AGREEMENT FOR PURCHASE OF OWNERSHIP INTEREST
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1. Parties. This Agreement for Purchase of Ownership Interest
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(the "Agreement") is entered into this 20th day of October, 2003, and shall be
deemed effective as of October 31, 2003, by and between Xxxxxxxx DEC, LLC
("Seller"), a Colorado limited liability company with offices located at 0000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000; and Intercell International
Corporation ("Buyer"), a Nevada corporation with offices located at 000
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000.
2. Recitals. Seller is a Colorado limited liability company that
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was organized on December 4, 1998 as Xxxxxxxx Associates, LLC. On June 1, 2000,
Seller changed its name to Xxxxxxxx DEC, LLC and has operated continuously under
that name.
In order to raise capital for its continuing operations, Seller
desires to sell a sixty percent (60%) ownership interest in Seller's business
and Buyer desires to purchase a sixty percent (60%) ownership interest in
Seller's business according to the term and conditions set forth in this
Agreement.
Therefore, in consideration of the payment by Buyer and transfer of
ownership by Seller, the representations and warranties and the mutual promises
and covenants set forth in this Agreement, Buyer and Seller agree as follows.
3. Purchase of Ownership Interest.
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3.1 Purchase of Membership Interest. Subject to the terms and
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conditions set forth herein, at the Closing (as defined below) Seller will sell
to Buyer and Buyer will purchase from Seller, a membership interest in Seller's
business equal to sixty percent (60%) of the total ownership interest in Seller
(the "Membership Interest"). Sale of the Membership Interest as set forth above
shall be evidenced by resolutions of the managers and members of Seller and by
execution at Closing by Buyer and Seller of that certain Second Amended and
Restated Operating Agreement of Xxxxxxxx DEC, LLC in the form attached hereto as
Attachment 3.1 to this Agreement (the "Operating Agreement").
3.2 Purchase Price. Buyer will pay to Seller for the
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Membership Interest the total sum of Seven Hundred Thousand Dollars ($700,000)
at the Closing without offset or adjustment (the "Purchase Price").
3.3 Payment of Purchase Price. The Purchase Price will be
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paid to Seller at Closing in the form of cash, electronic transfer funds,
certified check, savings and loan teller's check or cashier's check.
4. Representations, Warranties and of Buyer. The Buyer makes the
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following representations and warranties to Seller and to each of the existing
Members and Managers of Seller:
4.1 Due Authorization; Binding Obligation; No Conflict. The
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execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Buyer. This Agreement has been duly executed and
delivered by the Buyer and is a valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate or conflict with any federal
or state law, statute, regulation, decree, injunction, judgment or order which
is either applicable to, binding upon or enforceable against the Buyer; or (ii)
result in any breach of or default under any mortgage, contract, agreement or
other instrument that is either binding upon or enforceable against the Buyer.
4.2 Conditions and Best Efforts. Buyer will use its best
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efforts to effectuate the transactions contemplated by this Agreement and to
fulfill all the conditions of Buyer's obligations under this Agreement, and
shall do all acts and things as may be required to carry out Buyer's obligations
and to consummate this Agreement.
4.3 Confidential Information. Buyer and Seller entered into a
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letter agreement dated September 8, 2003 under which Buyer agreed to maintain
the confidentiality of Confidential Information received from Seller. A copy of
that agreement is attached as Attachment 4.3 to this Agreement. Notwithstanding
any provisions of this Agreement to the contrary, the agreement set forth in
Attachment 4.3 shall not be merged into this Agreement and shall survive the
closing of this transaction. If for any reason the transaction provided for
under this Agreement is not closed, Buyer will not disclose to third parties any
confidential information received from Seller in the course of investigating,
negotiating, and performing the transactions contemplated by this Agreement and
all such information shall be treated in accordance with the terms of Attachment
4.3.
4.4 Accuracy of Representations and Warranties. None of the
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representations or warranties of Buyer contain, or will contain, any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make statements in this Agreement not misleading.
4.5 No Proceeding or Litigation. No action, suit, or proceeding
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before any court or any governmental or regulatory authority will have been
commenced and be continuing, and no investigation by any governmental or
regulatory authority will have been commenced and be continuing, and no action,
investigation, suit, or proceeding will be threatened at the time of Closing
against Buyer or any of Buyer's affiliates, associates, officers, or directors,
seeking to restrain, prevent, or change the Purchase, questioning the validity
or legality of the Purchase, or seeking damages in connection with the Purchase.
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4.6 Authorization and Validity of Documents. The execution,
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delivery, and performance of this Agreement by Buyer, and the consummation by
Buyer of the transactions contemplated hereby, have been duly and validly
authorized by Buyer. This Agreement has been duly executed, acknowledged and
delivered by Buyer and is a legal, valid, and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
4.7 Investment Representations.
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4.7.1 Buyer is acquiring the Membership Interest for its
own account with the present intention of holding the Membership Interest for
purposes of Buyer's continuing ownership and investment in Seller in accordance
with the terms of the Operating Agreement. During the course of the negotiation
of this Agreement, Buyer has reviewed all information provided to it by the
Seller and has had the opportunity to ask questions of and receive answers from
representatives of the Seller concerning the Seller, the Membership Interest
offered and sold under this Agreement, and to obtain all information requested
by Buyer. Buyer has reviewed the Operating Agreement and has agreed, at
Closing, to execute the Operating Agreement and to be bound by its terms.
4.7.2 Seller has provided to Buyer full and complete
access to the assets, operations and facilities and records of Seller and has
also provided such additional information concerning the business of Seller as
Buyer from time to time may have requested. Buyer has agreed to close the
purchase and sale of the Membership Interest under the terms of this Agreement
with the full understanding and agreement that Buyer is solely responsible for
investigation and evaluation of Seller's business and is not relying on the
analysis or conduct of Seller or Seller's agents.
4.7.3 Buyer is (a) an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act of 1933, as
amended; (b) experienced in making investments of the kind contemplated by this
Agreement; and (c) capable, by reason of its business and financial experience,
of evaluating the relative merits and risks of an investment in the Membership
Interest; and (d) able to afford the loss of its investment in the Membership
Interest.
4.8 Buyer's Investors and Indemnification of Seller. Buyer
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is solely responsible for the source and acquisition of funds used for the
purchase of the Membership Interest under this Agreement. Buyer is solely
responsible for all communications, whether written or oral, with Buyer's
investors. Seller did not participate in or in any way control the
relationship and participation of Buyer's investors. Buyer shall indemnify and
hold harmless, Seller and each of Seller's agents, managers, members, employees,
successors and assigns, for any and all claims, liabilities, damages or costs,
including reasonable attorneys' fees, arising from or relating to any claims by
third parties concerning the investment of funds to participate in the purchase
and sale of the Membership Interest or any liability of Buyer for matters
arising under or relating to this Agreement. In entering into this Agreement,
Buyer has not relied on any oral or
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written information from Seller, or any of Seller's employees, members, managers
or agents, other than the limited representations and warranties of Seller
contained herein. Buyer acknowledges that no employee or agent of Seller has
been authorized to make, and that Buyer has not relied upon, any statements,
representations or warranties other than specifically contained in the
Agreement.
4.9 Brokerage. There are no claims for brokerage
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commissions, finders' fees, or similar compensation, contingent or otherwise,
in connection with the matters that are the subject of this Agreement based on
any arrangement or agreement entered into by Buyer and binding upon Seller.
5. Representations and Warranties of Seller.
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5.1 Due Authorization; Binding Obligation; No Conflict. The
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execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Seller. This Agreement has been duly executed and
delivered by the Seller and is a valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate or conflict with any federal
or state law, statute, regulation, decree, injunction, judgment or order which
is either applicable to, binding upon or enforceable against the Seller; (b)
result in any breach of or default under any mortgage, contract, agreement or
other instrument which is either binding upon or enforceable against the Seller.
5.2 Conditions and Best Efforts. Seller will use its best
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efforts to effectuate the transactions contemplated by this Agreement and to
fulfill all the conditions of Seller's obligations under this Agreement, and
shall do all acts and things as may be required to carry out Seller's
obligations and to consummate this Agreement.
5.3 No Proceeding or Litigation. Except as previously disclosed
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in writing, no action, suit, or proceeding before any court or any governmental
or regulatory authority will have been commenced and be continuing, and no
investigation by any governmental or regulatory authority will have been
commenced and be continuing, and no action, investigation, suit, or proceeding
will be threatened at the time of Closing against Seller, or any of Seller's
affiliates, associates, officers, or directors, that would have a material or
adverse affect on the transactions set forth under this Agreement.
6. Employment of Xx. Xxxxxxxx After Closing. Buyer and Seller
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agree that the Seller's business after Closing shall be operated and managed by
Xxxxxxx X. Xxxxxxxx ("Xx. Xxxxxxxx") and Xxxx X. Xxxxx ("Xx. Xxxxx") according
to the terms and conditions set forth in the Operating Agreement. Xx.
Xxxxxxxx'x Employment with the Seller on and after the date of Closing shall be
according to the terms and conditions set forth in that certain Employment
Agreement attached hereto as Attachment 6. Seller shall, at Closing, execute
the Employment Agreement in substantially the same form as
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Exhibit 6 and promptly deliver the same to Xx. Xxxxxxxx with the request that
the same be signed and a copy returned to Seller. Execution and delivery of the
Employment Agreement by Seller and Xx. Xxxxxxxx shall be a condition to Closing,
and Buyer hereby consents to and specifically authorizes Seller to enter into
the Employment Agreement with Xx. Xxxxxxxx at the Closing. Effective on the
Closing Date, Buyer shall appoint Xx. Xxxxxxxx to Buyer's Board of Directors.
7. Employment of Xx. Xxxxx After Closing. Buyer and Seller agree
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that the Seller's business after Closing shall be operated and managed by
Xxxxxxx X. Xxxxxxxx ("Xx. Xxxxxxxx") and Xxxx X. Xxxxx ("Xx. Xxxxx") according
to the terms and conditions set forth in the Operating Agreement. Xx. Xxxxx'x
Employment with the Seller on and after the date of Closing shall be according
to the terms and conditions set forth in that certain Employment Agreement
attached hereto as Attachment 7. Seller shall, at Closing, execute the
Employment Agreement in substantially the same form as Exhibit 7 and promptly
deliver the same to Xx. Xxxxx with the request that the same be signed and a
copy returned to Seller. Execution and delivery of the Employment Agreement by
Seller and Xx. Xxxxx shall be a condition to Closing, and Buyer hereby consents
to and specifically authorizes Seller to enter into the Employment Agreement
with Xx. Xxxxx at the Closing.
8. Appointment of Manager. On and as of the Closing, Seller shall
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appoint Xxxxxx X. Xxxxxxxx as a Manager of Seller along with Xx. Xxxxxxxx and
Xx. Xxxxx. Further, so long as Buyer owns an equity interest in Seller, Seller
shall annually re-appoint Xxxxxx X. Xxxxxxxx as a manager of Seller.
9. Stock Option Plan. Effective as of the date of Closing of this
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Agreement, Buyer shall issue to Xx. Xxxxxxxx and Xx. Xxxxx, and each of them
separately, stock options for 500,000 shares of Buyer's common stock (the "Stock
Option") under the terms of Intercell's registered stock option plan. The Stock
Option shall be subject to the terms of Buyer's registered stock option plan,
and shall be exercised in accordance with the terms of an Option Agreement in
substantially the same form as that Option Agreement attached hereto as
Attachment 8. At Closing, Buyer and shall execute and deliver to both Xx.
Xxxxxxxx and to Xx. Xxxxx, individually and separately, the Option Agreement.
Execution and delivery of the Option Agreement by Buyer and both Xx. Xxxxxxxx
and Xx. Xxxxx shall be a condition to Closing.
10. Consultant Payment. Xxxxxxxx Consulting, Ltd. ("Xxxxxxxx")
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provided services to Seller in accordance with the terms of that certain letter
agreement dated May 14, 2003 and entered into between Xxxxxxxx and Seller. In
accordance with the terms of the letter agreement, Seller is required to pay to
Xxxxxxxx at Closing a success fee of ten percent (10%) of the equity funding
paid by Buyer to Seller less all consulting fees previously paid by Seller to
Xxxxxxxx prior to Closing (the "Contingent Fee"). The Contingent Fee shall be
calculated according to the terms of the letter agreement and shall be paid in
full to Xxxxxxxx at Closing from the Purchase Price.
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11. Closing.
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11.1 Time, Place, and Manner of Closing. The closing (the
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"Closing") will be held at 3:00 a.m. on October 20, 2003 at the offices of
--
Xxxxxx & Xxxxxx, P.C., 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx or
such other place as the parties may agree. At the Closing the parties to this
Agreement shall execute and exchange certificates and other instruments and
documents in order fully to perform and satisfy the terms and conditions of this
Agreement. Upon the determination of each party that its conditions to
consummate the Purchase have been satisfied or waived, the Seller shall deliver
to the Buyer (a) the resolutions of Seller, duly executed, evidencing the
transfer of the Membership Interest to Buyer; (b) a fully executed copy of the
Option Agreement; and (c) a fully executed copy of the Operating Agreement, and
the Buyer shall deliver to Seller (a) the Purchase Price in the form and amount
set forth in paragraph 3 above; (b) the resolutions of Buyer, duly executed,
authorizing Buyer's entry into and performance of this Agreement; (c) a fully
executed copy of the Option Agreement; (d) a fully executed copy of the
Operating Agreement; and (e) fully executed copies of the Employment Agreements
between Seller and both Xx. Xxxxxxxx and Xx. Xxxxx. From time to time after the
Closing, Seller and Buyer, at the request of the other party, will execute,
deliver, and acknowledge all such further instruments of transfer and conveyance
and will perform all such other acts as either party may reasonably request to
the extent necessary to more properly effect the transfers and obligations
required under this Agreement.
11.2 Consummation of Closing. All acts, deliveries, and
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confirmation comprising the Closing regardless of chronological sequence shall
be deemed to occur contemporaneously and simultaneously upon the occurrence of
the last act, delivery, or confirmation of the Closing and none of such acts,
deliveries, or confirmations shall be effective unless and until the last of the
same shall have occurred. Regardless of when the last act, delivery, or
confirmation of the Closing shall take place, the transfer of the Membership
Interest shall be deemed to occur as of the close of business at the principal
office of Seller on the date of the Closing. Notwithstanding anything to the
contrary stated herein, and solely for accounting purposes, the effective date
of this Agreement shall be October 31, 2003.
11.3. Financial Information. Seller agrees to provide
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audited and unaudited financial statements in a form and content suitable for
filing with the Securities and Exchange Commission to Buyer as and when required
by Buyer in order to permit Buyer to timely file all reports, schedules and
other filings which Buyer is required to file with the Securities and Exchange
Commission as a fully reporting company under Section 12 of the Securities
Exchange Act of 1934.
12. Arbitration. Any dispute, claim, or controversy arising
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out of or relating to this Agreement or the breach thereof shall be settled by
binding arbitration in Denver, Colorado in accordance with the rules then
obtaining of the American Arbitration Association. Judgment upon the award
rendered in such arbitration may be entered in any court having jurisdiction
thereof. Costs of arbitration, including
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reasonable attorney's fees, shall be paid by the party against whom the award or
judgment, or both, is entered.
13. Miscellaneous Provisions.
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13.1 Amendment and Modification. Subject to applicable law,
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this Agreement may be amended, modified, or supplemented only by a written
agreement signed by all parties.
13.2 Waiver of Compliance; Consents.
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13.2.1 Any failure of any party to comply with any
obligation, covenant, agreement, or condition herein may be waived by the party
entitled to the performance of such obligation, covenant, or agreement or who
has the benefit of such condition, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement, or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
13.2.2 Whenever this Agreement requires or permits
consent by or on behalf of any party hereto, such consent will be given in a
manner consistent with the requirements for notice set for below.
13.3 Notices. All notices, requests, demands, and other
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communications required or permitted hereunder will be in writing and will be
deemed to have been duly given when delivered by hand or three (3) days after
being mailed by certified or registered mail, return receipt requested, with
postage prepaid:
If to Buyer:
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Intercell International Corporation
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
If to Seller:
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Xxxxxxxx DEC, LLC
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Either party may change their address by giving notice to the other
party in the manner set forth above.
13.4 Assignment. This Agreement shall not be assigned by
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either party without the prior written consent of the other party to this
Agreement. No permitted assignment will release the assignor from its
obligations hereunder. Subject to the foregoing, this Agreement and all of the
provisions hereof will be binding upon and
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inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, executors, and personal representatives. Nothing in the
Agreement, express or implied, is intended to confer on any person other than
the parties hereto, or their respective successors, any rights, remedies,
obligations, or liabilities under or be reason of this Agreement.
13.5 Governing Law and Jurisdiction. This Agreement shall be
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governed by, and interpreted in accordance with, the laws of the state of
Colorado as now in effect.
13.6 Counterparts. This Agreement may be executed in two or
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more counterparts, each of which shall be deemed an original binding the signer
thereof against the other signing parties, but all counterparts together will
constitute one and the same instrument.
13.7 Certain Rules of Construction. The provisions of this
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Agreement have been examined, negotiated, and revised by counsel for each party,
and no implication will be drawn against any party hereto by virtue of the
drafting of this Agreement.
13.8 Survivability. The representations and warranties of
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the parties, and the indemnification of Seller by Buyer as set forth in this
Agreement, shall survive the termination or closing of this Agreement.
13.9 Entire Agreement. This Agreement and any other document
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to be furnished pursuant to the provisions hereof embody the entire agreement
and understanding of the parties hereto as to the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants, or undertakings other than those expressly set forth or referred to
in this Agreement and the Attachments to this Agreement. This Agreement and
such documents supersede all prior agreements and understandings among the
parties with respect to the subject matter hereof.
13.10 Severability. Any term or provision of this Agreement
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that is invalid or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement, or affecting the validity or enforceability of
any of the terms or provisions of this Agreement.
13.11 Attorney Fees. If any action is brought by any party to
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this Agreement to enforce or interpret its terms or provisions, the prevailing
party will be entitled to reasonable attorney fees and costs incurred in
connection with such action prior to and at trial and on any appeal therefrom.
13.12 Payment of Fees and Expenses. Each party to this
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Agreement will be responsible for, and will pay, all of its own fees and
expenses, including those of counsel and each of the parties' accountants,
incurred in the
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negotiation, preparation, and consummation of the Agreement and the closing of
the transaction under this Agreement.
14. Attachments. The following Attachments are attached to and
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constitute an integral part of this Agreement and are incorporated herein by
this reference.
Attachment Item
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3.1 Second Amended and Restated Operating Agreement of
Xxxxxxxx DEC, LLC
4.3 Confidentiality Agreement between Xxxxxxxx DEC, LLC
and Intercell International Corporation
6 Employment Agreement between Xxxxxxxx DEC, LLC and
Xxxxxxx X. Xxxxxxxx
7 Employment Agreement between Xxxxxxxx DEC, LLC and
Xxxxx X. Xxxxx
8 Option Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
XXXXXXXX DEC, LLC:
By: /s/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx, Manager/Member
By: /s/ Xxxxx X. Xxxxx, Xx.
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Xxxxx X. Xxxxx, Xx., Manager/Member
INTERCELL INTERNATIONAL CORPORATION:
By: /s/ Xxxx X. Xxxxxxxxx
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Xxxx X. Xxxxxxxxx,
President & Chief Executive Officer
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SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF XXXXXXXX DEC LLC
A COLORADO LIMITED LIABILITY COMPANY
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF
XXXXXXXX DEC LLC
Recitations. This Second Amended and Restated Operating Agreement (the
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"Agreement") is made and entered into as of October 20, 2003 by and among
Xxxxxxxx DEC LLC (the "Company"), a Colorado limited liability company; Xxxxxxx
X. Xxxxxxxx ("Xx. Xxxxxxxx"); Xxxxx X. Xxxxx, Xx. (Xx. Xxxxx"); and Intercell
International Corporation, a Nevada corporation ("Intercell").
Xx. Xxxxxxxx and Xx. Xxxxx (collectively, the "Initial Members") and the
Company entered into the Operating Agreement of Xxxxxxxx Associates Company
dated as of December 4, 1998.
The Company, the Initial Members and Xxxxxxx Xxxxxxx ("Xx. Xxxxxxx")
entered into an Amended and Restated Operating Agreement of Xxxxxxxx Associates
LLC dated February 1, 2000 (the "2000 Agreement").
Pursuant to that certain Purchase and Sale Agreement dated as of October
24, 2000, Xx. Xxxxxxx transferred and conveyed to the Company all of Xx.
Xxxxxxx'x right, title and interest in and to the Company, including, by way of
illustration and not in limitation of the generality of the foregoing, all
Membership Interest, all Voting Interest and any and all interest in the
profits, losses and management of the Company.
As of the date of this Agreement, Xx. Xxxxxxx has no interest in the
Company of any kind or description, and Xx. Xxxxxxxx and Xx. Xxxxx constitute
all of the Members of the Company and all of the Managers of the Company.
Contemporaneously with the execution and delivery of this Agreement, the
Company, the Initial Members and Intercell have entered in to an agreement (the
"Purchase Agreement") pursuant to which, inter alia, Intercell has agreed to
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purchase and the Company has agreed to sell a sixty percent (60%) Membership
Interest (as such term is defined in paragraph 11.24 of this Agreement) upon the
terms and conditions set forth in the Purchase Agreement.
