OPERATING AGREEMENT
OF
MILFAM LLC,
AN OHIO LIMITED LIABILITY COMPANY
This operating agreement is entered into as of December 10, 1996 by Xxxxx
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X. Xxxxxx, III, the Irrevocable Trust U/A Xxxxxxxxx X. Xxxxxx dated March 26,
1991, and the Irrevocable Trust U/A Xxxxx X. Xxxxxx, III dated December 31,
1991.
RECITALS
The Company was established as an Ohio limited liability company pursuant
to articles of organization filed by Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxxxxx
as the initial members. Xx. Xxxxxx and Xx. Xxxxxxxxxx have resigned as members
and the parties hereto have been admitted as members.
The parties have agreed to organize and operate a limited liability company
under the laws of the State of Ohio in accordance with the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the parties, intending
legally to be bound, agree as follows:
SECTION I
DEFINED TERMS
The following capitalized terms shall have the meanings specified in this
Section I. Other terms are defined in this Agreement, and, throughout this
Agreement, those terms shall have the meanings respectively ascribed to them.
"Act" means the Ohio Limited Liability Company Act, Chapter 1705 Ohio
Revised Code as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Interest
Holder, the deficit balance, if any, in the Interest Holder's Capital Account as
of the end of the relevant taxable year, after giving effect to the following
adjustments:
(i) the deficit shall be decreased by the amounts which the Interest
Holder is obligated to restore pursuant to Section 4.4(b), or is
deemed obligated to restore pursuant to Regulation Section
1.704-1(b)(2)(ii)(c); and
(ii) the deficit shall be increased by the items described in
Regulation Section 1.704-1(b)(2)(ii)-(d)(4), (5), and (6).
"Agreement" means this Agreement, as amended from time to time.
"Capital Account" means the account to be maintained by the Company for
each Interest Holder in accordance with the following provisions:
(i) an Interest Holder's Capital Account shall be credited with the
Interest Holder's Capital Contributions, the amount of any
Company liabilities assumed by the Interest Holder (or which are
secured by Company property distributed to the Interest Holder),
the Interest Holder's distributive share of Profit, and any item
in the nature of income or gain specially allocated to the
Interest Holder pursuant to the provisions of Section IV (other
than Section 4.3(c)); and
(ii) an Interest Holder's Capital Account shall be debited with the
amount of money and the fair market value of any Company property
distributed to the Interest Holder, the amount of any liabilities
of the Interest Holder assumed by the Company (or which are
secured by property contributed by the Interest Holder to the
Company), the Interest Holder's distributive share of Loss, and
any item in the nature of expenses or losses specially allocated
to the Interest Holder pursuant to the provisions of Section IV
(other than Section 4.3(c)).
If any Membership Interest is transferred pursuant to the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent the Capital Account is attributable to the transferred Membership
Interest. If the book value of Company property is adjusted pursuant to Section
4.3(c), the Capital Account of each Membership Interest Holder shall be adjusted
to reflect the aggregate adjustment in the same manner as if the Company had
recognized gain or loss equal to the amount of such aggregate adjustment. It is
intended that the Capital Accounts of all Interest Holders shall be maintained
in compliance with the provisions of Regulation Section 1.704-1(b), and all
provisions of this Agreement relating to the maintenance of Capital Accounts
shall be interpreted and applied in a manner consistent with that Regulation.
"Capital Contribution" means the total amount of cash and the fair market
value of any other assets contributed (or deemed contributed under Regulation
Section 1.704-1(b)(2)(iv)(d)) to the Company by a Member, net of liabilities
assumed or to which the assets are subject.
"Cash Flow" means all cash funds derived from operations of the Company
(including interest received on reserves), without reduction for any non-cash
charges, but less cash funds used to pay current operating expenses and to pay
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or establish reasonable reserves for future expenses, debt repayments, capital
improvements, and replacements as determined by the Manager. Cash Flow shall be
increased by the reduction of any reserve previously established.
"Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law.
"Company" means the limited liability company formed in accordance with
this Agreement.
"Family Member" means Xxxxxxxxx Xxxx and any of her descendants and any
trusts for their benefit.
"Interest Holder" means any Person who holds a Membership Interest, whether
as a Member or an unadmitted assignee of a Member.
"Involuntary Transfer" means, with respect to any Interest Holder, the
transfer of any interest in the Company upon death, divorce, insolvency,
bankruptcy or other proceeding with respect to creditors.
"Involuntary Withdrawal" means, with respect to any Member, the occurrence
of any of the following events:
(i) the Member makes an assignment for the benefit of creditors;
(ii) the Member files a voluntary petition of bankruptcy;
(iii) the Member is adjudged bankrupt or insolvent;
(iv) the Member files a petition or answer seeking for the Member any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any statute,
law, or regulation;
(v) the Member files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against
the Member in any proceeding described in Subsection (iv);
(vi) any proceeding against the Member seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution,
or similar relief under any statute, law, or regulation,
continues for one hundred twenty (120) days after the
commencement thereof, or the appointment of a trustee, receiver,
or liquidator for the Member or all or any substantial part of
the Member's properties without the Member's agreement or
acquiescence, which appointment is not vacated or stayed for
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ninety (90) days or, if the appointment is stayed, for ninety
(90) days after the expiration of the stay during which period
the appointment is not vacated;
(vii) if the Member is an individual, the Member's death or
adjudication by a court of competent jurisdiction as incompetent
to manage the Member's person or property;
(viii) if the Member is acting as a Member by virtue of being a
trustee of a trust, the termination of the trust;
(ix) if the Member is a partnership or another limited liability
company, the dissolution and commencement of winding up of the
partnership or limited liability company;
(x) if the Member is a corporation, the dissolution of the
corporation or the revocation of its charter; or
(xi) if the Member is an estate, the distribution by the fiduciary of
the estate's entire interest in the limited liability company.
