Thomas Eide

Down round or bust!!

The fall of LevelUp will sting the capital markets surrounding mobile payments, at least for a moment. Instant success for LevelUp came from mining SCVNGR’s customers to “first-adopter” their QR code-based mobile payment application. Their CEO made a gamble that 100+ sales team could spread LevelUp like a virus. Why wouldn’t he make that gamble? He was selling a product that answered merchant’s biggest complaint, “…the #$%^ing credit card fees”. Now that gamble has turned into survival with only 5,000 merchants. 

What can LevelUp do to finish their mission?  What will it take to turn 5,000 merchants into 50,000 or 500,000? What can LevelUp do turn outbound efforts into an inbound waterfall?

1. Merchants HATE onboarding! Spin up a merchant in a few seconds and at virtually NO cost. This means approving a merchant instantly and setting up a direct deposit using information the merchant knows by heart. No waiting for micro-deposits to verify account ownership. Remove the blockers for merchants to sign up!!

2. PROFIT. LevelUp claims to make $0.70 per transaction. The Feds report average transaction spend for in-person payments is $40.00. If Level-Up is paying 2% (avg from PIN-based debit to AMEX) and $0.15 per payment, their cost on $0.70 revenue is $0.95. Even if LevelUp’s average payment size is significantly less, they can’t even make gross profit paying credit card fees. They MUST move their customer payments off the credit card rail to good-funds decoupled debit payment ( a direct bank payment that without NSF risk).

3. Make it EASIER! Consumers should LOVE LevelUp almost as much as Starbucks users love their app. The difference is Starbuck users are loyal enough to overlook the pain in the @$$ it is to setup the app, create an account and add a payment source. LevelUp has to make account creation Facebook-easy and they have to make adding a payment source ignorant-easy (Card.io, card reader or Knox).

LevelUp has a responsibility to the mobile payments market to WIN and 5,000 merchants doesn’t even show up on the scoreboard. Everyone that feels credit card security is becoming worthless and interchange fees are usury is counting on LevelUp and anyone else innovating around an antiquated payment system to make the world a little easier for all of us.

Thomas Eide

CEO, Knox Payments

Awesome article on 2009 stats including: PIN-based debit vs Signature-based debit, value per consumer, and fraud stats on debit.

FREE Corporate document: Operations Agreement for LLC

As I’ve done in previous posts, I am posting FREE templates of common corporate documents because starting a new business has many challenges associated with the operations of the business.  And one of those challenges is creating and establishing corporate documents.

Warning:  This information is not intended to constitute legal advice and should not be relied upon in lieu of consultation with appropriate legal advisors in your own jurisdiction.  It may not be current as the laws in the area of informed consent change frequently.


OPERATING AGREEMENT OF {INSERT COMPANY NAME}, LLC a {STATE NAME} Limited Liability Company

TABLE OF CONTENTS

ARTICLE I. DEFINITIONS … … … … … … … … … … … Page 

ARTICLE II. PURPOSE AND POWERS OF COMPANY … … … . Page 

ARTICLE III. NAMES, ADDRESSES AND MEMBERSHIP INTERESTS OF INITIAL MEMBERS; PRINCIPAL OFFICE … … . . Page 

ARTICLE IV. VOTING POWERS, MEETINGS, ETC. OF MEMBERS… Page

ARTICLE V. MANAGERS… … … … … … … … … … . Page

ARTICLE VI. CONTRIBUTIONS TO THE COMPANY, DISTRIBUTIONS AND PARTICIPATION

RIGHTS … … … … … … … … … … … … Page

ARTICLE VII. RECORDS, REPORTS, ETC… … … … … … . . Page

ARTICLE VIII. ASSIGNMENT AND RESIGNATION… … … … . Page

ARTICLE IX. DISSOLUTION AND TERMINATION … … … . . Page

ARTICLE X. CERTAIN RESTRICTIVE COVENANTS; INFORMATION; FIDUCIARY DUTIES… .

OPERATING AGREEMENT for {INSERT COMPANY NAME}, LLC

This Operating Agreement (“Agreement”), is entered into effective as of {INSERT MONTH AND DAY}, 2012, by and among the parties identified as the initial members of the Company on Schedule “A” attached hereto and made a part hereof (“Initial Members”). The undersigned, by their execution of this Agreement, have become members of {INSERT COMPANY NAME}, LLC, a {STATE NAME} limited liability company (the “Company”).

RECITALS

The undersigned parties have caused the Company to be organized as a limited liability company under the laws of the {GOVERNING STATE e.g. Commonwealth of Massachusetts}. The undersigned parties wish to enter into this Operating Agreement in order to set forth the terms and conditions on which the management, business and financial affairs of the Company shall be conducted.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, covenants and conditions herein contained, the receipt and sufficiency of which are hereby acknowledged, the undersigned do hereby covenant and agree as follows:

ARTICLE I

DEFINITIONS

1.01 The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein):

(1) “Act” shall mean the {STATE NAME} Limited Liability Company Act, {STATE Code §…} et seq., as amended and in force from time to time.

(2) “Agreement” shall mean this Operating Agreement, as originally executed and as amended from time to time.

(3) “Articles” shall mean the Articles of Organization of the Company, as amended and in force from time to time.

(4) “Capital Account” shall mean as of any given date the amount calculated and maintained by the Company for each Member as provided in Section 6.04 hereof.

(5) “Capital Contribution” shall mean any contribution to the capital of the Company by a Member in cash, property or services, or a binding obligation to contribute cash, property or services, whenever made. “Initial Capital Contribution” shall mean the initial contribution to the capital of the Company by a Member, as determined pursuant to Section 6.01 hereof.

(6) “Code” shall mean the Internal Revenue Code of 1986 or corresponding provisions of subsequent superseding federal revenue laws.

(7) “Company” shall refer to {INSERT COMPANY NAME}, LLC.

(8) “Distributable Cash Flow” shall be defined as set forth in Section 6.08(a) herein.

(9) “Effective Date” shall mean the date set forth in the opening paragraph of this Agreement.

(10) “Entity” shall mean any general partnership, limited partnership, a limited liability company, corporation, joint venture, trust, business trust, cooperative or other association.

(11) “Manager” shall mean a manager of the Company, whose rights, powers and duties are specified in Article V hereof. A Manager does not have to be a Member.

(12) “Member” shall mean each Person that is identified herein as an Initial Member or is admitted as a Member (either as a transferee of a Membership Interest or as an additional Member) as provided in Article VIII hereof. A Person shall cease to be a Member at such time as he no longer owns any Membership Interest.

(13) “Membership Interest” shall mean the ownership interest of a Member in the Company as set forth in Schedule “A” attached to this Agreement which Schedule may be revised from time to time as necessary.

(14) “Person” shall mean any natural person or Entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such Person where the context so requires.

ARTICLE II

PURPOSE AND POWERS OF COMPANY

2.01 Purpose. The purposes of the Company shall be to:

(a) {INSERT APPLICABLE PURPOSE OF COMPANY}, as the Members may from time to time deem to be in the best interests of the Company.

(b) {INSERT APPLICABLE PURPOSE OF COMPANY}, that the Members may from time to time deem to be in the best interests of the Company.

(c) Engage in such other activities as are related, necessary or incidental to the foregoing purposes.

2.02 Powers. The Company shall have all powers and rights of a limited liability company organized under the Act, to the extent such powers and rights are not prescribed by the Articles.

ARTICLE III

NAMES, ADDRESSES AND MEMBERSHIP INTERESTS OF INITIAL MEMBERS; PRINCIPAL OFFICE

3.01 Names, Addresses, and Membership Interests of Initial Members. The names, addresses, and Membership Interests of the Initial Members are as follows:

Names and Address                                Membership Interest

3.02 Principal Office. The principal office of the Company shall be at {INSERT PHYSICAL OFFICE ADDRESS}. The principal office may be changed from time to time by the Manager.

ARTICLE IV

VOTING POWERS, MEETINGS, ETC. OF MEMBERS

4.01 In General. The Members shall not be entitled to participate in the day to day affairs and management of the Company, but instead, the Members’ right to vote or otherwise participate with respect to matters relating to the Company shall be limited to those matters as to which the express terms of the Act, the Articles or this Agreement vest in the Members the right to so vote or otherwise participate.

4.02 Actions Requiring Approval of Members.

(a) Notwithstanding any other provision of this Agreement but subject to the provisions of Section 4.02(c) below, the approval of not less than two-thirds of the Members shall be required in order for any of the following actions to be taken on behalf of the Company:

(i) Amending the Articles in any manner that materially alters the preferences, privileges or relative rights of the Members.

(ii) Electing the Manager or setting or adjusting his compensation as provided in Article V hereof.

(iii) Taking any action which would make it impossible to carry on the ordinary business of the Company.

(iv) Confessing a judgment against the Company in excess of $1,000.

(v) Filing or consenting to filing a petition for or against the Company under any   federal or state bankruptcy, insolvency or reorganization act.

