EXHIBIT 10.2
OPERATING AGREEMENT
OF
M & M CONSULTING LIMITED LIABILITY COMPANY
AGREEMENT made as of the 7th day of July, 1996, by and between ▇▇▇▇▇▇▇
Merchants Bank and MSB Leasing, Inc. (hereinafter individually referred to as
"Member", and collectively referred to as "Members").
WITNESSETH:
WHEREAS, the Members desire to form a limited liability company (the
"Company") pursuant to the provisions of the Maine Limited Liability Company
Act, 31 M.R.S.A. ss. 601 et. seq. (the "Act'); and
WHEREAS, the purpose of the Company is to engage in certain activities
closely related to the business of banking or managing or controlling banks, as
permitted by applicable state and federal law.
NOW, THEREFORE, the Members agree as follows:
ARTICLE 1
Formation, Name, Purpose, Location, Registered Office
-----------------------------------------------------
1.1 Formation. The Members hereby form a limited liability company
pursuant to the Act on the terms and conditions stated herein to take effect
upon the filing of the Company's Articles of Organization with the Secretary of
State of the State of Maine ("Secretary of State").
1.2 Name. The name of the Company shall be "M & M Consulting Limited
Liability Company."
1.3 Purpose. The principal purpose of the Company is to engage in
certain activities closely related to the business of banking or managing or
controlling banks, as permitted by applicable state and federal law.
1.4 Place of Business. The principal office of the Company shall be
located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, or at such other or additional
locations as may be determined by the Members.
1.5 Registered Office and Registered Agent. The address of the
Company's initial registered office shall be ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇.
The name and address of the
Company's initial registered agent shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇. The registered
office and registered agent may be changed from time to time as the Members deem
advisable by filing notice of such changes with the Secretary of State in
accordance with the Act.
ARTICLE 2
Term; Dissolution
-----------------
2.1 Term. The term of the Company shall be thirty (30) years from the
date of filing of Articles of Organization with the Secretary of State, unless
the Company is earlier dissolved in accordance with either the provisions of
this Operating Agreement or the Act.
2.2 Dissolution. The Company shall be dissolved upon the occurrence of
any of the following events:
(a) the expiration of the term set forth in Section 2.1;
(b) the written agreement of the Members holding more than 50% of
interests in the Company;
(c) the sale or other disposition of all or substantially all of
the assets of the Company or the permanent cessation of the
Company's business operations; or
(d) the death, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member or occurrence of any other event which
terminates the continued membership of a Member in the Company
(a "Withdrawal Event") or any other event which causes a
dissolution under the Act, unless the business of the Company
is continued by the consent of those remaining Members who
collectively own at least a majority of the capital interests
(as measured by the positive balances of their capital
accounts) of the remaining Members within ninety (90) days
after the Withdrawal Event, or such other event, and there are
at least two remaining Members.
Upon the occurrence of any dissolution hereunder, the affairs of the
Company shall be wound up in accordance with Article 8 and immediately
thereafter the Company shall terminate.
ARTICLE 3
Capital
-------
-2-
3.1 Members' Capital Contributions. Each Member shall contribute such
amount as is set forth in Schedule A hereto as its initial capital contribution.
3.2 Membership Interests. The Members shall have the membership
interests in the Company specified on Schedule A ("Membership Interests").
Schedule A shall be amended from time to time to reflect the withdrawal or
admission of Members, and any changes in the Membership Interest held by a
Member arising from the transfer of a Membership Interest to or by such Member.
3.3 Capital Accounts. A capital account shall be maintained for each
Member, in accordance with tax accounting principles, which shall reflect its
initial capital contribution as set forth in Schedule A, and shall be adjusted
and maintained as follows:
(a) As of the end of each fiscal year of the Company, each Member's
opening capital account for such year shall be increased by an
amount equal to (i) the cash and the agreed fair market value
of property (net of any liabilities assumed by the Company or
to which such property is subject) contributed to the capital
of the Company by such Member for such year; and (ii) such
Member's share of Company taxable income for such year,
including income and gain exempt from tax; and
(b) As of the end of the fiscal year of the Company, each Member's
opening capital account for such year shall be decreased by an
amount equal to (i) the aggregate amount of cash distributions
and the agreed fair market value of any property (net of any
liabilities assumed by such Member or to which such property is
subject) distributed to such Member during such year; (ii) such
Member's share of expenditures of the Company not deductible
and not properly chargeable as a capital expenditure; and (iii)
such Member's share of Company losses for such year, provided,
however, that if it is necessary to determine the capital
account of any Member during the fiscal year, the capital
account of the Member shall be determined after giving effect
to all allocations of taxable income, gain and loss
attributable to transactions effected prior to the time such
determination is made and all distributions of cash theretofore
made for such year.
