1
EXHIBIT 10.1
ULTRA BIKERS, LLC
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
2
ULTRA BIKERS, LLC
TABLE OF CONTENTS
Page
----
ARTICLE I - FORMATION OF LIMITED LIABILITY COMPANY . . . . . . . . . . . . . . 1
1.1 Formation and Effective Date of Agreement . . . . . . . . . . . . 1
1.2 Name and Principal Place of Business . . . . . . . . . . . . . . . 1
1.3 Agent for Service of Process . . . . . . . . . . . . . . . . . . . 1
1.4 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II - MEMBERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Initial Members . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 3
2.3 LLC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Additional Members . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Admission of Substitute Members . . . . . . . . . . . . . . . . . . 4
2.6 Resignation or Withdrawal of a Member . . . . . . . . . . . . . . . 4
2.7 Dissociation of a Member . . . . . . . . . . . . . . . . . . . . . 4
2.8 Rights of Dissociating Member . . . . . . . . . . . . . . . . . . . 4
ARTICLE III - CONTRIBUTIONS TO CAPITAL . . . . . . . . . . . . . . . . . . . . 4
3.1 Initial Contributions . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Additional Contributions . . . . . . . . . . . . . . . . . . . . . 5
3.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV - MANAGEMENT AND RESTRICTIONS . . . . . . . . . . . . . . . . . . . 5
4.1 Management by Management Board . . . . . . . . . . . . . . . . . . 5
4.2 Authority of Management Board . . . . . . . . . . . . . . . . . . 5
4.3 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 Action without Meeting . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Compensation of Members . . . . . . . . . . . . . . . . . . . . . 7
4.8 Amendment of Articles or Agreement . . . . . . . . . . . . . . . . 7
4.9 Member Representatives . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V - NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . 7
3
ARTICLE VI - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Required Officers . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Compensation of Officers . . . . . . . . . . . . . . . . . . . . . . 8
6.4 Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.5 Duties of President . . . . . . . . . . . . . . . . . . . . . . . . 8
6.6 Duties of Vice-President . . . . . . . . . . . . . . . . . . . . . . 8
6.7 Duties of Secretary . . . . . . . . . . . . . . . . . . . . . . . . 8
6.8 Duties of Assistant Secretary . . . . . . . . . . . . . . . . . . . 8
6.9 Duties of Treasurer . . . . . . . . . . . . . . . . . . . . . . . . 8
6.10 Duties of Assistant Treasurer . . . . . . . . . . . . . . . . . . . 9
6.11 Other Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII - ACCOUNTING AND RECORDS . . . . . . . . . . . . . . . . . . . . . 9
7.1 Financial and Tax Reporting . . . . . . . . . . . . . . . . . . . . 9
7.2 Supervision; Inspection of Books . . . . . . . . . . . . . . . . . . 9
7.3 Reliance on Records and Books of Account . . . . . . . . . . . . . . 9
7.4 Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VIII - ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1 Allocation of Net Income or Net Loss . . . . . . . . . . . . . . . . 10
8.2 Time of Allocations . . . . . . . . . . . . . . . . . . . . . . . . 10
8.3 Special Tax Provisions . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IX - DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Distribution Shares . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE X - NO TRANSFER OF MEMBERSHIP . . . . . . . . . . . . . . . . . . . . . 11
10.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.2 Transfer Void . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.3 Rights of Assignees . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE XI - OPTIONS; BUY-OUT . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Purchase of UKC and UKP . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE XII - INDEMNIFICATION AND LIMITATION OF LIABILITY . . . . . . . . . . . 12
12.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12.2 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE XIII - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.2 Authority to Wind Up . . . . . . . . . . . . . . . . . . . . . . . . 14
13.3 Winding Up and Certificate of Cancellation . . . . . . . . . . . . . 14
13.4 Distribution of Assets . . . . . . . . . . . . . . . . . . . . . . . 15
4
ARTICLE XIV - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XV - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.2 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . 16
15.3 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.4 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . 17
15.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 17
15.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.10 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
EXECUTION PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5
ULTRA BIKERS, LLC
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the "Agreement")
is entered into this 13th day of September, 1996, among Bikers Dream, Inc., a
California corporation ("Bikers Dream") and Xxxx Acres Investments, Inc., a
California corporation ("Xxxx Acres"), as members (the "Members") of Ultra
Bikers, LLC, a California limited liability company (the "LLC").
ARTICLE I
FORMATION OF LIMITED LIABILITY COMPANY
1.1 FORMATION AND EFFECTIVE DATE OF AGREEMENT. The members have
formed the LLC pursuant to the Xxxxxxx-Xxxxxx Limited Liability Company Act
(the "Act") by causing Articles of Organization conforming to the requirements
of the Act to be filed with the office of the Secretary of State of the State
of California.
1.2 NAME AND PRINCIPAL PLACE OF BUSINESS. Unless and until
amended in accordance with this Agreement and the Act, the name of the LLC will
be "Ultra Bikers, LLC." The principal place of business of the LLC in
California shall be 00000 Xxxxxxxx Xxxxxx, Xxxxx X, Xxxxxxxxx, Xxxxxxxxxx
00000, or in such other place or places as the Members from time to time
determine.