(b) Notwithstanding any other provision of this Agreement, the unanimous consent of the Members shall be required in order to remove a Manager for cause as defined in Section 5.02(c). For purposes of this Agreement, any Member-Manager who is the subject of such action shall not be entitled to vote. Notwithstanding the foregoing, in the event there are only two Members in the Company at the time of the vote to remove a Manager for cause, and the subject Manager is also a Member and opposed to his or her removal, {INSERT ATTORNEY NAME}, an attorney practicing in {CITY, STATE}, shall be employed to arbitrate the dispute and to make a final determination of whether the said Manager should be removed for cause. In the event {MR./MRS. ATTORNEY NAME} is unable or unwilling to act in such capacity, the Members agree to have the dispute resolved by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules. The arbitrator’s decision shall be final and binding on all parties.

(c) Except as set forth in Sections 4.02(a) and (b) above or under the express terms of any other Section of this Agreement, the affirmative vote of the Members holding a majority of the Membership Interests shall be necessary and sufficient in order to approve or consent to any other matters which require the approval or consent of the Members. Notwithstanding anything herein to the contrary, in the event there are only two Members in the Company and they are deadlocked in making a decision or voting on any matter that may come before them, the Members shall have a professional arbitrator, selected as provided in Section 4.02(b), above to be the tie-breaking vote in any such decision or matter.

4.03 Action by Members. In exercising their rights as provided above, the Members shall act collectively through meetings and/or written consents as provided in this Article.

4.04 Special Meetings. Special meetings of the Members, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Manager, and shall be called by the Manager at the request of a majority of the Members.

4.05 Place of Meeting. The place of any meeting of the Members shall be the principal office of the Company, unless another place, either within or outside the {GOVERNING STATE}, is designated by the Manager.

4.06 Notice of Meetings. Written notice stating the place, day and hour of any meeting of the Members and, if a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than twenty-four (24) nor more than seventy-two (72) hours before the date of the meeting, either personally or by mail, by or at the direction of the Manager, to each Member.

4.07 Conduct of Meetings. All meetings of the Members shall be presided over by a chairperson of the meeting, who shall be a Manager, or a Member designated by the Manager. The chairperson of any meeting of the Members shall determine the order of business and the procedure at the meeting, including, regulation of the manner of voting and the conduct of discussion, and shall appoint a secretary of such meeting to take minutes thereof.

4.08 Participation by Telephone or Similar Communications. Members may participate and hold a meeting by means of conference telephone or similar communications equipment by means of which all Members participating can hear and be heard, and such participation shall constitute attendance and presence in person at such meeting.

4.09 Waiver of Notice. When any notice of a meeting of the Members is required to be given, a waiver thereof in writing signed by a Member entitled to such notice, whether given before, at, or after the time of the meeting as stated in such notice, shall be equivalent to the proper giving of such notice.

4.10 Action by Written Consent. Any action required or permitted to be taken at a meeting of Members may be taken without a meeting if one or more written consents to such action are signed by the Members who are entitled to vote on the matter set forth in the consents and who constitute the requisite number or percentage of such Members necessary for adoption or approval of such matter on behalf of the Company. By way of example and not limitation, the Members holding a majority of the Membership Interests may take action as to any matter specified in Section 4.02(c) hereof by signing one or more written consents approving such action, without obtaining signed written consents from any other Members. Such consent or consents shall be filed with the minutes of the meetings of the Members. Action taken under this Section shall be effective when the requisite Members have signed the consent or consents, unless the consent or consents specify a different effective date.

ARTICLE V

MANAGERS

5.01 Powers of Manager. Except as expressly provided otherwise in the Act, the Articles or this Agreement, the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed by, one or more Managers. The powers so exercised shall include but not be limited to the following:

(a) Entering into, making and performing agreements, contracts, deeds, deeds of trust, notes, leases, financing statements, security agreements, and other undertakings binding the Company that may be necessary, appropriate or advisable in furtherance of the purposes of the Company.

(b) Opening and maintaining bank accounts, investment accounts and other arrangements, drawing checks and other orders for the payment of money, and designating individuals with authority to sign or give instructions with respect to those accounts and arrangements. Company funds shall not be commingled with funds from other sources and shall be used solely for the business of the Company.

(c) Collecting funds due to the Company.

(d) Acquiring, utilizing for the Company’s purposes, maintaining and disposing of any assets of the Company.

(e) To the extent that funds of the Company are available therefor, paying debts and obligations of the Company.

(f) Borrowing money or otherwise committing the credit of the Company for Company activities, and voluntarily prepaying or extending any such borrowings.

(g) Employing from time to time persons, firms or corporations for the operation and management of various aspects of the Company’s business, including, without limitation, managing agents, contractors, subcontractors, architects, engineers, laborers, suppliers, accountants, business and/or financial consultants and attorneys on such terms and for such compensation as the Managers shall determine, notwithstanding the fact that the Managers or any Member may have a financial interest in such firms or corporations.

(h) Making elections available to the Company under the Code.

(i) Obtaining general liability, property and other insurance for the Company, as the Managers deem proper.

(j) Taking such actions as may be directed by the Members in furtherance of their approval of any matter set forth in Section 4.02 hereof.

(k) Preparing an annual budget for the Company.

(l) Doing and performing all such things and executing, acknowledging and delivering any and all such instruments as may be in furtherance of the Company’s purposes and necessary and appropriate to the conduct of its business.

5.02 Election, Etc. of Managers.

(a) The Initial Members hereby unanimously elect {INSERT NAME} and {INSERT NAME} as the initial Managers of the Company, to serve until the occurrence of any of the events set forth in Section 5.02(b) below.

(b) If any Person resigns or otherwise vacates the office of Manager, or upon the death, disability, liquidation, dissolution or insolvency of any Manager, the Members shall elect a replacement Manager to serve the remaining term of such office, unless one or more other Persons then serve as Manager(s) and the Members determine not to fill such vacancy. A Person may also be removed as a Manager by the Members for “cause”, as defined herein. A Manager may, but shall not be required to, be elected from among the Members.

(c) For purposes of this Agreement, a Manager shall be deemed “disabled” as provided in Section 8.10 of this Agreement. Further, “cause” shall be defined as the dereliction or non-performance of one’s duties, fraud, misappropriation, embezzlement, conviction of a felony or other gross misconduct which shall seriously compromise the business or operation of the Company.

5.03 Action by Two or More Managers. Unless otherwise expressly provided by the Act, the Articles, or the terms of this Agreement, the vote, approval or consent of a majority of the Managers, determined on a per capita basis, shall be necessary and sufficient for the Managers to take any action on behalf of the Company that the Managers are authorized to take pursuant to the Act, the Articles or this Agreement.

5.04 Execution of Documents and Other Actions. The Managers may delegate to one or more of their number the authority to execute any documents or take any other actions deemed necessary or desirable in furtherance of any action that they have authorized on behalf of the Company as provided in Section 5.03 hereof.

5.05 Single Manager. If at any time there is only one Person serving as a Manager, such Manager shall be entitled to exercise all powers of the Managers set forth in this Section, and all references in this Section and otherwise in this Agreement to “Managers” shall be deemed to refer to such single Manager.

5.06 Reliance by Other Persons. Any Person dealing with the Company, other than a Member, may rely on the authority of a particular Manager or Managers in taking any action in the name of the Company, if such Manager or Managers provide to such Person a copy of the applicable provision of this Agreement and/or the resolution or written consent of the Managers or Members granting such authority, certified in writing by such Manager or Managers to be genuine and correct and not to have been revoked, superseded or otherwise amended.

5.07 Manager’s Compensation and Expenses. The Manager shall receive reasonable compensation for his services rendered to the Company as a Manager as determined by the Members pursuant to Article IV herein. The Company shall reimburse any Manager for reasonable out of pocket expenses which were or are incurred by the Manager on behalf of the Company with respect to the start up or operation of the Company, the on going conduct of the Company’s business, or the dissolution and winding up of the Company and its business. Such expenses shall be paid upon receipt of invoice or statement evidencing such expenses.

5.08 Indemnification. The Company shall indemnify each Manager, whether serving the Company or, at its request, any other Entity, to the full extent permitted by the Act. The foregoing rights of indemnification shall not be exclusive of any other rights to which the Managers may be entitled. The Managers may, upon the approval of the Members, take such action as is necessary to carry out these indemnification provisions and may adopt, approve and amend from time to time such resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law.

5.09 Liability of Managers. So long as the Managers act in good faith with respect to the conduct of the business and affairs of the Company, no Manager shall be liable or accountable to the Company or to any of the Members, in damages or otherwise, for any error or judgment, for any mistake of fact or of law, or for any other act or thing which he may do or refrain from doing in connection with the business and affairs of the Company, except for willful misconduct or gross negligence or breach of fiduciary duty, and further except for breaches of contractual obligations or agreements between the Managers and the Company.

