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OPERATING AGREEMENT
OF
EMS GENOMICS, L.L.C.
(A NEVADA LIMITED LIABILITY COMPANY)
January 17, 2014
This OPERATING AGREEMENT of EMS GENOMICS, L.L.C is entered into and shall
be effective as of January 17, 2014 by and between its founders DR. JOSEPH GRZYMSKI and
CARL STAUB, as the Original Managing Members, and for all intents and purposes treated as
part of the Articles of Organization on the following terms and conditions:
SECTION 1. The Company
1.1
Formation. The Company was formed on December 13, 2013, to engage in certain
scientific research relating to genetic characteristics of microorganisms found in fresh and salt
water and certain terrestrial environments, and to engage in the production, marketing, sale and/or
licensing of the products discovered or resulting from such research. The Members have entered
into certain agreements with the founders of this Company to acquire the assignment of certain
research methodologies, formulae, patentable (or potentially patentable) devices, and related
intellectual properties, and are forming this Company to continue said research activities in the
form of a Limited Liability Company upon the terms and conditions set forth in these Articles.
1.2 Name. The name of the Company shall be the EMS GENOMICS, L.L.C..
1.3 Purpose. The purpose of the Company is limited to conducting the operations referred-to in
section 1.1 above, including all activities incidental to the creation, production, marketing,
development and exploitation of said microorganism products, along with the technologies related
to large scale production of such discoveries and products; as well as any related sales, licensing,
joint venture(s) or other business transactions undertaken with a view toward monetizing the
benefits of the research to be conducted, as well as any other activity permitted by the laws of the
State of Nevada and the United States.
1.4 Principal Place of Business. The principal place of business of the Company shall be at 9395
Double R Boulevard, Reno, NV 89521, being situated in the County of Washoe, within the State
of Nevada. The Managing Member may change the principal place of business of the Company to
any other place within the State of Nevada upon ten (10) days' notice to the other Member(s).
1.5 Term. The term of the Company commenced on the date the Company was formed, as set
forth in Section 1.1 hereof, and shall continue until December 31, 2063 unless the Company is
dissolved earlier as set forth in this Agreement.
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1.6 Filings.
(a)
The Managing Member(s), acting either individually or jointly, shall cause
appropriate fictitious business name certificates, business licenses, applications for tax
identification numbers and like statements to be filed and published for the Company under the
name set forth in Section 1.2 hereof or such other name as the Company may have or use.
(b)
The Managing Member shall execute and cause to be filed original or amended
certificates and shall take any and all other actions as may be reasonably necessary to perfect and
maintain the status of the Company as a Company or similar type of entity under the laws of any
other states or jurisdictions in which the Company engages in business.
1.7 Independent Activities. Each Managing Member, each Associate Member and each Investor
Limited Member may, notwithstanding this Agreement, engage in whatever activities they choose,
whether the same are competitive with the Company or otherwise, without having or incurring any
obligation to offer any interest in such activities to the Company or any Member. Neither this
Agreement, nor any activity undertaken pursuant, hereto shall prevent any Managing Member
from engaging in such activities, nor shall this Agreement require any Managing Member to
permit the Company or any Member to participate in any such activities. As a material part of the
consideration for the execution of this Agreement by each Managing Member and the admission of
each Associate Member or Investor Limited Member, each such Member hereby waives,
relinquishes, and renounces any such right or claim of participation in any activities of the
Managing Members.
1.8 Definitions. Capitalized words and phrases used in this Agreement have the following
meanings:
(a) "Act" means the Nevada Uniform Limited Liability Company Act, as set forth in
Chapter 86 of the Nevada Revised Statutes, as amended from time to time (or any corresponding
provisions of succeeding law).
(b) "Affiliate" means, with respect to any Person, (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) any Person owning or
controlling 10 percent or more of the outstanding voting securities of such Person, (iii) any officer,
director, or Managing Member of such Person, or (iv) any Person who is an officer, director,
Managing Member, trustee, or holder of 10 percent or more of the voting securities of any Person
described in clauses (i)through (iii) of this sentence.
(c) "Agreement" or "Company Agreement" means this Operating Agreement of Company,
as amended from time to time. Words such as "herein," "hereinafter," "hereof," "hereto," and
"hereunder" refer to this Agreement as a whole, unless the context otherwise requires.
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(d) "Capital Account" means, with respect to any Member, Associate Member or Investor
Limited Member, the Capital Account maintained for such Person in accordance with the
following provisions: (i) To each Person's Capital Account there shall be added or credited such
Person's Capital Contributions, such Person's distributive share of Profits, and any items in the
nature of income or gain that are specially allocated pursuant to Section 3.3 hereof, and the
amount of any Company liabilities (if any) that are assumed by such Person or that are secured by
any Company Property distributed to such Person; (ii) from each Person's Capital Account there
shall be subtracted or debited the amount of cash and the Gross Asset Value of any Company
Property distributed to such Person pursuant to any provision of this Agreement, such Person's
distributive share of Losses, and any other items in the nature of expenses or losses that are
specially allocated pursuant to Section 3.4 hereof, and the amount of any liabilities of such Person
that are assumed by the Company, or that are secured by all property contributed by such Person
to the Company; (iii) In the event any interest in the Company is transferred in accordance with
the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred interest.
The foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Treasury Regulation Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In
the event the Managing Member shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto, are computed in order to comply with such
Regulations, the Managing Member may make such modification, provided that it is not likely to
have a material effect on the amounts distributable to any Member or Members pursuant to Section
11 hereof upon the dissolution of the Company. The Managing Member shall adjust the amounts
debited or credited to Capital Accounts with respect to (iv) any property contributed to the
Company or distributed to the Managing Member and Members, and (v) any liabilities that are
secured by such contributed or distributed property or that are assumed by the Company or the
Managing Member and Members, in the event the Managing Members shall determine such
adjustments are necessary or appropriate pursuant to Treasury Regulation Section 1.704-1
(b)(2)(iv). The Managing Member also shall make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with Treasury
Regulation Section 1.704-1(b).
(e) "Capital Contribution" means, with respect to any Member, the amount of money and
the initial Gross Asset Value of any property (other than money) contributed to the Company with
respect to the interests held by such Member.
(f) "Code" means the Internal Revenue Code, as amended from time to time (or any
corresponding provisions of succeeding law).
(g) "Depreciation" means, for each fiscal year or other period, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for
such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted
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basis for federal income tax purposes at the beginning of such year of other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery deduction for such year or other
period bears to such beginning adjusted tax basis.
(h) " Member" means any Person (i) whose name is set forth in the first paragraph of this
Agreement as the original Managing Member; or who has been admitted as an additional or
substituted Associate Member; or who has been admitted as an additional substituted Investor
Limited Member, pursuant to the terms of the Company’s Private Placement Memorandum or the
terms of this Agreement, and (ii) who is the owner of a Unit of Ownership Interest in the
Company. "Members" means all such Persons. All references in this Agreement to a majority in
interest or a specified percentage of the Members shall mean Members holding more than 50
percent or such specified percentage, respectively, of the Units of Ownership Interests then held
by Members.
