LLC Operating Agreement – BroadVision Inc.
OPERATING AGREEMENT
OF
BROADVISION (DELAWARE) LLC
(a Delaware limited liability company)
November 14, 2008
BROADVISION (DELAWARE) LLC
OPERATING AGREEMENT
This Operating Agreement (the “Operating Agreement”) of
BroadVision (Delaware) LLC, a Delaware limited liability
company (the “Company”), originally made as of August 15, 2007, is amended and
restated as of November 14, 2008 by and among the members listed on Schedule A
hereto.
Whereas, the Company was formed pursuant to the provisions
of the Delaware Limited Liability Company Act (the “Act”), upon the filing of
Certificate of Formation (the “Certificate”) with the Delaware Secretary of
State on December 20, 2006; and
Whereas, the Members desire to enter into this Amended and
Restated Operating Agreement in order to set forth their respective ownership
interests in the Company and the principles by which the Company will be
operated and governed in carrying on its business;
Now, Therefore, in consideration of mutual covenants and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Members agree as follows:
ARTICLE I
Definitions
1.1 Definitions. The
following terms used in this Operating Agreement shall have the following
meanings (unless otherwise expressly provided herein):
(a) “Accounting Period” shall be (i) the Company153s Fiscal
Year if there are no changes in the Members153 respective interests in Company
income, gain, loss or deductions during such Fiscal Year except on the first day
thereof or (ii) any other period beginning on the first day of a Fiscal Year, or
any other day during a Fiscal Year, upon which occurs a change in such
respective interests, and ending on the last day of a Fiscal Year, or on the day
preceding an earlier day upon which any change in such respective interest shall
occur.
(b) “Act” shall mean the Delaware Limited Liability Company
Act, as amended.
(c) “Additional Member” shall mean any Person who or that is
admitted to the Company as an Additional Member pursuant to Article XII hereof.
(d) “Adjusted Asset Value” with respect to any asset shall
be the asset153s adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Adjusted Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market value of
such asset at the time of contribution, as determined by the contributing Member
and the Board and shall be set forth on Schedule A;
(ii) The Adjusted Asset Values of all Company assets shall
be adjusted to equal their respective gross fair market values, as determined by
the Board, and the resulting unrecognized profit or loss allocated to the
Capital Accounts of the Members pursuant to Article X, as of the following
times: (A) the grant of an additional interest in the Company by any new or
existing Member; (B) the distribution by the Company to a Member of more than a
de minimis amount of Company assets, unless all Members receive
simultaneous distributions of either undivided interests in the distributed
property or identical Company assets in proportion to their interests in Company
distributions; and (C) the termination of the Company either by expiration of
the Company153s term or the occurrence of an event of early termination; and (D)
the liquidation of the Company within the meaning of Treasury Regulation
§1.704-1(b)(2)(ii)(g).
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(iii) The Adjusted Asset Values of the Company assets shall
be increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code 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 Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
(e) “Adjusted Capital Account,” with respect to any Member,
shall mean the Member153s Capital Account as adjusted by the items described in
Sections 1.704-2(g)(1), 1.704-2(i)(5) and 1.704-1(b)(2)(ii)(d)(4), (5) and (6)
of the Treasury Regulations.
(f) “Affiliate” with respect to any Person, shall mean (i)
any Person that beneficially holds, directly or indirectly, or otherwise
controls, ten percent or more of such Person153s outstanding securities, (ii) any
Person, ten percent or more of which Person153s outstanding securities are
beneficially held, directly or indirectly, or are otherwise controlled, by such
a Person, and (iii) any Person, ten percent or more of which Person153s
outstanding securities are beneficially held, directly or indirectly, or are
otherwise controlled, by a Person described in (i) above.
(g) “Bankruptcy” of a Person shall mean (i) the filing by a
Person of a voluntary petition seeking liquidation, reorganization, arrangement
or readjustment, in any form, of its debts under the U.S. Bankruptcy Code (or
corresponding provisions of future laws) or any other federal, state or foreign
insolvency law, or a Person153s filing an answer consenting to or acquiescing in
any such petition, (ii) the making by a Person of any assignment for the benefit
of its creditors or the admission by a Person of its inability to pay its debts
as they mature or (iii) the expiration of 60 days after the filing of an
involuntary petition under the Bankruptcy Code (or corresponding provisions of
future laws) seeking an application for the appointment of a receiver for the
assets of a Person, or an involuntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts under any other
federal, state or foreign insolvency law, unless the same shall have been
vacated, set aside or stayed within such 60 day period.
(h) “Board” shall have the meaning set forth therefor in
Section 4.1.
(i) “Capital Account” as of any given date shall mean the
Capital Account of each Member as specified in Section 9.3.
(j) “Capital Contribution” shall mean the amount of money
and the fair market value of any property contributed to the Company by a Member
whenever made net of any liability of such Member assumed by the Company and any
liability secured by property contributed by such Member. Any reference to a
capital contribution of a Member shall include the Capital Contribution made by
a predecessor holder of any Shares held by such Member with respect to such
Shares.
(k) “Capital Transactions” shall mean a sale or other
disposition, whether direct or indirect, of all or substantially all of the
Company153s assets and any merger of the Company, in each case as a result of
which the Members will no longer have an interest in the Company or the net
assets of the Company are or will be distributed in full to the Members.
(l) “Certificate” shall have the meaning set forth therefor
in the recitals hereof.
(m) “Change in Control” means (i) any Transfer (including by
way of merger, consolidation or other reorganization) in one transaction or a
series of related transactions by the Company of the equity of the Company if
the Members of the Company immediately prior to such transaction or series of
related transactions own less than 50% of the Company153s voting power immediately
after such transaction or series of related transactions, or (ii) a Capital
Transaction.
(n) “Class A Member” means each Member holding Class A
Shares, with respect to such Class A Shares. The initial Class A Member is
BroadVision, Inc., which owns all 80 of the authorized Class A Shares.
(o) “Class B Member” means each Member holding Class B
Shares, with respect to such Class B Shares. The initial Class B Member is CHRM
LLC, which owns all 20 of the authorized Class B Shares.
(p) “Code” shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequent superseding federal revenue
laws.
(q) “Company” shall refer to BroadVision (Delaware) LLC.
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(r) “Company Nonrecourse Liabilities” shall mean
“nonrecourse liabilities” as characterized under Section 1.704-2(b)(3) of the
Treasury Regulations. Subject to the foregoing sentence, Company Nonrecourse
Liabilities means liabilities of the Company (or a portion thereof) with respect
to which none of the Members bears the Economic Risk of Loss (other than through
the Member153s indirect interest as a Member in the Company assets subject to the
liability). Any liability of the Company to a Member and any liability
guaranteed by a Member or with respect to which a Member has pledged personal
assets (to the extent the Member may bear the burden of an economic loss
attributable to the liability) shall not be classified as a Company Nonrecourse
Liability.
(s) “Company Property” shall mean any tangible and
intangible personal property now owned or hereafter acquired by the Company,
including, without limitation, all cash, cash equivalents, deposits, accounts
receivable, stock, securities or any other property.
(t) “Dissolution Event” shall have the meaning set forth
therefor in Section 13.1.