5.10 Obligation of Managers. A Manager shall be entitled to engage, or participate, in any other venture, business, profession or occupation. A Manager shall be required to allocate only so much time and effort as he deems reasonable and appropriate in conducting the business and affairs of the Company.

ARTICLE VI

CONTRIBUTIONS TO THE COMPANY, DISTRIBUTIONS AND PARTICIPATION RIGHTS

6.01 Initial Capital Contributions. Each Initial Member, upon the execution of this Agreement, shall make as an Initial Capital Contribution the amount shown on Schedule “A” which is attached hereto. The Initial Capital Contribution to be made by any Person who hereafter is admitted as a Member and acquires his Membership Interest from the Company shall be determined by the Members.

6.02 Additional Capital Contributions. All Managers may jointly, from time to time, in their sole discretion, call for additional Capital Contributions from the Members in proportion to their Membership Interests for operating expenses, debt service and other Company obligations; and within fifteen (15) days of the notice of the call, each Member shall contribute his pro rata share. Except with the unanimous consent of the Members, no Member shall be required to lend or make any additional Capital Contribution in excess of that requested by the Manager hereunder.

6.03 Remedies for Default. (a) If any Member fails to pay any amount that he is required to pay to the Company under Sections 6.01 and 6.02 he shall be deemed a “Defaulting Member.” The amount in default shall bear interest at an annual interest rate of three percent (3%) plus the Prime Rate in effect from time to time (but not higher than the maximum rate legally permitted). All distributions otherwise payable to the Defaulting Member shall be retained by the Company and applied first to the payment of interest and then to the principal of the amount in default. A Defaulting Member shall not be entitled to vote on Company matters and his interest shall be disregarded in determining whether the requisite consent has been obtained on any Company matters.

(b) In addition to the foregoing, the remaining contributing Members (“Contributing Members” or “Non-Defaulting Members”) may elect between the following remedies:

(i) The Contributing Members may purchase the Membership Interest of the Defaulting Member for the amount of his Capital Account and the payment to the Company of all obligations of the Defaulting Member to the Company. In order to exercise the election to purchase, the Contributing Members that so elect shall give thirty (30) days notice to the Defaulting Member. If the Defaulting Member does not cure the default within the thirty (30) day period, his Membership Interest shall be deemed to have been sold to the electing Contributing Members, who shall pay for the Membership Interest within thirty (30) days after the expiration of the notice period. If more than one Contributing Member elect to purchase the Membership Interest of the Defaulting Member, they may do so in proportion to their respective interests or as they may otherwise agree. The Defaulting Member shall not have a right to cure his default after the expiration of the thirty (30) day notice period but shall have no further obligation with respect to the default.

(ii) (A) The Contributing Members may make a Capital Contribution to the Company in the amount that the Defaulting Member is in default, at any time before the default is cured. If any Contributing Member desires to exercise the election to make a Capital Contribution as provided in this Section 6.03(b)(ii), that Member shall give ten (10) days notice to the Defaulting Member (the “Default Notice”) and to the other Members. If the Defaulting Member does not cure the default within the ten (10) period by payment of the amount in default (and interest thereon), the Contributing Members may make a Capital Contribution to the Company. The Capital Contribution shall be made within twenty (20) days after the date of the Default Notice. If more than one Contributing Member elect to make a Capital Contribution to the Company, they may do so in proportion to their respective Membership Interests or as they may otherwise agree.

(B) Upon the making of a Capital Contribution under Section 6.03(b) (ii)(A), the Membership Interest of each Member shall be recalculated, with the Membership Interest of the Defaulting Member reduced by that portion of Membership Interest equal to a fraction, the numerator of which is the product of 1.3 multiplied by the excess of (i) the amount of the Defaulting Member’s share of the additional capital for which the Manager has called over (ii) the amount of that share, if any, that the Defaulting Member has paid to the Company; and the denominator of which shall be the sum of all Capital Contributions made by all Members to the Company during its existence. The amount by which the Defaulting Member’s Membership Interest is reduced shall be added to the Membership Interests of those Contributing Members that made a Capital Contribution to the Company in the amount by which the Defaulting Member was in default, as provided in Section 6.02(b)(ii)(A) above, in proportion to their respective shares of the Capital Contribution. Such Capital Contribution shall be deemed to cure the default of the Defaulting Member with respect to that particular default.

(c) The Defaulting Member hereby irrevocably constitutes and appoints the Contributing Members, any one of whom may act, as the Defaulting Member’s attorney-in-fact to execute and deliver any documents necessary or appropriate to effectuate Section 6.02(b) including an assignment of the Defaulting Member’s Membership Interest. The appointment by the Defaulting Member of the Contributing Members as his attorney-in-fact is irrevocable and shall be deemed to be a power coupled with an interest and shall survive the incompetency, bankruptcy, or dissolution of any person giving that power.

(d) The remedies provided in this Section 6.02 shall be the sole and exclusive remedies for failure to comply with Sections 6.01 and 6.02, and all other remedies are hereby waived.

6.04 Return of Capital Contribution. Except as otherwise specifically provided for herein, the Members shall not be allowed to withdraw or have refunded any Capital Contribution. No member shall be entitled to be paid interest on his Capital Contributions or Capital Account.

6.05 Capital Accounts. Separate Capital Accounts shall be maintained for each Member in accordance with the following provisions:

(a) To each Member’s Capital Account there shall be credited the fair market value of such Member’s Initial Capital Contribution and any additional Capital Contributions, such Member’s distributive share of profits, and the amount of any Company liabilities that are assumed by such Member or that are secured by any Company property distributed to such Member.

(b) To each Member’s Capital Account there shall be debited the amount of cash and the fair market value of any property distributed to such Member pursuant to any provision of this Agreement, such Member’s distributive share of losses, and the amount of any liabilities of such Member that are assumed by the Company or that are secured by any property contributed by such Member to the Company.

(c) 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.

(d) The Capital Account shall also include a pro rata share of the fair market value of any property contributed by a person who is not a Member, such value to be the same value reported for federal gift tax purposes if a gift tax return is filed, and if not, the value in the case of real property shall be determined by an independent M.A.I. appraiser actively engaged in appraisal work in the area where such property is located and selected by the Managers, and otherwise by the certified public accountant or accountants then serving the Company.

(e) If any Member makes a non pro rata Capital Contribution to the Company or the Company makes a non pro rata distribution to any Member, the Capital Account of each Member shall be adjusted to reflect the then fair market value of the assets held by the Company immediately after the Capital Contribution or distribution.

6.06 Loans to the Company. If the Company has insufficient funds to meet its obligations as they come due and to carry out its routine, day to day affairs, then, in lieu of obtaining required funds from third parties or selling its assets to provide required funds, the Company may, but shall not be required to, borrow necessary funds from one or more of the Members as designated by the Managers; provided that the terms of such borrowing shall be commercially reasonable and the Company shall not pledge its assets to secure such borrowing.

6.07 Effect of Sale or Exchange. In the event of a permitted sale or other transfer of a  Membership Interest in the Company, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent they relate to the transferred Membership Interest.

6.08 Distributions of Distributable Cash Flow. Distributable Cash Flow and other property as follows: 

(a) Distributable Cash Flow Defined. The term “Distributable Cash Flow” for a fiscal year of the Company shall mean for any fiscal year, the excess, if any, of the net income or losses, adjusted for any non-cash expense or revenue items to reach cash generated or used by operations, over the sum of:

(i) All amounts paid or accrued by or on behalf of the Company in such fiscal year related to: (1) the payment or amortization of any debts or liabilities of the Company, and (2) the purchase of assets, except to the extent such payments or amortization or purchase is financed by new indebtedness;

(ii) All amounts paid for expenses not deducted or deductible for federal income tax purposes; and

(iii) Such reasonable reserves as the Managers shall deem necessary, including, without limitation, reserves for taxes, insurance and capital improvements.

(b) Distributions of Cash Flow. Distributable Cash Flow of the Company shall be paid out to the Members pro rata in accordance with their respective Membership Interests. Notwithstanding anything herein to the contrary, with respect to any taxable period of the Company during which it is taxed as a partnership or an S corporation, within thirty (30) days after the Company files its federal income tax return for such taxable period the Company shall promptly pay a distribution to all Members in an amount equal to (i) that portion of the Company’s income attributed to such Members during such taxable period multiplied by (ii) the sum of the maximum federal and state individual income tax rates in effect for such taxable period, less (iii) the amount of any distributions with respect to the Members’ interest distributed by the Company during such taxable period. Notwithstanding the previous sentence, distributions shall be made to the Members pro rata based on their membership interest in the Company. If, at the time of the request, the Company does not have sufficient funds available to permit it lawfully to pay such a distribution, the Company shall take such action, adopt such resolutions, and cause such certificates and other documents to be filed as may be necessary to create sufficient funds to permit the Company to pay such a distribution. The Managers of the Company may, in their discretion, elect to cause the Company to make quarterly distributions to the Members on a pro rata basis for federal and state estimated tax payments in such amounts as the Managers determine in their discretion.