"Manager" is the Person designated as such in Section 5.1 and any
successors thereto. If there is more than one Manager, the term "Manager" shall
include all such persons as the context requires.
"Member" means each Person signing this Agreement and any Person who
subsequently is admitted as a Member of the Company.
"Member Loan Nonrecourse Deductions" means any Company deductions that
would be Nonrecourse Deductions if they were not attributable to a loan made or
guaranteed by a Member within the meaning of Regulation Section 1.704-2(i).
"Membership Interest" means an Interest Holder's share of the Profits and
Losses of, and the right to receive distributions from, the Company.
"Membership Rights" means all of the rights of a Member in the Company,
including a Member's: (i) Membership Interest; and (ii) the rights granted to
Members under this Agreement or under the Act.
"Minimum Gain" has the meaning set forth in Regulation Section 1.704-2(d).
Minimum Gain shall be computed separately for each Interest Holder in a manner
consistent with the Regulations under Code Section 704(b).
"Negative Capital Account" means a Capital Account with a balance of less
than zero.
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"Nonrecourse Deductions" has the meaning set forth in Regulation Section
1.704-2(b)(1). The amount of Nonrecourse Deductions for a taxable year of the
Company equals the net increase, if any, in the amount of Minimum Gain during
that taxable year, determined according to the provisions of Regulation Section
1.704-2(c).
"Nonrecourse Liability" means any liability of the Company with respect to
which no Member has personal liability determined in accordance with Code
Section 752 and the Regulations promulgated thereunder.
"Percentage" means, (i) as to a Member, the percentage set forth after the
Member's name on Exhibit A, as amended from time to time, and (ii) as to an
Interest Holder who is not a Member, the Percentage of the Member whose
Membership Interest has been acquired by such Interest Holder, to the extent the
Interest Holder has succeeded to that Member's Membership Interest.
"Person" means and includes any individual, corporation, partnership,
association, limited liability company, trust, estate, or other entity.
"Positive Capital Account" means a Capital Account with a balance greater
than zero.
"Profit" and "Loss" means, for each taxable year of the Company (or other
period for which Profit or Loss must be computed) the Company's taxable income
or loss determined in accordance with Code Section 703(a), with the following
adjustments:
(i) all items of income, gain, loss, deduction, or credit required to
be stated separately pursuant to Code Section 703(a)(1) shall be
included in computing taxable income or loss; and
(ii) any tax-exempt income of the Company, not otherwise taken into
account in computing Profit or Loss, shall be included in
computing taxable income or loss; and
(iii) any expenditures of the Company described in Code Section
705(a)(2)(B) (or treated as such pursuant to Regulation Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in
computing Profit or Loss, shall be subtracted from taxable income
or loss; and
(iv) gain or loss resulting from any taxable disposition of Company
property shall be computed by reference to the adjusted book
value of the property disposed of, notwithstanding the fact that
the adjusted book value differs from the adjusted basis of the
property for federal income tax purposes; and
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(v) in lieu of the depreciation, amortization, or cost recovery
deductions allowable in computing taxable income or loss, there
shall be taken into account the depreciation computed based upon
the adjusted book value of the asset; and
(vi) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 4.3 hereof
shall not be taken into account in computing Profit or Loss.
"Regulations" means the income tax regulations, including any temporary
regulations, from time to time promulgated under the Code.
"Secretary" means the Secretary of State of Ohio.
"Voluntary Transfer" means any voluntary sale, hypothecation, pledge,
assignment, attachment, or other voluntary transfer.
"Voluntary Withdrawal" means a Member's dissociation with the Company by
means other than a transfer or an Involuntary Withdrawal.
"Units" has the meaning set forth in Section 3.7.
SECTION II
FORMATION AND NAME: OFFICE; PURPOSE; TERM
2.1 Organization. The parties shall operate a limited liability
company pursuant to the Act and the provisions of this Agreement and, for that
purpose, have caused Articles of Organization to be executed and filed with the
Secretary.
2.2 Name of the Company. The name of the Company shall be "Milfam
LLC." The Company may do business under that name and under any other name or
names upon which the Manager selects. If the Company does business under a name
other than that set forth in its Articles of Organization, then the Company
shall file a fictitious name certificate as required by law.
2.3 Purpose. The Company is organized solely to serve as general
partner of a limited partnership that will purchase, acquire, buy, sell, own,
trade in, hold,and otherwise deal in securities, and to do any and all things
necessary, convenient, or incidental to such purpose.
2.4 Term. The term of the Company shall begin upon the filing of the
Articles of Organization with the Secretary and shall continue in existence
until December 31, 2050, unless its existence is sooner terminated pursuant to
Section VII of this Agreement.
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2.5 Principal Office. The principal office of the Company in Ohio
shall be located at 2500 PNC Center, 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxx
00000 or at any other place that the Manager selects.
2.6 Statutory Agent. The name and address of the Company's statutory
agent in the State of Ohio shall be Xxxxxx X. Xxxxxx, 2500 PNC Center, 000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000 .
2.7 Members. The name and present mailing address of each Member, as
well as the number of Units owned by each Member, are set forth on Exhibit A.
SECTION III
MEMBERS; CAPITAL; CAPITAL ACCOUNTS
3.1 Initial Capital Contributions. Within a reasonable time following
the execution of this Agreement, the Members shall contribute to the Company
cash or other property having a value in the amounts set forth opposite their
respective names on Exhibit A.
