|
LIMITED LIABILITY COMPANY AGREEMENT
OF
PDCA HOLDINGS HOLDINGS, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this " Agreement") is
made and entered into effective as of January 25th, 2008, by and among those named in Schedule 1 attached hereto ("Member," or specifically by name where appropriate, and collectively as "Members"). The Members hereby form a limited liability company on the
terms and conditions set forth herein. Except as otherwise provided, the rights and liabilities of the Members shall be governed by the Revised Code of Washington Chapter 25.15.
Capitalized terms used in this Agreement which are not defined when first used are defined in the "Definitions" section.
SECTION 1
FORMATION
1.1 Name. The name of the Company is "PDCA HOLDINGS, L.L.C."
1.2 Principal Place of Business. The principal place of business of the Company
shall be 611 NW State Avenue, Chehalis, Washington 98532, or at such other place as may be designated by the Company.
1.3 Term. The term of existence of the Company shall be from the effective date the Certificate of Formation is filed with the Washington Secretary of State and shall continue until the thirtieth (30th) anniversary of such effective date, unless the Company is earlier dissolved in accordance with either this Agreement or the Act.
SECTION 2
BUSINESS OF COMPANY
The business of the Company shall be:
2.1 To provide technical services to inventors as an invention incubator to form licensing agreements with high technology firms, and to assist with manufacturing assembly and distribution.
2.2 To carry on any lawful business or activity which may be conducted by a limited
liability company organized under the Act; and
2.3 To exercise all other powers necessary to or reasonably connected with the
Company' s business which may be legally exercised by limited liability companies under the Act.
SECTION 3
NAMES AND ADDRESSES OF MEMBERS
The names and addresses of the Members are set forth on attached Schedule 1, as
amended or restated from time to time.
SECTION 4
RIGHTS AND OBLIGATIONS OF MEMBERS
4.1 Limitation of Liability. Each Member's liability shall be limited as set forth in
this Agreement and the Act.
4.2 Liability for Company Obligations. Members shall not be personally liable for any debts, obligations or liabilities of the Company beyond their respective Capital Contributions, except as otherwise provided by law.
4.3 Inspection of Records. Upon reasonable request, each Member shall have the right to inspect and copy at such Member's expense, during ordinary business hours the records required to be maintained by the Company.
4.4 No Priority and Return of Capital. Except as expressly provided in this Agreement, no Unit Holder shall have priority over any other Unit Holder, either as to the return of Capital Contributions or as to Net Profits, Net Losses or distributions; provided, that this paragraph shall not apply to loans made by a Member to the Company.
4.5 Withdrawal of Member. Except as expressly permitted in this Agreement, no Member shall voluntarily resign or otherwise withdraw as a Member. Unless otherwise approved by Members holding a Majority interest, a Member who resigns or withdraws pursuant to this Agreement shall be entitled to receive only those distributions to which such person would have been entitled had such person been an Economic Interest Owner.
4.6 Conduct of Member. At all times, all Members must act in good faith both for the Company and in their relationship with other Members.
SECTION 5
CONTRIBUTIONS TO THE COMPANY
5.1 Member's Capital Contributions. Each Member's contribution to the
Company is set forth opposite his name in Column B of Schedule 1, and such amount shall be credited against his Capital Account.
5 .1.2 The Agreement is entered into among the Company and its Members and is expressly not intended for the benefit of any creditor of the Company or any other person. Except and only to the extent provided by applicable statute, no such creditor or third party shall have any rights under the Agreement or any agreement between the Company and any Member with respect to any Capital Contribution or otherwise.
5.2 Additional Capital Contributions. Each Member shall be required to make such Additional Capital Contributions as shall be determined by Members pursuant to this Agreement. The Company shall give written notice to each Member of the amount of any required Additional Capital Contribution, and each member shall pay to the Company such
Additional Capital Contribution no later than thirty (30) days following the date such notice is
given. This section shall be for the sole benefit of the Members and the Company, and no one shall under any circumstances, have any right to compel any actions or payments by the Members.
5.3 Remedies for Failure to Pay Additional Capital Contributions.
5.3.1 If any Member who is required to do so fails to contribute his share of
Additional Capital Contribution, the Company shall notify the other Members and they shall have the option to either;
5.31.1 Treat the noncontributing Member as a defaulting member, or
5.3.1.2 Contribute, in proportion to their respective Percentage Interests or as they may otherwise agree, the amount required from the noncontributing Member, and the Percentage Interests of all Member shall then be equal to the ratio of a fraction, the
numerator of which is the aggregate contributions of each such Member pursuant to this
section, and the denominator of which is the aggregate contributions of all Members pursuant to this section.
5.3.2 If the Members elect to treat the noncontributing Member as a defaulting member, the Company upon the vote of non-defaulting Members who hold a majority of the
Percentage Interests held by the non-defaulting Members, may compel a Member, through the filing of a lawsuit, to pay his share of Company obligations or Additional Capital
Contributions together with reasonable attorney's fees and interest on such unpaid capital
contributions at an annual interest rate of four percentage points higher than the highest interest rate then being charged to the Company by any non-Member creditor from the date when the capital contribution was due until paid in full. Non-defaulting Members also may elect to purchase the Membership Interest of a defaulting member pursuant to the "Transferability" section.
5.4 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, except as otherwise specifically provided for herein. No interest shall be paid on any Member's Capital Contribution or Capital Account. No Member shall be entitled to return of Capital Contributions, except as provided by the terms of this Agreement.