(u) “Distributable Cash” shall mean Net Operating Cash Flow;
where “Net Operating Cash Flow” shall mean for any period the Operating Cash
Flow for such period plus depreciation and amortization to the extent reflected
in Operating Cash Flow for such period less (i) the capital expenditures of the
Company for such period determined in accordance with GAAP, (ii) any changes in
net working capital requirements to be met from Operating Cash Flow for such
period as determined by the Board, (iii) all amounts distributed by the Company
pursuant to Section 10.3(a) of this Operating Agreement, (iv) required payments
under Company indebtedness for such period and (v) Reserves; and where
“Operating Cash Flow” shall mean for any period the consolidated gross revenues
of the Company for such period less all operating and nonoperating expenses of
the Company for such period, including all charges of a proper character
(including provision for taxes, if any, and current additions to reserves), all
determined in accordance with GAAP applied on a basis consistent with the
Company153s prior corresponding periods, if any.
(v) “Economic Risk of Loss” shall have the meaning defined
in Treasury Regulations Section 1.704-2(b)(4).
(w) “Fiscal Year” shall mean the Company153s fiscal year. The
Company153s fiscal year-end shall be December 31.
(x) “Funds From Operations” shall mean all Distributable
Cash held by the Company which results from the operation of the business of the
Company from whatever source, except for Funds From Capital Transactions and
Capital Contributions.
(y) “Funds From Capital Transactions” shall mean all
Distributable Cash or other property held by the Company that results from a
Change in Control.
(z) “Invested Capital” shall mean the amount by which a
Member153s Capital Contribution exceeds all distributions made to him through the
date of determination.
(aa) “Manager” shall mean Pehong Chen and any successor
manager appointed in accordance with this Operating Agreement.
(bb) “Member” shall mean the Class A Members and each of the
Class B Members listed on Schedule A hereto, any Additional Member and any
Substituted Member that is, as of a given time, a member of the Company.
(cc) “Member Minimum Gain” shall mean, with respect to each
Member Nonrecourse Debt, an amount equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i).
(dd) “Member Nonrecourse Debt” shall mean any nonrecourse
debt of the Company for which any Member bears the Economic Risk of Loss.
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(ee) “Member Nonrecourse Deductions” shall mean, with
respect to a Member Nonrecourse Debt, the excess, if any, of the net increase,
if any, in the amount of Member Minimum Gain attributable to such Member
Nonrecourse Debt during an Accounting Period over the aggregate amount of any
distributions during such Accounting Period to such Member that bears the
Economic Risk of Loss for such Member Nonrecourse Debt to the extent such
distributions are from the proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(2).
(ff) “Net Profit or Net Loss” shall be an amount computed
for each Accounting Period as of the last day thereof that is equal to the
Company153s taxable income or loss for such Accounting Period, determined under
the accrual method of accounting in accordance with Section 703(a) of the Code
(for this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Profit or Net
Loss pursuant to this Section 1.1(ff) shall be added to such taxable income or
loss;
(ii) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in computing Net Profit or Net Loss pursuant to this
definition shall be subtracted from such taxable income or loss;
(iii) Gain or loss resulting from any disposition of a
Company asset with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Adjusted Asset Value
of the asset disposed of rather than its adjusted tax basis;
(iv) In the event of a distribution in kind of Company
Property to the Members, the gain or loss that would result from a sale of such
Company Property at fair market value shall be added to such taxable income or
loss; and
(v) Items that are specially allocated pursuant to Section
10.2 hereof shall not be taken into account in computing Net Profit or Net Loss.
(gg) “Operating Agreement” shall mean this Amended and
Restated Operating Agreement as originally executed and as amended in accordance
with the terms of this Operating Agreement from time to time.
(hh) “Person” shall mean any individual or corporation,
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or other entity, including any
government or political subdivision or any agency or instrumentality thereof and
the heirs, executors, administrators, legal representatives, successors, and
permitted assigns of such “Person” where the context so admits.
(ii) “Regulatory Allocations” shall mean the allocations
pursuant to Sections 10.2(a) through 10.2(c) of this Operating Agreement.
(jj) “Reserves” shall mean, with respect to any Fiscal Year,
funds set aside or amounts allocated during such Fiscal Year to reserves that
shall be maintained in amounts deemed sufficient by the Board for working
capital and to pay taxes, insurance, debt service or other costs or expenses
incident to the ownership or operation of the Company153s business.
(kk) “Restricted Share Agreements” shall mean those certain
agreements entered into from time to time between the Company and certain of the
Members.
(ll) “Securities Act” shall mean the Securities Act of 1933,
as amended.
(mm) “Shares” shall mean the capital Shares issued by the
Company to the Members, which represent each Member153s interest in the Company.
The Company is authorized to issue Class A Shares and Class B Shares.
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(nn) “Substitute Member” shall mean any Person who or that
is admitted to the Company as a Substitute Member pursuant to Articles XI and
XII of this Operating Agreement.
(oo) “Transfer” means any sale, assignment, encumbrance,
hypothecation, pledge, conveyance in trust, gift, transfer by request, devise or
descent, or other transfer or disposition of any kind, including, but not
limited to, transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, of any of the
Shares.
(pp) “Treasury Regulations” shall mean the Income Tax
Regulations, including temporary regulations, promulgated under the Code, as
amended from time to time.
ARTICLE II
Formation Of Company
2.1 Formation. The
Company was organized as a Delaware limited liability company under and pursuant
to the Act upon the filing by the Company of its Certificate of Formation with
the Delaware Secretary of State.
2.2 Name. The name of the
Company is BroadVision (Delaware) LLC.
2.3 Principal Place of Business.
The principal place of business of the Company shall be located in
Redwood City, California. The Company may locate its places of business and
registered office at any other place or places as the Board may from time to
time deem advisable. The Board shall give prompt notice of any such change to
each Member.
2.4 Registered Office and Registered Agent. The Company153s
registered office in the state of Delaware shall be at the office of its
registered agent for service of process, and the name and address of its initial
registered agent for service of process shall be Corporation Trust Center, 1209
Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The
Managers may change the Company153s agent for service of process from time to
time.
2.5 Term. The Company153s
existence commenced upon the filing with the Secretary of State of the State of
Delaware of the Certificate and shall continue until the Company is dissolved in
accordance with either the provisions of this Operating Agreement or the Act.
Purposes Of Company
3.1 Company Purposes.
The purpose of the Company is to engage in any lawful act or activity
for which a limited liability company may be organized under the laws of the
State of Delaware, incident, necessary, advisable or desirable to carry out the
foregoing. The Company shall have all powers available to limited liability
companies under the Act to make and perform all contracts and to engage in all
actions and transactions necessary or advisable to carry out the purposes of the
Company.
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ARTICLE IV
Management of Company
4.1 Board of Managers.
(a) The Company shall have a board of Managers (the
“Board”), which shall initially consist of a single manager, but may be
increased or decreased by the affirmative vote of the Class A Member. The
Managers shall be appointed by the Class A Member.
(b) Subject to the provisions of law or any limitations in
the Act, the business and affairs of the Company shall be managed and all
powers, including without limitation, the redemption or repurchase of Shares,
shall be exercised, by or under the direction of the Board; provided
that no Manager shall have the authority to bind the Company unless authorized
to do so by the Board.