1.3 AGENT FOR SERVICE OF PROCESS. Until such time as the Members
have appointed a different person to act in the State of California as the
agent of the LLC for service of process, the LLC's agent or service of process
in the State of California shall be Rowland W. Day II, whose address is Day
Xxxxxxxx & XxXxxx, 0000 Xxxxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx 00000.
1.4 AGREEMENT. For and in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members executing this
Agreement hereby agree to the terms and conditions of this Agreement, as it may
from time to time be amended. It is the express intention of the parties
hereto that this Agreement shall be the sole statement of agreement among them,
and, except to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to sections of the Code or Treasury
Regulations or is expressly prohibited or ineffective under the Act, the
Agreement shall govern even when inconsistent with or different from the
provisions of the Act or any other law or rule. To the extent any provision of
the Agreement is prohibited or ineffective under the Act, the Agreement shall
be considered amended to the smallest degree possible in order to make the
agreement effective under the Act. In the event the Act is subsequently
amended or interpreted in such a way to make valid any provision of the
Agreement that was formerly invalid, such provision shall be considered to be a
part of this Agreement from and after the date of such interpretation or
amendment.
6
1.5 BUSINESS.
(a) The purpose of the LLC is to (i) distribute and sell
motorcycles and related parts and accessories manufactured by the Ultra Kustom
Cycles division ("UKC") of Xxxx Acres to retail establishments, and (ii) engage
in any other lawful act or activity for which an LLC may be organized under the
Xxxxxxx-Xxxxxx Limited Liability Company Act, provided that the LLC shall not
engage in the practice of any profession requiring a license under the laws of
the State of California obtaining such license.
(b) The business of the LLC shall be conducted as follows:
(i) Bikers Dream shall loan (the "Initial Loan")
Two Million Dollars ($2,000,000) to the LLC pursuant to a note (the "Initial
Note"), which Initial Loan shall be non-interest bearing and shall be payable
by the LLC, but payable in no event later than September 30, 1997, with One
Million Dollars ($1,000,000) of the Initial Loan to be funded and paid by
September 18, 1996 and an additional One Million Dollars ($1,000,000) to be
funded and paid by Bikers Dream within ninety days thereafter;
(ii) The LLC shall loan to Xxxx Acres, for
distribution to UKC, promptly upon receipt of the Initial Loan described in
Section 1.5(b)(i) hereof from Bikers Dream, the amount of such Initial Loan,
pursuant to the terms of a note, which shall be non-interest bearing and
payable in no event later than September 30, 1997, the proceeds of which shall
be used by UKC to manufacture motorcycles;
(iii) Xxxx Acres must sell all motorcycles
manufactured by it to the LLC, and may not sell any motorcycles to any other
retailer, distributor, or any other person, and Xxxx Acres shall contribute all
its dealers to the LLC;
(iv) The LLC shall be the exclusive distributor of
motorcycles manufactured by Xxxx Acres world wide;
(v) Xxxx Acres shall sell its motorcycles to the
LLC at a cost of $14,000 for a standard bike, and the LLC shall sell the
motorcycles to Bikers Dream at a cost of $14,400 for such standard bikes;
(vi) The LLC will be the exclusive distributor of
Bikers Dream for new motorcycles manufactured by third parties, and the LLC
shall sell such motorcycles to Bikers Dream at cost;
(vii) Sales of motorcycles by the LLC to retailers
other than Bikers Dream will be at prices as determined by the Management Board
of the LLC, but shall not be at a price below the invoice price to Bikers
Dream; and
2
7
(viii) Xxxx Acres shall not engage in any retail
sales of motorcycles, and shall present to Bikers Dream all opportunities for
all such retail sales.
1.6 DEFINITIONS. Terms not otherwise defined in this Agreement
shall have the meanings set forth in Article XIII.
1.7 TERM. The term of the LLC shall begin upon the filing of the
Articles of Organization and shall continue until September 30, 1997 unless its
existence is sooner terminated pursuant to Article XII of this Agreement, or
unless its term is extended by agreement of the Members. The provisions of
Article XI may extend beyond the term of the LLC according to their terms.
ARTICLE II
MEMBERSHIP
2.1 INITIAL MEMBERS. The Members of the LLC are Bikers Dream and
Xxxx Acres, each of whom is admitted to the LLC as a Member as of the effective
date this Agreement becomes effective.