Contemporaneously with the execution and delivery of this Agreement, the
Company has entered into agreements with Xx. Xxxxxxxx and Xx. Xxxxx
(collectively, the "Employment Agreements") to serve as two (2) of the Managers
of the Company for the term and upon the terms and conditions set forth in the
Employment Agreements.
Therefore, in consideration of the Recitations, which shall be deemed to be
a substantive part of this Agreement, and of the mutual covenants, promises,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company, the Initial Members and Intercell hereby agree
as follows.
ARTICLE 1 - FORMATION OF THE COMPANY
1.1 Organization of Company. The Company was organized as a Colorado
-----------------------
limited liability company on December 4, 1998 by executing and delivering
Articles of Organization to the Colorado Secretary of State,. The Company and
its Members hereby forever discharge the organizer, and the organizer shall be
indemnified by the Company and the Members, from and against any expense or
liability actually incurred by the organizer by reason of having been the
organizer of the Company.
1.2 Name. The name of the Company is Xxxxxxxx DEC LLC.
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1.3 Places of Business. The Company may locate its business at such place
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or places as the Members may from time to time deem advisable.
1.4 Registered Offices and Registered Agents. The address of the
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Company's initial registered office in the State of Colorado and the name of the
registered agent at that address shall be as set forth in the Articles of
Organization. The registered office or registered agent, or both, in the State
of Colorado may be changed from time to time by filing the address of the new
registered office or the name of the new registered agent, as the case may be,
with the Colorado Secretary of State pursuant to the Colorado Act. The Company
shall appoint registered agents and maintain registered offices in other
jurisdictions as may be required by law.
ARTICLE 2 - PURPOSES OF THE COMPANY
The purposes of the Company shall be to accomplish the lawful businesses
and activities that the Members determine shall be pursued by the Company.
ARTICLE 3 - CERTAIN RIGHTS AND OBLIGATIONS
OF MEMBERS AND MANAGERS
3.1. Meetings of Members. Meetings of Members may be called by (i) the
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Managers; or by (ii) the affirmative vote of a Majority in Interest of Members.
3.1.1 Annual Meetings. Annual meetings of Members shall be required.
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3.1.2 Special Meetings. Special meetings of the Members may be
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called at any time by the Manager or by a Majority in Interest of the Members.
If not otherwise stated in or fixed in accordance with the remaining provisions
hereof, the record date for determining Members entitled to call a special
meeting is the date any Member first signs the notice of that meeting. Only
business within the purpose or purposes described in the notice (or waiver
thereof) required by this Agreement may be conducted at a special meeting of the
Members. Special meetings of Members shall be held at the registered office of
the Company at such date and time as may be determined by the Manager.
3.1.3 Notice of Meetings. Written notice stating the place, day, and
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hour of the meeting, the purpose for which the meeting is called, shall be
delivered not less than ten (10) days nor more than fifty (50) days before the
date of the meeting, by certified mail, to each Member of record entitled to
vote at such meeting. A waiver of notice in writing, signed by the Member
before, at, or after the time of the meeting stated in the notice shall be
equivalent to the giving of such notice.
3.1.4 Proxies. A Member may vote in person or by proxy executed in
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writing by the Member. By attending a meeting, in person or by proxy, a Member
waives objection to the lack of notice or defective notice unless the Member, at
the beginning of the meeting, objects to the holding of the meeting or the
transacting of business at the meeting. A Member who is present at a meeting of
Members at which action on any matter is taken shall be presumed to have
assented to the action unless such Member (i) votes against the action; or (ii)
objects at the beginning of the meeting to the holding of the meeting or the
transacting of business at the meeting; or (iii) files written dissent to such
action with the person presiding at the meeting before adjournment. The right
of a Member to dissent as to a specific action taken at a meeting of Members is
not available to a Member who votes in favor of such action or abstains in the
voting thereon.
3.1.5 Participation by Conference Telephone. Any Member may
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participate in a Members' meeting by, or the meeting may be conducted through
the use of, any means of communication by which all persons participating in the
meeting may hear each other during the meeting. A member participating in a
meeting by this means is deemed to be present in person at the meeting.
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3.1.6 Quorum. A Majority in Interest of the Members entitled to vote
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shall constitute a quorum at the meeting of Members. If a quorum is not
represented at any meeting of the Members, such meeting may be adjourned for a
period not to exceed thirty (30) days at any one adjournment; provided, however,
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that if the adjournment is for more than ten (10) days, a notice of the
adjourned meeting shall be given to each Member entitled to vote at the meeting.
3.1.7 Written Consent. Any action of Members taken by written
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consent or by telephone conference shall be effective on the date on which the
consent with the requisite signatures has been delivered to the Company.
3.2 Conflicting Interest Transactions. As used in this Section, (a)
---------------------------------
"conflicting interest transaction" means (i) a loan or other assistance by the
Company to a Member, Manager or to a Related Entity; or (ii) a guaranty by the
Company of an obligation of a Member, of a Manager or of a Related Entity; or
(iii) a contract or transaction between the Company and a Member, Manager or a
Related Entity; and (b) "Related Entity" means, with respect to a Member or
Manager, an Entity that is an Affiliate of the Member or Manager or in which the
Member or Manager is a director, officer, partner, or trustee of, or holds a
similar position, or has a financial interest. No conflicting interest
transaction shall be void or voidable or be enjoined, set aside, or give rise to
an award of damages or other sanctions in a proceeding by the Company or by any
Member or Manager, directly or by or in the right of the Company, solely because
the conflicting interest transaction involves a Member, Manager, or a Related
Entity or solely because the Member or Manager participates in vote or approval
of such conflicting interest transaction, or solely because the Member's vote or
Manager's consent is counted for such purpose, if (i) the material facts as to
the relationship or interest of the Member, Manager or Related Party and as to
the conflicting interest transaction are disclosed or are known to the Members
or Managers consenting to the transaction and the Members or Managers in good
faith authorize, approve, or ratify the conflicting interest transaction by a
Majority Vote of the Remaining Members or Remaining Managers; or (ii)the
conflicting interest transaction is fair as to the Company as of the time it is
undertaken by, or becomes binding upon, the Company.
3.3 Indemnity of Members, Managers, and Agents. Without limiting any other
------------------------------------------
obligation of the Company to any Member or Manager, the Company shall indemnify
each Member and Manager with respect to, and make advances for, the payments
made, personal liabilities incurred, and expenses incurred by the Member or
Manager in the ordinary and proper conduct of the Company's business and affairs
(including the winding up thereof) or the preservation of the Company's business
or property, to the maximum extent indemnification and advances are permitted
under Section 7-80-410 of the Colorado Act. The Company may indemnify its
employees and other agents who are not Members or Managers to the fullest extent
permitted by law or to any lesser extent, as the Managers may determine.
3.4 Compensation of Members. No Member shall be entitled to compensation
-----------------------
for services rendered to the Company. Managers shall be entitled to such
compensation for services rendered to the Company as may be determined from time
to time by the Members.
3.5 Liability of Members and Managers. No Member or Manager shall be
---------------------------------
liable under any judgment, decree, or order of a court, or in any other manner,
for any debt, obligation, or liability of the Company. No Member or Manager
shall be liable to the Company or to any Member for any loss or damage sustained
by the Company or by any Member, unless the loss or damage is the result of
fraud, deceit, gross negligence, willful misconduct, breach of this Agreement or
a wrongful taking by the Member or Manager. It is expressly recognized that no
Member or Manager guarantees, in any way, the return of any Member's Capital
Contribution, a profit for any Member from the operations of the Company, or any
distribution from the Company.
3.5 Members' and Managers' Duty to Company. The parties acknowledge that
--------------------------------------
the Managers shall conduct the business of the Company as their principal
occupation. Any Member or Manager may have other business interests and may
engage in other activities in addition to those relating to the Company,
provided that such activities do not interfere with the performance of services
to the
3
Company. Neither the Company nor any Member or Manager shall have any right, by
virtue of this Agreement, to share or participate in such other interests or
activities of any Member or Manager or to the income or proceeds derived
therefrom.
3.6 Inspection and Copying. Upon request, each Member and Economic
----------------------
Interest Owner shall have the right to inspect and copy such Company documents,
at the requesting Member's and Economic Interest Owner's expense; provided,
however, that access to any such documents may be restricted as the Members
determine in order to preserve intellectual property of the Company from misuse.
3.7 Economic Priority. Except as may be provided in this Agreement, no
-----------------
Member or Economic Interest Owner shall have priority over any other Member or
Economic Interest Owner, whether as to Net Profits, Net Losses, distributions,
or other economic matters; provided, however, that this Section 3.8 shall not
apply to loans (as distinguished from Capital Contributions) which a Member has
made to the Company.
3.8 Priority and Return of Capital. Except as may be provided in this
------------------------------
Agreement, no Member shall have priority over any other Member, either as to the
return of Capital Contributions or as to Profits, Losses or Distributions;
provided, however, that this Section 3.9 shall not apply to loans (as
-------- -------
distinguished from Capital Contributions) which a Member has made to the
Company.
ARTICLE 4 - MANAGEMENT OF THE COMPANY
4.1 Management by Managers. The business and affairs of the Company
----------------------
shall be managed by the Managers of the Company. The Managers of the Company
shall be Xxxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxx, Xx. and Xxxxxx X. Xxxxxxxx
(individually, a "Manager," and collectively, the "Managers"), who shall serve
in such capacity until their respective successors are designated in accordance
with the provisions of this Agreement and the provisions of the Employment
Agreements (as hereinabove defined). Except for situations in which the approval
of the Members is required by this Agreement or by non-waivable provisions of
applicable law (i) the powers of the Company shall be exercised by or under the
authority, and the business and affairs of the Company shall be managed under
the direction, of the Managers, and (ii) the Managers or either one of them, may
make all decisions and take all actions for the Company not otherwise provided
for in this Agreement, including, without limitation, the following:
4.1.1 acquire by purchase, lease, or otherwise any real or personal
property that may be necessary, convenient, or incidental to the accomplishment
of the purposes of the Company;
4.1.2 operate, maintain, finance, improve, construct, own, grant
options with respect to, sell, convey, assign, mortgage, and lease any real
estate and any personal property necessary, convenient, or incidental to the
accomplishment of the purposes of the Company;
4.1.3 execute any and all agreements, contracts, documents,
certifications, and instruments necessary or convenient in connection with the
management, maintenance, and operation of the property of the Company or in
connection with managing the affairs of the Company;
4.1.4 borrow money and issue evidences of indebtedness necessary,
convenient, or incidental to the accomplishment of the purposes of the Company
and secure the same by mortgage, pledge, or other lien on any property of the
Company;
4.1.5 execute, in furtherance of any or all of the purposes of the
Company, any deed, lease, mortgage, deed of trust, mortgage note, promissory
note, xxxx of sale, contract, or other instrument purporting to convey or
encumber any or all of the property of the Company;
4
4.1.6 prepay in whole or in part, refinance, recast, increase, modify,
or extend any liabilities affecting the property of the Company and in
connection therewith execute any extensions or renewals of encumbrances on any
or all of the property of the Company;
4.1.7 care for and distribute funds to the Unitholders by way of
cash, income, return of capital, or otherwise, all in accordance with the
provisions of this Agreement, and perform all matters in furtherance of the
objectives of the Company or this Agreement;
4.1.8 contract on behalf of the Company for the employment and
services of employees and/or independent contractors, such as lawyers,
accountants, and investment advisors, and delegate to such Persons the duty to
manage or supervise any of the assets or operations of the Company;
4.1.9 engage in any kind of activity and perform and carry out
contracts of any kind necessary or incidental to, or in connection with, the
accomplishment of the purposes of the Company as may be lawfully carried on or
performed by a limited liability company under the laws of each state in which
the Company is then formed or qualified;
4.1.10 take, or refrain from taking, all actions not expressly
proscribed or limited by this Agreement as may be necessary or appropriate to
accomplish the purposes of the Company;
4.1.11 institute, prosecute, defend, settle, compromise, and dismiss
lawsuits or other judicial or administrative proceedings brought on or in behalf
of, or against, the Company, the Members, or the Unitholders in connection with
activities arising out of, connected with, or incidental to this Agreement and
to engage counsel or others in connection therewith;
4.1.12 establish reserves for debts, liabilities, and obligations of
the Company (whether accrued, contingent, or otherwise) and for capital
improvements to the Company's property and for any other contingencies that the
Managers determine are necessary; and
4.1.13 take such other action and perform such other services as are
necessary, customary, or appropriate for the operation of the Company.
Except as otherwise expressly provided in this Agreement or the Act, the Members
shall have no right to control or manage, nor shall they take any part in the
control or management of, the property, business, or affairs of the Company, but
they may exercise the rights and powers of the Members under this Agreement,
including, without limitation, the right to approve certain matters as provided
herein.
4.2 Authority to Bind. Unless authorized to do so by this Agreement or by
-----------------
the Managers in writing, no attorney-in-fact, employee, or other agent shall
have any power or authority to bind the Company in any way, to pledge its
credit, or to render it liable financially or otherwise for any purpose. No
Member or Unitholder shall have any power to bind the Company unless such Member
or Unitholder has been authorized by the Managers to act as agent of the Company
in accordance with the previous sentence.
4.3 Restrictions on Authority of Managers. Notwithstanding the provisions
-------------------------------------
of Section 4.1, the Managers may not cause the Company to do any of the
following without obtaining the prior written consent of a Majority of the
Capital Interests of the Members unless otherwise specified:
4.3.1 sell, exchange, or otherwise dispose of (other than by way of a
pledge, mortgage, deed of trust, or trust indenture) all or substantially all of
the Company's assets;
4.3.2 be a party to (i) a merger or (ii) an exchange or acquisition of
the type described in Section 4-80-1003 of the Act or 4-90-203 of the Colorado
Corporation and Association Act, which shall require the consent of a Required
Interest of the Members;
5
4.3.3 amend or restate the Articles;
4.3.4 dissolve the Company, which shall require the consent of a
Required Interest; or
4.3.5 make any distribution of any property of the Company to the
Members except for distributions as specifically required under this Agreement.
4.4 Execution of Documents. Any document or instrument may be executed
-----------------------
and delivered on behalf of the Company by the Managers (or by any Manager if
more than one), including, without limitation, any deed, mortgage, note or other
evidence of indebtedness, lease, security agreement, financing statement,
contract, contract of sale, or other instrument purporting to convey or
encumber, in whole or in part, any or all of the assets of the Company at any
time held in its name, or any compromise or settlement with respect to accounts
receivable or claims of the Company; and, subject to the authorization
requirements set forth herein or in the Act, no other signature shall be
required for any such instrument to bind the Company. Any Person dealing with
the Company may rely (without duty of further inquiry) upon a certificate signed
by the Manager as to (i) the identity of the Manager, any Member, or Unitholder;
(ii) the existence or nonexistence of any fact or facts that constitute a
condition precedent to acts by the Manager or that are in any other manner
germane to the affairs of the Company; (iii) the Persons who are authorized to
execute and deliver any instrument or document of the Company; or (iv) any act
or failure to act by the Company or any other matter whatsoever involving the
Company or any Member or Unitholder.
4.5 Compensation of Managers. In consideration of its performance of
------------------------
services on behalf of the Company, each Managers shall receive as compensation
for his services, the compensation set forth in the Employment Agreement(s) for
each Manager, executed and delivered contemporaneously with the execution and
delivery of this Agreement.
4.6 Expenses of the Company. The Company shall pay all expenses as are
-----------------------
necessary to, or appropriate for, the prudent operation of the Company.
4.7 Managers and Term of Office. The Company shall have three (3)
---------------------------
Managers, unless otherwise determined by a Required Interest at a special
meeting of the Members. Each Manager shall hold office until he has resigned or
been removed in accordance with this Agreement.
4.8 Vacancies; Removal; Resignation. Any Manager position to be filled for
-------------------------------
any reason shall be filled by a vote of a Majority in Interest of the Members at
an annual or special meeting of the Members called for that purpose. At any
meeting of the Members at which a quorum is present and which is called
expressly for that purpose, or pursuant to a written consent adopted pursuant to
this Agreement, any Manager may be removed by a Required Interest (which for
these purposes only shall mean one or more Members (without regard to the
Manager) having among them at least a majority of the Units owned by all Members
(without regard to any Units owned by the Manager)) provided, however, that a
Manager may only be removed "for cause," which shall mean the gross negligence
or willful misconduct of the Manager with respect to the Company's business,
properties, or affairs. Any Manager may resign at any time, but only at a
meeting of the Members, duly called and at which a successor Manager is
appointed by a Majority in Interest of the Members. Any successor Manager must
satisfy at the time of appointment, and must agree to satisfy at all times in
the future while such Person is a successor Manager of the Company, the
requirements set forth in the last sentence of Section 4.1(a).
4.9 Officers. Any Manager may, from time to time, designate one or more
--------
individuals to be officers of the Company and assign titles to particular
officers. No officer need be a resident of the state of Colorado, a Member or a
Manager. Any officers so designated shall have such authority and perform such
duties as the Manager may, from time to time, delegate to them.
4.9.1 Unless a Manager decides otherwise, if the title is one
commonly used for officers of a business corporation formed under the Colorado
Business Corporation Act (or any successor statute
6
thereto), the assignment of such title shall constitute the delegation to such
officer of the authority and duties that normally are associated with that
office, subject to any specific delegation of authority and duties made to such
officer by the Manager and subject to all standards of care and restrictions
applicable to the Members and the Manager hereunder.
4.9.2 Each officer shall hold office until a successor shall be duly
designated and shall qualify or until such officer's death, or until such
officer shall resign or shall have been removed in the manner set forth in this
Agreement. Any number of offices may be held by the same person. The salaries or
other compensation, if any, of the officers and agents of the Company shall be
fixed from time to time by the Manager. Any officer may be removed, with or
without cause, by the Managers whenever in their judgment the best interests of
the Company will be served thereby; provided, however, that such removal shall
-------- -------
be without prejudice to the contract rights, if any, of the Person so removed.
Any vacancy occurring in any office of the Company may be filled by a Manager.
4.10 Company Documents. The Manager shall maintain and preserve, until at
-----------------
least five years after the dissolution of the Company and longer if necessary
and appropriate in connection with the winding up of its business and affairs,
all accounts, books, and other Company documents which are reasonably necessary
as a record of its business and affairs, in which shall be entered fully and
accurately all transactions and other matters relating to the Company's business
in such detail and completeness as is customary and usual for businesses of the
type engaged in by the Company. Such documents shall be maintained at the
principal executive office of the Company. Without limiting the generality of
the foregoing, the Recordkeeper shall maintain and preserve the following:
4.10.1 A current list of the full name and last-known business,
residence, or mailing address of each Member and of each Economic Interest
Owner, both past and present;
4.10.2 A copy of the Articles of Organization and all amendments,
together with executed copies of any powers of attorney pursuant to which any
amendment has been executed;
4.10.3 A copy of this Agreement, including Attachments and Schedules,
as in effect from time to time;
4.10.4 Copies of all writings, if any, other than this Agreement,
which obligate a Member to contribute cash, property or services to the Company,
and copies of all writings evidencing the obligation of any member to contribute
cash, property, or services to the Company;
4.10.5 Minutes of every meeting of the Members and copies of all
written consents by which Members take action;
4.10.6 Copies of the Company's Federal, state, and local income tax
returns and reports, if any, for the three most recent years;
4.10.7 Copies of all financial statements of the Company for the
three most recent years; and
4.10.8 Records and accounts of all operations and expenditures of the
Company.
ARTICLE 5 - CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
5.1 Application of Article to Economic Interest Owners. The provisions of
--------------------------------------------------
this Article 5 shall apply to Economic Interest Owners as if they were
"Members," to their Economic Interests in the Company as if those Economic
Interests were "Membership Interests"; provided, however, that the foregoing
shall not entitle any Economic Interest Owner to vote or otherwise to give or
withhold consent, agreement, or approval with respect to any matter on which a
Member may vote or give or withhold consent, agreement, or approval.
7
5.2 Members' Capital Contributions. The Members have made the
------------------------------
contributions set forth in Schedule A, attached to and constituting a part of
this Agreement.
5.3 Additional Capital Contributions. Except as set forth in Section 5.2,
--------------------------------
no Member shall be required to make any Capital Contribution. A Member may make
additional Capital Contributions if and to the extent requested by the Manager
and approved by the unanimous written consent of the Members; provided, however,
that, at the time of the contribution and within thirty days thereafter, all
other Members shall be given the opportunity to make additional Capital
Contributions; and provided, further, that any Member may choose to make a
smaller additional Capital Contribution, or to make no additional Capital
Contribution, at the time of contribution.
5.4 Capital Accounts. A separate Capital Account shall be maintained for
----------------
each Member. Each Member's Capital Account shall be increased by (1) the amount
of money contributed by the Member to the Company; (2) the fair market value of
property contributed by the Member to the Company (net of liabilities secured by
such contributed property that the Company is considered to assume or take
subject to under Section 752 of the Code); (3) each allocation to the Member of
Net Profits; (4) each item in the nature of income or gain which is specially
allocated to the Member pursuant to Section 6.3(a), 6.3(b), 6.3(c), 6.3(d),
6.3(e), 6.3(i) or 6.3(j); and (5) each allocation to the Member of income
described in Section 705(a)(1)(B) of the Code. Each Member's Capital Account
shall be decreased by (A) the amount of money distributed to the Member by the
Company; (B) the fair market value of property distributed to the Member by the
Company (net of liabilities secured by such distributed property that the Member
is considered to assume or take subject to under Section 752 of the Code); (C)
each allocation to the Member of expenditures described in Section 705(a)(2)(B)
of the Code; (D) each item in the nature of deduction or loss that is specially
allocated to the Member pursuant to Section 6.3(a), 6.3(b), 6.3(c), 6.3(d),
6.3(e), 6.3(i) or 6.3(j); and (E) allocations to the Capital Account of the
Member of Net Losses.
