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SAMPLE OPERATING AGREEMENT
This Operating Agreement (the “Agreement”) of Company (hereinafter the
“Company”) is entered into as of today between Pat, Luis and Joe.
RECITALS
A. The Members hereto shall cause to be formed a limited liability company
pursuant to and in accordance with the Ohio Limited Liability Company Act, as amended
from time to time (“OLLCA”);
B. The Members wish to comply with the requirements of the OLLCA and to
promote their mutual interests by defining their respective rights, obligations and
restrictions with respect to management of the Company and transferability of their
interests therein;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
ARTICLE I
ORGANIZATION AND PURPOSE
1.1 Organization. The Members have agreed to the organization of a limited liability
company pursuant to the OLLCA and the provisions of this Agreement and, for that
purpose, will cause a Certificate of Formation to be executed and filed for record with the
Ohio Secretary of State and agree to the provisions set forth herein.
1.2 Name of the Company. The name of the limited liability company formed shall
be Company. The Company may do business under that name and under any other name
or names which the Members select. If the Company does business under a name other
than that set forth in its Certificate of Formation, then the Company shall file an
application for an assumed business name as required by law.
1.3. Term. The term of the Company shall begin on its formation date and continue
until dissolved in accordance with the OLLCA and the provisions of this Agreement.
1.4 Purpose. The Company will be formed as a to engage in any lawful act or activity
for which limited liability companies may be formed under the OLLCA and to engage in
any and all activities necessary or incidental to the foregoing.
1.5 Office. The registered office of the Company shall be at address and name of
agent. .
1.6 Members. The membership interests of the Members are set forth below, and the
Members shall own an interest in the Company, in accordance with the following
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percentages (the “Membership Interest(s)”), subject to adjustment, by the prior written
consent of all Members, including but not limited to, the event additional members are
admitted:
Name Membership Interest = 100%
Patrick 33.3%
Joe 33.3%
Luis 33.3%
ARTICLE II
CAPITAL
2.1 Capital. The Members shall contribute the amounts following their names on
Exhibit “A” attached hereto and incorporated by reference herein (herein after referred to
as “Initial Contribution(s)”). The Initial Contributions to be allocated shall be determined
not later than 90 days after the execution date of this Agreement. Except as shall be
expressly set forth herein, no member shall be required to (a) make any additional Capital
Contributions (hereinafter Initial Contributions plus additional Capital Contributions shall
be collectively referred to as “Capital Contribution(s)”), (b) make any loan, or (c) caused
to be loaned any money or other assets to the Company (collectively (b) and (c) shall
hereinafter be referred to as “Member Loan(s)”).
2.2 An individual capital account shall be maintained for each Member (hereinafter
referred to as “Capital Account(s)”). Each Member’s Capital Account shall consist of its
Capital Contributions, and subject to the prior written approval of all other Members,
increased by (i) such Member’s additional contributions to the capital of the Company, if
any, and (ii) such Member’s share of the Net Profits of the Company and decreased by
(a) distributions to such Member by the Company, (b) such Member’s distributive share
of Net Losses of the Company, and (c) such Member’s distributive share of expenditures
of the Company not deductible in computing net profits or losses and not properly treated
as capital expenditures. No Member shall have the right to withdraw, or receive any
return of, its Capital Contributions, if any, and no Capital Contributions may be returned,
except as specifically provided herein.
2.3 No interest shall be paid by the Company on Capital Contributions of Members.
Unless approved by the vote or prior written consent of all Members, in accordance with
Article IV of this Agreement, no Member shall have the right to withdraw from the
Company, or to demand a refund or return of all or any part of its Capital Contributions,
and no Member shall be entitled to any compensation for use of the Capital
Contributions.
2.4 For purposes of this Agreement, the Net Profits and Net Losses of the Company
for any fiscal year shall be determined under the cash basis method of accounting in
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accordance with generally accepted accounting principles in the US, consistently applied
(hereinafter “GAAP”).
2.4.1 Any Net Profits of the Company shall be allocated among the Members
pro rata in accordance with their respective Membership Interests in effect for such year
(with appropriate adjustments if Membership Interests change during the year). The sum
of the Membership Interests of all Members shall be equal to 100 percent at all times.
The Membership Interests of the Members are set forth in Section 1.6 hereof. Any
subsequent changes to these Membership Interests will be reflected from time to time on
the Company’s books and records.
2.4.2 Any Net Losses of the Company shall be allocated among the Members
pro rata in accordance with their respective Capital Account balances as of the first day
of such year, with a proportionate adjustment made if there are Capital Contributions or
withdrawals during the year, except that Net Losses may be allocated to Members who
are “at risk” as determined under the OLLCA, with the prior written consent of all other
Members.
2.4.3 As used herein, the terms “Profits” and “Losses” shall mean, for each
fiscal year, the economic Net Profits and Net Losses of the Company as determined for
each fiscal year, or portion thereof, in accordance with GAAP in the United States of
America, consistently applied. The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply with
all applicable provisions of the Internal Revenue Code of 1986, as amended from time to
time (“Code”), or any corresponding Federal tax statute enacted after the date of this
Agreement. A reference to a specified section of the Code refers not only to such
specific section but also to any corresponding provision of any Federal tax statute enacted
after the execution date of this Agreement, as such specific section or corresponding
provision is in effect on the date of application of the provisions of this Agreement. If in
the opinion of the Company’s accountants the manner in which Capital Accounts are to
be maintained pursuant to the preceding provisions of this Article should be modified to
comply with the Code thereunder, then notwithstanding anything to the contrary
contained in the preceding provisions of this section, subject to the prior written consent
of a supermajority of the Members, the method in which Capital Accounts are maintained
shall be so modified; provided, however, that any change in the manner of maintaining
Capital Accounts shall not materially alter the economic agreement among the Members
as set forth in this Agreement. It is intended that all of the allocations of income, gain,
loss, deduction and credit pursuant to this Agreement will comply with the Code, and this
Agreement shall be interpreted consistently therewith. For federal, state and local income
tax purposes, each item of income, gain, loss, deduction or credit of the Company shall
be allocated among the Members pursuant to the other applicable provisions of this
Article II.