2.2 REPRESENTATIONS AND WARRANTIES. Each Member hereby represents
and warrants to the LLC and each other Member as follows:
(a) Authorization. It is duly organized, validly
existing, and in good standing under the law of its state of organization and
that it has full power and authority to execute and enter into this Agreement
and to perform its obligations hereunder and that all actions necessary for the
due authorization, execution, delivery and performance by that Member of this
Agreement have been duly taken;
(b) Compliance with Other Instruments. The Member's
authorization, execution, delivery, and performance of this Agreement do not
conflict with any other agreement or arrangement to which such Member is a
party or by which it is bound;
(c) Purchase Entirely for Own Account. The Member is
acquiring its interest in the LLC for the Member's own account for investment
purposes only and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof and has no contract, understanding,
undertaking, agreement or arrangement of any kind with any Person to sell,
transfer or pledge to any Person its interest or any part thereof nor does such
Member have any plans to enter into any such agreement;
(d) Investment Experience. By reason of their business
or financial experience, the Members have the capacity to protect their own
interests in connection with the transactions contemplated hereunder, are able
to bear the risks of an investment in the LLC, and at the present time could
afford a complete loss of such investment;
3
8
(e) Disclosure of Information. The Member is aware of
the LLC's business affairs and financial condition and has acquired sufficient
information about the LLC to reach an informed and knowledgeable decision to
acquire an interest in the LLC;
(f) Federal and State Securities Laws. Assuming federal
and state securities laws apply to the interests described herein, the Member
acknowledges that the interests have not been registered under the Securities
Act of 1933 or any state securities laws, inasmuch as they are being acquired
in a transaction not involving a public offering, and, under such laws, may not
be resold or transferred by the Member without appropriate registration or the
availability of an exemption from such requirements. In this connection, the
Member represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act of 1933.
2.3 LLC SHARES. Ownership of the LLC shall be divided into and
represented by shares of the LLC (the "Shares"). The LLC shall issue a single
class of Shares. The total number of Shares which the LLC is authorized to
issue shall be 1,000.
2.4 ADDITIONAL MEMBERS. No additional Persons may be issued
Shares of the LLC or admitted to the LLC as Members.
2.5 ADMISSION OF SUBSTITUTE MEMBERS. No Assignee of Shares of the
LLC shall be admitted as a Substitute Member save as provided in Section 2.8
hereof.
2.6 RESIGNATION OR WITHDRAWAL OF A MEMBER. Except as specifically
provided below, and subject to the provisions for transfer contained in Article
X, no Member shall have the right to resign or withdraw from membership in the
LLC or withdraw his interest in the capital.
2.7 DISSOCIATION OF A MEMBER. The expulsion, Bankruptcy or
dissolution of a Member (i) will cause such Member to be dissociated from the
LLC (a "Dissociated Member"), (ii) will terminate the continued membership of
such Member in the LLC, and (iii) will cause a dissolution of this LLC pursuant
to Article XII hereof.
2.8 RIGHTS OF DISSOCIATING MEMBER. In the event any Member
becomes a "Dissociated Member," the Dissociated Member shall be entitled to
participate in the winding up of the LLC to the same extent as any other
Member.
ARTICLE III
CONTRIBUTIONS TO CAPITAL
3.1 INITIAL CONTRIBUTIONS. Contemporaneously with the execution
of this Agreement, each Member shall contribute to the capital of the LLC as
follows:
4
9
(a) Bikers Dream shall loan the Initial Loan to the LLC;
and
(b) Bikers Dream shall further by September 18, 1996,
contribute an additional $25,000 nonrefundable sum to be applied to out-of-
pocket expenses; and
(c) UKC shall contribute its expertise in the business of
distributing and selling motorcycles.
3.2 ISSUANCE OF SHARES. In exchange for the Initial Contribution
of the Members, Bikers Dream shall be issued 490 Shares and Xxxx Acres shall be
issued 510 Shares.
3.3 ADDITIONAL CONTRIBUTIONS. No Member shall be permitted or
required to make any additional contribution to the capital of the LLC without
the consent of the Members.
3.4 INTEREST. No Member shall be entitled to any interest with
respect to contributions to or share of the capital of the LLC.
ARTICLE IV
MANAGEMENT AND RESTRICTIONS
4.1 MANAGEMENT BY MANAGEMENT BOARD. The LLC shall be managed and
controlled by a management board (the "Management Board") to consist of two
representatives appointed by Xxxx Acres and reasonably acceptable to Bikers
Dream, and one representative appointed by Bikers Dream and reasonably
acceptable to Xxxx Acres. Neither Member shall have the right to remove the
representatives of the other Member from the Management Board for any reason.
Initially, the members of the Management Board shall be Xxxx Xxxxx and Xxxxx
Xxxxxxxx as appointees of Xxxx Acres and Rowland W. Day, II, as the appointee
of Bikers Dream.
4.2 AUTHORITY OF MANAGEMENT BOARD.
(a) The Management Board may exercise all powers of the
LLC and do all such lawful acts and things as they may determine to be
necessary or appropriate in the ordinary course of the trade or business of the
LLC.
(b) Notwithstanding the above, the Management Board may
not do or permit to be done any of the following without the express approval
of all Members:
(i) Any act or thing which this Agreement
expressly requires to be approved, consented to, determined or authorized by
the Members;
5
10
(ii) Voluntarily cause the dissolution of the LLC
prior to September 30, 1997;
(iii) Sell all or a significant part of the LLC
assets, or engage in any material recapitalization or merger; or
(iv) Incur any liabilities in excess of $25,000.
(c) All matters requiring the vote, approval, consent,
authorization or determination of the Members shall require the vote or consent
of all Members.