3.2 Additional Capital Contributions. No Member shall be required to
contribute any additional capital to the Company, and no Member shall have any
personal liability for any obligation of the Company.
3.3 No Interest on Capital Contributions. Interest Holders shall not
be paid interest on their Capital Contributions.
3.4 Return of Capital Contributions. Except as otherwise provided in
this Agreement, no Interest Holder shall have the right to receive the return of
any Capital Contribution.
3.5 Form of Return of Capital. If an Interest Holder is entitled to
receive a return of a Capital Contribution, the Interest Holder shall not have
the right to receive anything but cash in return of the Interest Holder's
Capital Contribution.
3.6 Capital Accounts. A separate Capital Account shall be maintained
for each Interest Holder.
3.7 Units. Ownership rights in the Company will be reflected in Units.
Subject to limitations on voting rights imposed by this Agreement, each Unit has
equal governance rights with every other Unit and, in matters subject to a vote
of the Members, each Unit carries with it the right to one vote. Except as
otherwise provided herein, each Unit has equal rights with every other Unit with
respect to sharing of Profits and Losses and with respect to distributions. The
Manager will determine when and for what consideration the Company will issue
Units, and, subject to any limitations imposed by this Agreement, the Manager
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will determine how many Units may be issued. For each Member, the records of the
Company will state the value and nature of the contribution received by the
Company and the number of Units received in return by the Member. The Company
initially will have 100,000 Units.
3.8 Loans. Any Member may, at any time, make a loan to the Company in
any amount and on those terms upon which the Company and the Member agree.
SECTION IV
PROFIT, LOSS AND DISTRIBUTIONS
4.1 Allocations of Profit or Loss.
(a) Allocation to Manager. While Xxxxx X. Xxxxxx, III serves as
Manager of the Company, he shall be allocated an amount equal to the sum of any
guaranteed payment paid to the Company pursuant to Section 3.8 of the respective
Partnership Agreements of Milfam I L.P. and Milfam II L.P and any profit
allocated to the Company pursuant to Sections 4.1(a)(2)(i) and (ii) of such
agreements.
(b) Remaining Profit or Loss. After giving effect to the special
allocations set forth in Sections 4.1(a) and 4.3, for any taxable year of the
Company, Profit or Loss shall be allocated to the Interest Holders in
proportion to their Units.
4.2 Distributions
(a) Cash Flow. Cash Flow for each taxable year of the Company
shall be distributed first to Xxxxx X. Xxxxxx, III while he serves as Manager of
the Company in an amount sufficient to cause cumulative Cash Flow distributed to
him pursuant to this sentence to equal the cumulative Profits allocated to him
pursuant to Section 4.1(a). The balance of any Cash Flow shall be distributed
to the Interest Holders in proportion to their Units at such time and in such
amounts as are determined by the Manager, in his sole discretion.
(b) Distribution on Termination. On termination of the Company,
assets shall be distributed and applied by the Company in the following order
and priority:
(i) to the payment of all expenses of the Company incident to
winding up; then
(ii) to the payment of debts and liabilities of the Company then
due and outstanding (including all debts due to any Interest
Holder); then
(iii) to the establishment of any reserves which the Manager
deems necessary for liabilities or obligations of the
Company; then
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(iv) the balance shall be distributed to the Interest Holders in
accordance with their respective Capital Account balances.
4.3 Regulatory Allocations.
(a) Qualified Income Offset. No Interest Holder shall be
allocated Losses or deductions if the allocation causes an Interest Holder to
have an Adjusted Capital Account Deficit. If an Interest Holder receives (1) an
allocation of Loss or deduction (or item thereof) or (2) any distribution, which
causes the Interest Holder to have an Adjusted Capital Account Deficit at the
end of any taxable year, then all items of income and gain of the Company
(consisting of a pro rata portion of each item of Company income, including
gross income and gain) for that taxable year shall be allocated to that Interest
Holder, before any other allocation is made of Company items for that taxable
year, in the amount and in proportions required to eliminate the excess as
quickly as possible. This Section 4.3(a) is intended to comply with, and shall
be interpreted consistently with, the "qualified income offset" provisions of
the Regulations promulgated under Code Section 704(b).
(b) Minimum Gain Chargeback. Except as set forth in Regulation
Section 1.704-2(f)(2), (3), and (4), if, during any taxable year, there is a net
decrease in Minimum Gain, each Interest Holder, prior to any other allocation
pursuant to this Section IV, shall be specially allocated items of gross income
and gain for such taxable year (and, if necessary, subsequent taxable years) in
an amount equal to that Interest Holder's share of the net decrease of Minimum
Gain, computed in accordance with Regulation Section 1.704-2(g). Allocations of
gross income and gain pursuant to this Section 4.3(b) shall be made first from
gain recognized from the disposition of Company assets subject to non-recourse
liabilities (within the meaning of the Regulations promulgated under Code
Section 752), to the extent of the Minimum Gain attributable to those assets,
and thereafter, from a pro rata portion of the Company's other items of income
and gain for the taxable year. It is the intent of the parties hereto that any
allocation pursuant to this Section 4.3(b) shall constitute a "minimum gain
chargeback" under Regulation Section 1.704-2(f).
(c) Contributed Property and Book-ups. In accordance with Code
Section 704(c) and the Regulations thereunder, as well as Regulation Section
1.704-l(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any
property contributed (or deemed contributed) to the Company shall, solely for
tax purposes, be allocated among the Interest Holders so as to take account of
any variation between the adjusted basis of the property to the Company for
federal income tax purposes and its fair market value at the date of
contribution (or deemed contribution). If the adjusted book value of any
Company asset is adjusted as provided herein, subsequent allocations of income,
gain, loss, and deduction with respect to the asset shall take account of any
variation between the adjusted basis of the asset for federal income tax
purposes and its adjusted book value in the manner required under Code Section
704(c) and the Regulations thereunder.
