or its capacity as such shall be liable for the debts, obligations or liabilities of the Company, including, without limitation, under a judgment, decree or order of a court. Without limiting the foregoing, the provisions of this Agreement are not intended to be for the benefit of any creditor or other Person (except for Members, Managers and officers of the Company) to whom any debts, liabilities or obligations are owed by (or who otherwise may have any claim against) the Company or any of the Members; and, except for Members, Managers and officers of the Company, no creditor or other such Person shall obtain any right under any of the provisions of this Agreement or shall by reason of any of such provisions make any claim in respect of any debt, liability or obligation (or otherwise) against the Company or any of the Members.

2.12 Advice of Counsel. Each Person signing this Agreement understands that this Agreement contains legally binding provisions, has had the opportunity to consult with a lawyer, and has either consulted a lawyer or consciously decided not to consult a lawyer.

ARTICLE III

Management

Management by Managers. Except for situations in which the approval of the Members is expressly required by this Agreement or by nonwaivable provisions of applicable law, the powers of the Company shall be exercised by, vested-in, or under the authority of, and the business and affairs of the Company shall be manager-managed under the direction of the Board of Managers; and the Board of Managers may make all decisions and take all actions for the Company not otherwise provided for in this Agreement. All decisions or actions of the Board of Managers allowed, permitted or required under this Agreement or the Act shall be made by action of the Board of Managers. In addition, the Board of Managers shall have the power to delegate tasks to any officer, employee or agent of the Company. Notwithstanding the foregoing, the affirmative vote of the Majority in Interest shall be required before any of the following actions are taken by the Company:

(a) Consummation of any Sale of the Company;

(b) Filing for bankruptcy, appointment of a receiver or trustee or making a transfer for the benefit of creditors;

(c) Dissolving, liquidating or winding up of the Company’s affairs or the cessation of the Company’s business operations;

(d) Any change in the priority of distribution and payments to Members;

(e) Any action that authorizes or creates any new class of equity or debt convertible into equity;

(f) Incurring or causing the Company to incur indebtedness for borrowed money in excess of [One Hundred Thousand Dollars ($100,000)] in the aggregate, or the renewal or extension of any such indebtedness by the Company or permitting there to be any liens, encumbrances or security interests on any of the Company’s assets;

(g) Any expenditure or the incurrence of any debt or obligation if, after giving effect thereto, either the Company would be unable to pay its debts and obligations as and when due, or the total sum of the Company’s assets would be less than the total sum of the Company’s liabilities;

(h) Except for a clerical, non-substantive amendment, any waiver, repeal, amendment, restatement or correction to the Articles of Organization of the Company and/or this Agreement; or

(i) Materially changing the nature of the business of the Company.

Emergency Powers of the Managers. Subject to any Member consents required herein, the Board of Managers shall have the express right to take any and all such actions as the Board of Managers, in their reasonable judgment, deem necessary for the protection of the Company or its assets.
Composition of the Board of Managers. The Board of Managers shall consist of up to four (4) Managers, and may be increased or decreased from time to time by a Majority in Interest. Managers need not be Members, natural persons, or residents of the state of Florida. The Members holding a Majority in Interest shall appoint the Managers of the Company at a meeting of Members called by the Board of Managers or a Majority in Interest to elect, and pursuant to each written consent of Members holding Class A Units executed for the purpose of electing, members of the Board of Managers, which shall initially be as follows
[Insert Name]
[Insert Name]
[Insert Name]
[Insert Name]
Term. Each Manager shall hold office until his or her successor is appointed, or, if earlier, until such Manager’s death, resignation or removal as provided in this Agreement.
Removal from Office. Managers designated hereunder may be removed from office at any time with or without Cause by the Members holding a Majority in Interest. Prior to the removal of any Manager becoming effective, the Company shall pay in full all reimbursable expenses of such Manager and any other sums owed to such Manager for services rendered in his or her capacity as Manager.
Vacancies and Election. In the event that any individual designated to serve on the Board of Managers is removed in accordance with Section 3.5 or for any reason ceases to serve as a member of the Board of Managers during such Manager’s term, the resulting vacancy on the Board of Managers may be filled by the remaining Managers appointing a replacement Manager designated by the individual or individuals who had the right to designate the Manager who is being replaced pursuant to Section 3.5.
Quorum and Manner of Acting. Except as otherwise provided by statute, a majority of the Managers at the time in office, shall constitute a quorum for the transaction of business at any meeting, or all Managers if there are only two (2) or less Managers, and the affirmative action of a majority of the Managers present at any meeting at which a quorum is present shall be required for the taking of any action by the Board of Managers, except as provided below.
Meetings. The Board of Managers may hold their meetings in such place or places in the State of Florida or outside the State of Florida, as they shall determine from time to time. The Managers may participate in a meeting thereof by means of telephone conference or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. Any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting if the Managers necessary to take such action consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Company.
Adjournment. In the absence of a quorum at any meeting of the Board of Managers such meeting need not be held; or a majority of the Managers present thereat may adjourn such meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given.
Resignation. Any Manager may resign at any time by giving written notice of his, her or its resignation to the Board of Managers, unless the Manager is the sole Manager, in which case the Manager shall give his, her or its written notice of resignation to the Members. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Compensation. Managers, in their capacity as Managers, shall not receive any stated salary or other compensation for their services, except as otherwise may be provided by a Majority in Interest from time to time. The Company may reimburse any Manager for reasonable expenses incurred by the Manager in connection with his or her performance of services for the Company upon receipt by the Company of proper substantiation of such expenses. The foregoing notwithstanding, nothing contained in this Agreement shall be construed to preclude any Manager from serving the Company in any other capacity or office and receiving compensation for such service.

ARTICLE IV

Officers

4.1 Designation; Term; Qualifications. The Board of Managers may (but shall not be obligated to), from time to time, designate one or more natural Persons to be officers of the Company. Any officer so designated shall have such authority and perform such duties as the Board of Managers may, from time to time, delegate to them. The Board of Managers may assign titles to particular officers, and, unless the Board of Managers decide otherwise, the assignment of such title shall constitute the delegation to such officer of the authority and duties that are normally associated with that office. Each officer shall hold office for the term for which such officer is designated and until his or her successor shall be duly designated and shall qualify or until his or her death, resignation or removal as provided in this Agreement. Any Person may hold any number of offices. No officer need be a Member, a resident of the State of Florida, or a United States citizen. Designation of a Person as an officer of the Company shall not of itself create any contract rights.

