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EXHIBIT 10.2
O.N.E. COLOR COMMUNICATIONS, LLC
OPERATING AGREEMENT
May 1, 1998
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
ARTICLE II FORMATION OF COMPANY; MEMBERSHIP INTERESTS 4
2.1 Formation 4
2.2 Name 4
2.3 Principal Place of Business 5
2.4 Registered Office and Registered Agent 5
2.5 Term 5
2.6 Certificates of Membership Interests 5
2.7 Certificates 5
2.8 Transfer of Certificates 5
2.9 Lost, Stolen, Destroyed or Mutilated Certificates 6
2.10 Regulations Relating to Shares 6
2.11 Holders of Record 6
ARTICLE III BUSINESS OF COMPANY 6
3.1 Permitted Businesses 6
ARTICLE IV NAMES AND ADDRESSES OF MEMBERS 6
ARTICLE V RIGHTS AND DUTIES OF BOARD OF MANAGERS 7
5.1 Management 7
5.2 Number, Election, Tenure and Qualifications 7
5.3 Regular Meetings; Notice 8
5.4 Special Meetings; Notice 8
5.5 Manner of Acting 8
5.6 Presumption of Assent 8
5.7 Certain Powers of Managers 9
5.8 Managers Have No Exclusive Duty to Company 10
5.9 Bank Accounts 10
5.10 Resignation 10
5.11 Removal 10
5.12 Vacancies 10
ARTICLE VI OFFICERS 11
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6.1 Officers of the Company 11
6.2 Election Managers and Term of Office 11
6.3 Removal 11
6.4 Vacancies 11
6.5 Chairman 12
6.6 President 12
6.7 The Vice Presidents 13
6.8 The Treasurer 13
6.9 The Secretary 14
6.10 Assistant Treasurers and Assistant Secretaries 14
6.11 Salaries 14
6.12 Delegation of Duties 15
ARTICLE VII MEETINGS OF MEMBERS 15
7.1 Meetings 15
7.2 Place of Meetings 15
7.3 Notice of Meeting 15
7.4 Record Date 15
7.5 Quorum 16
7.6 Manner of Acting 16
7.7 Proxies 16
7.8 Action by Members Without a Meeting 16
7.9 Waiver of Notice 17
ARTICLE VIII STANDARD OF CARE AND INDEMNIFICATION OF MANAGERS,
OFFICERS AND EMPLOYEES 17
8.1 Standard of Care 17
8.2 Indemnification of Managers. Officers and Employees 17
ARTICLE IX RIGHTS AND OBLIGATIONS OF MEMBERS 17
9.1 Limitation of Liability 17
9.2 List of Members 17
9.3 Company Books 18
9.4 Priority and Return of Capital 18
9.5 Resignation 18
ARTICLE X CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS 18
10.1 Initial Capital Contributions 18
10.2 Additional Capital Contributions 19
10.3 Capital Accounts 19
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ARTICLE XI ALLOCATIONS. INCOME TAX. ELECTIONS AND REPORTS 20
11.1 Allocations of Net Profits and Net Losses 20
11.2 Special Allocations to Capital Accounts 20
11.3 Distributions 23
11.4 Accounting Principles 24
11.5 Interest on and Return of Capital Contributions 24
11.6 Loans to Company 24
11.7 Accounting Period 24
11.8 Records and Reports 24
11.9 Returns and Other Elections 25
11.10 Tax Matters Partner 25
ARTICLE XII RESTRICTIONS ON TRANSFERABILITY 25
12.1 Restriction on Transfer of Membership Interests 25
12.2 Voluntary Sales 26
12.3 Sale of Membership Interests Upon Death, Bankruptcy, Dissolution 27
12.4 Effectiveness of Transfer 28
12.5 Vote on Transfer 28
ARTICLE XIII ADDITIONAL MEMBERS 28
13.1 Admission of New Members 28
13.2 Allocations to New Members 28
ARTICLE XIV DISSOLUTION AND TERMINATION 29
14.1 Dissolution 29
14.2 Winding Up 29
14.3 Distribution of Assets Upon Winding Up 30
14.4 Articles of Dissolution 30
ARTICLE XV MISCELLANEOUS PROVISIONS 31
15.1 Notices 31
15.2 Application of California Law 31
15.3 Waiver of Action for Partition 31
15.4 Amendment 31
15.5 Execution of Additional Instruments 31
15.6 Construction 31
15.7 Headings 31
15.8 Waivers 32
15.9 Rights and Remedies Cumulative 32
15.10 Severability 32
15.11 Heirs, Successors and Assigns 32
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15.12 No Third Party Beneficiaries 32
15.13 Counterparts 32
15.14 Dispute Resolutions 32
15.15 Investment Representations 35
15.16 Execution of Notes, Checks, Contracts and Other Instruments 36
SIGNATURE PAGE 36
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OPERATING AGREEMENT
THIS OPERATING AGREEMENT is made and entered into this first day of May, 1998,
among XXXXXXX HOLDING CORP. ("Xxxxxxx") and O.N.E. COLOR COMMUNICATIONS, INC.
("O.N.E., Inc.") (together, the "Members").
WHEREAS, the Members have formed a limited liability company under the
Xxxxxxx-Xxxxxx Limited Liability Company Act. The Articles of Organization of
the Company filed with the California Secretary of State on April 27, 1998 are
hereby adopted and approved by the Members.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Operating Agreement shall have the following
meanings (unless otherwise expressly provided herein):
(a) The "Articles" shall mean the Articles of Organization of the Company as
filed by the organizer of the Company with the California Secretary of State,
as the same may be amended from time to time.
(b) "Board of Managers" has the meaning set out in Section 5.1.
(c) "California Act" shall mean the Xxxxxxx-Xxxxxx Limited Liability Company
Act at California Corporations Code Sec. 17000, et seq. as the same may be
amended from time to time.
(d) "Capital Account" as of any given date shall mean the Capital
Contributions to the Company by a Member as adjusted up to the date in
question pursuant to Article X.
(e) "Capital Contribution" shall mean any contribution to the capital of the
Company in cash or property by a Member whenever made. "Initial Capital
Contribution" shall mean the initial contribution to the capital of the
Company pursuant to this Operating Agreement.
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(f) "Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent superseding federal revenue laws.
(g) "Company" shall refer to O.N.E. Color Communications, LLC
(h) "Deficit Capital Account" shall mean with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
taxable year, after giving effect to the debit to such Capital Account for the
items described in Treasury Regulations 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
This definition of Deficit Capital Account is intended to comply with the
provision of Treasury Regulations 1.704-1(b)(2)(ii)(d), and will be
interpreted consistently with those provisions.
(i) "Distributable Cash" shall mean all cash, revenues and funds received by
the Company from Company operations, less the sum of the following to the
extent paid or set aside by the Company: (i) all principal and interest
payments on indebtedness of the Company and all other sums paid to lenders;
(ii) all cash expenditures incurred in the normal operation of the Company's
business; and (iii) such reserves as the Managers or their designees deem
reasonably necessary for the proper operation of the Company's business.
(j) "Entity" shall mean any general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust,
cooperative, association, foreign trust or foreign business organization.
(k) "Fiscal Year" shall mean the Company's fiscal year, which shall end on
September 30 each year.
(l) "Majority Interest" shall mean the affirmative vote of Members holding
more than fifty percent (50%) of the aggregate Percentage Interests in the
Company.
(m) "Manager" shall mean one or more members of the Board of Managers of the
Company. References to the Managers in the singular or as him, her, it,
itself or other like references shall also, where the context so requires, be
deemed to include the plural or the masculine or feminine reference, as the
case may be.
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(n) "Member" shall mean, in connection with the formation of the Company,
each of the parties who executes a counterpart of this Operating Agreement as
a Member and, after the formation of the Company, each of the parties who may
be admitted as a Member in accordance with Section 13.1 of this Operating
Agreement.
(o) "Membership Interest" shall mean a Member's entire interest in the
Company, including the right to participate in the management of the business
and affairs of the Company, including the right to vote on, consent to, or
otherwise participate in any decision or action of or by the Members granted
pursuant to this Operating Agreement and the California Act.
(p) "Membership Interest Agreement" shall mean the Asset Purchase and
Membership Interest Agreement dated as of February 24, 1998 among Xxxxxxx, XX,
Xxxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxx Xxxxx, Xxxxx Xxxxx and the Company, as the
same may be amended from time to time.
