Exhibit 10.1
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
M2 LEASE FUNDS LLC
THIS SECOND AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement") of M2
Lease Funds LLC (the "Company") is made as of August 26, 2005 by and between
Quad City Bank and Trust Company ("QCBT") and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇▇")
(collectively, the "Members," and individually, a "Member"). Capitalized terms
used in this Agreement without definition shall have the meanings assigned to
them in Exhibit A attached to this Agreement.
W I T N E S S E T H:
WHEREAS, certain current and former members of the Company and the Company are
parties to that certain Operating Agreement dated as of January 6, 1998 (the
"Original Agreement");
WHEREAS, the Original Agreement was amended and restated in its entirety on
January 13, 2005, the ("First Amended Agreement") when the Company sold and
issued certain units to State Financial Services Corporation ("SFSC");
WHEREAS, pursuant to that certain Unit Purchase Agreement dated August 12, 2005
by and between ▇▇▇▇▇▇▇▇▇▇▇ and SFSC, ▇▇▇▇▇▇▇▇▇▇▇ purchased all of SFSC's
ownership interest in the Company;
WHEREAS, pursuant to that certain Unit Purchase Agreement by and among QCBT and
▇▇▇▇▇▇▇▇▇▇▇ (the "Unit Purchase Agreement"), QCBT purchased as of the date
hereof an eighty percent (80%) ownership interest in the Company;
WHEREAS, as of the date hereof ▇▇▇▇▇▇▇▇▇▇▇ has retained a twenty percent (20%)
ownership interest in the Company; and
WHEREAS, the Members now desire to set forth the terms and conditions of their
agreements and understandings in this Agreement, which shall replace and
supercede the First Amended Agreement, effective as of the date hereof.
NOW, THEREFORE, in consideration of the promises set forth herein, the parties
hereto do mutually promise and agree as follows:
ARTICLE I
General Provisions
Section 1.1. Name. The name of the Company is "M2 Lease Funds LLC".
Section 1.2. Registered Office and Agent.
(a) Office and Agent. The principal place of business of the Company and
the Company's registered office shall be a location near Brookfield,
Wisconsin, and the Company's registered agent shall be F&L Service
Corp.
(b) Changes. The Board of Directors shall appoint a new registered agent
and change the registered office, if appropriate, if: (i) the then
current registered agent resigns or (ii) the Board of Directors
determines to make an appointment or change in the registered agent.
(c) Filing upon Change. Upon the appointment of a new registered agent or
the change of the registered office, the Board of Directors shall file
or cause the filing of the document required by section 183.0105 of
the WLLCL as appropriate to the circumstances.
Section 1.3. Purpose. The purpose of the Company is to conduct any lawful
business permitted under the WLLCL.
ARTICLE II
Capital Contributions
Section 2.1. Capital Contribution and Units. Exhibit C attached to this
Agreement sets forth each Member's capital contributions made to date, the
number of Units (the "Units") held by each Member and the current Capital
Account balance of each Member opposite such Member's respective name therein.
Section 2.2. Additional Capital Contributions. The Members shall not be required
to make any additional capital contributions or loans to the Company. The
provisions set forth in this Section 2.2 shall not affect QCBT's funding
obligations set forth in Section 6.9, below.
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Section 2.3. Return of Capital. No Member is entitled to withdraw or resign from
the Company, to receive a return of any part of the Member's capital
contribution, to receive any distribution, or to receive a repayment of any
balance in the Member's Capital Account, as defined in Section 3.1, below,
except as expressly provided in this Agreement. No Member has the right to
demand that distributions be in kind. No Member will be paid interest on any
capital contribution or on the Member's Capital Account.
ARTICLE III
Capital Accounts
Section 3.1. Capital Accounts. There shall be established and maintained with
respect to each Member a capital account ("Capital Account") (each Member's
current Capital Account balance is set forth in Exhibit C) in accordance with
the following:
(a) Credits. Each Member's Capital Account shall be increased by (1) the
Member's Capital Contributions, (2) the Member's allocable share of
Profits pursuant to Article V, below, and (3) the amount of any debt
of the Company that is assumed by the Member or that is secured by any
property distributed to the Member.
(b) Debits. Each Member's Capital Account shall be decreased by (1) the
amount of cash and the Asset Value of any property distributed to the
Member, (2) the Member's allocable share of Losses pursuant to Article
V, below, and (3) the amount of any debt of the Member that is assumed
by the Company or secured by any property contributed by the Member to
the Company.
(c) Transfers. In the event any Member assigns all or any part of the
Member's Units in accordance with the terms of this Agreement, the
Transferee shall succeed to the Capital Account of the Transferor to
the extent the Capital Account relates to the transferred Units.
Section 3.2. Interpretation. The provisions of Section 3.1, above, and the other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with section 1.704-1(b) of the Treasury Regulations, the
terms and requirements of which are incorporated in this Agreement by reference,
and shall be interpreted and applied in a manner consistent with those terms and
requirements.
ARTICLE IV
Distributions
Section 4.1. Current Distributions.
(a) Current Tax Distributions. To the extent permitted by law and
consistent with the Company's obligations to its creditors as
determined by the Board of Directors, the Company shall make Tax
Distributions on or before the Tax Distribution Dates. The aggregate
amount of the Tax Distribution made with respect to any given Tax
Distribution Date shall be the product of (i) the Company's estimated
federal taxable income under the provisions of the Internal Revenue
Code (the "Code"), for the Fiscal Period ending on the last day of the
calendar month immediately preceding the Tax Distribution Date and
commencing on the first day of the calendar month that includes the
immediately previous Tax Distribution Date, multiplied by (ii) the
applicable Tax Rate. Notwithstanding the foregoing, to the extent the
Company has had an estimated federal taxable Loss for any prior Fiscal
Period in that Fiscal Year, the amount in clause (i), above, shall be
reduced by that portion of the Loss remaining after reducing taxable
income for prior Fiscal Periods in the Fiscal Year for the Loss. Each
Member shall receive a Tax Distribution proportional to the amount of
federal taxable income to be allocated to the Member pursuant to
Article V, below.
(b) Additional Tax Distributions. In the event any income tax return of
the Company, as a result of an audit or otherwise, reflects items of
income, gain, loss, or deduction that are different from the amounts
estimated pursuant to Section 4.1(a), above, with respect to a Fiscal
Year in a manner that results in additional income or gain of the
Company being allocated to the Members, an additional Tax Distribution
shall be made under the principles of Section 4.1(a), above, to the
Members (or former Members except SFSC) who are allocated the
additional income or gain, except that (i) the last day of the
calendar month in which the adjustment occurs shall be treated as a
Tax Distribution Date, (ii) the amount of the additional income or
gain shall be treated as the Company's federal taxable income, and
(iii) the applicable Tax Rate shall be that which applied for the
Fiscal Period to which the additional income or gain relates.
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(c) Equalizing Distribution. If the Company makes a distribution (or
payment in the case of a former Member) pursuant to Section 4.1(a) or
4.1(b) which is not in proportion with the number of Units held by
each Member (a "Nonprorata Tax Distribution"), the Company shall,
before making any distribution in proportion with Units pursuant to
Section 4.1(d), make distributions to its Members ("Equalizing
Distributions") to the extent that and in proportion such that after
taking into account the cumulative total of the Nonprorata Tax
Distributions and Equalizing Distributions made pursuant to this
Section 4.1(c), the cumulative total of distributions received by each
Member is equal to the cumulative total of distributions such Member
would have received if all Tax Distributions and Equalizing
Distributions made pursuant to Sections 4.1(a), (b) and this Section
4.1(c) were made in proportion to Units held at the time of the
Nonprorata Tax Distribution. Interest shall accrue on such unpaid
Equalizing Distributions from the date of any such Nonprorata Tax
Distribution to the date of payment of such corresponding Equalizing
Distribution at a floating rate equal to the prime rate published from
time to time in The Wall Street Journal, Midwest Edition. Any interest
paid on the Equalizing Distributions shall constitute a "guaranteed
payment" within the meaning of Code Section 707(c).
(d) Cash Available for Distribution. When and as approved by the Board of
Directors, Cash Available for Distribution shall be distributed to the
Members in proportion to the number of Units held during the Fiscal
Period to which the distribution relates, provided, however, unless
Unanimous Consent of the Members is obtained, the Company shall not
make a distribution other than Tax Distributions such that the
Tangible Equity Ratio is reduced below 10:1.
Section 4.2. Liquidating Distributions. In the event the Company is liquidated
pursuant to Article IX, below, the assets to be distributed pursuant to Section
9.5(d)(iii), below, shall be distributed to the Members in accordance with their
Capital Account balances, after making the adjustments for allocations under
Article V, below, up to and including the date of the liquidating distribution.
ARTICLE V
Allocation of Profits and Losses
Section 5.1. Allocation of Profits and Losses. Except as provided in Sections
5.2, 5.3, and 5.4, below, Profits and Losses shall be allocated among the
Members in proportion to the number of Units held during the Fiscal Period.
Section 5.2. Regulatory Allocations. This Agreement shall be deemed to contain
provisions relating to "minimum gain chargeback," "nonrecourse deductions,"
"qualified income offset," "gross income allocations," and any other provision
required to be contained in this Agreement pursuant to the Treasury Regulations
promulgated under section 704(b) of the Code (the "Regulatory Allocations"),
other than any requirement that a Member be required to contribute to the
Company an amount equal to any deficit in the Member's capital account.
No allocation of Loss shall be made to a Member if the allocation would result
in a negative balance in the Member's Capital Account in excess of the amount
the Member is obligated to restore or is deemed obligated to restore pursuant to
the penultimate sentences of Section 1.704-2(g)(1) and (i)(5) of the Treasury
Regulations. In the event there is a negative balance in the Member's Capital
Account in excess of the amount(s) set forth above, the Member shall be
allocated income and gain in the amount of that excess as quickly as possible to
decrease such negative balance so that it equals the amount set forth in the
preceding sentence. Any Loss that cannot be allocated to a Member pursuant to
the restrictions contained in this paragraph shall be allocated to other
Members.
The Regulatory Allocations are intended to comply with the Treasury Regulations
promulgated under section 704(b) of the Code. The other provisions of this
Article V notwithstanding, the Regulatory Allocations shall be taken into
account in allocating other Profits, Losses, and items of income, gain, and
deduction among the Members so that, to the extent possible, the net amount of
the allocations of other Profits, Losses, and other items and the Regulatory
Allocations to each Member shall equal the net amount that would have been
allocated to each such Member if the Regulatory Allocations had not occurred.
Section 5.3. Other Allocation Rules.
(a) Transfer of Units. If a Member transfers all or any portion of the
Member's Units pursuant to this Agreement during any Fiscal Period,
the Profits (or Losses) allocated to the Members for each such Fiscal
Period shall be allocated among the Members in proportion to their
respective Units from time to time during the Fiscal Period, in
accordance with section 706 of the Code, using any convention
permitted by law and selected by the Board of Directors or Officers.
(b) Determination of Allocable Amounts. The Profits, Losses, or any other
items allocable to any Fiscal Period shall be determined on a daily,
monthly, or other basis, as determined by the Board of Directors or
Officers, using any permissible method under section 706 of the Code
and the Treasury Regulations under that section.