SECTION 6
ALLOCATION OF NET PROFITS AND LOSSES
6.1 Allocation of Net Profit or Loss. The Net Profit or Net Loss for any fiscal
year of the Company shall be allocated among the Unit Holders in accordance with their respective Percentage Interests.
6.2 Limitation. The Net Loss allocated to each Unit Holder for each Company
fiscal year pursuant to the preceding paragraph shall not exceed the maximum amount of Net Loss that can be so allocated without causing each Unit Holder to have a Deficit Capital
Account at the end of the fiscal year. All Net Losses in excess of the limitation set forth in the - preceding sentence shall be allocated to the other Unit Holders, who do not have Deficit
Capital Accounts, in proportion to their respective Percentage Interests. All losses in excess of the above limitations shall be allocated first to Unit Holders, who bear the economic risk of
loss for Company liabilities, in proportion to their respective Percentage Interests, then to all Unit Holders in proportion to their respective Percentage Interest.
SECTION 7
DISTRIBUTIONS
7.1 Non-liquidating Cash Distributions. Pursuant to a Major Decision,
distributions of Distributable Cash, other than distributions in liquidation, shall be made to the Unit Holders in accordance with their Percentage Interests.
7.2 Distributions in Kind. Non-cash assets, if any, shall be distributed in a manner that reflects how cash proceeds from the sale of such assets for fair market value would have
been distributed (after any unrealized gain or loss attributable to such non-cash assets has been allocated among the Unit Holders.)
7.3 Limitation Upon Distributions. No distribution shall be declared and paid to the extent that, after the distribution is made (a) the Company would not be able to pay its
debts as they became due m the usual course of business, or (b) the assets of the Company are
not in excess of all liabilities of the Company, except liabilities to Members on account of their Capital Contributions .
7.3.1 A Unit Holder who receives a distribution in violation of the above limitation is not liable to the Company unless he knew the distribution violated such limitation.
7.3.2 A Unit Holder who receives a distribution from the Company and who knew the distribution violated such limitation shall have no liability for the amount of the distribution after the expiration of three (3) years from the date of the distribution unless an action to recover the distribution from such Unit Holder is commenced prior to the expiration of such three (3) year period and an adjudication of liability against such Unit Holder is made in such action.
SECTION 8
MANAGEMENT
8.1 Management. The business and affairs of the Company shall be managed by
the Members. Except as otherwise provided in this Agreement, all determinations, decisions, approvals and actions affecting the Company and its business and affairs shall be made and authorized by the affirmative vote of Members holding more than fifty percent (50%) of the Units then held by all Members.
8.1.1 Signing Members. Subject to the limitations set forth below, all instruments for the Company need only be executed by one Member.
8.1.2 Higher Vote Required for Major Decisions. Major Decisions, shall not be made or taken without the prior written approval of Members holding the aggregate of sixty-seven percent (67%) of the Units held by Members at such time. A Major Decision is any of the following acts:
8.1.2.1 Sell, transfer, convey, or encumber the Company's real property and improvements;
8.1.2.2 Sell, transfer, or encumber substantially all of the Company's assets, other than real property and improvements;
8.1.2.3 Distribute any cash or other assets of the Company to a Member;
8.1.2.4 Call for any Additional Capital Contributions from the Members to provide funds for payment of the expenses of the Company of whatever nature;
8.1.2.5 Incur new obligations in the name of the Company that exceed Company's annual budget by more than $5,000 in the aggregate (exclusive of interest) for any one fiscal year, except as expressly authorized or otherwise in this Agreement; or
8.1.2.6 Cause to be done any act, which has or would have a material adverse effect upon the Company.
8.1.3 Decisions Requiring Unanimous Approval. Unanimous agreement of all Members shall be required for the Company to purchase any real property. If a decision is
made to purchase any real property, the Company may borrow from any Member to make such purchase and that Member shall receive from the Company a note and first deed of trust on the property so purchased, which note shall be guaranteed by all non-loaning Members.
8.1.4 After a Major Decision has been made, the Signing Member shall take any and all such actions and execute any and all documents necessary to implement such Major Decision.
8.2 Compensation. Unless approved by Members holding a Majority Interest, no Member or Affiliate shall receive compensation for services to the Company. Members shall be reimbursed by the Company for reasonable out-of-pocket expenses incurred in connection with the Company's business.
8.3 Limitation on Liability; Indemnifications.
8.3.1 Limitation on Liability. No Unit Holder shall be personally liable for any debts, losses or liabilities of the Company beyond the Member's respective payment of contributions and any Additional Capital Contributions, except as otherwise provided by law. No Unit Holder shall have liability to the Company or its Members for monetary damages except for acts or omissions which involve violation of this Agreement, intentional misconduct, a knowing violation of law, conduct violating RCW 25.15.235, or for any transaction from which the Unit Holder has personally received a benefit in money, property or services to which the Unit Holder was not legally entitled. If the Act is hereafter amended to authorize action further eliminating or limiting the personal liability of Unit Holders to persons who are not Unit Holders, then the liability of a Member shall be eliminated or limited to the full extent permitted by the Act, as so amended.
8.3.2 The Company shall indemnify and hold harmless any Unit Holder, employee, or agent ("Indemnitee") against any liability, loss, damage, cost or expense incurred on behalf of the Company or in furtherance of the Company's interests except for acts or omissions that involve intentional misconduct, knowing violation of law, conduct violating RCW 25.15.235, or for any transaction from which the Indemnitee has personally received a benefit in money, property or services to which the Indemnitee was not legally entitled.