4.3 MEETINGS. The Management Board and the Members of the LLC may
hold meetings, both regular and special, either within or without the State of
California. The meetings may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings or as
shall be specified in a written waiver, signed by all members of the Management
Board in the case of a meeting of the Management Board and all Members in the
case of a meeting of the Members, who did not participate in the meeting.
Regular meetings of the Management Board and the Members may be held without
notice at such time and at such place as shall from time to time be determined
by all members of the Management Board in the case of a meeting of the
Management Board and all Members in the case of a meeting of the Members.
4.4 SPECIAL MEETINGS. Special meetings of the Management Board
and the Members may be called by the President on four (4) days' notice to all
members of the Management Board in the case of a meeting of the Management
Board and all Members in the case of a meeting of the Members by mail or 48
hours' notice to all members of the Management Board in the case of a meeting
of the Management Board and all Members in the case of a meeting of the Members
either personally or by telegram; special meetings of the Management Board or
the Members shall be called by the President or Secretary in like manner and on
like notice on the written request of a Member.
4.5 ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Management Board and the Members may be taken
without a meeting, if all members of the Management Board in the case of a
meeting of the Management Board and all Members in the case of a meeting of the
Members, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Management Board or the Members meetings, as
the case may be.
4.6 TELEPHONIC MEETINGS. Members may participate in a meeting of
the Members and members of the Management Board may participate in a meeting of
the Management Board by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
6
11
4.7 COMPENSATION OF MEMBERS. Unless otherwise expressly approved
by the Members, the Members shall not be entitled to any compensation for
services or activities undertaken in their capacity as a Member of the LLC, and
members of the Management Board shall not be entitled to any compensation for
services or activities undertaken in their capacities as members of the
Management Board.
4.8 AMENDMENT OF ARTICLES OR AGREEMENT. The Members shall have
the duty and authority to amend the Articles of Organization or this Agreement
as and to the extent necessary to reflect any and all changes or corrections
necessary or appropriate as a result of any action taken by the Members in
accordance with the terms of this Agreement.
4.9 MEMBER REPRESENTATIVES. Each Member shall from time to time
designate up to two persons to participate as the sole representatives of such
Member at any meeting of the Members.
ARTICLE V
NOTICES
5.1 NOTICES. Whenever, under the provisions of the Act, the
Articles of Organization or this Agreement, notice is required to be given to
any Member, it shall not be construed to mean personal notice, but such notice
may be given in writing, by mail, addressed to such Member at his address as it
appears on the records of the LLC with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to Members may also be given by telegram or
facsimile.
5.2 WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the statutes, the Articles of Organization or this
Agreement, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VI
OFFICERS
6.1 REQUIRED OFFICERS. The officers of the LLC shall be elected
by the Members and shall include a President and a Secretary. The Members may
also elect a Treasurer and/or one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. Any number of offices may be held by the
same person, unless this Agreement otherwise provides. The initial President
and Treasurer shall be Rowland W. Day, II, the Vice-President shall be Xxxxx
Xxxxxxxx and the Secretary shall be Xxxx Xxxxx.
6.2 ELECTION OF OFFICERS. The Members at their first meeting
shall elect a President and a Secretary. The Members may appoint such other
officers and agents as it shall deem appropriate
7
12
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Members.
6.3 COMPENSATION OF OFFICERS. The salaries of all officers and
agents of the LLC, if any, shall be fixed by unanimous agreement of the
Management Board.
6.4 TERM OF OFFICE. The officers of the LLC shall hold office
until September 30, 1997. Such officers can be removed by the Management Board
if they commit a felony.
6.5 DUTIES OF PRESIDENT. The President shall be the chief
executive officer of the LLC, and shall also be a member of the Management
Board, and shall preside at all meetings of the Members and the Management
Board. He shall have general and active management of the day to day business
and affairs of the LLC and shall see that all orders and resolutions of the
Members and the Management Board are carried into effect. The President shall
be responsible for taxes and audits, and shall execute bonds, mortgages and
other contracts except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Members to some other officer or agent of the LLC.
6.6 DUTIES OF VICE-PRESIDENT. In the absence of the President or
in the event of his inability or refusal to act, the Vice President, if any,
(or in the event there be more than one Vice President, the Vice Presidents in
the order designated by the Members, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice Presidents shall perform such other
duties and have such other powers as the Members may from time to time
prescribe.
6.7 DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the Members and the Management Board and record all the proceedings of the
meetings thereof in a book to be kept for that purpose. He shall give, or
cause to be given, notice of all meetings of the Members and the Management
Board and special meetings of the Members and the Management Board, and shall
perform such other duties as may be prescribed by the Members or President.
6.8 DUTIES OF ASSISTANT SECRETARY. The Assistant Secretary, or,
if there be more than one, the Assistant Secretaries in the order determined by
the Members (or if there be no such determination, then in the order of their
election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
Members, President or Secretary may from time to time prescribe.