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Section 5.4. Tax Allocations.
(a) Capital Contributions. In accordance with section 704(c) of the Code
and the Treasury Regulations under that section, income, gain, loss,
and deduction with respect to any contribution to the Company's
capital shall, solely for tax purposes, be allocated among the Members
so as to take account of any variation between the property's adjusted
basis to the Company for federal income tax purposes and its initial
Asset Value.
(b) Adjustment of Asset Value. If the Asset Value of any Company asset is
adjusted, subsequent allocations of income, gain, loss, and deduction
with respect to the asset shall take account of any variation between
the asset's adjusted basis for federal income tax purposes and its
Asset Value as so adjusted in the same manner as under section 704(c)
of the Code and the Treasury Regulations under that section.
(c) Elections. Except as otherwise provided herein, any elections or other
decisions relating to the allocations shall be made by the Board of
Directors or Officers in any manner that reasonably reflects the
purpose and intent of this Agreement. In accordance with Section
704(c) of the Code and the Treasury Regulations promulgated
thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for
income tax purposes, be allocated among the Members so as to take into
account any variation between the adjusted basis of such property to
the Company for federal and state income tax purposes and its Asset
Value using the "traditional method with curative allocations" of
making Section 704(c) allocations. Upon the request of QCBT, the
Company shall make a Section 754 election.
(d) Imputed Amounts. To the extent the Company has interest income or
deductions with respect to any obligation of or to a Member pursuant
to section 483, sections 1271-1288, or section 7872 of the Code, the
interest income or deductions shall be specially allocated to the
Member to whom the obligation relates. To the extent a Member has
income imputed to him or it and the Company receives a deduction for
such imputed income, such deduction shall be specially allocated to
such Member who has imputed income.
ARTICLE VI
Management of the Company and Actions by Members
Section 6.1. Authority and Powers of the Board of Directors.
(a) Authority and Powers in General. Except to the extent otherwise
provided in this Agreement, the business of the Company shall be
managed by the Board of Directors, and no Member shall have any right
or power to take part in the management or control of the Company or
its business. Each Director shall be considered a manager under
sections 183.0102(13) and 183.0401(2) of the WLLCL, provided the
rights and responsibilities of the Directors as managers shall be
limited as expressly set forth in this Agreement. Except as such
authority may be so limited, the Board of Directors shall have full
and complete authority to manage the business of the Company, to make
all decisions regarding those matters, and to perform all other acts
customary or incident to the management of the Company's business.
Members have the right to vote only on those matters expressly set
forth in this Agreement or as required by the WLLCL. The Board of
Directors shall be elected by the Members in accordance with Section
6.2, below.
(b) Certain Authority and Powers. Without limiting the generality of
Section 6.1(a), above, the Board of Directors shall have the authority
to:
(i) Establish reserves and thereafter maintain such reserves in such
amounts as the Board of Directors deems appropriate;
(ii) Directly or through the Company's subsidiaries, subdivide,
improve, develop, and lease all or any part of the Company's
property;
(iii) Borrow money and procure temporary, permanent, conventional, or
other financing on such terms and conditions, at such rates of
interest, and from such parties as the Board of Directors
determines, and, in connection with such loans, if security is
required for the loans, mortgage or grant a security interest,
directly or through the Company's subsidiaries, in any portion
of the Company's assets;
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(iv) After giving notice to the Members, bring, defend, settle,
compromise, or otherwise participate in any and all actions,
proceedings, or investigations, whether at law, in equity, or
before any governmental authority or agency, and whether brought
against the Company or the Members, related to the business of
the Company or the enforcement or protection of interests in or
of the Company;
(v) Insure the Company's activities and property;
(vi) Enter into agreements with Persons for property management
services, property improvement or development, other real estate
services, and all other contracts or agreements, including,
without limitation, as partner, joint venturer, shareholder, or
otherwise, that the Board of Directors deems consistent with the
Company's purpose, and pay from the Company's funds the
consideration required under such contracts or agreements;
(vii) Pay out of the Company's funds all fees and expenses incurred in
the organization and operation of the Company;
(viii)Authorize the execution of all documents, instruments, and
agreements reasonably deemed by the Board of Directors to be
needed for the performance of its duties and the exercise of its
powers under this Agreement, including those relating to
obtaining tax incremental financing, if available;
(ix) Appoint a registered agent or change the registered office
pursuant to Section 1.2 above;
(x) Retain attorneys, accountants, and other professionals in the
course of performing the Board of Directors' duties;
(xi) Offer for sale to third parties Units and cause this Agreement
to be amended to admit as Members the purchasers of such Units
at the fair value of such Units as reasonably determined by the
Board of Directors in good faith and on such other terms and
conditions as the Board of Directors, in its reasonable
judgment, deems appropriate; and
(xiii)Do all other acts as the Board of Directors, in its sole and
unrestricted discretion, determines are necessary or advisable
to carry out the business of the Company.
Section 6.2. Composition of the Board of Directors.
(a) Number, Election, Tenure, and Qualifications of Directors. The number
of Directors of the Company shall initially be seven (7), but shall in
no case be greater than seven (7). While ▇▇▇▇▇▇▇▇▇▇▇ is a Member
hereunder, he shall be entitled to designate two (2) Directors.
Directors shall be elected by Majority Consent. Directors need not be
Members of the Company. Each Director shall hold office until the
occurrence of an event set forth in subsection (b), below.
(b) Withdrawal of Director. An individual shall cease to be a Director
upon the earliest to occur of any of the following: (i) the
individual's voluntary resignation, which shall be effective upon
delivery of a written notice from the individual to the Company unless
the notice specifies a later effective date; (ii) the individual's
removal by Majority Consent; (iii) the individual's seventy-second
(72nd) birthday); or (iv) the individual's death, incapacity, or
inability to act as a Director for any reason.
(c) Vacancy. If a Director ceases to be a Director for any reason, the
remaining Director or Directors, if any, shall continue to act as
such. Upon withdrawal of a Director, the Members or ▇▇▇▇▇▇▇▇▇▇▇, as
applicable, shall, as promptly as practicable, choose a substitute
Director as provided in Section 6.2(a), above. If the Company at any
time lacks Directors, the Members shall perform the duties of the
Board of Directors by Majority Consent unless and until the Members
elect by Majority Consent a substitute Director or Directors. In this
case, the Members will be Managers under sections 183.0102(13) and
183.0401(2) of the WLLCL. The lack of Directors shall not cause a
dissolution or termination of the Company.
Section 6.3. Manner of Acting by Board of Directors. Any actions of the Board of
Directors shall be taken in the manner set forth below.
(a) Manner of Acting. The consent of the Board of Directors to any act or
failure to act may be given by the affirmative vote of a majority of
the Directors at a meeting at which a quorum of the Board of Directors
(as defined in subsection (e), below), participate in person or by
telephone or other electronic means, or in a writing signed by all
Directors.
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(b) Records. The Company shall keep written records of all actions taken
by the Board of Directors.
(c) Meetings. Meetings of the Board of Directors may be called by the
president of the Company or by any two Directors. Meetings not held by
electronic means shall be held at the Company's principal place of
business or at such other place as may be designated by the Person(s)
calling the meeting. The president, and in the president's absence,
any Director chosen by the Directors present, shall act as chairperson
of the meeting. The secretary of the Company will act as secretary of
all meetings of the Board of Directors, but in the secretary's
absence, the presiding Officer may appoint any Director or other
Person present to act as secretary of the meeting.
(d) Notice. No matter shall be voted upon at a meeting of the Board of
Directors unless at least 48 hours' notice of the matter to be voted
on is given or such notice is waived by any Director not receiving it.
A Director shall be deemed to have waived notice of any matter acted
upon at any meeting that the Director attends or in which the Director
participates unless at the beginning of the meeting, or promptly upon
commencement of the Director's participation in the meeting, the
Director objects to the consideration of the matter because of lack of
proper notice. Written records kept pursuant to Section 6.3(b), above,
of a meeting at which a Director was present, or in which the Director
participated, shall be prima facie evidence that the Director was duly
notified of the matters voted upon at the meeting or that the Director
waived the notice requirement unless the Director's objection as
required by this Section 6.3(d) is noted in the records. No prior
notice shall be required for any action taken by written consent of
the Directors.
(e) Quorum. At any meeting of Directors, a majority of the number of
Directors shall constitute a quorum of the Board of Directors, but a
majority of the Directors present (though less than a quorum) may
adjourn a meeting from time to time without further notice.
(f) Voting. Each Director shall be entitled to one vote. Any Director
abstaining from voting on a given matter shall be deemed to have voted
in the same manner as the majority, if any, of the Directors not
abstaining from voting on that issue. Any Director having a personal
stake in the outcome of an issue (other than the economic stake
inuring to the Director solely as a result of the Units held by the
Director or the Director's employer) shall abstain from voting on the
issue unless all Directors have such a personal stake.
(g) Expenses. All reasonable and customary out-of-pocket expenses incurred
by a Director in connection with the Company's business shall be paid
by the Company or be reimbursed to the Director by the Company.
Section 6.4. Officers.
(a) Number of Officers. The Board of Directors may fill the offices of
president, vice-president, secretary, and treasurer. The Board of
Directors may appoint such other Officers and assistant Officers as it
deems necessary. If specifically authorized by the Board of Directors,
an Officer may appoint one or more Officers or assistant Officers. The
same individual may simultaneously hold more than one office in the
Company.
(b) Appointment and Term of Office. The Officers of the Company shall be
appointed by the Board of Directors for a term as determined by the
Board of Directors. If no term is specified, they shall hold office
until they are removed or they resign, or until their successor is
appointed. The designation of a specified term does not grant to the
Officer any contract rights, and the Board of Directors may remove the
Officer at any time prior to the termination of the term. Such a
removal shall be without prejudice to the contract rights, if any, of
the Person so removed.
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(c) President. The president shall be the principal and chief executive
officer of the Company and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business
and affairs of the Company. The president may sign certificates,
deeds, mortgages, bonds, contracts, or other instruments that are
necessary to be executed in the course of the Company's regular
business or that the Board of Directors has authorized to be executed,
except in cases in which the execution of such instruments shall be
expressly delegated by the Board of Directors to some other Officer or
agent of the Company, or shall be required by law to be otherwise
executed. Except as otherwise provided by the Board of Directors, the
president may authorize any vice-president or other Officer or agent
of the Company to sign, execute, and acknowledge such documents or
instruments in the president's place. The president, in general, shall
perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to
time. While ▇▇▇▇▇▇▇▇▇▇▇ is an employee of the Company, the Board of
Directors shall elect and retain him as the president and chief
executive officer.
(d) Vice-Presidents. In the absence of the president or in the event of
the president's death or inability or refusal to act, the
vice-president, if one has been elected (or in the event that there is
more than one, the vice-presidents in the order designated by the
Board of Directors, or in the absence of designation, then in the
order of their appointment) and upon approval by the Board of
Directors, shall perform the duties of the president, and when so
acting, shall have all the powers of, and be subject to all the
restrictions on, the president. Any vice-president shall perform such
duties as from time to time may be assigned to that vice-president by
the president or the Board of Directors.