8.3.3 Any indemnification required to be made by the Company shall be made promptly following the fixing .of the liability, loss, damage, cost or expense incurred or suffered by a final judgment of any court, settlement, contract or otherwise. In addition, the Company may advance funds to an Indemnitee claiming indemnification under this section for legal expenses and other costs incurred as a result of a legal action brought against such Indemnitee only if (i) the legal action relates to the performance of duties or services by the Indemnitee on behalf of the Company, (ii) the legal action is initiated by a party other than a Unit Holder, and (iii) such Indemnitee undertakes to repay the advanced funds to the Company if it is determined that such Indemnitee is not entitled to indemnification pursuant to the terms of this Agreement.
SECTION 9
TRANSFERABILITY
9.1 General. Except as otherwise expressly provided in this Agreement, no Unit
Holder shall have the right to:
(a) sell, assign, transfer, exchange or otherwise transfer for consideration, (collectively, "sell" or "sale") or
(b ) gift, bequeath or otherwise transfer for no consideration whether or not by operation of law, except in the case of bankruptcy (collectively "gift"), all or any part of its Membership Interest or Economic Interest. Each Unit Holder acknowledges the reasonableness on sale and gift of Membership Interests and Economic Interests imposed by this Agreement. Accordingly, the restrictions on sale and gift contained herein shall be specifically enforceable.
9.2 First Refusal Rights.
9.2.1 A Unit Holder desiring to sell all or any portion of its Membership Interest or Economic Interest ("Selling Unit Holder") to a third party purchaser shall obtain from such third party purchaser a bona fide written offer to purchase such interest, stating the terms and conditions upon which the purchase is to be made and the cash consideration offered therefor. Such Selling Unit Holder shall give written notice to the other Unit Holders and the Company of its intention to so transfer such interest. Such notice shall be set forth in the complete terms of the written offer to purchase and the name and address of the proposed third party purchaser. The notice must contain all the material terms relating to the purchase and sale, the consideration must be entirely monetary and the offer must require that the transferee be bound by all the terms and conditions of this Agreement and that the purchase and sale is contingent upon approval of the Company's lenders, if such approval is required by the terms of loan documents.
9.2.2 The non-selling Unit Holders, shall, on a basis pro rata to their Units
or on a basis pro rata to the Units of those remaining Unit Holders exercising their first refusal rights, have the first right to purchase all (but not less than all) of the interests proposed to be sold by the selling Unit Holder upon the same terms and conditions stated in the notice given pursuant to the preceding section by giving written notice to the other Unit Holders and the Manager within ten (10) days after such notice from the Selling Unit Holder. The failure of a Unit Holder to so notify the other Unit Holders and the Company of its desire to exercise its first refusal rights within said ten (10) day period shall result in the termination of such Unit Holder's first refusal rights.
9.2.3 Within ten (10) day after expiration of the ten (10) day period specified in the preceding paragraph, the Company shall notify those Unit Holders electing to exercise their first refusal rights of any Units that the other Unit Holders did not elect to purchase. Those Unit Holders exercising first refusal rights in accordance with the preceding paragraph shall then notify the Company and the other purchasing Unit Holders whether they elect to purchase such remaining Units, which shall be pro rata or allocated in such other manner as the purchasing Unit Holders shall agree. If no such notification is received by the Company from any such Unit Holders in accordance with this paragraph, no Unit Holder shall have any further first refusal rights.
9.2.3.1 If Unit Holders have elected to purchase all of the Units
offered by the Selling Unit Holder, the Selling Unit Holder shall sell such Units upon the same terms and conditions specified in the notice and the purchasing Unit Holders shall have the right to close the purchase within thirty (30) days after receipt of notification from the Company that such Unit Holders have elected to purchase the Selling Unit Holder's U nits, whichever is longer.
9.2.3.2 If Unit Holders do not elect to purchase all of the Units offered by the Selling Unit Holder in accordance with this section, then the Selling Unit Holder shall be entitled to sell such Units to the third party purchaser in accordance with the terms and conditions upon which the purchase is to be made as specified in the notice. However, if such sale is not completed within thirty (30) days following expiration of the other Unit Holders, first refusal rights, then the Selling Unit Holder shall not be entitled to complete the sale to such third party purchaser and the Selling Unit Holder's Units shall continue to be subject to the rights of first refusal set forth in this section with respect to any proposed subsequent transfer.
9.2.4 Conditions for Recognizing Sale of Gift. Upon the purchase or the gift of a Membership Interest or an Economic Interest, and as a condition to recognizing the effectiveness and binding nature of any sale or gift and substitution of a person as a new Unit Holder, the Company may require the transferring Unit Holder and the proposed purchaser, donee or successor-in-interest, as the case may be to execute, acknowledge and deliver to the Manager such instruments of transfer, assignment and assumption and such other agreements and to perform all such other acts that the Company may deem necessary or desirable to:
9.2.4.1 constitute such Person as a Unit Holder;
9.2.4.2 confirm that the person desiring to become a Unit Holder, has accepted, assumed and agreed to be subject and bound by all of the terms, obligations and conditions of this Agreement (whether such person is to be admitted as a new Member or an Economic Interest Owner);
9.2.4.3 maintain the status of the Company as a partnership for federal income tax purposes; and
9.2.4.4 assure compliance with any applicable state and federal laws, including securities laws and regulations.