4.2 Removal and Resignation. Any officer of the Company may be removed as such, with or without Cause, by the Board of Managers. Any officer of the Company may resign as such at any time upon written notice to the Company. Such resignation shall be made in writing and shall take effect at the time specified therein or, if no time is specified therein, at the time of its receipt by the Board of Managers. The acceptance of a resignation shall not be necessary to make it effective, unless expressly provided for in the resignation.

4.3 Vacancies. Any vacancy occurring in any office of the Company may be filled by the Board of Managers.

4.4 Compensation. Compensation, if any, of the officers of the Company shall be fixed from time to time by the Board of Managers. Compensation received by an officer who is also a Member shall not be considered a distribution to such Member under this Agreement.

ARTICLE V

Contributions to Capital and Capital Accounts

5.1 Capital Contributions.

(a) Each Member shall have contributed the amount of cash (or property) to or upon the order of the Company set forth as the initial Capital Contribution (if any) of such Member on Schedule A attached hereto. No Member shall be obligated to make additional Capital Contributions to the Company other than such additional Capital Contribution as may be agreed upon the Board of Managers and such the Member.

5.2 Advances by Members.

(a) Advances. If the Company requires cash for any reasonable business purpose, any Member, if so requested by the Board of Managers, may agree to advance all or part of the needed funds to or on behalf of the Company. An advance described in this Section 5.2(a) shall constitute a loan from such Member to the Company, shall bear interest at a reasonable market interest rate agreed to by the Board of Managers from the date of the advance until the date of repayment, shall be made on such additional terms as agreed to by the Member making such advance and the Board of Managers, and shall not be a Capital Contribution. The Board of Managers shall have no obligation to seek any such loans or advances from any or all Members. Nothing in this Section 5.2(a) shall limit the Board’s ability or authority to approve and obtain loans from Persons who are not Members.

(b) Interested Transactions. The Company may enter into transactions and other undertakings (including borrowing money) with a Manager or Member, with the approval of a majority of the Disinterested Managers (regardless of whether the Disinterested Managers constitute a quorum), and if all of the Managers are not Disinterested Managers, on commercially reasonable third-party terms. To be valid, the approval must be based on all material information concerning both the undertaking and the interested Manager’s or Member’s relationship to the undertaking. Borrowing from, or engaging in other transactions with, one or more Members does not obligate the Company to provide comparable opportunities to other Members.

5.3 Withdrawal or Reduction of Members’ Contributions to Capital. A Member shall not receive out of the Company’s Assets any part of his, her or its Capital Contributions until all liabilities of the Company have been paid or there remains assets sufficient to pay such liabilities. No Member shall have the right to withdraw all or any part of its Capital Contribution or to receive any return on any portion of its Capital Contribution, except as may be otherwise specifically provided in this Agreement. Under circumstances involving a return of any Capital Contribution, no Member shall have the right to receive property other than cash except as otherwise agreed to by the Board of Managers. No Member shall be paid interest on any of its Capital Contributions or on its Capital Account. An unrepaid Capital Contribution shall not be a liability of the Company or of any Member. A Member shall not be required to contribute or to lend any cash or property to the Company to enable the Company to return any Member’s Capital Contributions.

5.4 Capital Accounts.

(a) General. An individual capital account (a “Capital Account”) shall be established and maintained for each Member in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Each Member’s Capital Account shall be increased by: (i) the amount of money contributed by such Member to the Company, (ii) the Gross Asset Value of property contributed by such Member to the Company (net of liabilities secured by the contributed property that the Company is considered to assume or take subject to under Section 752 of the Code), and (iii) allocations to such Member of Profits (or items thereof) as provided in this Agreement. Each Member’s Capital Account shall be decreased by: (x) the amount of money distributed to such Member by the Company, (y) the Gross Asset Value of property distributed to such Member by the Company (net of liabilities secured by the distributed property that the Member is considered to assume or take subject to under Section 752 of the Code), and (z) allocations to such Member of Losses (or items thereof) as provided in this Agreement. The Capital Accounts also shall be maintained and adjusted as permitted by the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and (g) and as required by the other provisions of Treasury Regulation Section 1.704-1(b)(2)(iv) and Treasury Regulation Section 1.704-1(b)(4). Upon any transfer of Units, the portion of the Capital Account of the transferor that is attributable to the transferred Units shall carry over to the transferee Member in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(1).

(b) Adjustments for Certain Events. Immediately prior to: (i) any Capital Contribution (other than a de minimis Capital Contribution) to the Company by a new or existing Member as consideration for a Unit, (ii) the distribution (other than a de minimis distribution) of any Company asset in kind (whether or not in redemption of a Unit), (iii) the liquidation of the Company within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g) or (iv) the issuance of any Unit to any Person as compensation for services provided by such Person, each Member’s Capital Account shall be adjusted to reflect the manner in which the unrealized income, gain, loss or deduction inherent in all Company Assets (and not already reflected in the Members’ Capital Accounts) would be allocated among the Members pursuant to Article VI if all Company Assets were (or, in the case of a distribution pursuant to clause (ii), the Company Asset to be distributed was) sold for fair market value (as determined by the Board of Managers) on the date of such contribution, distribution, liquidation, issuance, or incorporation; provided, however, that adjustments pursuant to clause (i), clause (ii) and clause (iv) of this sentence shall be made only if the Board of Managers reasonably determine that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company.