(i) "Managing Member" means any Person who (i) is referred to as such in the first
paragraph of this Agreement or has become a Managing Member pursuant to the terms of this
Agreement, and (ii) has not ceased to be a Managing Member pursuant to the terms of this
Agreement. "Managing Members" means all such Persons.
Reserved.
(j) “Associate Member” means any Person (including a corporation, partnership, trust or
similar entity who (or which) has been granted any Unit of Ownership Interest in exchange for
services or other non-monetary consideration other than those persons identified as founders and
Original Members in the first paragraph of this Agreement.
(k) “Investor Limited Member” means any Person (including a corporation, partnership,
trust or similar entity who (or which) has acquired any Unit of Ownership Interest pursuant to the
terms of that certain Private Placement Memorandum dated December 1, 2013 which is being
issued by the Company contemporaneously with the execution of this Operating Agreement. By
terms of the Private Placement Memorandum and this Operating Agreement, the Company shall
require that any person seeking to acquire any Units of Ownership Interest as an Investor Limited
Member shall be required to demonstrate that such person qualifies as an “Accredited Investor” as
defined in Rule 501(a) of Regulation D under the Federal Securities Act of 1933.
(l) “Board of Managing Directors” as further specified in Section 5.1 below, means that
group of five natural persons which is vested with overall governing authority for the Company’s
business affairs. All Managing Members shall, ex officio, be members of the Board of Managing
Directors.
(m) “Net Cash Flow From Operations” means the gross cash proceeds from Company
operations less the portion thereof used to pay or establish reserves for all Company expenses,
debt payments, capital improvements, replacements, and contingencies, all as determined by the
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Managing Member. "Net Cash Flow From Operations" shall not include the amount of any
Member’s capital contributions, or other receipts in the nature of subsidies or grants from any
governmental, educational or other non-profit organization. “Net Cash Flow From Operations”
shall not be reduced by depreciation, amortization, cost recovery deductions or similar allowances.
(n) "Net Cash Flow From Sales, Licensing or Borrowing" means the net cash proceeds
from all sales, license or royalty fees, as well as other dispositions (other than in the ordinary
course of business) and all Borrowing of Company Property, less any portion thereof used to
establish reserves, all as determined by the Managing Members. "Net Cash From Sales or
Borrowing" shall include all principal and interest payments with respect to any note or other
obligation received by the Company in connection with sales and other dispositions (other than in
the ordinary course of business) of Company Property.
(o) "Original Member" means any Person who (i) is referred to as such in the first
paragraph of this Agreement, and (ii) has not ceased to be a Member pursuant to the terms of this
Agreement.
(p) "Members" means all Managing Members, Associate Members, and Investor Limited
Members where no distinction is required by the context in which the term is used herein.
"Member" means any one of the Members. All references in this Agreement to a “majority in
interest” or a specified percentage of the Members shall be interpreted as referring-to a majority or
specified percentage of the Units of Ownership Interest as voted by Members owning or holding
such Units, as compared to the total number of Units of Ownership Interest then outstanding as
held by all Members.
(q) "Company" means the Company continued pursuant to this Agreement and the
Company continuing the business of this Company in the event of dissolution as herein provided.
(r) "Company Property" means all real or personal property, whether tangible or intangible
in character, (and specifically including all intellectual property) which is developed, created or
acquired by the Company and any improvements thereto.
(s) "Person" means any individual, Company, corporation, trust, or other entity.
(t) "Profits" and "Losses" means, for each fiscal year or other period, an amount equal to
the Company's taxable income or loss for such year or period, determined in accordance with
Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a) (1) shall be considered as included in taxable
income or loss), with the following adjustments: (i) Any income of the Company that is exempt
from federal income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 1.8(t) shall be added to such taxable income or loss; (ii) Any expenditures
of the Company described in Code Section 705(a)(2) (B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section t.704-1(b)(2)(iv)(i), and not otherwise taken
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into account in computing Profits or Losses pursuant to this Section 1.8(t), shall be subtracted
from such taxable income or loss; (iii) Gain or loss resulting from any disposition of Company
Property with respect to which gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that
the adjusted tax basis of such property differs from its Gross Asset Value; (iv) In lieu of the
depreciation, amortization, and other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account Depreciation for such fiscal year or
other period, computed in accordance with Section 1.8(g) hereof; and (v) Notwithstanding any
other provision of this Section 1.8(t), any items which are specially allocated pursuant to Section
3.3 or Section 3.4 hereof shall not be taken into account in computing Profits or Losses.
(u) “Federal Tax Purposes” refers generally to accounting procedures and other actions by
the Company undertaken in compliance with the requirements of the Title 26 of the United States
Code, court cases decided thereunder, as well as revenue rulings and other official guidance issued
under authority of the United States Treasury
(v) "Intellectual Property" shall include certain scientific and/or technologic knowledge,
concerning genetic characteristics of microorganisms found in fresh and salt water or in terrestrial
environments, as developed by Company founder DR. JOSEPH GRZYMSKI.
(w) "Substituted Member" means any Person admitted to the Company as a Member
pursuant to Section 9 hereof.
(y) "Treasury Regulations" means the Income Tax Regulations promulgated under Title 26
of the United States Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
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SECTION 2. MEMBERS’ CAPITAL CONTRIBUTIONS
2.1
Capital Structure. The initial equity ownership of the Company shall be divided into
1000 Units of Ownership Interest.
2.2 Managing Members. The Original Managing Members shall be DR. JOSEPH GRZYMSKI
and CARL STAUB. The initial Units of Ownership Interest allocated to the DR. GRZYMSKI
shall be 400 Units (representing 40% (Forty Percent) of the Company’s total ownership). The
initial Units of Ownership Interest allocated to CARL STAUB shall be 101 Units (representing
10.1 Percent (Ten and One Tenth Percent) of the Company’s total ownership). Except as otherwise
specified in Section 3 of this Operating Agreement, these Units, expressed as a percentage of total
number of the Company’s total Units outstanding shall generally apply for determining allocations
of income and loss, as well as the ownership of capital, unless otherwise specified in this
agreement.
2.3 Associate Members. As defined in above section 1.8(j), Associate Members include any
Person who acquires any Unit of Ownership Interest for services or other non-monetary
consideration. As of the date of Organization of this Company, the founders have entered into an
Agreement with the Board of Regents of the Nevada System of Higher Education on behalf of the
Desert Research Institute, (hereinafter called "DRI") to provide all required laboratory facilities,
technical staff salaries, administrative support and other related overhead items in exchange for at
a predetermined monthly payment by the Company. The DRI Foundation (on behalf of DRI) shall
also receive 40 Units of Ownership Interest (representing a 4 percent share of the total Units to be
issued) as of the date of commencement of the Company’s operations. In addition to the Units
allocated and granted to the DRI Foundation, the Company is also reserving for allocation 59
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Units of Ownership Interest to be issued to the technical staff workers. Such units may be issued to
technical staff as additional compensation for services, subject to the discretion of the Managing
Members. This percentage shall apply for determining allocations of income and loss, as well as
the initial ownership of capital, unless otherwise specified in this agreement. Except as otherwise
specified in Section 3 of this Operating Agreement, these Units, expressed as a percentage of total
number of the Company’s total Units outstanding, shall generally apply for determining allocations
of income and loss, as well as the ownership of capital, unless otherwise specified in this
agreement.