(q) "Net Losses" shall mean, for each Fiscal Year, the losses and deductions
of the Company determined in accordance with accounting principles
consistently applied from year to year employed under the accrual method of
accounting and as reported, separately or in the aggregate, as appropriate, on
the Company's information tax return filed for federal income tax purposes,
plus any expenditures described in Section 705(a)(2)(B) of the Code.
(r) "Net Profits" shall mean, for each Fiscal Year, the income and gains of
the Company determined in accordance with accounting principles consistently
applied from year to year employed under the accrual method of accounting and
as reported, separately or in the aggregate, as appropriate, on the Company's
information tax return filed for federal income tax purposes, plus any income
described in Section 705(a)(l)(B) of the Code.
(s) "Reserves" shall mean funds set aside or amounts allocated to reserves
which shall be maintained in amounts deemed sufficient by the Managers for
working capital and to pay taxes, insurance, debt service or other costs or
expenses incident to the ownership or operation of the Company's business.
(t) "Offered Membership Interests" has the meaning set forth in Section
12.2(a).
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(u) "Offering Member" has the meaning set forth in Section 12.2(a).
(v) "Resignation" has the meaning set out in Section 9.5.
(w) "Operating Agreement" shall mean this Operating Agreement as originally
executed and as amended from time to time.
(x) "Percentage Interest" shall mean for any Member, the percentage of
Membership Interest in the Company as set forth on Exhibit A, as the same may
be changed from time to time upon the acquisition or disposition of Membership
Interests, the redemption of Membership Interests, or the addition on deletion
of Members.
(y) "Person" shall mean any individual or entity, and their heirs, executors,
administrators, legal representatives, successors and assigns where the
context so permits.
(z) "Transferring Member" shall mean (i) any Member who sells, assigns,
pledges, hypothecates, transfers, exchanges or otherwise transfers for
consideration all or any portion of his Membership Interest or (ii) any Member
who gifts, bequeaths or otherwise transfers for no consideration (by operation
of law or otherwise, except with respect to bankruptcy) all or any part of his
Membership Interest.
(aa) "Treasury Regulations" shall include proposed, temporary and final
regulations promulgated under the Code in effect as of the date of filing the
Certificate and the corresponding sections of any regulations subsequently
issued that amend or supersede such regulations.
Capitalized terms used herein and not defined herein shall have the respective
meanings given to those terms in the Membership Interest Agreement.
ARTICLE II
FORMATION OF COMPANY; MEMBERSHIP INTERESTS
2.1 Formation. O.N.E. Color Communications, LLC has been organized as a
California limited liability company by executing and delivering the Articles
to the California Secretary of State in accordance with and pursuant to the
California Act. The Articles are attached hereto as Exhibit A.
2.2 Name. The name of the Company is O.N.E. Color Communications, LLC
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2.3 Principal Place of Business. The principal place of business of the
Company shall be 0000 00xx Xxxxxx, Xxxxxxx, Xxxxxxxxxx, 00000. The Company
may locate its place of business at any other place or places as the Board of
Managers may deem advisable.
2.4 Registered Office and Registered Agent. The company's initial
registered office shall be 0000 00xx Xxxxxx, Xxxxxxx, Xxxxxxxxxx, 00000 and
the name of its initial agent for service of process shall be Xxxxxxx Xxxxx.
2.5 Term. The term of the Company shall expire and the Company shall
dissolve on April 30, 2048 pursuant to its Articles of Organization unless the
Company is earlier dissolved in accordance with either the provisions of this
Operating Agreement or the California Act.
2.6 Certificates of Membership Interests. The Board of Managers of the
Company may make such rules and regulations as they may deem appropriate
concerning the issuance and registration of Membership Interests in the
Company. The Board of Managers may authorize the issuance of any Membership
Interest without certificates. Such authorization shall not affect Membership
Interests already represented by certificates until they are surrendered to
the Company.
2.7 Certificates. If the Board of Managers authorizes the issuance of
certificates, such certificate or certificates shall be in such form as the
Board of Managers may from time to time prescribe, and signed (in facsimile or
otherwise as permitted by law) by the President or a Vice President and the
Secretary or the Treasurer or an Assistant Secretary or an Assistant
Treasurer, which shall represent the number of Membership Interests owned by
such holder. The Board may authorize the issuance of certificates for
fractional shares or, in lieu thereof, scrip or other evidence of ownership,
which may (or may not) as determined by the Board entitle the holder thereof
to voting, dividends or other rights of Members.
2.8 Transfer of Certificates. If the Board of Managers authorizes the
issuance of certificates, transfers of Membership Interests of the Company
shall be made on the books of the Company only upon surrender to the Company
of the certificate or certificates for such Membership Interests properly
endorsed by the holder or by his assignee, agent or legal representative, who
shall furnish proper evidence of assignment, authority or legal succession, or
by the agent of one of the foregoing thereunto duly authorized by an
instrument duly executed and filed with the Company, in accordance with
regular commercial practice.
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2.9 Lost, Stolen, Destroyed or Mutilated Certificates. New certificates for
Membership Interests may be issued to replace certificates lost, stolen,
destroyed or mutilated upon such conditions as the Board of Managers may from
time to time determine.
2.10 Regulations Relating to Membership Interests. The Board of Managers
shall have power and authority to make all such rules and regulations not
inconsistent with the Operating Agreement as it may deem expedient concerning
the issue, transfer and registration of certificates representing Membership
Interests of the Company.
2.11 Holders of Record. The Company shall be entitled to treat the holder of
record of any Membership Interests of the Company as the holder and owner in
fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Membership Interests on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise expressly provided by law.
ARTICLE III
BUSINESS OF COMPANY
3.1 Permitted Businesses. The business of the Company shall be to:
(a) engage in the business of graphic arts ; and
(b) to carry on any other lawful business or activity in connection with the
foregoing or otherwise, and to have and exercise all of the powers, rights and
privileges which a limited liability company organized pursuant to the
California Act may have and exercise.
ARTICLE IV
NAMES AND ADDRESSES OF MEMBERS
The names and addresses of the initial Members are as follows:
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NAME ADDRESS
---- -------
Xxxxxxx Holding Corp. c/o Matthews International
Corporation
Two XxxxxXxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn.: President
O.N.E. Color Communications, Inc. c/o Xxxxxxx Xxxxx
0000 00xx Xxxxxx
Xxxxxxx, XX 00000
ARTICLE V
RIGHTS AND DUTIES OF BOARD OF MANAGERS
5.1 Management. The business, property and affairs of the Company shall be
managed exclusively by its "Board of Managers". Except for situations in
which the approval of the Members is expressly required by this Agreement, the
Board of Managers shall have full, complete and exclusive authority, power and
discretion to manage and control the business, affairs and properties of the
Company, to make all decisions regarding those matters and to perform any and
all other acts or activities customary or incident to the management of the
Company's business and objectives. No one Manager may take or effect any
action on behalf of the Company or otherwise bind the Company in the absence
of a formal delegation of authority by the Board of Managers to such Manager.
Unless authorized to do so by this Operating Agreement or by the Managers of
the Company, no Member, officer, employee, attorney-in fact or other agent
shall have any power or authority to bind the Company.
5.2 Number, Election, Tenure and Qualifications. The number of Managers
which shall constitute the first Board of Managers shall be two (2).
Thereafter, the number of Managers of the Company shall be fixed from time to
time by the Members owning a Majority Interest, subject to the requirements of
the Membership Interest Agreement. In no instance shall there be less than
one (1) Manager. Subject to the requirements of Section 10.02 of the
Membership Interest Agreement, Managers shall be elected by the vote of a
Majority Interest of the Members. Each Manager shall hold office until his
successor shall have been elected and qualified. Managers need not be Members
of the Company.
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5.3 Regular Meetings; Notice. Regular meetings of the Board of Managers
shall be held at such time and place as shall be designated by the Board of
Managers from time to time. Notice of such regular meetings shall not be
required, except as otherwise expressly required herein or by law, and except
that whenever the time or place of regular meetings shall be initially fixed
and then changed, notice of such action shall be given promptly by telephone
or otherwise to each Manager not participating in such action. Any business
may be transacted at any regular meeting.