ARTICLE VI

Allocations; Distributions; Taxes; Books; Records; and Bank Accounts

6.1 Allocations of Profits and Losses.

Subject to Sections 6.1(d) and (e) below, Profit or Loss for each Fiscal Year shall be allocated to the Members in amounts that would result in Capital Account balances for each Member, increased by such Member’s share of partnership minimum gain (as defined according to Treasury Regulation Section 1.704-2(g)) and such Member’s partner nonrecourse debt minimum gain (as defined in Treasury Regulation Section 1.704-2(i)(2)), equal to all amounts required to be distributed pursuant to Section 6.3(f) to such Member in the priority and manner provided therein on a hypothetical sale of the Company, after taking in account any distributions under Section 6.3(a). In determining the amounts distributable to Members under Sections 6.3(a) and 6.3(f) upon a hypothetical sale, it shall be presumed that (i) all of the Company’s remaining assets are sold at their respective Gross Asset Values, (ii) payments to any holder of a nonrecourse debt are limited to the Gross Asset Value of the assets securing repayment of such debt, (iii) all Units are vested, and (iv) the proceeds of such hypothetical sale are applied and distributed in accordance with Section 6.3(f)
Subject to the provisions of Section 6.1(c) below, with respect to the allocation of Losses or Profits pursuant to this Section 6.1 among the Members for any Fiscal Year in which an additional or substitute Member is admitted to the Company, all Losses or Profits so allocable shall be allocated in a manner that takes into account the varying ownership of Units during such Fiscal Year as determined by the Board using any permissible method under Code Section 706 and the Treasury Regulations thereunder. In no event shall a retroactive allocation of Losses be made pursuant to this Section 6.1.
Upon each admission of an additional Member after the execution of this Agreement by the parties hereto, the Company’s Profits or Losses for the fiscal period ending on the day before such admission shall be allocated among the Persons who are Members immediately before such admission. Thereafter a Capital Account shall be established for the newly-admitted Member.
In no event shall Losses of the Company be allocated to a Member if such allocation would cause or increase a negative balance in such Member’s Adjusted Capital Account. Instead, any such Losses shall be reallocated among the Members with positive balances in their Adjusted Capital Accounts in proportion to such positive balances. Any Losses allocated pursuant to this Section 6.1(d) shall be reversed with an allocation of Profits prior to any allocations pursuant to Section 6.1(a) in the reverse order and in the amounts such Losses were allocated.

(e) Special Allocations.

(i) Minimum Gain Chargeback. Except as otherwise provided in Treasury Regulation Section 1.704-2(f) notwithstanding any other provision of this Agreement, if there is a net decrease in partnership minimum gain (as defined in the Code) during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in partnership minimum gain, determined in accordance with Treasury Regulation Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Treasury Regulation Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.1(e)(i) is intended to comply with the minimum gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.

(ii) Partner Minimum Gain Chargeback. Except as otherwise provided in Treasury Regulation Section 1.704-2(i)(4), notwithstanding any other provision of this Section 6.1(e), if there is a net decrease in partner nonrecourse debt minimum gain (as defined in the Code) attributable to a partner nonrecourse debt during any Fiscal Year, each Member who has a share of the partner nonrecourse debt minimum gain attributable to such partner nonrecourse debt, determined in accordance with Treasury Regulation Section 1.704-2(i)(5), shall be specially allocated items of income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in partner nonrecourse debt minimum gain attributable to such partner nonrecourse debt, determined in accordance with Treasury Regulation Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Treasury Regulation Section 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.1(e)(ii) is intended to comply with the minimum gain chargeback requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(iii) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (d)(5) or (d)(6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 6.1(e)(iii) shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article V have been tentatively made as if this Section 6.1(e)(iii) were not a term of this Agreement. This Section 6.1(e)(iii) is intended to constitute a “qualified income offset” provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(iv) Gross Income Allocation. In the event any Member has a deficit Capital Account at the end of any Fiscal Year which is in excess of the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 6.1(e)(iv) shall be made if and only to the extent that such Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Section 6.1(e) have been tentatively made as if this Section 6.1(e)(iv) and Section 6.1(e)(iii) hereof were not in the Agreement.

Partner Nonrecourse Deductions. Any partner nonrecourse deductions for any Fiscal Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the partner nonrecourse debt to which such partner nonrecourse deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i)(1).
Nonrecourse Deductions. Nonrecourse deductions (as defined in the Treasury Regulations) shall be specially allocated among the Members pro-rata in accordance with their Percentage Interests.

(vii) Curative Allocations. The allocations set forth in Sections 6.1(d) and 6.1(e)(i), (ii), (iii), (iv), (v) and (vi) hereof (collectively, the “Regulatory Allocations”) are intended to comply with requirements of the Treasury Regulations. It is the intent of the parties hereto that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 6.1(e)(vii). Therefore, notwithstanding any other provision of Article VI (other than the Regulatory Allocations), the Board of Managers shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account such Member would have had if the Regulatory Allocations were not terms of this Agreement and all Company items were allocated pursuant to Section 6.1. In exercising its discretion under this Section 6.1(e)(vii), the Board of Managers shall take into account future Regulatory Allocations under Sections 6.1(e)(i) and (ii) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 6.1(e)(v) and (vi).

(viii) Allocations of Withholding. To the extent the Company receives (or is deemed to receive) an amount of income that is net of any withholding tax: (i) such income shall be allocated among the Members as if the Company received the gross amount of such income before giving effect to the payment of the withholding tax and (ii) any resulting tax credit shall be allocated among the Members in proportion to such Member’s allocable share of income (including income allocated pursuant to Section 704(c) of the Code) to which the credit relates.

(ix) Member Loans. Any interest deductions with respect to loans to the Company by any Member shall be specially allocated to the Member making such loan to the extent that the interest owing under any such loan is not actually paid.

(x) Partnership Minimum Gain. If, during a Fiscal Year, the Company makes a distribution to any Member of the proceeds of any nonrecourse liability of the Company that would otherwise be allocable to an increase in partnership minimum gain pursuant to Treasury Regulation Section 1.704-2(h), then the Company may elect, to the extent permitted by Treasury Regulation Section 1.704-2(h)(3), to treat such distribution as a distribution that is not allocable to an increase in partnership minimum gain.

6.2 Tax Allocations.

(a) In General. Except as otherwise provided in this Section 6.2, taxable income and loss and all items thereof shall be allocated to the Members to the greatest extent practicable in a manner consistent with the manner set forth in Section 6.1 and Sections 704(b) and (c) of the Code. Allocations pursuant to this Section 6.2 are solely for federal income tax purposes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.

