AMENDED AND RESTATED OPERATING AGREEMENT UPSTATE NEW YORK REAL ESTATE INFORMATION SERVICES LLC

Transcription

1 AMENDED AND RESTATED OPERATING AGREEMENT OF UPSTATE NEW YORK REAL ESTATE INFORMATION SERVICES LLC This Amended and Restated Operating Agreement ( Agreement ), dated as of, 2017, is by and among those executing this Agreement or any Acknowledgment thereof (the undersigned ). WHEREAS, the undersigned are members of a limited liability company known as Upstate New York Real Estate Information Services LLC pursuant to the New York Limited Liability Company Law; and WHEREAS, the undersigned desire to establish their respective rights and obligations pursuant to the New York Limited Liability Company Law in connection with such limited liability company; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned agree as follows: ARTICLE I Definitions 1.1 Definitions. In this Agreement, the following terms shall have the meanings set forth below: (a) Acknowledgment shall mean the acknowledgment and agreement in the form attached as Exhibit 1 hereto. (b) Act shall mean the New York Limited Liability Company Law, as amended and in effect from time to time. (c) Agreement shall mean this Amended and Resated Operating Agreement of Upstate New York Real Estate Information Services LLC together with Exhibit 1 hereto. hereof. (d) Allocable Interests shall have the meaning set forth in Section 6.2 (e) Articles of Organization shall mean the Articles of Organization of the Company filed or to be filed with the New York Department of State, as they may from time to time be amended. (f) Associate or associated shall mean a Person that is (i) licensed by the State of New York as a real estate broker or a real estate salesman/salesperson, and (ii) associated with or a representative of the Member, as those terms are used in the Real Property Law of the State of New York.

2 (g) Available Cash means, with respect to any period for which such calculation is being made, the amount determined by the Managers for distribution to the Members by the Company from the operations of the Company. (h) Capital Account means the Capital Account maintained for a Member pursuant to Section 6.4 hereof. (i) Capital Contribution means, with respect to any Member, any cash, cash equivalents or the Agreed Value of Contributed Property which such Member contributes to the Company pursuant to Section 6.1 hereof. (j) Code means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. (k) Commonly Controlled Party with respect to a specified Member, shall mean any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Member. As used in this definition, the term control means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. For the avoidance of doubt, in the event the Member is a franchisee, neither the franchisor of a Member ( Franchisor ), nor another franchisee of the Franchisor will be considered to be a Commonly Controlled Party of that Member as a result of the franchise relationship. (l) Services LLC. Company shall refer to Upstate New York Real Estate Information (m) Distribution means any cash and other property distributed to a Member by the Company from the operations of the Company. (n) Eligibility Standards shall refer to the standards described at Section 3.8 hereof, the satisfaction of which are conditions precedent to becoming a Member of the Company. (o) Franchisor shall have the meaning set forth in Section 1.1(k). (p) Managers means the individuals elected to the positions having the authority, responsibility and rights described in Article IV herein. Class I Managers shall describe the individuals named pursuant to Section 4.4(a). Class II Managers shall describe the individuals named pursuant to Section 4.4(b). Class III Managers shall describe the individuals elected pursuant to Section 4.5. (q) Measuring Period shall mean the twelve (12) calendar month period from October 1 through September 30 of each year. 2

3 (r) Member shall mean each Person who or which meets the eligibility requirements of Section 3.8 of this Agreement and who or which executes a counterpart (including the Acknowledgment) of this Agreement as a Member. (s) Membership Interest means an ownership interest in the Company and includes any and all benefits to which the holder of such a Membership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. (t) Membership Register means the record maintained by the Company reflecting the names and addresses of the Members, the Capital Contributions (if any) of each Member, each Member s Transactions for the Measuring Period or any other relevant period, the classification of each Member for voting purposes as either a Class I Voting Member, a Class II Voting Member, a Class III Voting Member or a Non-Voting Member and the Allocable Interest of each Member. The Officers of the Company, at the direction of the Managers, or in the case of any Member s address, at the direction of such Member, shall amend and revise the Membership Register from time to time to properly reflect any changes to the information set forth therein, including to reflect the admission or withdrawal of Members. Any amendment or revision to the Membership Register or to the Company s records to reflect information regarding Members shall not be deemed to be an amendment to this Agreement. (u) Membership Unit means a fractional, undivided share of the Membership Interests of all Members. Each Member shall own one (1) Membership Unit. The number of Membership Units outstanding are set forth in the Membership Register, as such Membership Register may be amended or revised from time to time. The Membership Units shall be uncertificated securities, all Membership Units will be held by the Company in book form and no physical certificates will be issued, unless the Managers shall determine at some point in the future that ownership of a Membership Unit is to be evidenced by such form of certificate for units as the Managers adopt from time to time. (v) MLS means the multiple listing service operated by the Company (or any predecessor thereof). (w) Net Income means, for any taxable period, the excess, if any, of the Company s items of income and gain for such taxable period over the Company s items of loss and deduction for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with federal income tax accounting principles. (x) Net Loss means, for any taxable period, the excess, if any, of the Company s items of loss and deduction for such taxable period over the Company s items of income and gain for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with federal income tax accounting principles. (y) Non-Voting Members means the Persons defined at Section 3.10 hereof. (z) Person shall mean any natural person, corporation, governmental authority, limited liability company, partnership, trust, unincorporated association or other entity. 3