3.4 Change in Tax Law. Notwithstanding anything to the contrary herein,
it is the intention of the Company that it be classified as a partnership for
federal income tax purposes and that it conform to the requirements of the
Internal Revenue Code with respect to the validity of the allocations of items
including income, gain, loss, and tax credits. In the event of a change in the
Internal Revenue Code or Treasury Regulations, the Members hereby agree to
consult with tax counsel to determine whether an amendment to this Agreement is
required and, if it is, to adopt such amendment.
-3-
3.5 Interest on Capital; Loans by or to Members. No interest or other
compensation shall be allowed to any Member with respect to its capital account,
except its share of the profits, losses and distributions of the Company as
hereinafter provided. The Company shall not make loans to, or borrow from, any
Member without the consent of all the Members.
3.6 Withdrawal of Capital. Except as may be specifically provided in
this Agreement, no Member shall have the right to withdraw from the Company all
or any part of its capital contribution nor shall such Member have any right to
demand and receive property or cash of the Company in return of its capital
contribution.
3.7 Liability of Members for Repayment of Capital. No Member shall have
any liability for the repayment of any capital contribution of any other Member.
ARTICLE 4
Profits, Losses and Cash Distributions
--------------------------------------
4.1 Company Profits, Losses and Cash Distributions. All profits, losses
and distributions of cash or other property from the Company to the Members
shall be allocated or distributed in accordance with each Member's Membership
Interest, as set forth on Schedule A, provided that upon the dissolution of the
Company all distributions of cash shall be made in accordance with Article 8.
4.2 Priority & Timing. No Member shall have priority over any other
Member with regard to allocations of profits or losses or distributions from the
Company. All distributions of Company funds to the Members shall be made at such
times as the Members may determine.
ARTICLE 5
Management and Administrative Policies
--------------------------------------
5.1 Voting. Unless otherwise expressly provided herein, all actions and
decisions of the Company shall be by majority in Membership Interests. No Member
shall be disqualified from voting or otherwise participating in any decision
because of a conflict in interest.
5.2 Authority; Reliance by Third Parties; Management Committee;
Proprietary Information.
(a) The Members shall have the authority to manage the business of
the Company. Such authority shall include, without limitation,
the authority
-4-
to purchase, sell, mortgage, lease, and otherwise dispose of
property, both real and personal, to hire employees, to
contract with third parties to render or receive services and
to borrow money and otherwise pledge the credit of the Company.
The signature of a duly authorized officer of any one Member
alone shall be sufficient to bind the Company and every
document executed by a Member shall be conclusive evidence in
favor of every person relying in good faith thereon or claiming
thereunder that at the time of the delivery thereof (i) this
Company was in existence, (ii) this Agreement had not been
amended in any manner so as to restrict such authority and
(iii) the execution and delivery of such documents were duly
authorized under this Article.
(b) The Members may appoint executive officers and/or a management
committee consisting of representatives of each Member to which
the Members may delegate such rights, duties, and
responsibilities as they shall determine from time to time.
Such delegation shall not relieve the Members of their
responsibility for managing the business of the Company or
affect their ability to bind the Company in dealings with third
parties.
(c) Each Member recognizes and acknowledges that the business of
the Company will expose the Company's employees to trade
secrets and proprietary information and processes, as they may
exist from time to time, of each Members' business operations,
as well as trade secrets and proprietary information and
processes, as they may exist from time to time, of other
competitors of the Members or their affiliates. The Members
hereby agree that the Company can be effectively managed
without having such proprietary information disclosed by
Company employees to employees, officers or directors of either
Member or either Member's affiliates. The Members hereby
establish the following policies to assure that such trade
secrets, information or processes will not be disclosed to
either of the Members or their representatives:
(A) Each Member shall designate an executive officer of such
Member to represent the Member in Company management
decisions.
(B) The Company shall employ executive officers and employees
who are capable of managing and carrying out the day to day
business affairs of the Company and who shall be
contractually obligated to refrain from disclosing
confidential client information to the Members or their
representatives.
-5-
(C) The Company shall not employ any executive officer or
employee who is also an employee, agent, officer or
director of a Member or any affiliate of a Member (other
than the Company itself).
(D) Employees, agents and consultants engaged by the Company
shall refrain from disclosing to the Members (or
representatives of the Members) confidential information of
any client of the Company. Each employee, agent or
consultant engaged by the Company whose position involves
the handling of confidential client information shall sign
a confidentiality agreement for the purpose of effecting
the policies set forth herein.