(c) Except as specifically set forth in this Operating
Agreement, the Members hereby delegate all power and authority to manage the
business and affairs of the Company to the Board. The Board shall delegate the
management of the day-to-day operation of the business of the Company to such
officers as the Board determines appropriate; provided that the
business and affairs of the Company shall be managed and all powers shall be
exercised under the ultimate direction of the Board.
(d) Except as otherwise expressly provided in this
Agreement, the Members expressly waive, to the fullest extent permitted by law,
any and all rights and benefits such Members might otherwise have under the Act.
Except as expressly provided in this Agreement, the Members shall have no right
to petition a court for the dissolution of the Company.
4.2 Reimbursement of Expenses.
The Managers will receive from the Company reimbursement for all
reasonable out-of-pocket expenses incurred in connection with their service as
Managers in accordance with such guidelines as may be established by the Board
from time to time.
4.3 Meetings of the Board of
Managers; Action by the Board.
(a) The Board (and any committees thereof) shall meet at
such times and from time to time as the members of the Board designate, upon
reasonable notice to the members of the Board.
(b) At all meetings of the Board, a majority of the Board
members shall constitute a quorum for the transaction of business. Unless
otherwise expressly stated in this Agreement, the act of a majority of the Board
members present at any meeting at which there is a quorum shall be the act of
the Board. The Board may also act by unanimous written consent.
(c) Unless otherwise expressly stated in this Agreement, the
approval of the Board will be deemed to be occasioned by the affirmative vote or
consent of a majority of the members of the Board.
(d) Any resolutions of or actions taken by the Board shall
be binding and the officers shall be bound to act in accordance with any such
recommendations or actions.
4.4 Committees of the Board.
The Board may designate one or more committees, each consisting of two
or more Managers, to serve at the pleasure of the Board. Any such committee
shall have authority to act in the manner and to the extent provided in the
resolution of the Board, and may have all the authority of the Board in the
management of the business and affairs of the Company.
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4.5 Fiduciary Duties of the Managers. A member of the Board
shall perform the duties of a member of the Board, including duties as a member
of any committee of the Board upon which the member may serve, in good faith, in
a manner such member believes to be in the best interests of the Company and its
equity holders and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances; provided, however, that if the Company is in a zone of
insolvency, a member of the Board may also consider the best interests of the
creditors in performing his or her duties as a member of the Board (in a manner
consistent with Delaware corporate fiduciary duties).
4.6 Resignation. A Manager may resign at any time by giving
written notice to the Members. The resignation of a Manager shall take effect
upon receipt of notice thereof or at such later time as shall be specified in
such notice; unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
4.7 Removal. Any Manager
may be removed as a Manager at any time, with or without cause, by the Class A
Member.
4.8 Vacancies. If a Manager ceases to be a Manager for any
reason (other than a reduction in the number of Managers by the Class A Member),
a successor Manager may be appointed by the Class A Member.
4.9 Managers153 Duty to Company. Managers may have other
business interests and may engage in other activities in addition to those
relating to the Company. Neither the Company nor any Member shall have any
right, by virtue of this Operating Agreement, to share or participate in such
other investments or activities of the Managers, its directors or officers or to
the income or proceeds derived therefrom.
4.10 Additional Capital. The Company shall not raise
additional capital without the approval of the Managers. No Member shall be
required to make any additional contribution to the Company153s capital.
4.11 Reports to Members.
As soon as practicable after the end of any Fiscal Year but in any
event within 120 days thereafter, the Board shall cause the Company to transmit
to each Member of the Company and to each Person (or such Member153s or Person153s
legal representative) who was a Member during any part of the Fiscal Year in
question, a copy of the Member153s Schedule K-1 thereto. Notwithstanding anything
contained in this agreement to the contrary, the Members shall be permitted to
inspect and copy any documents and records of the Company upon reasonable
request.
Officers
5.1 Appointment of Officers. The day-to-day management of
the business and affairs of the Company may be vested in one or more officers,
at the sole discretion of the Board. The Board shall appoint such officers of
the Company as the Board shall deem necessary and appropriate, which officers
may include, but shall not be limited to: (a) Chief Executive Officer; (b)
President; (c) one or more Vice Presidents; (d) Secretary; and (e) Treasurer or
Chief Financial Officer. Any two or more of such offices may be occupied by the
same person. Unless and until otherwise determined by the Board, Pehong Chen
shall serve as the Company153s Chief Executive Officer, Chief Financial Officer
and Secretary.
5.2 Tenure and Duties of Officers. Except where herein
expressly provided to the contrary, and subject to the discretion of the Board,
all decisions by the officers with respect to the day-to-day management of the
Company shall be binding on the Company and each of the Managers and the Members
shall not have rights of management, control, or approval over the day-to-day
business and affairs of the Company. Each officer shall carry out its fiduciary
obligations to the Members to the extent required by applicable law, and subject
to the provisions of Article VII. Any officer may be removed, at any time, by
the Board in its sole discretion. Election of an additional officer or an
officer to fill a vacancy, if any, shall be by the affirmative vote of the
Board. Each officer shall hold office at the pleasure of the Board and until his
or her successor shall have been duly elected and qualified, unless sooner
removed.
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5.3 Power and Authority of
Officers. In addition to the powers now or hereafter granted to an
officer under the Act, subject to the conditions and limitations set forth in
this Agreement, the officers shall have full power and authority to do all
things deemed necessary or desirable to conduct the day-to-day business of the
Company, including, without limitation, to take all actions, enter into all
contracts and retain such services they deems necessary or desirable to carry
out the Company business and to preserve Company assets and interests, to enter
into agreements and execute instruments in the name of the Company on such terms
as they deem advisable, and to execute loans, mortgages, deeds of trust and any
other security agreements or documents incident to obtaining any financing
deemed necessary or appropriate by the Board.
5.4 Prohibited Action. The officers shall not, unless the
Board has given prior written approval:
(a) do any act in contravention of this Agreement in its
present form or as amended;
(b) do any act that would make it impossible to carry on the
ordinary business of the Company;
(c) confess a judgment against the Company;
(d) settle any claim the Company may have against an officer
or its Affiliates;
(e) amend this Agreement if such amendment materially and
adversely affects the rights or duties of a Member;
(f) admit an additional officer or a substituted officer; or
(g) take any action that would constitute a Capital
Transaction or Change in Control.
To the extent the Board153s consent is required for any of the foregoing
matters, the Board shall provide their consent or disapproval in writing to the
officers within 15 days after request by the officers. The failure of the Board
to provide such written consent or disapproval within said time period shall be
deemed disapproval by the Board to the matter under consideration.
ARTICLE VI
Rights And Obligations Of Members
6.1 Limitation of Liability. Each Member153s liability shall
be limited as set forth in the Act and other applicable law. Except as otherwise
provided by the Act or as specifically agreed in writing by a Member, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or
otherwise, shall be the debts, obligations and liabilities solely of the
Company, and the Members of the Company shall not be obligated personally for
any of such debts, obligations or liabilities solely by reason of being a Member
of the Company.
6.2 Nature of Rights and Obligations. Except as otherwise
expressly provided herein, nothing contained in this Operating Agreement shall
be deemed to constitute a Member an agent or legal representative of the other
Members. A Member shall not have any authority to act for, or to assume any
obligation or responsibility on behalf of, any other Member or the Company.