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(d) Code Section 754 Adjustment. To the extent an adjustment to
the tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulation Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of the
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases basis), and the gain or loss shall be specially allocated to the
Interest Holders in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to that Section of the
Regulations.
(e) Nonrecourse Deductions. Nonrecourse Deductions for a taxable
year or other period shall be specially allocated among the Interest Holders in
proportion to their Units.
(f) Member Loan Nonrecourse Deductions. Any Member Loan
Nonrecourse Deduction for any taxable year or other period shall be specially
allocated to the Interest Holder who bears the risk of loss with respect to the
loan to which the Member Loan Nonrecourse Deduction is attributable in
accordance with Regulation Section 1.704-2(b).
(g) Withholding. All amounts required to be withheld pursuant to
Code Section 1446 or any other provision of federal, state, or local tax law
shall be treated as amounts actually distributed to the affected Interest
Holders for all purposes under this Agreement.
4.4 Liquidation and Dissolution.
(a) If the Company is liquidated, the assets of the Company shall
be distributed to the Interest Holders in accordance with the balances in their
respective Capital Accounts, after taking into account the allocations of Profit
or Loss pursuant to Section 4.1, if any, and distributions, if any, of cash or
property, if any, pursuant to Sections 4.2.
(b) No Interest Holder shall be obligated to restore a Negative
Capital Account.
4.5 General.
(a) Timing of Distributions. Except as otherwise provided in this
Agreement, the timing and amount of all distributions shall be determined by the
Manager.
(b) Distributions in Kind. If any assets of the Company are
distributed in kind to the Interest Holders, those assets shall be valued on the
basis of their fair market value, and any Interest Holder entitled to any
interest in those assets shall receive that interest as a tenant-in-common with
all other Interest Holders so entitled. Unless the Manager otherwise agrees,
the fair market value of the assets shall be determined by an independent
appraiser who shall be selected by the Manager. The Profit or Loss for each
unsold asset shall be determined as if the asset had been sold at its fair
market value, and the Profit or Loss shall be allocated as provided in Section
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4.1 and shall be properly credited or charged to the Capital Accounts of the
Interest Holders prior to the distribution of the assets in liquidation pursuant
to Section 4.4.
(c) Timing of Allocations. All Profit and Loss shall be
allocated, and all distributions shall be made, to the Persons shown on the
records of the Company to have been Interest Holders as of the last day of the
taxable year for which the allocation or distribution is to be made.
Notwithstanding the foregoing, unless the Company's taxable year is separated
into segments, if there is a Transfer or an Involuntary Withdrawal during the
taxable year, the Profit and Loss shall be allocated between the original
Interest Holder and the successor on the basis of the number of days each was an
Interest Holder during the taxable year; provided, however, the Company's
taxable year shall be segregated into two or more segments in order to account
for Profit, Loss, or proceeds attributable to any extraordinary non-recurring
items of the Company.
(d) Amendments. The Manager is authorized, upon the advice of the
Company's tax counsel, to amend this Article IV to comply with the Code and the
Regulations promulgated under Code Section 704(b); provided, however, that no
amendment shall materially affect distributions to an Interest Holder without
the Interest Holder's prior written consent.
SECTION V
MANAGEMENT: RIGHTS, POWERS, AND DUTIES
5.1 Management.
(a) Manager. The Company shall be managed by one or more
Managers. The number of Managers shall be determined periodically by the
Members owning 75 percent or more of the Units. The Company initially will have
one Manager. Xxxxx X. Xxxxxx, III is hereby designated to serve as the initial
Manager. At such time as he is unable or unwilling to serve as Manager,
Xxxxxxxxx Xxxx will designate one or more banks or trust companies authorized to
do business under the laws of any state or under the National Bank Act of the
United States to serve as Manager.
(b) General Powers. The Manager shall have full, exclusive, and
complete discretion, power, and authority, subject in all cases to the other
provisions of this Agreement and the requirements of applicable law, to manage,
control, administer, and operate the business and affairs of the Company for the
purposes herein stated, and to make all decisions affecting such business and
affairs, including without limitation, for Company purposes, the power to:
(i) acquire by purchase, exchange, lease, or otherwise, any real
or personal property, tangible or intangible;
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(ii) construct, operate, maintain, finance, and improve, and to
own, sell, convey, assign, mortgage, or lease any real
estate and any personal property;
(iii) sell, dispose, trade, or exchange assets;
(iv) enter into agreements and contracts and to give receipts,
releases, and discharges;
(v) purchase liability and other insurance to protect properties
and business;
(vi) borrow money for and on behalf of the Company, on a secured
or unsecured basis, and, in connection therewith, execute
and deliver instruments authorizing the confession of
judgment against the Company.