6.09 Distribution of the Proceeds of Sale or Refinance.

(a) Sale. In the event of a sale of the assets of the Company, the net proceeds of sale shall be distributed to the Members in accordance with Section 6.08 above.

(b) Refinance. In the event that the Managers determine that all or any part of the proceeds of financing or refinancing secured by the assets of the Company exceed the needs of the Company, such excess proceeds shall be distributed to the Members in accordance with Section 6.08 above.

6.10 Distribution of Debt Instruments. In the event the Company sells its assets and all or a portion of the sales price is paid by a promissory note or installment contractual obligation (“Debt Instrument”), all interest and principal received by the Company shall be treated as net proceeds of a sale or refinance, or if such sale occurs in conjunction with the dissolution of the Company, as net proceeds of dissolution distributable in accordance with Article IX hereof, as the case may be.

6.11 Other Distributions. All distributions of cash or other property (except upon the Company’s dissolution, which shall be governed by the applicable provisions of the Act and Article IX hereof) shall be made to the Members in accordance with Section 6.08 hereof. Except as otherwise specifically provided herein, all distributions of cash or property shall be made at such time and in such amounts as determined by the Managers. All amounts withheld pursuant to the Code or any provisions of state or local tax law with respect to any payment or distribution to the Members from the Company shall be treated as amounts distributed to the relevant Member or Members pursuant to this Section.

6.12 Allocation. Except as otherwise provided in this Article and Article IX hereof, all items of income, gain, loss, deduction and credit, whether resulting from the Company’s operations or in connection with its dissolution, shall be allocated to the Members for federal, state and local income tax purposes in proportion to their respective Membership Interests.

6.13 Allocation with Respect to Property. If, at any time during the Company’s existence, any Member contributes to the Company property with an adjusted basis to the contributing Member which is more or less than the agreed fair market value and such property is accepted by the Company at the time of its contribution, the taxable income, gain, loss, deductions and credits with respect to such contributed property for tax purposes only (but not for purposes of calculating the Members’ respective Capital Accounts) shall be shared among the Members so as to take account of the variation between the basis of the property to the Company and its agreed fair market value at the time of contribution, pursuant to Section 704(c) of the Code.

6.14 Income Tax Election. The Managers may, at any time, make or petition to revoke, as the case may be, the election referred to in Section 754 of the Code or the corresponding provision of any subsequent revenue act. Each Member agrees in the event of such an election to supply the Company with the information necessary to give effect thereto.

ARTICLE VII

RECORDS, REPORTS, ETC.

7.01 Records. The Company shall maintain and make available to the Members its records to the extent provided in the Act.

7.02 Financial and Operating Statements and Tax Returns. Within seventy five (75) days from the close of each fiscal year of the Company, or as soon as practicable, the Managers shall cause to be delivered to each Member a statement setting forth such Member’s allocable share of all tax items of the Company for such year, and all such other information as may be required to enable each Member to prepare his federal, state and local income tax returns in accordance with all the applicable laws, rules and regulations. The Managers also shall cause to be prepared and filed all federal, state and local income tax returns required of the Company for each fiscal year.

7.03 Banking. The funds of the Company shall be kept in one or more separate bank accounts in the name of the Company in such banks or other federally insured depositories as may be designated by the Managers, or shall otherwise be invested in the name of the Company in such manner and upon such terms and conditions as may be designated by the Managers. All withdrawals from any such bank accounts or investments established by the Managers hereunder shall be made on such signature or signatures as may be authorized from time to time by the Managers. Any account opened by the Managers for the Company shall not be commingled with other funds of the Managers or interested persons.

7.04 Power of Attorney. (a) Each Member does hereby irrevocably constitute and appoint the Managers serving in office from time to time, and each of them, as such Member’s true and lawful attorney, in his name, place and stead, to make, execute, consent to, swear to, acknowledge, record and file from time to time any and all of the following:

(i) Any certificate or other instrument which may be required to be filed by the Company or the Members under the laws of the {GOVERNING STATE} or under the applicable laws of any other jurisdiction in order to conduct business in any such jurisdiction, to the extent the Managers deem any such filing to be necessary or desirable.

(ii) Any amendment to the Articles adopted as provided in this Agreement.

(iii) Any certificates or other instruments which may be required to effectuate the dissolution and termination of the Company pursuant to the provisions of this Agreement.

(iv) Any certificate, document, or instrument necessary or appropriate for the disposition of a Membership Interest if required under the terms of this Agreement, subject to the provisions hereof.

(b) It is expressly understood, intended and agreed by each Member for himself, his successors and assigns, that the grant of the power of attorney to the Managers pursuant to subsection (a) is coupled with an interest, is irrevocable, and shall survive the death or legal incompetency of the Member or such assignment of his Membership Interest.

(c) One of the ways that the aforementioned power of attorney may be exercised is by listing the names of the Members and having the signature of the Manager or Managers, as attorney—in fact, appear with the notation that the signatory is signing as attorney in fact of the listed Members.

ARTICLE VIII

ASSIGNMENT AND RESIGNATION

8.01 Assignment Generally. Except as provided in Sections 8.02, 8.03, and 8.04 of this Agreement, each Member hereby covenants and agrees that he will not sell, assign, transfer, mortgage, pledge, encumber, hypothecate or otherwise dispose of all or any part of his interest in the Company to any person, firm, corporation, trust or other entity without first offering in writing to sell such interest to the Company and the remaining Members as provided herein. The Company shall have the right to accept the offer at any time during the thirty (30) days following the date on which the written offer is delivered to the Company. Except in the case of a bona fide offer to purchase the Member’s interest, the purchase price to be paid by the Company or remaining Members, as the case may be, shall be the fair market value of the interest as determined in Section 8.04(d). In the case of a bona fide offer, the purchase price shall be the price set forth in the offer; provided, however, the offeror can demonstrate his, her or its ability to finance the purchase price offered. The consent of all the Managers shall be required to authorize the exercise of such option by the Company. If the Company shall fail to accept the offer within the thirty (30) day period, the remaining Members, who are interested in purchasing the interest, shall have the right to purchase such interest on a pro rata basis for a period of thirty (30) days following the Company’s thirty (30) day option period. If neither the Company nor the remaining Members elect to accept the offer during the aforesaid sixty (60) day period, such interest may during the following sixty (60) days be disposed of free of the restrictions imposed by this Agreement; provided, however, that the purchase price for such interest shall not be less and the terms of purchase for such interest shall not be more favorable than the purchase price and terms of purchase that would have been applicable to the Company or the remaining Members had the Company or the remaining Members purchased the interest; provided further that any purchaser of the interest shall first become a Member pursuant to this Agreement; and provided further that any interest not so disposed of within the 60 day period shall thereafter remain subject to the terms of this Agreement. Notwithstanding the preceding sentence, no purchaser, transferee or assignee of a Membership Interest shall become a Member of the Company except upon the consent of a majority-in-interest of the non transferring or assigning Members.

8.02 Gift to Family Member and Exempt Assignment. Notwithstanding Section 8.01, a Member shall not be required to offer to sell his Membership Interest to the Company prior to transferring his Membership Interest to his spouse or any of his descendants, or to a trust, family limited partnership or similar entity, the sole beneficiaries of which are one or more of his spouse and his descendants, provided that such transfer is by way of inter vivos gift or testamentary or intestate succession. Notwithstanding the preceding sentence, no assignee of a Membership Interest shall become a Member of the Company except upon the consent of a majority-in-interest of the non assigning Members.

8.03 Transfers from Custodianship. Notwithstanding Section 8.01, any Membership Interest which is held by a custodian for a minor under the laws of the {GOVERNING STATE} or any other state shall be fully transferable and assignable to the minor, without an offer being made to the Company, when the minor reaches the age of termination of such custodianship under the applicable statute.

8.04 Purchase of Certain Membership Interests. (a) If an Option Event (as defined below) occurs with respect to any Member (an “Option Member”), the Company, and then the remaining Members, shall have the option to purchase the Option Member’s Membership Interest upon the terms and conditions set forth in this Section 8.04. For purposes of the foregoing, an “Option Event” shall mean the inability of a Member to pay his debts generally as they become due, or any assignment by a Member for the benefit of his creditors, and/or to settle an outstanding debt, or the filing by a Member of a voluntary petition in bankruptcy or similar insolvency proceedings, or the filing against a Member of an involuntary petition in bankruptcy or similar insolvency proceeding that is not dismissed within ninety (90) days thereafter, or the death of a Member unless his Membership Interest passes in accordance with Section 8.02 above, or the disability of any Member, as defined in Section 8.10 herein, who is also an employee and/or Manager of the Company, or the conclusion of any divorce proceeding, as defined in Section 8.11 herein. The term “Option Member” shall include an Option Member’s personal representative or trustee in bankruptcy, to the extent applicable.