6.9 DUTIES OF TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the LLC and shall deposit all
moneys and other valuable effects in the name and to the credit of the LLC in
such depositories as may be designated by the Management Board. The
8
13
Treasurer shall disburse the funds of the LLC as may be ordered by the Members
or the Management Board, taking proper vouchers for such disbursements, and
shall render to the President and the Management Board, at its regular
meetings, or when the Management Board so requires, an account of all his
transactions as Treasurer and of the financial condition of the LLC.
6.10 DUTIES OF ASSISTANT TREASURER. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Members (or if there be no such determination, then in the order of
their election) shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Members may from time to time prescribe.
6.11 OTHER EMPLOYEES. The LLC shall hire the following persons at
the following salaries:
(i) Xxxxx Xxxxxxxx, at a xxxxx salary of $1,500 per week;
(ii) Xxxxxx Xxxxxxxx, at a gross salary of $1,500 per
week; and
(iii) A bookkeeper at a salary to be determined by the
Management Board.
ARTICLE VII
ACCOUNTING AND RECORDS
7.1 FINANCIAL AND TAX REPORTING. The LLC shall prepare its
financial statements in accordance with generally accepted accounting
principles as from time to time in effect and shall prepare its income tax
information returns using such methods of accounting and tax year as the
Management Board deems necessary or appropriate under the Code and Treasury
Regulations.
7.2 SUPERVISION; INSPECTION OF BOOKS. Proper and complete books
of account and records of the business of the LLC (including those books and
records identified in Section 17058 of the Act) shall be kept under the
supervision of the President at the LLC's principal office and at such other
place as designated by the Management Board. The President shall give notice
to each Member of any changes in the location of such books and records. Such
books and records shall be open to inspection, audit and copying by any Member,
or its designated representative, upon reasonable notice at any time during
business hours for any purpose reasonably related to the Member's Interest in
the LLC. Any information so obtained or copied shall be kept and maintained in
strictest confidence except as required by law.
7.3 RELIANCE ON RECORDS AND BOOKS OF ACCOUNT. Any Member shall be
fully protected in relying in good faith upon the records and books of account
of the LLC and upon such information, opinions, reports or statements presented
to the LLC by its Member, any of its other
9
14
Members, Member of its Management Board, officers, employees or committees, or
by any other person, as to matters the Member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the LLC, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits or losses of the LLC or any other facts pertinent to the
existence and amount of assets from which distributions to members might
properly be paid.
7.4 ANNUAL REPORTS. The annual financial statements of the LLC
shall be audited and reported on as of the end of each Fiscal Year and as of
September 30, 1997, by a firm of independent certified public accountants
selected by the Members and paid for by the LLC. A copy of the annual report
shall be transmitted to the Members within ninety (90) days after the end of
each Fiscal Year.
7.5 TAX RETURNS. The President shall, within ninety (90) days
after the end of each Fiscal Year, file a Federal income tax information return
and transmit to each Member a schedule showing such Member's distributive Share
of the LLC's income, deductions and credits, and all other information
necessary for such Members timely to file their Federal income tax returns.
The President similarly shall file, and provide information to the Members
regarding, all appropriate state and local income tax returns.
ARTICLE VIII
ALLOCATIONS
8.1 ALLOCATION OF NET INCOME OR NET LOSS. For each Accounting
Period, Net Income or Net Loss of the LLC shall be allocated to the Members in
proportion to their ownership of Shares.
8.2 TIME OF ALLOCATIONS. The Net Income or Net Loss of the LLC for
each Accounting Period shall be allocated to the Members' at the end of the
Accounting Period in accordance with the provisions of Section 8.1 above.
8.3 SPECIAL TAX PROVISIONS.
(a) Partnership Treatment. The Members expect and intend
that the LLC shall be treated as a partnership for all federal income tax
purposes and each Member and the Members agree that they (i) will not on any
federal, state, local or other tax return take a position, and shall not
otherwise assert, inconsistent with such expectation and intent; or (ii) do any
act or thing which could cause the LLC to be treated as other than a
partnership for federal income tax purposes.
(b) Tax Allocations. Except as otherwise provided in
this Article VIII, items of income, gain, loss or deduction recognized for
income tax purposes shall be allocated in the same manner that the
corresponding items entering into the calculation of Net Income and Net Loss
are allocated pursuant to this Agreement.
10
15
ARTICLE IX
DISTRIBUTIONS
9.1 DISTRIBUTION SHARES. There will be no distributions by the
LLC to Members until September 30, 1997.
ARTICLE X
NO TRANSFER OF MEMBERSHIP
10.1 TRANSFER. No Member may transfer, sell, encumber, mortgage,
assign or otherwise dispose of any portion of its Shares, except as
contemplated by Section 11.2(a) hereof.
10.2 TRANSFER VOID. Any purported transfer, sale, encumbrance,
mortgage, assignment, or disposition of Shares shall be void and of no effect
to, on or against the LLC, any Member, any creditor of the LLC or any claimant
against the LLC.
10.3 RIGHTS OF ASSIGNEES. The Assignee of a Shares has no right to
vote or to participate in the management of the business and affairs of the LLC
or to become a Member. The Assignee is only entitled to receive distributions
and to be allocated the Net Profits and Net Losses attributable to the Shares
transferred to the Assignee.