ARTICLE III
FISCAL YEAR, PROFITS AND LOSSES DISTRIBUTIONS
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3.1 Fiscal Year. The fiscal year of the Company shall commence as of May 1st and
terminate on April 30th the following year, for each calendar year during the Term of this
Agreement (“Fiscal Year”).
3.2 Net Cash Flow. Subject to Section 3.3 below, distributions of net cash flow of the
Company, if any, less such reasonable reserves as the Members shall determine to be
necessary for present operations and/ or future contingencies, shall be made at such time
and in such amounts as the Members shall determine by prior written approval of a
supermajority of the Members. For purposes hereof, net cash flow shall be the net profits
or losses of the Company for the Fiscal Year, plus any amounts deducted during such
period for depreciation, unpaid accrued interests and other non-cash charges. In addition,
the amount paid during such period for Member reimbursements, Capital Contributions
and previously unpaid accrued interest shall be subtracted, unless otherwise advised by
the Company’s accountants. Net cash flow shall be distributed to the Members in
proportion to each Members’ Interests.
3.3 Capital Contributions Delinquency. No distributions of net cash flow shall be
made to any Member who is in default of its Capital Contribution, until such time as the
delinquency plus interest thereon computed at the rate charged to the Company by its
institutional lender on the last date of the month prior to the date that distributions are
made (the “Delinquency”) is recouped. All such Member’s distributions, up to the
amount of the Delinquency, shall instead be paid to the Company (or any respective
Members who loaned more than their proportionate share, up to the amount of such
excess loans, distributed pro rata among those Members, including interest computed in
the manner set forth above) in reduction of the Delinquency.
3.4 Intentionally deleted.
3.5 Distribution Proceeds. The net cash proceeds resulting from the sale, exchange,
lease, refinance or other transfer of all or substantially all of the assets of the Company or
from the liquidation of the assets of the Company following the dissolution thereof,
subject to the applicable provisions of this Agreement, which are not reinvested or
retained by the Company for the continuation of its business, and after deducting all
related expenses, (hereinafter referred to as “Distribution Proceeds”) shall be distributed
and applied in the following order of priority:
3.5.1 to pay any debts or liabilities of the Company, including, but not limited
to, all outstanding Member Loans (together with interest thereon as calculated pursuant to
other applicable provisions contained herein) made to the Company by any Member and
all necessary expenses of liquidation, if applicable;
3.5.2 to establish any reserves which the Members deem reasonably necessary
to provide for any contingent or unforeseen liabilities or obligations of the Company,
provided, however that at the expiration of such period of time as the Members deem
advisable, the balance of such reserves remaining after the payment of such contingencies
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shall be distributed to the Members in accordance with Sections 3.5.3, 3.5.4, and 3.5.5
below:
3.5.3 to the Initial Members, in proportion to their respective Capital
Contributions;
3.5.4 to the Members, in accordance with, and proportionate to their respective
positive Capital Account balances remaining after the payments described in this Section,
3.5, (until the positive Capital Account of each Member, on a pro rata basis, is reduced to
zero); and
3.5.5 to the Members in proportion to each Member’s Membership Interest.
3.6 Members’ Reimbursements. The Company shall reimburse the Members for any
expenses paid by them that properly are to be borne by the Company, as approved by the
Members from time to time. Notwithstanding the foregoing, with respect to any
expenses related to client development, relations, retention, or investment incurred by any
Member shall be reimbursable up to $300. Any amounts in excess of $300 shall be
reimbursable, but only upon the approval of a supermajority of the Members, unless
otherwise unanimously agreed upon by the other Members.
ARTICLE IV
MANAGEMENT
4.1 Management by the Members. The business and affairs of the Company shall be
managed by and all Company decisions shall be made by the supermajority vote of the
Members, except as otherwise provided herein. The Members may designate or elect
officers to assist in the management of the day to day operations of the business and
affairs of the Company, and such officers may take any actions as are necessary or
appropriate, within the scope of their respective duties and responsibilities, to carry out
the approved decisions of a supermajority of the Members. All Members shall have the
title, rights, duties, obligations and compensation as set forth in the Employment
Agreement, attached hereto as Exhibit “B”, and incorporated by reference herein, which
shall be determined, for each Initial Member, not later than 90 days after the execution
date of this Agreement. The Chief Executive Officer (“CEO”), to be determined at a
future date, shall have the discretion and authority to make all Company decisions
relating to financing and strategy, on behalf of the Company and the other Members, if
necessary, subject to the applicable state or local law.
4.2 Intentionally deleted.
4.3 Execution of Non-Disclosure/Non-Circumvention Agreements: All Members
agree to simultaneously execute Exhibit “C”, attached hereto and incorporated by
reference herein.