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6.3 Member Access to Records.
Upon written request of any Member, setting forth the purpose for such
request, each Member shall have the right, during regular business hours, to
inspect and copy such Company documents at the Member153s expense as are set forth
in Section 10.7.
6.4 Certain Actions Requiring Member Approval.
Notwithstanding any other provision in this Operating Agreement to the contrary,
without the approval of the Class A Member, the Company may not:
(a) sell, exchange or otherwise dispose of all, or
substantially all of the Company153s assets;
(b) merge or consolidate the Company with or into any other
entity;
(c) establish additional classes of Shares or increase the
number of authorized Shares;
(d) alter the primary purpose of the Company;
(e) take any act which would make it impossible to carry on
the ordinary business of the Company; or
(f) amend this Operating Agreement or the Company153s
Certificate of Formation (other than an amendment to Schedule A to reflect
permitted Transfers or issuances of Shares not prohibited hereby).
Certain Matters Concerning
Members, Managers And Executive Officers
7.1 Liability of Members, Managers and Officers;
Indemnification.
(a) No Member, Manager or officer of the Company shall be
liable, in damages or otherwise, to the Company or any Member for any act or
omission performed or omitted to be performed by it in good faith (except for
intentional misconduct or recklessness) pursuant to the authority granted to
such Member, Manager or officer of the Company by this Operating Agreement or by
the Act.
(b) To the fullest extent permitted by the laws of Delaware,
the Company shall indemnify and hold harmless each Member, Manager and their
respective officers, directors, shareholders, members or partners and each
Officer of the Company (each, an “Indemnitee”), from and against any and all
losses, claims, demands, costs, damages, liabilities (joint or several),
expenses of any nature (including reasonable attorneys153 fees and disbursements),
judgments, fines, settlements and other amounts (“Damages”) arising from any and
all claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which an Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the business of the Company, regardless of whether an Indemnitee continues to
be a Member, Manager or an officer, director, shareholder, member or partner of
such Member or Manager or an officer of the Company at the time any such
liability or expense is paid or incurred, except for any Damages based upon,
arising from or in connection with any act or omission of an Indemnitee
committed without authority granted pursuant to this Operating Agreement or in
bad faith or otherwise constituting recklessness or willful misconduct or gross
negligence.
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(c) Expenses (including reasonable attorneys153 fees and
disbursements) incurred in defending any claim, demand, action, suit or
proceeding, whether civil, criminal, administrative or investigative, subject to
Section 7.1(b) hereof, may be paid (or caused to be paid) by the Company in
advance of the final disposition of such claim, demand, action, suit or
proceeding upon receipt of an undertaking by or on behalf of the Indemnitee to
repay such amount if it shall ultimately be determined, by a court of competent
jurisdiction from which no further appeal may be taken or the time for any
appeal has lapsed (or otherwise, as the case may be), that the Indemnitee is not
entitled to be indemnified by the Company as authorized hereunder or is not
entitled to such expense reimbursement.
(d) The indemnification provided by Section 7.1(b) hereof
shall be in addition to any other rights to which an Indemnitee may be entitled
under any agreement or vote of the Members, as a matter of law or otherwise,
both (i) as to action in the Indemnitee153s capacity as a Member, Manager or as an
officer, director, shareholder, member or partner of a Member or Manager or as
an Officer of the Company, and (ii) as to action in another capacity, and shall
continue as to an Indemnitee who has ceased to serve in such capacity and shall
inure to the benefit of the heirs, successors, assigns, administrators and
personal representatives of the Indemnitee.
(e) Any indemnification hereunder shall be satisfied only
out of the assets of the Company, and the Members shall not be subject to
personal liability by reason of these indemnification provisions.
(f) The indemnification provided by this Section 7.1 shall
be in addition to any other rights to which each Indemnitee may be entitled
under any agreement or vote of the Members, as a matter of law or otherwise,
both as to action in the Indemnitee153s capacity as a Member or as an officer,
director, employee, shareholder, member or partner of a Member or of an
Affiliate, and shall inure to the benefit of the heirs, successors, assigns,
administrators and personal representatives of the Indemnitee.
(g) The Company may purchase and maintain insurance on
behalf of one or more Indemnitees and other Persons against any liability which
may be asserted against, or expense which may be incurred by, any such Person in
connection with the Company153s activities, whether or not the Company would have
the power to indemnify such Person against such liability under the provisions
of this Operating Agreement.
(h) An Indemnitee shall not be denied indemnification in
whole or in part under this Section 7.1 because the Indemnitee had an interest
in the transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Operating Agreement.
(i) The provisions of this Section 7.1 are for the benefit
of each Indemnitee and its heirs, successors, assigns, administrators and
personal representatives, and shall not be deemed to create any rights for the
benefit of any other Persons.
7.2 Other Matters Concerning the
Members, Managers and Officers of the Company.
(a) Each Member, Manager and officer of the Company may rely
on, and shall be protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by the proper
party or parties.
(b) For purposes of this Operating Agreement, each Member,
Manager and officer of the Company may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, other consultants and
advisers reasonably selected by it and any written advice or written opinion of
any such Person as to matters which such Member, Manager and officer of the
Company reasonably believes to be within such Person153s professional or expert
competence, and any act or omission, if done or omitted to be done in good faith
reliance upon any such advice or opinion, will be conclusively presumed not to
constitute fraud or willful or reckless misconduct.
~ 10 ~
Meetings Of Members
8.1 Meetings. Meetings of the Members shall be held at such
date and time as the Board may fix from time to time. Additionally, a special
meeting may be called by any Member or Members holding more than 40% of the
Shares.
8.2 Place of Meetings. The Board may designate any place
within the United States as the place of meeting for any meeting of the Members.
If no designation is made, or if a special meeting is called by any Member or
Members pursuant to Section 8.1, the place of meeting shall be the principal
executive office of the Company.
8.3 Notice of Meetings. Except as provided in Section 8.6,
written notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less than five
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the Board or person calling the meeting, to each
Member entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered as provided in Section 14.1.
8.4 Meeting of all Members. If all of the Members consent to
the holding of a meeting at such time and place, such meeting shall be valid
without call or notice, and at such meeting lawful action may be taken.
8.5 Record Date. For the
purpose of determining Members entitled to notice of or to vote at any meeting
of Members or any adjournment thereof, or Members entitled to receive payment of
any distribution, or in order to make a determination of Members for any other
purpose, the date on which notice of the meeting is mailed or the date on which
the resolution declaring such distribution is adopted, as the case may be, shall
be the record date for such determination of Members. When a determination of
Members entitled to vote at any meeting of Members has been made as provided in
this Section 8.5, such determination shall apply to any adjournment thereof.
8.6 Quorum. Members holding a majority of the Class A
Shares, present in person or represented by proxy, shall constitute a quorum at
any meeting of Members. In the absence of a quorum at any such meeting, Members
holding a majority of the Class A Shares so represented may adjourn the meeting
from time to time for a period not to exceed 60 days without further notice.
However, if the adjournment is for more than 60 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each Member of record entitled to vote
at the meeting. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal during such meeting of Members holding Interests whose absence would
cause less than a quorum.