(vii) execute or modify leases and options;
(viii) prepay, in whole or in part, refinance, amend, modify, or
extend any mortgages or deeds of trust which may affect any
asset and in connection therewith to execute for and on
behalf of the Company any extensions, renewals, or
modifications of such mortgages or deeds of trust;
(ix) execute any and all other instruments and documents which
may be necessary or in the opinion of the Manager desirable
to carry out the intent and purpose of this Agreement,
including, but not limited to, documents whose operation and
effect extend beyond the term of the Company;
(x) make any and all expenditures which the Manager deems
necessary or appropriate in connection with the management
of the affairs of the Company and the carrying out of its
obligations and responsibilities under this Agreement,
including, without limitation, all legal, accounting, and
other related expenses incurred in connection with the
organization and financing and operation of the Company;
(xi) enter into any kind of activity necessary to, in connection
with, or incidental to, the accomplishment of the purposes
of the Company;
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(xii) invest and reinvest Company reserves in short-term
instruments or money market funds;
(xiii) purchase, invest and reinvest, retain, operate and sell
any business interest, whether organized as a sole
proprietorship, partnership, trust, limited liability
company or other type of entity, for such time and in such
manner as the Manager may deem advisable;
(xiv) employ legal counsel, investment counsel and other agents
in any manner in connection with the administration of the
assets of the Company and to pay such compensation and
expenses in connection therewith as the Manager deems
reasonable under the circumstances; and
(xv) employ officers, managers, employees or agents as the
Manager may deem advisable in its management of the
Company's business;
(c) Limitation on Authority of Manager. If there is more than one
Manager, decisions of the Managers will require the approval of a majority of
the Managers. While Xxxxx X. Xxxxxx, III serves as manager, he shall have
complete control over all of the affairs of the Company and need not seek the
consent or approval of any Member with respect to any action. Any Manager who
serves after him shall not undertake any of the following without the approval
of the Members:
(i) the sale of substantially all of the assets of the Company;
(ii) admitting additional Members to the Company;
(iii) issuing additional Units;
(iv) hiring of a professional manager to run the Company or a
significant part of the Company;
(v) determining the compensation to be paid to the Manager; or
(vi) engaging in business in any jurisdiction which does not
provide for the registration of limited liability companies.
(d) Limitation on Authority of Members.
(i) No Member is an agent of the Company solely by virtue of
being a Member, and no Member has authority to act for the
Company solely by virtue of being a Member.
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(ii) This Section 5.1 supersedes any authority granted to the
Members pursuant to Section 1705.25(A) of the Act. Any Member who takes any
action or binds the Company in violation of this Section 5.1 shall be solely
responsible for any loss and expense incurred by the Company as a result of the
unauthorized action and shall indemnify and hold the Company harmless with
respect to the loss or expense.
(e) Removal of Manager. Xxxxx X. Xxxxxx, III may not be removed
as Manager except for cause. The Members may remove any other Manager for cause.
For cause means the occurrence of any of the following conditions:
(i) the Manager commits a felonious criminal act;
(ii) the Manager's continuous and uninterrupted inability for
a period of two months or more to perform the duties required under this
Agreement by reason of accident, illness or disease;
(iii) taking an action with reckless disregard for the best
interest of the Company; or
(vi) an intentional breach of this Agreement.
In addition to removing a Manager for reasons set forth above, any Manager,
other than Xxxxx X. Xxxxxx, III, may be removed for continued unsatisfactory
performance. To remove a Manager on such basis, Members owning 75% or more of
the Units held by Members (exclusive of the Units owned by the Manager) must
state in writing the basis for the Manager's unsatisfactory performance. The
Manager will be given a 90-day period within which to have his performance
deemed satisfactory. If, at the close of such 90-day period, Members owning 75%
or more of the Units held by Members (exclusive of Units owned by the Manager)
still deem the Manager's performance unsatisfactory, the Manager may be removed.
A new Manager will be appointed by Xxxxxxxxx Xxxx or her legal representative
while she is still alive, and, after her death, by Members owning a majority of
the Units held by Members.
5.2 Meetings of and Voting by Members.
(a) Voting. Any Member holding Units will be entitled to vote
such Units.
(b) Meetings. A meeting of the Members may be called at any time
by the Manager or by those Members entitled to vote holding at least fifty-one
percent (51%) of the Units held by Members. Meetings of Members shall be held
at the Company's principal place of business or at any other place designated by
the Person calling the meeting. Not less than ten (3) nor more than ninety (90)
days before each meeting, the Person calling the meeting shall give written
notice of the meeting to each Member entitled to vote at the meeting. The
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notice shall state the time, place, and purpose of the meeting. Notwithstanding
the foregoing provisions, each Member who is entitled to notice waives notice if
before or after the meeting the Member signs a waiver of the notice which is
filed with the records of Members' meetings, or is present at the meeting in
person or by proxy. Unless this Agreement provides otherwise, at a meeting of
Members, the presence in person or by proxy of Members holding not less than a
majority of the Units then held by Members entitled to vote constitutes a
quorum. Subject to any limitations set forth in this Agreement, a Member
entitled to vote may vote either in person or by written proxy signed by the
Member or by his duly authorized attorney in fact.
(c) Required Vote. Except as otherwise provided in this
Agreement, wherever this Agreement requires the approval of Members, the
affirmative vote of Members holding or entitled to vote a majority or more of
the Units for which votes may be cast shall be required to approve the matter.
(d) Written Consent. In lieu of holding a meeting, the Members
entitled to vote may take action by a written instrument indicating the consent
of Members holding or entitled to vote a majority or more of the Units for which
votes may be cast.
5.3 Personal Services.
(a) Required Services. No Member shall be required to perform
services for the Company solely by virtue of being a Member. Unless approved by
the Manager, no Member shall perform services for the Company or be entitled to
compensation for services performed for the Company.
(b) Compensation. The Manager shall be entitled to reasonable
compensation for services performed for the Company as set forth above. In
addition, the Manager shall be entitled to reimbursement for expenses reasonably
incurred in connection with the activities of the Company.
5.4 Duties of Parties.
(a) Time Commitment. The Manager shall devote such time to the
business and affairs of the Company as is necessary to carry out the Manager's
duties set forth in this Agreement.