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4.4 It is the intention of the Members that the Company shall be treated as a LLC for
all tax purposes and each Member shall refrain from taking any actions inconsistent with
such characterization. The Chief Financial Officer (“CFO”), to be determined at a future
date, shall have the discretion and authority to make all tax elections, on behalf of the
Company and the other Members, if necessary, subject to the applicable provisions of the
Code and any applicable state or local tax law. All reasonable expenses incurred by the
CFO, approved by supermajority of the Members, while acting in such capacity shall be
paid or reimbursed by the Company.
4.5 Voting by and Meetings of Members:
4.5.1 Majority Vote. The Initial Members to this Agreement shall maintain
exclusive voting rights throughout the term of this Agreement, unless otherwise agreed
upon at a later date by unanimous consent. Any Supermajority vote shall be defined as
consisting of four (2) out of five (3) Initial Members. Notwithstanding the foregoing, the
following actions shall require the unanimous consent of all Initial Members:
(a) to admit new Members or to transfer all or any portion of a Member’s
Membership Interest;
(b) to approve the repayment of Capital Contributions, subject to other
applicable provisions of this Agreement;
(c) to approve the annual budget and/or the incurrence of any extraordinary
indebtedness, other than indebtedness in the ordinary course of business of the Company;
(d) to approve the Company making an investment in or a loan to any person
or entity, subject to other applicable provisions of this Agreement;
(e) to amend the Company’s Articles of Organization or this Operating
Agreement.
Notwithstanding the foregoing, the following actions shall require Supermajority
consent of all Initial Members:
(f) to approve an increase in the compensation of any Member, or other
employee of the Company;
(g) to approve a sale, exchange, lease, mortgage, pledge or other transfer of all
or substantially all of the assets of the Company;
(h) to approve a merger, acquisition or consolidation with another entity;
(i) to approve prepayment of a Member Loan;
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4.5.2 Meetings. A meeting of the Members may be called at any time by a
Member on not less than ten (10) nor more than ninety (90) days prior written notice to
all Members before each meeting. No annual or regular meetings of Members are
required. The notice shall state the time, place, and purpose of the meeting.
4.5.3 Consent In Lieu of Meeting. In lieu of holding a meeting, the Members
may vote or otherwise take action by a written instrument indicating the Supermajority
approval of the Members.
4.5.4 Attendance At Meetings By Teleconference. Meetings of the Members
may be undertaken by means of a conference telephone or similar communications
equipment by which all individuals participating in the meeting can hear each other
during the meeting. Participation by such means shall constitute presence in person at
such meeting.
4.5.5 Proxies. At all meetings of Members, a Member may vote in person or
by proxy. Such proxy shall be filed by any Member prior to the commencement of the
meeting and may be filed by regular postal service, facsimile, or email transmission at the
principal office of the Company.
4.5.6 Limited Liability. No Member shall be personally liable under any
judgment of a court, or in any other manner, for any debt, obligation, or liability of the
Company, whether that liability or obligation arises in contract, tort, or otherwise, solely
by reason of being a Member of the Company.
ARTICLE V
BOOKS AND RECORDS
5.1 Bank Accounts. All funds of the Company shall be deposited in a bank account
or accounts opened in the Company’s name. A Supermajority of the Members may
determine the institution or institutions at which the accounts will be opened and
maintained, the types of accounts, and the persons who will have authority with respect to
the management of the assets of the accounts and the funds therein.
5.2 Books and Records.
5.2.1 Maintenance of Books and Records. The books and records of the
Company shall be kept at the principal place of business of the Company, or in such other
place as designated by a supermajority of the Members.
5.2.2 Examination of Books and Records. The books and records shall be
maintained in accordance with GAAP, consistently applied and shall be available at the
Company’s principal office for examination by any Member or the Member’s duly
authorized representative at any and all reasonable times during normal business hours
upon twenty four hours prior written notice to be delivered to the Company’s principal
office.
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5.2.3 Payment of Costs of Inspection. Each Member shall reimburse the
Company for all costs and expenses incurred by the Company in connection with the
Member’s inspection and/or copying of the Company’s books and records, within 30
days after the date on which the expenses were incurred.
5.3 Furnishing of Income Tax Information. Within 90 days after the end of each
fiscal year, such appropriate information as may be required by each Member for the
purpose of preparing their income tax returns for that year shall be furnished to each
Member.
5.4 Adjustment of Basis of Assets. In case of a transfer of all or part of the interest of
any Member, the Company may elect, pursuant to the applicable Sections of the Code to
adjust the basis of the assets of the Company provided that such election shall be
allowable at the time and provided further there is no detriment to the other Members.
5.5 Title to Company Property. All real and personal property acquired by the
Company shall be acquired and held by the Company in its name.
5.6 Obligations of Members to Report Allocations. The Members are aware of the
income tax consequences of the allocations made by this Agreement, and hereby agree to
be bound by the provisions of this Agreement in reporting their shares of the Company
income and loss for income tax purposes.
ARTICLE VI
TRANSFER OF MEMBER’S INTEREST
6.1 Transfer. Except as permitted in this Article 6, no Member may transfer, assign,
sell, give, pledge, hypothecate, bequeath or otherwise encumber (collectively “Transfer”)
all or any part of its Membership Interest in the Company unless approved by the
unanimous written consent of the Members in accordance with Section 4.5.1(a) and any
attempt to do so without such prior written approval or consent shall be null and void and
of no force or effect. Notwithstanding anything to the contrary contained in this
Agreement, it is understood and agreed that any Transfer of a Membership Interest
pursuant to this Article 6 shall specifically exclude any transfer of voting rights which
have been previously vested solely in the Initial Members.