5.4.1 In the event of a permitted transfer of a Membership Interest
or an Economic Interest in the Company, the Capital Account of the transferor
shall become the Capital Account of the transferee to the extent it relates to
the transferred Membership Interest or Economic Interest in accordance with
Section 1.704-1(b)(2)(iv) of the Treasury Regulations.
5.4.2 The manner in which Capital Accounts are to be maintained
pursuant to this Section 5.4 is intended to comply with the requirements of
Section 704(b) of the Code and the Treasury Regulations promulgated thereunder.
If in the opinion of the Company's accountants the manner in which Capital
Accounts are to be maintained pursuant to the preceding provisions of this
Section 5.4 should be modified in order to comply with Section 704(b) of the
Code and the Treasury Regulations thereunder, then, notwithstanding anything to
the contrary contained in the preceding provisions of this Section 5.4 or in
Section 12.4, upon a Majority Vote of all of the Members the method in which
Capital Accounts are maintained shall be so modified; provided, however, that no
change in the manner of maintaining Capital Accounts shall be made which
materially alters the economic agreement among the Members and Economic Interest
Owners without the unanimous vote of all of the Members.
5.4.3 Provision for payment and distribution of liquidation proceeds
is made in Section 10.5.1.
5.5 No Obligation to Restore Negative or Deficit Balances. Except as
-----------------------------------------------------
otherwise provided in Section 5.2 or Section 5.3 or in the Colorado Act, no
Member or Economic Interest Owner shall have any liability to restore all or any
portion of a negative or deficit balance in the Member's or Economic Interest
Owner's Capital Account, and the negative or deficit balance of the Member's
Capital Account shall not be considered a debt owed by the Member to the Company
or to any other Person for any purpose whatsoever. This provision shall apply,
without limitation, to a liquidation within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Treasury Regulations.
8
5.6 No Interest on Capital Contributions; No Right to Return of Capital
-------------------------------------------------------------------
Contributions. No Member shall be entitled to interest on the Member's Capital
-------------
Contribution. No Member shall be entitled to a return of the Member's Capital
Contribution, as such, but only to such distributions as are provided for in
this Agreement.
5.7 Loans to Company. Nothing in this Agreement shall prevent any Member
----------------
from making secured or unsecured loans to the Company by agreement with the
Company; provided, however, that Section 3.5 shall apply with respect to any
such loan.
ARTICLE 6 - ALLOCATIONS, INCOME TAX,
DISTRIBUTIONS, ELECTIONS AND REPORTS
6.1 Application of Article to Economic Interest Owners. The provisions of
--------------------------------------------------
this Article 6 shall apply to Economic Interest Owners as if they were
"Members," to their Economic Interests in the Company as if those Economic
Interests were "Membership Interests"; provided, however, that the foregoing
shall not entitle any Economic Interest Owner to vote or otherwise to give or
withhold consent, agreement, or approval with respect to any matter on which a
Member may vote or give or withhold consent, agreement, or approval.
6.2 Allocations of Net Profits and Net Losses. The Net Profits or Net
-----------------------------------------
Losses of the Company for each fiscal year shall be allocated to the Members in
the respective proportions stated on Schedule A; provided, however, that it is
recognized that a Member may transfer some or all of the Member's share of Net
Profits and Net Losses to another Person or Persons pursuant to other provisions
of this Agreement. A Member's share of distributions is determined based upon
the Member's share of Net Profits and Net Losses, as provided in Section 6.4.
6.3 Special Allocations to Capital Accounts and Certain Other Income Tax
--------------------------------------------------------------------
Allocations. Notwithstanding Section 6.2 hereof:
-----------
6.3.1 In the event any Member unexpectedly receives any adjustment,
allocation, or distribution described in Section 1.704-1(b)(2)(ii)(d)(4), (5),
or (6) of the Treasury Regulations, which create or increase a Deficit Capital
Account of the Member, then items of Company income and gain (consisting of a
pro rata portion of each item of Company income, including gross income and gain
for such year and, if necessary, for subsequent years) shall be specially
allocated to the Member in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, the Deficit Capital Account so
created as quickly as possible. It is the intent that this Section 6.3.1 be
interpreted to comply with the alternate test for economic effect set forth in
Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
6.3.2 In the event any Member would have a Deficit Capital Account at
the end of any Company taxable year which is in excess of the sum of any amount
that the Member is treated as being obligated to restore to the Company under
Section 1.704-1(b)(2)(ii)(c) of the Treasury Regulations and the Member's share
of minimum gain as defined in Section 1.704-2(g)(1) of the Treasury Regulations
(which is also treated as an obligation to restore in accordance with Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations), the Capital Account of the
Member shall be specially credited with items of Membership income (including
gross income) and gain in the amount of such excess as quickly as possible.
6.3.3 Notwithstanding any other provision of this Section 6.3, if
there is a net decrease in the Company's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the Company, then the
Capital Account of each Member shall be allocated items of income (including
gross income) and gain for such year (and if necessary for subsequent years)
equal to that Member's share of the net decrease in Company minimum gain. This
Section 6.3.3 is intended to comply with the minimum gain chargeback requirement
of Section 1.704-2 of the Treasury Regulations and shall be interpreted
consistently therewith. If, in any taxable year in which the Company has a net
9
decrease in the Company's minimum gain, the minimum gain chargeback requirement
would cause a distortion in the economic arrangement among the Members and it is
not expected that the Company shall have sufficient other income to correct that
distortion, the Members may in their discretion (and shall, if requested to do
so by any Member) seek to have the Internal Revenue Service waive the minimum
gain chargeback requirement in accordance with Treasury Regulation Section
1.704-2(f)(4).
6.3.4 Items of Company loss, deduction, and expenditure described in
Section 705(a)(2)(B) of the Code which are attributable to nonrecourse debt of
the Company and are characterized as partner (herein Member) nonrecourse
deductions under Section 1.704-2(i) of the Treasury Regulations shall be
allocated to the Members' Capital Accounts in accordance with Section 1.704-2(i)
of the Treasury Regulations.
6.3.5 Beginning in the first taxable year in which there are
allocations of "nonrecourse deductions" (as described in Section 1.704-2(b) of
the Treasury Regulations), such nonrecourse deductions shall be allocated to the
Members for any period in the same manner as Net Profits or Net Losses is
allocated for such period.
6.3.6 In accordance with Section 704(c)(1)(A) of the Code and Section
1.704-1(b)(2)(i)(iv) of the Treasury Regulations, if a Member contributes
property with a fair market value that differs from its adjusted basis at the
time of contribution, income, gain, loss, and deductions with respect to the
property shall, solely for Federal income tax purposes and not for Capital
Account purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company and its
fair market value at the time of contribution.
6.3.7 Pursuant to Section 704(c)(1)(B) of the Code, if any
contributed property is distributed by the Company, other than to the Member who
contributed the property, within five years of the contribution of the property
to the Company, then, except as provided in Section 704(c)(2) of the Code, the
contributing Member shall, solely for Federal income tax purposes and not for
Capital Account purposes, be treated as recognizing gain or loss from the sale
of such property, at the time of such distribution, in an amount equal to the
gain or loss that would have been allocated to the contributing Member under
Section 704(c)(1)(A) of the Code if the property had been sold at its fair
market value at the time of the distribution.
6.3.8 In the case of any distribution by the Company to a Member or
Economic Interest Owner, the Member or Economic Interest Owner shall, solely for
Federal income tax purposes and not for Capital Account purposes, be treated as
recognizing gain in an amount equal to the lesser of: (1) the excess (if any) of
(a) the fair market value of the property (other than money) received in the
distribution over (b) the adjusted basis of the Member's Membership Interest or
Economic Interest Owner's Economic Interest in the Company immediately before
the distribution, reduced (but not below zero) by the amount of money received
in the distribution; or (2) the Net Precontribution Gain (as defined in Section
737(b) of the Code) of the Member or Economic Interest Owner. The Net
Precontribution Gain means the net gain (if any) which would have been
recognized by the distributee Member or Economic Interest Owner under Section
704(c)(1)(B) of the Code if all property which (A) had been contributed to the
Company within five years of the distribution, and (B) is held by the Company
immediately before the distribution, had been distributed by the Company to
another Member or Economic Interest Owner. If any portion of the property
distributed consists of property which had been contributed by the distributee
Member or Economic Interest Owner to the Company, then such property shall not
be taken into account under this Section 6.3.8 and shall not be taken into
account in determining the amount of the Net Precontribution Gain. If the
property distributed consists of an interest in an Entity, the preceding
sentence shall not apply to the extent that the value of such interest is
attributable to the property contributed to such Entity after such interest had
been contributed to the Company.
6.3.9 All recapture of income tax deductions resulting from sale or
disposition of Company property shall be allocated to the Member or Members to
whom the deduction that gave rise to such
10
recapture was allocated hereunder, to the extent that the Member or Members are
allocated any gain from the sale or other disposition of such property.
6.3.10 Any credit or charge to the Capital Accounts of the Members
pursuant to Section 6.3.1, 6.3.2, 6.3.3, 6.3.4, or 6.3.5 shall be taken into
account in computing subsequent allocations of profits and losses pursuant to
Section 6.2, so that the net amount of any items charged or credited to Capital
Accounts pursuant to Section 6.2, 6.3.1, 6.3.2, 6.3.3, 6.3.4, or 6.3.5 shall, to
the extent possible, be equal to the net amount that would have been allocated
to the Capital Account of each Member pursuant to the provisions of this Article
6 if the special allocations required by Section 6.3.1, 6.3.2, 6.3.3, 6.3.4, or
6.3.5 had not occurred.
6.4 Distributions. Subject to Section 10.5.1, and subject to the effects
-------------
of transfers of rights to receive distributions made in accordance with the
terms and conditions of this Agreement but without transfer of associated rights
in Net Profits and Net Losses, all distributions shall be made to the Members
and Economic Interest Owners pro rata in proportion to the respective rights of
the Members and Economic Interest Owners in Net Profits and Net Losses as
determined pursuant to Section 6.2 as of the record date of such distribution.
6.4.1 Except as otherwise provided in this Agreement, all
distributions shall be made at such times as may be determined by a Required
Interest of the Members. All amounts withheld pursuant to the Code or any
provisions of state or local tax law with respect to any payment or distribution
to a Member or Economic Interest Owner from the Company shall be treated
nevertheless as amounts that have been distributed to the Member or Economic
Interest Owner pursuant to this Section 6.4.
6.4.2 The Company may offset damages for breach of this Agreement by
a Member or Economic Interest Owner against the amount otherwise distributable
to the Member or Economic Interest Owner.
6.4.3 Notwithstanding any provision of this Agreement to the
contrary, the Company shall make distributions annually to each Member in an
amount sufficient to pay any estimated tax liability attributable to each
Member's interest in the Company during the prior tax year of the Company
provided, however, that in no event shall a Member receive a distribution from
the Company to the extent that, after giving effect to the distribution, all
liabilities of the Company would exceed the fair value of the Company's assets.
A Member who receives any distribution from the Company is liable to the Company
with respect thereto only to the extent provided by the Colorado Act.
6.4.4 Regardless of the nature of any Member's Capital Contribution,
a Member or Economic Interest Owner has only the right to demand and receive
cash with respect to any distribution to which the Member or Economic Interest
Owner is entitled. A Member or Economic Interest Owner may not be compelled to
accept a distribution of any asset in kind from the Company to the extent that
the percentage of the asset distributed to the Member or Economic Interest Owner
exceeds a percentage of that asset which is equal to the percentage in which the
Member or Economic Interest Owner shares in distributions from the Company.
6.5 Accounting Principles and Elections. The profits and losses of the
-----------------------------------
Company for "book purposes" shall be determined in accordance with generally
accepted accounting principles applied on a consistent basis using the accrual
method of accounting. All elections, including the election of tax accounting
methods (which may vary from book accounting methods), permitted to be made by
the Company under Federal or state laws shall be made by an affirmative vote of
a Required Interest of the Members.
6.6 Accounting Period. Unless and until otherwise determined by a
-----------------
Majority Vote of All the Members, the Company's accounting period shall end on
September 30 of each year.
11
6.7 Returns. Unless the task is delegated to another Person by the
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Members, the Recordkeeper shall cause the preparation and timely filing of all
tax returns required to be filed by the Company pursuant to the Code and all
other tax returns deemed necessary in each jurisdiction in which the Company
does business. Copies of such returns, or pertinent information therefrom,
shall be furnished to the Members within a reasonable time after the end of the
Company's fiscal year.
ARTICLE 7- MERGERS AND OTHER TRANSACTIONS
7.1 Merger, Consolidation, or Conversion. The Company may merge with or
------------------------------------
be consolidated or converted into another limited liability company or other
business entity pursuant to applicable law and a plan therefor adopted by a vote
of the Required Interest of the Members. Such plan shall set forth the matters
required by the applicable law governing the merger, consolidation or conversion
and be approved by a vote of the Required Interest of the Members.
7.2 Membership Interest Exchange. Each Member and each Economic Interest
----------------------------
Owner shall exchange all Membership Interests and all Economic Interests in
accordance with a plan therefor adopted by the Members. Such plan shall set
forth the following:
The terms and conditions of the exchange; The manner and basis of converting
the Membership Interests and Economic Interests of the Company into shares,
obligations, or other securities of the surviving or any other Entity or into
money or other property in whole or part;
Such other provisions relating to the exchange as may be deemed necessary or
appropriate, including amendments to the Articles of Organization or this
Agreement.
Notice of adoption of the plan shall be given to each Member and each Economic
Interest Owner prior to the effectuation of the exchange, but failure to give
such notice to an Economic Interest Owner shall not affect the validity of the
plan or the effectiveness of the exchange.
7.3 Equality of Treatment. All Membership Interests and all Economic
---------------------
Interests shall be treated-proportionately and pro tanto-equally under any plan
for merger, consolidation, or exchange adopted pursuant to the foregoing
Sections of this Article 7.
7.4 Transfer of All Assets. Provision for the transfer of all or
----------------------
substantially all of the assets of the Company is made in Section 3.2.
7.5 No Dissenter's Rights. No Person dissenting to any merger,
---------------------
consolidation, Membership Interest or Economic Interest exchange, or transfer of
assets shall have any right of appraisal and sale or other right analogous to
"dissenters' rights" in the corporate context.
ARTICLE 8 - RESTRICTIONS ON TRANSFERABILITY
8.1 General. No Member or Economic Interest Owner shall have the right to
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transfer any part of the Member's Membership Interest or Economic Interest
Owner's Economic Interest and transfers of such Membership Interests and
Economic Interests shall be subject to this Article 8. Except as otherwise
specifically provided in this Article 8, neither a Member nor an Economic
Interest Owner shall have the right to transfer, sell, encumber or gift all or
any part of its Membership Interest or Economic Interest. Each Member and
Economic Interest Owner hereby acknowledges the reasonableness of the
restrictions on sale and gift of Membership Interests and Economic Interests
imposed by this Agreement, in view of the Company purposes and the relationship
of the Members and Economic Interest Owners, and agrees that such restrictions
shall be specifically enforceable.
8.2 Death and Other Involuntary Dissociation. Upon the death or
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involuntary Dissociation of a Member or Economic Interest Owner, the Company and
the remaining Members shall have the right to purchase the Economic Interest or
Membership Interest of the Dissociated Member for an amount equal to the Fair
Market Value of the Economic Interest of Membership Interest, to be paid in five
equal annual payments without interest equal to 1/5 of the Fair Market Value,
the first of which shall be made no later than ninety (90) days after the date
that the Fair Market Value of the Economic Interest or
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Membership Interest is determined with each successive payment to be made no
latter than the second, third, fourth or fifth anniversary (as the case may be)
of the initial payment hereunder. The Fair Market Value of an Ownership Interest
or Membership Interest shall be determined by agreement between the Company,
acting through its remaining Members or Managers, and holder ("Holder") of the
Interest after the death, involuntary Dissociation. In the event the Holder and
the Company cannot agree on a fair market value of the Interest, each of the
Company and the Holder shall set forth his, her, or its estimate of the Fair
Market Value of the Interest and the Company and the Holder shall agree upon an
independent third party with experience in appraising business interests to
determine the Fair Market Value of the Interest. The party whose estimate of the
Fair Market Value of the Interest is the farthest from the Fair Market Value of
the Interest shall pay the costs of the appraisal.
8.3 Transferring Party's Indemnity Obligation. Each Transferring Party
-----------------------------------------
hereby indemnifies the Company and the remaining Members against any and all
loss, damage, and expense (including attorneys' and other professionals' fees
incurred in applying and enforcing the provisions of this Agreement and
including tax liabilities or loss of tax benefits) resulting directly or
indirectly because of any transfer or purported transfer in violation of this
Agreement.
8.4 Transferee Not Member in Absence of Members' Consent. Notwithstanding
----------------------------------------------------
anything contained in this Agreement to the contrary, if the transferee is not a
Member immediately prior to the sale or gift, then the transferee shall be
merely an Economic Interest Owner and shall not become a Member, and shall have
no right to participate in the management of the business or affairs of the
Company, unless and until the transferee is admitted to membership pursuant to
Article 9.
ARTICLE 9 - ADDITIONAL MEMBERS
9.1 Admission of Additional Members. Any Person may, upon a vote of the
-------------------------------
Required Interest of the Members, be admitted as a Member in the Company by the
issuance by the Company of Membership Interests for such consideration as is
approved a Majority Vote of All the Members; provided, however, that, if the
Person is a Transferee of Economic Interests from a Member or Members holding a
majority of all of the Member Votes, then that Person's admission as a Member
shall require, in addition to a vote of the Required Interest of the Members,
the affirmative vote of at least one Member who was not among the transferors of
such Economic Interests.
9.2 Documentation of Admission. As a condition to the admission of a
--------------------------
Person as a Member, the remaining Members may require the Person, and any Member
or other transferring Party from which the Person is acquiring any Economic
Interest, to execute, acknowledge, and deliver to the Company and the remaining
Members such instruments of transfer, assignment, and assumption and such other
certificates, representations, and documents, and to perform such other acts, as
the remaining Members may reasonably deem necessary or desirable to (i)
constitute the transferee as a Member; (ii) confirm that the transferee,
desiring to be admitted as a Member, has agreed to be subject to and bound by
all of the terms and conditions of the Articles of Organization and this
Agreement that are applicable to Members; (iii) preserve the Company after the
completion of such sale or gift under the laws of each jurisdiction in which the
Company is organized, qualified, or does business; (iv) maintain the status of
the Company as a partnership for Federal tax purposes; and (v) assure compliance
with applicable state and Federal laws, including securities laws.
9.3 Effective Date of Admission. Unless otherwise agreed by a Majority
---------------------------
Vote of the Remaining Members, the admission of a Person as a Member shall be
deemed effective as against the Company and the Members as of the last day of
the calendar month in which the last of the following events occurs: (i) the
vote required therefor under Section 9.1 is obtained; or (ii) the Person being
admitted as a Member and the Member or Transferring Party, if any, transferring
a Membership Interest or Economic Interest to that Person comply with Section
9.2 with respect to all requirements that have been fixed by the Members
pursuant to that Section. Notwithstanding the foregoing, Intercell
International Corporation shall be deemed a Member effective as of the date
hereof.
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9.4 No Retroactive Allocations. No new Member shall be entitled, upon
--------------------------
admission as a Member, to any retroactive allocation of losses, income, or
deduction incurred by the Company; provided, however, that the Members may, in
their discretion, either close the Company books (as though the Company's tax
year had ended) at the time a new Member is admitted or make pro rata
allocations of loss, income, and deductions to the new Member for that portion
of the Company's tax year in which the new Member was admitted in accordance
with the provisions of Section 706(d) of the Code and the Treasury Regulations
promulgated thereunder.
9.5 Modification of Allocations. , The allocation of Net Profits and Net
---------------------------
Losses pursuant to Section 6.2 and Schedule A may be modified upon a vote of the
Required Interest of the Members (excluding the newly admitted Member) in
connection with the issuance by the Company of Membership Interests in the
admission of a new Member. Such modification will necessarily modify the Member
Votes held by each Member, pursuant to Section 11.26.
ARTICLE 10 - DISSOCIATION, DISSOLUTION, AND TERMINATION
10.1 Dissociation. Except as expressly permitted in this Agreement, a
------------
Member shall not voluntarily Dissociate. The remedy for breach of this Section
10.1shall be monetary damages only and not specific performance, and such
damages may be offset against distributions by the Company to which the
Dissociating Member would otherwise be entitled, pursuant to Section 6.4.2.
Unless otherwise approved by the Nondissociating Members, a Dissociating Member,
regardless of whether the Member's Dissociation was voluntary, shall be entitled
to receive only those distributions to which the Dissociating Member would have
been entitled had the Dissociating Member remained a Member and only at such
times as such distributions would have been made had the Dissociating Member
remained a Member. Except as otherwise expressly provided herein, a
Dissociating Member shall become an Economic Interest Owner.