(e) Secretary. The secretary shall: (i) keep the minutes of the
proceedings of the Board of Directors in one or more books provided
for that purpose; (ii) see that all notices are duly given in
accordance with the provisions of Section 6.3(d), above, and 6.7(d),
below; (iii) be custodian of the Company records; (iv) when requested
or required, authenticate any Company records; (v) keep a register of
each Member's address; and (vi) in general perform all duties incident
to the office of secretary and such other duties as from time to time
may be assigned to the secretary by the president or the Board of
Directors.
(f) Treasurer. The treasurer shall: (i) have charge and custody of and be
responsible for all Company funds and securities; (ii) receive and
give receipts for moneys due and payable to the Company from any
source whatsoever, and deposit all such moneys in the Company's name
in such bank, trust company, or other depository as shall be selected
by the Board of Directors; and (iii) in general perform all of the
duties incident to the office of treasurer and such other duties as
from time to time may be assigned to the treasurer by the president or
the Board of Directors.
(g) Assistant Secretaries and Assistant Treasurers. The assistant
secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the Board of Directors.
Section 6.5. Restrictions on Authority of the Board of Directors and Officers.
(a) Absolute Restrictions. The Board of Directors shall not have the
authority to:
(i) Do any act in contravention of applicable law;
(ii) Possess Company property, or assign rights in specific Company
property, for other than a purpose of the Company; or
(iii) Perform any act that would subject the Members to liability in
any jurisdiction except as expressly provided in this Agreement
and except for liability for any income taxes attributable to
the business of the Company.
(b) Restrictions Without Unanimous Consent. Without Unanimous Consent of
the Members, the Board of Directors shall not have the authority to:
(i) Do any act that is in contravention of this Agreement or that
would make it impossible to carry on the activities of the
Company;
(ii) Enter into a merger transaction involving the Company in which
the Members do not hold a majority of the economic and voting
interests of the surviving entity;
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(iii) Amend the Articles of Organization or amend or revoke this
Agreement;
(iv) Make an assignment for the benefit of creditors;
(v) File or cause to be filed a voluntary or involuntary petition in
bankruptcy;
(vi) Consent to the appointment of a trustee, receiver or liquidator
for all or any substantial part of the assets of the Company;
(vii) Change or modify the accounting methods used by the Company; or
(viii)Decrease the current limit on the credit authority afforded to
▇▇▇▇▇▇▇▇▇▇▇, unless otherwise required by applicable law or
regulation.
Section 6.6. Powers of Members. Except in any situation in which powers are
exclusively reserved to the Members in nonwaivable provisions of the WLLCL (in
the sense that the arrangement may not be changed pursuant to an operating
agreement of a limited liability company), or as expressly provided in this
Agreement, the Members shall not have the power to manage or control the affairs
of the Company or to bind or obligate the Company in any manner.
Section 6.7. Actions by Members. Any actions of the Members shall be taken in
the manner set forth below, unless expressly provided otherwise in this
Agreement:
(a) Manner of Acting. Except as otherwise provided in this Agreement, the
consent of the Members to any act or failure to act may be given by
Majority Consent at a meeting at which a quorum of Members (as defined
in subsection (f) of this Section 6.7) participate in person or by
telephone or other electronic means. Alternatively, the Members may
act by unanimous written consent without the need for a meeting.
Notwithstanding the foregoing, the Unanimous Consent of the Members
shall be required to take any actions set forth in Section 6.5(b)
above.
(b) Records. The Company shall keep written records of all actions taken
by the Members.
(c) Meetings. Meetings of the Members may be called by the president, by
any Director, or by Majority Consent. Meetings not held by electronic
means shall be held at the Company's principal place of business or at
such other place as may be designated by Majority Consent.
(d) Notice. No matter shall be voted upon at a meeting of Members unless
at least five days' notice of the matter to be voted on is given or
such notice is waived by any Member who is entitled to vote and who
has not received notice. A Member shall be deemed to have waived
notice of any matter acted upon at any meeting that the Member attends
or in which the Member participates unless at the beginning of the
meeting or promptly upon commencement of the Member's participation in
the meeting the Member objects to the consideration of the matter
because of lack of proper notice. No prior notice shall be required
for any action taken by written consent of the Members.
(e) Record Date. For the purpose of determining the Members entitled to
receive notice of any meeting of the Members, or the Members entitled
to vote or take any other action, the Board of Directors may fix in
advance a date as the record date. The record date shall not be more
than 10 days before the date on which the particular action requiring
such a determination of Members is to be taken. If no record date is
so fixed by the Board of Directors, the record date shall be at the
close of business on: (i) with respect to any meeting of Members, the
day before the first notice is delivered to Members, and (ii) with
respect to any action taken in writing without a meeting, the date the
first Member signs the consent pursuant to which such action is taken.
(f) Quorum. At any meeting of the Members, Members holding sufficient
Units to give Majority Consent to the action taken at any meeting,
represented in person or by proxy, shall constitute a quorum of the
Members at the meeting. If a quorum is not present at any meeting, a
majority of the Members present may adjourn the meeting from time to
time without further notice. At any adjourned meeting at which a
quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
(g) Voting. Each Unit shall be entitled to one vote. Each Member holding
Units shall vote all of the Units held by that Member in the same
manner as to any given matter submitted for a vote.
8
(h) Proxies. At all meetings of Members, a Member may vote by proxy
executed in writing by the Member or by the Member's duly authorized
attorney-in-fact. Proxies shall be filed with the president or
secretary of the Company before or at the time of the meeting. No
proxies shall be valid after six months from the date of execution,
unless expressly provided otherwise in the proxy.
Section 6.8. Indemnification of Board of Directors, Officers, and Members.
(a) Liability of Board of Directors, Officers, and Members. No Director,
Officer, or Member shall be liable to the Company for any loss or
damage suffered by the Company on account of any action taken or
omitted to be taken by the Person serving as a Director, Officer, or
Member, that the Person in good faith believed to be in or not opposed
to the Company's best interests, and with respect to any criminal
action or proceeding, that the Person had no reasonable cause to
believe was unlawful. In addition, no Director, Officer, or Member
shall be liable to the Company for any loss or damage suffered by the
Company on account of any action taken or omitted to be taken in
reliance upon advice of counsel for the Company or upon statements
made or information furnished by Officers or employees of the Company
that the Director, Officer, or Member had reasonable grounds to
believe to be true. The foregoing shall not be exclusive of other
rights and defenses to which the Director, Officer, or Member may be
entitled as a matter of law.
(b) Successful Defense. The Company shall indemnify a Person serving as a
Director, Officer, or Member to the extent the Person has been
successful on the merits or otherwise in the defense of a claim,
action, dispute, or issue such that the Person has no liability for
all Expenses incurred in connection with the claim, action, dispute,
or issue, if the Person was a party due to the Person's role as a
Director, Officer, or Member. Indemnification under this subsection
(b) shall be made within 10 days of receipt by the Company of a
written demand for indemnification.
(c) Other Cases. In cases not included under subsection (b), above, the
Company shall indemnify the Director, Officer, or Member against
Liability and Expenses incurred by the Person in connection with a
claim, action, dispute, or issue, if the Person was a party due to the
Person's role as a Director, Officer, or Member, unless it shall have
been concluded that the Person breached or failed to perform a duty
owed to the Company (using the procedure set out in Section 6.8(d),
below), which breach or failure constitutes:
(i) A willful failure to deal fairly with the Company in connection
with a matter in which the person has a material conflict of
interest;
(ii) A violation of criminal law, unless the Person had reasonable
cause to believe the Person's conduct was lawful or no
reasonable cause to believe the conduct was unlawful;
(iii) A transaction from which the Person derived an improper personal
profit; or
(iv) Willful misconduct.
Indemnification required under this subsection (c) shall be made upon
the last to occur of (i) 30 days from the Company's receipt of a
written demand for indemnification or (ii) the determination set forth
in Section 6.8(d), below.
(d) Means of Determining Whether Indemnification Is Prohibited. Unless
otherwise provided by a written agreement between the Director,
Officer, or Member seeking indemnification and the Company, the denial
of indemnification under Section 6.8(c), above, shall be determined by
the Board of Directors. Any Director seeking indemnification shall not
be entitled to vote on this matter unless all Directors are seeking
indemnification, in which event the Members shall decide the right to
indemnification by Unanimous Consent. If the Board of Directors or
Members determines that a Director, Officer, or Member seeking
indemnification under Section 6.8(c), above, is not entitled to
indemnification, and the Director, Officer, or Member does not agree
with the determination, the matter shall be determined by arbitration
pursuant to Section 11.7, below.
(e) Effect of Termination of Proceeding. The termination of a claim,
action, dispute, or issue by judgment, order, settlement, or
conviction, or upon a plea of no contest or an equivalent plea creates
a presumption that indemnification of the Director, Officer, or Member
is not required under this Section 6.8.
9
(f) Request for Indemnification and Assignment of Claims Required. To seek
indemnification, the Director, Officer, or Member shall make a written
request to the Company. As a precondition to any right to receive
indemnification, the writing shall contain a declaration that the
Company shall have the right to exercise all rights and remedies
available to the Director, Officer, or Member against any other
Person, arising out of, or related to, the claim, action, dispute, or
issue that resulted in the Liability and Expenses for which the
Director, Officer, or Member seeks indemnification, and that the
Director, Officer, or Member is deemed to have assigned to the Company
all such rights and remedies.
(g) Allowance of Expenses as Incurred. Upon written request by the
Director, Officer, or Member, the Company shall pay or reimburse the
Person's reasonable expenses incurred as a party to a claim, action,
dispute, or issue if the Person provides the Company with all of the
following:
(i) A written affirmation of the Person's good faith belief that the
Person has not breached or failed to perform the Person's duties
to the Company; and
(ii) A written undertaking, executed personally or on the Person's
behalf, to repay the allowance without interest to the extent
that it is ultimately determined in accordance with Section
6.8(d), above, that indemnification under this Section 6.8 is
prohibited.
The undertaking under this subsection (g) shall be accepted without
reference to the Person's ability to repay the allowance. The
undertaking shall be unsecured.
(h) Insurance. The Company shall purchase and maintain customary
directors' and officers' insurance on behalf of any Person who is a
Director, Officer, or Member against any Liability asserted against or
incurred by the Person in any such capacity or arising out of the
Person's status as such, regardless of whether the Company is required
or authorized to indemnify or allow Expenses to the Person under this
Section 6.8, provided further that such insurance shall provide
coverage in excess of $1,000,000.
(i) Severability. If this Section 6.8 or any portion of this Section 6.8
is invalidated on any ground by any court of competent jurisdiction,
the Company shall indemnify the Director, Officer, or Member as to
Liabilities and Expenses, paid in settlement with respect to any
claim, action, dispute, or issue to the full extent permitted by any
applicable portion of this Section 6.8 that is not invalidated or by
applicable law.
(j) Continuation of Indemnification. The indemnification provided by this
Section 6.8 shall be the exclusive indemnification available from the
Company to its Directors, Officers, and Members, and shall continue as
to a Person who has ceased to be a Director, Officer, or Member, and
shall inure to the benefit of the heirs, successors, executors, and
administrators of any such Person.