8.7 Manner of Acting. The affirmative vote of Class A
Members holding a majority of the Class A Shares shall be the act of the Members
unless the vote of a greater or lesser proportion or number is otherwise
required by the Act or this Operating Agreement. The Class B Shares shall have
no voting rights.
~ 11 ~
8.8 Proxies. At all
meetings of Members, a Member may vote in person or by proxy executed in writing
by the Member or by a duly authorized attorney-in-fact. Such proxy shall be
filed with the Board before or at the time of the meeting. No proxy shall be
valid after 11 months from the date of its execution, unless otherwise provided
in the proxy.
8.9 Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting if
the action is evidenced by one or more written consents describing the action
taken, signed and delivered to the Secretary within 60 days of the record date
for that action, by Members having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting at which
all Members entitled to vote on that action were present and voted. All such
consents shall be delivered to the Secretary of the Company for inclusion in the
minutes or for filing with the Company records. Action taken under this Section
8.9 is effective when consents from the Members whose aggregate Shares are
required to authorize the proposed action shall have been received by the
Secretary unless the consent specifies a different effective date. Any Member
giving a written consent may revoke the consent by a writing received by the
Secretary before written consents representing the number of votes required to
authorize the proposed action have been received by the Secretary. The record
date for determining Members entitled to take action without a meeting shall be
the date the first Member signs a written consent. If the consents of all
Members entitled to vote have not been solicited in writing, and if the
unanimous written consent of all such Members shall not have been received, the
Secretary shall give prompt notice of any action approved by the Members without
a meeting to those Members entitled to vote on such matters who have not
consented thereto in writing.
8.10 Waiver of Notice. When any notice is required to be
given to any Member, a waiver thereof in writing signed by the person entitled
to such notice, whether before, at or after the time stated therein, shall be
equivalent to the giving of such notice.
Contributions To The Company,
Shares And Capital Accounts
9.1 Capital Contributions. The Capital Contributions, if
any, of each Member have been made and are set forth on Schedule A hereto, as
are the Share holdings of each Member.
No Member shall be required to make an additional Capital Contribution.
9.2 Shares. As of the date hereof, each Member153s interest in
the Company shall be represented by Shares of membership interest. The Company
has authorized the issuance of 100 Shares of which 80 are Class A Shares and 20
are Class B Shares. The number of Shares held by each Member as of the date
hereof is set forth on Schedule A. Additional Shares (including new classes or
series of Shares) may from time to time be issued by the Board in accordance
with this Operating Agreement.
~ 12 ~
9.3 Capital Accounts.
(a) A separate Capital Account will be maintained for each
Member.
(i) To each Member153s Capital Account there shall be credited
(A) such Member153s Capital Contributions, (B) such Member153s distributive share of
Net Profits and any items in the nature of income or gain that are specially
allocated pursuant to Section 10.2, and (C) the amount of any Company
liabilities assumed by such Member or that are secured by any Property
distributed to such Member;
(ii) To each Member153s Capital Account there shall be debited
(A) the amount of money and the fair market value of any Property distributed to
such Member pursuant to any provision of this Operating Agreement, (B) such
Member153s distributive share of Net Losses and any items in the nature of
expenses or losses that are specially allocated pursuant to Section 10.2, and
(C) the amount of any liabilities of such Member assumed by the Company or that
are secured by any property contributed by such Member to the Company.
(b) In the event of a permitted sale or exchange of all or
part of a Member153s 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 interest.
(c) The manner in which Capital Accounts are to be
maintained pursuant to this Section 9.3 is intended, and shall be construed so
as, to comply with the requirements of Code Section 704(b) and the Treasury
Regulations promulgated thereunder.
(d) The Members153 Capital Accounts are subject to adjustment
as provided in Section 1.1(e).
9.4 Withdrawal of Capital. A Member shall not be entitled to
demand or receive from the Company the liquidation of his interest in the
Company until the Company is dissolved in accordance with the provisions hereof
and other applicable provisions of the Act.
Allocations, Income Tax Elections And Reports
10.1 Allocation of Profits and Losses.
(a) Allocation of Net Profits. Except as provided in Section
10.1(c), the Net Profits of the Company for each Accounting Period shall be
allocated among the Class A Members in proportion to their respective Class A
Shares.
(b) Allocation of Net Losses. Except as provided in Section
10.1(d), the Net Losses of the Company for each Accounting Period shall be
allocated among the Members as follows:
(i) First, among the Class A Members in proportion to and in
the amount of the excess, if any, of the Net Profits allocated under Section
10.1(a) after the date of this Operating Agreement but not distributed over
allocations of Net Loss after the date of this Operating Agreement;
(ii) Second, to the Members in proportion to their
respective Capital Account Balances until allocation of Net Losses to any such
Member would result in such Member having an Adjusted Capital Account balance
less than zero (0) at the end of such Accounting Period;
~ 13 ~
(iii) Third, to any Members with positive Adjusted Capital
Account balances in proportion to such positive Adjusted Capital Account
balances; and
(iv) Then, after all Members have an Adjusted Capital
Account balance of zero, to all Members in proportion to their respective
Shares.
(c) Allocation of Net Profit from a Capital Transaction.
The Net Profit from a Capital Transaction shall be allocated as follows:
(i) First, to each Member until its Capital Account balance
is equal to the amount of its Invested Capital, pro rata in proportion to the
maximum amount allocable to each Member under this Section 10.1(c)(i); and
(ii) Then, to the Members pro rata in proportion to their
respective Shares.
(d) Allocation of Net Loss from a Capital Transaction. The
Net Loss from a Capital Transaction shall be allocated as follows:
(i) First, among the Members in proportion to and in the
amount of the excess, if any, of the undistributed Net Profits previously
allocated under Section 10.1(a) over prior allocations of Net Loss;
(ii) Second, to the Members in proportion to their
respective Adjusted Capital Account balances until the allocation of Net Loss to
any Member would result in such Member having an Adjusted Capital Account
balance less than zero;
(iii) Third, to any Members with positive Adjusted Capital
Account balances in proportion to such Adjusted Capital Account balances; and
(iv) Then, to all Members in proportion to their respective
Shares.
10.2 Special
Allocations.
Notwithstanding Section 10.1,
(a) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, items
of Company income and gain shall be specially allocated to each such Member in
an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the deficit balance of the Adjusted Capital Account of
such Member as quickly as possible; provided that an allocation
pursuant to this Section 10.2(a) shall only be made if and to the extent such
Member would have a deficit balance in its Adjusted Capital Account after all
other allocations provided for in Section 10.1 and Section 10.2 have been made
as if this Section 10.2(a) were not in this Operating Agreement.
~ 14 ~
(b) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Accounting Period which is in excess
of the sum of (i) the amount such Member is obligated to restore pursuant to any
provision of this Operating Agreement, if any, and (ii) the amount such Member
is deemed to be obligated to restore pursuant to the penultimate sentence of
Treasury Regulations Sections l.704-2(g)(1) and 1.704-2(i)(5), each such Member
shall be specially allocated items of Company income and gain in the amount of
such excess as quickly as possible; provided that an allocation
pursuant to this Section 10.2(b) shall only be made if and to the extent that
such Member would have a deficit Capital Account in excess of such sum after all
other allocations provided for in Section 10.1 and Section 10.2 have been made
as if Section 10.2(a) hereof and this Section 10.2(b) were not in this Operating
Agreement.