9.2.5 Any sale or gift of a Unit Holder's interest in compliance with this section shall be effective when the remaining Members' consent thereto is given, or, if no such consent was required, then on such date that the transferor and the transferee both comply with Section 12.2(c). The transferring Unit Holder hereby indemnifies the Company against any and all loss, damage, or expense (including, without limitation, tax liabilities or loss of tax benefits) arising directly or indirectly as a result of any transfer or purported transfer in violation of this section.
9.2.6 A Unit Holder may gift all or any portion of its interest, without regard to First Refusal Rights, provided, that the donee complies with the above conditions for recognizing a sale or gift, and further provided that the donee is either such Unit Holder's spouse, former spouse, or lineal descendent (including adopted children). In the event of a gift of all or any portion of a Unit Holder's interest to one or more donees who are under eighteen (18) years of age, one or more trusts shall be established to hold the gifted interest(s) for the benefit of such donee(s) until all of the donee(s) reach the age of at least eighteen (18) years.
9.3 Transferee Not Member in Absence of Consent.
9.3.1 Consent of Members. Notwithstanding anything to the contrary in this section, if the sale or gift of a Unit Holder's interest to a transferee or donee who is not a Member immediately prior to the sale or gift is not approved in writing by seventy-five percent (75%) of the Units then held by the non-transferring Members, in their sole discretion, then the proposed transferee or donee shall have no right to participate in the management of the business and affairs of the Company or to become a Member. Such transferee or donee shall be merely an Economic Interest Owner.
9.3.2 Purchase of Balance of Rights. Promptly following any sale or gift of a Member's Economic Interest which does not at the same time transfer the balance of the rights associated with such person's Membership Interest, the Company shall purchase from such person, and such person shall sell to the Company for a purchase price of $100.00, all such remaining rights and interests retained by such person which immediately prior to such sale or gift were associated with the transferred Economic Interest. The acquisition by the Company of such person's rights shall not cause a dissolution of the Company and such person shall no longer be a Member.
9.4 Encumber or Pledge. No Unit Holder may directly or indirectly encumber his interest in the Company without the prior written consent of seventy-five percent (75%) of the Units then held by the other Members. In the event that any Unit Holder pledges or otherwise encumbers any of its Membership Interest or Economic Interest as security for repayment of a liability, any such pledge or hypothecation shall be made pursuant to a pledge or hypothecation agreement that requires the pledgee or secured party to be bound by all the terms and conditions of this section. Third parties who are not Members or Economic Interest Owners can foreclose on an Economic Interest without being bound by this paragraph.
9.5 Purchase of a Defaulting Member's Membership Interest. In the event any Member is a defaulting member, the other Members may elect to purchase the Membership Interest of the defaulting member in proportion to their respective Percentage Interests or as they may otherwise agree. Should one Member choose not to purchase all of his proportionate share, the other non-defaulting Members may purchase that share. The purchase shall be upon the following terms:
9.5.1 The other Members shall notifying the defaulting member in writing ("Notice") that he is in default and that they elect to purchase his Membership Interest. The Notice shall contain a purchase price and terms of purchase. The purchase price shall in no event be less than the amount of the defaulting member's Capital Account minus (1) any
unpaid Company liabilities for which he is responsible, (2) any unpaid Capital Contributions for which he is responsible, and (3) any other damages attributable to the default.
9.5.2 If the defaulting member fails to respond to the Notice within twenty (20) days of the mailing of the Notice, his silence shall be deemed an acceptance of the offered purchase price. Should the defaulting member reject the offered purchase price within twenty (20) days of mailing of the Notice, the defaulting and the non-defaulting members shall designate a mutually acceptable CPA or other business valuation expert who shall establish the fair market value of the defaulting member's interest in the Company when reduced by his proportionate share of the liabilities, unpaid obligations and damages. If the Members are unable to mutually agree on an acceptable CPA or business valuation expert, then the presiding judge shall make such a designation. Good will of the Company, if any, shall not be considered in determining fair market price. The defaulting member shall pay for the appraisal. Once a fair market price has been determined, the non-defaulting members shall purchase the defaulting member's interest for seventy percent (70%) of its fair market value as determined by the valuation expert. Terms of the purchase shall provide for a ten percent (10%) cash down payment with the balance to be evidenced by a promissory note from the non-defaulting members providing for equal quarterly payments of the balance, together with interest at nine percent (9%) per annum amortized over ten (10) years. A balloon payment of unpaid principal and interest shall be due upon dissolution of the Company.
9.5.3 The purchase shall close within thirty (30) days after the purchase price has been accepted or after the appraised fair market value has been determined, whichever event occurs first.
SECTION 10
ADDITIONAL MEMBERS
The Company may permit the admission of additional Member and determine the Capital Contributions of such Members upon the prior written approval of Members holding the aggregate sixty-seven percent (67%) of the Units held by Members at such time.