Section 6.9. Funding Operations. To the extent not limited or precluded by
applicable law or regulation, QCBT agrees that from time to time it shall
provide funding for operations of the Company at QCBT's discretion and subject
to QCBT's lending policies in effect from time to time at a rate equal to the
Federal Home Loan Bank Rate for a comparable duration as posted by the Federal
Home Loan Bank of Chicago on the last day of the month.
ARTICLE VII
Transfer of Units
Section 7.1. General Restrictions on Transfers. Except in accordance with the
terms of this Agreement and subject to Article VIII of this Agreement,
▇▇▇▇▇▇▇▇▇▇▇ may not Transfer all or any portion of his Units without the consent
of the Board of Directors. Notwithstanding anything contained herein, QCBT may
transfer Units to an Affiliate without the approval or consent of any other
Member (a "QCBT Affiliate Transfer"), provided, however, that QCBT adheres to
Article VIII. In the event of a QCBT Affiliate Transfer, QCBT's Affiliate shall
become a party to this Agreement. Any Transfer, attempted Transfer, or purported
Transfer in violation of this Agreement's terms and conditions shall be null and
void.
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Section 7.2. Third-Party Transfers.
(a) Notice of Transfer. Except in the case of an Involuntary Transfer
subject to Section 7.3, below or a Disposition (as defined in Section
7.6, below), a Transferor must send a Notice of Transfer to the
Company, and the applicable provisions of this Section 7.2 must be
complied with, before a Transfer will be effective. The Notice of
Transfer shall contain (i) the Units proposed to be Transferred, (ii)
the identity of the Transferee, (iii) the terms upon which the
Transfer is proposed to be made, and (iv) the date of the proposed
Transfer. The secretary shall deliver a copy of each Notice of
Transfer to each Member promptly upon receipt of the notice.
(b) Option to Purchase. A Transferor may not Transfer the Transferor's
Units pursuant to Section 7.2(c), below, without first offering to
sell the Units to the Company and the other Members. The Company shall
have 30 days from the date of receipt of the Notice of Transfer to
exercise the option to purchase contained in this Section 7.2(b) by
providing written notice of the exercise of the option to the
Transferor. If the option is exercised, the Transferor shall be
obligated to sell, and the Company shall be obligated to purchase, all
or a portion of the Transferor's Units upon the same terms,
conditions, and price as offered by the Transferee and described in
the Notice of Transfer. In the event the Company does not exercise its
option to purchase all of the Units being offered, the president shall
call a meeting of all of the Members (other than the Transferor). The
meeting shall be held at the Company's regular office, or such other
location as determined by the eligible Members, not less than 15 days
nor more than 30 days after the expiration of the offer to the
Company. The president shall make successive offers of the Units not
accepted by the Company to those Persons present or legally
represented at the meeting, including the president, in accordance
with the following procedures. The successive offers shall continue
until either all of the Units so offered are accepted or it is
determined by successive offerings that all of the Units so offered
will not be accepted. If the offer of sale is not accepted by the
Company and the other Members with respect to all of the Units offered
for sale, then none of the acceptances shall be effective, and the
Transferor may Transfer the Units pursuant to Section 7.2(c), below.
If the Company or other Members accept the offer of sale, such Sale
must be completed within one hundred and twenty (120) days of
acceptance. At the meeting, the president shall offer the Units to the
Persons who are present or are legally represented at the meeting,
including the president, in the following manner:
(i) The president shall offer to each Member present or legally
represented at the meeting, and each may accept, only that
proportion of the Units being offered by the president as
corresponds to that Member's share of the Units held by all of
the Members present or legally represented at the meeting; and
(ii) If all the Units offered for sale are not accepted in accordance
with the procedures set forth in clause (i), above, the
president shall thereafter make successive offerings to the
Members present or legally represented at the meeting who did
not previously refuse to accept all of the Units offered to them
at the meeting. During each offering, the president shall offer
to each such Member only that proportion of the Units not
previously accepted as corresponds to that Member's share of the
Units held by all of the Members to whom the successive
offerings are being made.
(c) Transfer to Third Party. If the Company or the Members have not
elected to purchase the Units pursuant to section 7.2(b), above, the
Transferor may Transfer all (but not less than all) of the
Transferor's Units pursuant to this Section 7.2(c), at which time the
Transfer will be effective and the Transferee will become a Member.
(i) The Transferor may Transfer all (but not less than all) of the
Units identified in the Notice of Transfer to the third party
designated in the Notice of Transfer at the same price and on
the same terms of payment specified in the Notice of Transfer,
provided that the Transfer is made within 120 days after the
date of the Notice of Transfer.
(ii) The Transferee must, as part of the closing of the Transfer,
sign a counterpart to this Agreement agreeing for the benefit of
the other Members to be bound by this Agreement to the same
extent as if the Transferee had been an original party to this
Agreement and the Transferee shall be subject to the same
transfer restrictions contained in this Article VII that are
applicable to the Transferor.
11
(iii) The Transferee must, as part of the closing of the Transfer,
take all actions and execute all instruments required by the
Company in order for the Transfer to comply with any applicable
federal or state laws and regulations relating to the Transfer
of a Unit or with this Agreement.
If the Units proposed to be Transferred pursuant to the Notice of
Transfer are not Transferred within the applicable periods and in
accordance with the foregoing provisions of this Section 7.2(c), the
Units shall again be subject to the restrictions of this Article VII.
Section 7.3. Involuntary Transfer. An Involuntary Transfer to a Person other
than the Company or another Member will be effective only after the applicable
provisions of this Section 7.3 have been complied with. The creditor, receiver,
trust or trustee, estate, beneficiary, or other Person to whom Units are
Transferred by Involuntary Transfer (the "Involuntary Transferee") will have
only the rights provided in this Section 7.3. "Involuntary Transfer" means any
Transfer of Units by operation of law or in any proceeding, including a Transfer
resulting from the dissociation of a Member, by or in which a Member would, but
for the provisions of this Section 7.3, be involuntarily deprived of any
interest in or to the Member's Units, including, without limitation, (a) a
Transfer on death or bankruptcy, (b) any foreclosure of a security interest in
the Units, (c) any seizure under levy of attachment or execution, or (d) any
Transfer to a state or to a public office or agency pursuant to any statute
pertaining to escheat, abandoned property, or forfeiture.
(a) Notice to Company. The Transferor and the Involuntary Transferee shall
each immediately deliver a written notice to the Company describing
the event giving rise to the Involuntary Transfer; the date on which
the event occurred; the reason or reasons for the Involuntary
Transfer; the name, address, and capacity of the Involuntary
Transferee; and the Units involved (a "Notice of Involuntary
Transfer").
(b) Effect of Involuntary Transfer. Upon the receipt of the Notice of
Involuntary Transfer, the Involuntary Transferee shall have the rights
of an assignee of the Transferor's Units as set out in section
183.0704(1)(b) of the WLLCL. Unless and until the Involuntary
Transferee is admitted as a member by the Board of Directors, the
Units held by the Involuntary Transferee shall have no voting rights
such that the determination of Majority Consent shall be made by
excluding the Units held by the Involuntary Transferee for all
purposes.
Section 7.4. Marital or Community Property and Divorce.
(a) Marital or Community Property Rights. For purposes of this Agreement,
any reference to Units shall include all interests in the Units now or
hereafter acquired by the spouse of a Member or the spouse of a
Transferee as a result of (1) community or marital property laws
including community or marital property, deferred marital property, or
augmented marital property, or (2) a property division or other award
or Transfer upon dissolution of marriage. The creation of an interest
in Units by operation of any applicable community or marital property
law shall not be deemed a Transfer so long as the Units in which an
interest is created continue to satisfy the following two conditions:
(i) The Units are registered in the name of the Member or
Transferee; and
(ii) The Units are controlled by the Member or Transferee.
(b) Involuntary Transfer. If the conditions set forth in either Section
7.4(a)(i) or Section 7.4(a)(ii), above, cease to be satisfied for any
reason (including without limitation the death of the spouse of a
Member or the spouse of a Transferee or the dissolution of the
marriage), the resulting Transfer shall be considered an Involuntary
Transfer subject to the provisions of Section 7.3, above.
(c) Member to Vote. Each Member shall vote with respect to all matters
that come before the Members until the Transfer, if any, of the Units
to the Member's spouse pursuant to Section 7.4(b), above. By signing a
spousal consent and acknowledgment, if a spouse is married to a Member
at the time that Member becomes a Member, or by becoming the spouse of
a Member, the spouse, without further act or deed, grants to the
Member an irrevocable and absolute proxy and power of attorney (the
proxy and power being coupled with an interest) to (i) take such
actions on the spouse's behalf without any further deed than the
taking of the action by the Member with respect to the Units otherwise
held by the Member, and (ii) sign any document evidencing the action
for or on behalf of the spouse relating to the Units.
12
Section 7.5. Redemption of Units Held by ▇▇▇▇▇▇▇▇▇▇▇. Upon the earlier to occur
of (i) the termination of ▇▇▇▇▇▇▇▇▇▇▇'▇ employment with the Company for any
reason or; (ii) the seventh (7th) anniversary of the date hereof, either
▇▇▇▇▇▇▇▇▇▇▇ or the Company can issue a notice (a "Put/Call Notice") to redeem
▇▇▇▇▇▇▇▇▇▇▇'▇ Units in the Company. Upon the delivery of a Put/Call Notice, the
Company shall have the obligation to redeem and ▇▇▇▇▇▇▇▇▇▇▇ shall have the
obligation to sell, all, but not less than all, of ▇▇▇▇▇▇▇▇▇▇▇'▇ Units.
(a) Termination - For Cause by the Company or Voluntarily by ▇▇▇▇▇▇▇▇▇▇▇.
The purchase price for ▇▇▇▇▇▇▇▇▇▇▇'▇ Units for termination by the
Company for Cause or by ▇▇▇▇▇▇▇▇▇▇▇ voluntarily shall be an amount
equal to a percentage of the Book Value (as determined in accordance
with Exhibit B) subject to adjustments as set forth in Section 7.5(c)
and in accordance with the table below:
Date of Termination Percentage of Book Value
---------------------------------------------------------------------------------------------------------------------
Prior to first anniversary of the date hereof 25% of the Book Value thereof
On or after first anniversary but prior to second 25% of the Book Value thereof
anniversary of the date hereof
On or after second anniversary but prior to third 50% of the Book Value thereof
anniversary of the date hereof
On or after third anniversary but prior to fourth 50% of the Book Value thereof
anniversary of the date hereof
On or after fourth anniversary but prior to fifth 75% the Book Value thereof
anniversary of the date hereof
On or after fifth anniversary but prior to sixth 75% of the Book Value thereof
anniversary of the date hereof
On or after sixth anniversary but prior to seventh 75% of the Book Value thereof
anniversary of the date hereof
After seventh anniversary of the date hereof, if 100% of the Book Value thereof
terminated for Cause
After seventh anniversary of the date hereof, if 200% of the Book Value thereof (subject to reduction as
▇▇▇▇▇▇▇▇▇▇▇ leaves voluntarily detailed in Section 7.5(c)(iii) below).