5.4 Special Meetings; Notice. Special meetings of the Board of Managers may
be called at any time by the Board itself, or by the chairman or the
president, or by at least one-fourth of the Managers, to be held at such place
and day and hour as shall be specified by the person or persons calling the
meeting. Notice of every special meeting of the Board of Managers shall be
given by the Secretary to each Manager at least two days before the meeting.
Any business may be transacted at any special meeting regardless of whether
the notice calling such meeting contains a reference thereto, except as
otherwise required by law.
5.5 Manner of Acting. The Board of Managers shall meet at least once each
calendar year. The Managers may designate any place, either within or outside
the State of California, as the place of meeting for any meeting of Managers.
If no designation is made, the place of meeting shall be the principal place
of business of the Company. A majority of the Board of Managers shall
constitute a quorum at meetings of the Board of Managers. If a quorum is
present, the affirmative vote of a majority of those in attendance shall
constitute the act of the Board of Managers, unless the vote of Members is
otherwise required by this Operating Agreement, the California Act or the
Articles. Any Manager may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in the
meeting by means of such equipment shall constitute presence in person at such
meeting. Action may be taken without a meeting if the action is evidenced by
one or more written consents signed by each Manager.
5.6 Presumption of Assent. Minutes of each meeting of the Board shall be
made available to each Manager at or before the next succeeding meeting. Each
Manager shall be presumed to have assented to such minutes unless his
objection thereto shall be made to the Secretary at or within two days after
such succeeding meeting.
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5.7 Certain Powers of Managers. Without limiting the generality of Section
5.1, the Board of Managers (as a whole) shall have power and authority (and no
individual Manager shall alone have such power and authority; provided that
this shall not prevent a person who is both a Manager and an officer from
acting as an officer hereunder), after due action, on behalf of the Company:
(a) to acquire real property from any Person as the Managers may determine,
whether or not such Person is directly or indirectly affiliated or connected
with any Manager or Member;
(b) to borrow money for the Company on such terms as the Managers deem
appropriate, and in connection therewith, to hypothecate, encumber and grant
security interests in the assets of the Company to secure repayment of the
borrowed sums. No debt shall be contracted or liability incurred by or on
behalf of the Company except by the Managers, or to the extent permitted
herein, by agents or employees of the Company expressly authorized to contract
such debt or incur such liability by the Managers;
(c) to purchase liability and other insurance to protect the Company's
property and business;
(d) to hold and own Company real and personal properties in the name of the
Company;
(e) to invest Company funds;
(f) to execute on behalf of the Company all instruments and documents,
including, without limitation, checks; drafts; notes and other negotiable
instruments; mortgages or deeds of trust; security agreements; financing
statements; documents providing for the acquisition, mortgage or disposition
of the Company's property; assignments, bills of sale; leases; and any other
instruments or documents necessary to the business of the Company;
(g) to employ accountants, legal counsel, agents or other experts to perform
services for the Company;
(h) to enter into any and all other agreements on behalf of the Company, in
such forms as the Managers may approve;
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(i) to appoint such agents, officers and delegees as may be necessary or
appropriate to the conduct of the business; and
(j) to do and perform all other acts as may be necessary or appropriate to
the conduct of the Company's business.
5.8 Managers Have No Exclusive Duty to Company. A Manager shall not be
required to manage the Company as his or her sole and exclusive function and
he or she may have other business interests and may engage in other activities
in addition to those relating to the Company. Neither the Company, a Member
nor any other Manager shall have any right, by virtue of this Operating
Agreement, to share or participate in such other investments or activities of
the Manager or in the income or proceeds derived therefrom. Managers shall
receive no compensation for their services as Managers.
5.9 Bank Accounts. The Board of Managers may from time to time authorize the
opening of bank accounts in the name and on behalf of the Company and the
Managers shall determine who shall have the signatory power over such
accounts.
5.10 Resignation. Any Manager of the Company may resign at any time by
giving written notice to the Members of the Company and the other Managers of
the Company. The resignation of any Manager shall take effect upon receipt of
notice thereof or at such later date specified in such notice; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. The resignation of a Manager who is also a
Member shall not affect the Manager's rights as a Member and shall not
constitute a withdrawal of a Member.
5.11 Removal. Subject to the requirements of the Membership Interest
Agreement, all or any lesser number of Managers may be removed at any time,
with or without cause, by the Members owning a Majority Interest. The removal
of a Manager who is also a Member shall not affect the Manager's rights as a
Member and shall not constitute a withdrawal of a Member.
5.12 Vacancies. Subject to the requirements of the Membership Interest
Agreement, any vacancy occurring for any reason in the number of Managers of
the Company may be filled by the Members owning a Majority Interest. Any
Manager's position to be filled by reason of an increase in the number of
Managers shall be filled by the Members at a meeting of Members called for
that purpose or by the Members' unanimous written consent. A Manager elected
to fill a vacancy shall be elected for the unexpired term of his predecessor
in office and shall hold office until the expiration of such term and until
his successor shall be elected and qualified or until his earlier death,
resignation or removal. A Manager chosen to fill a position resulting from an
increase in the number of the Board of Managers shall hold office until his
successor shall be elected and qualified, or until his earlier death,
resignation or removal.
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ARTICLE VI
OFFICERS
6.1 Officers of the Company. The Company shall have officers consisting of
a chairman, a president, a treasurer and a secretary, and such vice
presidents, assistant vice presidents, assistant treasurers, assistant
secretaries or other officers or agents as may be elected and appointed by the
Board of Managers. Any two or more offices may be held by the same person.
The officers shall act in the name of the Company and shall supervise its
operation under the direction and management of the Board of Managers, as
further described below.
6.2 Election and Term of Office. The officers of the Company shall be
elected annually by the Board of Managers. Vacancies may be filled or new
offices created and filled at any meeting of the Board of Managers. Each
officer shall hold office until his or her successor shall have been duly
elected and shall have qualified or until his or her death or until he or she
shall resign or shall have been removed in the manner hereinafter provided.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.3 Removal. Any officer or agent may be removed by the Board of Managers
whenever in their judgment the best interests of the Company would be served
thereby, but such removal shall be without prejudice to the contract rights,
if any, of the person so removed.
6.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise may be filled by the Board of Managers
for the unexpired portion of the term.
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6.5 Chairman. If there shall be a chairman, he or she shall be elected from
among the Managers, shall preside at all meetings of the Members and of the
Board or provided herein, and shall have such other powers and duties as from
time to time may be prescribed by the Board. Xxxxxxx Xxxxx shall be the
initial Chairman of the Company and if Xxxxxxx Xxxxx ceases to serve as
Chairman, Xxx Xxxxxxx shall serve as Chairman of the Company and if Xxx
Xxxxxxx ceases to serve as Chairman, Xxxxxx Xxxxx shall serve as Chairman of
the Company. Such Chairman, as the case may be, shall serve as such until his
or her successor is elected by a majority of the Board of Managers of the
Company.
6.6 President. The president shall be the chief executive officer of the
Company and shall be in general and active charge of the entire business and
all the affairs of the Company and shall have the powers and perform the
duties incident to that position, including the power to bind the Company in
accordance with this Section 6.6. He or she shall have such other powers and
perform such duties as are specified in this Operating Agreement and as may
from time to time be assigned to him or her by the Board of Managers of the
Company.
The president shall have general and active management of the business of the
Company and shall see that all orders and resolutions of the Board of Managers
of the Company are carried into effect. The president may execute bonds,
mortgages and other contracts (whenever requiring a seal, under the seal of
the Company), except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Managers of the Company to some other
officer or agent of the Company. The president shall have general powers of
supervision and shall be the final arbiter of all differences between officers
of the Company, and such decision as to any matter affecting the Company shall
be final and binding as between the officers of the Company subject only to
the Board of Managers of the Company.
Notwithstanding the foregoing or the provisions of Section 5.7 hereof, without
the prior consent and authorization of the Board of Managers, neither the
president nor any other officer of the Company have the power or authority to,
and none of them shall, enter into any of the following transactions:
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(i) the sale, purchase or lease of any capital assets for an aggregate
amount in excess of $100,000;
(ii) the sale or purchase of any fixed assets, business or product line for
an aggregate amount in excess of $100,000;
(iii) any other contract, including a sales contract, supply contract or
employment agreement, for an aggregate amount in excess of $100,000; and
(iv) the incurrence of indebtedness for borrowed money by the Company or the
pledging or permitting of any liens on the assets of the Company in connection
therewith, for an amount in excess of $100,000.