(b) Upon any Option Event occurring to an Option Member, the Option Member shall deliver written notice of the occurrence of such Option Event to the Company and the remaining Members. The Company shall have the option, but not the obligation, to purchase the Option Member’s Membership Interest at any time during the sixty (60) day period immediately following the date on which it receives notice of the occurrence of the Option Event which sixty (60) day purchase period shall be extended automatically to the extent applicable to take into account the provisions set forth in Sections 8.04 (d) and (e). Such option shall entitle the Company to purchase such Membership Interest for the fair market value of such Membership Interest. The fair market value of the interest shall be the amount that the Option Member would receive in exchange for his entire interest in the Company if the Company sold all of its assets, subject to their liabilities, at their fair market value as of the date on which the Option Event occurred and distributed the net proceeds from such sale in complete liquidation of the Company. The consent of all the Managers shall be required to authorize the exercise of such option by the Company. Such option must be exercised by delivery of a written notice from the Company to the Option Member during the aforementioned period. Upon delivery of such notice the exercise of such option shall be final and binding on the Company and the Option Member. In the event the Company elects not to exercise its option, the remaining Members who are interested in acquiring the Membership Interest shall have thirty (30) days in which to exercise their option to purchase such interest on a pro rata basis following the expiration of the Company’s option period as set forth herein. The terms and conditions for the purchase of such interest by the remaining Members so interested shall be the same as for the Company.

(c) If the foregoing option is not exercised, the business of the Company shall continue, and the Option Member shall retain his Membership Interest.

(d) The fair market value of the Option Member’s Membership Interest shall be determined as expeditiously as possible by a disinterested appraiser mutually selected by the Option Member and the Company (the Company’s selection being made by the Managers). If the Option Member and the Company are unable to agree on a disinterested appraiser, then the Option Member and the Company shall each select a disinterested appraiser and if the disinterested appraisers selected are not able to agree as to the fair market value of the interest, then the two disinterested appraisers shall select a third disinterested appraiser who shall determine the fair market value. The determination of the fair market value of the Option Member’s Membership Interest by the appraiser or appraisers shall be conclusive and binding on all parties. All costs of an appraiser mutually selected by the Option Member and the Company or the two disinterested appraisers shall be shared equally by the Option Member and the Company. All costs of an individually selected appraiser shall be borne by the parties selecting such appraiser.

(e) Subject to any applicable time periods set forth in this Article VIII which may extend the purchase period, if the option to purchase the Option Member’s Membership Interest is exercised by the Company, or the remaining Members, as the case may be, then not later than thirty (30) days after the date on which the appraisal described above is complete (the “Appraisal Date”), the Company, or the remaining Members, as the case may be, shall, if the Company, make a distribution of property (which may be cash or other assets of the Company), or if the remaining Members, make a distribution of cash to the Option Member with a value equal in amount to the fair market value of the Option Member’s Membership Interest; provided, however, that at the election of the Company such distribution to the Option Member may be made in five (5) equal annual installments, the first of which shall be made on the thirtieth (30th) day after the Appraisal Date and one of which shall be made on the same date in each of the four years thereafter, provided, further, however, that notwithstanding an election by the Company to make the distribution to the Option Member in five equal annual installments, the Company may accelerate without penalty all of such installments at any time or any part of such installment at any time. Any unpaid capital contributions of the Option Member and any damages occurring to the Company as a result of the Option Event shall be taken into account in determining the net amount due the Option Member at the closing, and any excess of such unpaid capital contributions or damages over the amount due at closing shall be netted against subsequent installment payments as they become due.

(f) In order to fund any obligations under this Agreement, the Company may maintain such life insurance policies on the lives of one or more Members as the Members determine from time to time to be desirable.

8.05 Absolute Prohibition. Notwithstanding any other provision in this Article VIII, the Membership Interest of a Member, in whole or in part, or any rights to distributions therefrom, shall not be sold, exchanged, conveyed, assigned, pledged, hypothecated, subjected to a security interest or otherwise transferred or encumbered, if, as a result thereof, the Company would be terminated for federal income tax purposes in the opinion of counsel for the Company or such action would result in a violation of federal or state securities laws in the opinion of counsel for the Company.

8.06 Members Acquiring Membership Interest from Company. No Person, other than the Initial Members identified herein as of the date of execution of this Agreement, who acquires a Membership Interest from the Company shall be admitted as a Member of the Company, except upon the unanimous consent of the Members.

8.07 Resignation. No Member shall be entitled to resign from the Company except upon the unanimous written consent of the Members. Any attempted resignation without such consent shall be of no force or effect.

8.08 Effect of Prohibited Action. Any transfer or other action in violation of this Article shall be void ab initio and of no force or effect whatsoever.

8.09 Rights of an Assignee. If an assignee of a Membership Interest is not admitted as a Member because of the failure to satisfy the requirements of Section 8.01 or 8.05 hereof, such assignee shall nevertheless be entitled to receive such distributions from the Company as the assigning Member would have been entitled to receive under Article VI of this Agreement with respect to such Membership Interest had the assigning Member retained such Membership Interest.

8.10 Disability. A Member who is also an employee and/or Manager of the Company shall be deemed to be disabled for the purposes of this Agreement if: (i) a court of competent jurisdiction in a final adjudication so determines; or (ii) a physician engaged by the Company at its expense states, in writing, that the Member is disabled and that such disability is expected to continue for at least three (3) months. The subject Member hereby agrees to provide such medical information as may be reasonably necessary and to make himself or herself reasonably available for physical examinations in order to facilitate a determination of whether the Member is disabled for the purposes of this Agreement. In the event the Member refuses to comply within thirty (30) days with any reasonable request made hereunder to submit to such a physical examination, then the Member shall be deemed to have been determined to be disabled for the purposes of this Agreement.

8.11 Divorce Proceeding. A divorce proceeding shall be deemed to mean any divorce settlement, divorce decree or any method of marital dissolution, including, without limitation, the entry of a final order of divorce dissolving a Member’s marriage, or the entry of any court order disposing of all or any portion of a Member’s interest in the Company or the rights associated therewith; provided, however, the only interest of the Member in the Company to be effected by any such divorce proceeding is such Member’s interest that would, but for this provision, be held by or transferred to a person who is not already a Member of the Company or an employee and/or Manager of the Company.

ARTICLE IX

DISSOLUTION AND TERMINATION

9.01 Events of Dissolution. The Company shall be dissolved upon the first to occur of the following:

(a) Any event which under the Articles requires dissolution of the Company.

(b) The unanimous written consent of the Members to the dissolution of the Company.

(c) The entry of a decree of judicial dissolution of the Company as provided in the Act.

(d) Any event not set forth above which under the Act requires dissolution of the Company.

9.02 Liquidation. Subject to Section 9.04, upon the dissolution of the Company, it shall wind up its affairs and distribute its assets in accordance with the Act by either or a combination of both of the following methods as the Members shall determine:

(a) Selling the Company’s assets and, after the payment of Company liabilities, distributing the net proceeds therefrom to the Members in proportion to their Membership Interests and in satisfaction thereof; and/or

(b) Distributing the Company’s assets to the Members in kind with each Member accepting an undivided interest in the Company’s assets, subject to its liabilities, in satisfaction of his Membership Interest. The interest conveyed to each Member in such assets shall constitute a percentage of the entire interests in such assets equal to such Member’s Membership Interest.

9.03 Orderly Liquidation. A reasonable time as determined by the Managers not to exceed eighteen (18) months shall be allowed for the orderly liquidation of the assets of the Company and the discharge of liabilities to the creditors so as to minimize any losses attendant upon dissolution.

9.04 Distributions. Upon liquidation, the Company assets (including any cash on hand) shall be distributed in the following order and in accordance with the following priorities:

(a) First, to the payment of the debts and liabilities of the Company and the expenses of liquidation, including a sales commission to the selling agent, if any; then

(b) Second, to the setting up of any reserves which the Managers (or the person or persons carrying out the liquidation) deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company. At the expiration of such period as the Managers (or the person or persons carrying out the liquidation) shall deem advisable, but in no event to exceed 18 months, the Company shall distribute the balance thereof in the manner provided in the following subsections; then

(c) Third, to the Members in proportion to their respective Membership Interests.

(d) In the event of a distribution in liquidation of the Company’s property in kind, the fair market value of such property shall be determined by a qualified and disinterested M.A.I. appraiser actively engaged in appraisal work in the jurisdiction where the asset is located, selected by the Managers (or the person or persons carrying out the liquidation), and each Member shall receive an undivided interest in such property equal to the portion of the proceeds to which he would be entitled under the immediately preceding subsections if such property were sold at such fair market value.

9.05 Taxable Gain or Loss. Taxable income, gain and loss from the sale or distribution of Company property incurred upon or during liquidation and termination of the Company shall be allocated to the Members as provided in Section 6.12 above.

