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1. Formation
This Operating Agreement (this “Agreement”) of [LLC NAME], a [STATE OF FORMATION] limited liability company (the “Company”), is entered into as of [DATE] (the “Effective Date”), by and among the Members identified on Exhibit A attached hereto (each a “Member” and collectively the “Members”). The Company was formed on [DATE OF FORMATION] upon the filing of Articles of Organization (the “Articles”) with the [STATE OF FORMATION] Secretary of State in accordance with the [STATE OF FORMATION] Limited Liability Company Act, as amended (the “Act”).
This Agreement shall govern the internal affairs of the Company and the conduct of its business. To the extent any provision of this Agreement is inconsistent with or contrary to the Act, this Agreement shall control to the maximum extent permitted by the Act. By executing this Agreement, each Member agrees to be bound by all the terms, conditions, and provisions hereof.
2. Name and Principal Office
The name of the Company is [LLC NAME]. The Company’s principal office shall be located at [PRINCIPAL OFFICE ADDRESS], or at such other place as the Members may from time to time designate. The Company may maintain additional offices at such other places as the Members deem advisable.
The registered agent of the Company for service of process in the State of [STATE OF FORMATION] shall be [REGISTERED AGENT NAME], located at [REGISTERED AGENT ADDRESS]. The Members may change the registered agent or registered office from time to time in the manner provided by the Act.
3. Purpose
The purpose of the Company is to engage in [DESCRIPTION OF BUSINESS PURPOSE] and any and all lawful activities for which a limited liability company may be organized under the Act. The Company shall possess and may exercise all powers and privileges granted by the Act or by any other applicable law or by this Agreement, together with any powers incidental thereto, insofar as such powers are necessary or convenient to the conduct, promotion, or attainment of the business or purposes of the Company.
4. Term
The term of the Company commenced on the date the Articles were filed with the [STATE OF FORMATION] Secretary of State and shall continue in perpetuity unless the Company is dissolved in accordance with Section 13 of this Agreement or as otherwise provided by the Act. The existence of the Company as a separate legal entity shall continue until cancellation of the Articles in the manner required by the Act.
5. Members and Membership Interests
The names, addresses, initial Capital Contributions, and Membership Interest Percentages of the Members are set forth on Exhibit A attached hereto and incorporated herein by reference. Each Member’s Membership Interest Percentage shall represent such Member’s proportionate share of the total membership interests in the Company. Exhibit A shall be updated by the Members from time to time to reflect changes in membership, Capital Contributions, and Membership Interest Percentages.
EXHIBIT A — MEMBERS
Member Name: [MEMBER 1 NAME]
Address: [MEMBER 1 ADDRESS]
Initial Capital Contribution: $[AMOUNT]
Membership Interest Percentage: [PERCENTAGE]%
Member Name: [MEMBER 2 NAME]
Address: [MEMBER 2 ADDRESS]
Initial Capital Contribution: $[AMOUNT]
Membership Interest Percentage: [PERCENTAGE]%
Member Name: [MEMBER 3 NAME]
Address: [MEMBER 3 ADDRESS]
Initial Capital Contribution: $[AMOUNT]
Membership Interest Percentage: [PERCENTAGE]%
No Member shall have any interest in any specific asset of the Company. A Member’s Membership Interest is personal property for all purposes. No Member may assign, sell, transfer, pledge, encumber, or otherwise dispose of all or any portion of such Member’s Membership Interest except in accordance with Section 11 of this Agreement.
6. Capital Contributions
Each Member has contributed to the Company the initial Capital Contribution set forth on Exhibit A. No Member shall be required to make any additional Capital Contributions to the Company. However, upon the affirmative vote of Members holding at least [REQUIRED VOTE PERCENTAGE]% of the total Membership Interest Percentages, the Members may agree to make additional Capital Contributions in proportion to their Membership Interest Percentages. Any Member who fails to make a required additional Capital Contribution within [NUMBER] days of written notice shall be deemed a “Defaulting Member.”
If a Member is deemed a Defaulting Member, the non-defaulting Members may, at their election: (a) advance the Defaulting Member’s share of the required Capital Contribution as a loan to the Defaulting Member, bearing interest at the rate of [INTEREST RATE]% per annum, which loan shall be repaid from distributions that would otherwise be made to the Defaulting Member; (b) treat the advance as an additional Capital Contribution by the non-defaulting Members, thereby diluting the Defaulting Member’s Membership Interest Percentage proportionally; or (c) pursue any other remedy available at law or in equity. No interest shall accrue on any Member’s Capital Contribution, and no Member shall have the right to withdraw or receive any return of such Member’s Capital Contribution except as provided in this Agreement.
7. Allocations of Profit and Loss
The net profits and net losses of the Company for each fiscal year shall be allocated among the Members in proportion to their respective Membership Interest Percentages, unless otherwise required by Section 704 of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder.