SECTION 11
DISSOLUTION AND TERMINATION
11.1 Dissolution. The Company shall be dissolved:
11.1.1 upon expiration of the Company's specified term of existence;
11.1.2 by the written agreement of all Members; or
11.2.3 when a person ceases to be a Member upon the occurrence of any of any of the following events, unless there are at least two (2) remaining Members (or at least one remaining Member and a new Member is admitted) and the business of the Company is continued with the written consent of all remaining Members within ninety (90) days following the occurrence of such event:
11.1.3.1 The Member withdraws by voluntary act from the Company giving thirty (30) days written notice to the other Members;
11.1.3.2 The Member assigns all of his Membership Interests;
11.1.3.3 The Member is removed as a Member in accordance with this Agreement;
11.1.3.4 The Member, without the written consent of all other Members at the time either;
11.1.3.4.1 Makes a general assignment for the benefit of creditors;
11.1.3.4.2 Files a voluntary petition in bankruptcy;
11.1.3.4.3 Becomes the subject of an order for relief in bankruptcy proceedings ;
11.1.3.4.4 Files a petition or answer seeking for himself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation.
11.1.3.4.5 Files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against him or her in a bankruptcy proceeding or any proceeding of the nature described above;
11.1.3.4.6 Seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the member or of all or any substantial part of the Member's properties;
11.1.3.5 One hundred twenty (120) days after the commencement of any proceeding against the Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, if the proceeding has not been dismissed, or if within ninety (90) days after the appointment without his or her consent or acquiescence of a trustee, receiver, or liquidator of the Member or of all or any substantial part of the Member's properties, the appointment is not vacated or stayed, or within ninety (90) days after the expiration of any stay, the appointment is not vacated;
11.1.3.6 In the case of a Member who is an individual, the entry of an order by a court of competent jurisdiction adjudicating the Member incompetent to manage his or her person or estate;
11.1.3.7 In the case of a Member that is another limited liability
company, the dissolution and commencement of winding up of such limited liability company;
11.1.3.8 In the case of a Member that is a corporation, the filing of
articles of dissolution or the equivalent for the corporation or the administrative dissolution of the corporation and the lapse of any period authorized for application for reinstatement;
11.1.3.9 In the case of a Member that is a limited partnership, the dissolution and commencement of winding up of such limited partnership; or
11.1.3.10 In the case of a Member not otherwise described in this section, the dissolution and commencement of winding up of such Member.
11.2 Effect of Dissolution. Upon dissolution, the Company shall cease carrying on the Company business, but the Company shall continue until the winding up of its affairs is completed and the Certificate of Dissolution has been issued by the Secretary of State.
11.3 Allocation of Net Profits and Loss in Liquidation. The allocation of Net
Profit, Net Loss and other items of the Company following the date of dissolution, including
but not limited to gain or loss upon the sale of all or substantially all of the Company’s assets, shall be determined in accordance with the provisions of the “Allocation of Profit and Loss"
and "Distribution" sections and shall be credited or charged to the Capital Accounts of the Unit Holders in the same manner as Net Profit, Net Loss, and other items of the Company would have been credited or charged if there were no dissolution and liquidation.
11.4 Winding Up, Liquidation and Distribution of Assets. Upon dissolution, the
Company shall immediately proceed to wind up its affairs, unless the business of the Company is continued with the written consent of all remaining Members within ninety (90) days following the occurrence of the dissolution event. The Company shall sell or otherwise liquidate all of its assets as promptly as practicable (except to the extent assets are distributed to the Unit Holders in kind) and shall apply the proceeds of such sale and the remaining Company assets in the following order of priority:
11.4.1 Payment of creditors, including Members who are creditors, to the extent otherwise permitted by law, in satisfaction of Company liabilities, other than liabilities for distribution to Members;
11.4.2 Establishment of any reserves deemed reasonably necessary for contingent or unforeseen Company obligations; and
11.4.3 Payment at the expiration of such period as is deemed advisable, the balance then remaining, to the Unit Holders in proportion to the positive balances of their respective Capital Accounts, as determined after taking into account all Capital Account adjustments for the taxable year during which the liquidation occurs.
11.5 No Obligation to Restore Negative Capital Account Balance on Liquidation. Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g), if any Unit Holder has a negative Capital Account balance (after giving effect to all contribution, distributions, allocations and other Capital Account adjustment for all taxable years, including the year during which such liquidation occurs), such Unit Holder shall have no obligation to make any Capital Contribution to the Company, and the negative balance of such Unit Holder's Capital Account shall not be considered a debt owed by such Unit Holder to the Company or to any other person for any purpose whatsoever .
11.6 Termination. The Company shall comply with any applicable law pertaining to the winding up of its affairs and the final distribution of its assets. Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated.
11.7 Certificate of Cancellation. 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 Unit Holders, the Company shall file a certificate of cancellation as required by RCW 25.15.080. Upon filing the certificate of cancellation, the existence of the Company shall cease, except as otherwise provided in the Act.
11.8 Return of Contribution Nonrecourse to Other Members. Except as provided by law or as expressly provided in this Agreement, upon dissolution each Unit Holder shall look solely to the Company assets for the return of Capital Contributions. If the property remaining after the payment or discharge of Company liabilities is insufficient to return the Unit Holder's contributions, no Unit Holder shall have recourse against any other Unit Holder .
SECTION 12
MEETINGS OF MEMBERS
12.1 Annual Meeting. The annual meeting of the Members shall be held on the
5th day of April at the registered office of the LLC each and every year, or at such other time as shall be determined by the Members, for the purpose of the transaction of such business as may come before the meeting.
12.2 Special Meetings. Special meetings of the Members for any purpose or purposes, may be called by the Members holding at least twenty-five percent (25% ) of the Units held by Members.