2.4 Capital Contributions.
(a) The Managing Member shall make a Capital Contribution of his interest in the abovedesignated Intellectual Property, which as of the date of Formation of this Company had an agreed
value of $1.00 in the books of this Company.
(b) The Associate Member(s) shall not be required to make any Capital Contributions.
(c) As specified by the terms of the accompanying Private Placement Memorandum, each
Investor Limited Member shall make a Capital Contribution of $75,000.00 per 40 Units of
Ownership Interest issued.
(d) Except as otherwise provided in this Agreement, no Member shall withdraw any portion of
the Capital Contributions without the consent of a majority in interest of all the Members. Under
circumstances requiring a return of any Capital Contributions, no Member shall have the right to
receive property other than cash, except as may be specifically provided herein.
(e) No Member shall receive any interest, salary, or drawing with respect to his Capital
Contributions or his Capital Account or for services rendered on behalf of the Company or otherwise
in his capacity as a Member, except as otherwise provided in this Agreement or as approved by a
majority of the Board of Directors.
(f) Except as otherwise provided by the Nevada Uniform Limited Liability Company Act, a
Member shall be liable only to make his Capital Contributions and shall not be required to lend any
funds to the Company. After each Member’s Capital Contributions as described above have been
paid, such Member shall not be required to make any additional capital contributions to the
Company. Except as may required by the cancellation or rescission of the offering described in the
Company’s Private Placement Memorandum, no Managing Member shall have any personal liability
for the repayment of any Capital Contributions of any Member.
2.5 Preemptive Rights.
Preemptive Rights.
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Each Class “A” Member shall have a Preemptive Right to subscribe for or purchase all or any part
of its Preemptive Share of any Additional Units that the Company may, from time to time, propose
to issue or sell. This Preemptive Right shall be subject to the following provisions:
(a)
Notice Procedures. If the Company proposes to undertake an issuance of
Additional Units, it shall give the Class “A” Member written notice of its intention, describing the
type of Additional Units, the price and the general terms upon which the Company proposes to issue
the same. The Class “A” Member shall have 30 days from the date of receipt of such notice to
notify the Company of its election to purchase up to its Preemptive Share of such Additional Units
for the price, at the time and upon the general terms specified in the notice, by giving written notice
to the Company and stating therein the quantity of Additional Units to be purchased; provided, that
the Class “A” Member shall have at least 30 days following delivery of its notice of election to
consummate the purchase of such Additional Units.
(b)
Completion of Transaction. If the Class “A” Member fails to notify the Company
of its intent to exercise the Preemptive Right within said 30-day period or to consummate such
purchase as required, the Company shall have 90 days thereafter to consummate the sale of the
Additional Units, at a price and upon general terms no more favorable to the purchasers thereof than
specified in the Company’s notice. If the Company has not sold such Additional Units within said
90-day period, the Company shall not thereafter issue or sell any Additional Units, without first
offering such securities to the Class “A” Member in the manner provided above.
(c)
Preemptive Share Definition. The term “Preemptive Share” means a fraction the
numerator of which is number of Class Units held by a Class “A” Member prior to the issuance of
Additional Units and the denominator of which is the total number of Class “A” Units issued and
outstanding immediately prior to the issuance of the Additional Units.
(d)
Additional Units Definition. The term “Additional Units” means any Membership
Interests, whether now authorized or not, and rights, options or warrants to purchase Membership
Interests and securities of any type whatsoever that are, or may become, convertible into
Membership Interests.
(e)
Preemptive Right Definition. The term “Preemptive Right” means the right of a
Class “A” Member to purchase that Class “A” Member’s Preemptive Share.
(f)
Termination of Preemptive Right. The Preemptive Right of a Class “A” Member
will terminate permanently if that Class “A” Member ever elects not to exercise its full Preemptive
Right or upon an underwritten public offering of the Company.
SECTION 3. ALLOCATIONS OF INCOME, LOSS AND OTHER TAX ITEMS
3.1
Profits. Except as provided in Sections 3.3(a), 3.4(a), 3.5(b), and 3.5(e) ( i) hereof, all
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Profits (as defined in above Section 1.8(t) ) from operations or disposal of the Company’s assets for
any fiscal year shall generally be allocated according to the percentage which each Member’s Units of
Ownership Interest bears to total number of outstanding Units.
3.2 Losses. Except as provided in Sections 3.4(a) and 3.5(e)( i) hereof, all Losses (as defined in
above Section 1.8(t) ) from operations or disposal of the Company’s assets for any fiscal year shall
generally be allocated according to the percentage which each Member’s Units of Ownership Interest
bears to total number of outstanding Units.
3.3 Special Allocations to Investor Limited Members During Initial Research Phase. The
Company anticipates that during its first several years of existence (the “Initial Research Phase”),
that its expenditures on research activities and other administrative costs will likely exceed
anticipated revenues from sales or licensing of its discoveries and/or products. Accordingly,
consistent with the definitions set forth in above section 1.8(t), starting with the date of formation
of the Company, and for all tax years ending on, or prior to, the year in which the cumulative total
amount of the Company’s items of taxable net profits (including, without limitation all items of
income or gain as determined for federal tax purposes, hereinafter, the “net taxable income”) first
exceeds the cumulative total amount of the Company’s net taxable losses as determined for federal
tax purposes (including, without limitation, research expenses to the extent deductible under IRS
Code 174, allowable trade or business expenses, and other items in the nature of expenses or
losses; hereinafter, “the net taxable losses”) all of the Company’s annual net taxable losses shall be
allocated only to the Units held by Investor Limited Members, and divided amongst such Investor
Limited Members in proportion to the percentage which the number of Units held by the
respective Investor Limited Member bears to the total number of Units held by all Investor
Limited Members; for such year(s), all of the Company’s net taxable income shall be allocated
only to the Units held by Investor Limited Members, and divided amongst such Investor Limited
Members in proportion to the percentage which the number of Units held by the respective
Investor Limited Member bears to the total number of Units held by all Investor Limited
Members. Effective as of the end of the tax year in which the amount of the cumulative net profits
allocated to the Investor Limited members is first equal to or exceeds the amount of the cumulative
net losses allocated to the Investor Limited Partners under this Section, the allocation of all items
of income shall revert to the percentages specified in above Sections 3.1 and 3.2.
3.4
Special Allocations: Items in the Nature of Tax Credits, Expenses or Losses. (Reserved)
3.5
Other Allocations Rules.