9.06 No Recourse Against Members. Except as provided by law, upon dissolution, each Member shall look solely to the assets of the Company for the return of his Capital Contribution. If the Company’s property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return the Capital Contribution of each Member, such Member shall have no recourse against any other Member or any Manager.

ARTICLE X

CERTAIN RESTRICTIVE COVENANTS; CONFIDENTIAL INFORMATION; FIDUCIARY DUTIES

10.01 Restrictive Covenants; Confidential Information. Any Member of the Company who has also served or currently serves as a Manager thereof (“Member Manager”) agrees to not:

(a) During the period where he or she owns a membership interest in the Company and for a period of two (2) years thereafter (the “Restricted Period”), directly or indirectly, alone or as a partner, member, principal, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity with respect to or in connection with the ownership, development, purchasing, sale or conversion of apartments to condominium units, including, without limitation, the filing of applications for or otherwise obtaining any governmental approvals, licenses or permit for such activities (collectively, the “Company Business”) within (i) the city of {CITY, STATE} and any cities or counties contiguous to the city of {CITY, STATE} or (ii) any city or county where the Company has conducted the Company Business prior to the date hereof, or where the Company conducts the Company Business or its Managers have approved written plans to conduct the Company Business hereafter (the “Restricted Area”); provided, however, that the beneficial ownership of less than five percent (5%) of any class of securities of any entity having a class of equity securities actively traded on a national securities exchange or over-the-counter market, in and of itself, shall not be deemed to violate the prohibitions of this Agreement.

(b) During the Restricted Period, directly or indirectly, (i) induce any customer of the Company Business or any customer of the Company, the Company’s subsidiaries, affiliated entities, successors or assigns (collectively the “Company Entities”), to patronize any business which is directly or indirectly in competition with the Company Business conducted by any of the Company Entities in the Restricted Area; (ii) canvass, solicit or accept any such competitive business from any Person (as hereinafter defined) which is a customer of the Company Business conducted by any of the Company Entities in the Restricted Area; or (iii) request or advise any customer of the Company Business conducted by any of the Company Entities in the Restricted Area to withdraw, curtail or cancel any such customer’s business with the Company Entities or their successors. For purposes of this Agreement, “Person” shall mean an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including any governmental authority.

(c) During the Restricted Period, directly or indirectly, employ any Person who was employed by the Company Entities within six (6) months prior to the date being employed by the Member Manager, or in any manner seek to induce any employee of the Company Entities to leave his or her employment.

(d) At any time following the date hereof, directly or indirectly, in any way utilize, disclose, copy, reproduce or retain in its or his possession any Confidential Information (including, but not limited to, (i) any customer lists and (ii) any accounts receivable records). The Member Manager understands and agrees and so stipulates that any information or material he comes into contact with while employed by the Company or while a Member of the Company, which material has not been previously published, shall be deemed to be confidential (the “Confidential Information”). For purposes of this Agreement, Confidential Information shall include trade secrets as defined by applicable state law. The Member Manager will not, without the prior written consent of the Company (x) disclose any portion of the Confidential Information to any Person or entity other than the employees of the Company who reasonably need to have access to the Confidential Information; or (y) use any portion of the Confidential Information for any purposes other than in connection with the Member Manager’s employment or ownership of a membership interest in the Company. The Member Manager represents, warrants, covenants and agrees that he shall take all necessary steps to safeguard the Confidential Information in order to prevent disclosure and misuse thereof, other than such disclosure as is permitted under this Agreement. Upon the Company’s request, the Member Manager shall, at the Company’s election, either (1) return to the Company all documents, papers, notes or other writings or recordings whatsoever of the Confidential Information, whether prepared by the Member Manager of the Company (“the Confidential Records”) or (2) cause to be destroyed all of the Confidential Records. If the Company elects to allow the Member Manager to destroy all the Confidential Records, the Member Manager shall, following the destruction thereof, deliver to the Company a certification to such effect. Notwithstanding anything to the contrary set forth above, the Member Manager shall be entitled to disclose any Confidential Information in accordance with the valid order of any judicial or administrative or other government agency; provided, however, that the Member Manager will give the Company as much notice as is reasonably practicable of any judicial, administrative or governmental agency request for such information and will cooperate with the Company in all reasonable respects if the Company seeks (by lawful means) to prevent such disclosure. For purposes of this Section 10.01, the references to Member and Member Manager shall include an individual and any entity in which the individual is a principal and/or owner.

10.02 Fiduciary Duties. Unless otherwise expressly provided hereunder or under any other agreement entered into between the Company and the Member Manager, for so long as he or she is a Manager of the Company, the Member Manager shall devote so much of his or her time, energy, attention and skill to the service of the Company as is necessary to conduct the Company Business. For so long as the Member Manager is a Manager of the Company, he or she shall owe to the Company all of the fiduciary and other duties an agent owes to its principal. This Section 10.02 shall not be construed as limiting in any way the duties the Member Manager otherwise owes to the Company (1) pursuant to other provisions of this Agreement; or (2) at common law or under the laws of the {GOVERNING STATE} by virtue of his or her employment with the Company.

10.03 Reasonable Restrictions; Remedies. The Member Manager agrees and acknowledges that the restrictions contained in Article X of this Agreement are reasonable in scope and duration, and are necessary to protect the Company Entities. The parties agree that the covenants and agreements of the Member Manager set forth above are separate and distance covenants and agreements of the Member Manager and if any such provision is void, invalid or unenforceable, such covenants and agreements shall be severed from this Agreement and shall not affect or impair any other section or the balance of this Agreement, and this Agreement with the void, invalid or unenforceable section stricken herefrom shall remain in full force and effect. Further, the periods and scope of the restrictions set forth above shall be reduced by the minimum amount necessary to reform such section to the maximum level of enforcement permitted to the Company by the law governing this Agreement, if such reform is permitted. The Member Manager agrees and acknowledges that any breach of this Agreement will cause irreparable injury to the Company Entities and upon any breach or threatened breach of any provision of this Agreement, the Company Entities shall be entitled to injunctive relief, specific performance or other equitable relief, without the necessity of posting bond; provided, however, that this shall in no way limit any other remedies which the Company Entities may have as a result of such breach, including the right to seek monetary damages. The Company and the Member Manager hereby agree that the Company may assign, without limitation, the foregoing restrictive covenants to any successor to the Company Business of any of the Company Entities.

ARTICLE XI

MISCELLANEOUS PROVISIONS

11.01 Attorneys’ Fees. In the event any party brings an action to enforce any provisions of this Agreement, whether such action is at law, in equity or otherwise, and such party prevails in such action, such party shall be entitled, in addition to any other rights or remedies available to it, to collect from the non prevailing party or parties the reasonable costs and expenses incurred in the investigation preceding such action and the prosecution of such action, including, but not limited to, reasonable attorneys’ fees and court costs.

11.02 Notices. Whenever, under the provisions of the Act or other law, the Articles or this Agreement, notice is required to be given to any Person, it shall not be construed to mean exclusively personal notice unless otherwise specifically provided, but such notice may be given in writing, by mail, addressed to the Company at its principal office from time to time and to any other Person at his address as it appears on the records of the Company from time to time, with postage thereon prepaid. Any such notice shall be deemed to have been given at the time it is deposited in the United States mail. Notice to a Person may also be given personally or by telegram or telecopy sent to his address as it appears on the records of the Company. The addresses of the Initial Members as shown on the records of the Company shall originally be those set forth in Article III hereof. Any Person may change his address as shown on the records of the Company by delivering written notice to the Company in accordance with this Section. 

11.03 Application of {STATE} Law. This Agreement, and the interpretation hereof, shall be governed exclusively by its terms and by the laws of the {GOVERNING STATE}, without reference to its choice of law provisions, and specifically the Act.

11.04 Amendments. No amendment or modification of this Agreement shall be effective except upon the unanimous written consent of the Members.

11.05 Construction. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders, and vice versa.

11.06 Headings. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof.

11.07 Waiver. The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation.

11.08 Rights and Remedies Cumulative. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.

11.09 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.

11.10 Heirs, Successors and Assigns. Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns.

11.11 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company.

11.12 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

11.13 Entire Agreement. This Agreement sets forth all of the premises, agreements, conditions and understandings between the parties respecting the subject matter hereof and supersedes all prior negotiations, conversations, discussions, correspondence, memoranda and agreements between the parties concerning such subject matter.

The undersigned, being all the Members of the Company, hereby agree, acknowledge and certify that the foregoing Operating Agreement constitutes the sole and entire Operating Agreement of the Company, unanimously adopted by the Members of the Company as of the date first written above.

INITIAL MEMBERS:

___________________________________

{INSERT NAME}

___________________________________

{INSERT NAME}

Warning:  This information is not intended to constitute legal advice and should not be relied upon in lieu of consultation with appropriate legal advisors in your own jurisdiction.  It may not be current as the laws in the area of informed consent change frequently.