ARTICLE XI
OPTIONS; BUY-OUT
11.1 OPTIONS. Bikers Dream shall grant 2,500,000 options to Xxxx
Acres (the "Options") to purchase common stock of Bikers Dream, no par value
per share, at a purchase price of $1.65 per share, such Options to expire on
September 30, 1998, and to be exercisable on demand on or after August 31,
1997, or earlier with the consent of Bikers Dream, which Options may be
exercised pursuant to the so-called "immaculate cashless exercise." The shares
issuable upon exercise of the Options shall be registered for resale at the
expense of Bikers Dream after September 5, 1997. The shares issuable upon
exercise of the Options shall be subject to a lock-up until September 30, 1998.
Xxxx Acres shall deliver an irrevocable notice to Bikers Dream between August
31, 1997 and September 5, 1997, notifying Bikers Dream as to whether it will or
will not exercise the Options.
11.2 PURCHASE OF UKC AND UKP.
(a) Upon receipt of an irrevocable notice of intent to
exercise of the Options, Bikers Dream shall purchase (the "Purchase") Xxxx
Acres' Shares in the LLC and all of the assets (and no liabilities) of the
historical businesses of UKC and Xxxx Acres' motorcycle parts division
11
16
("UKP"), including the trade names, from Xxxx Acres, which Purchase must be
closed within 120 days after receipt by Bikers Dream of the irrevocable notice
of intent to exercise by Xxxx Acres.
(b) The Purchase price for the Purchase shall be Four
Million Dollars ($4,000,000) in cash. Bikers Dream may call the Initial Loan
in order to satisfy part of the purchase price.
(c) Immediately prior to the closing of the Purchase the
LLC must distribute all its cash to the Members in accordance with Section 13.4
hereof, including the repayment of the Initial Loan.
(d) Upon the closing of the Purchase, Bikers Dream shall
enter into one year employment agreements with each of Xxxxxx Xxxxxxxx and
Xxxxx Xxxxxxxx with a total aggregate compensation under both agreements not to
exceed $250,000.
(e) Xxxx Acres will make standard representations and
warranties to Bikers Dream, as of the date of closing of the exercise by Bikers
Dream of the Purchase.
(f) Xxxx Acres shall operate UKC and UKP in the ordinary
course consistent with past practice, subject to the transactions contemplated
by this Agreement, between the date hereof and the date of closing of the
Purchase.
(g) As of a date no more than 10 days prior to the
closing of the Purchase Xxxx Acres shall cause to be delivered to Bikers Dream
financial statements of UKC and UKP audited by a firm of independent
accountants reasonably acceptable to Bikers Dream and at a cost to be paid by
Bikers Dream.
(g) In connection with the Purchase, Xxxx Acres agrees to
deliver such additional documents and certificates, including a xxxx of sale,
assignments of contracts, assignments of trademarks and service marks, and
similar such instruments of transfer, and such other matters as Bikers Dream
may reasonably require.
(h) It is a condition of the Purchase that there shall
not be a claim that is likely to have an adverse effect of $5,000 or more on
UKC or UKP, unless resolved or bonded by Xxxx Acres.
ARTICLE XII
INDEMNIFICATION AND LIMITATION OF LIABILITY
12.1 INDEMNIFICATION.
(a) To the fullest extent permitted by the Act and by
law, the Members, and the partners, shareholders, controlling persons,
officers, directors and employees of the Members, and
12
17
the officers of the LLC and the members of the Management Board (herein
referred to as "Indemnitees") shall, in accordance with this Section 12.1 be
indemnified and held harmless by the LLC from and against any and all loss,
claims, damages, liabilities joint and several, expenses, judgments, fines,
settlements and other amounts arising from any and all claims (including
reasonable legal expenses), demands, actions, suits or proceedings (civil,
criminal, administrative or investigative) in which they may be involved, as a
party or otherwise, by reason of their management of, or involvement in, the
affairs of the LLC, or rendering of advice or consultation with respect
thereto, or which relate to the LLC, its properties, business or affairs, if
such Indemnitee acted in good faith and in a manner such Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the LLC, and, with
respect to any criminal proceeding, had no reasonable cause to believe the
conduct of such Indemnitee was unlawful. The termination of a proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption that the Indemnitee
did not act in good faith and in a manner which the Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the LLC or that the
Indemnitee had reasonable cause to believe that the Indemnitee's conduct was
unlawful (unless there has been a final adjudication in the proceeding that the
Indemnitee did not act in good faith and in a manner which the Indemnitee
reasonably believed to be in or not opposed to the best interests of the LLC;
or that the Indemnitee did have reasonable cause to believe that the
Indemnitee's conduct was unlawful).