(Reserved)
3.6
Tax Allocations: Code Section 704( c). The Members’ initial Capital Accounts shall take
into account the agreed value of the intellectual property contributed by the Managing Member(s)
as determined as of the date of the initial formation of this Company. This amount is expected to
be different than the Managing Members’ tax basis of such property, as determined for Federal
Income Tax purposes. Accordingly, the books, records, and tax filings of the Company will be
adjusted to take account of any difference between the fair market value of contributed Property
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and the tax basis of said Property to take into account the adjustments required by Internal
Revenue Code Section 704( c). In the event of any other contribution of property by a successor
Member (if any there be), then the books and records of the Company will be adjusted to reflect
the variation between the additional property's tax basis and fair market value in accordance with
Code Section 704( c) and the Treasury Regulations thereunder;
and income, gain, loss, and deduction with respect to any additional property contributed to the
capital of the Company shall, solely for tax purposes, be allocated among the Members so as to
take account of any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its initial fair market value.
Any elections or other decisions relating to such allocations shall be made by the Managing
Member in any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 3.6 are solely for purposes of federal, state, and local taxes
and shall not affect, or in any way be taken into account in computing, any Person's Capital
Account or share of Profits, Losses, other items, or distributions pursuant to any provision of this
Agreement.
SECTION 4. DISTRIBUTIONS
4.1 Net Cash From Operations. Except as otherwise provided in Section 11 hereof, Net Cash
Flow From Operations (including ordinary sales or licensing of the Company’s products or
discoveries), if any, shall be distributed, at such times as the Managing Members may determine,
in proportion to the ownership percentage specified in Section 2 above.
4.2 Net Cash Flow from Borrowing. Except as otherwise provided in Section 11 hereof, Net
Cash From Borrowing(s) shall be distributed, at such times as the Managing Member may
determine, in proportion to the ownership percentage specified in Section 2 above.
SECTION 5. MANAGEMENT
5.1 Board of Managing Directors. Governance of the Company’s business affairs shall be vested
in the Board of Managing Directors. The initial Board shall consist of five (5) natural persons,
who shall each have the title of “Managing Director”. The original Managing Members shall also
be Managing Directors. The Managing Members shall appoint the other three initial Managing
Directors. A Managing Director shall not be required to own any Units of Ownership Interest in
the Company as a condition for appointment to this Board. The Board of Managing Directors shall
meet at least once during every 12 consecutive calendar months commencing with the date of the
Company’s formation. Additional meetings of the Board may be called by any Managing Member
upon 7 days notice (which a majority of the Board may waive). Such meetings may or may not be
conducted telephonically. The Board shall be charged with ( i) acting in consultation with the
Managing Members in setting overall company policies; (ii) reviewing the financial results of the
Company’s Operations; (iii) reviewing the status of the Company’s research and development
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activities; (iv) considering proposed Amendments to this Operating Agreement, and issuing
recommendations concerning same to the Members upon which they would take action at a plenary
meeting of the Members; and (v) considering proposed transactions having the effect of a
liquidation, dissolution or sale of a substantial portion of the Company’s assets, and issuing
recommendations concerning same to the Members upon which they would take action at a plenary
meeting of the Members.
5.2 Authority of the Managing Member(s). Except to the extent otherwise provided herein, the
Managing Member(s), acting individually or jointly, shall have the sole and exclusive right to
manage the business of the Company and shall have all of the rights and powers which may be
possessed by Managing Members under the Act including, without limitation, the right and power
to:
(a) acquire by purchase, lease, or otherwise any real or personal property which may be
necessary, convenient, or incidental to the accomplishment of the purposes of the Company, as
limited in section 1.3 above;
(b) operate, maintain, finance, improve, construct, own, grant options with respect to, sell,
convey, assign, mortgage, and lease any real estate and any personal property necessary,
convenient or incidental to the accomplishment of the purposes of the Company as limited in
section 1.3 above;
(c) execute any and all agreements, contracts, documents, certifications, and instruments
necessary or convenient in connection with the management, maintenance, and operation of
Company Property;
(d) borrow money and issue evidences of indebtedness necessary, convenient, or incidental
to the accomplishment of the purposes of the Company, and secure the same by mortgage, pledge,
or other lien on any Company Property, as are necessary to consummate the purchase or
Borrowing of any Company Property;
(e) execute, in furtherance of any or all of the purposes of the Company, any deed, lease,
mortgage, deed of trust, mortgage note, promissory note, bill of sale, contract, or other instrument
purporting to convey or encumber any or all of the Company Property;
(f) prepay in whole or in part, refinance, recast, increase, modify, or extend any liabilities
affecting the Company Property and in connection therewith execute any extensions or renewals of
encumbrances on any or all of the Company Property
(g) care for and distribute funds to the Members by way of cash, income, return of capital,
or otherwise, all in accordance with the provisions of this Agreement, and perform all matters in
furtherance of the objectives of the Company or this Agreement
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(h) contract on behalf of the Company for the employment and services of employees
and/or independent contractors and delegate to such Persons the duty to manage or supervise any
of the assets or operations of the Company;
( i) engage in any kind of activity and perform and carry out contracts of any kind
(including contracts of insurance covering risks to Company Property and Managing Member
liability) necessary or incidental to, or in connection with, the accomplishment of the purposes of
the Company, as may be lawfully carried on or performed by a Company under the laws of each
state in which Company is then formed or qualified; and
(j) make any and all elections for federal, state, and local tax purposes including, without
limitation, any election, if permitted by applicable law; (i) to adjust the basis of Company Property
pursuant to Code Sections 754, 734(b), and 743(b), or comparable provisions of state or local law,
in connection with transfers of interests and Company distributions; (ii) to extend the statute of
limitations for assessment of tax deficiencies against Members with respect to adjustments to the
Company's federal, state, or local tax returns ; and (iii) to represent the Company and the
Members before taxing authorities or courts of competent jurisdiction in tax matters affecting the
Company and the Members in their capacity as Members, and to execute any agreements or other
documents relating to or affecting such tax matters, including agreements or other documents that
bind the Members with respect to such tax matters or otherwise affect the rights of the Company
or the Members. The Managing Member, or if more than one Managing Member, the Managing
Member is specifically authorized to act as the "Tax Matters Member" under the Code and in any
similar capacity under state or local law.
In the event more than one Person is a Managing Member, the rights and powers of the
Managing Member hereunder shall be exercised by them in such manner as they may agree. In the
absence of an agreement among such Persons, no Managing Member shall exercise any of such
rights and powers without the unanimous consent of all such Persons.
5.3 Right to Rely on Managing Member(s). Any Person dealing with the Company may rely
upon a certificate signed by at least one Managing Member as to:
(a) the identity of any Managing Member or Member;
(b) the existence or nonexistence of any fact or facts which constitute a condition precedent
to acts by a Managing Member or which are in any other manner germane to the affairs of the
Company;
( c) the Persons who are authorized to execute and deliver any instrument or document of
the Company; or
(d) any act or failure to act by the Company or any other matter whatsoever involving the
Company or any Member.