(b) Outside Ventures. Except as otherwise expressly provided in
Section 5.4(c), nothing in this Agreement shall be deemed to restrict in any way
the rights of any Member to conduct any other business or activity whatsoever,
and the Member shall not be accountable to the Company or to any Member with
respect to that business or activity even if the business or activity competes
with the Company's business. The organization of the Company shall be without
prejudice to the respective rights of the Members to maintain, expand, or
diversify such other interests and activities and to receive and enjoy profits
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or compensation therefrom. Each Member waives any rights the Member might
otherwise have to share or participate in such other interests or activities of
any other Member.
(c) Arm's Length Dealings. Each Member understands and
acknowledges that the conduct of the Company's business may involve business
dealings and undertakings with Members. In any of those cases, those dealings
and undertakings shall be at arm's length and on commercially reasonable terms.
5.5 Liability and Indemnification.
(a) Standard Imposed. The Manager shall not be liable,
responsible, or accountable, in damages or otherwise, to any Member or to the
Company for any act performed by the Manager within the scope of the authority
conferred on the Manager by this Agreement, except as provided in Section
1705.29(D) of the Act.
(b) Right to Indemnity. The Company shall indemnify the Manager
for any act performed by the Manager within the scope of the authority conferred
on the Manager by this Agreement unless the act is proved by clear and
convincing evidence to have been undertaken with deliberate intent to cause
injury to the Company, with reckless disregard for the best interest of the
Company, or to be an intentional breach of this Agreement.
5.6 Power of Attorney.
(a) Grant of Power. Each Member constitutes and appoints the
Manager as the Member's true and lawful attorney-in-fact ("Attorney-in-Fact"),
and in the Member's name, place and stead, to make, execute, sign, acknowledge,
and file:
(i) Articles of Organization or any amendment thereto, which has
been approved as provided in this Agreement;
(ii) all documents (including amendments to articles of
organization) which the Attorney-in-Fact deems appropriate
to reflect any amendment, change, or modification of this
Agreement;
(iii) any and all other certificates or other instruments
required to be filed by the Company under the laws of the
State of Ohio or of any other state or jurisdiction,
including, without limitation, any certificate or other
instruments necessary in order for the Company to continue
to qualify as a limited liability company under the laws of
the State of Ohio;
(iv) one or more fictitious or trade name certificates; and
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(v) all documents which may be required to dissolve and
terminate the Company and to cancel its Articles of
Organization.
(b) Irrevocability. The foregoing power of attorney is
irrevocable and is coupled with an interest, and, to the extent permitted by
applicable law, shall survive the death or disability of a Member. It also
shall survive the Involuntary or Voluntary Transfer of an Interest, except that
if the transferee is approved for admission as a Member, this power of attorney
shall survive the delivery of the assignment for the sole purpose of enabling
the Attorney-in-Fact to execute, acknowledge, and file any documents needed to
effectuate the substitution. Each Member shall be bound by any representations
made by the Attorney-in-Fact acting in good faith pursuant to this power of
attorney, and each Member hereby waives any and all defenses which may be
available to contest, negate, or disaffirm the action of the Attorney-in-Fact
taken in good faith under this power of attorney.
SECTION VI
TRANSFER OF INTERESTS AND WITHDRAWALS OF MEMBERS
6.1 Transfers.
(a) General Restriction. No Person may make any transfer, either
a Voluntary Transfer, Involuntary Transfer, or otherwise, of all or any portion
of or any interest or rights in the Person's Membership Rights or Membership
Interest unless the following conditions ("Conditions of Transfer") are
satisfied:
(i) The transfer will not require registration of Membership
Interests or Membership Rights under any federal or state
securities laws;
(ii) The transferee agrees to be bound by the terms of Section VI
of this Agreement.
(iii) the transfer will not result in the termination of the
Company pursuant to Code Section 708; and
(iv) the transferor complies with the right of first refusal
provisions set forth in Section 6.1(d).
(b) Permitted Transfer. If the Conditions of Transfer are
satisfied, then a Member or Interest Holder may transfer all or any portion of
that Person's Membership Interest. Without receiving the consent of Members
owning at least 75% of the Units, exclusive of Units held by the Transferors,
the transfer of a Membership Interest pursuant to this Section 6.1 shall not
result in the transfer of any of the transferor's other Membership Rights, if
any, and the transferee of the Membership Interest shall have no right to: (i)
become a Member; (ii) exercise any Membership Rights other than those
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specifically pertaining to the ownership of a Membership Interest; or (iii) act
as an agent of the Company.
(c) Consent to Restriction. Each Member hereby acknowledges the
reasonableness of the prohibition contained in this Section 6.1 in view of the
purposes of the Company and the relationship of the Members. The transfer of
any Membership Rights or Membership Interests in violation of the prohibition
contained in this Section 6.1 shall be deemed invalid, null and void, and of no
force or effect. Any Person to whom Membership Rights are attempted to be
transferred in violation of this Section shall not be entitled to vote on
matters coming before the Members, participate in the management of the Company,
act as an agent of the Company, receive distributions from the Company, or have
any other rights in or with respect to the Membership Rights.
(d) Right of First Refusal.
(i) If:
(A) an Interest Holder (a "Transferor") intends to transfer
all or any portion of, or any interest or rights in a
Membership Interest either to a bona fide third party
purchaser or pursuant to an Involuntary Transfer, or,
(B) an Interest Holder is a spouse of a Family Member, and
the Interest Holder and such Family Member are
divorced,
the Transferor shall so notify the Company (the "Transfer
Notice"). The Transfer Notice shall describe the terms upon
which the Membership Interest is to be transferred or that
the Interest Holder and the Family Member are getting a
divorce. The Company shall have the option (the "Company
Option") to purchase all of the Membership Interest to be
transferred on the terms proposed by a bona fide third party
purchaser. With respect to an Involuntary Transfer or
divorce, the Company also shall have the option to purchase
all of the Membership Interest that is subject to the
Involuntary Transfer or that is owned by the Member who is
getting divorced, for a price equal to the fair market value
of the Membership Interest as determined by an independent
appraiser, taking into account adjustments for lack of
marketability, lack of control and any other adjustments
that may apply (the "Purchase Price").