(b) Section 704(c) of the Code. In accordance with Section 704(c) of the Code, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for income tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value.

(c) Adjustments Under Section 704(c) of the Code. In the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraph (ii) of the definition of “Gross Asset Value,” subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted tax basis of such asset and its Gross Asset Value in the same manner as under Section 704(c) of the Code.

(d) Decisions Relating to Section 704(c) of the Code. The Board of Managers shall make any elections or other decisions relating to allocations under this Section 6.2, including the selection of any allocation method permitted under Treasury Regulation Section 1.704-3.

6.3 Distributions. Except as provided in Section 9.2, distributions by the Company shall be made as follows:

(a) Distributions from Operations. Except as otherwise provided in this Section 6.3, distributions of cash in excess of the reasonable business needs of the Company and distributions of securities and other non-cash assets held by the Company may be made annually or at such times and in such amounts as may be determined from time to time by the Board in its sole discretion. Any such distributions (other than tax distributions described in Section 6.3(b) or distributions described in Section 6.3(f)) shall be made to the Members in amounts to be determined by the Board in its sole discretion pro rata based on the Members’ Percentage Interests; provided, however, that the Company will endeavor not to make any distributions to a Member pursuant to this Section 6.3(a) that will cause or increase a negative balance in such Member’s Adjusted Capital Account.

(b) Tax Distributions. The Board shall cause the Company to distribute to all Members to whom items of taxable income or gain have been allocated for a fiscal quarter (or for any portion thereof) an amount intended to enable such Members to pay their respective federal, state and local tax liabilities resulting from the allocation. The Board shall calculate the amount of such tax distributions by assuming that each Member will pay taxes at the same rate, as determined by the Board. Amounts distributed to a Member pursuant to this Section 6.3(b) shall be treated as advances against amounts distributable to such Member pursuant to Section 6.3(f), as applicable, and shall be applied against any such future distributions until all such advances have been repaid.

(c) Certain Payments.Payment of the following amounts shall be treated as distributions made (pursuant to Section 6.3) to any Member on whose behalf such payments were made:

(i) expenses incurred by the Company in connection with the preparation and filing of any tax returns or similar reports required to be filed by or on behalf of such Member by reason of such Member’s participation in the Company, with any related deductions deemed a deduction of such Member and not of the Company for the purpose of computing Company Profits or Loss;

(ii) amounts properly withheld by the Company to be paid to any governmental entity as a withholding tax with respect to such Member’s income from the Company, with any related deductions deemed a deduction of such Member and not of the Company for the purpose of computing Company Profits or Loss; and

(iii) any tax paid by the Company because of such Member’s particular status, with any related deductions deemed a deduction of such Member and not of the Company for the purpose of computing Company Profits or Loss.

(d) Form of Distributions; Accounting for Distributions. The Board may elect to distribute cash, securities or other non-cash assets or any combination thereof pursuant to this Section 6.3. No fractional shares of securities shall be distributed. In the event any portion of a distribution is made in securities or non-cash assets, the fair market value of such securities or non-cash assets shall be determined as of the date of distribution by the Board and each Member receiving such distribution shall have his, her or its Capital Account debited with the fair market value of the securities or non-cash assets distributed to it, him or her.

(e) No Other Distributions or Withdrawals. Except as the Board may determine pursuant to this Section 6.3, or as may otherwise be expressly provided in this Agreement, no Member shall have any right to withdraw or receive any cash or other property from the Company.

(f) Distributions Upon a Sale of the Company and Liquidating Distributions. Distributions of cash, securities and other non-cash assets held by the Company upon a Sale of the Company or the liquidation of the Company shall be made to the Members, pro rata according to their relative Percentage Interests.

(g) Profit Interests Adjustment. Notwithstanding anything to the contrary in this Agreement, any distributions to the holders of Units pursuant to Section 6.3 shall be adjusted by the Board of Managers as necessary to ensure that the issuance of certain Units intended to be treated as “profits interests” for federal income tax purposes are so treated.

(h) Withholding. All amounts withheld pursuant to the Code or any provision of state or local tax laws 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 6.3. The Company is authorized to withhold amounts from payment or distribution to Members to the extent required under applicable law.

6.4 Tax Returns. The Board of Managers shall cause to be prepared and timely filed all necessary federal and state income tax returns for the Company. Each Member shall furnish to the Company all pertinent information in his or her possession relating to Company operations that is necessary to enable the Company’s income tax returns to be prepared and filed. The Company shall provide to each Member within sixty (60) days following the end of such Fiscal Year all applicable tax information required by any Member to file his or her tax returns for such year.

6.5 Tax Matters Partner. [_____]shall be the “tax matters partner” of the Company pursuant to Section 6231(a)(7) of the Code. The tax matters partner shall have the authority to make any tax elections which the Company is entitled to make pursuant to the Code. A Majority in Interest may, at any time, elect a different tax matters partner in accordance with the Code.

6.6 Maintenance of Books and Fiscal Year. The Company shall keep and maintain accurate and complete books and records of accounts and shall keep minutes of the proceedings of the Board of Managers and the Members. The books of account for the Company shall be maintained in accordance with generally accepted accounting principles consistently applied, except that the Capital Accounts shall be maintained in accordance with Section 5.4 of this Agreement.

6.7 Reports/Information Rights. Each Member shall be furnished by the Company with: (i) the financial statements of the Company whenever such financial statements have been prepared by the Company and (ii) any other information which any Member may reasonably request. In addition, within ninety (90) days following the end of each Fiscal Year during the term of the Company, each Member shall be furnished with a statement of changes in Members’ Capital Accounts for, or as of the end of, that Fiscal Year. These financial statements must be prepared in accordance with generally accepted accounting principles consistently applied (except as therein noted). The Board of Managers also may cause to be prepared or delivered such other records as they may deem appropriate. The Company shall bear the costs of all such financial statements and reports.

6.8 Bank and Investment Accounts. The Board of Managers shall establish and maintain one or more separate bank and investment accounts and arrangements for Company funds in the Company name with financial institutions and firms that the Board of Managers determine. The Board of Managers shall not commingle the Company’s funds with the funds of any Member.