(b) Termination - Without Cause by the Company or by Death or Disability.
The purchase price for ▇▇▇▇▇▇▇▇▇▇▇'▇ Units for termination by the
Company without Cause or by reason of death or Disability shall be an
amount equal to a percentage of Book Value (as determined in
accordance with Exhibit B) subject to adjustment as set forth in
Section 7.5(c) and in accordance with the Table below:
13
Date of Termination Percentage of Book Value
-------------------------------------------------------------------------------------------
Prior to fifth anniversary of the date hereof 150% of the Book Value thereof
On or after the fifth anniversary, but prior to sixth 160% of the Book Value thereof
anniversary of the date hereof
On or after sixth anniversary, but prior to seventh 180% of the Book Value thereof
anniversary of the date hereof
On or after seventh anniversary of the date hereof 200% of the Book Value thereof.
(c) Other Redemption Matters.
(i) Payment for ▇▇▇▇▇▇▇▇▇▇▇'▇ ownership interest as required by this
Section 7.5 shall be in cash at the closing thereof, which shall
take place within thirty (30) days from termination.
(ii) If QCR Holdings, Inc. ("QCR") or QCBT has undergone a Change of
Control within the two (2) years preceding ▇▇▇▇▇▇▇▇▇▇▇'▇
termination by the Company without Cause, the purchase price
shall not be less than 200% of the Book Value thereof.
(iii) The Book Value percentage for a voluntary termination by
▇▇▇▇▇▇▇▇▇▇▇ after the 7th year anniversary of the closing (200%)
shall be reduced each year that the Company fails to meet the
Projections. The reduction would equal the percentage by which
the Company missed the Projections, capped at 10% per year, and
further capped at a total reduction of 50% for all 7 years. For
example, if the Company missed the Projections by more than 10%
in 5 separate years, the Book Value percentage would be adjusted
from 200% to 150%. As further example, if the Company missed the
Projection by 5% in three separate years, the Book Value
percentage would be adjusted from 200% to 185%.
(iv) In the event the Company, for whatever reason, fails to redeem
▇▇▇▇▇▇▇▇▇▇▇'▇ Units as provided in this Section 7.5, QCBT agrees
to purchase the Units pursuant to the terms in this Section 7.5.
(v) If ▇▇▇▇▇▇▇▇▇▇▇ would be due an Equalizing Distribution in the
event an Equalizing Distribution would be required to be paid
pursuant to Section 4.1(c) before a distribution could be made
pursuant to Section 4.1(d), then the full amount of such
Equalizing Distribution (together with accrued interest) shall
be paid to ▇▇▇▇▇▇▇▇▇▇▇ at closing in addition to the purchase
price calculated above.
(vi) If any Adjustment Transaction, any agreement requiring an
Adjustment Transaction which is enforceable by a third party or
an option or similar right to require an Adjustment Transaction
occurs, is entered into or is granted at any time within
thirty-six (36) months following the closing of a redemption
pursuant to Section 7.5(b) (the "Original Sale"), then (A) the
Company shall give ▇▇▇▇▇▇▇▇▇▇▇ or his estate prompt written
notice stating in reasonable detail the particulars thereof; (B)
the purchase price per Unit for the equity interest which was
purchased in the Original Sale shall be increased by the excess,
if any, of the Adjusted Price over such price; and (C) such
increase in the purchase price shall be paid by the Company to
▇▇▇▇▇▇▇▇▇▇▇ or his estate. Any adjustment pursuant to this
Section 7.5(c)(vi) shall be paid immediately after the
Adjustment Transaction as to which such adjustment relates by
the Company to ▇▇▇▇▇▇▇▇▇▇▇.
14
Section 7.6. Right of Co-Sale. Notwithstanding the foregoing to the contrary, in
the event that holders of more than fifty percent (50%) of the Units (the
"Selling Members") seeks to Transfer, in one or a series of related
transactions, a majority of the outstanding Units of the Company to Unrelated
Purchaser(s) (a "Disposition"):
(a) Each other Member (the "Minority Unitholders") is hereby given the
right and option, to be exercised in a writing delivered to the
Selling Members within ten (10) business days after receiving written
notice of such Transfer from the Selling Members (which notice shall
contain the amount and class of Units proposed to be Transferred, the
identity of the Transferee, the terms on which the Transfer is
proposed to be made, and the date of the proposed Transfer), to
Transfer to the Unrelated Purchaser(s), on the same terms and
conditions as applicable to the Selling Members, such portion of their
Units as the portion of the Units being Transferred by the Selling
Members bears to the entire number of Units owned prior thereto by the
Selling Members (a "Proportionate Share"). The price per Unit at which
the Minority Unitholders may participate shall take into account
differences in Capital Accounts attributable to the Units and shall be
determined as follows: (a) the value of the Company shall be
calculated by determining the Company value necessary to provide the
Selling Member an amount equal to the amount paid for the Transferred
Units in the Disposition if the Company were liquidated in accordance
with Article IX; and (b) each Unit shall be valued at the amount the
holder of such Unit would receive attributable to such Unit if the
Company was sold for the amount calculated in clause (a) and the
Company was liquidated in accordance with Article IX. Notwithstanding
anything contained in this Section 7.6 to the contrary, in no event
shall ▇▇▇▇▇▇▇▇▇▇▇'▇ Proportionate Share be less than what he would
otherwise receive pursuant to a Put/Call Notice delivered pursuant to
Section 7.5, above, appropriately prorated in the event less than all
of ▇▇▇▇▇▇▇▇▇▇▇'▇ Units are Transferred pursuant to this Section 7.6.
(b) In the event any Member declines to exercise his, her or its rights as
provided in Section 7.6(a), above, the Selling Members are hereby
given the right and option, to be exercised by written notice to such
declining Member(s) within five (5) business days after the expiration
of the option set forth in Section 7.6(a), above, to require the
declining Member(s) to Transfer to the Unrelated Purchaser(s), on the
same terms and conditions as applicable to the Selling Members, a
Proportionate Share at the purchase price determined using the method
set forth in Section 7.6(a), above.
A failure by the Unrelated Purchaser(s) to consummate such Transfer of the Units
of each of the other Members simultaneously with the sale by the Selling Members
on the terms and conditions required pursuant to the foregoing, above, shall
prohibit the Selling Members from Transferring any Units to such Unrelated
Purchaser(s).
Section 7.7. Sale of Assets. In the event that the Company decides to sell,
transfer or otherwise dispose of greater than 1/3rd of all of the assets of the
Company or its subsidiaries, whether in one or a series of related transactions,
the Company must send a notice to ▇▇▇▇▇▇▇▇▇▇▇ detailing the proposed transfer
and the terms upon which the transfer is proposed to be made. ▇▇▇▇▇▇▇▇▇▇▇ shall
have thirty (30) days from the date of receipt of the notice from the Company to
exercise the option to purchase such assets in accordance with the proposed sale
or transfer. If ▇▇▇▇▇▇▇▇▇▇▇ elects to exercise its right of first refusal, such
acquisition shall be completed within one hundred and twenty (120) days of his
acceptance.
Section 7.8. Specific Performance. The parties declare that it may be impossible
to measure in money the damages that will accrue to any party by reason of a
failure to perform any of the obligations under this Article VII, and the
parties agree that this Article VII shall be specifically enforced. Therefore,
if any Member or Transferee institutes any action or proceeding to enforce the
provisions of this Article VII, any Person, including the Company, against whom
the action or proceeding is brought waives the claim or defense that the party
has or may have an adequate remedy at law. The Person shall not urge in any such
action or proceeding the claim or defense that a remedy at law exists, and the
Person shall consent to the remedy of specific performance of this Agreement.
ARTICLE VIII
Absolute Restrictions on Transfers
No Transfer of any Units may be made if, in the opinion of the Company's legal
counsel, the transfer or assignment will violate any applicable federal or state
securities laws. Before making any Transfer of any Units, the Transferor must
notify the Company in writing, and the president shall, if the president
believes there is a material risk of violating this Article VIII, obtain an
opinion from the Company's legal counsel confirming whether the proposed
Transfer will cause such a violation of securities laws. Legal fees shall be the
Transferor's responsibility.
15
ARTICLE IX
Dissociation, Dissolution, and Liquidation
Section 9.1. Effect of Dissociation. The dissociation of a Member pursuant to
section 183.0802 of the WLLCL will not entitle a Member to a distribution in
redemption of the member's Units. An event of dissociation under section
183.0802(1)(d)-(k) of the WLLCL will be treated as an Involuntary Transfer
pursuant to Section 7.3 of this Agreement.
Section 9.2. Events Causing Dissolution. The Company shall be dissolved upon (a)
the approval of the dissolution by the Members by Unanimous Consent, or (b) the
entry of a decree of judicial dissolution pursuant to section 183.0902 of the
WLLCL. The Company shall not be dissolved upon the occurrence of any other
event, including the dissociation of a Member under the WLLCL.
Section 9.3. Filing and Notice. Upon dissolution of the Company under Section
9.2, above, the president or the Liquidating Trustee (as set forth in Section
9.5(a), below) shall promptly, upon appointment, execute and file on the
Company's behalf Articles of Dissolution as provided in section 183.0906 of the
WLLCL. The president or the Liquidating Trustee shall also notify the Company's
known claimants as provided in section 183.0907 of the WLLCL and publish a
notice of the Company's dissolution as provided in section 183.0908 of the
WLLCL, except as otherwise determined by the Board of Directors.
Section 9.4. Termination. Dissolution of the Company shall be effective on the
date on which the event under Section 9.2, above, occurs, but the Company shall
not terminate until Articles of Dissolution have been duly filed under the
WLLCL, the Company's affairs have been wound up, and the Company's assets have
been distributed as provided in Section 9.5, below. Notwithstanding the
dissolution of the Company, prior to the liquidation and termination of the
Company, the business of the Company and the affairs of its Members, as such,
shall continue to be governed by this Agreement.
Section 9.5. Distribution of Assets Upon Termination.
(a) Upon the dissolution of the Company pursuant to Section 9.2, above,
the president (or if there is no president or the president refuses to
serve, a person approved by the Board of Directors as the liquidating
trustee of the Company (the "Liquidating Trustee")) shall proceed
diligently to wind up the Company's affairs and distribute its assets
in accordance with the provisions of Section 9.5(d), below.
(b) All salable assets of the Company may be sold in connection with any
dissolution at public or private sale or at such price and upon such
terms as the president or the Liquidating Trustee, as the case may be,
may deem advisable. A Member or any entity in which a Member is in any
way interested may purchase assets at the sale. The president or the
Liquidating Trustee, as the case may be, in that Person's sole and
absolute discretion, may in accordance with Section 9.5(d), below,
distribute the Company's assets in kind based on their fair market
value.
(c) The Company's Profits and Losses shall be determined as of the end of
the period of winding up in accordance with the provisions of this
Agreement and shall be credited or charged to the Members' respective
Capital Accounts.