5.4 Restrictions on Authority of the Managing Member.
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5.4.1 Without the consent of all of the Members, no Managing Member shall have the
authority to:
(a) do any act in contravention of this Agreement;
(b) do any act which would make it impossible to carry on the ordinary business of the
Company, except as otherwise provided in this Agreement;
( c) confess a judgment against the Company;
(d) possess Company Property, or assign rights in specific Company Property, for other
than the Company's purpose;
(e) knowingly perform any act that would subject any other Member to legal liability, or
incur a right of contribution for any debts incurred other than in furtherance of the Company's
purpose; or
(f) invest in junior trust deeds or similar obligations.
5.4.2 Without the consent of the Board of Managing Directors and a majority in interest
of the Members, no Managing Member shall have the authority to:
(a)
sell or otherwise dispose of at one time all or substantially all of the Company
Property, except for a liquidating sale of Company Property in connection with the dissolution of
the Company;
(b)
elect to dissolve the Company; or
(c)
amend this Operating Agreement.
//
5.5 Duties and Obligations of the Managing Member(s).
5.5.1 The Managing Member(s) shall take all actions which may be necessary or
appropriate (a) for the continuation of the Company's valid existence as a Company under the laws
of the State of Nevada and (b) for the acquisition, development, maintenance, preservation, and
operation of Company Property in accordance with the provisions of this Agreement and
applicable laws and regulations.
5.5.2 The Managing Members shall have the fiduciary duty for the safekeeping and use of
all of Company Property, whether or not in the immediate possession or control of the Managing
Members, and shall not employ or permit another to employ Company Property in any manner
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except for the exclusive benefit of the Company.
5.5.3 The Managing Member shall devote to the Company such time as may be necessary
for the proper performance of all duties hereunder, but the Managing Members shall not be
required to devote full time to the performance of such duties.
5.5.4 The Managing Members shall be under a fiduciary duty to conduct the affairs of the
Company in the best interests of the Company and of the Member, including the safekeeping and
use of all of the Company Property and the use thereof for the exclusive benefit of the Company.
5.6 Indemnification of the Managing Members and Managing Directors.
5.6.1 The Company, its receiver, or its trustee shall indemnify, save harmless, and pay all
judgments and claims against any Managing Member, or any Managing Director, relating to any
liability or damage incurred by reason of any act performed or omitted to be performed in
connection with the business of the Company, including attorney fees incurred by such Managing
Member or Managing Director in connection with the defense of any action based on any such act
or omission, which attorney fees may be paid as incurred, including all such liabilities under
federal and state securities laws (including the Securities Act of 1933, as amended) as permitted by
law.
5.6.2 In the event of any action by a Member against any Managing Member or Managing
Director, including a Company derivative suit, the Company shall indemnify, save harmless, and
pay all expenses of such Managing Member or managing Director, including attorney fees,
incurred in the defense of such action, if such Managing Member or Managing Director is
successful in such action.
5.6.3 The Company shall indemnify, save harmless, and pay all expenses, costs, or
liabilities of any Managing Member or Managing Director who for the benefit of the Company
makes any deposit, acquires any option, or makes any other similar payment or assumes any
obligation in connection with any property proposed to be acquired by the Company and who
suffers any financial loss as the result of such action.
5.6.4 Notwithstanding the provisions of Sections 5.5.1, 5.5.2, and 5.5.3 above, no
Managing Member or Managing Director shall be indemnified from any liability for fraud, bad
faith, willful misconduct or gross negligence.
5.7 Compensation and Expenses of the Managing Members and Managing Directors.
5.7.1 Each Managing Member may charge the Company for any out of pocket expenses
incurred which are reasonably necessary for the conduct of the Company’s business.
5.7.2 Each member of the Board of Managing Directors may charge the Company for any
out of pocket expenses incurred which are reasonably necessary for the conduct of the Company’s
business.
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5.7.3 Except as set forth in the Memorandum, no Managing Member or Managing Director
shall receive any fees or other compensation for serving as a Managing Member or Managing
Director, unless such fees or other compensation are approved by the Board of Managing
Directors and the Members of the Company in the same manner provided for Amendments of this
Operating Agreement. However, each Managing Member shall nonetheless be entitled to the
distributions and allocations appropriate to his or her Units of Ownership Interest on the same
basis as other Members, as provided-for elsewhere in this Agreement.
5.8 Operating Restrictions.
5.8.1 No loans or guarantees of loans shall be made by the Company to any Managing
Member or any Affiliate of a Managing Member.
5.8.2 No rebates, kickbacks, or reciprocal arrangements may be received or entered into
by any Managing Member, nor may any Managing Member participate in any business
arrangement which would circumvent this Agreement.
5.8.3 The funds of the Company shall not be commingled with the funds of any other
Person.
5.8.4 The signature of the Managing Members shall be necessary to convey title to any
real property owned by the Company or to execute any promissory notes, trust deeds, mortgages,
or other instruments of hypothecation, and all of the Members agree that a copy of this Agreement
may be shown to the appropriate parties in order to confirm the same, and further agree that the
signature of any one or more of the Managing Members shall be sufficient to execute any
"statement of Company" or other documents necessary to effectuate this or any other provision of
this Agreement. All of the Members do hereby appoint each Managing Member as their
attorney-in-fact for the execution of any or all of the documents described herein.
//
//
//
SECTION 6. ROLE OF ASSOCIATE MEMBERS
6.1
Rights or Powers. Except as otherwise set forth in Section 6.2 hereof, the Associate
Members shall have no rights or powers to take part in the management and control of the
Company and its business and affairs.
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6.2 Voting Rights. The Associate Member shall have the right to vote on the matters explicitly set
forth in this Agreement. Such Matters include transactions having the effect of a liquidation,
dissolution or sale of a substantial portion of the Company’s assets.
SECTION 7. BOOKS AND RECORDS
7.1 Books and Records. The Company shall keep adequate books and records at its place of
business, setting forth a true and accurate account of all business transactions arising out of and in
connection with the conduct of the Company.
7.2 Annual Reports. The Company shall file tax returns and issue financial reports utilizing a
fiscal year ended December 31st (unless earlier termination pursuant Section 11 below). Within a
reasonable period after the end of each Company fiscal year, each Member shall be furnished with
an annual report containing a balance sheet as of the end of such fiscal year and statements of
income, Members' equity, and changes in financial position and a cash flow statement for the year
then ended. Provided that such annual reports are issued within 90 days following the close of the
Company=s fiscal year, the Members shall not have any further right to have access to, inspect or
copy the contents of such books or records, except upon written permission of a Managing
Member.
7.3 Tax Information. Necessary tax information shall be delivered to each Member after the end
of each fiscal year of the Company. Every effort shall be made to furnish such information within
75 days after the end of each fiscal year.
7.4 Accounting Method. The books and records of the Company shall be kept on the cash receipts
and disbursements method of accounting, except as otherwise required for federal tax purposes.
SECTION 8. AMENDMENTS; MEETINGS
8.1
Amendments.