10.2 Application of Remainder of Article to Economic Interest Owners. The
---------------------------------------------------------------
provisions of the following Sections of this Article 10 shall apply to Economic
Interest Owners, as if they were "Members," to their Economic Interests in the
Company, as if those Economic Interests were "Membership Interests"; provided,
however, that the foregoing shall not entitle any Economic Interest Owner to
vote or otherwise to give or withhold consent, agreement, or approval with
respect to any matter on which a Member may vote or give or withhold consent,
agreement, or approval.
10.3 Dissolution. The Company shall be dissolved upon the occurrence of
-----------
either of (i) the unanimous written agreement of all Members that it shall be
dissolved; or (ii) the Dissociation of a Member, unless the business of the
Company is continued by the vote of a Majority in Interest of the
Nondissociating Members given within ninety days after the Dissociation, and, in
the event there is only one remaining Member, that Member admits another Person
to membership in the Company within ninety days after the Dissociation.
10.3.1 As soon as possible following the occurrence of any of the
events specified Section 10.3 effecting the dissolution of the Company, an
appropriate representative of the Company shall execute a statement of intent to
dissolve in a form that complies with the requirements of the Colorado Act and
deliver the same to the Colorado Secretary of State for filing pursuant to the
Colorado Act.
10.3.2 If a Member who is an individual dies or a court of competent
jurisdiction adjudges the Member to be incompetent to manage the Member's person
or property, the Member's executor, administrator, guardian, conservator, or
other legal representative ("successor") may exercise all of the Member's rights
for the purpose of settling the estate or administering property of the Member,
provided, however, that, except to the extent required by applicable law, the
successor shall not be considered a Member and shall have no right to vote or to
give or withhold consent, agreement, or approval with respect to any matter on
which a Member might vote or give or withhold consent, agreement, or approval.
14
10.4 Effect of Filing of Statement of Intent to Dissolve. Upon the filing
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with the Colorado Secretary of State of the Company's statement of intent to
dissolve, the Company shall cease to carry on its business, except insofar as
may be necessary for the winding up of its business, but its separate existence
shall continue until a certificate of dissolution has been issued by the
Secretary of State or until such separate existence is terminated in connection
with judicial dissolution or liquidation of the Company.
10.5 Winding Up, Liquidation, and Distribution of Assets. Upon
---------------------------------------------------
dissolution of the Company, an accounting shall be made of the accounts of the
Company and of the Company's assets, liabilities, and operations, from the date
of the last previous accounting until the date of dissolution. The Members may
cause such accounting to be made by independent accountants and shall cause such
accounting to be made by independent accountants upon the request of any Member.
Upon dissolution of the Company, the Members shall immediately proceed to wind
up the business and affairs of the Company.
10.5.1 In winding up the business and affairs of the Company, the
Members shall (i) Sell or otherwise liquidate all of the Company's assets as
promptly as practicable (except to the extent the Members may determine to
distribute assets to the Members in kind, it being recognized that any in-kind
distribution is subject to Section 6.4.4); (ii) Allocate the profits or losses
resulting from such sales to the Members' Capital Accounts in accordance with
the provisions of this Agreement; (iii) Discharge all liabilities of the
Company (including liabilities to Members who are also creditors, to the extent
otherwise permitted by law) other than liabilities to Members for distributions,
and establish such reserves as the Members deem reasonable to provide for
contingent liabilities of the Company (for purposes of determining the Capital
Accounts of the Members, the amounts of such Reserves shall be deemed to be an
expense of the Company); and (iv) Distribute the remaining assets in accordance
with the following:
10.5.1.1 If any assets of the Company are to be distributed in
kind, the net fair market value of such assets as of the date of dissolution
shall be determined by independent appraisal or by agreement of the Members.
Such assets shall be deemed to have been sold as of the date of dissolution for
their fair market value, and the Capital Accounts of the Members and Economic
Interest Owners shall be adjusted pursuant to the provisions of Section 5.4 and
Article 6 of this Agreement to reflect such deemed sale.
10.5.1.2 The positive balance (if any) of each Member's Capital
Account (as determined after taking into account all Capital Account adjustments
for the Company's taxable year during which the liquidation occurs) shall be
distributed to the Members, either in cash or in kind, as determined by the
Members, with any assets distributed in kind being valued for this purpose at
their net fair market value. Any such distributions to the Members in respect
of their Capital Accounts shall be made in accordance with the time requirements
set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
10.5.1.3 Notwithstanding any provision hereof to the contrary,
in the event that Xxxxxxx X. Xxxxxxxx is a Member or Economic Interest Owner,
and further if Xxxxxxx X. Xxxxxxxx so elects by notifying the other Members
within thirty (30) days after dissolution, the right to use the names "Xxxxxxxx
and Associates" and "Xxxxxxxx DEC LLC," and the then-current customer list of
the Company shall be distributed to Xxxxxxx X. Xxxxxxxx, and Xxxxxxx X. Xxxxxxxx
shall pay to the other Members and Economic Interest Owners at the time of
dissolution an amount equal to five percent (5%) of the net profits of any
entity using the names "Xxxxxxxx and Associates" or "Xxxxxxxx DEC LLC," or using
any part of the customer list for a period of one year after the date of
dissolution. "Net profits" for such organization shall be determined using
generally accepted accounting methods or in any other manner agreed upon by the
parties. The amount payable under this provision shall be paid quarterly
starting based on a good faith estimate of net profits three months after the
date of dissolution and continuing every three months thereafter, with all
adjustments to reflect the difference between actual and estimated net profits
to be paid within 30 days after the final results for the year are known. In
consideration of
15
the payment described herein, the other Members and economic interest owners
agree that they will not solicit work from any of the persons named on the
customer list for a period ending one year after dissolution of the Company.
10.5.2 In connection with liquidation, the Company may offset damages
for breach of this Agreement by a Member against the amount otherwise
distributable to the Member, pursuant to Section 6.4.2.
10.5.3 The provisions of Section 5.5, which eliminates any liability
of a Member or Economic Interest Owner to restore any portion of a deficit
balance in the Member's or Economic Interest Owner's Capital Account, apply to
deficit balances in Capital Accounts upon liquidation of the Company.
10.5.4 When all debts, liabilities, and obligations of the Company
have been paid and discharged or adequate provisions have been made therefor and
when all of the remaining property and assets have been distributed to the
Members, the Company shall be deemed terminated.
10.5.5 The Members shall comply with all applicable laws pertaining
to the winding up of the business and affairs of the Company and the
distribution of its assets.
10.6 Articles of Dissolution. When all debts, liabilities, and obligations
-----------------------
have been paid and discharged or adequate provisions have been made therefor and
all of the remaining property and assets have been distributed to the Members,
articles of dissolution shall be executed in duplicate and verified by the
Person signing the articles, which articles shall set forth the information
required by the Colorado Act. Duplicate originals of such articles of
dissolution shall be delivered to the Colorado Secretary of State.
10.7 Certificate of Dissolution. Upon the issuance of the certificate of
--------------------------
dissolution, the existence of the Company shall cease, except for the purpose of
suits, other proceedings, and appropriate action as provided in the Colorado
Act. The Member shall have authority to distribute any Company property
discovered after dissolution, convey real estate, and take such other action as
may be necessary on behalf of an in the name of the Company.
ARTICLE 11 - DEFINITIONS
The following terms used in this Agreement have the meanings ascribed to
them in this Article 11:
11.1 "Agreement" means this Operating Agreement, as amended from time to
---------
time.
11.2 "Articles of Organization" means the Articles of Organization of the
------------------------
Company as filed with the Secretary of State of Colorado on December 4, 1998, as
the same may be amended from time to time.
11.3 "Affiliate" means, with respect to any Person (such Person being
---------
referred to in this Section 11.3 as the "Target Person"), (a) any Person
directly or indirectly controlling, controlled by, or under common control with
the Target Person, (b) any Person owning, of record or beneficially, ten
percent or more of the outstanding Voting Interests of the Target Person, unless
another Person owns, beneficially, a larger percentage of the outstanding Voting
Interests of the Target Person, (c) any Person who is a director, officer,
partner, or trustee of, or is in a similar capacity with respect to, the Target
Person, or (d) any Person who is a director, officer, partner, or trustee of,
or is in a similar capacity with respect to, or is holder of ten percent or more
of the Voting Interests of, any Person described in clauses (a) through (c) of
this sentence. For purposes of this definition, the term "controls," "is
controlled by," or "is under common control with" shall refer to the possession,
directly
16
or indirectly, of the power to direct or cause the direction of the management
and policies of the Target Person, whether through the ownership of voting
securities, by contract, or otherwise.
11.4 "Capital Account" of a Member, as of any given date, means the
---------------
Capital Contribution to the Company by the Member as adjusted to the date in
question pursuant to Article 5.
11.5 "Capital Contribution" means any contribution, whenever made, by a
--------------------
Member to the capital of the Company, whether in cash or property. Whether a
payment of cash or a transfer of property is a contribution to the capital of
the Company, and, therefore, a Capital Contribution, shall be determined by the
agreement between the Member making the payment or transfer and the other
Members acting by a Majority Vote of the Remaining Members.
11.6 "Capital Interest" means the proportion that a Member's positive
----------------
Capital Account balance, if any, bears to the aggregate Capital Accounts of all
Members whose Capital Accounts have positive balances, as such proportion may
change from time to time. Negative Capital Account balances are disregarded in
the determination of "Capital Interests."
11.7 "Code" means the Internal Revenue Code of 1986 or corresponding
----
provisions of superseding Federal revenue laws.
11.8 "Colorado Act" means the Colorado Limited Liability Company Act or
------------
any act that supersedes the Colorado Limited Liability Company Act, as the same
may be amended from time to time.
11.9 "Company" is defined in the first paragraph of this Agreement.
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11.10 "Deficit Capital Account" means, with respect to any Member, the
-----------------------
deficit balance, if any, in the Member's Capital Account as of the end of the
taxable year, after giving effect to the following adjustments:
(i) Credit to such Capital Account of all amounts which the Member is
treated as being obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the
Treasury Regulations, as well as any addition thereto pursuant to the next to
last sentence of Sections 1.704-2(g)(1) and (i)(5) of the Treasury Regulations,
after taking into account thereunder any changes during such year in partnership
minimum gain (as determined in accordance with Section 1.704-2(d) of the
Treasury Regulations) and in the minimum gain attributable to any partner
nonrecourse debt (as determined under Section 1.704-2(i)(3) of the Treasury
Regulations); and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.
This definition of Deficit Capital Account is intended to comply with the
provision of Treasury Regulations Sections 1.704-1(b)(2)(ii)(d) and 1.704-2, and
is to be interpreted consistently with those provisions.
11.11 "Depreciation" means, with respect to each asset, for each fiscal
------------
year, an amount equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to the asset for such fiscal year; provided,
however, that, if the Gross Asset Value of the asset differs from its adjusted
basis for Federal income tax purposes at the beginning of such fiscal year,
"Depreciation" shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the Federal income tax depreciation, amortization, or other
cost recovery deduction for such fiscal year bears to such beginning adjusted
tax basis; and provided, further, that, if the adjusted basis for Federal income
tax purposes of an asset at the beginning of such fiscal year is zero,
"Depreciation" shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Members.
17
11.12 "Dissociating Member" means a Person who has been a Member but who
-------------------
Dissociates. The term is used in each case with reference to a specific
Dissociation and does not refer to Persons who have previously Dissociated, or
who may subsequently Dissociate, in Dissociations other than the specific one
under consideration.
11.13 "Dissociation" refers to the death, resignation, bankruptcy, or
------------
dissolution of a Member or the occurrence of any other event (other than the
termination of the Company) which terminates the continued membership of a
Member in the Company. Dissociation is subject to restriction pursuant to
Section 10.1.
11.14 "Economic Interest" means a Member's or Economic Interest Owner's
-----------------
share, if any, of the Company's Net Profits and Net Losses and distributions of
the Company's assets pursuant to this Agreement and the Colorado Act, but
"Economic Interest" shall not include any right to participate in the management
of the business or affairs of the Company or any right to vote with Members upon
any matter upon which a vote of the Members is taken.
11.15 "Economic Interest Owner " the owner of an Economic Interest who is
-----------------------
not a Member.
11.16 "Entity" means any legally recognized Person other than an
------
individual.
11.17 "Fiscal Year" means the Company's fiscal year, which shall be
-----------
September 30 of each year.
11.18 "Gift" and its derivatives means gift, bequeath, or otherwise
----
transfer for no consideration, whether or not by operation of law, except in the
case of bankruptcy
11.19 "Gifting Party" means any Member or Economic Interest Owner who
-------------
gifts all or any part of its Membership Interest or Economic Interest.
11.20 "Gross Asset Value" means, with respect to any asset, the asset's
-----------------
adjusted basis for Federal income tax purposes; provided, however, that:
(i) The initial Gross Asset Value of an asset contributed by a Member
to the Company shall be the gross fair market value of the asset at the time of
such contribution, as determined by the contributing Member and a Majority Vote
of the Remaining Members; provided, however, that the initial Gross Asset Values
of the assets (other than cash) contributed to the Company pursuant to Section
5.2 hereof shall be as set forth in Schedule A.
(ii) The Gross Asset Values of all assets shall be adjusted to equal
their respective gross fair market values, as determined by the Members, as of
the following times: (1) the acquisition of an interest (as that term is used
in Regulations Section 1.704-1(b)(2)(iv)(f)(5)(i)) by a new or existing Member
in exchange for more than a de minimis contribution of property (including
money); (2) the distribution by the Company to a Member of more than a de
minimis amount of property as consideration for a Membership Interest or
Economic Interest; and (3) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments
pursuant to clauses (1) and (2) of this Section shall be made only if the
Members reasonably determine that such adjustments are necessary or appropriate
to reflect the relative economic interests of the Members in the Company;
(iii) The Gross Asset Value of an asset distributed to a Member shall
be adjusted to equal the gross fair market value of the asset on the date of
distribution as determined by the distributee and a Majority Vote of the
Remaining Members, and
(iv) The Gross Asset Values of assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code
18
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation Section 1.704-1(b)(2)(iv)(m), Section (relating to the definition of
Net Profits and Net Losses), and Section 5.4; provided, however, that Gross
Asset Values shall not be adjusted pursuant to this definition to the extent the
Members determine that an adjustment pursuant to Section 11.20(ii)is necessary
or appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to this Section 11.20(iv). If the Gross Asset Value of an
asset has been determined or adjusted pursuant to Section 11.20(i), 11.20(ii),
or 11.20(iv), then such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Net Profits and Net Losses.
11.21 "Majority Vote of All the Members" means the affirmative vote of
--------------------------------
Members holding a majority of all of the Member Votes. This term is distinct
from the term "Majority Vote of the Remaining Members," which is defined in
Section 11.23.
11.22 "Majority in Interest of the Nondissociating Members" means Members
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(other than the Dissociating Member) holding a majority of the Capital Interests
(determined, however, by disregarding the Capital Interest of the Dissociating
Member) and a majority of the profits allocable to the Members (determined,
however, by disregarding the profits allocable to the Dissociating Member) based
on any reasonable estimate of profits from the date of the Dissociation of the
Dissociating Member to the projected termination of the Company, taking into
account present and future allocations of profits under this Agreement as in
effect at that time. A "Majority in Interest of the Nondissociating Members" is
not determined with any reference to Member Votes.
11.23 "Majority Vote of the Remaining Members" means a vote by
--------------------------------------
Members-other than the contributing Member, transferring Member, or other
particular Member who is the subject of the specific occasion to which the
provision, in which the phrase is used, is to be applied-holding a majority of
the Member Votes held by all of the Members other than that contributing Member,
transferring Member, or other particular Member.
11.24 "Member" means each Person who is named as an initial Member in the
------
first paragraph of this Agreement and each other Person who is admitted as a
Member pursuant to the terms and conditions of this Agreement; provided,
however, that, unless the context otherwise requires, the term "Member" shall
not include any such Person from and after the time that Person Dissociates from
the Company.
11.25 "Membership Interest" means a Member's entire interest in the
-------------------
Company including the Member's Economic Interest, Member Votes, and such other
rights and privileges that the Member may enjoy by being a Member. If a Member
acquires an Economic Interest from another Person, or if a Person who has
acquired an Economic Interest subsequently is admitted as a Member, the Member's
Membership Interest shall include all rights associated with such Economic
Interest, notwithstanding that the Economic Interest Owner from whom the
Economic Interest was acquired may not have been a Member.
11.26 "Member Vote" refers to the right that a Member has to vote (the
-----------
term "vote" is defined in Section 11.37) on matters that are presented to the
Members for decision. Each Member shall have one "Member Vote" for each one
percentage point of the Member's share in Net Profits and Net Losses as
allocated pursuant to Section 6.2 and a fraction of a "Member Vote" for each
fraction of a percentage point of such share; provided, however, that, in the
event a Member (the "first Member") transfers any portion of the Member's
Economic Interest to another Person, the first Member's Member Votes shall not
be affected by such transfer unless and until the transferred portion of the
Economic Interest is acquired or held by another Member (the "second Member"),
at which time the Member Vote, if any, that is associated with the transferred
portion shall become the Member Vote of the second Member and no longer that of
the first Member. A Member may be denied participation in a particular vote
pursuant to the application of the provisions of Section 11.22 or Section 11.23.
The number of Member Votes which each Member is entitled to cast shall be
reflected on Schedule A.
19
11.27 "Net Profits" and "Net Losses" means for each taxable year of the
-----------
Company an amount equal to the Company's net taxable income or loss for such
year as determined for Federal income tax purposes (including separately stated
items) in accordance with the accounting method and rules used by the Company
and in accordance with Section 703 of the Code, subject to the following
provisions:
(i) Any item of income, gain, loss, or deduction allocated to Members
pursuant to Section 6.3 shall not be taken into account in computing Net Profits
or Net Losses;
(ii) Any income of the Company that is exempt from Federal income tax
and is not otherwise taken into account in computing Net Profits and Net Losses
pursuant to this definition shall be added to such net taxable income or loss;
(iii) Any expenditure of the Company described in Section
705(a)(2)(B) of the Code and not otherwise taken into account in computing Net
Profits and Net Losses shall be subtracted from such net taxable income or loss;
(iv) In the event the Gross Asset Value of an asset is adjusted
pursuant to Section 11.20(ii) or 11.20(iii)19(c), the amount of such adjustment
shall be taken into account, as gain or loss from the disposition of such asset,
in computing Net Profits or Net Losses;
(v) Gain or loss resulting from the disposition of an asset with
respect to which gain or loss is recognized for Federal income tax purposes
shall be computed with reference to the Gross Asset Value of the asset,
notwithstanding that the adjusted tax basis of the asset differs from its Gross
Asset Value;
(vi) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account, in computing Net Profits or Net Losses,
Depreciation for such fiscal year; and
(vii) To the extent an adjustment to the adjusted tax basis of an
asset pursuant to Section 734(b) of the Code or Section 743(b) of the Code is
required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations
to be taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Membership Interest or Economic
Interest, the amount of such adjustment shall be treated as an item of gain (if
the adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Net Profits or
Net Losses.
11.28 "Person" means an individual or Entity and shall include the heirs,
------
executors, administrators, legal representatives, successors, and assigns of a
"Person" where the context permits or requires.
11.29 "Recordkeeper" means the Person appointed by the Members to keep the
------------
books and records of the Company and to perform the other duties specified in
this Agreement as duties of the Recordkeeper.
11.30 "Required Interest" means one or more Members having among them at
-----------------
least a majority of the Units of all Members.
11.31 "Sale" and its derivatives means transfer for consideration.
----
11.32 "Schedule A" means Schedule A to this Agreement reflecting matters
----------
such as Members' identities, share of Net Profits and Net Losses, and Member
Votes, which schedule bears the most recent date and is signed by a Member or
Members holding a majority of all of the Member Votes. Schedule A is prima
facie evidence of the agreement of the parties hereto with respect to the
matters reflected therein, but it is recognized that, through inadvertence or
otherwise, Schedule A may not be modified
20
from time to time as required to reflect the parties' agreement, or as
circumstances, change, and, accordingly, any party to this Agreement may, by a
preponderance of the evidence, show that Schedule A is not an accurate
reflection of the parties' agreement.
11.33 "Selling Party" means any Member or Economic Interest Owner who
-------------
sells all or any portion of its Membership Interest or Economic Interest.
11.34 "Transfer" includes sale, gift, bequest, assignment, and all other
--------
modes of transfer but does not include the mere creation of a security interest
or encumbrance. The foreclosure of a security interest or encumbrance is a
"transfer."
11.35 "Transferring Party" shall mean either a Selling Party or a Gifting
------------------
Party.
11.36 "Treasury Regulations" shall include temporary and final regulations
--------------------
promulgated under the Code that are in effect as of the date of the filing of
the Articles of Organization and the corresponding sections of any regulations
subsequently promulgated that amend or supersede such regulations. The term
"Treasury Regulations" shall also include regulations that have been proposed by
the Internal Revenue Service under the Code at or prior to the date of the
filing of the Articles of Organization, and have not been withdrawn at or prior
to such date, as well as the corresponding provisions of any regulations
subsequently promulgated that, amend or supersede such proposed regulations.
11.37 "Unitholders" means all Persons who hold Units in the Company,
-----------
regardless of whether they are Members. "Unitholder" means any one of the
Unitholders.
11.37 "Vote" includes consent, approval, and agreement, as the context may
----
permit.