(d) Upon the dissolution and winding up of the Company, the Company's
assets shall be distributed in the following order of priority to the
extent available:
(i) First, to creditors of the Company in satisfaction of any debts
and liabilities of the Company, whether by payment or by the
establishment of any reserve that the president or the
Liquidating Trustee deems, in that Person's sole discretion,
necessary (with the balance remaining in any such reserve, after
the expiration of such period of time as the president or the
Liquidating Trustee, as the case may be, deems advisable, and
after payment of any such liabilities and obligations, to be
distributed in the manner set forth in this Section 9.5(d)); and
(ii) Second, to the Members, in accordance with Section 4.2, above.
All distributions pursuant to this Section 9.5(d) shall be made no later than
the latter of (i) the end of the Fiscal Year during which the liquidation of the
Company occurs or (ii) 90 days after the date of that liquidation.
Section 9.6. Limitation on Liability. Each Member shall look solely to the
Company's assets for all distributions from the Company and the return of the
Member's Capital Contribution to the Company and shall have no recourse (upon
dissolution or otherwise) against any Director, Officer, or Member, or any of
their respective affiliates.
16
ARTICLE X
Books and Records
Section 10.1. Books and Records. The Company's books and records shall be
maintained at the Company's principal office or at any other place designated by
the Board of Directors and shall be available for inspection and copying by any
Member or any Member's duly authorized representative(s), at the Member's own
expense, during normal business hours.
Section 10.2. Company Funds. The Company's funds may be deposited in such
banking institutions as the Board of Directors determines, and withdrawals shall
be made only in the regular course of the Company's business on such signature
or signatures as the Board of Directors determines. All deposits and other funds
not needed in the operation of the business may be invested in certificates of
deposit, short-term money market instruments, money market funds, government
securities, or similar investments as the Board of Directors determines.
Section 10.3. Availability of Information. The Company shall keep at its
principal office and place of business, and each Member shall have the right to
inspect and copy, all of the following: (a) a current list of the full name and
last-known business address of each Member or former Member set forth in
alphabetical order, the date on which each Member or former Member became a
Member, and, if applicable, the date on which any former Member ceased to be a
Member; (b) a copy of the Articles of Organization and all amendments to the
Articles; (c) copies of the Company's federal, state, and local income tax
returns and financial statements, if any, for its four most recent years; and
(d) copies of this Agreement and any effective written amendments to this
Agreement.
Section 10.4. Tax Returns. The Board of Directors shall cause to be prepared and
shall file (after review and approval of the Members in their reasonable
judgment) on or before the due date (or any extension of the due date) any
federal, state, or local tax returns required to be filed by the Company. The
Board of Directors shall cause the Company to pay any taxes payable by the
Company out of Company funds. The Board of Directors shall appoint an officer to
serve as the Company's "tax matters partner" as defined for purposes of the
Code.
Section 10.5. Reports. Within 75 days after the end of each Fiscal Year, the
Board of Directors shall send to each Person who was a Member at any time during
the Fiscal Year then ended (a) a balance sheet as of the end of the Fiscal Year,
(b) statements of income, Members' equity, changes in financial position, and a
cash flow statement for the Fiscal Year then ended, and (c) such tax information
as is necessary or appropriate for the preparation by the Members of their
individual federal and state income tax returns.
ARTICLE XI
Miscellaneous
Section 11.1. Amendments to Agreement. No amendment or modification of this
Agreement shall be valid unless made in writing and approved by Unanimous
Consent.
Section 11.2. ▇▇▇▇▇▇▇▇▇▇▇ Guarantee. The parties agree that ▇▇▇▇▇▇▇▇▇▇▇ shall
guarantee twenty percent (20%) of any loan made to the Company by QCBT or its
Affiliates pursuant to a guarantee in the form attached to this Agreement as
Exhibit D.
Section 11.3. Appointment of President as Attorney-in-Fact. The Members appoint
the president as their true and lawful attorney-in-fact with full authority in
their name to execute, deliver, file, and record at the appropriate public
offices such documents as may be necessary or appropriate to carry out the
provisions of this Agreement, including but not limited to all certificates and
other instruments (including counterparts of this Agreement), and any amendment
of this Agreement, that the president deems appropriate to qualify or continue
the Company as a limited liability company in the jurisdictions in which the
Company conducts business or in which such qualification or continuation is, in
the president's opinion, necessary to protect the Members' limited liability.
Section 11.4. Integration. This Agreement supersedes all prior oral or written
agreements or understandings between the parties to this Agreement regarding the
subject matter of this Agreement.
Section 11.5. Binding Provisions. The agreements and covenants contained in this
Agreement inure solely to the benefit of the parties to this Agreement. The
agreements and covenants contained in this Agreement shall be binding on the
heirs, executors, administrators, personal representatives, successors, and
assigns of the respective parties to this Agreement.
17
Section 11.6. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of Wisconsin, without giving effect to
the principles of conflicts of laws.
Section 11.7. Separability of Provisions. Each provision of this Agreement shall
be considered separable, and if for any reason any provision or provisions of
this Agreement are determined to be invalid or contrary to any existing or
future law, the invalidity shall not affect or impair the operation of those
portions of this Agreement that are valid.
Section 11.8. Notice. Any notice required or permitted to be given pursuant to
this Agreement shall be valid only if in writing and shall be deemed to have
been duly given (a) when personally delivered, (b) when transmitted by fax if
confirmation of receipt is printed out on the sending fax machine, or (c) three
days after being mailed by certified mail, postage prepaid, addressed to the
Person receiving notice at the address contained in the Company's records,
unless that Person otherwise notifies the Company in accordance with this
Section 11.7 of a change of address.
Section 11.9. Counterparts. This Agreement may be executed in counterparts, all
of which taken together shall constitute the same agreement.
[Remainder left intentionally blank]\
18
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
set forth above.
QUAD CITY BANK AND TRUST COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Address: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
------------------------------ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Address: 17500 Mariner Court
------------------------------ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Spousal Consent and Acknowledgment
I acknowledge that I have read the foregoing Agreement and that I understand its
contents. I am aware that by its provisions my spouse agrees to limit the
transferability of and the voting rights attendant upon his Units of M2 Lease
Funds LLC held by him on this date, or hereafter acquired, upon the occurrence
of certain events. I am further aware that included in such limitations shall be
any interest I have in the Units (including without limitation any right or
interest by operation of the Wisconsin Marital Property Law, chapter 766 of the
Wisconsin Statutes, or by operation of any other law) and the interest of any of
my heirs, legatees, or other transferees. I consent to and approve the
provisions of the Agreement, and agree that the Units and my interest in them
are subject to the provisions of the Agreement, and direct the personal
representative of my estate to promptly comply with all of the provisions of the
Agreement, including without limitation Article VII. I further agree that I will
take no action at any time to hinder the operation of the Agreement as to the
Units or any interest that I or my transferees have in it.
Date: August 26, 2005 Spouse: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
19
EXHIBIT A
DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set
forth below and any derivatives of the terms shall have correlative meanings:
Adjusted Price means the quotient of (a) the sum of (i) the Transaction Price
multiplied by the number of Units outstanding on the date of the Adjustment
Transaction plus (ii) the total consideration paid in the Original Sale divided
by (b) the sum of (x) the number of Units sold in the Original Sale, plus (y)
the number of Units outstanding on the date of the Adjustment Transaction
(appropriately adjusted to reverse any sale or redemption of Units, capital
contribution, split, dividend, recapitalization or similar event between the
date of the Original Sale and the Adjustment Transaction).
Adjustment Transaction means (a) any purchase of more than 50% of the
outstanding Units by any person who is not a Member or an Affiliate of a Member;
(b) any transaction or contract or series of transactions or contracts resulting
in Units ordinarily representing the right to elect a majority of the Board of
Directors of the Company being owned or controlled by any person other than a
Member or an Affiliate of a Member or by a group of persons acting in concert
any of whom are not a Member or an Affiliate of a Member; (c) any issuance or
sale by the Company of securities or other rights or instruments having the
right to require the issuance or sale of Units constituting more than 50% of the
outstanding Units immediately following such issuance or sale of such Units; (d)
any sale by the Company of all, or substantially all, of its assets; (e) any
liquidation or dissolution of the Company; or (f) any transaction or combination
of the transaction having substantially the same effect as any of the foregoing.
Agreement means this operating agreement of the Company.
Asset Value means as of the date of this Agreement, the fair market value of
such asset pursuant to Schedule 2.2 of the Unit Purchase Agreement, and as of
any date thereafter, with respect to any asset, the asset's adjusted basis for
federal income tax purposes as of such date, except as follows:
(1) The initial Asset Value of any asset contributed by a Member to the Company
after the date hereof shall be the gross fair market value of the asset, as
reasonably determined by the Board of Directors;
(2) The Asset Values of all assets of the Company shall be adjusted to equal
their respective gross fair market values, as reasonably determined by the
Board of Directors, as of the following times: (a) the acquisition of
additional Units by any new or existing Member in exchange for more than a
de minimis Capital Contribution; (b) the distribution by the Company to a
Member of more than a de minimis amount of the Company's property as
consideration for Units if the Board of Directors reasonably determines
that the adjustment is necessary or appropriate to reflect the relative
economic interests of the Members; and (c) the liquidation of the Company
within the meaning of section 1.704-1(b)(2)(ii)(g) of the Treasury
Regulations;
(3) The Asset Value of any Company asset distributed to any Member shall be the
gross fair market value of the asset on the date of distribution reasonably
determined by the Board of Directors;
(4) The Asset Value of the Company's assets shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of the assets pursuant to
section 734(b) or section 743(b) of the Code, but only to the extent
required by section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations;
provided, however, that Asset Values shall not be adjusted pursuant to this
clause (4) to the extent the Board of Directors reasonably determines that
an adjustment pursuant to clause (2), above, is necessary or appropriate in
connection with a transaction that otherwise would result in an adjustment
pursuant to this clause (4); and
(5) If the Asset Value of an asset has been determined or adjusted pursuant to
clause (1), (2), or (4), above, the Asset Value shall thereafter be
adjusted by the depreciation taken into account with respect to that asset
for purposes of computing Profits and Losses.
Board of Directors means the persons elected as directors of the Company
pursuant to Section 6.2 of this Agreement.
Book Value shall have the meaning set forth in Exhibit B.
Book Value Statement shall have the meaning set forth in Exhibit B.
Capital Account shall have the meaning set forth in Section 3.1 of this
Agreement.
20
Cash Available for Distribution means Cash Flow less Tax Distributions.
Cash Flow means cash funds provided from the operation of the Company's
business, without deduction for depreciation, but after deducting cash funds
used to pay all other expenses, debt payments, capital improvements and
replacements, and amounts set aside for the restoration or creation of reserves
by the Board of Directors.