8.1.1 Amendments to this Agreement may be proposed by any Managing Member or by
any Member or Members holding 10 percent or more of the outstanding Units of Ownership
Interest in the Company. Following such proposal, the Managing Member shall submit to the
Board of Managing Directors a verbatim statement of any proposed amendment, providing that
counsel for the Company shall have approved of the same in writing as to form, and the Managing
Members shall include in any such submission a recommendation as to the proposed amendment.
The Managing Member shall seek the written vote of the Board on the proposed amendment or
shall call a meeting to vote thereon and to transact any other business that it may deem
appropriate. For purposes of obtaining a written vote, the Managing Members may require
response within a reasonable specified time, but not less than 15 days, and failure to respond in
such time period shall constitute a vote which is consistent with the Managing Member's
recommendation with respect to the proposal. Following a determination by the Board, the
Managing Member shall submit the proposed Amendment and the Board of Managing Directors’
17
recommendation thereon for the consideration of all of the Members. Such submission to the
Members shall include a verbatim statement of any proposed amendment, the Board’s
recommendation thereon and (providing that counsel for the Company shall have approved of the
same in writing as to form, the Managing Members shall also include with any such submission,
the counsel’s recommendation as to the proposed amendment). The Managing Member(s) shall
seek the written vote of the Members on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that it may deem appropriate. For purposes of obtaining
a written vote, the Managing Member(s) may require response within a reasonable specified time,
but not less than 15 days, and failure to respond in such time period shall constitute a vote which
is consistent with the Managing Member's recommendation with respect to the proposal. A
proposed amendment shall be adopted and be effective as an amendment hereto if it receives the
affirmative vote of a majority in interest of the Members.
8.1.2 Notwithstanding Section 8.1.1 hereof, in general, ( i) this Agreement shall not be
amended without the consent of more than SIXTY PERCENT of the outstanding number of Units
of Ownership Interest, if such amendment would (A) convert a Member's interest in the Company
into a Managing Member's interest, (B) modify the liability of a Member, or ( C) alter the interest
of a Member in Profits, Losses, or any Company distributions; and (ii) this Agreement may be
amended by the Managing Members, without the consent of any of the Members, provided that
such amendment is only for purposes of: (A) to add to the representations, duties, or obligations of
the Managing Member or surrender any right or power granted to the Managing Members herein,
for the benefit of the Members; (B) to cure any ambiguity, to correct or supplement any provision
hereof, which may be inconsistent with any other provisions hereof, or to make any other
provision with respect to matters or questions arising under this Agreement not inconsistent with
the intent of this Agreement.
8.2 Meetings and Means of Voting
8.2.1 Meetings of the Members or of the Board of Managing Directors may be called by
any Managing Member, or may be called upon the written request of any Members holding 10
percent or more of the total interests in the Company. The call shall state the nature of the business
to be transacted. Notice of any such meeting shall be given to all Members not more than 60 days
nor less than seven (7) days prior to the date of such meeting. Members may vote in person or by
proxy at such meeting. Whenever the vote or consent of Members is permitted or required under
the Agreement, such vote or consent may be given at a meeting of Members or may be given in
accordance with the procedure prescribed in Section 8.1 hereof. Except as otherwise expressly
provided in the Agreement, the vote of a majority in interest of the Members shall control.
8.2.2 For the purpose of determining the Members entitled to vote at any meeting of the
Members or any adjournment thereof, the Managing Member or the Members requesting such
meeting may fix, in advance, a date as the record date for any such determination of Members.
Such date shall not be more than 60 days nor less than 7 days before any such meeting.
18
8.2.3 Each Member may authorize any Person or Persons to act for him by proxy on all
matters in which a Member is entitled to participate, whether by waiving notice of any meeting, or
voting or participating at a meeting. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of
the Member executing it.
8.2.4 Each meeting of Members shall be conducted by the Managing Members or such
other Person as the Managing Members may appoint pursuant to such rules for the conduct of the
meeting as the Managing Members or such other Person deems appropriate.
SECTION 9. Members.
9.1 In General.
9.1.1 Except as otherwise set forth in this Section 9, a Member shall not sell, assign,
transfer, pledge, or hypothecate all or any portion of his interest in the Company without the
consent of the Managing Member, and a Managing Member shall not sell, assign, transfer, pledge,
or hypothecate all or any portion of his interest without the consent of a majority in interest of the
Members. Any sale, assignment, transfer, pledge, or hypothecation which does not comply with
the provisions of this Section 9 shall be void and shall not cause or constitute a dissolution of the
Company.
9.1.2 Each Member hereby represents and warrants to each Managing Member and to the
Company that his acquisition of any percentage interest in the Company is made as principal for
his account for investment purposes only and not with a view to the resale or distribution of such
interest.
9.1.3 Each Member agrees that he will not sell, assign, or otherwise transfer his interest,
or any portion thereof, to any Person who does not similarly represent and warrant and similarly
agree not to sell, assign, or transfer such interest, or portion thereof, to any Person who does not
similarly represent and warrant and agree.
9.1.4 Each Member hereby agrees that a legend to the effect of the following may be
placed upon any documents evidencing ownership issued to such Member representing the interest
to which such Member has subscribed that transfer of such interest are restricted as described in
the foregoing paragraphs.
9.2. Exception.
A Member may sell, assign, or transfer his interest in the Company if and only if:
9.2.1 Such sale, transfer, or assignment is with respect to his full or partial interest in the
Company;
19
9.2.2 Such sale, transfer, or assignment, when aggregated with any prior sales, transfers,
or assignments of Company interests, does not result in a sale or exchange within a 12-month
period of 50 percent or more of the total interest in the Company's capital and profits within the
meaning of Code Section 708(b);
9.2.3 Such Member and his purchaser, transferee or assignee, execute, acknowledge, and
deliver to the Managing Member such instruments of transfer and assignment with respect to such
transaction as are in form and substance satisfactory to the Managing Member;
9.2.4 Unless the transfer is to the heirs, devisees or legatees of a deceased Member or the
interests are registered under the Securities Act of 1933, as amended, and any applicable state
securities law, such Member delivers to the Managing Member an opinion of counsel satisfactory
to the Managing Member that the interests may be sold in reliance on an exemption from such
registration requirements, it being the understanding of each Member that neither the Managing
Member nor the Company has any obligation or intention to register the Company interests for
resale under any federal or state securities laws or to take any action which would make available
any exemption from the registration requirements of such laws;
9.2.5 Such Member certifies to the Managing Member that such sale, transfer, or
assignment will not cause the application of the so-called tax-exempt leasing rules in Code Section
168(j), or similar rules, to the Company, Company Property, or the other Members; and
9.2.6 Such Member pays the Company a transfer fee that is sufficient to pay all reasonable
expenses of the Company in connection with such transaction.