5.3 Fiduciary Duty; Devotion of Time; Compensation. Each Member shall
exercise its powers and discharge its duties in good faith with a view to the
interests of the Company and its Members with that degree of diligence, care and
skill that ordinarily prudent persons would exercise under similar circumstances
in like positions. No Member shall be compensated for its services to the
Company, except as is expressly provided in the Agreement, but each Member shall
be entitled to charge the Company, or to be reimbursed by the Company, for all
reasonable out of pocket expenses actually incurred by it and paid to third
parties in connection with the Company business.
5.4 Exculpation and Indemnification.
(a) Exculpation. The doing of any act or the failure to do any act
by a Member or such Member's representative, the effect of
which may cause or result in loss or damage to the Company or
its property, shall not subject such Member or such Member's
representative, to any liability to the Company, or to the
other Members, unless the Member's (or its representatives)
acts or omissions constituted bad faith, gross negligence,
willful misconduct, or fraud, or violated Section 5.3.
(b) Indemnification. The Company shall indemnify the Members and
their representatives and make advances for expenses to the
maximum extent permitted under the Act. The Company shall
indemnify its employees and other agents to the fullest extent
permitted by law, provided that such indemnification in any
given situation is first approved by the Members. The right to
indemnification under this Section shall be fully vested with
respect to any matter occurring while this Section was in
effect. No amendment of this Section shall have any retroactive
effect except as to enhance such right for the benefit of the
indemnitee. Any indemnity under this Section 5.4 shall be
provided out of and to the extent of Company assets only and no
Member shall have any liability
-6-
on account thereof. The Members' rights of contribution under
local law shall not be abrogated by this Section.
5.5 Other Business Ventures. Each of the Members may engage
independently or with others in other business ventures of every nature or
description including competing ventures, and neither the Company nor any Member
shall have any rights in or to such independent ventures or the income or
profits derived therefrom.
5.6 Bank Accounts; Records; Reports.
(a) All funds of the Company shall be deposited in its name in such
checking account or other bank accounts as shall be designated
by the Members. Withdrawals shall be on such signatures as may
be determined by the Members from time to time.
(b) The Members shall keep or cause to be kept true and full books
of account, in which shall be recorded the transactions of the
Company, all of which shall at all times be maintained at the
principal office of the Company, or at such other office as
shall be designated for such purpose by the Members, and shall
be open for inspection and examination of the Members or their
representatives at any reasonable time.
(c) The Members shall cause to be prepared and sent to each Member
each year: (a) annual reports of the Company, including an
annual balance sheet and profit and loss statement, within 90
days after the close of each fiscal year; (b) annual statements
indicating the share of each Member of the net income, net
loss, depreciation, gain, loss and other relevant items of the
Company for each calendar year for federal income tax purposes;
and (c) a copy of the Company's federal information tax return
(Form 1065) and related Schedules K and K-1.
5.7 Fiscal Year. The fiscal year of the Company shall be the calendar
year.
5.8 Accounting Method. For tax and financial accounting purposes, the
Company shall adopt the accrual method of accounting.
ARTICLE 6
Withdrawal; Liquidation of Membership Interest
----------------------------------------------
6.1 Withdrawal. Status as a Member of the Company shall cease upon the
occurrence of bankruptcy or insolvency, dissolution or voluntary or involuntary
withdrawal
-7-
from the Company of a Member ("Withdrawal"). No Member shall have the power to
withdraw by voluntary act from the Company without the consent of all Members.
In the event of the Withdrawal of a Member, the Membership Interest of
the former Member shall be deemed to have been assigned to the former Member's
successor in interest. In the event of such an assignment, such assignee shall
not become a Member unless accepted as a Member by all remaining Members. Unless
such assignee is accepted as a Member, the assignee shall have no right to
participate in the management and affairs of the Company, but such assignee
shall be entitled to share in the economic attributes of the Company to which
the withdrawing Member was entitled. In the event of an assignment by virtue of
Withdrawal, the former Member shall have no further right to participate in the
management and affairs of the Company. The Company shall not be required to
liquidate the Membership Interest of a former Member.
ARTICLE 7
Restrictions of Transition of Membership Interest
-------------------------------------------------
7.1 No Assignment, Pledge or Encumbrance of Interests. No member may
assign, sell, pledge or encumber all or any part of its Membership Interest, in
any manner, whether voluntarily or involuntarily, by operation of law or
otherwise, without the consent of all the Members.
7.2 Sale or other Transfer of Interests. No Member shall have the right
to dispose of all or any portion of its Membership Interest except; (i) to
another Member, (ii) to an affiliate of such Member, or (iii) with the consent
of all the Members, which consent may be refused for any reason.