Xxxxxxx Xxxxx shall be the initial President of the Company and if Xxxxxxx
Xxxxx ceases to serve as President, Xxx Xxxxxxx shall serve as President of
the Company and if Xxx Xxxxxxx ceases to serve as President , Xxxxxx Xxxxx
shall serve as President of the Company. Such President, as the case may be,
shall serve as such until his or her successor is elected by a majority of the
Board of Managers of the Company.
6.7 The Vice Presidents. In the absence of (or at the request of) the
chairman, president or in the event of his or her inability or refusal to act,
a vice president (or in the event there be more than one vice president, the
vice presidents in the order designated, or in the absence of any designation,
then in the order of their election) shall perform the duties of the
president, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the president. Any vice president shall perform
such other duties as from time to time may be assigned to him by the chairman,
president or by the Board of Managers of the Company. Xxx Xxxxxxx shall serve
as a Vice-President of the Company and Xxxxxx Xxxxx shall serve as a
Vice-President of the Company and shall serve as such until their successors
are elected by a majority of the Board of Managers of the Company.
6.8 The Treasurer. The treasurer may be the chief financial officer of the
Company. The treasurer shall not be required to give a bond for the faithful
discharge of his or her duties. He or she shall: (i) have charge and custody
of and be responsible for all funds and securities of the Company; (ii) be
charged with primary responsibility for dealing with National Securities
Exchanges or other exchanges in which the Company may hold a membership or on
which the Company may trade; (iii) receive and give receipts for moneys due
and payable to the Company from any source whatsoever, and deposit all such
moneys in the name of the Company in such banks, trust companies or other
depositories as shall be selected by the Board of Managers of the Company; and
(iv) in general perform all the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the president
or by the Board of Managers of the Company.
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6.9 The Secretary. The secretary shall: (a) keep the minutes of the Board of
Managers' meetings in one or more books provided for that purpose; (b) see
that all notices are duly given in accordance with the provisions of this
Operating Agreement or as required by law; (c) be custodian of Company
records; (d) keep a register of the post office address of each Member which
shall be furnished to the secretary by such Member; (e) sign with the
chairman, the president or a vice president (as designated by the chairman),
any certificates for Membership Interests, the issue of which shall have been
authorized by resolution of the Board of Managers; (f) certify the resolutions
of the Board of Managers and other documents to the Company as true and
correct thereof; and (g) in general perform all duties incident to the office
of secretary and such other duties as from time to time may be assigned to him
by the chairman, president, a vice president (as designated by the chairman)
or by the Members of the Company. Xxx Xxxxxxx shall be the initial Secretary
of the Company and shall serve as such until her successor is elected by a
majority of the Board of Managers of the Company.
6.10 Assistant Treasurers and Assistant Secretaries. The assistant
treasurers shall respectively, if required by the Board of Managers of the
Company, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Managers of the Company shall
determine. The assistant treasurers and assistant secretaries, in general,
shall perform such duties as shall be assigned to them by the treasurer or the
secretary, respectively, or by the chairman, the president or the Board of
Managers of the Company. Each officer of the Company by virtue of his or her
office shall be an Assistant Secretary.
6.11 Salaries. The salaries and other compensation of the officers and other
employees of the Company shall be fixed from time to time by the Board of
Managers, and no officer or employee shall be prevented from receiving such
salary by reason of the fact that he is also a Manager or Member of the
Company.
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6.12 Delegation of Duties. The Board of Managers may in its discretion
delegate for the time being the powers and duties, or any of them, of any
officer to any other person whom it may select.
ARTICLE VII
MEETINGS OF MEMBERS
7.1 Meetings. Meetings of the Members, for any purpose or purposes, may be
called by any Member or Members owning at least twenty-five percent (25%) of
the aggregate Percentage Interests in the Company or by any Manager.
7.2 Place of Meetings. The Members may designate any place, either within
or outside the State of California, as the place of meeting for any meeting of
the Members. If no designation is made, the place of meeting shall be the
principal place of business of the Company.
7.3 Notice of Meeting. Except as provided in Section 7.4, written notice
stating the place, day and hour of the meeting and the purpose or purposes for
which the meeting is called shall be delivered not less than five (5) nor more
than thirty (30) days before the date of the meeting, either personally or by
mail, by or at the direction of the Managers or Member or Members calling the
meeting, to each Member entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered two (2) calendar days after being
deposited in the United States mail, addressed to the Member at his address as
it appears on the books of the Company, with postage thereon prepaid.
7.4 Record Date. For the purpose of determining Members entitled to notice
of or to vote at any meeting of Members or any adjournment thereof, or Members
entitled to receive payment of any distribution, or in order to make a
determination of Members for any other Purpose, the date on which notice of
the meeting is mailed or the date on which the resolution declaring such
distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section, such
determination shall apply to any adjournment thereof.
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7.5 Quorum. Members owning a Majority Interest, represented in person or by
proxy, shall constitute a quorum at any meeting of Members. In the absence of
a quorum at any such meeting, a majority of the Percentage Interests so
represented may adjourn the meeting from time to time for a period not to
exceed sixty (60) days without further notice. However, if the adjournment is
for more than sixty (60) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Member of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The Members present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the
withdrawal during such meeting of that number of Percentage Interests whose
absence would cause less than a quorum.
7.6 Manner of Acting. If a quorum is present, the affirmative vote of
Members owning a Majority Interest present in person or represented by proxy
shall be the act of the Members, unless the vote of a greater or lesser
proportion or number is otherwise required by the California Act, by the
Articles or by this Operating Agreement. Any Member may participate in a
meeting by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, and participation in the meeting by means of such equipment shall
constitute presence in person at such meeting.
7.7 Proxies. At all meetings of Members, a Member may vote in person or by
proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the Managers of the Company
before or at the time of the meeting. No proxy shall be valid after eleven
(11) months from the date of its execution, unless otherwise provided in the
proxy.
7.8 Action by Members Without a Meeting. Action required or permitted to be
taken at a meeting of Members may be taken without a meeting if the action is
evidenced by one or more written consents describing the action taken, signed
by each Member entitled to vote and delivered to the Managers of the Company
for inclusion in the minutes or for filing with the Company records. Action
taken under this Section is effective when all Members entitled to vote have
signed the consent, unless the consent specifies a different effective date.
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7.9 Waiver of Notice. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the person entitled to such
notice, whether before, at or after the time stated therein, shall be
equivalent to the giving of such notice.
ARTICLE VIII
STANDARD OF CARE AND
INDEMNIFICATION OF MANAGERS, OFFICERS AND EMPLOYEES
8.1 Standard of Care. No Manager or officer shall be liable to any Member
or to the Company by reason of the actions of such person in the conduct of
the business of the Company except for fraud, gross negligence or willful
misconduct, and if the person acted in good faith and in a manner the person
reasonably believed to be in, or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful.
8.2 Indemnification of Managers, Officers and Employees. The Company shall,
to the fullest extent to which it is empowered to do so by the California Act
or any other applicable law, indemnify and make advances for expenses to any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or
she is or was a Manager, officer or employee of the Company, against losses,
damages, expenses (including attorneys' fees), judgments, fines and amounts
reasonably incurred by him in connection with such action, suit or proceeding.
ARTICLE IX
RIGHTS AND OBLIGATIONS OF MEMBERS
9.1 Limitation of Liability.
A Member will not be personally liable to creditors of the Company for any
debts, obligations, liabilities or losses of the Company, whether arising in
contract, tort or otherwise, beyond such Member's Capital Contributions.
9.2 List of Members. Upon written request of any Member, the Managers shall
provide a list showing the names, addresses and Membership Interests of all
Members.
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9.3 Company Books. In accordance with Section 11.8 herein, the Board of
Managers shall maintain and preserve, during the term of the Company, all
accounts, books and other relevant Company documents. Upon reasonable written
request, each Member and his duly authorized representative shall have the
right, during ordinary business hours as reasonably determined by the Board of
Managers, to inspect and copy such Company documents (at the requesting
Member's expense) which the Managers, in their discretion, deem appropriate
for any purpose reasonably related to the requesting Member's Membership
Interest.