4 (aa) Regulations means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). (bb) Terminating Capital Transaction means any sale or other disposition of all or substantially all of the assets of the Company or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Company. (cc) Transactions shall mean each closed real estate transaction side in which a Member or any Commonly Controlled Party thereof was a recognized broker on the listing or sale function in respect of real estate transactions listed with the MLS. With respect to leases, transactions shall only include leases with annual rents in excess of $12,000. As more particularly described in Section 8.5 hereof, in the event a Member is acquired by another Member through a merger, acquisition, combination or other business transaction, the number of Transactions of the two Members will be combined for all purposes under this Agreement, including determining the Allocable Interest of the surviving Member (allocations and distributions) and the number of votes the surviving Member is entitled to cast, effective as of the date notice of such transaction is given by the surviving Member to the Company. For purposes of this Agreement, the number of Transactions for each Member reflected in the books and records of the Company shall be conclusive, absent manifest error. (dd) Voting Members shall mean those Persons described at Section 3.9. ARTICLE II Organization 2.1 Formation. The parties have caused the formation of Upstate New York Real Estate Information Services LLC pursuant to the Act by filing Articles of Organization with the New York Department of State. 2.2 Operating Agreement. This Agreement, including its Exhibit 1 shall constitute the Operating Agreement of the Company as such term is used in the Act. ARTICLE III Members 3.1 Names and Addresses. The names and addresses of the Members are as set forth in the Membership Register. Each Member shall own one (1) Membership Unit. 3.2 Additional Members. (a) A Person may be admitted as a Member after the date of this Agreement with the approval of the Managers. (b) The Managers may decide to require Persons seeking to be admitted as a Member after the date of this Agreement to pay a fee intended to defray the cost associated with 4

5 the preparation, review and processing of the related documents; any such fee shall be established in an amount that will not be exclusionary. (c) Notwithstanding the foregoing, no Person shall become a Member until such time as that Person has (i) executed and filed with the Company a written instrument satisfactory to the Managers agreeing to become a party to this Agreement and (ii) paid any fee determined by the Managers in accordance with Section 3.2(b). (d) Upon the admission of an additional Member in accordance with this Section 3.2 the Managers shall amend the Membership Register to reflect the admission of such additional Member. 3.3 Books and Records. The Company shall keep books and records of accounts and minutes of all meetings of the Members. 3.4 Information. Each Member may inspect during ordinary business hours and at the principal place of business of the Company the Articles of Organization, this Agreement, the Membership Register, the minutes of any meeting of the Members and any tax returns of the Company for the immediately preceding three calendar years. 3.5 Meetings of Members. The Members shall meet annually and at such other times as shall be determined in accordance with Article X hereof. 3.6 Voting Agreements. An agreement between two or more Members, if in writing and signed by the parties thereto, may provide that in exercising any voting rights, the number of votes held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them. 3.7 Action by Vote of the Members. Except as otherwise provided in this Agreement, the Act or the Articles of Organization, whenever the Members are required or permitted to vote or otherwise act, the act of the Members shall be determined by a majority of the votes cast by the Voting Members. Each Voting Member shall be entitled to the number of votes determined in accordance with the provisions of Section 3.14(d). 3.8 Members. The Members of the Company shall be Persons who or which execute a counterpart (including the Acknowledgment) of this Agreement as a Member and satisfy all of the following Eligibility Standards: (a) The Person shall be (i) a real estate broker that is not a representative of (or associated with) a real estate brokerage firm (a corporation, a limited liability company or a co-partnership), or (ii) a real estate brokerage firm that, in either instance (i) or (ii), is licensed as a real estate broker by the State of New York; (b) The principal broker of the Person shall be a REALTOR member of the National Association of REALTORS ; (c) The Person shall be a subscriber/participant in the MLS and shall at all times be in full compliance with all of the rules and regulations of the MLS; for avoidance of 5