6.1.1 Conditions of Transfer. No transferring Member (individually, a
“Transferor”) may Transfer all or any portion of or any interest or rights in the Member’s
Membership Interest (“Transfer of the Membership Interest”) unless the following
conditions (“Conditions of Transfer”) are satisfied:
(a) The Transfer of the Membership Interest will not require
registration of the Membership Interest under any federal or state securities laws;
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(b) The party to whom the Membership Interest is proposed to be
transferred (“Transferee”) delivers to the Company a written agreement, in a form
acceptable to the Company, to be bound by all the terms and conditions of this
Agreement;
(c) The Transfer of the Membership Interest will not result in the
termination of the Company pursuant to the applicable Section(s) of the Code;
(d) The Transfer of the Membership Interest will not result in the
Company being subject to the Investment Company Act of 1940, as amended;
(e) The Transferee delivers the Transferee’s taxpayer identification
number and the Transferee’s initial tax basis in the Transfer of the Membership Interest;
(f) The conditions of Section 4.5.1(a) are satisfied regarding, in part,
the approval of the Transfer by the Initial Members; and
(g) The Transferee obtains, at the expense of the Transferee, and
delivers to the Company, an opinion of legal counsel acceptable and approved by the
Members of the Company, confirming that the Conditions of Transfer have been
satisfied.
6.2 Family Transfers. A Member may Transfer all or any portion of their
Membership Interest in the Company as part of an estate planning technique to
member(s) of the immediate family of the Member (individually referred to as “Family
Transferee”), if Family Transferee signs a counterpart of this Agreement, as it may be
amended, agrees to be bound by its terms and conditions, and only upon the prior
Supermajority written consent of the Initial Members.
ARTICLE VII
DISSOLUTION AND TERMINATION
7.1 Upon the occurrence of any of the following events, the Company shall be
dissolved if:
7.1.1 the Company ceases its business operations on a permanent basis; or
7.1.2 the Members, in accordance with Articles III and IV herein, vote or
approve the dissolution and termination of the Company or to sell or Transfer all or
substantially all of the assets of the Company; or
7.1.3 Intentionally deleted; or
7.1.4 the entry of decree of judicial dissolution; or
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7.1.5 as otherwise provided in this Agreement or in the Articles of Organization
of the Company, as applicable.
7.2 The bankruptcy, death, dissolution, expulsion, incapacity, resignation, retirement
or withdrawal of any Member shall not cause the dissolution of the Company. Such
affected Member’s personal representative, executor, administrator or successor in
interest shall have all of the rights of a Member for the purpose of managing and settling
such affected Member’s estate, but any sale or other transfer of such affected Member’s
Interests shall continue to be subject to the provisions of this Agreement.
7.3 In the event of the dissolution of the Company, the business and affairs of the
Company shall continue to be governed by this Agreement during the winding up of the
Company’s business and affairs. In the event of such dissolution, distribution of all
proceeds, assets and any other capital account balances of the Company shall be
distributed subject to section 3.5 of this Agreement, as applicable.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Members may engage in other business ventures and investments of any nature
whatsoever, so long as such activities are not competitive with the business of the
Company. Neither the Company nor any of its Members shall, as a result of this
Company, have any right or interest, in any such other business that is substantially
similar to the Company. Neither the Company nor any of its Members shall have
ventures or investments or share in any income profit or receive any other benefit derived
from a business that is substantially similar to the business of the Company. The
Company may enter into contracts with its Members provided that the financial terms and
conditions are fair and reasonable to the Company at prices that are competitive for
comparable products or services. Members may engage in business activity that is
substantially similar to the business of the Company where prior business relationships
exist as evidenced in Exhibit “D”, as shall be amended from time to time.
8.2. Any notice required or given with respect to this Agreement shall be valid and
effective when delivered by registered or certified mail or by hand or by Express Mail,
Federal Express or similar overnight courier to the address hereinabove set forth. Any
Member hereto may change such address by notice given to Company and other
Members hereto in accordance with this Section 8.2.
8.3 This Agreement shall be binding upon and inure to the benefit of the Members
hereto and their respective heirs, legal representatives, successor and assigns. Any party
that receives an assignment of a Membership Interest in accordance with the terms hereof
shall be required to execute and deliver to each other Member, a legally enforceable
agreement expressly assuming all of the terms, conditions and covenants of this
Agreement and such other documents as the Members shall reasonably require prior to
such assignment becoming effective. Each Member shall provide prior written consent
evidenced by Exhibit “E”, the Spousal Consent Form, attached hereto and incorporated
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by reference herein, upon the event of their marriage, or if the Member is married at the
time of the execution of this Agreement.
8.4 This Agreement shall be governed by and construed in accordance with the laws
of the State of Ohio. Any dispute of any kind, nature or description between or among
the Members hereto arising out of or in relation to this Agreement shall be resolved by
binding arbitration in Cleveland, Ohio subject to the American Arbitration Association,
which tribunal shall have exclusive jurisdiction thereof. Judgment upon any award may
be entered in any court of competent jurisdiction. The arbitrator is authorized to award
the prevailing party reasonable counsel fees and expenses in connection with any
arbitration proceeding.