(c) Minimum Gain Chargeback. This Section 10.2(c) hereby
incorporates by reference the “minimum gain chargeback” provisions of Treasury
Regulation Section 1.704-2. In general, upon a reduction of the Company153s
minimum gain, the preceding sentence shall require that items of income and gain
be allocated among the Members in a manner that reverses prior allocations of
Nonrecourse and Member Nonrecourse deductions (as defined in such Treasury
Regulations) as well as reductions in the Members153 Capital Account balances
resulting from distributions that are allocable to increases in the Company153s
minimum gain. Subject to the provisions of Section 704 of the Code and the
regulations thereunder, if the Board determines at any time that operation of
such “minimum gain chargeback” provisions likely will not achieve such a
reversal by the conclusion of the liquidation of the Company, the Board shall
adjust the allocation provisions of this Section 10.2(c) as necessary to
preserve as best as possible the underlying economic objectives of the Members.
(d) Curative Allocations. The allocations set forth in
Sections 10.2(a), (b) and (c) (the “Regulatory Allocations”) are intended to
comply with certain requirements of the Treasury Regulations. It is the intent
of the Members that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Company income, gain, loss or deduction pursuant to this Section
10.2(d). Therefore, notwithstanding any other provision of this Section 10
(other than the Regulatory Allocations), the Company shall make such offsetting
special allocations of Company income, gain, loss or deduction in whatever
manner the Board determines appropriate so that, after such offsetting
allocations are made, each Member153s Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had the
Regulatory Allocations not been part of the Agreement and all Company items were
allocated pursuant to Section 10.1.
(e) Code Section 704(c) Allocations. In accordance with Code
Section 704(c) and the Treasury Regulations thereunder:
(i) Income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for income tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted tax basis of such property to the Company and its initial
Adjusted Asset Value. Such allocation shall be made in accordance with the
traditional method with curative allocations described by § 1.704-3(c) of the
Treasury Regulations.
(ii) In the event the Adjusted Asset Value of any Company
asset is adjusted pursuant to Section 1.1(d)(ii) hereof, subsequent allocations
of income, gain, loss, and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for Federal
income tax purposes and its Adjusted Asset Value in the same manner as under
Code Section 704(c) and the Treasury Regulations thereunder.
(f) Company Nonrecourse Deductions. Any Company Nonrecourse
Deductions for any Fiscal Year or Accounting Period shall be allocated to the
Members in accordance with their respective Interests.
(g) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year or Accounting Period shall be specially allocated
to the Member who bears the Economic Risk of Losses with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with Treasury Regulations Section 1.704-2(i).
~ 15 ~
(h) Company Minimum Gain Chargeback. Notwithstanding any
other provision of this Article X, if there is a net decrease in Company Minimum
Gain during any Fiscal Year, each Member shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years) in
an amount equal to the greater of (i) the portion of such Member153s share of the
net decrease in Company Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(g), that is allocable to the disposition of Company
Property subject to such Nonrecourse Liability, determined in accordance with
Treasury Regulations Section 1.704-2(f), or (ii) the negative balance standing
in such Member153s Capital Account. Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Section 1.704-2(f)(6). This
Section 10.3(c) is intended to comply with the minimum gain chargeback
requirements set forth in Treasury Regulations Section 1.704-2(f)(6) and shall
be interpreted consistently therewith.
(i) Member Minimum Gain Chargeback. Notwithstanding any
other provision of this Article X (except Section 10.3(c), which shall be
applied first), if there is a net decrease in Member Minimum Gain attributable
to a Member Nonrecourse Debt during any Fiscal Year or Accounting Period, each
Member who has a share of the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income and gain for
such year (and if necessary, subsequent years) in an amount equal to the greater
of (i) the portion of such Member153s share of the net decrease in Member Minimum
Gain attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(5), that is allocable to the disposition
of Company Property subject to such Member Nonrecourse Debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(4) or (ii) the negative
balance standing in such Member153s Capital Account. Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(4). This Section 10.3(d) is intended to comply with the minimum gain
chargeback requirements set forth in Treasury Regulations Section 1.704-2(i)(4)
and shall be interpreted consistently therewith.
10.3 Distributions.
(a) Mandatory Distributions. Subject to applicable law and
any limitations contained elsewhere in this Operating Agreement, the Board shall
distribute cash to the Members pro rata based on their respective allocable
shares of the Company153s taxable income for the Fiscal Year in an amount equal to
the product of (i) the Tax Percentage and (ii) the Company153s taxable income for
such Fiscal Year determined in accordance with Section 703(a) of the Code as
reflected on the Schedule K-1153s in respect of each Share (reduced by
distributions made to such member during such Fiscal Year pursuant to Sections
10.3(b) and (c)). For purposes hereof, “Tax Percentage” shall mean initially 45%
and shall be adjusted from time to time by the Board in response to changes in
the tax rates applicable to individuals under the Code and under the state
income tax laws of the State of California and in response to any other factors
which cause the distributions under this Section 10.3(a) to be less than a
Member153s tax liability in respect of each Share.
(b) Distributions of Funds From Operations. Subject to
applicable law and any limitations contained elsewhere in this Operating
Agreement, including Section 10.3(e), the Board may elect from time to time to
distribute Funds From Operations to the Class A Members, and such distributions
shall be to all Class A Members, pro rata in proportion to the Shares held by
the Class A Members.
(c) Distributions of Funds From Capital Transactions.
Subject to applicable law and any limitations contained elsewhere in
this Operating Agreement, the Managers shall distribute Funds From Capital
Transactions to the Members. Any distribution of Funds From Capital Transactions
made under this Section 10.3(c) shall be made to the Members in the amounts of
and in proportion with their Adjusted Capital Account balances.
(d) Tax Withholding. The Company shall comply with
withholding requirements under federal, state and local law and shall remit
amounts withheld to, and file required forms with, the applicable jurisdictions.
To the extent the Company is required to withhold and pay over any amounts to
any authority with respect to distributions or allocations to any Member, the
amount withheld shall be treated as a distribution in the amount of the
withholding to that Member. If the amount of withholding tax paid by the Company
was not withheld from actual distributions, the Company may, at its option, (i)
require the Member to promptly reimburse the Company for such withholding or
(ii) reduce any subsequent distributions by the amount of such withholding. Each
Member agrees to furnish the Company with any representations and forms as shall
reasonably be requested by the Company to assist it in minimizing or eliminating
and in determining the extent of, and in fulfilling, its withholding
obligations.
~ 16 ~
(e) Limitation on Distributions; Unvested Shares. Cash
otherwise distributable to a Member with respect to Shares that are unvested
under any agreement between the Member and the Company shall be retained by the
Company and shall be distributed to the Member without interest as and when such
Shares vest, or if such unvested Shares fail to vest and are cancelled, to all
other Members in proportion to their respective Shares. To the extent any
unvested Shares are cancelled, the affected Member153s Capital Account shall be
reduced by the amount of any undistributed Net Profit previously allocated to
such Member153s Capital Account with respect to the cancelled unvested Shares and
the amount of such reduction shall be allocated to the Capital Accounts of the
other Members in proportion to their respective Shares.