9.4 Priority and Return of Capital. Except as may be expressly provided in
Article XI, no Member shall have priority over any other Member, either as to
the return of Capital Contributions or as to Net Profits, Net Losses or
distributions; provided that this Section shall not apply to the repayment by
the Company of loans (as distinguished from Capital Contributions) which a
Member has made to the Company.
9.5 Resignation. No Member shall have the right to voluntarily resign as a
Member of the Company prior to the dissolution and winding up of the Company,
except that upon the Closing of the Call under Section 9.03 of the Membership
Interest Agreement, ONE COLOR COMMUNICATIONS , INC. shall have the right to
resign as a Member. Any resignation other than in such connection (a
"Resignation") by a Member shall constitute a breach of this Operating
Agreement and subject the Member submitting such Resignation to damages for
breach of this Operating Agreement by such Member.
ARTICLE X
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
10.1 Initial Capital Contributions. Each Member shall contribute such amount
set forth on Exhibit A as its Initial Capital Contribution.
If a Member fails to make the Initial Capital Contribution specified in this
section within 15 days after the effective date of this Agreement, that
Member's entire Membership Interest shall terminate, and that Member shall
indemnify and hold the Company and the other Members harmless from any loss,
cost, or expense, including reasonable attorneys' fees, caused by the failure
to make the Initial Capital Contribution.
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10.2 Additional Capital Contributions. If capital is needed for growth of
the Company, the Board of Managers may by unanimous vote: 1) require equal
Additional Capital Contributions from the Members; 2) seek equal loans by the
Members to the Company; and/or 3) seek third party loans.
10.3 Capital Accounts.
(a) A separate Capital Account will be maintained for each Member. Each
Member's Capital Account will be increased by (l) the amount of money
contributed by the Member to the Company; (2) the fair market value of
property contributed by the Member to the Company (net of liabilities secured
by such contributed property that the Company is considered to assume or take
subject to under Section 752 of the Code); (3) allocations of Net Profits and
Net Losses; and (4) allocations to such Member of income described in Section
705(a)( 1)(B) of the Code. Each Member's Capital Account will be decreased by
(1) the amount of money distributed to the Member by the Company; (2) the fair
market value of property distributed to the Member by the Company (net of
liabilities secured by such distributed property that such Member is
considered to assume or take subject to under Section 752 of the Code); (3)
allocations to such Member of expenditures described in Section 705(a)(2)(b)
of the Code; and (4) allocations to the account of such Member losses and
deductions as set forth in such Treasury Regulations, taking into account
adjustments to reflect book value.
(b) In the event of a permitted sale or exchange of a Membership Interest in
the Company pursuant to Article XII hereof, the Capital Account of the
Transferring Member shall become the Capital Account of the transferee to the
extent it relates to the transferred Membership Interest in accordance with
Treasury Regulations l.704-1(b)(2)(iv).
(c) The manner in which Capital Accounts are to be maintained pursuant to
this Section 10.3 is intended to comply with the requirements of Section
704(b) of the Code and the Treasury Regulations promulgated thereunder. If the
Company determines that the manner in which Capital Accounts are to be
maintained pursuant to the preceding provisions of this Section 10.3 should be
modified in order to comply with Section 704(b) of the Code and the Treasury
Regulations, then notwithstanding anything to the contrary contained in the
preceding provisions of this Section 10.3, the method in which Capital
Accounts are maintained shall be so modified; provided, however, that any
change in the manner of maintaining Capital Accounts shall not materially
alter the economic agreement between or among the Members as set forth in this
Operating Agreement.
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(d) Except as otherwise required in the California Act (and subject to
Sections 10.1 and 10.2), no Member shall have any liability to restore all or
any deficit balance in such Member's Capital Account.
(e) A Member shall not be entitled to withdraw any part of the Member's
Capital Contribution or to receive any distributions, whether of money or
property, from the Company except as provided in this Agreement.
ARTICLE XI
ALLOCATIONS, INCOME TAX, ELECTIONS AND REPORTS
11.1 Allocations of Net Profits and Net Losses. The Net Profits and Net
Losses of the Company shall be allocated as follows:
(a) Net Profit. The Net Profits for a fiscal year or other period of the
Company shall be allocated to the Members in Accordance with their respective
Membership Interests.
(b) Net Losses. The Net Losses, if any, for a fiscal year or other period of
the Company shall be allocated in the Members in accordance with their
respective Membership Interests.
11.2 Special Allocations to Capital Accounts. Notwithstanding Section 11.1
hereof:
(a) No allocations of loss, deduction and/or expenditures described in
Section 705(a)(2)(B) of the Code shall be charged to the Capital Account of
any Member if such allocation would cause such Member to have a Deficit
Capital Account. The amount of the loss, deduction and/or Section 705(a)(2)(B)
of the Code expenditure which would have caused a Member to have a Deficit
Capital Account shall instead be charged to the Capital Account of any Members
which would not have a Deficit Capital Account as a result of the allocation,
in proportion to their respective Capital Contributions, or, if no such
Members exist, then to the Members in accordance with their interests in
Company Net Profits pursuant to Section 11.1.
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(b) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations 1.704-1
(b)(2)(ii) (d) (4), (5) or (6) which create or increase a Deficit Capital
Account of such Member, then items of Company income and gain (consisting of a
pro rata portion of each item of Company income, including gross income, and
gain for such year and, if necessary, for subsequent years) shall be specially
credited to the Capital Account of such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations,
the Deficit Capital Account so created as quickly as possible. It is the
intent that this Section 11.2(b) be interpreted to comply with the alternate
test for economic effect set forth in Treasury Regulations 1.704-1 (b)(2)(ii)
(d).
(c) In the event any Member would have a Deficit Capital Account at the end
of any Company taxable year which is in excess of the sum of any amount that
such Member is obligated to restore to the Company under Treasury Regulations
1.704-1(b)(2)(ii)(c) and such Member's share of minimum gain as defined in
Treasury Regulations l.704-2(g)(l) (which is also treated as an obligation to
restore in accordance with Treasury Regulations l.704-1(b)(2)(ii)(d)), the
Capital Account of such Member shall be specially credited with items of
Membership income (including gross income) and gain in the amount of such
excess as quickly as possible.
(d) Notwithstanding any other provision of this Section 11.2, if there is a
net decrease in the Company's minimum gain as defined in Treasury Regulations
1.704-2(d) during a taxable year of the Company, then, the Capital Account of
each Member shall be allocated items of income (including gross income) and
gain for such year (and if necessary for subsequent years) equal to that
Member's share of the net decrease in Company minimum gain. This Section
11.2(d) is intended to comply with the minimum gain chargeback requirement of
Treasury Regulations 1.704-2 and shall be interpreted consistently therewith.
(e) Items of Company loss, deduction and expenditures described in Section
705(a)(2)(B) of the Code which are attributable to any nonrecourse debt of the
Company and are characterized as partner nonrecourse deductions under Treasury
Regulations l .704-2(i) shall be allocated to the Members' Capital Accounts
in accordance with Treasury Regulations l.704-2(i).
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(f) Beginning in the first taxable year in which there are allocations of
"nonrecourse deductions" (as described in Treasury Regulations 1.704-2(b)),
such deductions shall be allocated to the Members in accordance with, and as
part of, the allocations of Company profit or loss for such period.
(g) In accordance with Section 704 (c) of the Code, if a Member contributes
property with a fair market value that differs from its adjusted basis at the
time of contribution, income, gain, loss and deductions with respect to the
property shall, solely for federal 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 and its fair market value at the time of
contribution.
(h) Pursuant to Section 704(c)(1)(B) of the Code, if any contributed property
is distributed by the Company other than to the contributing Member within
five (5) years of being contributed, then, except as provided in Section
704(c)(2) of the Code, the contributing Member shall be treated as recognizing
gain or loss from the sale of such property in an amount equal to the gain or
loss that would have been allocated to such Member under Section 704(c)(1)(A)
of the Code if the property had been sold at its fair market value at the time
of the distribution.
(i) In connection with a Capital Contribution of money or other property
(other than a de minimis amount) by a new or existing Member, or in connection
with the liquidation of the Company, the Capital Accounts of the Members shall
be adjusted to reflect a revaluation of Company property (including intangible
assets) in accordance with Treasury Regulations 1.704-1(b)(2)(iv)(f). If,
under Treasury Regulations 1.704-1(b)(2)(iv)(f), Company property that has
been revalued is properly reflected in the Capital Accounts and on the books
of the Company at a book value that differs from the adjusted tax basis of
such property, then depreciation, depletion, amortization and gain or loss
with respect to such property shall be shared among the Members' in a manner
that takes account of the variation between the adjusted tax basis of such
property and its book value, in the same manner as variations between the
adjusted tax basis and fair market value of property contributed to the
Company are taken into account in determining the Members' shares of tax items
under Section 704(c) of the Code.