(b) The LLC may also indemnify any Person who was or is a
party or threatened to be made a party to any threatened, pending, contemplated
or completed action by or in the right of the LLC to procure a judgment in its
favor by reason of the fact that such Person is or was an officer, employee or
agent of the LLC, against expenses actually or reasonably incurred by such
Person in connection with the defense or settlement of such action, if such
Person acted in good faith and in a manner such Person reasonably believed to
be in, or not opposed to, the best interests of the LLC, except that
indemnification shall be made in respect of any claim, issue or matter as to
which such Person shall have been adjudged to be liable for misconduct in the
performance of the Person's duty to the LLC only to the extent that the court
in which such action or suit was brought, or another court of appropriate
jurisdiction, determines upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such Person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper. To the extent that the Person has been successful on the merits
or otherwise in defense of any proceedings referred to herein, or in defense of
any claim, issue or matter therein, the Person shall be indemnified by the LLC
against expenses actually and reasonably incurred by the Person in connection
therewith. Notwithstanding the foregoing, no Person shall be entitled to
indemnification hereunder for any conduct arising from the gross negligence or
willful misconduct of such Person or reckless disregard in the performance of
its duties hereunder.
(c) Expenses (including attorneys' fees) incurred in
defending any proceeding under Sections 1l.l(a) or (b) may be paid by the LLC
in advance of the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of the Indemnitee or Person to repay such amount if
it shall ultimately be determined that the Indemnitee or Person is not entitled
to be indemnified by the LLC as authorized hereunder.
13
18
(d) The indemnification provided by this Section 12.1
shall not be deemed to be exclusive of any other rights to which any Person may
be entitled under any agreement, or as a matter of law, or otherwise, both as
to action in a Person's official capacity and to action in another capacity.
(e) The Members shall have power to purchase and maintain
insurance on behalf of the LLC, the Members, officers, employees or agents of
the LLC and any other Indemnitees at the expense of the LLC, against any
liability asserted against or incurred by them in any such capacity whether or
not the LLC would have the power to indemnify such Persons against such
liability under the provisions of this Agreement.
12.2 LIMITATION OF LIABILITY. Notwithstanding anything to the
contrary herein contained, the debts, obligations and liabilities of the LLC
shall be solely the debts, obligations and liabilities of the LLC; and no
Member shall be obligated personally for any such debt, obligation or liability
of the LLC solely by reason of being a Member of the LLC.
ARTICLE XIII
TERMINATION
13.1 TERMINATION. The LLC shall be dissolved, its assets disposed
of and its affairs wound up upon the first to occur of the following:
(a) the expiration of its stated term;
(b) the written consent of the Members;
(c) the Bankruptcy or dissolution of a Member (a
"Dissolution Event"); or
(d) the entry of a decree of judicial dissolution under
the Act.
13.2 AUTHORITY TO WIND UP. The Members shall have all necessary
power and authority required to xxxxxxxx the assets of the LLC, to pay its
creditors, to distribute assets and otherwise wind up the business and affairs
of the LLC. In particular, the Members shall have the authority to continue to
conduct the business and affairs of the LLC insofar as such continued operation
remains consistent, in the judgment of the Members, with the orderly winding up
of the LLC.
13.3 WINDING UP AND CERTIFICATE OF CANCELLATION. The winding up of
the LLC shall be completed when all debts, liabilities and obligations of the
LLC have been paid and discharged or reasonably adequate provision therefore
has been made, and all of the remaining property and assets of the LLC have
been distributed to the Members. Upon the completion of winding up of the LLC,
a Certificate of Cancellation shall be filed with the California Secretary of
State.
14
19
13.4 DISTRIBUTION OF ASSETS. Upon dissolution and winding up of
the LLC, the affairs of the LLC shall be wound up and the LLC liquidated by the
Members. The assets of the LLC shall be distributed as follows in accordance
with the Act:
(a) to creditors of the LLC in the order of priority
provided by law;
(b) to Members and Dissociated Members for any amounts
the LLC owes them, other than in respect of the net credit balance of their
Capital Accounts;
(c) $1,500,000 to Bikers Dream in cancellation of the
Initial Note, which may be paid in cash or in motorcycles valued at cost to
Xxxx Acres;
(d) Xxxx Acres returns the Options to Bikers Dream for
cancellation;
(e) Xxxx Acres retains all rights to the LLC dealers, and
the dealers' contracts, UKC's and UKP's phone numbers and trademarks; and
(f) otherwise to the Members in proportion to their
ownership of Shares, provided that Sections 13.4(c), (d) and (e) shall only
apply in the event Xxxx Acres has given notice pursuant to Section 11.1 that it
does not intend to exercise the Options, and if Xxxx Acres has given notice
that it does intend to exercise the Options then the Initial Note shall be
repaid in full.
ARTICLE XIV
DEFINITIONS
14.1 DEFINITIONS. The following terms shall have the meanings set
forth for purposes of this Agreement:
(a) "ACCOUNTING PERIOD" shall mean for each Fiscal Year
the period beginning on the 1st of January and ending on the 31st of December;
provided however, that the first Accounting Period shall commence on the date
of formation of the LLC and shall end on December 31, 1996; and provided,
further, that a new Accounting Period shall commence on any date on which an
Additional or Substituted Member is admitted to the LLC or a Member ceases to
be a Member for any reason.
(b) "AGREEMENT" shall mean this LLC Agreement as the
same shall be amended from time to time.