10.4 Limitation Upon
Distributions.
(a) No distribution shall be declared and paid to a Member
in violation of the Act.
(b) A Member who receives a distribution in violation of the
Act shall be liable to the Company for the amount of the distribution to the
extent provided in the Act.
(c) No distribution shall be made to a Member to the extent
such distribution would create or increase a deficit in such Member153s Capital
Account.
10.5 Accounting Principles. For financial accounting
purposes, the profits and losses of the Company shall be determined in
accordance with generally accepted accounting principles applied on a consistent
basis under the accrual method of accounting.
10.6 Interest on and Return of Capital Contributions. No
Member shall be entitled to interest on its Capital Contribution or to return of
its Capital Contribution. In addition, no Member shall have the right to
withdraw any portion of such Member153s Capital Account. Except as required by the
Company, no Member shall be personally liable to any other Member for the return
of any Capital Contributions (or any additions thereto), it being agreed that
any distribution as may be made from time to time shall be made solely from the
assets of the Company and only in accordance with the terms of this Operating
Agreement.
10.7 Records and Reports. At the expense of the Company, the
Board shall maintain records and accounts of all operations and expenditures of
the Company for a period of five years from the end of the Fiscal Year during
which the last entry was made on such record, the first two years in the
principal office of the Company. At a minimum the Company shall keep the
following records:
(a) A current list of the full name and last known business
address of each Manager and each Member;
(b) A copy of the Certificate and all amendments thereto,
together with executed copies of any written powers of attorney pursuant to
which the Operating Agreement and any certificate and all amendments thereto
have been executed;
(c) Copies of the Company153s federal, foreign, state and
local income tax returns and reports, if any, for the three most recent years;
(d) Copies of the Operating Agreement and all amendments
thereto;
(e) True and full information regarding the status of the
business and financial condition of the Company, including financial statements
of the Company for the three most recent years; and
(f) True and full information regarding the amount of cash
and a description and statement of the agreed value of any other property or
services contributed by each Member and which each Member has agreed to
contribute in the future, and the date on which each became a Member.
~ 17 ~
10.8 Returns and Other Elections.
The Board shall cause the preparation and timely filing of all tax
returns required to be filed by the Company pursuant to the Code and all other
tax returns deemed necessary and required in each jurisdiction in which the
Company does business. Copies of such returns, or pertinent information
therefrom, shall be furnished to the Members within a reasonable time after the
end of the Company153s Fiscal Year. All elections permitted to be made by the
Company under federal or state laws shall be made by the Board in its
discretion.
10.9 Tax Matters Partner. BroadVision, Inc. is hereby
designated the Tax Matters Partner of Company for purposes of Chapter 63 of the
Code and the Treasury Regulations thereunder. The Tax Matters Partner shall
employ experienced tax counsel to represent the Company in connection with any
audit or investigation of the Company by the Internal Revenue Service and in
connection with all subsequent administrative and judicial proceedings arising
out of such audit. If the Tax Matters Partner is required by law or regulation
to incur fees and expenses in connection with tax matters not affecting all the
Members, then the Tax Matters Partner may, in its sole discretion, seek
reimbursement from those Members on whose behalf such fees and expenses were
incurred. The Tax Matters Partner shall keep the Members informed of all
administrative and judicial proceedings, as required by Section 6223(g) of the
Code, and shall furnish to each Member, if such Member so requests in writing, a
copy of each notice or other communication received by the Tax Matters Partner
from the Internal Revenue Service, except such notices or communications as are
sent directly to such requesting Member by the Internal Revenue Service. The
relationship of the Tax Matters Partner to the Members shall be that of a
fiduciary, and the Tax Matters Partner shall have fiduciary obligations to
perform its duties as Tax Matters Partner in such manner as will serve the best
interests of the Company and all of the Company153s Members. Except as set forth
above, the Company will bear all expenses incurred by the Tax Matters Partner in
carrying out his duties as such. To the fullest extent permitted by law, the
Company agrees to indemnify the Tax Matters Partner and its agents and save and
hold them harmless, from and in respect to all (i) fees, costs and expenses in
connection with or resulting from any claim, action or demand against the Tax
Matters Partner or the Company that arise out of or in any way relate to the Tax
Matters Partner153s status as Tax Matters Partner for the Company, and (ii) all
such claims, actions, and demands and any losses or damages therefrom, including
amounts paid in settlement or compromise of any such claim, action or
demand; provided that this indemnity shall not extend to conduct by the
Tax Matters Partner adjudged (i) not to have been undertaken in good faith the
Company or (ii) to have constituted recklessness, gross negligence or
intentional wrongdoing by the Tax Matters Partner. The Tax Matters Partner may
be changed by the Board.
Transferability
11.1 Restrictions on Transferability
(a) Except as provided in Section 11.3, no Member shall
Transfer its interest in the Company without the prior written consent of the
Board.
(b) In addition to other restrictions on transfer contained
herein, each Member agrees that it will not make any Transfer of all or any part
of its interest in the Company which will result in the violation by it or by
the Company of the Securities Act of 1933 or any other applicable securities
laws.
11.2 Exempt Transfers. Anything to the contrary herein
notwithstanding, the following transactions shall be exempt from the restriction
on transfer provided in Section 11.1:
(a) A Member153s Transfer during such Member153s lifetime to
such Member153s immediate family or to or from any trustee for the benefit of such
Member or such Member153s immediate family (i.e., spouse, lineal
descendant, father, mother, brother or sister).
(b) A Member153s Transfer to any person on death whether by
will, trust or intestacy.
(c) A Transfer to the Company.
In any such case, the Transferee shall receive and hold such interest subject
to the provisions of this Operating Agreement, including this Article XI, as a
Substitute Member, and there shall be no further transfer except in compliance
with this Article XI.
~ 18 ~
11.3 No Effect To Transfers In
Violation Of Operating Agreement. Any purported transfer in violation
of this Article XI shall be null and void and the purported Transferee shall
become neither a Member nor a holder of any interest in the Company whatsoever.
Additional And Substitute Members; Removal of Members
12.1 Admission of Additional Members and Substitute Members.
Any Person acceptable to the Board may, subject to the terms and
conditions of this Operating Agreement (including Sections 6.4 and 12.2), become
an Additional Member of the Company by the purchase of new Shares for such
consideration as the Board shall determine in accordance with the terms of this
Operating Agreement. The Board may, without the consent of any Member, issue
additional Shares out of the authorized Shares.
12.2 Allocations to Additional Members and Substitute Members.
No Additional Member or Substitute Member shall be entitled to any
retroactive allocation of losses, income or expense deductions incurred by the
Company.
Dissolution And Termination
13.1 Dissolution. The Company shall be dissolved upon the
occurrence of any of the following events (a “Dissolution
Event“):
(a) the written agreement of the Board; or
(b) the entry of a decree of judicial dissolution under the
Act.
13.2 Effect of Filing of Certificate of Cancellation. The
Company shall cease to carry on its business, except insofar as may be necessary
for the winding up of its business, upon the occurrence of a final dissolution
event, but its separate existence shall continue until a Certificate of
Cancellation has been filed with the Secretary of State of Delaware or until a
decree dissolving the Company has been entered by a court of competent
jurisdiction.