Cause means (a) the definition of "Cause" contained in Section 9(c) of that
certain Employment Agreement between ▇▇▇▇▇▇▇▇▇▇▇ and the Company, or (b) if no
such agreement exists, it means any of the following: (1) The willful and
continued failure of ▇▇▇▇▇▇▇▇▇▇▇ to substantially perform his duties as the
president or chief executive officer (other than as a result of physical or
mental illness or injury) after the Board delivers to ▇▇▇▇▇▇▇▇▇▇▇ a written
demand for substantial performance that specifically identifies the manner in
which the Board believes that ▇▇▇▇▇▇▇▇▇▇▇ has willfully failed to substantially
perform his duties and after ▇▇▇▇▇▇▇▇▇▇▇ has failed to resume substantial
performance of his duties on a continuous basis within ten (10) calendar days of
receiving such demand; (2) ▇▇▇▇▇▇▇▇▇▇▇ having been convicted of a felony (as
evidenced by binding and final judgment, order or decree of a court of competent
jurisdiction, in effect after exhaustion of all right of appeal) or such other
crime or legal violation which disqualifies ▇▇▇▇▇▇▇▇▇▇▇ from serving as an
officer or director of Lease Funds or otherwise substantially impairs his
ability to perform his duties or responsibilities; (3) A knowing, material
violation by ▇▇▇▇▇▇▇▇▇▇▇ of any applicable material law or regulation respecting
the business of the Company that has had, or is reasonably expected to have, a
material adverse effect upon the Company, any of the Company's members or QCBT;
or (4) If ▇▇▇▇▇▇▇▇▇▇▇ is removed and/or permanently prohibited from
participating in the conduct of the Company's affairs by an order issued by any
regulatory authority with jurisdiction over the Company, any of the Company's
members or QCBT.
Change of Control means the following:
(a) The consummation of the acquisition by any person (as such term is defined
in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the ▇▇▇▇ ▇▇▇) of thirty-three percent (33%) or
more of the combined voting power of the then outstanding voting securities
of QCR or QCBT; or
(b) The individuals who, as of the date hereof, are members of the Board of
Directors of QCR (the "QCR Board") cease for any reason to constitute a
majority of the QCR Board, unless the election, or nomination for election
by the stockholders, of any new director was approved by a vote of a
majority of the QCR Board, and such new director shall, for purposes of
this Agreement, be considered as a member of the QCR Board; or
(c) Consummation by QCR or QCBT of (i) a merger or consolidation if the
stockholders, immediately before such merger or consolidation, do not, as a
result of such merger or consolidation, own, directly or indirectly, more
than sixty-seven percent (67%) of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation, in substantially the same proportion as their ownership of
the combined voting power of the voting securities of QCR or QCBT
outstanding immediately before such merger or consolidation or (ii) a
complete liquidation or dissolution or an agreement for the sale or other
disposition of two-thirds or more of the consolidated assets of QCR or
QCBT.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because thirty-three percent (33%) or more of the combined voting power
of the then outstanding securities of QCR or QCBT is acquired by (i) a trustee
or other fiduciary holding securities under one or more employee benefit plans
maintained for employees of the entity or (ii) any corporation which,
immediately prior to such acquisition, is owned directly or indirectly by the
stockholders of QCR or QCBT in substantially the same proportion as their
ownership of stock of QCR or QCBT immediately prior to such acquisition.
Code means the Internal Revenue Code of 1986, as amended (or any corresponding
provisions of succeeding law).
21
Company means M2 Lease Funds LLC.
Depreciation means, for each Fiscal Period of the Company, an amount equal to
the depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset of the Company for such Fiscal Period under the Code, except
that if the Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Period, Depreciation shall
be an amount that bears the same ratio to such beginning Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such Fiscal Period bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes of an asset
at the beginning of such Fiscal Period is zero, Depreciation shall be determined
with reference to such beginning Asset Value using any reasonable method
consistent with the purpose and intent hereof.
Director means a member of the Board of Directors.
Disability means (a) if ▇▇▇▇▇▇▇▇▇▇▇ is party to an employment, management or
other similar agreement with the Company and such agreement includes a
definition of "Disability," the definition contained therein, or (b) if no such
agreement exists, it means the inability of ▇▇▇▇▇▇▇▇▇▇▇, due to a physical or
mental impairment, to perform the essential functions of ▇▇▇▇▇▇▇▇▇▇▇'▇ job with
the Company for a period of more than six (6) consecutive months, with or
without a reasonable accommodation. A determination of Disability shall be made
by the Board of Directors in consultation with a physician satisfactory to the
Company, and ▇▇▇▇▇▇▇▇▇▇▇ shall cooperate with the efforts to make such
determination. Any such determination by the Board of Directors shall be final,
conclusive and binding upon all interested parties
Disposition has the meaning set forth in Section 7.6.
▇▇▇▇▇▇▇▇▇▇▇ shall have the meaning listed in the preamble.
Equalizing Distributions shall have the meaning set forth in Section 4.1(c).
Expenses means fees, costs, charges, disbursements, reasonable attorney fees,
and any other reasonable expenses incurred in connection with a proceeding
giving rise to a request for indemnification.
First Amended Agreement shall have the meaning listed in the preamble.
Fiscal Period means a portion of a Fiscal Year.
Fiscal Year means any 12-month period selected by the Company from time to time
as its fiscal year, provided that in the year of the formation, sale, or
liquidation of the Company, a Fiscal Year may be less than a 12-month period.
Involuntary Transfer and Involuntary Transferee shall have the meanings set
forth in Section 7.3 of this Agreement.
Liability means the obligation to pay any judgment, settlement, penalty,
assessment, forfeiture, or fine whatsoever, including any excise tax assessed
with respect to an employee benefit plan.
Liquidating Trustee shall have the meaning set forth in Section 9.5(a).
Majority Consent means the consent, determined in accordance with Section 6.7 of
this Agreement, of holders of more than 50% of the Units at the time of the
consent, unless otherwise expressly provided in the Agreement; provided,
however, that for purposes of consenting pursuant to Article VII of this
Agreement, "Majority Consent" means the consent of the holders of a majority of
the Units at the time of the consent, excluding the Units that are being
transferred, and provided, further, that the Units of Involuntary Transferees
who have not been admitted as Members to the Company shall be excluded for all
purposes in determining Majority Consent.
Member means any Person listed in the preamble to this Agreement until such time
as the Person is no longer a Member in accordance with this Agreement and any
additional Person who is admitted as a Member to the Company in accordance with
this Agreement.
Minority Unit shall have the meaning set forth in Section 7.6(a).
Notice of Involuntary Transfer shall have the meaning set forth in Section
7.3(a).
Notice of Transfer shall have the meaning set forth in Section 7.2(a) of this
Agreement.
Officer means a Person appointed as an officer pursuant to Section 6.4 of this
Agreement.
22
Original Agreement shall have the meaning set forth in the preamble of this
Agreement.
Original Sale shall have the meaning set forth in Section 7.5(c)(vi).
Percentage Interest for purposes of Book Value as determined in accordance with
Exhibit B shall mean twenty percent (20%), which percentage shall appropriately
be adjusted in the event ▇▇▇▇▇▇▇▇▇▇▇ Transfers any Units or new Members are
admitted to the Company of whom approval of admission has been given by
▇▇▇▇▇▇▇▇▇▇▇ (such approval shall be for purposes of calculating Book Value only
and in no event shall be construed as affecting the rights of the parties hereto
concerning the subject matter hereof).
Person means an individual, a general partnership, a limited partnership, a
domestic or foreign limited liability company, a trust, an estate, an
association, a corporation, or any other legal or commercial entity.
Profits and Losses mean, for each Fiscal Period, an amount equal to the
Company's taxable income and loss for the Fiscal Period, determined in
accordance with section 703(a) of the Code (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
section 703(a)(1) of the Code shall be included in taxable income and loss),
with the following adjustments:
(1) Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Profits and Losses pursuant to
this definition shall be added to the taxable income or loss;
(2) Any expenditures of the Company described in section 705(a)(2)(B) of the
Code or treated as section 705(a)(2)(B) expenditures described in section
1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not otherwise taken
into account in computing Profits and Losses pursuant to this definition,
shall be subtracted from the taxable income or loss;
(3) In the event the Asset Value of any Company asset is adjusted pursuant to
the definition of Asset Value, the amount of the adjustment shall be taken
into account as gain or loss from the disposition of the asset for purposes
of computing Profits and Losses;
(4) Gain or loss resulting from any disposition of any property by the Company
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Asset Value of the property
disposed of, notwithstanding that the property's adjusted tax basis differs
from its Asset Value;
(5) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing the taxable income or loss,
there shall be taken into account Depreciation for the Fiscal Year or other
period;
(6) To the extent an adjustment to the adjusted tax basis of any Company asset
pursuant to section 734(b) or section 743(b) of the Code is required
pursuant to section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations to be
taken into account in determining Capital Accounts as a result of a
distribution other than in complete liquidation of a Member's Units, the
amount of the adjustment shall be treated as an item of gain (if the
adjustment increases the asset's basis) or loss (if the adjustment
decreases the asset's basis) from the disposition of the asset and shall be
taken into account for purposes of computing Profits and Losses; and
(7) Notwithstanding any other provisions of this definition, any items that are
specially allocated pursuant to Sections 5.2 and 5.4 of this Agreement
shall not be taken into account in computing Profits or Losses.
The amounts of the items of income, gain, loss, and deduction available to be
specially allocated pursuant to Sections 5.2 and 5.4 of this Agreement shall be
determined by applying rules analogous to those set forth in this definition as
appropriate.
Projections means the projections for the Company attached as Exhibit A to the
Employment Agreement between the Company and ▇▇▇▇▇▇▇▇▇▇▇.
Proportionate Share shall have the meaning set forth in Section 7.6(a).
Put/Call Notice shall have the meaning set forth in Section 7.5.
QCBT shall have the meaning listed in the preamble of this Agreement.
QCBT Affiliate Transfer shall have the meaning set forth in Section 7.1.
QCBT shall have the meaning set forth in Section 7.4(c)(ii).
23
SFSC shall have the meaning set forth in the preamble of this Agreement.
Selling Members shall have the meaning set forth in Section 7.6.
Tangible Equity Ratio means the ratio of all Company assets on the financial
statements to the tangible equity.
Tax Distribution means the amount distributed to Members pursuant to Section
4.1(a) and (b) of this Agreement.
Tax Distribution Dates means, except as provided in Section 4.1(b) of this
Agreement, January 15, April 15, June 15, and September 15 of each Fiscal Year
commencing with September 15, 2005.
Tax Rate means the highest combined marginal income tax rate for federal and
Wisconsin purposes for the Fiscal Period at issue applicable to corporations
subject to tax under Subchapter C of the Code, assuming in determining the tax
rate that state taxes are deductible for federal purposes. In determining the
Tax Rate, a separate Tax Rate shall be determined for ordinary income, long-term
capital gains and Section 1231 gains, respectively, if the Company has such
types of income and if the tax rates for such types of income are different.
Transaction Price means (1) in a case of an Adjustment Transaction described in
clauses (a), (b) or (e) of the definition of Adjustment Transaction, the highest
price per unit (including the fair market value of any non-cash consideration)
received in that Adjustment Transaction for Units; or (2) in the case of an
Adjustment Transaction which is described in clause (c) of the definition of
Adjustment Transaction, the sum (computed on a per unit basis) of the amount
paid for such securities or any other rights or instruments plus the total
additional consideration, if any, payable upon the issuance or sale of the Units
issuable pursuant thereto; or (3) in the event of an Adjustment Transaction
described in clause (d) of the definition of Adjustment Transaction, the book
value of the Company (computed on a per unit basis) immediately after
consummation of, and after giving effect to, such Adjustment Transaction; or (4)
in the event of any Adjustment Transaction described in clause (f) of the
definition of Adjustment Transaction, an equitable amount per unit determined in
accordance with the foregoing principals.