6 doubt, the payment by an Associate of the Person of a fee to subscribe to the MLS will not satisfy the requirement for the Person to be a subscriber to the MLS; and (d) No Commonly Controlled Party, Associate, representative or licensee of the Person seeking to become a Member is, directly or indirectly, also a Member. 3.9 Voting Members. A Voting Member shall be a Member of the Company who is actively engaged in the real estate brokerage business. (a) For purposes of this Agreement, a Member shall be deemed actively engaged in the real estate brokerage business if the Member had twenty (20) or more Transactions in the previous Measuring Period. (b) There shall be three (3) classes of Voting Members, defined as: (i) Class I Members - the three (3) Voting Members who had the three (3) highest number of Transactions (ranked first, second and third) in the previous Measuring Period. (ii) Class II Members - the three (3) Voting Members who had the next three (3) highest number of Transactions (ranked fourth, fifth and sixth) in the previous Measuring Period. (iii) Class III Members - Voting Members who had a minimum of twenty (20) Transactions in the previous Measuring Period and who are neither Class I Members nor Class II Members. (c) On or prior to November 1 of each year, the Company shall prepare a list of all Members of record, which list shall reflect all additions and deletions from the preceding calendar year based on satisfaction of the Eligibility Standards or any failure to satisfy or maintain such Eligibility Standards during the applicable Measuring Period. Such list shall also rank each Member according to Transactions for the preceding Measuring Period. This list will be maintained at the office of the Company and will be made available for inspection by any Member during normal business hours on at least two (2) business days written notice Non-Voting Members. The Non-Voting Members of the Company shall be those Members of the Company that have ceased to meet the requirements for being considered to be actively engaged in the real estate brokerage business as defined in Section Non-Member Customers. The Managers shall, from time to time, define classes and groups of non-members who shall be entitled to receive and utilize the information products and services of the Company including but not limited to, Persons that do not meet the qualifications and conditions for membership set forth herein Term of Membership. Membership shall be effective as of the first day of the calendar year following the fulfillment of all requirements necessary for the admission of the additional Member or at such other time as the Managers shall determine and shall remain in effect unless and until terminated as provided herein. 6

7 3.13 Termination of Membership. Membership may be terminated as follows: (a) By the Member, at any time upon at least ninety (90) days prior written notice to the Company. (b) By the Company, for the following conditions: (i) Nonpayment by the Member of the initial Capital Contribution established by the Managers as a condition of membership, if any; or (ii) (iii) Nonpayment by the Member of annual MLS subscription dues; or Nonpayment by the Member of MLS fees, fines or assessments; or (iv) Nonpayment by the Member of any financial obligation owed to the Company which continues for more than thirty (30) days after written notice thereof given by the Company following the due date; which failure shall cause the membership of the Member to automatically be terminated; or (v) The failure of the Member to abide by the National Association or REALTORS Code of Ethics and/or the MLS Rules and Regulations of the Company. (vi) The failure of the Member to meet the Eligibility Standards for membership in the Company (other than as provided for in (viii)). (vii) Except as otherwise provided in (iv), termination by the Company for any of the above listed reasons shall only occur after the Member is given written notice and a period of not less than fifteen (15) days to correct, to the Company s satisfaction, the event which is the basis for termination. (viii) Automatically upon the vote of the Managers effective as of the end of the calendar year following such Member s failure to be actively engaged in the real estate brokerage business as such phrase is defined in Section 3.9(a) during the prior Measuring Period; or (ix) Automatically upon the vote of the Voting Members holding eighty percent (80%) of the total number of votes eligible to be cast by the other Members at a meeting of the Voting Members; or Member; or (x) Automatically upon the death, incapacity or dissolution of a (xi) Automatically in the event a Member is not the surviving entity following a merger, acquisition, combination or other business transaction, except to the extent described in Section 8.5 hereof and if Section 8.5 does not apply, unless the surviving entity becomes a Member within ninety (90) days; or 7