Walmart exec says “no” to Google Wallet, NFC

Google Wallet had the door shut on them by Walmart.  Mike Cook, vice president and assistant treasurer for Walmart, Inc, not only rejected Google Wallet but he dismissed NFC and geo-location as well.  I had a high school Physics teacher who’s first question of the year was, “When is a risk worth taking?” His answer was “When the benefits outweigh the risks.”  Walmart doesn’t see the risk outweighing the benefit with NFC and Google Wallet because there is a huge separation in the differing payment systems.  Google has bet on NFC before the market it ready to bet on it.

http://www.mobilepaymentstoday.com/article/201555/Walmart-exec-says-no-to-Google-Wallet-NFC

I have always thought this should be a reality!LOL PayNet Real-Time Payments Network

Finally! someone is thinking outside the banking vault and generating real-time global money movement.  It is stressed to us when we become responsible for our own money what it’s important to stay on top of the movement of our money.  But that has not always been a simple task because there was so lag time between payments being posted, deposits being available, etc.  We have all played that guessing game and I guarantee we are all tired of it.  This is an exciting time, the financial institutions now have no excuse for withholding our money for days on end.  PaidThx is going to be even better than you can imagine with financial institutions using FIS’ PayNet. http://www.fisglobal.com/C016061

Business Start-Up 101: Capitalizing Your Business

I want to start my own venture and how do I raise money?  That is a big, big question.  Let’sgo back to the way we start a business.  First, we put together a team and then we go after a plan (this is what we are going to do and how we are going to get it done) then we are going to go out and make sales, and if we can’t get sales, we will get orders and if we can’t get orders, we will get letters of intent, just something that we can prove to ourselves and everybody else that this a viable business model.  And lastly we have got to get resources, people, capital, office space, different resources we need and then you come back and say, well I need the money to get all these resources.  So how do you get the money?  Everything boils down to one answer, You EARN IT!  You can go out and make sales and grow yours business that way, and a lot of people do this very, very successfully.  But what you want to know is how to raise capital from investors.


So you have this great idea, you have this great team and now how you pitch it to investors?  Well, let’s talk about what they need.  They look at a business opportunity just like you would…how much money do you want?  what are you going to use it for?  in what form do you need it, do you need free rent or do you need cash?  when do I get it back?  how do I get it back?  how much do I get back? and most importantly, if it all goes bad, how do I get out?  This is what the investors are thinking as you pitch your idea to them,  And you have gone through and answered those questions, you have a business plan that is bulletproof in your mind, you believe it in more than anything.  So go out and talk with a couple of friends, you have some high net worth individuals that you know, so go talk to them.  Ask them what would they want to see if you were pitching this as an investment.  That is a sign of admiration to say to someone, “I’d be interested in you helping me.”  And I guarantee the last thing they are going to say is that this isn’t for me.  Now what they are going to say is, “you know, let me look at it, this is real interesting, I like this, this is where you need improvement, this is where you need help.”  And if you get a couple that come in and help you, buy into it, you will get that confidence to GO and SELL.  And there are a lot of opportunities to go and say, “Hey, this is the type of model that works and I can SELL.”  

I hope this helps you and keep checking back for more episodes of this Start-up 101 series on YouTube. http://www.youtube.com/watch?v=EwDI7GCzT6U

FREE corporate document: Minutes of Initial BOD Meeting

Starting a new business has many challenges associated with the operations of the business.  One of those challenges is creating and establishing corporate documents.  I am offering fellow entrepreneurs FREE templates of common corporate documents. 

This information is not intended to constitute legal advice and should not be relied upon in lieu of consultation with appropriate legal advisors in your own jurisdiction.  It may not be current as the laws in the area of informed consent change frequently. 

MINUTES OF THE ORGANIZATIONAL MEETING OF

{COMPANY NAME}

DATE

            The initial meeting of the initial directors of {COMPANY NAME} (“Corporation”), was called to order on {DATE} at {TIME} at {STREET, CITY, STATE, ZIP} pursuant to written notice of the meeting.  The following individuals were present:  {INSERT NAMES OF INDIVIDUALS PRESENT}.

All the Board of Directors of the Corporation being present, formal notice calling the meeting was dispensed with, and the meeting declared to be regularly called.

UPON A MOTION DULY MADE, seconded and unanimously carried, {INSERT NAME} presided as Chairman of the

meeting and {INSERT NAME} acted as Secretary of the meeting and kept minutes.

The chairman presented to the meeting and thereupon the following resolutions were offered, seconded and unanimously adopted.

            The Chairman then presented and read to the meeting a copy of the Articles of Incorporation and reported that the Corporation was incorporated effective {DATE}.  The Corporation’s Secretary was instructed to cause a true copy of the Articles of Incorpora­tion to be inserted in the minute book.

            The Secretary then presented the board with a proposed form of bylaws.  The Board of Directors recognized that the shareholders of the Corporation unanimously accepted the Bylaws and Articles of Incorporation. The proposed bylaws were read to the meeting and considered by the directors.  Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that the bylaws submitted, and read, to this meeting are adopted as the Bylaws of {COMPANY NAME} and the Secretary was instructed to cause these bylaws to be inserted in the minute book.

The directors discussed the need for rules of procedures for its meetings. Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that the rules of procedures in the conduct of any and all Board of Director meetings shall be such: The meeting will have a point of commencement and of adjournment. The Chairman of the Board, if not the President, will call the meeting to order followed by a roll call. The minutes from the previous meeting will be presented followed by a motion to approve minute with majority vote. Action will be taken on agenda items followed by adjournment.

FURTHER RESOLVED, that the Board of Directors meetings will not be attended by anyone other than officers, directors, shareholders and any invited guests of the Board of Directors.

FURTHER RESOLVED, that the Secretary shall cause confidential copies of all resolutions to be delivered to every Director and Officer of the Corporation via hand delivery, electronic or mail, postage paid.

The directors recognized the Corporation issued {NUMBER WRITTEN IN LONG FORM (XXXXX)} shares of stock to Shareholders of the Corporation and that the Shareholders authorized {NUMBER WRITTEN IN LONG FORM (XXXXX)} shares of stock.

The directors discussed the need to operate within the definition of the Corporation’s Bylaws and the laws of the {GOVERNING STATE}. Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that the Secretary shall obtain a minute book (the “Minute Book”) and insert the Certificate of Incorporation and duplicate copy of the Articles of Incorporation which were filed with the State Corporation Commission in the Minute Book.

FURTHER RESOLVED, that the Secretary shall set up the usual and necessary records of account to maintain and file the Minute Book of meetings of Board of Directors and shareholders. The Secretary shall also open a Register of Directors and a Securities Register (comprised of Shareholders Ledgers, a Transfer Register and a Register of Shareholders).

FURTHER RESOLVED, that the Secretary shall file and maintain possession of the Stock Certificates of Corporation and all said Stock Certificates shall bear the official name of the Corporation and the seal of the Corporation.

The Secretary of the meeting produced the form of share certificate to be used for each of the classes of shares of the capital of the Corporation

RESOLVED, that the form of share certificates that are attached to these minutes shall be initialed by the Chairman for identification; are approved and adopted as the form of share certificates of the Corporation.

FURTHER RESOLVED, that the Secretary shall acquire a seal bearing the words “COMPANY NAME" (the "Corporate Seal") and an imprint thereof is directed to be placed on the margin of these minutes.

            The directors next considered the appointment of corporate officers.  After discussion, each of the following persons was appointed to the office preceding his/her name:

{NAME}, {President & Chief Executive Officer}

{NAME}, {Vice President & Chief Operating Officer}

{NAME}, {Vice President & Chief Technical Officer}

{NAME}, {Vice President & Treasurer}

{NAME}, {Vice President & Secretary}

            The directors discussed the salaries of the newly elected officers. Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that the Board of Directors hereby approves the salary of $00,000.00 annually to be paid to the following individuals: {INSERT NAMES}. The Board of Directors hereby approves the salary of $0.00 annually to be paid to the following individual: {INSERT NAME}.

            The directors next discussed the succession of the Vice President’s responsibilities in the absence of the President or in the event of the President’s inability or refusal to act. Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that the Chief Operating Officer shall immediately succeed the President followed by the Treasurer then followed by the Chief Technical Officer then followed by the most contiguous tenured Vice President of the Corporation.

            The directors next discussed the appointment of a registered agent and the selection of a registered office.  The Chairman noted that {INSERT NAME} was appointed the initial registered agent as required by law. Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that {INSERT NAME} is hereby designated as the new registered agent of the Corporation.  The Registered Office of the Corporation to be established and located at {INSERT STREET, CITY, STATE, ZIP} and the Secretary is instructed to insert a copy of the notice effecting any change in the Corporation’s Registered Office in the minute book of the Corporation and to perform any other tasks or notifications that may be required by law to facilitate this change.

The directors discussed the Corporation’s fiscal year and annual shareholder meeting schedule. Upon motion duly made and seconded, the following resolution was adopted:            

RESOLVED, that the Corporation’s fiscal year shall be the calendar year.