12.3 Place of Meetings. The Members may designate any place, either within or outside the state of Washington, as the place of meeting for any meeting of the Members. If no designation is made, or if a special meeting is called, the place of the meeting shall be the principal office of the Company.
12.4 Notice of Meetings. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose for which the meeting is called shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting to each Member entitled to vote at such meeting.
12.5 Record Date. For the purpose of determining Members entitled to notice of or to vote at any meeting, or Members entitled to receive payment of any distribution, 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. When a determination of Members entitled to vote at any meeting of Members has been provided in this paragraph, such determination shall apply to any adjournment thereof.
12.6 Quorum. A Majority Interest represented in person or by proxy shall constitute a quorum at any meeting of Members. In the absence of a quorum at any such meeting, a majority of the Units held by Members so represented may adjourn the meeting from time to time for a period not to exceed sixty (60) days without further notice. However, if the adjournment is for more than sixty (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 which 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 that number of Units whose absence would cause less than a quorum.
12.7 Proxies. At all meetings of Members, a Member may vote in person or by written proxy. Such proxy shall be filed with the Company before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.
12.8 Action by Members Without a Meeting. Action required or permitted to be taken at meeting of Members may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, executed by Members entitled to vote thereon and delivered to the Company for inclusion in the Company's minutes. Action taken under this paragraph is effective when all Members entitled to vote thereon have signed such consents, unless such consents specify a different effective date. The record date for determining Members entitled to take action without a meeting shall be the date the first Member signs a consent.
12.9 Waiver of Notice. When any notice is required to be given to a Member, a waiver thereof in writing signed by the Member entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice.
SECTION 13
INDEPENDENT ACTIVITIES OF MEMBERS
13.1 Other Business Activity of a Member. This Agreement shall not preclude a
Member, or an Affiliate, from engaging, directly or indirectly, in any business, including, but not limited to, any business which is similar to the business of the Company, or results in direct or indirect competition with the Company. Neither the Company nor any Member shall have any right to participate in any manner in the income earned by or accruing to any other Member or an Affiliate from the conduct of any other business.
13.2 Business Activity With a Member. This Agreement shall not preclude the
Company from engaging a Member, or an Affiliate, to perform services for the Company, so long as the compensation paid for the services is reasonably commensurate with that charged by outside third parties for similar service. Payment for such services shall require approval pursuant to Section 8.1.2 at time of payment. This Agreement shall not prevent any Member from making secured or unsecured loans to the Company.
SECTION 14
ACCOUNTING. BOOKS AND RECORDS
14.1 Accounting Principles. The Company's books and records shall be kept, and its income tax returns prepared, under such permissible method of accounting, consistently applied, as determined to be in the best interest of the Company and its Members.
14.2 Accounting Period. The Company's accounting period shall be the calendar year.
14.3 Records, Audits and Reports. At the expense of the Company, the Company shall maintain records and accounts of all operations and expenditures of the Company. The Company shall keep at its principal place of business the following records:
14.3.1 A current list and past list, setting forth the full name and last known mailing address of each Unit Holder;
14.3.2 A copy of the Certificate of Formation and all amendments thereto; 14.3.3 Copies of this Agreement and all amendments hereto;
14.3.4 Copies of the Company's federal, state, and local tax returns and
reports, if any, for the three (3) most recent years;
14.3.5 Minutes of every meeting of the Members and any written consents obtained from Members for actions taken by Members without a meeting; and
14.3.6 Copies of the Company's financial statements for the three (3) most recent years.
SECTION 15
MISCELLANEOUS PROVISIONS
15.1 Notices. Any notice, demand, or communication required or permitted under this Agreement shall be deemed to have been duly given if delivered personally to the party to whom directed or, if mailed by registered or certified mail, postage and charges prepaid, addressed (a) if to a Member, to the Member's address specified on attached Schedule 1, (b) if to the Company, to the Company's principal place of business. Except as otherwise provided herein, any such notice shall be deemed to be given when personally delivered or, if mailed, three (3) business days after the date of mailing. A Member or the Company may change its address for the purposes of notice hereunder by giving notice to the others specifying such changed address in the manner specified in this section.
15.2 Governing Law. The laws of the state of Washington shall govern this Agreement.
15.3 Jurisdiction. In the event of litigation, the Members agree to submit to the jurisdiction of the courts of the state of Washington, with venue in the Lewis County Superior Court.
15.4 Litigation Expenses. In any litigation between or among the Unit Holders, the losing party shall pay the reasonable legal fees, expenses and costs of the prevailing party, which amount shall be added to any judgment entered.
15.5 Further Action. The Unit Holders shall execute and deliver all documents, provide all information, and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of this Agreement.
15.6 Amendments. This Agreement may not be amended except by the unanimous written agreement of all of the Members.
15.7 Construction. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa.
15.8 Headings. The headings in this Agreement are inserted for convenience only and shall not affect the interpretations of this Agreement.
15.9 Waivers. The failure of any person to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation.
15.10 Rights and Remedies Cumulative. The rights and remedies provided by this Agreement are cumulative and the use of anyone right or remedy shall not preclude or waive the rights to use any or all other available remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance, or otherwise.
15.11 Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid, illegal, or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.
15.12 Heirs, Successors and Assigns. Each of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns.
15.13 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company.
15.14 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.