ARTICLE VII

Transferability of Units

7.1 Restrictions on Disposition of Interests.

(a) Except as specifically provided in this Article VII, no Member may Transfer any Units other than pursuant to Sections 7.3 and 7.6. Notwithstanding the foregoing, any Member may Transfer Units (i) to an existing Member, a Family Member, a trust or estate planning vehicle created for the primary benefit of the Member or a Family Member or a devisee, (ii) to an Affiliate or (iii) to the Company under the terms of any incentive unit plan approved by the Board, without complying with the provisions of Sections 7.3 and 7.6. Any attempted Transfer of Units, other than in accordance with this Article VII, shall be, and is hereby declared, null and void ab initio.

(b) The Company shall not recognize for any purpose any purported Transfer unless and until the other applicable provisions of this Article VII have been satisfied and the Board of Managers have received, on behalf of the Company, a document: (i) executed by both the Member effecting the Transfer (or, if the Transfer is on account of the death, incapacity, or liquidation of the transferor, its representative) and the Person to which the Units are Transferred, (ii) including the notice address of any Person to be admitted to the Company as a Member and its agreement to be bound by this Agreement, (iii) setting forth the number of Units Transferred and the number of Units being retained (which together shall total the number of Units of the Member effecting the Transfer before the Transfer), (iv) containing a representation and warranty that the Transfer was made in accordance with all applicable laws and regulations and (v) containing a statement signed by the transferee that such transferee shall be bound by all of the terms and provisions of this Agreement. The Member effecting a Transfer shall pay, or reimburse the Company for, all costs and expenses incurred by the Company in connection with the Transfer (including, without limitation, any costs or expenses for legal fees incurred by the Company in connection with the Transfer) on or before the tenth day after the receipt by that Person of the Company’s invoice for the amount due.

(c) Notwithstanding the provisions of this Article VII to the contrary, no Member shall be permitted at any time to Transfer to any Person any Units if (i) such Transfer would not be in compliance with applicable securities laws, (ii) such Transfer constitutes an event of default under the terms of any indebtedness or other contractual obligations of the Company, (iii) such Transfer would cause the Company to be treated as a corporation for federal income tax purposes (other than with respect to a Conversion), or (iv) the Person to which the Units are to be Transferred is a competitor of the Company as determined in the reasonable discretion of the Board.

7.2 Additional Members. Subject to the preemptive rights provided for in Section 7.4, additional Persons may be admitted to the Company as Members and additional Units may be created and issued to such Persons and to existing Members only with the consent of the Board of Managers.

7.3 Right of First Refusal. If any Member (the “Transferring Member”) shall propose to Transfer Units to any Person (a “Proposed Transferee”) other than pursuant to Section 7.1(a), such sale shall be conditioned upon the satisfaction of the following conditions precedent:

(a) Such Transferring Member shall first offer to sell to the Company or any Persons designated by the Company as the “Purchaser” hereunder (the Company or such designees being referred to as the “Designated Purchaser”) the Units that the Transferring Member desires to Transfer (the “Offered Units”), at the same price and on the terms identical in all material respects that the Transferring Member intends to Transfer the Offered Units to the Proposed Transferee; provided that the Designated Purchaser shall have no rights to acquire the Offered Units unless the Designated Purchaser acquires all of the Offered Units. Such offer shall be made by a written notice (the “Notice of Proposed Sale”) delivered to the Company not less than thirty (30) days prior to the proposed Transfer. Such notice shall set forth the identity of the Proposed Transferee, the Offered Units proposed to be Transferred, the terms and conditions of the proposed Transfer, including price per share and any other material terms and conditions or material facts relating to the proposed Transfer. In addition, the Transferring Member shall provide to the Designated Purchaser all such other information relating to the Offered Units, the Proposed Transferee and the proposed Transfer as the Designated Purchaser may reasonably request.

(b) If the Designated Purchaser does not accept the offer made by the Transferring Member with respect to all of the Offered Units within the time periods provided above, then the Transferring Member shall have the right for a period of sixty (60) days following the thirtieth day after the Company shall have received the Notice of Proposed Sale in accordance with Section 7.3(a), to Transfer all of the Offered Units, but at not less than the price, and upon terms not more favorable to the Proposed Transferee, than were contained in the Notice of Proposed Sale. Any Offered Units not sold within such 60-day period shall continue to be subject to the requirements of this Article VII.