ARTICLE 12 - MISCELLANEOUS PROVISIONS
12.1 Notices. Each notice and other communication under or with respect
-------
to this Agreement (including instruments tendered as full satisfaction of debts
and other communications concerning disputed debts) shall be in writing
(including by telegraph, telex, telecopier, and other available communication
facilities providing written copy to the recipient Person) and shall be
effective when actually delivered to the Person to which it is directed or when
deposited in the United States mail at a time when the postal service is not
experiencing a strike or other disruption in service and no such strike or
disruption is publicly expected within a seven day period following such
deposit, postage prepaid, addressed to the Person to which it is directed, to
the attention of the individual, and at the address, provided for that Person in
Schedule A (or if that Person is the Company, to the attention of the
Recordkeeper) or to the attention of such other individual, or at such other
address, as that Person may designate by notice (such individual being referred
to as the "Notice Individual" and such address being referred to as the "Notice
Address"); provided that any notice that is directed to any Economic Interest
Owner may be given as if to the Member from whom the Economic Interest Owner
received, directly or indirectly, the Economic Interest. Delivery of a notice
or other communication to a Person, if made at the Notice Address, shall be to
an individual whom the noticing or communicating Person reasonably believes is
likely to transmit the notice or communication to the Notice Individual;
provided, however, that delivery by a commercial carrier shall be presumed to
have been to such an individual. Delivery of a notice or other communication to
a Person at a place other than the Notice Address shall be only to the Notice
Individual. A stamped receipt issued by a United States post office for
registered mail shall be presumptive evidence of deposit in the United States
mail, and a receipt signed by a responsible Person for the recipient Person or a
delivery confirmation from a commercial messenger or courier shall be
presumptive evidence of actual delivery.
12.2 Application of Colorado Law. This Agreement shall be construed as
---------------------------
though prepared by all of the parties hereto. This Agreement, and the
performances of the parties hereunder, shall be governed by the laws of the
State of Colorado without giving effect to the principles of conflicts of laws
21
that would otherwise provide for the application of the substantive law of
another jurisdiction. Any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement must be brought against
a party in the courts of the State of Colorado, if it has or can obtain
jurisdiction, in the United States District Court for either such state, and
each party hereto hereby consents for that party and the party's successors to
the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in this Section may be served on
any party anywhere in the world and may also be served upon any party in the
manner provided above for giving notices to a party under this Agreement.
12.3 Waiver of Action for Partition. Each Member and Economic Interest
------------------------------
Owner irrevocably waives any right that it may have to maintain any action for
partition with respect to the property of the Company; provided, however, that
this provision shall not apply to any asset that is distributed in kind to any
Member or Economic Interest Owner.
12.4 Amendments. This Agreement may be amended from time to time by the
----------
affirmative vote of a Member or Members holding, in the aggregate, a majority of
all of the Member Votes held by all of the Members.
12.4.1 Provision is made elsewhere in this Agreement for
modifications of Schedule A in connection with the admission of additional
Members and transfers of Membership Interests and Economic Interests, and this
Section does not supersede such provisions.
12.4.2 The Articles of Organization may be amended from time to time
by the affirmative vote of a Member or Members holding, in the aggregate, a
majority of all of the Member Votes held by all of the Members.
12.5 Execution of Additional Instruments. Each Member hereby agrees to
-----------------------------------
execute such other and further statements of interest and holdings,
designations, powers of attorney, and other instruments necessary or appropriate
to comply with any laws, rules or regulations.
12.6 Headings and Pronouns. Headings and captions contained in this
---------------------
Agreement are solely for the convenience of the parties and are not to be
considered in interpreting or construing this Agreement or the parties' rights,
remedies, and obligations hereunder. The words "herein," "hereof," and
"hereunder," when used in this Agreement, refer to this Agreement in its
entirety. The word "include" and its derivatives mean by way of example and not
by way of exclusion or limitation. Words in the singular include the plural and
words in the plural include the singular, according to the requirements of the
context. Words importing a gender include all genders.
12.7 Waivers. No party shall be deemed to have waived any right or remedy
-------
under or with respect to this Agreement unless such waiver is expressed in a
writing signed by such party. No waiver of any right or remedy under or with
respect to this Agreement by a party on any occasion or in any circumstance
shall be deemed to be a waiver of any other right or remedy on that occasion or
in that circumstance nor a waiver of the same or of any other right or remedy on
any other occasion or in any other circumstance.
12.8 Rights and Remedies Cumulative. The rights and remedies provided by
------------------------------
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive the right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
12.9 Severability. If any provision in this Agreement is held to be
------------
invalid or unenforceable on any occasion or in any circumstance, such holding
shall not be deemed to render the provision invalid or unenforceable on any
other occasion or in any other circumstance nor to render any other provision
hereof invalid or unenforceable, and to that extent the provisions of this
Agreement are severable;
22
provided, however, that this provision shall not preclude a court of competent
jurisdiction from refusing so to sever any provision if severance would be
inequitable to one or more of the parties.
12.10 Heirs, Successors, and Assigns. Each and all of the covenants,
------------------------------
terms, provisions, and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors, and
assigns. No assignment of this Agreement or of any right or obligation
hereunder shall relieve the assignor of the assignor's obligations hereunder
without the written consent of the other parties.
12.11 No Third Party Beneficiaries; No Rights in Creditors. This Agreement
----------------------------------------------------
creates no rights benefiting third Persons and no third Person shall have any
right to enforce any provision hereof, except as may be specifically provided
herein. Without limiting the generality of the preceding sentence, none of the
provisions of this Agreement shall be for the benefit of or enforceable by any
creditor of the Company.
12.12 Rule Against Perpetuities. The parties hereto intend that the Rule
-------------------------
Against Perpetuities (and any similar rule of law) not be applicable to any
provision of this Agreement. However, notwithstanding anything to the contrary
in this Agreement, if any provision in this Agreement would be invalid or
unenforceable because of the Rule Against Perpetuities or any similar rule of
law but for this Section 12.12 the parties hereto hereby agree that any future
interest which is created pursuant to said provision shall cease if it is not
vested within twenty-one years after the death of the last survivor of the group
composed of the initial Members and their issue who are living on the effective
date of this Agreement.
12.13 Investment Representations. The Members and Economic Interest Owners
--------------------------
understand that (i) no Membership Interest or Economic Interest has been
registered under the Securities Act of 1933, the Colorado Securities Act, or any
other state securities laws (collectively, the "Securities Acts") because of the
Company's reliance upon exemptions from the registrations requirements of the
Securities Acts; and that (ii) that the Company has relied upon the fact that
the Membership Interests and Economic Interests are to be held by each Member
for investment; and that (iii) that exemption from registrations under the
Securities Acts would not be available if the Membership Interests and Economic
Interests were acquired by a Member or Economic Interest Owner with a view to
distribution. Accordingly, each Member and Economic Interest Owner hereby
confirms to the Company that the Member or Economic Interest Owner is acquiring
the Membership Interest or Economic Interest for the Member's or Economic
Interest Owner's own account, for investment, and not with a view to the resale
or distribution thereof. Each Member and Economic Interest Owner agrees not to
hypothecate or transfer or offer to hypothecate or transfer any portion of the
Membership Interests or Economic Interests unless there is an effective
registration or other qualification relating thereto under the Securities Act of
1933 and under all applicable state securities laws or unless the holder of
Membership Interests or Economic Interests delivers to the Company an opinion of
counsel, reasonably satisfactory to a Majority Vote of the Remaining Members,
that such registration or other qualification under such Act and applicable
state securities laws is not required in connection with such hypothecation,
transfer, or offer. Each Member and Economic Interest Owner understands that
the Company is under no obligation to register any Membership Interest or
Economic Interest or to assist the Member or Economic Interest Owner in
complying with any exemption from registration under the Securities Acts if the
Member or Economic Interest Owner should, at a later date, wish to dispose of
the Membership Interest or Economic Interest. Furthermore, each Member realizes
that the Membership Interests and Economic Interests are unlikely to qualify for
disposition under Rule 144 of the Securities and Exchange Commission unless the
Member is not an "affiliate" of the Company and the Membership Interest or
Economic Interest has been beneficially owned and fully paid for by the Member
or Economic Interest Owner for at least three years. Prior to acquiring any
Membership Interests or Economic Interest, each Member and Economic Interest
Owner has made an investigation of the Company and its business and has had made
available to the Member or Economic Interest Owner all information with respect
thereto which the Member or Economic Interest Owner needed to make an informed
decision to acquire the Membership Interest or Economic Interest. Each Member
and Economic Interest Owner considers itself
23
to be a Person possessing experience and sophistication as an investor which are
adequate for the evaluation of the merits and risks of the Member's or Economic
Interest Owner's investment in the Membership Interest or Economic Interest.
12.14 Other Representations and Warranties. As of the date the Member
------------------------------------
becomes a Member, each Member represents and warrants that:
12.14.1 Due Incorporation or Formation; Authorization of Agreement.
----------------------------------------------------------
If a Member purports to be an Entity, then each such Member is duly existing as
an Entity and in good standing under the laws of the jurisdiction of its
formation and has the power and authority, as an Entity, to own its property and
carry on its business as owned and carried on at the date hereof and as
contemplated hereby. The Member is duly licensed or qualified to do business
and in good standing in each of the jurisdictions in which the failure to be so
licensed or qualified would have a material adverse effect on its financial
condition or its ability to perform its obligations hereunder. The Member has
the power and authority as an Entity to execute and deliver this Agreement and
to perform its obligations hereunder, and its execution, delivery, and
performance of this Agreement has been duly authorized by all necessary action.
12.14.2 Valid Obligation. This Agreement constitutes the legal,
----------------
valid, and binding obligation of the Member.
12.14.3 No Conflict with Restrictions; No Default. Neither the
-----------------------------------------
execution, delivery, and performance of this Agreement nor the consummation by
the Member of the transactions contemplated hereby shall
12.14.3.1 conflict with, violate, or result in a breach of any
of the terms, conditions, or provisions of any law, regulation, order, writ,
injunction, decree, determination, or award of any court, any governmental
department, board, agency, or instrumentality, domestic or foreign, or any
arbitrator, applicable to the Member or any of its Affiliates;
12.14.3.2 shall conflict with, violate, result in a breach of,
or constitute a default under any of the terms, conditions, or provisions of the
articles of incorporation, bylaws, partnership agreement or operating agreement
(if any) of the Member or any of its Affiliates or of any material agreement or
instrument to which the Member or any of its Affiliates is a party or by which
the Member, or any of its Affiliates is or may be bound or to which any of its
material properties or assets is subject;
12.14.3.3 shall conflict with, violate, result in a breach of,
constitute a default under (whether with notice or lapse of time or both),
accelerate or permit the acceleration of the performance required by, give to
others any material interests or rights, or require any consent, authorization,
or approval under any indenture, mortgage, lease agreement, or instrument to
which the Member or any of its Affiliates is a party or by which the Member or
any of its Affiliates is or may be bound; or
12.14.3.4 shall result in the creation or imposition of any lien
upon any of the material properties or assets of the Member or any of its
Affiliates.
12.14.4 Government Authorizations. Any registration, declaration, or
-------------------------
filing with, or consent, approval, license, permit, or other authorization or
order by, any government or regulatory authority, domestic or foreign, that is
required in connection with the valid execution, delivery, acceptance, and
performance by the Member under this Agreement or the consummation by the Member
of any transaction contemplated hereby has been completed, made, or obtained on
or before the effective date of this Agreement.
24
12.14.5 Litigation. Except as previously disclosed in writing, there
----------
are no actions, suits, proceedings, or investigations pending or, to the
knowledge of the Member or any of its Affiliates, threatened against or
affecting the Member or any of its Affiliates or any of their properties,
assets, or businesses in any court or before or by any governmental department,
board, agency, or instrumentality, domestic or foreign, or any arbitrator which
could, if adversely determined (or, in the case of an investigation, could lead
to any action, suit, or proceeding, which if adversely determined could)
reasonably be expected to materially impair the Member's ability to perform its
obligations under this Agreement or to have a material adverse effect on the
consolidated financial condition of the Member; and the Member or any of its
Affiliates has not received any currently effective notice of any default, and
the Member or any of its Affiliates is not in default, under any applicable
order, writ, injunction, decree, permit, determination, or award of any court,
any governmental department, board, agency, or instrumentality, domestic or
foreign, or any arbitrator which could reasonably be expected to materially
impair the Member's ability to perform its obligations under this Agreement or
to have a material adverse effect on the consolidated financial condition of the
Member.
12.14.6 Investment Company Act; Public Utility Holding Company Act.
----------------------------------------------------------
Neither the Member nor any of its Affiliates is, nor shall the Company as a
result of the Member holding an Interest be, an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940. Neither
the Member nor any of its Affiliates is, nor shall the Company as a result of
the Member holding an Interest be, a "holding company," "an affiliate of a
holding company," or a "subsidiary of a holding company," as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
12.14.7 Confidentiality. Except as contemplated hereby or required
---------------
by a court of competent authority, each Member shall keep confidential and shall
not disclose to others and shall use its reasonable efforts to prevent its
Affiliates and any of its, or its Affiliates', present or former employees,
agents, and representatives from disclosing to others without the prior written
consent of the Members any information which (i) pertains to this Agreement, any
negotiations pertaining thereto, any of the transactions contemplated hereby, or
the business of the Company; or (ii) pertains to confidential or proprietary
information of any Member or the Company or which any Member has labeled in
writing as confidential or proprietary; provided, however, that the Company may
disclose to its Affiliates' employees, agents, and representatives any
information made available to the Member. No Member shall use, and each Member
shall use its best efforts to prevent any Affiliate of the Member from using,
any information which (i) pertains to this Agreement, any negotiations
pertaining hereto, any of the transactions contemplated hereby, or the business
of the Company; or (ii) pertains to the confidential or proprietary information
of any Member or the Company or which any Member has labeled in writing as
confidential or proprietary, except in connection with the transactions
contemplated hereby.
12.14.8 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
CERTIFICATE
The undersigned Xxxxxxxx DEC LLC and all of the initial Members of Xxxxxxxx
DEC LLC, hereby agree, acknowledge, and certify that the foregoing Operating
Agreement constitutes the Operating Agreement of Xxxxxxxx DEC LLC adopted by the
Members as of the date first stated above.
XXXXXXXX DEC LLC:
by:______________________________
A Manager
25
by:______________________________
A Manager
INITIAL MEMBERS:
_________________________________
Xxxxxxx Xxxxxxxx
_________________________________
Xxxxx X. Xxxxx, Xx.
INTERCELL INTERNATIONAL CORPORATION:
by:______________________________
_________________________________
(title)
26
SCHEDULE "A" TO OPERATING AGREEMENT
----------------------------------------------------------------------------------------------------
Initial Capital Share of
Contribution Initial Share of Profits Number of
Member (Note 1) Total Capital and Losses Member Votes
----------------------------------- ----------------- ----------------- ----------- ------------
Xxxxxxx X. Xxxxxxxx
000 X. 00xx Xxx. Xxxx 0X $ 20% 20% 20
Xxxxxx, XX 00000
----------------------------------- ----------------- ----------------- ----------- ------------
Xxxx X. Xxxxx, Xx.
00000 Xxxxxxxxx Xxxxx $ 20% 20% 20
Xxxxxxxxxx, XX 00000
----------------------------------- ----------------- ----------------- ----------- ------------
Intercell International
Corporation $700,000 60% 60% 60
----------------------------------------------------------------------------------------------------
Note 1: The capital accounts of Xx. Xxxxxxxx and Xx. Xxxxx have been
------
adjusted pursuant to Section 11.20(ii) as of the date of this
Agreement.
27
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made and entered into as of October
20, 2003, by and between Xxxxxxxx DEC, LLC (the "Company"), a Colorado limited
liability company, with offices located at 0000 Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxxx 00000 and Xxxxx X. Xxxxx, Xx., an individual with his principal
business address at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 (the
"Executive");
1. EMPLOYMENT AND TERM.
(a) Employment. The Company hereby employs Executive and Executive
hereby accepts such employment, in the capacity of a Manager of the Company to
act in accordance with the terms and conditions hereinafter set forth.
(b) Term. Executive's employment hereunder shall be for an
initial term of five year (the "Initial Term") commencing on October 20, 2003
(the "Effective Date") and terminating on October 19, 2008, subject to the
extension or earlier expiration of the Initial Term as provided in this
Agreement. Within sixty (60) days of expiration of the Initial Term or
expiration of any Renewal Term (defined below), the Company shall review
Executive's performance under this Agreement and, in its sole discretion, renew
the Agreement for a term of five years (a "Renewal Term") commencing on the
first day immediately following the Expiration Date (as defined below). The
Company shall provide Executive written notice of its decision to renew or not
renew this Agreement at least fifty (50) days prior to the date this Agreement
expires under the Initial Term of any Renewal Term (the "Expiration Date"). If
the Company fails timely to provide Executive with such written notice, within
the time period set forth above, the Agreement shall automatically renew for an
additional Renewal Term. Whenever the word "Term" is used in this Agreement is
shall refer to either the Initial Term or the Renewal Term, as the case may be.
(c) Location of Employment. Effective upon the date of this
Agreement, and through the Initial Term the Company shall maintain an office for
Executive at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000, or such
other location upon which the Company and Executive shall mutually agree at
which location Executive shall carry out his duties.
2. DUTIES.
(a) During the period of employment as provided in Paragraph 1(b)
hereof, Executive shall serve as a Manger of the Company, and shall have all
powers and duties consistent with such position as set forth in the Second
Amended and Restated Operating Agreement of Xxxxxxxx DEC, LLC (the "Operating
Agreement") as the same may from time-to-time be amended, and subject to the
direction of the Company.
(b) Executive shall devote a minimum of 40 hours a week of his
entire professional time, attention and energy exclusively to the business and
affairs of the Company and its subsidiaries, as its business and affairs now
exist and as they hereafter may be changed, and shall not during the term of his
employment hereunder be engaged in any other business activity whether or not
such business activity is pursued for gain or profit. The foregoing shall not be
construed as preventing Executive from (a) managing his personal investments or
investing his assets in such form or manner as will not require any significant
services on his part in the operation of the affairs of the businesses or
entities in which such investments are made, provided Executive shall not invest
in any business competitive with the Company and its
affiliates, except those companies whose securities are listed on a national
securities exchange or quoted daily in the Over-the-Counter Market listing of
the The Wall Street Journal; or (B) preclude Executive from continuing to serve
on the Company of directors of any business Company or any charitable
organization on which he now serves and which has been disclosed to the Company
in writing or, subject to the prior approval of the Company, from accepting
employment to additional Company of directors, provided that such activities do
not materially interfere with the performance of Executive's duties hereunder.
(c) Executive further agrees that during the term of his
employment under this Agreement he will engage in no business or other
activities, directly or indirectly, which are or may be competitive with or
which might place him in a competing position to that of the Company and its
affiliates without obtaining the prior written consent of the Company,
including, without limitation, the solicitation or acceptance of consulting work
from clients of the Company and its affiliates for whom he has performed
services by virtue of this Agreement or who he has met in connection with his
employment under this Agreement.
3. COMPENSATION.
(a) Signing Bonus. Simultaneously with the execution and delivery
of this Agreement by both parties, the Company shall pay Executive a one-time
signing bonus in the amount of Fifty Thousand Dollars ($50,000). Upon entry into
this Agreement by both parties, the signing bonus shall be fully earned and not
subject to off set or return but shall be subject to applicable tax withholding
as set forth in paragraph 3(c) below.
(b) Base Salary. For services performed by Executive for the
Company pursuant to this Agreement during the Term, the Company shall pay
Executive a base salary at the rate of One Hundred Forty Four Thousand Dollars
($144,000) per year (the "Base Salary"). The Base Salary will be payable in
accordance with the Company's normal payroll practices but in no event less than
once a month. Any compensation paid to Executive under any additional
compensation or incentive plan of the Company, or that may be otherwise
authorized from time to time by the Company, shall be in addition to the Base
Salary to which Executive shall be entitled under this Agreement.
(c) Salary Increases and Annual Bonus. Effective as of each
anniversary during the Term of this Agreement, Executive shall receive an
increase in the Executive's annually Base Salary in an amount increased by the
annual Cost of Living Index. In addition to any salary increase or other
compensation, Executive shall receive an Annual Bonus in an amount equal to two
and one-half percent (2.5%) of the pretax earnings of the Company for the prior
fiscal year (the "Annual Bonus"), provided, however, that Executive's annual
-------- -------
bonus shall not exceed Fifty Thousand Dollars ($50,000) in any one year. The
Annual Bonus shall be calculated and paid to the Executive within ninety (90)
days following the end of the Company's fiscal year. In the event of an IPO by
the Company, if required by the underwriter, Executive agrees to waive any
further right to such annual bonus.
(d) Tax Withholding. The Company shall provide for the
withholding of any taxes required to be withheld by federal, state and local law
with respect to any payment in cash, shares of capital stock or other property
made by or on behalf of the Company to or for the benefit of Executive under
this Agreement or otherwise. The Company may, at its option: (i) withhold such
taxes from any cash payments owing to the Company to Executive, including any
payments owing under any other provision of this Agreement; (ii) require
Executive to pay to the
2
Company in cash such amount as may be required to satisfy such withholding
obligations; or (iii) make other satisfactory arrangements with Executive to
satisfy such withholding obligations.
4. BENEFITS. In addition to the Base Salary, Executive shall also be
entitled to the following:
(a) Participation in Benefit Plans. Executive shall be entitled to
participate in the various retirement, welfare, fringe benefit, group long-term
disability plans and other executive perquisite plans, programs and arrangements
of the Company available for senior executive level officers of the Company.