8 (xii) Automatically upon the entry of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver, or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings with respect to the Member, or for the winding up or liquidation of its affairs, and the continuance of any such decree or order unstated and in effect for a period of sixty (60) consecutive days; or (xiii) Automatically upon the consent by the Member to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the other party or of or relating to substantially all of its property; or the other party shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations. (c) Whenever a notice is given to a Member under Section 3.13(b) of a right to terminate, the Member shall be suspended from exercising any of the rights or privileges of membership pending resolution of the event which was the subject of the notice. (d) If a Member s Membership is terminated for any reason, the Company shall pay to such terminated Member the amount of such Member s Capital Account as of the effective date of such termination. If such amount exceeds $[ ] then the Company shall, in its sole discretion, have the option to pay such amount in substantially equal monthly installments over a period of [ ] months. Such amount shall bear interest at the lowest applicable federal rate Qualification of Voting Members. Company. (a) Only Voting Members shall be entitled to vote as a Member of the (b) All references in this Operating Agreement to the vote or meeting of Members shall mean and include Voting Members only, as defined in this Operating Agreement, except that non-voting Members are entitled to attend any meeting of the Voting Members. (c) Notwithstanding subparagraph 3.14(b), Non-Voting Members shall not be entitled to vote or to notice of meetings. (d) For each calendar year, each Voting Member entitled to vote shall have the number of votes equal to that Member s total Transactions for the previous Measuring Period. In determining a Member s Transactions for the previous Measuring Period, in the event a Member is acquired by another Member through a merger, acquisition, combination or other business transaction, the number of Transactions of the two Members will be combined for purposes of determining the number of votes the surviving Member is entitled to cast, effective as of the date notice of such transaction is given by the surviving Member to the Company. (e) Intentionally omitted. 8

9 (f) All Members entitled to vote shall be eligible to vote in person, by representative or by proxy at meetings of the Company or elections. Only Members entitled to vote shall be entitled to consent to action by the Company without a meeting. (i) Proxies - Voting Members may vote by written proxy at any meeting of the Members or elections, providing: A. No proxy shall be valid for more than eleven months after its date of execution or after the end of a calendar year. B. Any proxy may be revoked by the Member who granted the proxy upon written or personal notice to the Managers and to the individual holding such proxy. (ii) The Voting Member, if not an individual, shall vote only by: A. A valid written proxy on file with the Company signed by the President, General Partner or similarly responsible executive of the Voting Member; B. By any duly appointed and authorized officer of the Voting Member, if a corporation, limited liability company or co-partnership; or C. By its representative designated by the Voting Member in a letter authorizing such representation presented to the Secretary in advance of such action Record Date For Member Notice; Voting; Giving Consents. In order that the Company may determine the Members entitled to notice of or to vote at any meeting of the Member or any adjournment thereof, the Managers may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not be more than thirty (30) nor less than ten (10) days before the date of such meeting. law: If the Managers do not fix a record date in accordance with these bylaws and applicable (i) The record date for determining the Members entitled to notice of or to vote at a meeting of the Members shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining the Members entitled to consent to action by the Company in writing without a meeting, when no prior action by the Managers is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company by delivery to its principal place of business or a Manager or officer of the Company. Delivery made to the Company s principal place of business shall be by hand or by certified or registered 9

10 mail, return receipt requested. If no record date has been fixed by the Managers and prior action by the Managers is required, the record date for determining Members entitled to consent to action by the Company in writing without a meeting shall be at the close of business on the day on which the Managers adopt the resolution taking such prior action. A determination of Members of record entitled to notice of or to vote at a meeting of Members shall apply to any adjournment of the meeting; provided, however, that the Managers may fix a new record date for the adjourned meeting. ARTICLE IV Management and Extraordinary Transactions 4.1 Management. The Company s business shall be managed by Managers, who shall be individuals elected by the Members in accordance with this Article IV. 4.2 Duty of Managers. Each Manager shall perform his or her duties as a Manager in good faith and with that degree of care which an ordinary prudent person in like position would use under similar circumstances. In performing his or her duties, a Manager shall be entitled to rely on information, opinions, reports and statements, including, without limitation, financial statements and other financial data, in each case prepared by any Person as to matters the Manager reasonably believes are within such Person s professional or expert competence. No Manager shall receive compensation for his or her services as such. 4.3 Number of Managers. There will be twelve (12) Managers, with six (6) of those Managers named by the Class I Members and three (3) named by the Class II Members and three (3) elected by the Class III Members. Each Manager shall have one vote. No one will be allowed to substitute for a Manager or vote on behalf of a Manager. 4.4 Qualification of Managers. (a) Each of the three (3) Class I Members will designate two qualified persons as Class I Managers for a one (1) year term. Such designation shall occur at or within 10 days prior to the annual meeting. In order to be qualified as a Class I Manager, the person must be either an individual owner of an equity interest in the Class I Member or an employee of the Class I Member, and provided further, at least one of the two Managers designated by that Class I Member must (i) hold a valid real estate broker s license in the State of New York and (ii) be a REALTOR member of the National Association of REALTORS. (b) Each of the three (3) Class II Members will designate one qualified person as a Class II Manager for a one (1) year term. Such designation shall occur at or within 10 days prior to the annual meeting. In order to be qualified as a Class II Manager, the person must be either an individual owner of an equity interest in the Class II Member or an employee of the Class II Member, and must (i) hold a valid real estate broker s license in the State of New York and (ii) be a REALTOR member of the National Association of REALTORS. (c) The Class III Members will elect three (3) qualified persons as Class III Managers for a one (1) year term. In order to be qualified as a Class III Manager, the individual must (i) hold a valid real estate broker s license in the State of New York, (ii) be a REALTOR 10