8.5 The Members recognize that irreparable injury will result from a breach of any
provision of this Agreement and that money damages will be inadequate to remedy the
injury fully. Accordingly, in the event of a material breach or threatened material breach
of one or more of the provisions of this Agreement, any Member who may be injured (in
addition to any other remedies which may be available to that Member) and only upon a
Supermajority approval of the Members, the Members shall be entitled to one or more
preliminary or permanent orders (i) restraining and enjoining any act that would
constitute a material breach or (ii) compelling the performance of the non-performing
Member of any obligation that, if not performed, would constitute a material breach of
this Agreement.
8.6 This Agreement sets forth the entire agreement and understanding of the
Members in respect of the subject matter hereof and supersedes all prior and
contemporaneous agreements, arrangements and understandings, express or implied, oral
or written, relating to the subject matter hereof.
8.7 This Agreement may be amended or modified only by a Supermajority approval
of all Members evidenced by a fully executed written instrument. The failure of a
Member at any time(s) to require performance of any provisions hereof shall in no
manner affect the Member’s right at a later time to enforce the same. No waiver by any
Member of the breach of any term contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be construed as a further or
continuing waiver of any such breach or of the breach of any other term of this
Agreement.
8.8 Reference to this Agreement herein shall include any amendments or renewal
hereof.
8.9 If any non-material provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such provision and
only to the extent such provision shall be held to be invalid or unenforceable and shall not
in any way affect the validity or enforceability of the other provisions hereof, all of which
are hereby declared severable, and this Agreement shall be carried out as if such invalid
or unenforceable provision or portion thereof was not embodied herein.
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8.10 This Agreement may be executed in several counterparts, each of which shall be
an original, but all of which together shall constitute one and the same agreement. The
headings in this Agreement are solely for the convenience of the Members, and are not
intended to and do not limit, construe or modify any of the terms and conditions hereof.
8.11 None of the provisions of this Agreement shall be for the benefit of or be
enforceable by any creditors of the Company.
8.12 Words and phrases used herein in the singular shall be deemed to include plural
and vice versa, and nouns and pronouns used in any particular gender shall be deemed to
include any other gender, unless the context requires otherwise.
8.13 Notwithstanding anything to the contrary stated herein, no Member, nor any
permitted Transferee or successor or assign of any Member, shall be liable, responsible or
accountable in damages or otherwise for any errors in judgment, for any act, including
any act of active negligence, performed by any such person or entity, or for any omission
or failure to act, if the performance of such act or such omission or failure is done in good
faith, is within the scope of the authority conferred upon such person or entity by this
Agreement or by law and does not constitute breach of fiduciary duty, willful
misconduct, gross negligence or reckless disregard of duties.
8.14 The Company shall indemnify and hold harmless all of the Members as well as
the Members’ permitted Transferees, successors and assigns and its employees
(collectively the “Indemnified Person(s)”) from and against any and all liabilities
reasonably incurred by any such Indemnified Person in connection with the defense or
disposition of any proceedings in which any such Indemnified Person may be involved or
with which any such Indemnified Person may be threatened, with respect to or arising out
of any act, including any act of active negligence, performed by the Indemnified Person
or any omission or failure to act if (i) the performance of the act or the omission or failure
was done in good faith and within the scope of the authority conferred upon the
Indemnified Person by the Agreement or by law, except for acts which constitute breach
of fiduciary duty, willful misconduct, gross negligence or reckless disregard of duties or
(ii) a court of competent jurisdiction determines upon application, in view of all the
circumstances, the Indemnified Person is fairly and reasonably entitled to indemnification
for such liabilities as such court may deem proper.
8.15 Each Member shall execute all certificates and other documents and shall do all
such filing, recording, publishing, and other acts as may be appropriate to comply with
the requirements of law for the formation and operation of the Company and to comply
with any laws, rules, and regulations relating to the acquisition, operation, or holding of
the property of the Company.
8.16 By signing this Agreement, each Member acknowledges that they shall have had
a reasonable opportunity, prior to the date of execution of this Agreement, to consult with
outside legal counsel and receive their legal opinion, as to the sufficiency of the terms
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and conditions contained herein, prior to the execution of this Agreement, and by doing
so, each Member acknowledges complete acceptance of all the terms and conditions of
this Agreement.
IN WITNESS HEREOF, the parties have executed this Agreement as of the day
and year first above written. .
FOUNDING MEMBERS OF COMPANY
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EXHIBIT “A”
INITIAL CONTRIBUTIONS
Patrick $1
Joe $1
Luis $1
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EXHIBIT “B”
Company
EMPLOYMENT AGREEMENT
This employment agreement is effective as of November 11th, 2011, between
“Future CEO” (“Executive”) and Company (“Employer”), with a principal place of
business located in Cleveland, OH.
1. Employer desires the services of Executive in order to retain his experience,
abilities and knowledge and is therefore willing to engage his services on the
terms and conditions set forth below.
2. Executive desires to continue in the employ of Employer and is willing to do
so on the terms and conditions set forth below.
THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this agreement, it is agreed as follows:
Unless the parties agree otherwise in writing during Executive’s employment,
Executive shall perform the services he/she is required to perform under this
agreement at any office opened by Employer; provided, however, that
Employer may from time to time require Executive to travel temporarily to
other locations on Employer’s business.