(ii) The Company Option shall be and remain irrevocable for a
period (the "Company Option Period") ending at 11:59 P.M.
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local time at the Company's principal office on the
thirtieth (30th) Day following the date the Transfer Notice
is given to the Company.
(iii) At any time during the Company Option Period, the Company
may elect to exercise the Company Option by giving written
notice of its election to the Transferor. The Transferor
shall not be deemed a Member for the purpose of voting on
whether the Company shall elect to exercise the Company
Option.
(iv) If the Company chooses to exercise the Company Option, the
Company's notice of its election shall fix a closing date
for the purchase, which shall not be earlier than five (5)
days after the date of the notice of election or more than
thirty (30) days after the expiration of the Company Option
Period.
(v) If the Company chooses to exercise the Company Option, the
Purchase Price shall be paid, at the Company's election, in
cash at closing or in up to 48 equal monthly installments
with interest at the applicable federal rate in effect as of
the date of closing. In the latter case, payment will be
secured by the Membership Interest purchased.
(vi) If the Company fails to exercise the Company Option, the
other Members will have the option to acquire the Membership
Interest in the same proportions as the Units that the
acquiring Member owns bears to the total number of Units
owned by the Members who desire to acquire Membership
Interest that is the subject of the transfer, or in such
other proportions as the Members may agree (the"Member
Option"). The terms of the Member Option will be the same as
the terms of the Company Option.
(vii) The Member Option shall be and remain irrevocable for a
period (the "Member Option Period") ending at 11:59 P.M.
local time at the Company's principal office on the
thirtieth (30th) Day following the date the Company Option
Period expires.
(viii) If a Member chooses to exercise the Member Option, the
Purchase Price shall be paid, at the election of the Member,
in cash at closing or in up to 48 equal monthly installments
with interest at the applicable federal rate in effect as of
the date of closing. In the latter case, payment will be
secured by the Membership Interest purchased.
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(ix) If the Members fails to exercise the Member Option, the
Transferor shall be permitted to offer and sell for a period
of ninety (90) days (the "Free Transfer Period") after the
expiration of the Member Option Period on the terms set
forth in the notice or at a price not less than the Purchase
Price. If the Transferor does not Transfer the Membership
Interest within the Free Transfer Period, the Transferor's
right to Transfer the Membership Interest pursuant to this
Section shall terminate.
(x) Any Transfer of the Transferor Interest made after the last
day of the Free Transfer Period or without strict compliance
with the terms, provisions, and conditions of this Section
and other terms, provisions, and conditions of this
Agreement, shall be null, void and of no force or effect.
6.2 Voluntary Withdrawal. No Member shall have the right or power to
Voluntarily Withdraw from the Company.
6.3 Involuntary Withdrawal. Immediately upon the occurrence of an
Involuntary Withdrawal, the successor of the withdrawn Member shall thereupon
become an Interest Holder but shall not become a Member. The interest held will
be subject to the option rights set forth in Section 6.1.
SECTION VII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
7.1 Events of Dissolution. The Company shall be dissolved upon the
happening of any of the following events:
(a) when the period fixed for its duration in Section 2.4 has
expired;
(b) upon the written agreement of Members owning 75% or more of
the Units; or
(c) upon the death, insanity, bankruptcy, retirement,
resignation,or expulsion of any Member, unless remaining Members owning a
majority of the Units owned by remaining Members elect to continue the business
of the Company pursuant to the terms of this Agreement within 120 days after the
occurrence of such event.
7.2 Procedure for Winding Up and Dissolution. If the Company is
dissolved, the Manager shall wind up its affairs. On winding up of the Company,
the assets of the Company shall be distributed, first, to creditors of the
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Company, including Interest Holders who are creditors, in satisfaction of the
liabilities of the Company, and then to the Interest Holders in accordance with
Section 4.4 of this Agreement
7.3 Filing of Certificate of Dissolution. If the Company is dissolved,
the Manager shall promptly file a Certificate of Dissolution with the Secretary.
If there is no Manager, then the Certificate of Dissolution shall be filed by
the remaining Members; if there are no remaining Members, the Certificate shall
be filed by the last Person to be a Member; if there is neither a Manager,
remaining Members, or a Person who last was a Member, the Certificate shall be
filed by the legal or personal representatives of the Person who last was a
Member.
SECTION VIII
BOOKS, RECORDS, ACCOUNTING, AND TAX ELECTIONS
8.1 Bank Accounts. All funds of the Company shall be deposited in a
bank account or accounts maintained in the Company's name. The Manager shall
determine the institution or institutions at which the accounts will be opened
and maintained, the types of accounts, and the Persons who will have authority
with respect to the accounts and the funds therein.
8.2 Books and Records.
(a) Records Kept. The Manager shall keep or cause to be kept
complete and accurate books and records of the Company and supporting
documentation of the transactions with respect to the conduct of the Company's
business. The records shall include, but not be limited to, financial
statements of the Company for the three most recent fiscal years, a copy of the
Articles of Organization and operating agreement, together with any relevant
powers of attorney, information regarding the amount of cash or agreed value of
property or services contributed, or agreed to be contributed in the future, by
each Member, the respective rights of the Company and each Member regarding the
return of contributions, and the Company's federal, state, or local tax returns.
(b) Accounting Method. The books and records shall be maintained
in accordance with sound accounting practices and shall be available at the
Company's principal office for examination by any Member or by Member's duly
authorized representative at any and all reasonable times during normal business
hours.