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(j) Any credit or charge to the Capital Accounts of the Members pursuant to
Sections 11.1(b), (c), and/or (d) hereof shall be taken into account in
computing subsequent allocations of profits and losses pursuant to
Section 11.1, so that the net amount of any items charged or credited to
Capital Accounts pursuant to Sections 11.1 and 11.2 shall to the extent
possible, be equal to the net amount that would have been allocated to the
Capital Account of each Member pursuant to the provisions of this Article XI
if the special allocations required by Sections 11.2(b), (c) and/or (d) had
not occurred.
11.3 Distributions. Interim distributions and liquidating distributions
shall be made as follows:
(a) Subject to Section 17254 of the California Act, the Board of Managers
shall cause the Company to make quarterly distributions of fifty percent (50%)
of the estimated annual earnings for the Company to the Members to be divided
equally. In addition, the Managers may unanimously vote on interim
distributions of Distributable Cash or other property at such time and for
such amounts as determined by the Managers. All interim distributions of
Distributable Cash or other property shall be made in proportion to the
Members' respective Membership Interests.
(b) Upon liquidation of the Company, after settling accounts of creditors in
the order described in Section 14.3, liquidating distributions will be made in
accordance with the Members' positive Capital Account balances after taking
into account all Capital Account adjustments of the Company's taxable year
during which the liquidation occurs. Liquidation proceeds will be paid within
60 days of the end of the taxable year of liquidation (or, if later, within
ninety (90) days after the date of the liquidation).
(c) If a Member resigns under Section 9.5, the Company shall, subject to
Section 11.3(d), pay to the withdrawing Member any positive balance in the
withdrawing Member's Capital Account within ninety (90) days from the date of
the Resignation. The remaining Members shall have the right in their sole
discretion at any time within sixty (60) days of the Resignation to determine
all Net Profits and Net Losses of the Company as of the date of such
determination and to make appropriate credits and debits to the Members'
Capital Accounts. The Capital Account of the withdrawing Member as of the date
of determination shall be conclusively deemed to be the fair value of all his
Membership Interest and the payment provided for in this Section 11.3(c) shall
be the full and only consideration for the redemption of the withdrawing
Member's Membership Interest.
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(d) The Company may offset damages for breach of this Operating Agreement by
a Member whose interest is liquidated (either upon the Resignation of the
Member or the liquidation of the Company but not in the case of a Call under
the Membership Interest Agreement) against the amount otherwise distributable
to such Member pursuant to this Section in addition to any remedies otherwise
available under applicable law.
(e) A Member has no right to demand and receive any distribution in a form
other than cash.
11.4 Accounting Principles. The Company's financial statements shall be
prepared and its profits and losses shall be determined in accordance with
generally accepted accounting principles applied on a consistent basis under
the accrual method of accounting.
11.5 Interest on and Return of Capital Contributions. No Member shall be
entitled to interest on his Capital Contribution or a return of his Capital
Contribution.
11.6 Loans to Company. Nothing in this Operating Agreement shall prevent any
Member from making secured or unsecured loans to the Company by agreement with
the Company.
11.7 Accounting Period. The Company's accounting period shall be the Fiscal
Year.
11.8 Records and Reports. At the expense of the Company, the Managers shall
maintain records and accounts of all operations and expenditures of the
Company. At a minimum, the Company shall keep at its principal place of
business the following records:
(a) A current list of the full name and last known business residence, or
mailing address of each Member;
(b) A copy of the Articles and all amendments thereto, together with executed
copies of any powers of attorney pursuant to which any amendment has been
executed;
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(c) Copies of the Company's financial statements and income tax returns and
reports, if any, for the three most recent years; and
(d) Copies of the Company's currently effective written Operating Agreement.
11.9 Returns and Other Elections. The Managers shall cause the preparation
and timely filing of all tax returns required to be filed by the Company
pursuant to the Code and all other tax returns deemed necessary and required
in each jurisdiction in which the Company does business. Copies of such
returns or pertinent information therefrom, shall be furnished to the Members
within a reasonable time after the end of the Company's fiscal year.
All elections permitted to be made by the Company under federal or state laws
shall be made by the Managers in their sole discretion.
In recognition of the fact that the Company expects to be treated as a
partnership for federal income tax purposes, the Members agree to treat their
Membership Interests as partnership interests for U.S. federal and state
income tax reporting purposes.
11.10 Tax Matters Partner. Oakland National Engraving Company, Inc. shall be
designated the "Tax Matters Partner" (as defined in Section 6231 of the Code),
and is authorized and required to represent the Company (at the Company's
expense) in connection with all examinations of the Company's affairs by tax
authorities, including, without limitation, administrative and judicial
proceedings, and to expend Company funds for professional services and costs
associated therewith. The Members agree to cooperate with each other and to
do or refrain from doing any and all things reasonably required to conduct
such proceedings.
ARTICLE XII
RESTRICTIONS ON TRANSFERABILITY
12.1 Restriction on Transfer of Membership Interests. During the term of
this Agreement, no Member shall sell, give, pledge, assign or otherwise
dispose of any or all of his Membership Interests to any other person or
entity except in accordance with the terms hereof.
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12.2 Voluntary Sales.
(a) If a Member has received a bona fide written offer stated in terms of
cash or cash equivalents from a prospective purchaser of any or all of his
Membership Interests (herein referred to as the "Offered Membership
Interests"), before accepting such offer, such Member (herein referred to as
the "Offering Member") shall offer such Membership Interests in writing to the
Company at the price and on the other terms and conditions contained in such
offer; provided, however, that the Company shall not be required to meet any
non-monetary terms of the offer, including without limitation delivery of
other securities in exchange for the Offered Membership Interests. The notice
given by the Offering Member shall contain a complete copy of the offer
received by him from the bona fide offeror. If the Offering Member is Xxxxxxx,
Xxxxxxx shall also give notice to KC offering to purchase all of KC's
Membership Interest for an amount which is the greater of the Call Purchase
Price under the Asset Purchase and Membership Interest Agreement or the amount
of the bona fide written offer whichever is greater. If KC accepts such offer
the purchase shall occur as set forth for a Call sale in Article IX of the
Asset Purchase and Membership Interest Agreement.
(b) The Company shall have the right, within thirty (30) days after receipt
of such notice, to notify the Offering Member of its election to purchase. In
such notice, the Company shall also fix a closing date not more than thirty
(30) days after the date of its notice of election to purchase.
(c) Should the Company not desire to purchase the Membership Interests
offered, the Company shall promptly communicate the offer for the remaining
interests to the other Members who shall have thirty (30) days from the date
of such notice within which to notify the Offering Member and the Company of
their respective elections to purchase. The other Members shall have the
option of purchasing the Membership Interests at the same price and terms as
the Company. The closing date of any purchase hereunder by such other Members
shall be not more than thirty (30) days after the date of their notice of
election to purchase. Any Membership Interests purchased by the other Members
shall be purchased in proportion to their holdings. That is, the number of
Offered Membership Interests that each other Member shall be entitled to
purchase hereunder shall be determined by multiplying the total Offered
Membership Interests by a fraction, the numerator of which shall be the number
of Membership Interests then owned by the purchasing Member (or which the
purchasing Member shall have the right to acquire by reason of a then pending
offer to purchase) and the denominator of which shall be the number of
Membership Interests then owned by all purchasing Members then participating
in such offer.
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(d) Unless the Company and the other Members agree to purchase the Offered
Membership Interests pursuant to the terms hereof, their right to purchase
said interests shall terminate and the Offering Member shall be free for a
period of ninety (90) days to sell the Offered Membership Interests to the
third person at the same price and on the same terms set forth in the Offering
Member's notice of intended sale. Any person who acquires such Membership
Interests shall automatically be bound by the terms of this Agreement
(including the Call provisions set forth in the Membership Interest Agreement)
and shall be required to join in and execute and deliver a copy of this
Agreement as an additional Member party. If the Membership Interests are not
sold by the Offering Member within the ninety (90) day period, all rights to
transfer the Membership Interests free of the foregoing restrictions shall
terminate.