If a sale, transfer, or assignment of Company interests complies with the provisions of this
Section 9.2, but the Person acquiring such Company interest is not admitted as a Substituted
Member pursuant to Section 9.3 hereof, such Person shall be entitled to receive distributions and
allocations with respect to such interest as set forth in this Agreement, including Section 9.5
hereof, but shall have no right to any information or accounting of the affairs of the Company,
shall not be entitled to inspect the books or records of the Company, and shall not be entitled to
any of the rights of a Managing Member or a Member under the Act or the Agreement.
9.3. Substituted Members.
No Person taking or acquiring, by whatever means, the interest of any Member in the
Company shall be admitted as a Substituted Member without the consent of every Managing
Member and unless such Person:
9.3.1 Elects to become a Substituted Member by delivering notice of such election to the
Company;
20
9.3.2 Executes, acknowledges, and delivers to the Company such other instruments as the
Managing Members may deem necessary or advisable to effect the admission of such Person as a
Substituted Member, including, without limitation, the written acceptance and adoption by such
Person of the provisions of the Agreement; and
9.3.3 Pays a transfer fee to the Company in an amount sufficient to cover all reasonable
expenses connected with the admission of such Person as a Substituted Member. The Managing
Member shall amend Exhibit A attached hereto from time to time to reflect the admission of
Substituted Members.
9.4 Heirs Devisees, and Legatees. The heirs, devisees, and legatees of a deceased Member shall
have the rights of a transferee of a living Member, subject to administration of such deceased
Member's estate, and may become Substituted Members in lieu of the deceased Member upon the
consent of every Managing Member and compliance with the conditions of Section 9.3 hereof.
9.5 Distributions and Allocations With Respect to Transferred Company Interests. If any
interest in the Company is sold, assigned, or transferred during any accounting period in
compliance with the provisions of this Section 9, then Profits, Losses, each item thereof, and all
other items attributable to such interest for such period shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests during the period in
accordance with Code Section 706(d), using any conventions permitted by law and selected by the
Managing Member. All distributions on or before the date of such transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee. Solely for purposes of
making such allocations and distributions, the Company shall recognize such transfer not later than
the end of the calendar month during which it is given notice of such transfer, provided that if the
Company does not receive a notice stating the date such interest was transferred and such other
information as the Managing Member may reasonably require within 30 days after the end of the
accounting period during which the transfer occurs, then all of such items shall be allocated, and
all distributions shall be made, to the person who, according to the books and records of the
Company, on the last day of the accounting period during which the transfer occurs, was the
owner of the interest. Neither the Company nor any Managing Member shall incur any liability for
making allocations and distributions in accordance with the provisions of this Section 9.5, whether
or not any Managing Member or the Company has knowledge of any transfer of ownership of any
interest.
SECTION 10. Managing Members
10.1 Cessation. A person shall cease to be a Managing Member upon the transfer of his entire
interest in the Company or upon his removal pursuant to Section 10.2 hereof, withdrawal in
accordance with Section 10.3 hereof, death, adjudication of incompetence or any of the other
21
events set forth in Section 15642 of the Act. Upon the occurrence of any such event, such Person
or his transferee shall have the right to receive distributions and allocations with respect to his
Company interest, shall be treated as the transferee of a Member, and shall have the right to
become a Substituted Member with the consent of the remaining Managing Members (if there is no
remaining Managing Member, then with the consent of any Managing Members elected pursuant
to Section 10.5 hereof).
10.2 Removal of a Managing Member. A majority in interest of the Members may remove any
or all of the Managing Members at any time.
10.3 Withdrawal of a Managing Member. Upon 30 days' notice to the Members, any Managing
Member may withdraw as a Managing Member at any time, provided that such Managing Member
delivers to the Company an opinion of competent counsel to the effect that such withdrawal will
not adversely affect the classification of the Company as a Company for Federal income tax
purposes.
10.4 Right of the Remaining Managing Member(s) to Continue Company. In the event any
Person ceases to be a Managing Member pursuant to Section 10.1 hereof, the remaining Managing
Members, if any, shall have the right and the power to continue the Company and its business
without dissolution.
10.5 Election of New Managing Members. In the event any Person ceases to be a Managing
Member pursuant to Section 10.1, and as a consequence thereof the Company has no Managing
Member, any Member may nominate one of more Persons for election as Managing Members. No
Person shall become a Managing Member unless elected by (a) an affirmative vote of a majority in
interest of the Members, if such person ceased to be a Managing Member by reason of his removal
pursuant to Section 10.2 hereof, or (b) an affirmative vote of all of the Members, if such Person
ceased to be a Managing Member for any other reason.
11. DISSOLUTION AND WINDING UP
11.1 Dissolution. The Company shall dissolve upon the first to occur of any of the following
events:
11.1.1 The expiration of the term of the Company;
11.1.2 The sale of all or substantially all of the Company property, as approved by a by
Members holding a majority of the outstanding Units of Ownership Interest;
11.1.3 The election of the Members, pursuant to Section 5.3.2(b) hereof, to dissolve the
Company;
22
11.1.4 The failure of the remaining Managing Members, if any, to continue the Company
and its business without dissolution pursuant to Section 10.4 hereof in the event any person ceases
to be a Managing Member pursuant to Section 10.1 hereof;
11.1.5 The death of any single Member holding a 50 (fifty) percent or larger interest in the
Company; or
11.1.5 The failure to elect a new Managing Member of Managing Members in the event all
of the Managing Members cease to be Managing Members pursuant to Section 10.1 hereof.
11.2 Winding Up. Upon a dissolution of the Company, the Managing Member or courtappointed trustee if there be no Managing Member shall take full account of the Company's
liabilities and Company Property and the Company property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom, to the extent sufficient
therefor, shall be applied and distributed in the following order:
11.2.1 To the payment and discharge of all of the Company's debts and liabilities (other
than those to any Members), including the establishment of any necessary reserves for contingent
liabilities;
11.2.2 To the payment of any debts and liabilities, if any, to the Members; and
11.2.3 To the Members in accordance with the adjusted balances in their Capital Accounts.
11.3 Compliance with the Timing Requirements of the Regulations. In the event the
Company is "liquidated" within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g),
(a) distributions shall be made pursuant to this Section 11 (if such liquidation constitutes a
dissolution of the Company) or Section 4 hereof (if it does not) to the Managing Members and
Members who have positive Capital Accounts in compliance with Treasury Regulation Section
l.704-1(b)(2)(ii)(b)(2), and (b) if any Managing Member's Capital Account has a deficit
balance(after giving effect to all contributions, distributions, and allocations for all taxable years,
including the year during which such liquidation occurs), such Managing Member shall contribute
to the capital of the Company the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulation Section 1.704-1(b) (2) (ii) (b) (3). Distributions pursuant to
the preceding sentence may be distributed to a trust established for the benefit of the Managing
Members and Members for the purposes of liquidating Company assets, collecting amounts owed
to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company
or of the Managing Members) arising out of or in connection with the Company. The assets of any
such trust shall be distributed to the Managing Member and Members from time to time, in the
reasonable discretion of the Managing Members), in the same proportions as the amount
distributed to such trust by the Company would otherwise have been distributed to the Managing
Member and Members pursuant to this Agreement.