Employer shall employ Executive as CEO with full power and authority to
manage and conduct all the business of Employer, subject to the directions
and policies of Employer and Members as they may be, from time to time,
stated either orally or in writing. Executive shall not, however, take any of the
following actions on behalf of Employer without the express written approval
of all Members of the Company:
(1) Borrowing or obtaining credit in any amount or executing any guaranty;
(2) Expending funds for capital equipment in excess of budgeted expenditures
for any calendar month;
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(3) Selling or transferring capital assets exceeding $1.00 in market value in
any single transaction or exceeding $1.00 in market value in any one fiscal
year.
During his employment, Executive shall devote his full business time, energy
and ability exclusively to the business and interests of Employer, and shall
not, without Employer’s prior written consent, render to others services of any
kind for compensation or engage in any other business activity that would
materially interfere with the performance of his duties under this agreement.
Executive represents to Employer that he has no other outstanding
commitments inconsistent with any of the terms of this agreement or the
services to be rendered hereunder. During his employment, Executive shall
devote such time, interest and effort to the performance of this agreement as
may be fairly and reasonably necessary.
During the employment term, Executive shall not, directly or indirectly,
whether as partner, employee, creditor, shareholder, or otherwise, promise,
participate or engage in any activity or other business competitive with
employer’s business.
During the term of this agreement, Employer agrees to pay executive a salary
of $TBD per year, to be determined within 30 days of initial funding of the
Company. The salary shall be payable as current salary, in no less frequent
than monthly installments subject to all applicable withholdings and
deductions.
The Members shall review Executive’s salary and additional benefits then
being paid to Executive not less frequently than every twelve months.
Following such review, the Supermajority vote of the Members may, at their
discretion, increase (but shall not be required to increase) Executive’s salary
or any other benefits.
If Executive’s employment with the Company terminates by virtue of an
“Involuntary Termination” (as defined herein) and is other than for “cause”
(as defined herein), or if Executive’s employment with the Company
terminates as a result of an Involuntary Termination at any time within twelve
months after a “Change of Control” (as defined herein), then Executive shall
be entitled to receive a buyout of his Membership Interest in the Company in
the manner and in accordance with the terms stated on Exhibit “A” hereto.
For this purpose, “Cause” is defined as: (i) an act of dishonesty made by
Executive in connection with Executive’s responsibilities as an employee, (ii)
Executive’s conviction of, or plea of nolo contendere to, a felony, (iii)
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Executive’s gross misconduct, or (iv) Executive’s failure to perform his
employment duties.
For this purpose, “Change of Control” of the Company is defined as (i) any
“person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) other than the heirs of an “Initial
Member”, as that term is defined in the Operating Agreement, is or becomes
the “beneficial owner” as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then
outstanding voting securities; or (ii) the date of the consummation of a merger
or consolidation of the Company with any other entity that has been approved
by the Members of the Company, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such
merger or consolidation, or the Members of the Company approve a plan of
complete liquidation of the Company; or (iii) the date of the consummation of
the sale or disposition by the Company of all or substantially all the
Company’s assets.
For this purpose, “Involuntary Termination” shall mean (i) without
Executive’s consent, the significant reduction of Executive’s duties or
responsibilities relative to his duties or responsibilities in effect immediately
prior to such reduction; (ii) without Executive’s consent, a significant
reduction (twenty percent 20% or more) by the Company in Executive’s
salary as in effect immediately prior to such reduction; (iii) a significant
reduction by the Company in the kind or level of employee benefits to which
Executive is entitled immediately prior to such reduction with the result that
Executive’s overall benefits package is significantly reduced; (iv) any
purported termination of Executive by the Company which is not effected by
virtue of Executive’s death or permanent and total disability; (v) without
Executive’s consent, a significant relocation of the primary location of
Executive’s place of employment beyond a twenty (20) mile radius of the
current principal office of the Company.
During the employment term, Executive shall be entitled to receive all other
benefits of employment generally available to Employer’s other executive and
managerial employees when and as he becomes eligible for them, including
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e.g. medical, dental, life and disability insurance benefits, and participation in
Employer’s pension plan and profit sharing plan, if any.
Employer reserves the right to modify, suspend or discontinue any and all of
the above benefit plans, policies and practices at any time without notice to or
recourse by Executive, so long as such action is taken generally with respect
to other similarly situated persons and does not single out Executive.
Executive shall be entitled to paid vacation in accordance with Employer’s
policies and practices in effect with respect to employer’s other executive and
managerial employees.
During the employment term, Employer shall reimburse Executive promptly
for reasonable business expenses, including travel, entertainment, parking,
business meetings, professional dues incurred and substantiated in accordance
with the policies and procedures established from time to time by Employer
with respect to Employer’s other executive and managerial employees.
All processes, inventions, patents, copyrights, trademarks and other intangible
rights that may be conceived or developed by Executive, either alone or with
others, during the term of Executive’s employment, whether or not conceived
or developed during Executive’s working hours, and with respect to which the
equipment, supplies, facilities, or trade secret information of Employer was
used, or that relate at the time of conception or reduction to practice of the
invention to the business of the Employer or to Employer’s actual or
demonstrably anticipated research and development, or that result from any
work performed by executive for employer, shall be the sole property of
Employer. Executive shall disclose to Employer all inventions conceived
during the term of employment, whether or not the property of Employer
under the terms of the preceding sentence, provided that such disclosure shall
be received by Employer in confidence. Executive shall execute all
documents, including patent applications and assignments, required by
Employer to establish Employers rights under this Section.