11 member of the National Association of REALTORS, and (iii) be an Associate of a Class III Member. In addition no more than one Class III Manager may be associated with a single Class III Member at any time and no Class III Manager may be associated with any Class I Member or any Class II Member at any time; and 4.5 Election and Term of Office of Managers. (a) Any Class III Member may nominate any individual eligible to be a Class III Manager by submitting to the Secretary/Treasurer of the Company a nomination for such individual at least two (2) months before the annual election of Class III Managers. (b) The Company shall present to the Class III Members no later than 21 days prior to the election a slate of all candidates nominated to stand for election as Class III Managers. (c) The election of Class III Managers shall take place in March of each year at the Annual Meeting of the membership, at a time and place specified by the Managers. Notice of the election shall be given to the membership at least twenty-one (21) days prior to the election. Voting shall take place during the hours specified by the Managers. (d) The President shall appoint an Election Committee of at least three (3) individuals who are Associates of Class III Members to conduct the election of Class III Managers. No more than one Associate of a Class III Member may serve on the Election Committee. (e) Voting of the Members on the election of Managers and any other matter is permitted only in person, by representative or by proxy; no absentee balloting or absentee voting is permitted. Voting by means of a conference telephone or similar communications equipment is not permitted. (f) The election of Class III Managers shall be by written and signed ballot, and each ballot shall state the name of the Voting Member, the number of votes it is entitled to cast on the records of the Company, and if such ballot be cast by proxy, the name of the proxy and a copy of the proxy. Neither Class I Members nor Class II Members are eligible to vote for Class III Managers. (g) The three (3) candidates for the positions of Class III Manager receiving a plurality of votes shall be declared the winners at the election meeting. In the event of a tie, the names of the two candidates shall be placed in a container and the President shall draw a name who shall be declared elected as Manager. (h) Those individuals named as the Class I Managers by the Class I Members and those individuals named as the Class II Managers by the Class II Members shall be deemed elected, and commence their service after their announcement at the meeting held for the election of the Class III Managers. (i) The Class I Managers, the Class II Managers and the Class III Managers shall serve one (1) year terms and shall be allowed to succeed themselves in the same position. 11

12 (j) If the entity with which a Manager is associated ceases to be a Member during a Manager s term (and 4.6(f) or (g) are not applicable) such Manager shall be deemed to have resigned and the Manager s position shall be declared vacant and the vacancy shall be filled at the next meeting of Managers unless such Manager was a Class III Manager and prior thereto such Manager shall qualify to retain his or her position through becoming associated with another Class III Member. (k) Each Manager, including a Manager elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and takes office. 4.6 Vacancy, Removal of Managers. (a) A Class I Manager or a Class II Manager who dies, resigns or otherwise ceases to be eligible to be a Manager as provided for herein shall be replaced by a Manager designated by the Member who designated the departing Manager. (b) A Class III Manager who dies, resigns or otherwise ceases to be eligible to be a Manager as provided for herein shall be replaced by the majority vote of the remaining Class III Managers and if those Managers cannot reach a decision, then the other Managers will designate a qualified person to fill the vacancy. (c) A Class I Manager or a Class II Manager may be removed at any time, either for or without cause, by the Member who designated the Manager being removed and shall be replaced by a Manager designated by that same Member. (d) A Class III Manager may be removed at any time, either for or without cause, only by the affirmative vote of the Class III Members holding a majority of the votes entitled to be cast at a special meeting of Class III Members called for such purpose (or by written consent without a meeting) and shall be replaced by the majority vote of the remaining Class III Managers and if those Managers cannot reach a decision, then the other Managers will designate a qualified person to fill the vacancy. (e) For purposes of proceeding under this Section 4.6(d), a special meeting (or action by written consent without a meeting) of the Members entitled to vote or take action shall be called by the President. (f) In the event of the merger, consolidation, purchase or any other business combination involving two Members who each have an Associate serving as a Manager, then: (i) if such combination involves one Class III Member and either a Class I or a Class II Member, the Manager who is a Class III Manager will be disqualified and the vacancy shall be filled according to Section 4.6(b) (by the majority vote of the remaining Class III Managers) and in the event those Managers cannot reach a decision, then the other Managers will designate a qualified person to fill the vacancy; (ii) if such combination involves two Class Ill Members, then those Managers shall decide which of them shall remain as a Manager and the vacancy shall be 12