ARTICLE 8
Dissolution and Winding Up
--------------------------
8.1 Effect of Dissolution. In the event of dissolution, the Company
shall cease to carry on its business, except insofar as may be necessary for the
winding up of its business, but its separate existence shall continue until a
certificate of cancellation has been filed with the Secretary of State or until
a decree dissolving the Company has been entered by a court of competent
jurisdiction.
8.2 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution, the Members shall immediately proceed to wind
up the affairs of the Company in accordance with the
requirements of the
-8-
Act and other applicable law. In furtherance of the winding up
of the Company, the Members shall:
(i) sell or otherwise liquidate all of the Company's assets
as promptly as practicable (except to the extent the
Members may determine to distribute any assets to
themselves in kind);
(ii) discharge or make reasonable provision for all
liabilities of the Company, including liabilities to
Members who are also creditors, other than liabilities to
Members for distributions and the return of capital, and
establish such reserves as may be reasonably necessary to
provide for contingent liabilities of the Company (for
purposes of determining the capital accounts of the
Members, the amounts of such reserves shall be deemed to
be an expense of the Company);
(iii) distribute the remaining assets of the Company in the
following order of priority:
(1) To each Member, with respect to the cumulative amount of
all accrued but unpaid pre-dissolution distributions for
which the Company is liable to the Member, the amount of
such liability;
(2) To each Member, with respect to its unreturned capital
contribution, an amount equal to the positive balance (if
any) in its capital account (as determined after taking
in to account all capital adjustments for the Company's
taxable year during which the liquidation occurs), or, if
the assets available to be distributed hereunder are
insufficient to cover the aggregate of all Members'
positive balances, a proportionate amount based upon the
relative positive balances of the Members; and
(3) To each Member, with respect to its Membership Interest,
a proportionate share of the remaining assets equal to
its Membership Interest.
(b) The Members shall cause an accounting to be made by the
Company's independent accountants of the accounts of the
Company and of the Company's assets, liabilities, and
operations, from the date of its previous accounting
until the date of dissolution.
-9-
(c) If any assets of the Company are distributed in kind, the
net fair market value of such assets as of the date of
dissolution shall be determined by independent appraisal
or by agreement of the Members. Such assets shall be
deemed to have been sold to the Members in proportion to
their Membership Interest as of the date of dissolution
for their market value, and the capital accounts of the
Members shall be adjusted to reflect such deemed sale.
(d) Notwithstanding anything to the contrary in this
Agreement, upon a liquidation, if any Member has a
deficient capital account (after giving effect to all
contributions, distributions, allocations and other
Capital Account adjustments for all taxable years,
including the year during which such liquidation occurs),
such Member shall have no obligation to make any capital
contribution, and the negative balance of such Member's
capital account shall not be considered a debt owed by
such Member to the Company or to any other person for any
purpose whatsoever.
8.3 Certificate of Cancellation. Upon completion of the winding up,
liquidation and distribution of the assets, the Company shall be deemed
terminated and the Members shall forthwith file with the Secretary of State a
certificate of cancellation. Thereafter, the Members, as liquidating trustees,
shall have authority to distribute any Company property discovered after
termination, convey real estate and take such other action as may be necessary
on behalf of and in the name of the Company.
ARTICLE 9
Amendment
---------
This Agreement may be amended at any time by written agreement of
Members holding more than 50% of Membership Interests in the Company.
ARTICLE 10
Miscellaneous
-------------
10.1 Notices. All notices, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given on the date
delivered in person to the party to whom notice is to be given, or on the first
business day after mailing if mailed to the last known address of the party to
whom notice is to be given by registered or certified mail, postage paid, return
receipt requested.
-10-
10.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the Company and there are no agreements,
understandings, warranties or representations between the parties with respect
to the Company except as set forth herein.
10.3 Binding Effect. This Agreement will inure to the benefit of and
bind the respective successors and assigns of the parties.
10.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
10.5 Construction. As used in this Agreement, the singular number shall
include the plural, and the plural the singular. Captions are inserted only as a
matter of convenience and in no way limit, define or extend the scope of this
Agreement.
10.6 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Maine.
10.7 Severability. If any provision of this Agreement is to be
determined to be invalid or unenforceable, it shall not affect the validity or
enforceability of the remaining provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WITNESS: ▇▇▇▇▇▇▇ Merchants Bank
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- ----------------------------------
Its: President
---------------------------------
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By:
--------------------------------- -----------------------------------
Its: Vice President
-----------------------------------
-11-
Schedule A to Operating Agreement
of
M & M Consulting Limited Liability Company
July 7, 1996
Member Capital Contribution Membership Interests
------ -------------------- --------------------
▇▇▇▇▇▇▇ Merchants Bank $25,000 50%
MSB Leasing, Inc. $25,000 50%
-12-