23
11.4 Rights of the Members. Except as otherwise provided in this Agreement, each Member shall
look solely to the assets of the Company for the return of his Capital Contribution and shall have
no right or power to demand or receive property other than cash from the Company. No Member
shall have priority over any other Member as to the return of his Capital Contributions,
distributions, or allocations.
SECTION 12. POWER OF ATTORNEY.
12.1 Managing Member(s) as Attorney-in-Fact. Each Member hereby makes, constitutes and
appoints the Managing Member(s) and each successor Managing Member, with full power of
substitution and re-substitution, his true and lawful attorney-in-fact for him and in his name, place,
and stead and for his use and benefit, to sign, execute, certify, acknowledge, swear to, file, and
record (a) this Agreement and all agreements, certificates, instruments, and other documents
amending or changing this Agreement as now or hereafter amended which the Managing Member
may deem necessary, desirable, or appropriate including, without limitation, amendments or
changes to reflect (i) the exercise by any Managing Member of any power granted to him under
this Agreement; (ii) any amendments adopted by the Members in accordance with the terms of this
Agreement; (iii) the admission of any substituted Member; and (iv) the disposition by any Member
of his interest in the Company; and (b) any certificates, instruments, and documents as may be
required by, or may be appropriate under, the laws of the State of Nevada or any other state or
jurisdiction in which the Company is doing or intends to do business. Each Member authorizes
each such attorney-in-fact to take any further action which such attorney-in-fact shall consider
necessary or advisable in connection with any of the foregoing, hereby giving each such
attorney-in-fact full power and authority to do and perform each and every act or thing whatsoever
requisite or advisable to be done in connection with the foregoing as fully as such Member might
or could do personally, and hereby ratifying and confirming all that any such attorney-in-fact shall
lawfully do or cause to be done by virtue thereof or hereof.
12.2 Nature as Special Power. The power of attorney granted pursuant to this Section 12: (i) is a
special power of attorney coupled with an interest and is irrevocable; (ii)may be exercised by any
such attorney-in-fact by listing the Members executing any agreement, certificate, instrument, or
other document with the single signature of any such attorney-in-fact acting as attorney-in-fact for
such Members; and (iii)shall survive the death, disability, legal incapacity, bankruptcy,
insolvency, dissolution, or cessation of existence of a Member and shalt survive the delivery of an
assignment by a Member of the whole or a portion of his interest in the Company, except that
where the assignment is of such Member's entire interest in the Company and the assignee, with
the consent of the Managing Member, is admitted as a Substituted Member) the power of attorney
shall survive the delivery of such assignment for the sole purpose of enabling any such attorney-infact to effect such substitution.
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SECTION 13. MISCELLANEOUS
13.1 Notices. Any notice, payment, demand, or communication required or permitted to be
given by any provision of this Agreement shall be in writing and shalt be delivered personally to
the Person or to an officer of the Person to whom the same is directed, or sent by regular,
registered, or certified mail, addressed as follows: if to the Company, to the Company at the
address set forth in Section 1.4 hereof, or to such other address as the Company may from time to
time specify by notice to the Members; if to a Managing Member, to such Managing Member at
the address set forth in Section 2.1 hereof, or to such other address as such Managing Member
may from time to time specify by notice to the Members; if to a Member, to such Member at the
address set forth in Section 2.2 hereof or on Exhibit A hereto, or to such other address as such
Member may from time to time specify by notice to the Company. Any such notice shall be
deemed to be delivered, given, and received for all purposes as of the date so delivered, if
delivered personally or if sent by regular mail, or as of the date on which the same was deposited
in a regularly maintained receptacle for the deposit of United States mail, if sent by registered or
certified mail, postage and charges prepaid.
13.2 Binding Effect. Except as otherwise provided in this Agreement, every covenant,
term, and provision of this Agreement shall be binding upon and inure to the benefit of the
Members and their respective heirs, legatees, legal representatives, successors, transferees, and
assigns.
13.3 Construction. Every covenant, term, and provision of this Agreement shall be
construed simply according to its fair meaning and not strictly for or against any Member.
13.4 Time. Time is of the essence with respect to this Agreement.
13.5 Headings. Section and other headings contained in this Agreement are for reference
purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or
intent of this Agreement or any provision hereof.
13.6 Severability. Every provision of this Agreement is intended to be severable. If any
item or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the validity or legality of the remainder of this Agreement.
13.7 Incorporation by Reference. Every exhibit, schedule, and/or appendix attached to
this Agreement and referred to herein is hereby incorporated in this Agreement by reference.
13.8 Additional Documents. Each Member, upon the request of any Managing Member,
agrees to perform all further acts and execute, acknowledge, and deliver any documents that may
be reasonably necessary, appropriate, or desirable to carry out the provisions of this Agreement.
13.9 Variation of Pronouns. All pronouns and any variations thereof shall be deemed to
25
refer to masculine, feminine, or neuter, singular or plural, as the identity of the Person or Persons
may require.
13.10 Nevada Law. The laws of the State of Nevada shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of the rights and duties of the
Members.
13.11 Waiver of Action for Partition. Each of the Members irrevocably waives any right
that he may have to maintain any action for partition with respect to any of the Company Property.
13.12 Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all of the Members had signed the same document. All
counterparts shall be construed together and shall constitute one agreement.
13.13 Loans. Any Member or Affiliate of a Member may, with the consent of the
Managing Member(s), lend or advance money to the Company. If a Managing Member or, with
the written consent of the Managing Member, any Member shall make any loan or loans to the
Company or advance money on its behalf, the amount of any such loan or advance shall not be
treated as a contribution to the capital of the Company, but shall be a debt due from the Company.
The amount of any such loan or advance by a lending Member or Affiliate of a Member shall be
repayable out of the Company's cash and shall bear interest at a rate not in excess of the greater of
(i) the prime rate established, from time to time, by any major bank selected by the Managing
Members for loans to its most creditworthy commercial borrowers, plus 3 percent per annum, or
(ii) the maximum rate permitted by law. None of the Members or their Affiliates shall be obligated
to make any loan or advance to the Company.
13.14 Sole and Absolute Discretion. Except as otherwise provided in this Agreement, all
actions which any Managing Member may take and all determinations which any Managing
Member may make pursuant to this Agreement may be taken and made at the sole and absolute
discretion of such Managing Member.
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IN WITNESS WHEREOF: The parties have entered into this OPERATING
AGREEMENT of EMS GENOMICS, L.L.C. as of the day first above set forth.
DATED: January 17, 2014
DR. JOSEPH GRZYMSKI
Managing Member
CARL STAUB
Managing Member
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County of Washoe
State of Nevada
)
) ss.
)
On January __, 2014, the above named JOSEPH GRZYMSKI and CARL STAUB
appeared before me, and upon presentation of satisfactory identification, acknowledged that they
had each executed the foregoing OPERATING AGREEMENT as their free act and deed.
Notary Public
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`