12.3 Sale of Membership Interests Upon Death, Bankruptcy, Dissolution.
(a) Following the death, bankruptcy, winding up, dissolution or
reorganization of a Member, the Company and the remaining Members shall have
the option to purchase all of the Membership Interests held by that Member on
the date of his death/bankruptcy or dissolution, and the estate or successors
in interest of that Member shall be obligated to sell all of its said
interests all on terms herein provided if the Company or the remaining Members
exercise their respective options hereunder.
(b) The Company shall have the right, within thirty days after receipt of
notice of the death, bankruptcy or dissolution of a Member, to notify the
estate or successor of such Member of its election to purchase. In such
notice, the Company shall also fix a Closing Date not more than thirty days
(30) after the date of its notice of election to purchase.
(c) Should the Company not desire to purchase the Membership Interests of
that Member, the Company shall promptly communicate the same to the other
Members who shall have thirty (30) days from the date of such notice within
which to notify the estate or successor of the such Member and the Company of
their respective elections to purchase all of such interests. The other
Members shall have the option of purchasing interests at the same price and
terms as the Company. The closing date of any purchase hereunder by such
other Members shall not be more than thirty (30) days after the date of their
notice of election to purchase. Any Membership Interests purchased by the
other Members shall be purchased in proportion to their holdings, calculated
in the manner set forth in Section 12.2(c) hereof.
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(d) The price to be paid for the purchased Membership Interest under this
Paragraph shall be the Applicable Percentage of Total Equity Value (as defined
in the Membership Interests Agreement). The representative of the estate or
successor of such Member shall cooperate with the Company and the remaining
Members to effectuate the purposes of this Agreement. All purchases shall be
paid for all in cash at the Closing Date.
12.4 Effectiveness of Transfer. Any sale or gift of any of a Member's
Membership Interest in the Company will take effect on the first day following
receipt by the Members of written notice that all of the requirements of the
above Sections have been met.
12.5 Vote on Transfer. Neither the Member whose interest is subject to
purchase under this Article, nor such Member's Affiliate, shall participate in
any vote or discussion of any matter pertaining to the disposition of the
Member's Membership Interest in the Company under this Agreement.
ARTICLE XIII
ADDITIONAL MEMBERS
13.1 Admission of New Members. From the date of the formation of the
Company, any Person or Entity acceptable to the Members by their unanimous
vote thereof may become a Member in the Company by the issuance by the Company
of a Membership Interest for such consideration as the members by their
unanimous vote shall determine, or by being a permitted transferee of an
existing Membership Interest in accordance with Article XII.
13.2 Allocations to New Members. No new Members shall be entitled to any
retroactive allocation of any item of income, gain, loss, deduction or credit
of the Company. The Managers may, at their option, at the time a Member is
admitted, close the Company books (as though the Company's tax year had ended)
or make pro rata allocations of items of income, gain, loss, deduction or
credit to a new Member for that portion of the Company's tax year in which a
new Member was admitted in accordance with the provisions of Section 706(d) of
the Code and the Treasury Regulations promulgated thereunder.
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ARTICLE XIV
DISSOLUTION AND TERMINATION
14.1 Dissolution.
(a) The Company shall be dissolved upon the occurrence of any of the
following events, and only such events:
(i) when the period fixed for the duration of the Company shall expire
pursuant to Section 2.5 hereof;
(ii) by the unanimous written agreement of all Members;
(iii) the entry of a decree of judicial dissolution under Section 17351 of
the California Act;
(iv) administrative dissolution under Section 17350 of the California Act;
or
(v) upon bankruptcy of a Member.
(b)Dissolution of the Company shall be effective on the day on which an event
described above occurs, but the Company shall not terminate until Articles of
Dissolution shall be filed with the Secretary of State of the State of
California and the assets of the Company are distributed as provided in
Section 14.4 below. Notwithstanding the dissolution of the Company, prior to
the termination of the Company, the business of the Company and the affairs of
the Members shall continue to be governed by this Operating Agreement.
14.2 Winding Up. The Members who have not wrongfully dissolved the Company
may wind up the Company's affairs, but a Court, upon cause shown, may wind up
the Company's affairs upon application of any Member or his legal
representative, and in connection therewith, may appoint a liquidating
trustee.
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14.3 Distribution of Assets Upon Winding Up.
On the dissolution of the Company, the Company shall engage in no further
business other than that necessary to wind up the business and affairs of the
Company. The Managers who have not wrongfully dissolved the Company, or, if
there is no such Manager, the Members, shall wind up the affairs of the
Company. The Delegates winding up the affairs of the Company shall give
Notice of the commencement of winding up by mail to all known creditors and
claimants against the Company whose addresses appear in the records of the
Company. After paying or adequately providing for the payment of all known
debts of the Company (except debts owing to Members), the remaining assets of
the Company shall be distributed or applied in the following order:
(a) To pay the expenses of liquidation.
(b) To the establishment of reasonable reserves by the Delegates for
contingent liabilities or obligations of the Company. Upon the Delegate's
determination that such reserves are no longer necessary, said reserves shall
be distributed as provided in this Section.
(c) To repay outstanding loans to Members. If there are insufficient funds
to pay such loans in full, each Member shall be repaid in the ratio that the
Member's loan, together with interest accrued and unpaid thereon, bears to the
total of all such loans from Members, including all interest accrued and
unpaid thereon. Such repayment shall first be credited to unpaid principal
and the remainder shall be credited to accrued and unpaid interest.
(d) Among the Members with Positive Capital Account Balances.
Each Member shall look solely to the assets of the Company for the return of
the Member's investment, and if the Company property remaining after the
payment or discharge of the debts and liabilities of the Company is
insufficient to return the investment of each Member, such Member shall have
no recourse against any other Members for indemnification, contribution, or
reimbursement, except as specifically provided in this Agreement.
14.4 Articles of Dissolution. When all debts, liabilities and obligations
have been paid and discharged or adequate provisions have been made therefor
and all of the remaining property and assets have been distributed to the
Members, articles of dissolution shall be executed by one or more authorized
persons, which articles of dissolution shall set forth the information
required by the California Act. Articles of dissolution shall be filed with
the California Secretary of State to accomplish the cancellation of the
Articles of the Company upon the dissolution and completion of the winding up
of the Company.
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ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Notices. Any notice, demand or communication required or permitted to
be given by any provision of this Operating Agreement shall be in writing and
shall be deemed to have been given when actually received. Any such notice,
demand or communication may be given by mail, express package service, telex
or telefax and shall be addressed to Member at the addresses shown in Article
IV, and/or to the Company at its principal office or to such other address as
a party may from time to time designate by notice to the other parties.
15.2 Application of California Law. This Operating Agreement, and the
application of interpretation hereof, shall be subject to and is governed
exclusively by its terms and by the laws of the State of California, and
specifically the California Act.
15.3 Waiver of Action for Partition. Each Member irrevocably waives during
the term of the Company any right that he or she may have to maintain any
action for partition with respect to the property of the Company.
15.4 Amendment. This Operating Agreement may be amended at any time in
writing by the unanimous vote of the Members.
15.5 Execution of Additional Instruments. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply
with any laws, rules or regulations.
15.6 Construction. Whenever the singular number is used in this Operating
Agreement and when required by the context, the same shall include the plural
and vice versa, and the masculine gender shall include the feminine and neuter
genders and vice versa.
15.7 Headings. The headings in this Operating 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 Operating Agreement or any provision
hereof.
37
15.8 Waivers. The failure of any party to seek redress for violation of or
to insist upon the strict performance of any covenant or condition of this
Operating Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from registered effect of an original
violation.
15.9 Rights and Remedies Cumulative. The rights and remedies provided by
this Operating Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive the right to use any or all other
remedies. Said rights and remedies are given in addition to any other rights
the parties may have by law, statute, ordinance or otherwise.
15.10 Severability. If any provision of this Operating Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Operating Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
15.11 Heirs, Successors and Assigns. Each and all of the covenants, terms,
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, successors
and assigns.
15.12 No Third Party Beneficiaries. None of the provisions of this Operating
Agreement shall be for the benefit of or enforceable by any third party who is
not a party to this Operating Agreement.