Notwithstanding the foregoing, the following special allocations shall be made in the following order of priority: (a) if there is a net decrease in the “minimum gain” (as defined in Treasury Regulation Section 1.704-2(b)(2)) attributable to Company nonrecourse liabilities during any fiscal year, each Member shall be allocated items of Company income and gain for such year in the manner and to the extent required by Treasury Regulation Section 1.704-2(f); (b) if there is a net decrease in the minimum gain attributable to Member nonrecourse debt during any fiscal year, each Member who has a share of the minimum gain attributable to such Member nonrecourse debt shall be allocated items of Company income and gain for such year in the manner and to the extent required by Treasury Regulation Section 1.704-2(i)(4); and (c) if any Member has an adjusted capital account deficit at the end of any fiscal year, such Member shall be allocated items of Company income and gain sufficient to eliminate such deficit as quickly as possible. The Members intend that the allocations set forth in this Section comply with the requirements of Sections 704(b) and 704(c) of the Code and the Treasury Regulations thereunder, and this Section shall be interpreted consistently with such intent.
8. Distributions
The Members may determine, by a vote of Members holding at least [REQUIRED VOTE PERCENTAGE]% of the total Membership Interest Percentages, to make distributions of the Company’s available cash or other property to the Members. All such distributions shall be made to the Members in proportion to their respective Membership Interest Percentages, unless otherwise unanimously agreed by all Members.
Notwithstanding the foregoing, the Company shall distribute to each Member, within [NUMBER] days after the end of each fiscal year (or quarterly, at the election of the Members), an amount equal to the estimated federal, state, and local income tax liability attributable to such Member’s share of the Company’s taxable income for such period, calculated using the highest combined marginal tax rate applicable to any Member (the “Tax Distribution”). Tax Distributions shall be treated as advances against, and shall reduce, subsequent distributions to which such Member would otherwise be entitled under this Section.
No distribution shall be made to the extent that, after giving effect to the distribution, the Company’s total liabilities (other than liabilities to Members on account of their Membership Interests) would exceed the fair value of the Company’s total assets. The Members shall not be obligated to restore any distribution that was properly made under this Agreement.
9. Management and Voting
The Company shall be managed by its Members (“Member-Managed”). Except as otherwise provided in this Agreement or required by the Act, all decisions regarding the management, affairs, and business of the Company shall be made by the affirmative vote of Members holding at least a majority of the total Membership Interest Percentages (“Majority Vote”). Each Member shall have voting rights proportional to such Member’s Membership Interest Percentage.
The following actions shall require the unanimous written consent of all Members: (a) the merger or consolidation of the Company with or into another entity; (b) the sale, exchange, lease, or other disposition of all or substantially all of the assets of the Company; (c) the admission of a new Member; (d) the amendment of this Agreement; (e) the dissolution of the Company; (f) the incurrence of indebtedness by the Company in excess of $[THRESHOLD AMOUNT]; (g) the entry into any contract or transaction with a value in excess of $[THRESHOLD AMOUNT]; (h) the issuance of additional Membership Interests; (i) any change in the Company’s tax classification; or (j) any act that would make it impossible to carry on the ordinary business of the Company.
The Members may designate one or more Members or non-Members as a manager or officers of the Company (each, a “Manager” or “Officer,” respectively) by Majority Vote. Any Manager or Officer so designated shall serve at the pleasure of the Members and may be removed at any time by Majority Vote. Day-to-day operations may be delegated to the Manager(s) or Officer(s) as determined by the Members.
10. Meetings
Meetings of the Members may be called by any Member upon not less than [NUMBER] days’ prior written notice to all other Members, which notice shall state the date, time, place, and purpose of the meeting. Meetings may be held at the Company’s principal office or at such other place as the Members may agree. Members may participate in any meeting by telephone, video conference, or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.
A quorum for the transaction of business at any meeting of the Members shall consist of Members holding at least [QUORUM PERCENTAGE]% of the total Membership Interest Percentages. Any action required or permitted to be taken at a meeting of the Members may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, signed by Members holding the minimum Membership Interest Percentages that would be necessary to authorize or take such action at a meeting. The Company shall maintain written minutes of all meetings and records of all actions taken by written consent.
11. Transfer Restrictions
No Member shall sell, assign, transfer, pledge, encumber, or otherwise dispose of (each, a “Transfer”) all or any portion of such Member’s Membership Interest without the prior unanimous written consent of all other Members, except as expressly provided in this Section. Any Transfer or attempted Transfer in violation of this Section shall be void and of no force or effect.
Right of First Refusal. If any Member (the “Offering Member”) desires to Transfer all or any portion of such Member’s Membership Interest to a third party (the “Proposed Transferee”), the Offering Member shall first deliver a written notice (the “Offer Notice”) to the Company and all other Members specifying the Membership Interest to be transferred, the proposed purchase price, and all other material terms and conditions of the proposed Transfer. Each non-offering Member shall have the right, exercisable within [NUMBER] days after receipt of the Offer Notice (the “Election Period”), to purchase all (but not less than all) of its pro rata share of the offered Membership Interest at the price and on the terms set forth in the Offer Notice. If the non-offering Members do not collectively elect to purchase all of the offered Membership Interest within the Election Period, the Offering Member may consummate the Transfer to the Proposed Transferee on terms no more favorable to the Proposed Transferee than those set forth in the Offer Notice, provided that (a) such Transfer is consummated within [NUMBER] days after the expiration of the Election Period, and (b) the Proposed Transferee agrees in writing to be bound by all the terms and conditions of this Agreement.