SECTION 16
REPRESENTATIONS AND WARRANTIES
16.1 Each Unit Holder represents, covenants and warrants to the other Unit Holders
that such Unit Holder:
16.1.1 Has full right, power, and authority to execute and deliver this Agreement;
16.1.2 Has taken all action necessary to constitute this Agreement as their valid and binding obligation enforceable in accordance with its terms;
16.1.3 Is not subject to any restriction or agreement which prohibits or would be violated by the execution and delivery hereof or the consummation of the transactions contemplated herein or pursuant to which the consent of any third person, firm, or corporation is required in order to give effect to the transactions contemplated herein; and
16.1.4 Shall take all such other action as shall enable them to remain a Unit Holder in the Company and perform their obligations hereunder.
16.2 Each Unit Holder hereby confirms the Units have been acquired for such Unit Holder's own account, for investment and not with a view to the resale or distribution thereof and may not be offered or sold to anyone unless there is an effective registration or other qualification relating thereto under all applicable Securities Acts or unless such Unit Holder delivers to the Company an opinion of counsel, satisfactory to the Company, that such registration or other qualification is not required .
SECTION 17
TAX MATTERS
17.1 Section 754 Elections. In the event of a transfer of all or any part of the interest of a Unit Holder, or in the event of the death of a Unit Holder, the Company may elect, by a majority vote of the Members and pursuant to Section 754 of the Code (or any corresponding provisions of succeeding law), to adjust the basis of the Company's assets. Notwithstanding an election pursuant to Section 754 having been made with respect to the interest of any Unit Holder, however, the determination of profits, losses, and capital account balances shall, for all purposes of this Agreement, be made without taking into account adjustments resulting from such election and such adjustments shall be taken into account on the income tax returns of the Unit Holders affected thereby.
17.2 Returns and Other Elections. The Company shall, with the assistance and guidance of the Company's accountant and tax return preparer, cause the preparation and timely filing of all tax and information returns required to be filed by the Company pursuant to the Code and all other tax and information 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 Unit Holders within a reasonable time after the end of the Company's fiscal year. Except as otherwise expressly provided to the contrary in this Agreement, all elections permitted to be made by the Company under federal or state laws shall be made by Members holding a Majority Interest.
17.3 Withholding, Amounts Withheld Treated as Distributions. The Company is authorized to withhold from distributions, or with respect to allocations or payments, to Unit Holders and to pay over to the appropriate federal, state or local governmental authority any amounts required to be withheld pursuant to the Code or provisions of applicable state or local law. All amounts withheld pursuant to the preceding sentence in connection with any payment, distribution or allocation to any Unit Holder shall be treated as amounts distributed to such Unit Holder for all purposes of this Agreement.
SECTION 18
CAPITAL ACCOUNTS, NON-PRO RATA DISTRIBUTIONS,
AND SUBSTANTIAL ECONOMIC EFFECT
18.1 Capital Accounts.
18.1.1 Establishment and Maintenance. A separate Capital Account will be maintained for each Unit Holder. Each Unit Holder's Capital Account shall be increased by (1) the amount of money contributed by such Unit Holder to the Company; (2) allocations to such Unit Holder of Net Profits; (3) any items in the nature of income and gain that are separately allocated to the Unit Holder; and (4) allocations to such Unit Holder of income and gain exempt from federal income tax. Each Unit Holder's Capital Account shall be decreased by (1) the amount of money distributed to such Unit Holder by the Company; (2) the fair market value of property distributed to such Unit Holder by the Company (net of liabilities secured by such distributed property that such Unit Holder is considered to assume or take); (3) allocations to such Unit Holder of expenditures described in Code Section 705(a)(2)(B); (4) any items in the nature of deduction and loss that are separately allocated to the Unit Holder; and (5) allocations to such Unit Holder of Net Losses. In the event of a permitted sale or exchange of a Unit 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 Unit.
18.1.2 Compliance with Regulations. The manner in which Capital Accounts are to be maintained is intended to comply with the requirements of Code Section 704(b ) and the Regulations promulgated thereunder. If in the opinion of the Company's legal counselor accountants the manner in which Capital Accounts are to be maintained should be modified in order to comply with Code Section 704(b) and the Regulations thereunder, then notwithstanding anything to the contrary, the method in which Capital Accounts are maintained shall be so modified; provided, however, that any such change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among the Unit Holders.
18.2 Other Allocation Rules.
18.2.1 General. Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Unit Holders in the same proportions as they share Net Profits or Net Losses, as the case may be, for the year.
18.2.2 Allocation of Recapture Items. In making any allocation among the Unit Holders of income or gain from the sale or other disposition of a Company asset, the ordinary income portion, if any, of such income and gain resulting from the recapture of cost recovery or other deductions shall be allocated among those Unit Holders who were previously allocated (or whose predecessors-in-interest were previously allocated) the cost recovery deductions or other deductions resulting in the recapture items, in proportion to the amount of such cost recovery deductions or other deductions previously allocated to them.
18.2.3 Allocations in Connection with Varying Interests. If, during a Company fiscal year , there is (i) a permitted transfer of a Unit Holder's interest, or (ii) the admission of a Member, Net Profit, Net Loss, each item thereof, and all other tax items of the Company for such period shall be divided and allocated among the Unit Holders by taking into account their varying interests during such fiscal year in accordance with Section 706( d) and using any permitted conventions selected by the Company.
18.2.4 Items Separately Allocated. Any items that are separately allocated pursuant to this section shall not be taken into account in computing Net Profits or Net Losses.