7.4 Preemptive Rights. The Company shall only issue additional Units in accordance with the following terms:

The Company shall not issue any additional Units unless it first delivers to each Member a written notice (the “Notice of Proposed Issuance”) specifying the type and total number of such additional Units that the Company then intends to issue (the “Offered New Units”), all of the material terms, including the price upon which the Company proposes to issue the additional Units and stating that the Member shall have the right to purchase the Offered New Units in the manner specified in this Section 7.4 for the same price per Unit and in accordance with the same terms and conditions specified in such Notice of Proposed Issuance.
During the thirty (30) consecutive day period commencing on the date the Company delivers to all of the Members the Notice of Proposed Issuance (the “Notice Period”) in accordance with Section 7.4 hereof, the Members shall have the option to purchase the Offered New Units at the same price per Unit and upon the same terms and conditions specified in the Notice of Proposed Issuance. Each Member electing to purchase Offered New Units must give written notice of its election to the Company prior to the expiration of the Notice Period and if a Member has not given written notice within the Notice Period, such Member shall be deemed to have rejected his, her or its right to purchase the Offered New Units. If the Offered New Units are being offered as a part of an investment together with debt or other instruments, any election by a Member to purchase Offered New Units shall also constitute an election to purchase a like portion of such debt or other instruments. Each Member shall have the right to condition his, her or its purchase of the Offered New Units upon the closing of the sale of the balance of the Offered New Units.
Each Member shall have the right to purchase that number of the Offered New Units as shall be equal to the number of the Offered New Units multiplied by a fraction, the numerator of which shall be the number of Units then owned by such Member and the denominator of which shall be the aggregate number of Units then owned by all of the Members. The amount of such Offered New Units that each Member is entitled to purchase under this Section 8.4(c) shall be referred to as its “Proportionate Share.”
No Member shall have the right to participate in the offer or purchase any Offered New Units unless at the time of such offer and sale such Member is an “Accredited Investor” as such term is defined in Rule 501 promulgated under the Securities Act.
No Member shall have any right of oversubscription.
If some or all of the Offered New Units have not been purchased by the Members pursuant to paragraphs (a) and (b) hereof, then the Company shall have the right, until the expiration of one-hundred eighty (180) days commencing on the first day immediately following the expiration of the Notice Period, to issue such remaining Offered New Units to one or more third parties, including any Members, at not less than, and on terms no more favorable in any material respect to the purchasers thereof than, the price and terms specified in the Notice of Proposed Issuance. If for any reason the Offered New Units are not issued within such period and at such price and on such terms, the right to issue in accordance with the Notice of Proposed Issuance shall expire and the provisions of this Agreement shall continue to be applicable to the Offered New Units.
No Members shall have preemptive rights with respect to the issuance of (i) Units issued or issuable to any employees, officers, Managers or consultants of the Company as consideration, in full or in part, for services performed for the Company (including, without limitation, pursuant to any incentive plan of the Company), the issuance of which has been approved by the Board of Managers, (ii) Units issued or issuable in connection with the Company obtaining debt financing from lenders, the issuance of which has been approved by the Board of Managers, (iii) Units issued or issuable in connection with the acquisition (whether by purchase, merger, consolidation or otherwise) of other Persons or the assets or business of other Persons, the issuance of which has been approved by the Board of Managers, (iv) Units issued or issuable to any vendor, supplier, service provider or other Person with whom the Company has commercial dealings as consideration, in full or in part, for goods sold or services performed, the issuance of which has been approved by the Board of Managers, (v) Units issued or issuable in connection with the split of Units, a recapitalization or reorganization of the Company’s Units or similar transactions, or (vi) Units issued or issuable in connection with a bona fide strategic investment in or by the Company or a joint venture involving the Company.
The Members holding a Majority in Interest may waive, either prospectively or retrospectively, any and all rights arising under this Section 7.4 with respect to the issuance of any additional Units to any Person, and any such waiver shall be effective as to all Members with such rights under this Section 7.4.

7.5 Drag Along Rights. Each Member (to the extent it has any approval, consent or voting rights or consent rights) will consent to and raise no objections against any Sale of the Company that is (a) approved (x) the Board of Managers and (y) by a Majority in Interest and (b) conditioned upon the participation of holders of all Units. If such Sale of the Company is structured as a Transfer of Units, each Member shall Transfer its Units on terms and conditions approved by the Board of Managers and the Majority in Interest, so long as the terms and conditions are consistent with the distribution and allocation provisions of this Agreement. Each Member agrees to cooperate with the Majority in Interest, to take any and all actions reasonably requested by the Majority in Interest, and to execute any and all agreements and instruments, including, without limitation, stock powers conveying its Units, in connection with a Sale of the Company approved by the Board of Managers and the Majority in Interest and satisfying the condition specified above. WITHOUT LIMITATION OF THE FOREGOING, EACH MEMBER HEREBY (A) WAIVES ANY APPRAISAL OR DISSENTER RIGHTS SUCH MEMBER MAY HAVE UNDER APPLICABLE LAW IN CONNECTION WITH ANY SALE OF THE COMPANY THAT IS APPROVED BY THE BOARD OF MANAGERS AND THE MAJORITY IN INTEREST AND SATISFIES THE CONDITIONS SPECIFIED ABOVE, AND (B) IRREVOCABLY APPOINTS THE MAJORITY IN INTEREST, OR ANY PERSON DESIGNATED BY THE MAJORITY IN INTEREST, AS ITS AGENT AND PROXY TO VOTE SUCH MEMBER’S UNITS AS THE MAJORITY IN INTEREST MAY DEEM NECESSARY OR APPROPRIATE IN CONNECTION WITH A SALE OF THE COMPANY, IN EACH CASE SATISFYING THE CONDITIONS SET FORTH ABOVE AND APPROVED BY THE MAJORITY IN INTEREST.

7.6 Tag-Along Rights. In the event that the Designated Purchaser does not exercise its right of first refusal pursuant to Section 7.3 and any Transferring Member(s) shall propose to Transfer to any Proposed Transferee(s) any Units, such proposed sale shall be conditioned upon receipt by each Member other than the Transferring Member(s) of a binding written offer (the “Tag Offer”) (conditioned solely upon the consummation of such proposed sale) by such Proposed Transferee(s) to purchase, at the same price and upon terms and conditions identical in all material respects as are applicable to the Transferring Member(s), a fraction of the Units held by such Member, the numerator of which fraction equals the number of Units that the Transferring Member(s) intend to sell, and the denominator of which is the total number of Units held by the Transferring Member(s). If the Proposed Transferee(s) states that he, she or it is or are unwilling to purchase, in the aggregate, more than a specified amount of Units and one or more Members have elected to accept the Tag Offer, then the Units being transferred by the Transferring Member(s) and the Members who have elected to accept the Tag Offer shall be reduced pro-rata in accordance with their relative holdings of Units. If no Members accept the Tag Offer within thirty (30) days of receipt, the Transferring Member(s) shall have the right for a period of sixty (60) days from the date of the Tag Offer to sell all of the Units, but at not less than the price, and upon terms not more favorable, than the Tag Offer. Any Units not sold by the end of this sixty (60) day period shall continue to be subject to the requirements of this Section 7.6.

7.7 Termination. The provisions of Article VII shall terminate upon the consummation of a Qualified IPO.

7.8 Certificates and Legends. The Company has no obligation to issue physical certificates evidencing Units. However, if the Board of Managers decides to issue physical certificates evidencing Units, such certificates will prominently contain legends regarding: (a) transfer restrictions under the Securities Act and applicable state securities laws, (b) transfer restrictions under this Agreement, and (c) any other applicable transfer restrictions.

ARTICLE VIII

Liability and Indemnification

Liability of a Member.

(a) A Member shall be liable only to make the payment of the Member’s Capital Contribution. No Member shall be liable for any obligations of the Company. After the Member’s Capital Contribution has been paid, the Member shall not be required to make any further Capital Contribution or lend any funds to the Company.