(c) "ASSIGNEE" shall mean a transferee or a Permitted
Transferee of a Shares who has not been admitted as a Substitute Member.
15
20
(d) "BANKRUPTCY" shall mean with respect to any Person
that a petition shall have been filed by or against such Person as a "debtor"
and the adjudication of such Person as a bankrupt under the provisions of the
bankruptcy laws of the United States of America shall have commenced, or that
such Person shall have made an assignment for the benefit of its creditors
generally or a receiver shall have been appointed for substantially all of the
property and assets of such Person.
(e) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(f) "DISSOLUTION" of a Member which is not a natural
person shall mean that such Member has terminated its existence, whether
partnership or corporate, wound up its affairs and dissolved; provided,
however, that a change in the membership of any Member that is a general
partnership shall not constitute "Dissolution" hereunder, whether or not the
Member is deemed technically dissolved for partnership law purposes so long as
the business of the Member is continued.
(g) "FISCAL YEAR" shall mean the period from January 1 to
December 31 of each year, or as otherwise required by law.
(h) "MEMBERS" shall mean all Members, including
Substitute Members, and Additional Members, but does not include Assignees.
(i) "NET INCOME OR NET LOSS" shall mean for any
Accounting Period the amount computed as of the last day thereof of the net
income or loss computed under generally accepted accounting principles.
(j) "PERSON" shall mean a natural person, partnership
(whether general or limited and whether domestic or foreign), LLC, foreign
limited liability company, trust, estate, association, corporation, custodian,
nominee or any other individual or entity in its own or representative
capacity.
(k) "SUBSTITUTE MEMBER" shall mean an Assignee who has
been admitted to all the rights of membership pursuant to this Agreement.
(l) "TREASURY REGULATIONS" means regulations issued
pursuant to the Code.
ARTICLE XV
MISCELLANEOUS
15.1 AMENDMENT. This Agreement may be amended only with the
consent of the Members.
15.2 POWER OF ATTORNEY. By signing this Agreement, each Member
designates and appoints the other Member as its true and lawful attorney, in
his name, place and xxxxx, to make,
16
21
execute, sign and file such instruments, documents or certificates which may
from time to time be required by the laws of the United States of America and
the State of California and any political subdivision thereof or any other
state or political subdivision in which the LLC shall do business to carry out
the purposes of this Agreement, except where such action requires the express
approval of the Members hereunder. Such attorney is not hereby granted any
authority on behalf of the undersigned Members to amend this Agreement except
that as attorney for each of the undersigned Members, the Member shall have the
authority to amend this Agreement and the LLC's Articles of Organization as may
be required to give effect to the transactions below following any necessary
approvals or consents of the Members:
(a) Extensions of the term of the LLC;
(b) Withdrawals or distributions; and
(c) Contributions of additional capital.
Each Member shall provide to the other Members copies of all documents
executed pursuant to the power of attorney contained in this Section 15.2.
15.3 LEGENDS. The certificates issued evidencing a Member's
interest in the LLC, each such certificate shall bear a legend to the effect
that the Shares have not been registered under the Securities Act of 1933, as
amended, and are subject to the restrictions on transferability and sale set
forth in this Agreement and under the Act.
15.4 WITHHOLDING TAXES. In the event that the LLC is obligated to
withhold and pay any taxes with respect to any Member, any tax required to be
withheld may be withheld from any distribution otherwise payable to such
Member, or in lieu thereof upon remittance to the appropriate tax authority may
be charged to that Member's Capital Account as if the amount of such tax had
been distributed to such Member.
15.5 FURTHER ASSURANCES. The parties agree to execute and deliver
any further instruments or documents and perform any additional acts which are
or may become necessary to effectuate and carry on the LLC created by this
Agreement.
15.6 BINDING EFFECT. Subject to the restrictions on transfer set
forth in Article X, this Agreement shall be binding on and inures to the
benefit of the Members and their respective transferees, successors, assigns
and legal representatives.
15.7 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
17
22
15.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter herein.
15.9 NOTICES. Any notice or other communication which one or more
Members may desire to give to another Member, shall be in writing, and shall be
deemed effectively given upon personal delivery or upon deposit in any United
States mail box, by registered or certified mail, return receipt requested, or
upon confirmed facsimile transmission, for delivery to such other Member:
(a) at the address or facsimile number shown in the
records of the LLC, except that notice relating to LLC meetings shall be in
accordance with the Act; or
(b) at such other address or facsimile number as such
Member may designate by fifteen (15) days' advance written notice to all other
Members and the Member; provided that for notices given to a Member having an
address outside the United States who has provided a telex address to the LLC,
the Member shall also transmit a copy of such notice by telex to the address so
given.
15.10 EFFECTIVE DATE. This Agreement shall be deemed to be
effective on the date when the Articles of Organization are filed.
15.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts with the same force and effect as if each of the signatories had
executed the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this LLC
Agreement as of the day and year first above written.
BIKERS DREAM, INC.
By:
-----------------------------
XXXX ACRES INVESTMENTS, INC.
By:
-----------------------------
18