Employer shall, to the maximum extent permitted by law and its Operating
Agreement, indemnify and hold Executive harmless for any acts or decisions
made in good faith while performing services for Employer. To the same
extent, Employer will pay, and subject to any legal limitations, advance all
expenses, including reasonable attorney fees and costs of court-approved
settlements, actually and necessarily incurred by Executive in connection with
the defense of any action, suit or proceeding and in connection with any
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appeal, which has been brought against Executive by reason of his service as
an office or agent of Employer.
Employer shall use its best efforts to obtain coverage for Executive (provided
it may be obtained at a reasonable cost) under any liability insurance policy or
policies now in force or hereafter obtained during the term of this agreement
that cover other officers of Employer having comparable or lesser status and
responsibility.
Because of his employment by Employer, Executive will have access to trade
secrets and confidential information about Employer, its products, its
customers and its methods of doing business. In consideration of his access to
this information, Executive agrees that for a period of three years after
termination of his employment, he will not directly or indirectly compete with
Employer in the field of publication, solicitation and sale of information in
printed form and as software of government required workplace materials,
such as plans to avoid and prevent workplace injury and illness, schemes,
regulation of worker’s compensation, employee hours and overtime and
OSHA requirements, all of which are mandated by laws, rules and regulations
of particular states and by the United States. Notwithstanding the above, in
the event that Executive’s employment is terminated as a result of Executive’s
involuntary termination without cause Executive’s non-competition term shall
be one year.
Executive understands and agrees that direct competition means services
competitive with those of Employer. Indirect competition means employment
by any competitor or third party providing services competing with
Employer’s services for which Executive will perform the same or similar
function as he performs for Employer.
In the course of his employment, Executive will have access to confidential
records and data pertaining to Employer’s customers and to the relationship
between these customers and Employer. Such information is considered
secret and is disclosed to Executive in confidence. During his employment by
Employer and for three years after termination of that employment, Executive
shall not directly or indirectly disclose or use any such information except as
required in the course of his employment by Employer. In addition, two years
after termination of his employment, Executive shall not induce or attempt to
induce any employee of Employer to discontinue employment with Employer
for the purpose of employment with a competitor of Employer.
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Any controversy or claim arising out of or relation to this Agreement, or
breach of this Agreement, shall be settled by arbitration and Mediation
Services (American Arbitration Association), and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction.
There shall be one arbitrator and the fees of the arbitrator shall be borne
equally by the parties. Each party shall pay his own attorneys and the
expenses of his or her witnesses and all other fees and costs associated with
such arbitration.
Executive is obligated under this agreement to render services of a special,
unique, unusual, extraordinary and intellectual character, which give this
agreement peculiar value. The loss of these services cannot be reasonably or
adequately compensated in damages in an action at law. Accordingly, in
addition to other remedies provided by law or this agreement, Employer shall
have the right to obtain injunctive relief against the breach of this contract by
Executive or the performance or the performance of services elsewhere by
Executive, or both.
This agreement contains the entire agreement between the parties and
supersedes all prior oral and written agreements, understandings,
commitments and practices between them, including all prior employment
agreements, whether or not fully performed by Executive before the date of
this agreement. No oral modifications, express or implied, may alter or vary
the terms of this agreement. No amendments to this agreement may be made
except by a writing signed by both parties. No employee or supervisor of the
employee is authorized to alter or vary the terms of this agreement except by
written agreement of the Chief Executive Officer. Any representations
contrary to this agreement, express or implied, written or oral, are hereby
disclaimed.
The formation, construction and performance of this agreement shall be
construed in accordance with the laws of Ohio.
Any notice to Employer required or permitted under this agreement shall be
given in writing to Employer, either by personal service or by registered or
certified mail, postage prepaid, addressed to Employer at its then principal
place of business. Any such notice to Executive shall be given in a like
manner and, if mailed, shall be addressed to Executive at his home address
then shown in Employer’s files. For the purpose of determining compliance
with any time limit in this agreement, a notice shall be deemed to have been
duly given (a) on the date of services, if served personally on the party to
whom notice is to be given, or (b) on the second business day after mailing, if
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mailed to the party to whom the notice is to be given in the manner provided
in this section.
If any provision of this agreement is held invalid or unenforceable, the
remainder of this agreement shall nevertheless remain in full force and effect.
If any provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all other
circumstances.
Executed by the parties as of the day and year first above written.
By: ________________________________________
Title: _______________________________________
Executive: __________________________________
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EXHIBIT “C”
MUTUAL NON-DISCLOSURE – NON-CIRCUMVENTION AGREEMENT
COMPANY.
This Mutual Non-Disclosure – Non-Circumvention Agreement (“Agreement”) is made as
of this date and parties and is interested in discussing the possibility of establishing a
business relationship between the Parties.
Non-Disclosure Clause
In the course of the association between the parties hereto reasonably believe that it shall
be necessary to disclose to each other certain proprietary information and non-public
written information, collectively “Confidential Information” as described herein, relating
to Company, the strict confidential nature of which the Parties desire to maintain.
In consideration of the terms and conditions hereinafter set forth, the Parties mutually
agree as follows:
1. Parties. As used hereafter the term “Disclosing Party” shall mean the Party which
is disclosing Confidential Information, and the term “Receiving Party” shall mean
the Party to which the Confidential Information is disclosed. Company may be
the Disclosing Party or the Receiving Party dependent on which Party is the
originator and which Party is the recipient of Confidential Information. The terms
“Parties” shall refer to all parties to this Agreement and their respective affiliates
and “Party” shall refer to one of the Parties and its affiliates.