(b) No distribution of cash made to the Member shall be determined a return or withdrawal of a Capital Contribution unless so designated by the Board of Managers in their sole and exclusive discretion, and the Member shall be obligated to pay any such amount to or for the account of the Company or any creditor of the Company.

(c) Except as otherwise provided herein, a Member with a negative balance in such Member’s capital account shall not have any obligation to the Company or any other Member to restore said negative balance to zero.

8.2 Indemnification.

(a) The Managers, tax matters partner, officers and their Affiliates and their respective directors, managers, officers, partners, agents, employees, heirs and personal representatives (individually, an “Indemnitee”) shall be indemnified and held harmless by the Company from and against any and all losses, claims, damages, liabilities, expenses (including legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which the Indemnitee may be involved, or threatened to be involved, as a party or otherwise by reason of the fact that such natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association or other entity is or was a Manager, tax matters partner, an officer or an Affiliate thereof or a director, manager, officer, agent, partner or employee thereof, which relates to or arises out of the Company, its assets, business or affairs, if in each of the foregoing cases (i) the Indemnitee acted in good faith and in a manner such Indemnitee believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal proceeding, had no reasonable cause to believe such Indemnitee’s conduct was unlawful and (ii) the Indemnitee’s conduct did not constitute gross negligence or willful or wanton misconduct. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the Indemnitee acted in a manner contrary to that specified in (i) or (ii) above. Any indemnification pursuant to this Article VIII shall be made only out of the assets of the Company and no Manager, officer or Member shall have any personal liability on account thereof.

(b) Expenses (including reasonable legal fees) incurred by an Indemnitee in defending or investigating any actual or threatened claim, demand, action, suit or proceeding described in this Section 8.2 shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Article VIII.

(c) The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, this Agreement, any other agreement, a policy of insurance or otherwise, and shall not limit in any way any right that the Company may have to make additional indemnifications with respect to the same or different Persons or classes of Persons. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall continue as to any Person who has ceased to be a Manager and shall inure to the benefit of the heirs, executors, administrators, successors and assigns of such a Person.

(d) The Company may purchase and maintain insurance on behalf of the Managers and officers against any liability asserted against them and incurred by them in such capacity, or arising out of their status as Managers or officers, whether or not the Company would have the power to indemnify them against such liability under this Article VIII.

8.3 Reliance by Managers. In discharging their duties, any Manager, when acting in good faith, may rely upon information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by: (a) one or more officers or employees of the Company whom the Manager reasonably believes to be reliable and competent in the matters presented, (b) counsel, public accountants or other persons as to matters that the Manager believes to be within that person’s professional or expert competence, or (c) a committee of Managers upon which the Manager does not serve, duly designated according to law, as to matters within its designated authority, if the Manager reasonably believes that the committee is competent.

ARTICLE IX

Dissolution, Liquidation and Termination

9.1 Dissolution. The Company shall be dissolved and its affairs shall be wound up upon the earlier of: (i) upon the election to dissolve the Company by the Board of Managers and the Majority in Interest, or (ii) the entry of a decree of judicial dissolution of the Company under the Act. Dissolution of the Company shall be effective as of the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until there has been a winding up of the Company’s business and affairs, and the Company Assets have been distributed as provided in Section 9.2 of this Agreement and in the Act.

9.2 Liquidation and Termination. Upon dissolution of the Company, the Board of Managers shall act as liquidators or may appoint one or more Members (with their consent) or third parties as liquidators. The liquidators shall proceed diligently to wind up the affairs of the Company and make final distributions as provided in this Section 9.2 and in the Act. The costs and expenses of liquidation shall be borne as a Company expense. Until final distribution, the liquidators shall continue to manage the Company’s Assets and the Company’s affairs with all the power and authority of the Board of Managers. After a final allocation of Profits and Losses pursuant to Section 6.1 and payment, satisfaction or discharge of the Company’s debts, liabilities and obligations (or adequate provision therefor) has been made, all remaining Company Assets shall be distributed to and among the Members in accordance with the order of priority set forth in Section 6.3(f). Notwithstanding the foregoing, in the event the Board shall determine that an immediate sale of part of or all of the remaining assets would cause undue loss to the Members, or the Board shall determine that it would be in the best interest of the Members to distribute the remaining assets to the Members in-kind (which distributions do not, as to the in-kind portions, have to be in the same proportions as they would be if cash were distributed, but all such in-kind distributions shall be equalized, to the extent necessary and as determined in good faith by the Board, with cash), then the Board may either defer liquidation of, and withhold from distribution for a reasonable time, any of the remaining assets except to the extent necessary to satisfy the Company’s debts and obligations, or distribute the remaining assets to the Members in-kind. The distribution of the Company Assets to the Members in accordance with the provisions of this Section 9.2 shall constitute a complete return to the Members of their Capital Contributions and a complete distribution to the Members with respect to their Units. To the extent that a Member returns funds to the Company, such Member shall have no claim against any other Member for such funds. If any of the Company’s Assets are to be distributed in kind, the Capital Accounts of the Members shall be adjusted in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(e) and such assets shall be distributed on the basis of the fair market value thereof (without taking Code Section 7701(g) into account) and any Member entitled to any interest in such assets shall receive such interest therein as a tenant-in-common with all other Members so entitled. The fair market value of such assets shall be that which is determined by the liquidator.

9.3 Deficit Capital Accounts. Notwithstanding anything to the contrary contained in this Agreement and notwithstanding any custom or rule of law to the contrary, to the extent that the deficit, if any, in the Capital Account of any Member results from or is attributable to deductions and losses of the Company (including, without limitation, non-cash items such as depreciation), or distributions of money or other assets pursuant to this Agreement to all Members in proportion to their respective Units, upon dissolution of the Company such deficit shall not be a Company Asset and such Member shall not be obligated to contribute such amount to the Company to bring the balance of such Member’s Capital Account to zero.

9.4 Articles of Dissolution. When all liabilities and obligations of the Company have been paid or discharged, or adequate provision has been made therefor, and all of the remaining Company Assets have been distributed to the Members according to their respective rights and interests as provided in Section 9.2 of this Agreement, the Company is terminated and the Board of Managers (or such other Person or Persons as the Act may require or permit) shall take such actions, and shall execute, acknowledge and file any and all instruments, as may be necessary or appropriate to reflect the dissolution and termination of the Company.