FURTHER RESOLVED, that the Board of Directors determined the annual shareholders’ meeting shall be held on ____________, 2012 at _____am at ________________ and the annual Board of Directors’ meeting shall transpire immediately following  the shareholders’ meeting at the same location.

The directors next discussed the designation of a depository for the funds of the Corporation. Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that the Treasurer on behalf of the Corporation shall open a Checking accounts (the “Account”) with {INSERT NAME OF BANK} (the “Institution”) and the following Corporate agents (the “Signatory Officers”) are authorized to sign for and on behalf of the Corporation any and all checks, drafts or other orders with respect to funds of the Corporation in this Account: Treasurer, President and Chief Operating Officer.

FURTHER RESOLVED, that the Treasurer shall execute resolutions for the above-mentioned purpose on the printed form of said Institution.  The Corporation’s Treasurer is hereby authorized to execute any documents necessary to effectuate the intent of this resolution.

FURTHER RESOLVED, that the Signatory Officers are authorized to transact any and all other business with the Institution deemed by the Signatory Officers to be reasonable and advisable except the borrowing of money or the obtaining of credit in any form or the use of any of the assets of the Corporation as any type of security or collateral. The Secretary of the Corporation is directed to communicate this authority and the relevant signatures to the Institution, and to ensure proper enforcement of this resolution.

The directors next discussed the authority to sign financial instruments on behalf of the Corporation. Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that the Treasurer, President, or Chief Operating Officer shall author or cause to be authored checks; however, any check greater in amount than $5,000 shall require the authorization of two (2) Signatory Officers of which one shall be the President or Treasurer and bear at least one signature of a Signatory Officer. All checks must first be reviewed and approved by the President, and shall be contained within the budget approved by the board of directors.

FURTHER RESOLVED, that in no event shall any Officer of the Corporation have the authority to author, withdraw, commit, transfer, bind, inure, or other, Corporation funds in excess of $20,000 without resolution of the Board of Directors.

FURTHER RESOLVED, that all said monetary limits shall be defined as a single payment, summation of multiple payments over a 90-day period or summation of obligations over the life of any contract.

FURTHER RESOLVED, that the Signatory Officer shall have full authority to cancel or cause stop payment on any checks issued or drawn on from Corporation’s bank accounts.

            The directors next discussed the execution of contracts incurred on behalf of the Corporation.  Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that only Officers of Corporation shall have the authority to bind Corporation into contract with monetary commitment. Any Officer shall not have the authority to bind Corporation into contract with monetary commitment greater than $5,000.00 without the signature or written (electronic or other) approval of two (2) Signatory Officers of which one shall be the President or Treasurer. Any contract in which the Corporation shall be bound with monetary commitment greater than $100,000 shall be determined by resolution of the Board of Directors, and shall be contained within the budget approved by the board of directors.

FURTHER RESOLVED, that all said monetary limits shall be defined as a single payment, summation of multiple payments over a 90-day period or summation of obligations over the life of any contract.

            The directors next discussed the expenses that have been incurred on behalf of the Corporation.  Upon motion duly made and seconded, the following resolution was adopted:

RESOLVED, that the Corporation shall pay the expenses incurred in the incorporation and organization of this Corporation, including those incurred prior to incorporation and prior to the date of this meeting, and to reimburse the Officers, Board of Directors, and other persons who have paid any such expense. The Officers are hereby authorized to make such reimbursements on behalf of the Corporation.

            The directors next discussed issues related to the day to day business activities of the Corporation.  Upon motion duly made and seconded, the following resolutions were adopted:

RESOLVED, that for the purpose of authorizing the Corporation to do business in any state, territory, or dependency of the United States or any foreign country in which it is necessary or expedient for this Corporation to transact business, the Officers are hereby authorized to appoint and substitute all necessary agents or attorneys for service of process, to designate and change the location of all necessary statutory offices, and to make and file all necessary certificates, reports, powers of attorney, and other instruments as may be required by the laws of such state, territory, dependency, or country to authorize the Corporation to transact business therein.

FURTHER RESOLVED, that the Treasurer is authorized to qualify Corporation as a foreign corporation in another state as he/she deems necessary to maintain operations.

The directors discussed the use of names used in connection of the Corporation’s business. Upon motion duly made and seconded, the following resolutions were adopted:

RESOLVED, that the Board of Directors authorizes adoption of the following trade names and the Secretary shall cause to be filed with the State Corporation Commission all names as fictitious names: {INSERT ALL FORMS OF THE COMPANY NAME}.

            The directors next discussed issues related to employment agreements by the officers for the benefit of the Corporation. Upon motion duly made and seconded, the following resolutions were adopted:

RESOLVED, that the officers shall be required to execute such Non-Disclosure, Employee Intellectual Property, Non-Interference, and Non-Disturbance Agreements in favor of the Corporation.

The directors next discussed required financial reporting, tax, accounting and periodic audits for the most recent fiscal period ended and the need for an auditor separate from its accounting consultants to be appointed for the Corporation for the upcoming year.

RESOLVED, that the Treasurer appoint the following accounting consultants of the Corporation for the ensuing year or until replaced: {INSERT YOUR ELECTED FIRM}

FURTHER RESOLVED, that the Treasurer appoint a third party audit firm on behalf of the Corporation for the ensuing year and for a term no greater than one year without resolution from the Board of Directors.

FURTHER RESOLVED, that the officers shall immediately proceed to carry on the business for which the Corporation was formed.

            There being no further business, the meeting was adjourned at {TIME}.

Dated in the {GOVERNING STATE} on the ____ day of _____, 2012, the undersigned hereby certifies that he/she is the duly elected and qualified Secretary and the custodian of the books, records and seal of {COMPANY NAME}, a corporation duly formed pursuant to the laws of the {GOVERNING STATE} and that the foregoing is a true record of resolution(s) duly adopted at a meeting of the Board of Directors and that said meeting was held in accordance with state law and the Bylaws of the above-mentioned Corporation and that said resolution(s) is/are now in full force and effect without modification or rescission.

                                                                                    ________________________                                                                        

                                                                                    {INSERT NAME}, Chairman

                                                                                    ________________________                                                                        

                                                                                    {INSERT NAME}, Secretary

The Board of Directors hereby issues the following stock warrants (the “Warrants”) whereas said Warrants shall expire on ___________, 2012 and whereas if said Warrants are not executed by aforementioned date, shares shall be forfeited to the Corporation:

________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share.

Warrants shall be distributed subject to the terms of the Stockholder Agreement.

2.      The Board of Directors hereby issues the following stock options to its Officers

________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share. ________________, ________ shares of Class A common stock of the Corporation for $___ per share.

3.      pool to be used

 Warning:  This information is not intended to constitute legal advice and should not be relied upon in lieu of consultation with appropriate legal advisors in your own jurisdiction.  It may not be current as the laws in the area of informed consent change frequently.

The Rise of Mobile Money is Driven By the Poor

I once had a business mentor tell me, “The poor pay for everything in this world.” Statistically I have to agree with him, but logically I couldn’t justify his comment…or maybe I just didn’t want to believe him.  The World Bank’s data shows that the low income population is amongst the highest percentage of mobile financial services users.  Kenya leads the world in mobile banking.  It looks like the underbanked are quietly taking matters into their own hands as the privileged (“overbanked”) are left covering the cost.  Maybe my mentor was right…but the poor won’t be paying the bank fees anymore.

http://thenextweb.com/mobile/2012/09/28/mobile-money-infographic/

The solution is here!LOL 10 million U.S. households don’t have bank accounts

Two terms sweeping into our vocabulary: unbanked and underbanked.  These are the households breaking tradition from using banks to alternative money options like prepaid cards, payday loans, check cashing services and cash.  The analysts rattle off the stats but the bottom line is that 28% unbanked and underbanked is THIS COUNTRY!!  And I can’t believe we have turned such a blind eye to our struggling fellow Americans.  The federal government has called us to take action, not just awe over the stats.  And the perfect solution to this problem is the social payment network PaidThx.

http://money.cnn.com/2012/09/12/pf/fdic-bank-accounts/index.html?iid=HP_River

What a “cute” idea.LOL Digital Tip Jar

The DipJar Digital Tip Jar isn’t a move forward for the credit card industry.  It is simply a lateral move that is only serving the purpose to extend the credit card market.  There is a change on the horizon and people are going to have to except that the only plastic your wallet is going to hold is your driver’s license.   The digital tip jar is a “cute” idea that retailers will continue to humour us all with as it sits there on the counter next to the register.  But how far will get us?  No place.  Sure, people may use it once or twice when it is shiny and new but like most toys, the fun quickly disappears.  The lack of use for the credit card tip jar is further evidence that we are moving into a cashless era where mobile payment services through such companies as PaidThx reign supreme.

http://gizmodo.com/5940404/digital-tip-jar-lets-you-leave-a-dollar-with-your-credit-card