Transfer means to sell, assign, give, bequeath, pledge, or otherwise encumber,
divest, dispose of, or transfer ownership or control of all of, any part of, or
any interest in a Unit to any Person, whether voluntarily or by operation of
law, whether inter vivos or upon death.
Transferee means any Person who proposes to acquire any or all of a Transferor's
Units, or a Person acquiring Units pursuant to the provisions of Article VII of
this Agreement.
Transferor means any Person who proposes to transfer or acquire any or all of a
then Member's Units pursuant to this Agreement.
Treasury Regulations or Regulations means the regulations adopted from time to
time by the Department of the Treasury under the Code, and any references to
"partners" or "partnership" in the Regulations shall refer, as appropriate, to
Members and the Company, respectively.
Unanimous Consent means the consent of all Members of the Company.
Unit means an interest in the Company received in exchange for a capital
contribution of $39,353.62 per Unit or, as regards the acquisition of Units at a
later date, such other amount as is determined by the Board of Directors.
Unit Purchase Agreement shall have the meaning set forth in the preamble of this
Agreement.
WLLCL means the Wisconsin Limited Liability Company Law.
24
EXHIBIT B
BOOK VALUE CALCULATION
I. Book Value shall mean an amount equal to the net book value of assets minus
liabilities of the Company as of the close of the month immediately
preceding the date of a Put/Call Notice (the "Determination Date")
multiplied by ▇▇▇▇▇▇▇▇▇▇▇'▇ Percentage Interest, using the following
valuation methods:
1. Except as set forth below in this Exhibit B, Book Value shall be
valued and computed in accordance with GAAP heretofor applied by the
Company as of the date of this Agreement, and shall not be computed
for tax purposes.
2. Regardless of accounting standard changes, modifications to the
Company's accounting policies, modification to the Company's lease
agreements or other like changes, all leases by the Company shall
constitute capital or financing leases, not operating leases, and as
such be treated under the direct financing method of accounting.
3. Liabilities and assets shall include year-end adjustments as of the
Determination Date required by GAAP.
4. Book Value shall include an adjustment for the amount by which amounts
paid to Affiliates of the Members in any transaction(s) exceeds the
fair market value of such transactions.
5. The Book Value as of the date of this Agreement using the foregoing
methods is $1,377,377.78, which reflects ▇▇▇▇-up to Book Value in
connection with QCBT's acquisition of 80% of the equity interest from
▇▇▇▇▇▇▇▇▇▇▇ on the date of this Agreement.
6. Book Value shall be reduced by the amount of any Equalizing
Distribution (plus related interest) which must be paid pursuant to
Section 4.1(c) before a distribution could be made pursuant to Section
4.1(d).
II. Closing. Unless there is a dispute regarding the Book Value calculation,
the Closing shall take place within thirty (30) days of a Put/Call Notice.
For purposes of determining the Book Value, within twenty (20) days
following a Put/Call Notice, the Company shall prepare and deliver to
▇▇▇▇▇▇▇▇▇▇▇ a statement of Book Value (a "Book Value Statement") prepared
in accordance with this Exhibit B, accompanied by sufficient detail to
determine the calculation of Book Value, and a report by Company's
independent accountant reflecting the Book Value.
▇▇▇▇▇▇▇▇▇▇▇ shall have ten (10) days after the receipt of the Book Value
Statement to make a written objection to the calculation. The parties shall
attempt in good faith to reach an agreement with respect to any matters in
dispute.
If the parties are unable to resolve the disagreements with respect to the
determination of the Book Value within thirty (30) days following an
objection by ▇▇▇▇▇▇▇▇▇▇▇, then the parties shall refer such differences to
Ernst & Young or such other national accounting firm mutually agreed upon
by the parties (the "CPA Firm"), who shall, acting as experts and not as
arbitrators, determine in accordance with this Agreement and Exhibit B, and
only with respect to the differences so submitted, the Book Value. The
parties shall direct the CPA Firm to use its best efforts to render its
determination within thirty (30) days after such submission. The CPA Firm's
determination will be conclusive and binding upon the parties, shall not be
subject to further review or approval and judgment therein may be entered
in any circuit court or any court of competent jurisdiction. The fees and
disbursements of the CPA Firm shall be paid by the non-prevailing party, as
determined by the CPA Firm. The Company shall make readily available to the
CPA Firm all relevant books and records and workpapers related to the
Company's operations and all other items reasonably requested by the CPA
Firm.
The Closing shall take place with five (5) days of the CPA's determination.
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EXHIBIT C
CAPITAL ACCOUNT
Member Capital Contribution Capital Account Number of Units
---------------------------------------------------------------------------------------------
QCBT 80% of the fair market value $5,509,511.22 140
of the Company's assets
net of the Company's liabilities
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 20% of the fair market value $1,377,377.78 35
of the Company's assets
Net of the Company's liabilities
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EXHIBIT D
GUARANTY
THIS GUARANTY is made and entered into as of the ____ day of August, 2005, by
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ("Guarantor") for the benefit of Quad City Bank and Trust
Company, an Iowa corporation ("QCBT").
W I T N E S S E T H:
WHEREAS, Guarantor and QCBT entered into that certain Second Amended and
Restated Operating Agreement of M2 Lease Funds LLC (the "Obligor") dated August
__, 2005 (the "Operating Agreement");
WHEREAS, Section 11.2 of the Operating Agreement requires that Guarantor execute
and deliver to QCBT a guaranty to secure up to twenty percent (20%) of any loan
made to the Obligor by QCBT or its affiliates on terms and conditions mutually
acceptable to Guarantor and QCBT;
WHEREAS, the Obligor has promised to pay QCBT the principal amount, plus
interest, of any amounts lent by QCBT to Obligor (the "Indebtedness");
WHEREAS, Guarantor and QCBT have agreed that this Guaranty will require
Guarantor to secure the bottom twenty percent (20%) of the Indebtedness as
described in more detail below.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Guarantor does hereby covenant and agree with
QCBT as follows:
1. Guaranty.
Subject to the limitations, terms and conditions of Section 3, below,
Guarantor hereby irrevocably guaranties the full and prompt payment and
performance of all obligations of Indebtedness (individually, an
"Obligation" and collectively, the "Obligations"). This is a Guaranty of
collection and, accordingly, if Obligor shall default in the payment or
performance of any of the Obligations when and as the same shall become
due, whether at the stated dates thereof, by acceleration or otherwise,
QCBT shall have the right to proceed against Guarantor only as provided in
Section 3 below.
2. Unconditional Guaranty.
No act or thing need occur to establish the liability of Guarantor
hereunder, and except as expressly provided in Section 3, below, no act or
thing shall in any way exonerate such Guarantor hereunder or modify,
reduce, limit or release such Guarantor's liability hereunder, including
without limitation, the death or incompetence of such Guarantor.
3. Limited Guaranty.
Notwithstanding any contrary provision of this Guaranty, Guarantor shall
not be obligated to make any payment hereunder until all attempts to
collect from Obligor, with due diligence and using reasonable means, have
failed to satisfy the Obligations in full. Such attempts shall include the
exhaustion of all rights and remedies at law and in equity that QCBT may
have against Obligor and the collateral, if any, securing the Note.
Guarantor's liability hereunder shall be limited to the lesser of (i) the
unpaid portion of the Obligations, after exhaustion of all rights and
remedies against Obligor and collateral securing the Indebtedness as
provided above, and (ii) 20% of the outstanding principal balance of the
Indebtedness.
4. Waiver.
To the extent not prohibited by law, Guarantor expressly waives notice of
the acceptance of this Guaranty, default under any Obligation, and
presentment, demand, notice and protest. Subject to Section 3 above, this
Guaranty shall be unconditional, absolute, and irrevocable, irrespective of
(a) the existence of any security given to secure the Obligations, (b)
impossibility or the illegality of performance on the part of Obligor under
any documents governing or involving the Obligations, (c) the sale or other
transfer of all or any portion of any collateral securing the Obligations,
(d) any defense that may arise by reason of the incapacity or lack of
authority of Obligor or Guarantor, or (e) any other circumstances,
occurrences or conditions, which are similar or dissimilar to any of the
foregoing, which might otherwise constitute a legal or equitable defense,
discharge or release of a guarantor. Further, Guarantor agrees that QCBT
may, at any time and from time to time, with or without consideration, (i)
extend time for payment or performance or grant other forbearances to
Obligor, and/or (ii) agree to the substitution, exchange or release of all
or any part of any collateral securing the Obligations, without notice to,
or further consent from, Guarantor. Any such action shall not in any way
affect or diminish the liability of Guarantor under this Guaranty.
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5. No Warranties or Representations.
Guarantor acknowledges and agrees that QCBT has not made any warranties or
representations with respect to, does not assume any responsibility to
Guarantor for, and does not have any duty to provide information to
Guarantor regarding, the collectibility or enforceability of any of the
Obligations. Guarantor has independently determined the collectibility and
enforceability of the Obligations and until the Obligations are paid and
performed in full, Guarantor will independently and without reliance on
QCBT continue to make such determinations.
6. Costs of Collection.
Guarantor agrees to pay all costs and expenses, including without
limitation, all court costs and reasonable attorneys' fees and expenses,
paid or incurred by QCBT in endeavoring to collect all or any part of the
Obligations after the same become due and owing from, or in prosecuting any
action against, Guarantor.
7. Binding Effect.
Guarantor agrees that this Guaranty shall be binding upon Guarantor and his
heirs, legal and personal representatives and assigns, and shall inure to
the benefit of and may be enforced by QCBT and its successors and assigns.
Guarantor acknowledges QBCT's acceptance hereof and reliance hereon.
8. Governing Law.
THIS GUARANTY HAS BEEN EXECUTED, DELIVERED AND ACCEPTED AT, AND SHALL BE
DEEMED TO HAVE BEEN MADE AT, MILWAUKEE, WISCONSIN, AND SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED, IN ACCORDANCE WITH THE INTERNAL (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS) LAWS AND DECISIONS OF THE STATE OF WISCONSIN, AND GUARANTOR
AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT WITHIN MILWAUKEE
COUNTY, WISCONSIN, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
GUARANTOR. GUARANTOR WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND
WAIVES ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER. NOTHING
IN THIS SECTION 8 SHALL AFFECT THE RIGHT OF QCBT TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF QCBT TO BRING ANY
ACTION OR PROCEEDING AGAINST GUARANTOR OR HIS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
9. Enforceability.
If any term, covenant or condition of this Guaranty, or the application
thereof to any person, entity or circumstance, shall, to any extent, be
invalid or unenforceable, all other provisions of this Guaranty, or the
application of such term, covenant or condition to persons or entities or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each term, covenant and condition herein
shall be valid and enforced to the fullest extent permitted by law.
10. Entire Agreement.
This Guaranty is intended by Guarantor as a final expression of this
Guaranty and is a complete and exclusive statement of its terms, there
being no conditions to the full effectiveness of this Guaranty. This
Guaranty may not be supplemented or amended except in a writing signed by
Guarantor.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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