13 filled according to Section 4.6(b) (by the majority vote of the remaining Class III Managers) and in the event those Managers cannot reach either of those decisions, then the other Managers will decide which of them shall remain as a Manager and/or designate a qualified person to fill the vacancy; and (iii) if the Managers who are involved do not include a Class III Manager, (meaning there is a combination of only Class I and/or Class II Members) the surviving Member will decide which of the Managers will be disqualified and which of the Managers will remain; the remaining Managers shall determine the identity of the new Class II Member under the definition set out at 3.9(b) (having the 7th highest number of Transactions for the previous year), and the vacancy shall be filled by the designation of that new Class II Member. (g) Except as provided in subsection (f) immediately above, in the event of any other merger, consolidation purchase or any other business combination that results in a Member who has an Associate serving as a Manager ceasing to exist, if the surviving entity does not become a Member within ninety (90) days, the Manager(s) appointed by such Member shall be deemed to have resigned and the vacancy shall be filled by the designation of the other Managers. 4.7 Powers of Managers. No Manager has authority to act for the Company. Whenever the Managers are required or permitted to take action, a meeting of the Managers must be held and the Managers may act only by vote in accordance with Section 10.12, except as provided below in Section in the case of unanimous written consent. Except as otherwise set forth in this Agreement, the Managers shall have power and authority, on behalf of the Company to (a) purchase, lease or otherwise acquire from, or sell, lease or otherwise dispose of to, any Person any property, (b) open bank accounts and otherwise invest the funds of the Company, (c) purchase insurance on the business and assets of the Company, (d) commence lawsuits and other proceedings, (e) enter into any agreement, instrument or other writing, (f) retain accountants, attorneys or other agents and (g) take any other lawful action that the Managers consider necessary, convenient or advisable in connection with any business of the Company. 4.8 No Exclusive Duty to Company. The Managers shall not be required to manage the Company as their sole and exclusive function and they may have other business interests and may engage in other activities in addition to those relating to the Company. Neither the Company nor any Member shall have any right pursuant to this Agreement to share or participate in such other business interests or activities or to the income or proceeds derived therefrom. The Manager shall incur no liability to the Company or any Member as a result of engaging in any other business interests or activities. 4.9 Limitation of Liability. Except as otherwise required by the Act, no Manager shall be liable to the Company or any Member for any loss or damage sustained by the Company or any Member unless the Manager has failed to comply with Section 4.2 hereof with respect to the actions or occurrences giving rise to such loss or damage. 13

14 4.10 Indemnification. To the maximum extent permitted under the Act, the Company shall indemnify and hold harmless each Manager from and against all claims and demands unless the Manager has failed to comply with Section 4.2 hereof with respect to the actions or occurrences giving rise to such claims and demands Extraordinary Transactions. Notwithstanding anything else in this Agreement, approval of the Members in accordance with Section 3.7 hereof, shall be necessary for the consummation of any of the following events: Person; (a) the merger, consolidation or combination of the Company with any other (b) the incurrence of indebtedness by the Company other than in the ordinary course of its business; (c) the sale, exchange, lease, pledge, or granting of a security interest in any of the assets of the Company other than in the ordinary course of its business; (d) (e) the dissolution of the Company; any change in the number of Managers of the Company. Notwithstanding any other provisions herein to the contrary, a Terminating Capital Transaction shall require the affirmative vote of Voting Members holding not less than seventyfive percent (75% ) of the total number of votes eligible to be cast by the Members at a meeting of the Members Amendments. This Agreement and the Articles of Organization may be amended from time to time in writing in accordance with the following: (a) upon a vote of the Members in accordance with Section 3.7; or (b) if the amendment is an amendment of the Articles of Organization of a type set forth in Section 213(b) of the Act, by vote of a majority of the Managers. 5.1 Officers. ARTICLE V Officers (a) The Officers of the Company shall be elected each year by the Managers from among the Managers. (b) The three (3) elected officers of the Company and the line of succession shall be President, Vice-President, Secretary-Treasurer and each shall be a current Manager. 14