Executive and his dependents, at Executive's request shall be enrolled in the
Company's health, life, disability and other insurance plans and programs
immediately upon his commencement of employment hereunder.
(b) Vacation and Sick Leave. Executive shall be entitled to
three (3) weeks of vacation during each calendar year during which this
Agreement is in effect, or such greater period as the Company may approve, and
to paid holidays given by the Company to its domestic employees generally,
without reduction in salary or other benefits. Executive shall also be entitled
to sick leave according to the sick leave policy, which the Company may adopt
from time to time.
(c) Expenses. The Company shall reimburse Executive, upon proper
accounting, for reasonable business expenses and disbursements incurred by him
in the course of the performance of his duties under this Agreement and in
accordance with the Company's policies as in effect from time to time.
(d) Proration of Benefits. Any payments or benefits hereunder, in
any year during which Executive is employed by the Company for less than the
entire year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such year
during which Executive is employed by the Company.
5. INDEMNIFICATION AND INSURANCE. Executive shall be entitled to the
maximum indemnification provided for Mangers and Members of the Company in the
Operating Agreement. Executive's rights under this Paragraph shall continue
without time limit so long as he may be subject to any such liability, whether
or not the Term of employment has ended. If not otherwise covered under an O &
D liability policy held by Intercell International Corporation, the Company
shall obtain and maintain, in effect, officers and directors liability
insurance, covering Executive, in an amount not less than $1,000,000 without
time limit so long as Executive may be subject to any such liability, whether or
not the Term of employment has ended.
6. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. Executive hereby
represents and warrants to the Company that (a) Executive's execution and
delivery of this Agreement and his performance of his duties and obligations
hereunder will not conflict with, or cause a default under, or give any party a
right to damages under, or to terminate, any other agreement to which Executive
is a party or by which he is bound; and (b) there are no agreements or
understandings that would make unlawful Executive's execution or delivery of
this Agreement or his employment hereunder.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Executive as follows:
3
(a) The Company is duly organized and established as a limited
liability company under the laws of the State of Colorado and has all requisite
power and authority to enter into this agreement and to perform its obligations
hereunder. The consummation of the transactions contemplated by this Agreement
will neither violate nor be in conflict with any agreement or instrument to
which the Company is a party or by which it is bound.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of the Company and are valid, legal and
binding obligations of the Company, enforceable in accordance with their terms
except as may be limited by the laws of general application relating to
bankruptcy, insolvency, moratorium or other similar laws relating to or
affecting the enforcement or creditors' rights, and rules of law governing
specific performance, injunctive relief or other equitable remedies.
8. TERMINATION.
(a) Cause. The Company may terminate Executive's employment at any
time for Cause (as defined herein), by reason of Disability (as defined herein),
or without Cause; provided, however, that for any reason constituting Cause,
Executive is given (1) reasonable notice ("Notice of Termination for Cause")
setting forth the reasons for the Company's intention to terminate for Cause and
the effective date of such termination (which effective date may be the date of
such notice); (2) an opportunity for Executive, together with his counsel, to be
heard before the Managers of the Company within two weeks of such notice; and
(3) within five (5) business days after Executive's hearing before the Company,
written notice to Executive from the Company of its good faith determination
that the reasons specified in the Notice of Termination for Cause constitute
Cause under this Paragraph 8(a), and that Executive's employment is terminated
effective as of the date specified in the Notice of Termination for Cause.
Executive's rights to receive his salary and benefits hereunder shall not be
affected during the period between the receipt of the Notice of Termination for
Cause and the determination, if any, by the Company that the reasons specified
in such notice constituted Cause. For purposes of this Agreement, "Cause"
means:
(i) Executive commits a breach of any material term of this
Agreement, or any material obligation of the Company, and such breach
constitutes gross negligence or willful misconduct and, if such breach
is capable of being cured, Executive Fails to cure such breach within
30 days of notice of such breach;
(ii) Executive is convicted of, or pleads guilty or nolo
contendere to a felony;
(iii) Executive's commission of any act that would cause any
license of the Company or its subsidiaries or affiliates to be
revoked, suspended, or not be renewed after proper application;
(iv) gross negligence in the performance of Executive's duties
and responsibilities;
(v) refusal of Executive to follow proper and achievable written
direction of the Company, provided that this shall not be Cause if
Executive in good faith believes the direction to be illegal,
unethical or immoral and so notifies the Company;
4
(vi) material fraud or dishonesty with regard to the Company
(other than good faith expense account disputes); or
(vii) continuous refusal to attempt to perform Executive's
responsibilities and duties after written notice.
(b) Good Reason. Executive may terminate his employment at any
time for any of the following reasons (each of which is referred to herein as
"Good Reason") by giving the Company notice of the effective date of such
termination (which effective date may be the date of such notice):
(i) the Company commits a breach of any material term of this
Agreement and, if such breach is capable of being cured, the Company
fails to cure such breach within 30 days of receipt of notice of such
breach; or
(ii) a change of position, duties or the assignments of duties
materially inconsistent with Executive's position as Executive Officer
of the Company.
(c) Change in Control. Executive may, at his option, terminate
his employment upon a "Change in Control." For purposes of this Agreement,
"Change of Control" shall mean:
(i) the Company's executing an agreement concerning the sale of
substantially all of its assets to a purchaser which is not a
subsidiary; or
(ii) the Company's adoption of a plan of dissolution or
liquidation;
(iii) the Company's executing an agreement concerning a merger or
consolidation involving the Company in which the Company is not the
surviving Company or if, immediately following such merger or
consolidation, less than fifty percent (50%) of the surviving
Company's outstanding ownership interest is held by persons who are
owners of the Company immediately prior to such merger of
consolidation.
(d) Executive's Rights to Terminate. Executive may, at his
option, terminate his employment hereunder for any reason upon 60 days' prior
written notice to the Company.
(e) Death. This Agreement shall terminate automatically upon
Executive's death.
(f) Disability. The term "Disability" as used in connection with
termination of the employment of Executive shall mean the inability of Executive
to substantially perform his material duties hereunder due to physical or mental
disablement which continues for a period of six (6) consecutive months, during
the term of employment (during which six (6) month period Executive's salary and
benefits shall continue) as determined by an independent qualified physician
mutually acceptable to the Company and Executive (or his personal
representative). Notwithstanding the above, in the event of Disability,
Executive shall be entitled to participate in and be covered by the Company's
group health plan until Executive is able to obtain health insurance on
substantially the same terms and conditions as provided in the Company's group
health plan; provided, however, that if the Company's group health plan does not
allow Executive and his dependents to continue coverage, then the Company and
Executive agree to negotiate a
5
mutually satisfactory alternative to provide Executive with the benefits
intended by this Paragraph 8(f).
(g) Without Cause. The Company may, at its option, terminate
Executive's employment without Cause at any time upon written notice to
Executive.
(h) Date of Termination. For purposes of this Agreement, the term
"Date of Termination" shall mean the date that any party gives notice, through
action or otherwise, that it intends to terminate this Agreement pursuant to the
terms hereof or the date, if any, specified by the terminating party in such
notice as the effective date of termination; provided, however, with respect to
termination for Cause, the Date of Termination shall be the date of receipt by
Executive of written notice form the Company as required by Paragraph 8(a)
hereof. In addition, where Executive gives notice to terminate this Agreement
and the effective date of termination is other than the date the Company
receives notice of termination, the Company reserves the right to accelerate the
Termination Date to the date Executive notified the Company of his intent to
terminate this Agreement.
9. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Without cause or for Good Reason. If the Company shall
terminate Executive's employment without Cause, or if Executive shall terminate
his employment for Good Reason, this Agreement shall terminate without further
obligation to Executive hereunder, other that the obligation (i) to continue to
pay Executive in accordance with the Company's normal payroll payment procedures
his Base Salary and other compensation from the Date of Termination at the rate
in effect on the Date of Termination for the greater of either the remaining
Term of this Agreement or two (2) years, whichever is greater; and (ii) to
continue to provide Executive with the benefits set forth in Paragraph 4(a)
through the next anniversary of the Effective Date.
(b) Voluntary. If Executive terminates his employment for other than
Good Reason (a "Voluntary Termination"), this Agreement shall terminate without
further obligation to Executive hereunder, other than the obligation (i) to
continue to pay Executive in accordance with the Company's normal payroll
payment procedures his Base Salary and other compensation through the Date of
Termination at the rate in effect on the Date Termination; and (ii) to continue
to provide Executive with benefits of the type described in Paragraph 4(a)
through the day preceding the Date of Termination.
(c) Cause. If Executive's employment shall be terminated by the
Company for "Cause" the Company shall continue to pay Executive his Base Salary
and other compensation through the Date of Termination at the rate in effect
upon the Date of Termination. Thereafter, the Company shall have no further
obligation to Executive.
(d) Death. If Executive's employment is terminated by reason of
Executive's death, the Company shall pay to Executive's heirs or estate, the
Base Salary and other compensation at the rate in effect on the day preceding
death in amount equal to two (2) years Base Salary together with an estimate of
other compensation due, which amount shall be paid in one lump sum within sixty
days of the date of death.
(e) Disability. If Executive's employment is terminated by reason of
Disability, the Company shall (i) continue in accordance with the Company's
normal payroll payment procedures to pay Executive his Base Salary and other
compensation form the Date of Termination at the rate in effect on the Date of
Termination, for a period of two (2) years
6
following the date of Disability; and (ii) continue to provide Executive with
benefits of the type described in Paragraph 4(a) for a period of two (2) years
following the date of Disability; provided, however, that if the Company's group
health plan does not allow Executive and his dependents to continue coverage,
then the Company and Executive agree to negotiate a mutually satisfactory
alternative to provide Executive with the benefits intended by this Paragraph
9(e).
(f) Change of Control. If Executive terminates his employment within
90 days following a Change of Control, the Company shall (i) continue in
accordance with the Company's normal payroll payment procedures to pay Executive
his Base Salary and other compensation at the rate in effect on the Date of
Termination for the greater of either the remaining Term of this Agreement or
two (2) years following the date of a Change of Control, whichever is greater;
and (ii) continue to provide Executive with benefits of the type described in
Paragraph 4(a) for a period of two (2) years following the date of a Change of
Control.
10. NON-COMPETITION. Executive acknowledges and recognizes the highly
competitive nature of the Company and its affiliates and Executive accordingly
covenants and agrees, that at all times for a period of twelve (12) consecutive
months subsequent to the end of the Term or the Date of Termination, whichever
occurs earlier, as follows:
(a) Executive will not directly or indirectly own, manage, operate,
finance, join control or participate in the ownership, management, organization
, financing or control of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with any
business or enterprise engaged in a business the same as or substantially
similar to the business of the Company and its affiliates except as a holder of
fewer that 5% of the outstanding shares or other equity interests of a company
whose shares or other equity interests are registered under Section 12 of the
Exchange Act.
(b) Executive will not directly or indirectly induce any employee of
the Company or any of its affiliates to engage in any activity in which
Executive is prohibited from engaging by subparagraph (a) above or to terminate
their employment with the Company or any of its affiliates, and will not
directly or indirectly employ or offer employment to any person who was employed
by the Company or any of its affiliates unless such person shall have been
terminated without cause or ceased to be employed by any such entity for a
period of at least 12 months.
(c) Executive will not use or permit his name to be used in
connection with any business or enterprise engaged in the business the same as
or similar to Company or its affiliates or any other business engaged in by
Company or any of its affiliates.
(d) Executive will not make any statement or take any action
intended to impair the goodwill or the business reputation of the Company or any
of is affiliates, or to be otherwise detrimental to the interests of the Company
or any of its affiliates, including any action or statement intended, directly
or indirectly, to benefit a competitor of the Company or any of its affiliates,
except as may be required by applicable law or by a local, state or federal
regulatory agency.
(e) Executive will not (i) disclose any customer lists or any part
thereof to any person, firm, Company, association or other entity for any reason
or purpose whatsoever; (ii) assist in obtaining any of the Company's customers
for any other similar business; (iii) encourage any customer to terminate,
change or modify its relationship with the Company; or (iv) solicit or divert or
attempt to solicit or divert the Company's customers.
7
(f) The Company shall have the right, subject to applicable law, to
inform any other third party that the Company reasonably believes to be, or to
be contemplating participating with Executive or receiving from Executive
properties of the Company in violation of this Agreement and of the rights of
the Company hereunder, and that participation by any such third party with
Executive in activities in violation of this Paragraph 10 may give rise to
claims by the Company against such third party;
(g) Executive and the Company agree that in light of the
specialized nature of the industry and the national-customer base of the
Company's business, that the restrictions set forth in this Paragraph 10 shall
apply to Executive within the territory of the United States of America. It is
expressly understood and agreed that although Executive and the Company consider
the restriction contained in the Paragraph 10 to be reasonable, if a final
judicial determination is made by a court of competent jurisdiction that the
time or territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum intent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein; provided, however that the provisions of
this Paragraph 10 shall not apply if Executive is terminated without Cause or
Executive terminates for Good Reason.
(h) The failure of Executive to abide by the provisions of this
Paragraph 10 shall be deemed a material breach of this Agreement. The primary
purpose of the covenant not to compete is the Company's legitimate interest in
protecting its economic welfare and business goodwill. The Company and the
Executive further agree that this covenant shall in no way be construed as a
mere limitation on competition nor shall it be construed as a restraint on
Executive's right to engage in a common calling.
11. PROPRIETARY INFORMATION. Executive agrees that at all times during
the Term of this Agreement and after Executive is no longer employed by the
Company, Executive shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit on any
person, firm, association or company other than the Company, any Proprietary
Information. "Proprietary Information" means information relating to the
properties, prospects, products, services or operations of the Company or any
direct or indirect affiliate thereof that is not generally known, is proprietary
to the Company or such affiliate and is made known to Executive or learned or
acquired by Executive while in the employ of the Company, including, by way of
illustration, but not limitation, information concerning trade secrets,
processes, structures, formulae, data and know-how, improvements, inventions,
product concepts, techniques, marketing plans, strategies, forecasts, customer
lists and information about the Company's employees and/or consultants
(including, without limitation, the compensation, job responsibility and job
performance of such employees and/or consultants). However, Proprietary
Information shall not include (i) at the time of disclosure to Executive such
information that was in the public domain or later entered the public domain
other than as result of a beach of an obligation herein; (ii) subsequent to
disclosure to Executive, Executive received such information form a third party
under no obligation to maintain such information in confidence, and the third
party came into possession of such information other than as a result of a
breach of an obligation herein; or (iii) rights otherwise authorized or reserved
in the Operating Agreement. All materials or articles of information of any
kind furnished to Executive by the Company or developed by Executive in the
course of his employment thereunder are and shall remain the sole property of
the Company; and if the Company requests the return of such information at any
time during, upon or after the
8
termination of Executive's employment hereunder, Executive shall immediately
deliver the same to the Company.
12. OWNERSHIP OF PROPRIETARY INFORMATION. Executive agrees that, except as
otherwise provided in the Operating Agreement, all Proprietary Information shall
be the sole property of the Company and its assigns, and the Company and its
assigns shall be the sole owner of all licenses and other rights in connection
with such proprietary Information. At all times during the Term of this
Agreement and after Executive is no longer employed by the Company, Executive
will keep the strictest confidence and trust all Proprietary Information and
will not use or disclose such Proprietary Information, or anything relating to
such information, without the prior written consent of the Company, except as
many be necessary in the ordinary course of performing his duties under this
Agreement.
13. DOCUMENTS AND OTHER PROPERTY. All materials or articles of
information of any kind furnished to Executive in the course of his employment
hereunder are and shall remain the sole property of the Company; and if the
Company requests the return of such information at any time during, upon or
after the termination of Executive's employment hereunder, Executive shall
immediately deliver the same to the Company. Executive will not, without the
prior written consent of the Company, retain any documents, data or property, or
any reproduction thereof of any description, belonging to the Company or
pertaining to any Proprietary Information.
14. THIRD-PARTY INFORMATION. The Company from time to time receives from
third parties confidential or proprietary information subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes ("Third-party Information"). At all times,
until after the later of (a) the Expiration Date, (b) the anniversary of the
Date of Termination; or (c) the period of time the Company must maintain the
Third-Party Information as confidential, Executive will hold Third-Party
Information in the strictest confidence and will not disclose or use Third-Party
Information except as permitted by the agreement between the Company and such
third party.
15. INTELLECTUAL PROPERTY. Any and all improvements, inventions, designs,
ideas, works of authorship, copyrightable works, discoveries, trademarks,
copyrights, trade secrets, formulae, processes, techniques, know-how, and data,
whether or not patentable (collectively "Products"), made or conceived or
reduced to practice or learned by Executive, either along or jointly with
others, during the period of Executive's employment (whether or not during
normal working hours) that are related to or useful in the actual or anticipated
business of the Company, or result from tasks assigned Executive by the Company
or result from Executive's use of premises or equipment owned, leased, or
contracted for by the Company (a) during the period of this Agreement, or (b)
within a period of one year after the Date of Termination, which may be directly
or indirectly useful in, or relate to, the business of the Company, shall be
promptly and fully disclosed by Executive to the Company and, if such
intellectual property was made, developed or created pursuant to Executive's
employment hereunder, such intellectual property shall be the Company's
exclusive property as against Executive, and Executive shall promptly deliver to
an appropriate representative of the Company as designated by the Company all
papers, drawings, models, data and other material relating to any invention
made, developed or created by him as aforesaid. Executive shall, at the request
of the Company and without any payment therefor, execute any documents necessary
or advisable in the opinion of the Company's counsel or direct issuance of
patents or copyrights to the Company with respect to such Products as are to be
the Company's exclusive property as against Executive or to vest in the Company
title to such Products as against executive. The expense of securing any such
patent or copyright shall be borne by the Company. Executive shall be
compensated, in accordance with the Company's
9
"Creative Awards" standard policy, for all Products created or developed by the
Executive either prior to his employment (if delivered to the Company) or during
the term of his Employment.
16. EQUITABLE RELIEF. Executive acknowledges that, in view of the nature
of the business in which the Company is engaged, the restrictions contained in
paragraphs 10 through 15, inclusive (the "Restrictions") are reasonable and
necessary in order to protect the legitimate interest of the Company, and that
any violation thereof would result in irreparable injuries to the Company, and
Executive therefor further acknowledges that, if Executive violates, or
threatens to violate, any of the Restrictions, the Company shall be entitled to
obtain from any court of competent jurisdiction, without the posting of any bond
or other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits and other benefits
arising from such violation, which rights shall be cumulative and in addition to
any other rights or remedies in law or equity to which the Company may be
entitled.
17. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the successors and
assigns of the Company. The Company shall require any successor (whether direct
or indirect, by purchase, merger, reorganization, consolidation, acquisition of
property or stock, liquidation or otherwise) to all or a significant portion of
its assets, by agreement in form and substance satisfactory to Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform this Agreement
if no such succession had taken place. Regardless whether such agreement is
executed, this Agreement shall be binding upon any successor of the Company in
accordance with the operation of law and such successor shall be deemed the
"Company," for purposes of this Agreement.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first-class
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Company:
-----------------
Xxxxxxxx DEC, LLC
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
if to Executive:
---------------
Xx. Xxxxx X. Xxxxx, Xx.
00000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
19. ARBITRATION OF ALL DISPUTES.
(a) Any controversy or claim arising out of or relating to this
Agreement or the breach thereof (including the arbitrability of any controversy
or claim), shall be settled by arbitration in the City of Denver in accordance
with the laws of the State of Colorado by arbitration held before the American
Arbitration Association. The arbitration shall be conducted
10
in accordance with the rules of the American Arbitration Association, except
with respect to the selection of arbitrators which shall be as provided in this
paragraph 19. The cost of any arbitration proceeding hereunder shall be borne
equally by the Company and Executive. The award of the arbitrators shall be
binding upon the parties. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
(b) If it shall be necessary or desirable for Executive to retain
legal counsel and incur other costs and expenses in connection with the
enforcement of any or all of his rights under this Agreement, and provided that
Executive prevails in the enforcement of such rights, the Company shall pay (or
Executive shall be entitled to recover from the Company, as the case may be)
Executive's reasonable attorneys' fees and costs and expenses in connection with
the enforcement of his rights including the enforcement of any arbitration
award.
20. NO ASSIGNMENT. Except as otherwise expressly provided herein, this
Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.
21. EXECUTION IN COUNTERPARTS. This Agreement may be executed by parties
hereto in two or more counterparts, each of which shall be deemed to be an
original, but all such counterparts shall constitute one and the same
instrument. The facsimile signature of any party to this Agreement shall be
considered an original signature of such person.
22. JURISDICTION AND GOVERNING LAW. Jurisdiction over disputes with
regard to this Agreement shall be exclusively in the courts of the State of
Colorado, and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of Colorado, other than the conflict
of laws provisions of such laws.
23. SEVERABILITY. If any provision of this Agreement shall be adjudged by
any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement.
24. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties hereof, and supersedes all other oral or written agreements or
understandings between them regarding the subject matter hereof. No change,
alteration or modification hereof may be made except in a writing, signed by
each of the parties hereto.