18.3 Substantial Economic Effect. The provisions of this section and of this Agreement are intended to have "substantial economic effect" and shall be interpreted in a manner consistent with the requirements of the Code and Regulations.
SECTION 19
DEFINITIONS
The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein):
19.1 Act. The Limited Liability Company Act of the state of Washington (RCW Ch. 25.15).
19.2 Affiliate. With respect to any Unit Holder, (i) any other Unit Holder directly or indirectly controlling, controlled by, or under common control with such Unit Holder, (ii) any Unit Holder owning or controlling fifty percent (50%) or more of the outstanding voting interests of such Unit Holder, (iii) any officer, director, or general partner of such Unit Holder, or (iv) any Unit Holder who is an officer, director, general partner, trustee or holder of fifty percent (50% ) or more of the voting interests of any Unit Holder described in clauses (i) through (iii). For purposes of this definition, the term " controls," "is controlled by," or "is under common control with" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Unit Holder, whether through the ownership of voting securities, by contract or otherwise.
19.3 Capital Account. The capital account determined and maintained for each Unit Holder in accordance with this Agreement.
19.4 Capital Contribution. Any contribution to the capital of the Company by a Member whenever made.
19.5 Certificate of Formation. The certificate of formation pursuant to which the Company was formed, as originally filed with the office of the Secretary of State, and as amended from time to time.
19.6 Code. The Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding federal revenue laws.
19.7 Company. PDCA HOLDINGS, L.L.C., formed under the laws of the state of Washington, and any successful limited liability company.
19.8 Deficit Capital Account. With respect to any Unit Holder, the deficit balance, if any, in such Unit Holder's Capital Account as of the end of the taxable year.
19.9 Distributable Cash. All cash received by the Company, less the sum of the following to the extent paid or set aside by the Company:
19.9.1 All principal and interest payments on indebtedness of the Company and other sums paid or payable to lenders or trade creditors;
19.9.2 All cash expenditures incurred incident to the normal operation of the Company's business; and
19.9.3 Reserves.
19.10 Economic Interest. A Unit Holder's share of Net Profits, Net Losses, and other tax items of the Company and distributions of the Company' s funds and assets pursuant to this Agreement and the Act, excluding any right to participate in the management or affairs of the Company, including the right to vote on, consent to or otherwise participate in any decision by the Members.
19.11 Economic Interest Owner. The owner of an Economic Interest who is not a Member.
19.12 Majority Interest. At any time, more that fifty percent (50%) of the then outstanding Units held by Members.
19.13 Member. Each such Person who executes a counterpart of this Agreement as a Member and each person who may hereafter become a Member. If a Person is a Member immediately prior to the acquisition by such person of an Economic Interest, such person shall have all the rights of a Member with respect to such Economic Interest.
19.14 Membership Interest. All of a Member's share in the Net Profits, Net Losses, and other tax items of the Company and distributions of the Company's assets pursuant to this Agreement and the Act and all of a Member's rights to participate in the management or affairs of the Company, including the right to vote on, consent to or otherwise participate in any decision of the Members.
19.15 Net Profits and Net Losses. The income, gains, losses, and deductions of the Company determined in accordance with accounting principles consistently applied from year to year employed under the method of accounting adopted by the Company and as reported separately or in the aggregate, as appropriate, on the tax return of the Company filed for federal income tax purposes.
19.16 Percentage Interest. With respect to any Unit Holder the percentage determined based upon the ratio that the number of Units held by such Unit Holder bears to the total number of outstanding Units. Each Unit Holder has the "Percentage Interest" in the Company which is set forth opposite his (the masculine form shall be deemed to mean either the feminine or neuter forms as well wherever appropriate) name in Column A of Schedule I. The Percentage Interests of the Unit Holders shall be subject to adjustment as provided for in this Agreement.
19.17 Property. All of the personal and real property and improvements of the Company.
19.18 Regulations. Proposed, temporary and final Treasury regulations promulgated under the Code and the corresponding sections of any regulations subsequently issued that amend or supersede such regulations.
19.19 Reserves. With respect to any fiscal period, funds set aside or amounts allocated during such period for reserves which shall be maintained in amounts deemed sufficient by Members holding a Majority Interest for working capital and to pay taxes, insurance, debt service or other costs or expenses incident to the ownership or operation of the Company's business.
19.20 Unit Holder. A Person who is a Member or who is an Economic Interest Owner.
19.21 Units. The Units issued to any Member or Economic Interest Owner under this Agreement as reflected in attached Schedule 1 , as amended from time to time.
This Agreement is executed by the undersigned Members effective as of the date first above written.
[Executed file available upon request]
DEBBIE BENNETT
CYNTHEA WILLIAMS
BRIGHT FAMILY LIMITED PARTNERSHIP,
a Tennessee Limited Partnership
by: TONY BRIGHT, General Partner
SCHEDULE 1
MEMBER INFORMATION
A B C D
Names and Initial
Addresses of Capital Percentage
Members Contributions Units Interest
Debbie Bennett $2,500.00 10 2.5%
611 NW State Ave.
Chehalis, WA 98532
Cynthea Williams $2,500.00 10 2.5%
5462 Strawberry Ct. SE
Lacey, WA 98513
Bright Family Limited Partnership All right, title and interest 380 95%
2765 Michigan Ave. Rd. NE to LP’s patents and patents
Cleveland, TN 37323 pending
|