15 (c) Officers shall be elected for terms of one year and shall be allowed to succeed themselves in the same position for an additional two (2) years only, with the exception of President. (d) No individual shall serve as President for more than two consecutive years without the unanimous vote of the Managers. (e) No elected Officer will receive compensation for his/her services as an Officer of the Company, except as specifically approved by the Managers. 5.2 Election of Officers. (a) The election of officers shall take place after the election of Managers each year and in no case more than fourteen (14) days after such election of Managers. The election of an Officer shall require the affirmative vote of seven (7) Managers, except as provided in subparagraph 5.2(c). (b) Prior to the vote for election of Officers, each Manager shall indicate his or her willingness to serve in the capacity of each office. (c) In the event of more than two candidates for an office, if after two ballots are conducted without a candidate receiving the required vote of seven (7) Managers, then the two candidates receiving the highest number of votes shall be retained for further balloting and those two remaining candidates shall then have a runoff election to determine whether a majority vote of those Managers present is attained for either candidate. If this vote results in a tie or failure to attain a majority vote of those Managers present, then one more ballot shall be taken and ifno majority is then attained the names of the two candidates shall be placed in a container and the President shall draw a name who shall be declared elected to the office. All balloting for the election of officers shall be by secret ballot, therefore voting by telephone conference shall not be permitted. Because the names of the candidates for each office will not be known until the meeting and election may require repeated rounds of voting which are intended to take place at a single meeting of the Managers, voting by written ballot submitted prior to the meeting shall not be permitted. (d) in following order: The election procedure for the Officers of this Company each year shall be (i) (ii) (iii) Election of President Election of Vice-President Election of Secretary /Treasurer 5.3 Vacancies in Offices. A vacancy in any office because of death, resignation, removal, disqualification or any other reason shall be filled by vote of the Managers for a Manager to fill the unexpired term of the vacancy. 15

16 5.4 Removal and Resignation of Officers. (a) Any elected Officer may be removed, either with or without cause, by the Managers, with a vote of seven (7) Managers. (b) Any officer may resign at any time by giving written notice to the Company. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the resigning officer is a party. 5.5 Duties of Officers. (a) President The President shall: Company. (i) (ii) Preside at all meetings of the Managers and Members of the Be the Chief Executive Officer of the Company. (iii) Have the general supervision, direction and control of the business and offices of the Company, subject to the control of the Managers. (b) Vice-President (i) of the President. In the absence or disability of the President, perform all the duties (ii) Have all the powers of, and be subject to all the restrictions upon, the President when acting as President. (iii) Have such other powers and performs such other duties as from time to time may be prescribed by the Managers. (c) Secretary /Treasurer The Secretary /Treasurer shall: (i) Keep or cause to be kept, at the principal executive office or such other place as the Managers may direct, a book of minutes of all meetings and actions of Managers, committees of Managers and Members, with the time and place of holding, whether regular or special. (ii) Give, or cause to be given, notice of meetings of the Members and of the Managers required by this Operating Agreement and shall keep in safe custody the seal, if any, of the Company. (iii) Be the chief financial Officer of the Company. 16

17 (iv) Keep and maintain, or cause to be kept and maintained, adequate and correct books and record of accounts of the properties and business transactions of the Company. (v) Have the books of account and all related documents, at all reasonable times open to inspection by any Manager. (vi) Deposit all money and other valuables in the name, and to the credit of, the Company with such depositories as may be designated by the Managers. Managers. (vii) Disburse the funds of the Company as may be ordered by the (viii) Render to the President and Managers, whenever they request it, an account of all transactions and of the financial condition of the Company. (ix) Have such other powers and perform such other duties as may be directed by the Managers or by this Operating Agreement. 5.6 Non Elected Officers. The Managers may appoint without an election an Executive Director, a Controller and other officers, who need not be Managers and who shall have such authority and responsibility as the Managers designate. The compensation of such appointed officers will be determined by the Managers. Without prejudice to any rights of such an officer under any contract of employment, any such appointed officer may be removed by the Managers, with our without cause, at any time. ARTICLE VI Capital Contributions, Allocations and Distributions 6.1 Capital Contributions. Capital Contributions are not anticipated. The Membership Register shall be amended by the Managers at the beginning of each calendar year and at such other times as necessary to accurately reflect the cancelation of Membership Interests, the issuance of additional Membership Units, the admission of additional Members, each Member s Transactions for the applicable period of time, or similar events having an effect on any item set forth therein. 6.2 Allocations. (a) For purposes of maintaining the Capital Accounts and in determining the rights of the Members among themselves, the Company s items of income, gain, loss and deduction (computed in accordance with the Code and the Regulations) for a taxable year shall be allocated among the Members with at least twenty (20) Transactions during the Measuring Period ending in the applicable taxable year (including any such Member who withdraws from membership in the Company prior to the end of the taxable year or whose membership interest is terminated prior to the end of the taxable year) in proportion to the number of Transactions for such Measuring Period by the Member to the total number of Transactions for such Measuring Period for all Members with at least twenty (20) Transactions for such Measuring Period ( Allocable Interests ). 17