2. Confidential Information.
a) “Confidential Information” means any type of information or material (i)
disclosed by either Party and/or (ii) known by the Receiving Party as a
consequence of or through participation in the Purpose (“Purpose” shall refer
to any and all business matters related to Company), and which information or
material is not generally known to the public. “Confidential Information”
includes, without limitation, any business technical or financial information
regarding such Party, marketing information, information which related to
contracts, business operations, trademarks, trade secrets, designs, customer
lists, business plans or strategies, information entrusted to the Disclosing Party
or its principal officers and employees by third parties, and any other
confidential or proprietary information All Confidential Information
exchanged between the Parties is considered loaned for use solely in
connection with the Purpose.
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b.) Confidential Information shall not include any information that: a) becomes
generally available to the public through no wrongful act of the Receiving
Party; or b) which is already lawfully in the possession of the Receiving Party
and not subject to an existing agreement of confidentiality between the
Parties; or c) which is received from a third party without restriction and
without breach of any confidentiality or non-disclosure agreement; d) which is
independently developed by the Receiving Party without reference to
Confidential Information; or e) which is disclosed pursuant to the binding
order of a government agency or a court so long as the Disclosing Party
provides the other party with notice of such requirement prior to any such
disclosure.
3. Confidentiality. All Parties hereto agree to hold all Confidential Information in
trust and confidence and agree that it shall be used only for the contemplated
Purpose set forth above, and shall not be used for any other purpose and/or
disclosed to any third party unless such use or dissemination is specifically
approved in writing by a duly authorized representative of the other non-
disclosing Party. Unless written consent is otherwise granted by the Disclosing
Party, the Parties agree that release, access to or use of disclosed Confidential
Information shall be restricted to the Receiving Party and those employees,
officers and agents of the Receiving Party’s organization who have a need to
know the Confidential Information in order to fulfill the Purpose for which the
Confidential Information was disclosed. The Receiving Party shall direct any
person to whom it releases or provides access to or use of the disclosed
Confidential Information to treat the same in the same manner and with the same
care as required of the Receiving Party. The Receiving Party shall use the same
degree of care to protect the secrecy or confidentiality of the Confidential
Information as it uses to protect its own Confidential Information, but in all events
use at least a reasonable degree of care. The confidentiality obligations imposed
herein shall extend for a period of two (2) years from the date of disclosure and
shall survive termination of this Agreement.
4. Return of Confidential Information. The original and all copies of all
Confidential Information or any part thereof shall be returned promptly by the
Receiving Party to the Disclosing Party within 30 days receipt of a written request
by the Disclosing Party except that the Receiving Party may upon written notice
to the Disclosing Party retain a single complete copy of the Confidential
Information in the exclusive possession of its attorney or general counsel’s office
solely for use in connection with the defense of any dispute arising from this
Agreement. This Agreement shall not be construed as granting or conferring any
rights, by license or otherwise, in any Confidential Information disclosed
hereunder.
5. Obligations. The release of Confidential Information discussed herein shall not
obligate either of the Parties to provide any additional Confidential Information.
In addition, neither the release of Confidential Information nor any other fact or
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circumstance in connection with this Agreement will in any way obligate either
Party to proceed further with the Purpose or enter into any other or further
agreement with the other Party.
Non-disclosure Clause. Under this Agreement, all Parties hereto have or shall
introduce to all other Parties, the companies or parties who may be considered
financing sources, strategic partners or other proprietary business relationships
(”Parties Introduced”). All Parties agree not to circumvent one another as
follows: The Parties agree not to make contact with, deal with, or otherwise be
involved in any transaction with any Parties Introduced without written
permission of the introducing Party for a period of two (2) years from the date of
this Agreement.
6. Remedies. In the event of a breach of any of the foregoing provisions, the Parties
agree that the harm suffered by the injured Party would not be compensable by
monetary damages alone and, accordingly, that the injured Party shall, in addition
to other available legal or equitable remedies, be entitled to an injunction against
such breach. No public announcement or disclosure may be made by either Party
concerning this Agreement or the related discussions without the prior written
approval of the other Party.
7. Attorneys’ Fees and Costs. If any Party brings an action upon this Agreement, the
prevailing Party shall be entitled to recover its actual expenses, including, but not
limited to, sums expended for its engagement of expert witnesses and their costs
and expenses, whether or not called to testify, and actual costs and attorney fees
incurred in connection therewith, whether at trial, arbitration, or any appeal there-
from, including, without limitation, those incurred in connection with any
bankruptcy, insolvency or reorganization proceeding or receivership in which
either Party is involved, including, without limitation, those incurred in making
any appearances in any such proceeding or in seeking relief from any stay or
injunction issued in or arising out of any such proceeding.
8. Governing Law. This Agreement is to be governed by the laws of the State of
Ohio; and the Parties hereby consent to the jurisdiction of the courts sitting in the
State of Ohio to adjudicate all disputes arising hereunder.
9. Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the Parties as to the subject matter hereto and supersedes
all previous agreements between the Parties whether express, implied, written or
oral. The Agreement can only modified by a written agreement duly signed by all
Parties hereto or a person duly authorized to sign agreements on behalf of each
such Party.
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10. No Assignment. None of the Parties hereto may assign this Agreement or
delegate their respective rights and duties hereunder, without the prior written
consent of all other Parties hereto.
11. Termination. This Agreement is set for a term of 24 months from the date of
execution of this Agreement after which any applicable Party hereto may
terminate this Agreement upon 90 days written notice to the other Parties hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
______________________________
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