25. HEADINGS DESCRIPTIVE. The headings of the several paragraphs of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
XXXXXXXX DEC, LLC:
By: ________________________________
EXECUTIVE
By: _________________________________
12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made and entered into as of October
20, 2003, by and between Xxxxxxxx DEC, LLC (the "Company"), a Colorado limited
liability company, with offices located at 0000 Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxxx 00000 and Xxxxxxx X. Xxxxxxxx, an individual with his principal
business address at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 (the
"Executive");
1. EMPLOYMENT AND TERM.
(a) Employment. The Company hereby employs Executive and Executive
hereby accepts such employment, in the capacity of a Manager of the Company to
act in accordance with the terms and conditions hereinafter set forth.
(b) Term. Executive's employment hereunder shall be for an
initial term of five year (the "Initial Term") commencing on October 20, 2003
(the "Effective Date") and terminating on October 19, 2008, subject to the
extension or earlier expiration of the Initial Term as provided in this
Agreement. Within sixty (60) days of expiration of the Initial Term or
expiration of any Renewal Term (defined below), the Company shall review
Executive's performance under this Agreement and, in its sole discretion, renew
the Agreement for a term of five years (a "Renewal Term") commencing on the
first day immediately following the Expiration Date (as defined below). The
Company shall provide Executive written notice of its decision to renew or not
renew this Agreement at least fifty (50) days prior to the date this Agreement
expires under the Initial Term of any Renewal Term (the "Expiration Date"). If
the Company fails timely to provide Executive with such written notice, within
the time period set forth above, the Agreement shall automatically renew for an
additional Renewal Term. Whenever the word "Term" is used in this Agreement is
shall refer to either the Initial Term or the Renewal Term, as the case may be.
(c) Location of Employment. Effective upon the date of this
Agreement, and through the Initial Term the Company shall maintain an office for
Executive at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000, or such
other location upon which the Company and Executive shall mutually agree at
which location Executive shall carry out his duties.
2. DUTIES.
(a) During the period of employment as provided in Paragraph 1(b)
hereof, Executive shall serve as a Manger of the Company, and shall have all
powers and duties consistent with such position as set forth in the Second
Amended and Restated Operating Agreement of Xxxxxxxx DEC, LLC (the "Operating
Agreement") as the same may from time-to-time be amended, and subject to the
direction of the Company.
(b) Executive shall devote a minimum of 40 hours a week of his
entire professional time, attention and energy exclusively to the business and
affairs of the Company and its subsidiaries, as its business and affairs now
exist and as they hereafter may be changed, and shall not during the term of his
employment hereunder be engaged in any other business activity whether or not
such business activity is pursued for gain or profit. The foregoing shall not be
construed as preventing Executive from (a) managing his personal investments or
investing his assets in such form or manner as will not require any significant
services on his part in the operation of the affairs of the businesses or
entities in which such investments are made, provided Executive shall not invest
in any business competitive with the Company and its
affiliates, except those companies whose securities are listed on a national
securities exchange or quoted daily in the Over-the-Counter Market listing of
the The Wall Street Journal; or (B) preclude Executive from continuing to serve
on the Company of directors of any business Company or any charitable
organization on which he now serves and which has been disclosed to the Company
in writing or, subject to the prior approval of the Company, from accepting
employment to additional Company of directors, provided that such activities do
not materially interfere with the performance of Executive's duties hereunder.
(c) Executive further agrees that during the term of his
employment under this Agreement he will engage in no business or other
activities, directly or indirectly, which are or may be competitive with or
which might place him in a competing position to that of the Company and its
affiliates without obtaining the prior written consent of the Company,
including, without limitation, the solicitation or acceptance of consulting work
from clients of the Company and its affiliates for whom he has performed
services by virtue of this Agreement or who he has met in connection with his
employment under this Agreement.
3. COMPENSATION.
(a) Signing Bonus. Simultaneously with the execution and delivery
of this Agreement by both parties, the Company shall pay Executive a one-time
signing bonus in the amount of Fifty Thousand Dollars ($50,000). Upon entry into
this Agreement by both parties, the signing bonus shall be fully earned and not
subject to off set or return but shall be subject to applicable tax withholding
as set forth in paragraph 3(c) below.
(b) Base Salary. For services performed by Executive for the
Company pursuant to this Agreement during the Term, the Company shall pay
Executive a base salary at the rate of One Hundred Forty Four Thousand Dollars
($144,000) per year (the "Base Salary"). The Base Salary will be payable in
accordance with the Company's normal payroll practices but in no event less than
once a month. Any compensation paid to Executive under any additional
compensation or incentive plan of the Company, or that may be otherwise
authorized from time to time by the Company, shall be in addition to the Base
Salary to which Executive shall be entitled under this Agreement.
(c) Salary Increases and Annual Bonus. Effective as of each
anniversary during the Term of this Agreement, Executive shall receive an
increase in the Executive's annually Base Salary in an amount increased by the
annual Cost of Living Index. In addition to any salary increase or other
compensation, Executive shall receive an Annual Bonus in an amount equal to two
and one-half percent (2.5%) of the pretax earnings of the Company for the prior
fiscal year (the "Annual Bonus"), provided, however, that Executive's annual
-------- -------
bonus shall not exceed Fifty Thousand Dollars ($50,000) in any one year. The
Annual Bonus shall be calculated and paid to the Executive within ninety (90)
days following the end of the Company's fiscal year. In the event of an IPO by
the Company, if required by the underwriter, Executive agrees to waive any
further right to such annual bonus.
(d) Tax Withholding. The Company shall provide for the
withholding of any taxes required to be withheld by federal, state and local law
with respect to any payment in cash, shares of capital stock or other property
made by or on behalf of the Company to or for the benefit of Executive under
this Agreement or otherwise. The Company may, at its option: (i) withhold such
taxes from any cash payments owing to the Company to Executive, including any
payments owing under any other provision of this Agreement; (ii) require
Executive to pay to the
2
Company in cash such amount as may be required to satisfy such withholding
obligations; or (iii) make other satisfactory arrangements with Executive to
satisfy such withholding obligations.
4. BENEFITS. In addition to the Base Salary, Executive shall also be
entitled to the following:
(a) Participation in Benefit Plans. Executive shall be entitled
to participate in the various retirement, welfare, fringe benefit, group
long-term disability plans and other executive perquisite plans, programs and
arrangements of the Company available for senior executive level officers of the
Company. Executive and his dependents, at Executive's request shall be enrolled
in the Company's health, life, disability and other insurance plans and programs
immediately upon his commencement of employment hereunder.
(b) Vacation and Sick Leave. Executive shall be entitled to
three (3) weeks of vacation during each calendar year during which this
Agreement is in effect, or such greater period as the Company may approve, and
to paid holidays given by the Company to its domestic employees generally,
without reduction in salary or other benefits. Executive shall also be entitled
to sick leave according to the sick leave policy, which the Company may adopt
from time to time.
(c) Expenses. The Company shall reimburse Executive, upon proper
accounting, for reasonable business expenses and disbursements incurred by him
in the course of the performance of his duties under this Agreement and in
accordance with the Company's policies as in effect from time to time.
(d) Proration of Benefits. Any payments or benefits hereunder, in
any year during which Executive is employed by the Company for less than the
entire year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such year
during which Executive is employed by the Company.
5. INDEMNIFICATION AND INSURANCE. Executive shall be entitled to the
maximum indemnification provided for Mangers and Members of the Company in the
Operating Agreement. Executive's rights under this Paragraph shall continue
without time limit so long as he may be subject to any such liability, whether
or not the Term of employment has ended. If not otherwise covered under an O &
D liability policy held by Intercell International Corporation, the Company
shall obtain and maintain, in effect, officers and directors liability
insurance, covering Executive, in an amount not less than $1,000,000 without
time limit so long as Executive may be subject to any such liability, whether or
not the Term of employment has ended.
6. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. Executive hereby
represents and warrants to the Company that (a) Executive's execution and
delivery of this Agreement and his performance of his duties and obligations
hereunder will not conflict with, or cause a default under, or give any party a
right to damages under, or to terminate, any other agreement to which Executive
is a party or by which he is bound; and (b) there are no agreements or
understandings that would make unlawful Executive's execution or delivery of
this Agreement or his employment hereunder.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Executive as follows:
3
(a) The Company is duly organized and established as a limited
liability company under the laws of the State of Colorado and has all requisite
power and authority to enter into this agreement and to perform its obligations
hereunder. The consummation of the transactions contemplated by this Agreement
will neither violate nor be in conflict with any agreement or instrument to
which the Company is a party or by which it is bound.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of the Company and are valid, legal and
binding obligations of the Company, enforceable in accordance with their terms
except as may be limited by the laws of general application relating to
bankruptcy, insolvency, moratorium or other similar laws relating to or
affecting the enforcement or creditors' rights, and rules of law governing
specific performance, injunctive relief or other equitable remedies.
8. TERMINATION.
(a) Cause. The Company may terminate Executive's employment at any
time for Cause (as defined herein), by reason of Disability (as defined herein),
or without Cause; provided, however, that for any reason constituting Cause,
Executive is given (1) reasonable notice ("Notice of Termination for Cause")
setting forth the reasons for the Company's intention to terminate for Cause and
the effective date of such termination (which effective date may be the date of
such notice); (2) an opportunity for Executive, together with his counsel, to be
heard before the Managers of the Company within two weeks of such notice; and
(3) within five (5) business days after Executive's hearing before the Company,
written notice to Executive from the Company of its good faith determination
that the reasons specified in the Notice of Termination for Cause constitute
Cause under this Paragraph 8(a), and that Executive's employment is terminated
effective as of the date specified in the Notice of Termination for Cause.
Executive's rights to receive his salary and benefits hereunder shall not be
affected during the period between the receipt of the Notice of Termination for
Cause and the determination, if any, by the Company that the reasons specified
in such notice constituted Cause. For purposes of this Agreement, "Cause"
means:
(i) Executive commits a breach of any material term of this
Agreement, or any material obligation of the Company, and such breach
constitutes gross negligence or willful misconduct and, if such breach
is capable of being cured, Executive Fails to cure such breach within
30 days of notice of such breach;
(ii) Executive is convicted of, or pleads guilty or nolo
contendere to a felony;
(iii) Executive's commission of any act that would cause any
license of the Company or its subsidiaries or affiliates to be
revoked, suspended, or not be renewed after proper application;
(iv) gross negligence in the performance of Executive's duties
and responsibilities;
(v) refusal of Executive to follow proper and achievable written
direction of the Company, provided that this shall not be Cause if
Executive in good faith believes the direction to be illegal,
unethical or immoral and so notifies the Company;
4
(vi) material fraud or dishonesty with regard to the Company
(other than good faith expense account disputes); or
(vii) continuous refusal to attempt to perform Executive's
responsibilities and duties after written notice.
(b) Good Reason. Executive may terminate his employment at any
time for any of the following reasons (each of which is referred to herein as
"Good Reason") by giving the Company notice of the effective date of such
termination (which effective date may be the date of such notice):
(i) the Company commits a breach of any material term of this
Agreement and, if such breach is capable of being cured, the Company
fails to cure such breach within 30 days of receipt of notice of such
breach; or
(ii) a change of position, duties or the assignments of duties
materially inconsistent with Executive's position as Executive Officer
of the Company.
(c) Change in Control. Executive may, at his option, terminate
his employment upon a "Change in Control." For purposes of this Agreement,
"Change of Control" shall mean:
(i) the Company's executing an agreement concerning the sale of
substantially all of its assets to a purchaser which is not a
subsidiary; or
(ii) the Company's adoption of a plan of dissolution or
liquidation;
(iii) the Company's executing an agreement concerning a merger or
consolidation involving the Company in which the Company is not the
surviving Company or if, immediately following such merger or
consolidation, less than fifty percent (50%) of the surviving
Company's outstanding ownership interest is held by persons who are
owners of the Company immediately prior to such merger of
consolidation.
(d) Executive's Rights to Terminate. Executive may, at his
option, terminate his employment hereunder for any reason upon 60 days' prior
written notice to the Company.
(e) Death. This Agreement shall terminate automatically upon
Executive's death.
(f) Disability. The term "Disability" as used in connection with
termination of the employment of Executive shall mean the inability of Executive
to substantially perform his material duties hereunder due to physical or mental
disablement which continues for a period of six (6) consecutive months, during
the term of employment (during which six (6) month period Executive's salary and
benefits shall continue) as determined by an independent qualified physician
mutually acceptable to the Company and Executive (or his personal
representative). Notwithstanding the above, in the event of Disability,
Executive shall be entitled to participate in and be covered by the Company's
group health plan until Executive is able to obtain health insurance on
substantially the same terms and conditions as provided in the Company's group
health plan; provided, however, that if the Company's group health plan does not
allow Executive and his dependents to continue coverage, then the Company and
Executive agree to negotiate a
5
mutually satisfactory alternative to provide Executive with the benefits
intended by this Paragraph 8(f).
(g) Without Cause. The Company may, at its option, terminate
Executive's employment without Cause at any time upon written notice to
Executive.
(h) Date of Termination. For purposes of this Agreement, the term
"Date of Termination" shall mean the date that any party gives notice, through
action or otherwise, that it intends to terminate this Agreement pursuant to the
terms hereof or the date, if any, specified by the terminating party in such
notice as the effective date of termination; provided, however, with respect to
termination for Cause, the Date of Termination shall be the date of receipt by
Executive of written notice form the Company as required by Paragraph 8(a)
hereof. In addition, where Executive gives notice to terminate this Agreement
and the effective date of termination is other than the date the Company
receives notice of termination, the Company reserves the right to accelerate the
Termination Date to the date Executive notified the Company of his intent to
terminate this Agreement.
9. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Without cause or for Good Reason. If the Company shall
terminate Executive's employment without Cause, or if Executive shall terminate
his employment for Good Reason, this Agreement shall terminate without further
obligation to Executive hereunder, other that the obligation (i) to continue to
pay Executive in accordance with the Company's normal payroll payment procedures
his Base Salary and other compensation from the Date of Termination at the rate
in effect on the Date of Termination for the greater of either the remaining
Term of this Agreement or two (2) years, whichever is greater; and (ii) to
continue to provide Executive with the benefits set forth in Paragraph 4(a)
through the next anniversary of the Effective Date.
(b) Voluntary. If Executive terminates his employment for other than
Good Reason (a "Voluntary Termination"), this Agreement shall terminate without
further obligation to Executive hereunder, other than the obligation (i) to
continue to pay Executive in accordance with the Company's normal payroll
payment procedures his Base Salary and other compensation through the Date of
Termination at the rate in effect on the Date Termination; and (ii) to continue
to provide Executive with benefits of the type described in Paragraph 4(a)
through the day preceding the Date of Termination.
(c) Cause. If Executive's employment shall be terminated by the
Company for "Cause" the Company shall continue to pay Executive his Base Salary
and other compensation through the Date of Termination at the rate in effect
upon the Date of Termination. Thereafter, the Company shall have no further
obligation to Executive.
(d) Death. If Executive's employment is terminated by reason of
Executive's death, the Company shall pay to Executive's heirs or estate, the
Base Salary and other compensation at the rate in effect on the day preceding
death in amount equal to two (2) years Base Salary together with an estimate of
other compensation due, which amount shall be paid in one lump sum within sixty
days of the date of death.
(e) Disability. If Executive's employment is terminated by reason of
Disability, the Company shall (i) continue in accordance with the Company's
normal payroll payment procedures to pay Executive his Base Salary and other
compensation form the Date of Termination at the rate in effect on the Date of
Termination, for a period of two (2) years
6
following the date of Disability; and (ii) continue to provide Executive with
benefits of the type described in Paragraph 4(a) for a period of two (2) years
following the date of Disability; provided, however, that if the Company's group
health plan does not allow Executive and his dependents to continue coverage,
then the Company and Executive agree to negotiate a mutually satisfactory
alternative to provide Executive with the benefits intended by this Paragraph
9(e).
(f) Change of Control. If Executive terminates his employment within
90 days following a Change of Control, the Company shall (i) continue in
accordance with the Company's normal payroll payment procedures to pay Executive
his Base Salary and other compensation at the rate in effect on the Date of
Termination for the greater of either the remaining Term of this Agreement or
two (2) years following the date of a Change of Control, whichever is greater;
and (ii) continue to provide Executive with benefits of the type described in
Paragraph 4(a) for a period of two (2) years following the date of a Change of
Control.
10. NON-COMPETITION. Executive acknowledges and recognizes the highly
competitive nature of the Company and its affiliates and Executive accordingly
covenants and agrees, that at all times for a period of twelve (12) consecutive
months subsequent to the end of the Term or the Date of Termination, whichever
occurs earlier, as follows:
(a) Executive will not directly or indirectly own, manage, operate,
finance, join control or participate in the ownership, management, organization
, financing or control of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with any
business or enterprise engaged in a business the same as or substantially
similar to the business of the Company and its affiliates except as a holder of
fewer that 5% of the outstanding shares or other equity interests of a company
whose shares or other equity interests are registered under Section 12 of the
Exchange Act.
(b) Executive will not directly or indirectly induce any employee of
the Company or any of its affiliates to engage in any activity in which
Executive is prohibited from engaging by subparagraph (a) above or to terminate
their employment with the Company or any of its affiliates, and will not
directly or indirectly employ or offer employment to any person who was employed
by the Company or any of its affiliates unless such person shall have been
terminated without cause or ceased to be employed by any such entity for a
period of at least 12 months.
(c) Executive will not use or permit his name to be used in
connection with any business or enterprise engaged in the business the same as
or similar to Company or its affiliates or any other business engaged in by
Company or any of its affiliates.
(d) Executive will not make any statement or take any action
intended to impair the goodwill or the business reputation of the Company or any
of is affiliates, or to be otherwise detrimental to the interests of the Company
or any of its affiliates, including any action or statement intended, directly
or indirectly, to benefit a competitor of the Company or any of its affiliates,
except as may be required by applicable law or by a local, state or federal
regulatory agency.
(e) Executive will not (i) disclose any customer lists or any part
thereof to any person, firm, Company, association or other entity for any reason
or purpose whatsoever; (ii) assist in obtaining any of the Company's customers
for any other similar business; (iii) encourage any customer to terminate,
change or modify its relationship with the Company; or (iv) solicit or divert or
attempt to solicit or divert the Company's customers.
7
(f) The Company shall have the right, subject to applicable law, to
inform any other third party that the Company reasonably believes to be, or to
be contemplating participating with Executive or receiving from Executive
properties of the Company in violation of this Agreement and of the rights of
the Company hereunder, and that participation by any such third party with
Executive in activities in violation of this Paragraph 10 may give rise to
claims by the Company against such third party;
(g) Executive and the Company agree that in light of the
specialized nature of the industry and the national-customer base of the
Company's business, that the restrictions set forth in this Paragraph 10 shall
apply to Executive within the territory of the United States of America. It is
expressly understood and agreed that although Executive and the Company consider
the restriction contained in the Paragraph 10 to be reasonable, if a final
judicial determination is made by a court of competent jurisdiction that the
time or territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum intent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein; provided, however that the provisions of
this Paragraph 10 shall not apply if Executive is terminated without Cause or
Executive terminates for Good Reason.
(h) The failure of Executive to abide by the provisions of this
Paragraph 10 shall be deemed a material breach of this Agreement. The primary
purpose of the covenant not to compete is the Company's legitimate interest in
protecting its economic welfare and business goodwill. The Company and the
Executive further agree that this covenant shall in no way be construed as a
mere limitation on competition nor shall it be construed as a restraint on
Executive's right to engage in a common calling.
11. PROPRIETARY INFORMATION. Executive agrees that at all times during
the Term of this Agreement and after Executive is no longer employed by the
Company, Executive shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit on any
person, firm, association or company other than the Company, any Proprietary
Information. "Proprietary Information" means information relating to the
properties, prospects, products, services or operations of the Company or any
direct or indirect affiliate thereof that is not generally known, is proprietary
to the Company or such affiliate and is made known to Executive or learned or
acquired by Executive while in the employ of the Company, including, by way of
illustration, but not limitation, information concerning trade secrets,
processes, structures, formulae, data and know-how, improvements, inventions,
product concepts, techniques, marketing plans, strategies, forecasts, customer
lists and information about the Company's employees and/or consultants
(including, without limitation, the compensation, job responsibility and job
performance of such employees and/or consultants). However, Proprietary
Information shall not include (i) at the time of disclosure to Executive such
information that was in the public domain or later entered the public domain
other than as result of a beach of an obligation herein; (ii) subsequent to
disclosure to Executive, Executive received such information form a third party
under no obligation to maintain such information in confidence, and the third
party came into possession of such information other than as a result of a
breach of an obligation herein; or (iii) rights otherwise authorized or reserved
in the Operating Agreement. All materials or articles of information of any
kind furnished to Executive by the Company or developed by Executive in the
course of his employment thereunder are and shall remain the sole property of
the Company; and if the Company requests the return of such information at any
time during, upon or after the
8
termination of Executive's employment hereunder, Executive shall immediately
deliver the same to the Company.
12. OWNERSHIP OF PROPRIETARY INFORMATION. Executive agrees that, except as
otherwise provided in the Operating Agreement, all Proprietary Information shall
be the sole property of the Company and its assigns, and the Company and its
assigns shall be the sole owner of all licenses and other rights in connection
with such proprietary Information. At all times during the Term of this
Agreement and after Executive is no longer employed by the Company, Executive
will keep the strictest confidence and trust all Proprietary Information and
will not use or disclose such Proprietary Information, or anything relating to
such information, without the prior written consent of the Company, except as
many be necessary in the ordinary course of performing his duties under this
Agreement.