15.13 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
15.14 Dispute Resolution
(a) General. Any disputes arising under this Agreement between the Company
and any Member or between any Members shall be resolved through the procedures
specified in this Section 15.14. The resolution of any disputes under this
Section 15.14 (whether through the negotiation, mediation or arbitration
procedures specified herein) shall be final and binding upon the parties to
such dispute, and specifically enforceable under applicable law by a court of
competent jurisdiction. The procedures set forth in this Section 15.14 shall
be initiated by the delivery of a written notice by the Company or a Member to
the other party or parties to the dispute stating that the claiming party has
a claim against the other party or parties, describing in reasonable detail
the nature and amount of such claim and the basis thereof.
38
(b) Negotiation. Prior to the submission of any dispute to the mediation or
arbitration procedures specified in subsections (c) or (d) of Section 15.14,
the parties to the dispute shall make every effort in good faith to resolve
such dispute by mutual agreement within thirty (30) days following the
initiation of the procedures set forth in Section 15.14 (the date on which
such thirty days expires, or any extension of such period as the parties to
the dispute may mutually agree to in writing, is hereby called the "Claim
Resolution Deadline Date").
(c) Mediation Procedures. If the parties to the dispute have not resolved
such dispute pursuant to the procedures set forth in subsection (b) of the
Section 15.14 by the Claim Resolution Deadline Date, then the mediation
procedures provided in this subsection (c) shall apply. Within thirty (30)
days after the Claim Resolution Deadline Date, the parties to the dispute
shall jointly appoint an independent and impartial mediator ("Mediator"). The
Mediator shall establish the procedures designed to facilitate the mediation
of such dispute, shall meet the representatives of the parties to the dispute
and take other appropriate actions to facilitate a negotiated or other
voluntary resolution of such dispute. If the parties have not resolved the
dispute within thirty (30) days after the appointment of the Mediator or such
later date as to which they mutually agree in writing (the "Mediation Deadline
Date"), then the arbitration procedures specified in subsection (d) shall
apply.
(d) Arbitration. If the parties to the dispute have not resolved the dispute
by the Mediation Deadline Date, the parties to the dispute shall jointly
select an independent and impartial arbitrator (the "Arbitrator"). The
Arbitrator shall have such expertise as the parties to the dispute agree is
relevant. The Arbitrator may be removed only by unanimous action of the
parties to the dispute. If the parties to the dispute are unable to agree
upon the selection of the Arbitrator within thirty (30) days after the
Mediation Deadline Date or such later date as to which they mutually agree in
writing, application shall be made to the American Arbitration Association in
Oakland, California ("AAA"), for the selection and appointment of the
Arbitrator. The arbitration proceeding shall be conducted in accordance with
the then-current rules of the AAA for arbitration of business disputes, to the
extent that such rules are not inconsistent with Section 15.14. The
Arbitrator may modify the procedures set forth in such rules from time to
time with the prior approval of the parties to the dispute. The place of such
arbitration shall be Oakland, California, or such other location agreed to by
the parties to the dispute. The arbitration proceedings shall be concluded
within one hundred eighty (180) days of the appointment of the Arbitrator or
such later date as the parties to the dispute mutually agree in writing.
Within thirty (30) days of the conclusion of the arbitration proceedings, the
Arbitrator shall present to the parties to the dispute a written statement of
the determination regarding the dispute. Failure to submit a position by any
party to the dispute shall be deemed an acceptance by such party of the other
party's position, and shall constitute a final, binding and specifically
enforceable decision against such party.
39
(e) Costs and Expenses. The fees and expenses of the Mediator and/or
Arbitrator shall be shared equally by each party to the dispute. Except as
otherwise provided in the proceeding sentence, if any action at law or in
equity is brought to enforce or interpret the provisions of this Agreement or
any other agreement or instrument provided for herein, the prevailing party in
such action shall be entitled to recover as an element of such party's costs
of suit, and not as damages, reasonable attorneys' fees, to be fixed by the
court. The prevailing party shall be the party who is entitled to recover its
costs of suit as ordered by the court or by applicable law or court rules. A
party not entitled to recover its costs shall not recover attorneys' fees. No
sum for attorneys' fees shall be counted in calculating the amount of judgment
for purposes of determining whether a party is entitled to recover its costs
or attorneys' fees.
(f) Confidentiality. Any dispute resolution proceeding (including without
limitation any mediation proceeding) held pursuant to Section 15.14 shall not
be public. In addition, except as may be required by law, each party to the
dispute, their respective representatives, the Mediator and the Arbitrator
shall strictly maintain the confidentiality of all issues, disputes,
arguments, positions, interpretations, awards, determinations, enclosures,
exhibits, summaries, compilations, studies, analyses, notes, documents,
statements, schedules and other similar items associated therewith.
40
15.15 Investment Representations. The undersigned Members understand
(i) that the Membership Interests issued pursuant to this Operating Agreement
have not been registered under the Securities Act of 1933 or any state
securities laws (the "Securities Acts") because the Company is issuing these
Membership Interests in reliance upon the exemptions from the registrations
requirements of the Securities Acts providing for issuance of securities not
involving a public offering, (ii) that the Company has relied upon the fact
that the Membership Interests are to be held by each Member for investment,
and (iii) that exemption from registrations under the Securities Acts would
not be available if the Membership Interests were acquired by a Member with a
view to distribution.
Accordingly, each Member hereby confirms to the Company that such Member is
acquiring a Membership Interest for such own Member's account, for investment
and not with a view to the resale or distribution thereof without complying
with an exemption for registrations under the Securities Acts. Each Member
agrees not to transfer, sell or offer or sale any of portion of the Membership
Interest unless there is an effective registration or other qualification
relating thereto under the Securities Acts or unless the holder of the
Membership Interest delivers to the Company an opinion of counsel,
satisfactory to the Company, that such registration or other qualification
under such Securities Acts is not required in connection with such transfer,
offer or sale. Each Member understands that the Company is under no
obligation to register the Membership Interests or to assist such Member in
complying with any exemption from registration under the Securities Acts if
such Member should at a later date wish to dispose of the Membership Interest.
Furthermore, each Member realizes that the Membership Interests are unlikely
to qualify for disposition under Rule 144 of the Securities and Exchange
Commission.
Prior to acquiring a Membership Interest, each Member has made an
investigation of the Company and its business and the Company has made
available to each such Member all information with respect thereto which such
Member needed to make an informed decision to acquire a Membership Interest.
Each Member considers himself to be a person possessing experience and
sophistication as an investor which are adequate for the evaluation of the
merits and risks of such Member's investment in a Membership Interest.
41
15.16 Execution of Notes, Checks, Contracts and Other Instruments. Subject
to Section 6.6 hereof, all notes, bonds, drafts, acceptances, checks,
endorsements (other than for deposit), guarantees and all evidences of
indebtedness of the Company whatsoever, and all deeds, mortgages, contracts
and other instruments requiring execution by the Company, may be signed by the
President, any Vice President or the Treasurer, and authority to sign any of
the foregoing, which may be general or confined to specific instances, may be
conferred by the Board of Managers upon any other person or persons. Any
person having authority to sign on behalf of the Company may delegate, from
time to time, by instrument in writing, all or any part of such authority may
be general or confined to specific instances. Facsimile signatures on checks
may be used if authorized by the Board of Managers.
IN WITNESS WHEREOF, the parties hereto have caused their signatures, or have
caused the signatures of their duly authorized representatives, to be set
forth below on the day and year first above written.
XXXXXXX HOLDING CORP.
By:
------------------------------
Its:
------------------------------
XXXXX CORPORATION
By:
------------------------------
Xxxxxxx Xxxxx, President
42
EXHIBIT A
MEMBERSHIP
INTEREST IN THE DESCRIPTION OF INITIAL
MEMBER / ADDRESSES COMPANY (%) CAPITAL CONTRIBUTIONS
------------------ --------------- ----------------------
Xxxxxxx Holding Corp. 50% Certain of the assets and
c/x Xxxxxxxx International liabilities of KC purchased
Corporation pursuant to and as described
Two NorthShore Center in the Membership Interest
Xxxxxxxxxx, XX 00000 Agreement, but not including
Attention: President any contingent liabilities of XX
Xxxxx Corporation 50% Certain of the assets and
0000 00xx Xxxxxx liabilities of KC as described
Xxxxxxx, XX 00000 in the Membership Interest
Agreement, but not including
any contingent liabilities of KC