ARTICLE X

Miscellaneous Provisions

10.1 Offset. Whenever the Company is to pay any sum to any Member, any amounts such Member owes the Company may be deducted from such sum before payment.

10.2 Notices. Except as expressly set forth to the contrary in this Agreement, all notices, requests, or consents provided for or permitted to be given under this Agreement shall be in writing and shall be given either by depositing such writing in the United States mail, addressed to the recipient, postage paid, and registered or certified with return receipt requested or by delivering such writing to the recipient in person, by courier, or by facsimile transmission; and a notice, request, or consent given under this Agreement shall be effective on receipt by the Person to whom sent. All notices, requests, and consents to be sent to a Member shall be sent to or made at the address given for such Member on Schedule A hereto or such other address as such Member may specify by notice to the Company, and the other Members. Any notice, request, or consent to the Company or the Board of Managers must be given to the Board of Managers at the address provided in Section 2.2 of this Agreement. Whenever any notice is required to be given by law, the Articles of Organization or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

10.3 Entire Agreement. This Agreement constitutes the entire agreement of the Members relating to the Company and supersedes all prior contracts or agreements with respect to the Company, whether oral or written.

10.4 Effect of Waiver or Consent. A waiver or consent, express or implied, to or of any breach or default by any Person in the performance by such Person of its obligations with respect to the Company shall not be a consent or waiver to or of any other breach or default in the performance by such Person of the same or any other obligations of such Person with respect to the Company. Failure on the part of a Person to complain of any act or omission of any Person or to declare any Person in default with respect to the Company, irrespective of how long that failure continues, shall not constitute a waiver by such Person of its rights with respect to that default until the applicable statute-of-limitations period has run.

10.5 Governing Law; Forum. This Agreement shall be governed by and shall be construed in accordance with the laws of the State of Florida, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the laws of another jurisdiction. Each Member irrevocably agrees that all actions arising under or relating to this Agreement and the transactions contemplated hereby and thereby shall be brought exclusively in any United States District Court or Florida State Court located in Alachua County, Florida having subject matter jurisdiction over such matters, and each Member hereby consents and agrees to such personal jurisdiction, and waives any objection as to the venue, of such courts for purposes of such action. In the event of a direct conflict between the provisions of this Agreement and (i) any provision of the Articles of Organization, or (ii) any mandatory provision of the Act, then the applicable provision of the Articles of Organization or the Act shall control.

10.6 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other Persons or circumstances shall not be affected thereby and such provision shall be enforced to the fullest extent permitted by law.

10.7 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, each Member shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and those transactions.

10.8 Headings and Sections. 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. Unless the context requires otherwise, all references in this Agreement to Sections or Articles shall be deemed to mean and refer to Sections or Articles of this Agreement.

10.9 Numbers and Gender. Where the context so indicates, the masculine shall include feminine and neuter, and the neuter shall include the masculine and feminine, and the singular shall include the plural.

10.10 Binding Effect. Except as otherwise provided in this Agreement to the contrary, this Agreement shall be binding upon and inure to the benefit of the Members, their distributees, heirs, legal representatives, executors, administrators, successors and assigns.

10.11 Counterparts. This Agreement may be executed in multiple counterparts, each of which when so executed and delivered shall be deemed an original, but all of which taken together shall constitute one and the same instrument. In the event that any signature is delivered by facsimile transmission or by the signature page being sent via e-mail to the other party as a portable document format (pdf.) file or image file attachment, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

10.12 Conflicts of Interest. Subject to the other express provisions of this Agreement or except as otherwise expressly agreed in writing, each Member of the Company at any time and from time to time may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including ones in competition with the Company, with no obligation to offer to the Company or any other Member the right to participate therein.

10.13 Amendment or Modification of Agreement. Subject to any approvals required under Section 3.1 above, this Agreement may be amended or terminated and the observance of any term of this Agreement may be waived with respect to all parties to this Agreement (either generally or in a particular instance and either retroactively or prospectively), with the affirmative vote or written consent of the Majority in Interest; provided, that if any amendment would materially and adversely affect a Member in a way that is materially different from the affect such amendment would have on other Members holding the same series of Units, such amendment shall not be effective as to such adversely affected Member unless consented to by such Member. Notwithstanding the foregoing, Schedule A hereto may be amended by the Company from time to time to add information regarding any Persons that become Members in accordance with the terms hereof. The Company shall give prompt written notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination or waiver. Any amendment, termination or waiver effected in accordance with this Section 10.13 shall be binding on all parties hereto, even if they do not execute such consent. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

10.14 Joinder. Additional parties who acquire Units may be added to this Agreement by execution and delivery of a counterpart signature page by such new party and the Company. The execution and delivery of such signature page and the revision of Schedule A in connection therewith shall not constitute an amendment or waiver under this Agreement. Such parties will constitute Members under this Agreement.

10.15 Specific Performance. The parties agree that due to the unique subject matter of this Agreement, monetary damages will be insufficient to compensate the Company in the event of a breach by a Member of any part of this Agreement. Accordingly, the parties agree that the Company shall be entitled (without prejudice to any other right or remedy to which it may be entitled) to an appropriate decree of specific performance or an injunction restraining any violation by a Member of this Agreement or other equitable remedies to enforce this Agreement (without establishing the likelihood of irreparable injury or posting bond or other security), and each Member waives in any action or proceeding brought to enforce this Agreement the defense that there exists an adequate remedy at law.

A sample form can be downloaded here.

Legal Disclaimer

The information provided in this article is for general informational purposes only and should not be construed as legal or tax advice. The content presented is not intended to be a substitute for professional legal, tax, or financial advice, nor should it be relied upon as such. Readers are encouraged to consult with their own attorney, CPA, and tax advisors to obtain specific guidance and advice tailored to their individual circumstances. No responsibility is assumed for any inaccuracies or errors in the information contained herein, and John Montague and Montague Law expressly disclaim any liability for any actions taken or not taken based on the information provided in this article.

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