No Transfer of a Membership Interest shall be effective unless and until the transferee executes a joinder to this Agreement in form and substance satisfactory to the remaining Members. Upon the admission of a transferee as a substitute Member, Exhibit A shall be amended to reflect the new ownership interests.
12. Withdrawal and Resignation
A Member may withdraw from the Company upon not less than [NUMBER] days’ prior written notice to the Company and all other Members (the “Withdrawal Notice”). The withdrawal of a Member shall not dissolve the Company. Upon withdrawal, the withdrawing Member’s Membership Interest shall be purchased by the Company or the remaining Members at a price equal to the fair market value of such Membership Interest as of the date of the Withdrawal Notice, determined by agreement of the withdrawing Member and the remaining Members, or if they cannot agree within [NUMBER] days, by an independent appraiser mutually selected by the parties.
The purchase price for the withdrawing Member’s Membership Interest shall be paid in cash within [NUMBER] days of the determination of fair market value, or in such installments as the parties may agree. Until the withdrawing Member’s Membership Interest has been fully purchased, the withdrawing Member shall retain such Membership Interest (and all rights and obligations associated therewith), except that the withdrawing Member shall have no right to participate in the management of the Company. A Member who withdraws in violation of this Agreement shall be liable to the Company and the remaining Members for damages caused by such wrongful withdrawal.
13. Dissolution
The Company shall be dissolved upon the first to occur of any of the following events: (a) the unanimous written consent of all Members; (b) the entry of a decree of judicial dissolution under the Act; (c) the occurrence of any event that makes it unlawful for the Company’s business to be continued; or (d) as otherwise required by the Act. The death, incapacity, bankruptcy, or withdrawal of a Member shall not cause the dissolution of the Company, and the remaining Members may continue the business of the Company without dissolution.
Upon dissolution, the Members shall wind up the Company’s affairs in accordance with the Act. The assets of the Company shall be distributed in the following order of priority: (a) first, to creditors of the Company, including Members who are creditors, in satisfaction of the liabilities of the Company (other than liabilities for distributions to Members), whether by payment or by the making of reasonable provision for payment thereof; (b) second, to the establishment of any reserves that the Members deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company; and (c) third, to the Members in proportion to their respective positive Capital Account balances, after giving effect to all contributions, distributions, and allocations for all periods. A certificate of cancellation shall be filed with the [STATE OF FORMATION] Secretary of State upon completion of the winding up of the Company’s affairs.
14. Indemnification
To the fullest extent permitted by the Act, the Company shall indemnify, defend, and hold harmless each Member, Manager, Officer, employee, and agent of the Company (each, an “Indemnified Party”) from and against any and all losses, claims, demands, costs, damages, liabilities (joint or several), expenses of any nature (including reasonable attorneys’ fees and disbursements), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits, or proceedings, whether civil, criminal, administrative, or investigative, in which the Indemnified Party may be involved, or is threatened to be involved, as a party or otherwise, by reason of the Indemnified Party’s status as a Member, Manager, Officer, employee, or agent of the Company; provided that the Indemnified Party acted in good faith and in a manner it reasonably 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 the conduct was unlawful.
The indemnification provided by this Section shall be in addition to any other rights to which an Indemnified Party may be entitled under any agreement, as a matter of law, in equity, or otherwise. The Company may purchase and maintain insurance on behalf of any Indemnified Party against any liability asserted against or incurred by such Indemnified Party in any such capacity, whether or not the Company would have the power to indemnify such person against such liability under this Section.
15. Amendments
This Agreement may be amended or modified only by a written instrument executed by all Members. No amendment shall be effective unless it is in writing and signed by all Members. Any amendment shall be binding on all Members and their respective heirs, successors, and assigns.
16. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of [GOVERNING LAW STATE], without regard to its conflict of laws principles. Any dispute arising out of or relating to this Agreement shall be resolved exclusively in the state or federal courts located in [COUNTY], [STATE], and each Member hereby consents to the personal jurisdiction of such courts.
If any provision of this Agreement is held to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The waiver by any Member of a breach of any provision of this Agreement shall not constitute a continuing waiver or a waiver of any subsequent breach of the same or a different provision. This Agreement constitutes the entire agreement among the Members with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written.
17. Signatures
IN WITNESS WHEREOF, the undersigned Members have executed this Operating Agreement as of the Effective Date first written above.
MEMBER 1:
_____________________________________
Signature
Name: [MEMBER 1 NAME]
Date: [DATE]
MEMBER 2:
_____________________________________
Signature
Name: [MEMBER 2 NAME]
Date: [DATE]
MEMBER 3:
_____________________________________
Signature
Name: [MEMBER 3 NAME]
Date: [DATE]