(c) Reimbursement. Each Member shall reimburse the Company for
all costs and expenses incurred by the Company in connection with the Member's
inspection and copying of the Company's books and records.
8.3 Annual Accounting Period. The annual accounting period of the
Company shall be its taxable year. The Company's taxable year shall be selected
by the Manager, subject to the requirements and limitations of the Code.
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8.4 Reports. As soon as practicable after the end of each taxable
year of the Company, the Manager shall cause to be sent to each Person who was a
Member at any time during the accounting year then ended that tax information
concerning the Company which is necessary for preparing the Interest Holder's
income tax returns for that year. At the request of any Member, and at the
Member's expense, the Manager shall cause an audit of the Company's books and
records to be prepared by independent accountants for the period requested by
the Member.
8.5 Tax Matters Partner. Xxxxx X. Xxxxxx, III shall be the Company's
tax matters partner ("Tax Matters Partner"). The Tax Matters Partner shall have
all powers and responsibilities provided in Code Section 6221, et seq. The Tax
Matters Partner shall keep all Members informed of all notices from government
taxing authorities that may come to the attention of the Tax Matters Partner.
The Company shall pay and be responsible for all reasonable third-party costs
and expenses incurred by the Tax Matters Partner in performing those duties. A
Member shall be responsible for any costs incurred by the Member with respect to
any tax audit or tax-related administrative or judicial proceeding against any
Member, even though it relates to the Company. The Tax Matters Partner may not
compromise any dispute with the Internal Revenue Service without the approval of
the Members.
8.6 Tax Elections. The Manager shall have the authority to make all
Company elections permitted under the Code, including, without limitation,
elections of methods of depreciation and elections under Code Section 754. The
decision to make or not make an election shall be at the sole and absolute
discretion of the Manager.
SECTION IX
GENERAL PROVISIONS
9.1 Assurances. Each Member shall execute all certificates and other
documents and shall do all such filing, recording, publishing, and other acts as
the Manager deems appropriate to comply with the requirements of law for the
formation and operation of the Company and to comply with any laws, rules, and
regulations relating to the acquisition, operation, or holding of the property
of the Company.
9.2 Notifications. Any notice, demand, consent, election, offer,
approval, request, or other communication (collectively a "notice") required or
permitted under this Agreement must be in writing and either delivered
personally, telecopied or sent by certified or registered mail, postage prepaid,
return receipt requested. A notice must be addressed to an Interest Holder at
the Interest Holder's last known address on the records of the Company. A
notice to the Company must be addressed to the Company's principal office. A
notice that is sent by mail will be deemed given three (3) business days after
it is mailed. Any party may designate, by notice to all of the others,
substitute addresses or addressees for notices; and, thereafter, notices are to
be directed to those substitute addresses or addressees.
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9.3 Specific Performance. The parties recognize that irreparable
injury will result from a breach of any provision of this Agreement and that
money damages will be inadequate to fully remedy the injury. Accordingly, in
the event of a breach or threatened breach of one or more of the provisions of
this Agreement, any party who may be injured (in addition to any other remedies
which may be available to that party) shall be entitled to one or more
preliminary or permanent orders (i) restraining and enjoining any act which
would constitute a breach or (ii) compelling the performance of any obligation
which, if not performed, would constitute a breach.
9.4 Complete Agreement. This Agreement constitutes the complete and
exclusive statement of the agreement among the Members. It supersedes all prior
written and oral statements, including any prior representation, statement,
condition, or warranty. Except as expressly provided otherwise herein, this
Agreement may not be amended without the written consent of all of the Members.
9.5 Applicable Law. All questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement shall be governed by the internal law, not
the law of conflicts, of the State of Ohio.
9.6 Section Titles. The headings herein are inserted as a matter of
convenience only and do not define, limit or describe the scope of this
Agreement or the intent of the provisions hereof.
9.7 Binding Provisions. This Agreement is binding upon, and inures to
the benefit of, the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors, and permitted
assigns.
9.8 Jurisdiction and Venue. Any suit involving any dispute or matter
arising under this Agreement may only be brought in the courts of the State of
Ohio. All Members hereby consent to the exercise of personal jurisdiction by
any such court with respect to any such proceeding.
9.9 Terms. Common nouns and pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular, and plural, as the identity of the Person
may in the context require.
9.10 Severability of Provisions. Each provision of this Agreement
shall be considered severable; and if, for any reason, any provision or
provisions herein are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
9.11 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which, when taken together, constitute one and the same document. The signature
of any party to any counterpart shall be deemed a signature to, and may be
appended to, any other counterpart.
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IN WITNESS WHEREOF, the parties have executed, or caused this Agreement to
be executed, under seal, as of the date set forth hereinabove.
/s/ Xxxxx X. Xxxxxx, III
------------------------------------------------
Xxxxx X. Xxxxxx, III
Irrevocable Trust U/A Xxxxxxxxx X. Xxxxxx dated
March 26, 1991
By: /s/ Xxxxx X. Xxxxxx, III
---------------------------------------------
Irrevocable Trust U/A Xxxxx X. Xxxxxx, III dated
December 31, 1991
By: /s/ Xxxxx X. Xxxxxx, III
---------------------------------------------
RESIGNATION
The undersigned hereby resign as Members of Milfam LLC effective as of the
time of the admission as Members of the parties to the foregoing Agreement.
Date: December 12, 1996 /s/ Xxxxxxx X. Xxxxxxxxxx
----------------- ------------------------------------------------
Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxxxx X. Xxxxxx
------------------------------------------------
Xxxxxx X. Xxxxxx
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