18 (b) Within seven (7) days of the end of the Measuring Period, the Company shall prepare a listing of each Member s Transactions and a summary of each Member s Allocable Interest, each of which shall be distributed to such Member (whether or not such Member has an Allocable Interest for such year) and Persons eligible to become Members in the next calendar year based on their satisfaction of the criteria in Section 3.14 as shown in such listing. The Members shall have fourteen (14) days to comment on such listing and summary. If a Member fails to comment on either during such fourteen (14) day period, such listing and summary shall be deemed final with respect to such Member. If a Member provides comments, the Company and the Member shall work expeditiously to resolve any such comments. The final determination of each Member s Allocable Interest shall be in the sole discretion of the Company. 6.3 Distributions. (a) Distribution of Available Cash. Annually, the Managers shall determine the amount of Available Cash generated by the Company with respect to the preceding year and shall cause the Company to distribute such Available Cash to the Members (including any Member who withdraws from membership in the Company prior to the end of the year or whose membership interest is terminated prior to the end of the year) in accordance with their Allocable Interests for such preceding year. The Managers shall endeavor to distribute sufficient cash once each year such that each Member will receive an amount at least equal to the amount of income tax associated with the income allocated to that Member with respect to the preceding year, such tax being calculated at the highest individual income tax rate then in effect. (b) Amounts Withheld. All amounts withheld pursuant to the Code or any provisions of any state or local tax law with respect to any allocation, payment or distribution to a Member or Assignee shall be treated as amounts distributed to the Member or Assignee pursuant to Section 6.3(a) for all purposes under this Agreement. (c) Distributions Upon Liquidation. Proceeds from a Terminating Capital Transaction and any other cash received or reductions in reserves made after commencement of the liquidation of the Company shall be distributed to the Members in accordance with Article IX. 6.4 Capital Accounts of the Members. (a) The Company shall maintain for each Member a separate Capital Account in accordance with the rules of Regulations Section (b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions and any other deemed contributions made by such Member to the Company pursuant to this Agreement and (ii) all items of Company income and gain (including income and gain exempt from tax) computed in accordance with the Code and allocated to such Member pursuant to Section 6.2 hereof, and decreased by (x) the amount of cash of all actual and deemed distributions of cash or property made to such Member pursuant to this Agreement and (y) all items of Company deduction and loss computed in accordance with the Code and allocated to such Member pursuant to Section 6.2 hereof. 18

19 (b) For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Members Capital Accounts, unless otherwise specified in this Agreement, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments: (c) Except as otherwise provided in Regulations Section (b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Company, provided that the amounts of any adjustments to the adjusted bases of the assets of the Company made pursuant to Section 734 of the Code as a result of the distribution of property by the Company to a Member (to the extent that such adjustments have not previously been reflected in the Members Capital Accounts) shall be reflected in the Capital Accounts of the Members in the manner and subject to the limitations prescribed in Regulations Section (b)(2)(iv)(m)(4). (1) The computation of all items of income, gain, and deduction shall be made without regard to the fact that items described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not includible in gross income or are neither currently deductible nor capitalized for federal income tax purposes. (2) Any income, gain or loss attributable to the taxable disposition of any Company property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Company s Carrying Value with respect to such property as of such date. (3) 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 calendar year. (d) The provisions of this Agreement (including this Section 6.4) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section l(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Tax Matters Partner shall determine that it is prudent to modify (i) the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Company, or any Member are computed or (ii) the manner in which items are allocated among the Members for federal income tax purposes in order to comply with such Regulations or to comply with Section 704(c) of the Code, the Tax Matters Partner may make such modification without regard to Article V of this Agreement, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article IX of the Agreement upon the dissolution of the Company. The Tax Matters Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the partners and the amount of Company capital reflected on the Company s balance sheet, as computed for book purposes, in accordance with Regulations Section (b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated 19