13.3 Distribution of Assets Upon Dissolution. In settling
accounts after dissolution, the liabilities of the Company shall be entitled to
payment in the order of priority as provided by law in satisfaction of all
liabilities and obligations of the Company whether by payment or the
establishment of reasonable reserves therefor. The remaining assets of the
Company shall be distributed to the Members in accordance with Section 10.3(c).
13.4 Winding Up. Except as provided by law, upon
dissolution, each Member shall look solely to the assets of the Company for the
return of its Capital Contribution. If the Company Property remaining after the
payment or discharge of the debts and liabilities of the Company is insufficient
to return the Capital Contribution of each Member, such Member shall have no
recourse against any other Member. The winding up of the affairs of the Company
and the distribution of its assets shall be conducted exclusively by the Board,
who subject to the terms of this Operating Agreement, are hereby authorized to
take all actions necessary to accomplish such distribution, including without
limitation, selling any Company assets the Board deems necessary or appropriate
to sell.
~ 19 ~
13.5 Filing of Certificate of
Cancellation.
(a) 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, a
Certificate of Cancellation shall be executed and filed with the Delaware
Secretary of State, which certificate shall set forth the information required
by the Act.
(b) Upon the acceptance of the Certificate of Cancellation,
the existence of the Company shall cease, except for the purpose of suits, other
proceedings and appropriate action as provided in the Act.
Miscellaneous Provisions
14.1 Notices. Any notice, demand or communication required
or permitted to be given by any provision of this Operating Agreement shall be
in writing and shall be deemed effectively given or delivered upon receipt. Any
such notice, demand or communication may be given: (a) by personal delivery to
the party to be notified; (b) by confirmed telex, telegraph, facsimile or
electronic mail; or (c) by mail or courier. All communications shall be
delivered to a Manager, a Member or the Company, as appropriate, to such
Manager153s, such Member153s or the Company153s address (including electronic mail
address) or facsimile number as such appears in the Company153s records as of the
date hereof or to such other address or facsimile number as such Member, such
Manager or the Company may designate by ten days advance written notice to the
other parties hereto.
14.2 Application of Delaware Law. This Operating Agreement,
and the application or interpretation hereof, shall be governed exclusively by
its terms and by the laws of the State of Delaware (without giving effect to
principles of conflicts of laws).
14.3 Waiver of Action for Partition. Each Member irrevocably
waives during the term of the Company any right that it may have to maintain any
action for partition with respect to the property of the Company.
14.4 Amendments. This Operating Agreement may be amended by
the Board or the Class A Member.
14.5 Execution of Additional Instruments. Each Member hereby
agrees to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
14.6 Construction. Whenever the singular number is used in
this Operating Agreement and when required by the context, the same shall
include the plural, and the masculine gender shall include the feminine and
neuter genders and vice versa. This Operating Agreement is prepared and executed
in the English language only and any translation of this Operating Agreement
into any other language shall have no effect.
~ 20 ~
14.7 Attorneys153 Fees.
In any judicial action or proceeding between the parties to enforce any of the
provisions of this Operating Agreement regardless of whether such action or
proceeding is prosecuted to judgment and in addition to any other remedy, the
unsuccessful party shall pay to the successful party all costs and expenses,
including reasonable attorneys153 fees, which shall include the reasonable value
of the services of staff attorney, incurred therein by the successful party.
14.8 Headings. The headings in this Operating Agreement are
inserted for convenience only and are in no way intended to describe, interpret,
define, or limit the scope, extent or intent of this Operating Agreement or any
provision hereof.
14.9 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any covenant or
condition of this Operating Agreement shall not prevent a subsequent act, which
would have originally constituted a violation, from having the effect of an
original violation.
14.10 Rights and Remedies
Cumulative. The rights and remedies provided by this Operating
Agreement are cumulative, and the use of any one right or remedy by any party
shall not preclude or waive the right to use any or all other remedies. Such
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
14.11 Severability. If
any provision of this Operating Agreement or the application thereof to any
person or circumstance shall be invalid, illegal or unenforceable to any extent,
the remainder of this Operating Agreement and the application thereof shall not
be affected and shall be enforceable to the fullest extent permitted by law.
14.12 Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements herein contained shall be binding
upon and inure to the benefit of the parties hereto and, to the extent permitted
by this Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
14.13 Creditors. None of the provisions of this Operating
Agreement shall be for the benefit of or enforceable by any creditor of the
Company.
14.14 Counterparts. This Operating Agreement may be executed
in counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
14.15 No Third Party Beneficiaries. It is understood and
agreed among the parties that this Operating Agreement and the covenants made
herein are made expressly and solely for the benefit of the parties hereto, and
that no other Person, other than an Indemnitee under Article VII hereof (but
only in respect of the rights under such Article VII), shall be entitled or be
deemed to be entitled to any benefits or rights hereunder, nor be authorized or
entitled to enforce any rights, claims or remedies hereunder or by reason
hereof.
14.16 Fees And Commissions. Each Member hereby represents
and warrants to the others that, it has not engaged or dealt with any other
person or party who may have any claim against the Company or such Member for
brokerage or other commissions or finder153s or other similar fees in connection
with formation of the Company. Each Member hereby agrees to indemnify the others
and hold the others harmless from and against all loss, cost, damage, and
expense whatsoever which the others may suffer or incur by reason of any claim
for a brokerage or finder153s or similar based on contracts, agreements, or
understandings made or allegedly made by the indemnifying party.
14.17 Warranty Of Authority. Each Member hereby represents
and warrants to the others that such Member has full power and lawful authority
to enter into and carry out the terms and provisions of this Operating Agreement
and that all actions necessary to confer such power and authority upon the
persons executing this Operating Agreement have been taken.
~ 21 ~
In Witness Whereof, the parties hereto have executed this
Operating Agreement to be duly executed by their respective authorized officers
as of the day and year first above written.
Manager:
/s/ Pehong Chen
Pehong Chen
Class A Member:
BroadVision, Inc.
By: /s/ Pehong Chen
Pehong Chen
Chief Executive Officer
Class B Member:
CHRM LLC
By: /s/ Pehong Chen
Pehong Chen
Manager
~ 22 ~
Schedule A
MEMBERS153 NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS AND
SHARES
|
Name of Member |
Capital Contribution |
Shares |
|||
|
I. Part I: Class A Member |
|||||
|
BroadVision, Inc. 1600 Seaport Boulevard Suite 550, North Building Redwood City, CA 94063 |
$ |
8,000.00 |
80 Class A |
||
|
II. Part II: Class B Member |
|||||
|
CHRM LLC 93 Ridgeview Drive Atherton, CA 94027 |
$ |
2,000.00 |
* |
20 Class B |
|
_______________
*The Members have nominally assigned a value of $2,000 to the Capital
Contribution of the Class B Member reflecting proportionality with the initial
Capital Contribution of the Class A Member. The Members deem the intellectual
property rights contributed by the Class B Member to have a fair market value
equal to 20% of the Company153s total Adjusted Asset Value at the time of
admission of the Class B Member as a Member. In the event that the adjustment
called for by Section 1.1(d)(ii) in connection with such admission results in an
increase in the Company153s aggregate Adjusted Asset Value, the deemed value of
the Capital Contribution of the Class B Member shall automatically be increased
accordingly.
~ 23 ~
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