13. DOCUMENTS AND OTHER PROPERTY. All materials or articles of
information of any kind furnished to Executive in the course of his employment
hereunder are and shall remain the sole property of the Company; and if the
Company requests the return of such information at any time during, upon or
after the termination of Executive's employment hereunder, Executive shall
immediately deliver the same to the Company. Executive will not, without the
prior written consent of the Company, retain any documents, data or property, or
any reproduction thereof of any description, belonging to the Company or
pertaining to any Proprietary Information.
14. THIRD-PARTY INFORMATION. The Company from time to time receives from
third parties confidential or proprietary information subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes ("Third-party Information"). At all times,
until after the later of (a) the Expiration Date, (b) the anniversary of the
Date of Termination; or (c) the period of time the Company must maintain the
Third-Party Information as confidential, Executive will hold Third-Party
Information in the strictest confidence and will not disclose or use Third-Party
Information except as permitted by the agreement between the Company and such
third party.
15. INTELLECTUAL PROPERTY. Any and all improvements, inventions, designs,
ideas, works of authorship, copyrightable works, discoveries, trademarks,
copyrights, trade secrets, formulae, processes, techniques, know-how, and data,
whether or not patentable (collectively "Products"), made or conceived or
reduced to practice or learned by Executive, either along or jointly with
others, during the period of Executive's employment (whether or not during
normal working hours) that are related to or useful in the actual or anticipated
business of the Company, or result from tasks assigned Executive by the Company
or result from Executive's use of premises or equipment owned, leased, or
contracted for by the Company (a) during the period of this Agreement, or (b)
within a period of one year after the Date of Termination, which may be directly
or indirectly useful in, or relate to, the business of the Company, shall be
promptly and fully disclosed by Executive to the Company and, if such
intellectual property was made, developed or created pursuant to Executive's
employment hereunder, such intellectual property shall be the Company's
exclusive property as against Executive, and Executive shall promptly deliver to
an appropriate representative of the Company as designated by the Company all
papers, drawings, models, data and other material relating to any invention
made, developed or created by him as aforesaid. Executive shall, at the request
of the Company and without any payment therefor, execute any documents necessary
or advisable in the opinion of the Company's counsel or direct issuance of
patents or copyrights to the Company with respect to such Products as are to be
the Company's exclusive property as against Executive or to vest in the Company
title to such Products as against executive. The expense of securing any such
patent or copyright shall be borne by the Company. Executive shall be
compensated, in accordance with the Company's
9
"Creative Awards" standard policy, for all Products created or developed by the
Executive either prior to his employment (if delivered to the Company) or during
the term of his Employment.
16. EQUITABLE RELIEF. Executive acknowledges that, in view of the nature
of the business in which the Company is engaged, the restrictions contained in
paragraphs 10 through 15, inclusive (the "Restrictions") are reasonable and
necessary in order to protect the legitimate interest of the Company, and that
any violation thereof would result in irreparable injuries to the Company, and
Executive therefor further acknowledges that, if Executive violates, or
threatens to violate, any of the Restrictions, the Company shall be entitled to
obtain from any court of competent jurisdiction, without the posting of any bond
or other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits and other benefits
arising from such violation, which rights shall be cumulative and in addition to
any other rights or remedies in law or equity to which the Company may be
entitled.
17. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the successors and
assigns of the Company. The Company shall require any successor (whether direct
or indirect, by purchase, merger, reorganization, consolidation, acquisition of
property or stock, liquidation or otherwise) to all or a significant portion of
its assets, by agreement in form and substance satisfactory to Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform this Agreement
if no such succession had taken place. Regardless whether such agreement is
executed, this Agreement shall be binding upon any successor of the Company in
accordance with the operation of law and such successor shall be deemed the
"Company," for purposes of this Agreement.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first-class
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Company:
-----------------
Xxxxxxxx DEC, LLC
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
if to Executive:
---------------
Xx. Xxxxxxx X. Xxxxxxxx
000 X. 00xx Xxxxxx, Xxxx 0X
Xxxxxx, Xxxxxxxx 00000
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
19. ARBITRATION OF ALL DISPUTES.
(a) Any controversy or claim arising out of or relating to this
Agreement or the breach thereof (including the arbitrability of any controversy
or claim), shall be settled by arbitration in the City of Denver in accordance
with the laws of the State of Colorado by arbitration held before the American
Arbitration Association. The arbitration shall be conducted
10
in accordance with the rules of the American Arbitration Association, except
with respect to the selection of arbitrators which shall be as provided in this
paragraph 19. The cost of any arbitration proceeding hereunder shall be borne
equally by the Company and Executive. The award of the arbitrators shall be
binding upon the parties. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
(b) If it shall be necessary or desirable for Executive to retain
legal counsel and incur other costs and expenses in connection with the
enforcement of any or all of his rights under this Agreement, and provided that
Executive prevails in the enforcement of such rights, the Company shall pay (or
Executive shall be entitled to recover from the Company, as the case may be)
Executive's reasonable attorneys' fees and costs and expenses in connection with
the enforcement of his rights including the enforcement of any arbitration
award.
20. NO ASSIGNMENT. Except as otherwise expressly provided herein, this
Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.
21. EXECUTION IN COUNTERPARTS. This Agreement may be executed by parties
hereto in two or more counterparts, each of which shall be deemed to be an
original, but all such counterparts shall constitute one and the same
instrument. The facsimile signature of any party to this Agreement shall be
considered an original signature of such person.
22. JURISDICTION AND GOVERNING LAW. Jurisdiction over disputes with
regard to this Agreement shall be exclusively in the courts of the State of
Colorado, and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of Colorado, other than the conflict
of laws provisions of such laws.
23. SEVERABILITY. If any provision of this Agreement shall be adjudged by
any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement.
24. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties hereof, and supersedes all other oral or written agreements or
understandings between them regarding the subject matter hereof. No change,
alteration or modification hereof may be made except in a writing, signed by
each of the parties hereto.
25. HEADINGS DESCRIPTIVE. The headings of the several paragraphs of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
XXXXXXXX DEC, LLC:
By: ________________________________
EXECUTIVE
By: _________________________________
12
VESTING OPTION GRANT AND ACKNOWLEDGEMENT
THIS AGREEMENT has been made this 20th day of October 2003, between Xxxxx X.
Xxxxx, Xx. (the "Employee") and Intercell International Corporation, a Nevada
corporation (the "Company").
1. GRANT OF ISO.
The Company, pursuant to the provisions of the Intercell International
Corporation 1995 Compensatory Stock Option Plan (the "Plan"), a copy of which
was previously received by the Employee, hereby grants to the Employee, subject
to the terms and conditions set forth or incorporated herein, an option to
acquire 500,000 Common Shares. The provisions of the 1995 Plan governing the
terms and conditions of the ISO granted hereby are incorporated in full herein
and made a part hereof by this reference.
2. VESTING.
The ISO granted hereunder shall be issuable and vested as follows:
IMMEDIATE AND IN FULL
3. TRANSFERABILITY.
The grant evidenced hereby is not assignable or transferable by the Employee
other than by the Employee's will or by the laws of descent and distribution, as
provided in paragraph 12 of the 1995 Plan. The shares shall be issuable only to
the Employee during the Employee's lifetime.
INTERCELL INTERNATIONAL
CORPORATION
By:__________________________
Xxxx X. Xxxxxxxxx, President
ATTEST:
By:___________________________
Xxxxxx X. Xxxxxxxx, Secretary
ACKNOWLEDGMENT
I, the undersigned person, company or firm, by signature below acknowledge as of
the date below to the Board of Directors and management of Intercell
International Corporation ("Company") that:
1. In connection with the grant of Common Shares to me under the 1995
Compensatory Stock Option Plan of the Company ("Plan"), the Company ahs
delivered to me the documents itemized below:
(i) Prospectus dated January 24, 1996;
(ii) Annual report on Form 10-KSB for the year ended September 30,
2002;
(iii) A copy of the Plan.
2. The Company has advised me that the Common Shares of the Company issued to
me under the plan previously have been registered with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended,
under cover of a Registration Statement on Form S-8, of which the
Prospectus is a part.
3. The Prospectus explains, and I understand, that certain reports and
documents listed in the Prospectus have been incorporated by reference into
the Prospectus and Registration Statement and form part of the statutory
Prospectus, and the periodic reports and annual reports to shareholders
subsequently filed by the Company with the SEC will automatically be deemed
to update the Registration Statement and Prospectus.
4. The Company has made clear to me that it will furnish to me, without charge
upon my request, any and all documents listed in the Prospectus as being
incorporated therein and in the Registration Statement by reference, and
any and all reports and documents hereafter automatically incorporated by
reference into the Prospectus and Registration Statement.
5. I ______AM _______ AM NOT a director or executive of the Company.
6. I ______AM _______ AM NOT the beneficial owner of 10% or more of the
Company's outstanding Common Shares.
7. The Undersigned hereby acknowledges receipt from the Company of the Plan
attached hereto, and accepts this Option subject to each and every term and
provisions of such Plan. The Undersigned hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Compensation Committee of the Board of Directors administering the Plan on
any questions arising under such Plan. The Undersigned recognizes that if
his employment with the Company or any subsidiary thereof shall be
terminated for any reason whatsoever, all of the Undersigned's rights
hereunder shall thereupon terminate as provided in the Plan.
DATED: October 20, 2003
X
------------------------------------------
Signature
------------------------------------------
Print Name
------------------------------------------
Address
------------------------------------------
Address
------------------------------------------
Social Security Number
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT has been made this 20th day of October 2003, between Xxxxx
X. Xxxxx, Xx. (the "Employee"), and Intercell International Corporation, a
Nevada corporation (the "Company").
1. GRANT OF OPTION.
The Company, pursuant to the provisions of the Intercell International
Corporation 1995 Compensatory Stock Option Plan (the "Plan"), a copy of which
was previously received by the Employee, hereby grants to the Employee, subject
to the terms and conditions set forth or incorporated herein, an option to
purchase form the Company all or any part of an aggregate of Common Shares, as
such Common Shares are now constituted, at the purchase price of $0.51 per
share. The provisions of the Plan governing the terms and conditions of the
Option granted hereby are incorporated in full herein and made a part hereof by
this reference. The Employee, by his or her signature below, agrees to be bound
by the terms and conditions thereof.
2. EXERCISE.
The Option evidenced hereby shall be exercisable in whole or in part (but only
in multiples of 100 shares unless exercise is as to the terminating balance of
this Option) on or after October 20, 2003 and on or before October 20, 2013
provided that the cumulative number of Common Shares as to which this Option may
be exercised (except in the event of death, retirement, or disability, as
provided in paragraph 11(a) of the Plan) shall not exceed the following amounts:
Cumulative Number of Shares: 500,000
Prior To Date (Not Inclusive of): OCTOBER 20, 2013
The Option evidenced hereby shall be exercisable by the delivery to and receipt
by the Company of (i) a written notice of election to exercise, in the form set
forth in Exhibit "A" hereto, specifying the number of Common Shares to be
purchased; (ii) accompanied by payment of the full purchase price thereof in
cash or certified check payable to the order of the Company, or by fully-paid
and nonassessable Common Shares of the Company properly endorsed over to the
Company, or by a combination thereof, and (iii) by return of this Incentive
Stock Option Agreement for endorsement of exercise by the Company. In the event
fully-paid and nonassessable Common Shares are submitted as whole or partial
payment for shares to be purchased hereunder, such Common Shares will be valued
at the Fair Market Value (as defined in the Plan) on the date such shares
received by the Company are applied to payment of the exercise price.
3. TRANSFERABILITY.
The Option evidenced hereby is not assignable or transferable by the Employee
other than by the Employee's will or by the laws of descent and distribution, as
provided in paragraph 12 of the Plan. The Option shall be exercisable only by
the Employee during the Employee's lifetime.
INTERCELL INTERNATIONAL
CORPORATION
By: _____________________________
Xxxx X. Xxxxxxxxx, President
ATTEST:
By: _____________________________
Xxxxxx X. Xxxxxxxx, Secretary
Date: October 20, 2003
Employee: Xxxxx X. Xxxxx, Xx.
Address: __________________________
__________________________
Social Security No.: __________________________
EXHIBIT A
NOTIFICATION OF ELECTION TO EXERCISE
(Suggested form of letter to be used for notification of election to exercise.
Please do not use this page, but follow this form in a separately typed letter.)
Date:
Attn: Xxxxxx Xxxxxxxx
Intercell International Corporation
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Dear Sir:
In accordance with paragraph 2 of the Incentive Stock Option Agreement
evidencing the Option granted to me on __________ under the Intercell
International Corporation 1995 Compensatory Stock Option Plan, I hereby elect to
exercise this Option to the extent of __________ Common Shares.
Enclosed are (i) Certificate(s) No.(s) ___________ representing fully-paid
Common Shares of ____________ endorsed to the Company with signature guaranteed;
(ii) and/or a certified check payable to the order of "Intercell International
Corporation" in the amount of $____________ as the balance of the purchase price
of $________ for the shares which I have elected to purchase; and (iii) the
original Incentive Stock Option Agreement for endorsement by the Company as to
exercise. I acknowledge that the Common Shares (if any) submitted as part
payment of the exercise price due hereunder will be valued by the Company at
their Fair Market Value (as defined in the 1995 Plan) on the date this exercise
is effected by the Company. In the event I hereafter sell any Common Shares
issued pursuant to the option within two years from the date of exercise or
within five years after the date of grant of this Option, I agree to notify the
Company promptly of the amount of taxable compensation realized by me by reason
of such for federal income tax purposes.
When the certificate for Common Shares, which I have elected to purchase,
has been issued, please deliver it to me, along with my endorsed Incentive Stock
Option Agreement in the event there remains an unexercised balance of shares
under the Option, at the following address:
Very Truly Yours,
___________________________________
Signature of Employee
Print Name
VESTING OPTION GRANT AND ACKNOWLEDGEMENT
THIS AGREEMENT has been made this 20th day of October 2003, between Xxxxxxx X.
Xxxxxxxx (the "Employee") and Intercell International Corporation, a Nevada
corporation (the "Company").
1. GRANT OF ISO.
The Company, pursuant to the provisions of the Intercell International
Corporation 1995 Compensatory Stock Option Plan (the "Plan"), a copy of which
was previously received by the Employee, hereby grants to the Employee, subject
to the terms and conditions set forth or incorporated herein, an option to
acquire 500,000 Common Shares. The provisions of the 1995 Plan governing the
terms and conditions of the ISO granted hereby are incorporated in full herein
and made a part hereof by this reference.
2. VESTING.
The ISO granted hereunder shall be issuable and vested as follows:
IMMEDIATE AND IN FULL
3. TRANSFERABILITY.
The grant evidenced hereby is not assignable or transferable by the Employee
other than by the Employee's will or by the laws of descent and distribution, as
provided in paragraph 12 of the 1995 Plan. The shares shall be issuable only to
the Employee during the Employee's lifetime.
INTERCELL INTERNATIONAL
CORPORATION
By:__________________________
Xxxx X. Xxxxxxxxx, President
ATTEST:
By:___________________________
Xxxxxx X. Xxxxxxxx, Secretary
ACKNOWLEDGMENT
I, the undersigned person, company or firm, by signature below acknowledge as of
the date below to the Board of Directors and management of Intercell
International Corporation ("Company") that:
1. In connection with the grant of Common Shares to me under the 1995
Compensatory Stock Option Plan of the Company ("Plan"), the Company ahs
delivered to me the documents itemized below:
(i) Prospectus dated January 24, 1996;
(ii) Annual report on Form 10-KSB for the year ended September 30,
2002;
(iii) A copy of the Plan.
2. The Company has advised me that the Common Shares of the Company issued to
me under the plan previously have been registered with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended,
under cover of a Registration Statement on Form S-8, of which the
Prospectus is a part.
3. The Prospectus explains, and I understand, that certain reports and
documents listed in the Prospectus have been incorporated by reference into
the Prospectus and Registration Statement and form part of the statutory
Prospectus, and the periodic reports and annual reports to shareholders
subsequently filed by the Company with the SEC will automatically be deemed
to update the Registration Statement and Prospectus.
4. The Company has made clear to me that it will furnish to me, without charge
upon my request, any and all documents listed in the Prospectus as being
incorporated therein and in the Registration Statement by reference, and
any and all reports and documents hereafter automatically incorporated by
reference into the Prospectus and Registration Statement.
5. I ______AM _______ AM NOT a director or executive of the Company.
6. I ______AM _______ AM NOT the beneficial owner of 10% or more of the
Company's outstanding Common Shares.
7. The Undersigned hereby acknowledges receipt from the Company of the Plan
attached hereto, and accepts this Option subject to each and every term and
provisions of such Plan. The Undersigned hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Compensation Committee of the Board of Directors administering the Plan on
any questions arising under such Plan. The Undersigned recognizes that if
his employment with the Company or any subsidiary thereof shall be
terminated for any reason whatsoever, all of the Undersigned's rights
hereunder shall thereupon terminate as provided in the Plan.
DATED: October 20, 2003
X
------------------------------------------
Signature
------------------------------------------
Print Name
------------------------------------------
Address
------------------------------------------
Address
------------------------------------------
Social Security Number
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT has been made this 20th day of October 2003, between Xxxxxxx
X. Xxxxxxxx (the "Employee"), and Intercell International Corporation, a Nevada
corporation (the "Company").
1. GRANT OF OPTION.
The Company, pursuant to the provisions of the Intercell International
Corporation 1995 Compensatory Stock Option Plan (the "Plan"), a copy of which
was previously received by the Employee, hereby grants to the Employee, subject
to the terms and conditions set forth or incorporated herein, an option to
purchase form the Company all or any part of an aggregate of Common Shares, as
such Common Shares are now constituted, at the purchase price of $0.51 per
share. The provisions of the Plan governing the terms and conditions of the
Option granted hereby are incorporated in full herein and made a part hereof by
this reference. The Employee, by his or her signature below, agrees to be bound
by the terms and conditions thereof.
2. EXERCISE.
The Option evidenced hereby shall be exercisable in whole or in part (but only
in multiples of 100 shares unless exercise is as to the terminating balance of
this Option) on or after October 20, 2003 and on or before October 20, 2013
provided that the cumulative number of Common Shares as to which this Option may
be exercised (except in the event of death, retirement, or disability, as
provided in paragraph 11(a) of the Plan) shall not exceed the following amounts:
Cumulative Number of Shares: 500,000
Prior To Date (Not Inclusive of): OCTOBER 20, 2013
The Option evidenced hereby shall be exercisable by the delivery to and receipt
by the Company of (i) a written notice of election to exercise, in the form set
forth in Exhibit "A" hereto, specifying the number of Common Shares to be
purchased; (ii) accompanied by payment of the full purchase price thereof in
cash or certified check payable to the order of the Company, or by fully-paid
and nonassessable Common Shares of the Company properly endorsed over to the
Company, or by a combination thereof, and (iii) by return of this Incentive
Stock Option Agreement for endorsement of exercise by the Company. In the event
fully-paid and nonassessable Common Shares are submitted as whole or partial
payment for shares to be purchased hereunder, such Common Shares will be valued
at the Fair Market Value (as defined in the Plan) on the date such shares
received by the Company are applied to payment of the exercise price.
3. TRANSFERABILITY.
The Option evidenced hereby is not assignable or transferable by the Employee
other than by the Employee's will or by the laws of descent and distribution, as
provided in paragraph 12 of the Plan. The Option shall be exercisable only by
the Employee during the Employee's lifetime.
INTERCELL INTERNATIONAL
CORPORATION
By: _____________________________
Xxxx X. Xxxxxxxxx, President
ATTEST:
By: _____________________________
Xxxxxx X. Xxxxxxxx, Secretary
Date: October 20, 2003
Employee: Xxxxxxx X. Xxxxxxxx
Address: __________________________
__________________________
Social Security No.: __________________________
EXHIBIT A
NOTIFICATION OF ELECTION TO EXERCISE
(Suggested form of letter to be used for notification of election to exercise.
Please do not use this page, but follow this form in a separately typed letter.)
Date:
Attn: Xxxxxx Xxxxxxxx
Intercell International Corporation
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Dear Sir:
In accordance with paragraph 2 of the Incentive Stock Option Agreement
evidencing the Option granted to me on __________ under the Intercell
International Corporation 1995 Compensatory Stock Option Plan, I hereby elect to
exercise this Option to the extent of __________ Common Shares.
Enclosed are (i) Certificate(s) No.(s) ___________ representing fully-paid
Common Shares of ____________ endorsed to the Company with signature guaranteed;
(ii) and/or a certified check payable to the order of "Intercell International
Corporation" in the amount of $____________ as the balance of the purchase price
of $________ for the shares which I have elected to purchase; and (iii) the
original Incentive Stock Option Agreement for endorsement by the Company as to
exercise. I acknowledge that the Common Shares (if any) submitted as part
payment of the exercise price due hereunder will be valued by the Company at
their Fair Market Value (as defined in the 1995 Plan) on the date this exercise
is effected by the Company. In the event I hereafter sell any Common Shares
issued pursuant to the option within two years from the date of exercise or
within five years after the date of grant of this Option, I agree to notify the
Company promptly of the amount of taxable compensation realized by me by reason
of such for federal income tax purposes.
When the certificate for Common Shares, which I have elected to purchase,
has been issued, please deliver it to me, along with my endorsed Incentive Stock
Option Agreement in the event there remains an unexercised balance of shares
under the Option, at the following address:
Very Truly Yours,
__________________________________
Signature of Employee
Print Name
