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J.Hazelbaker
J.Hazelbaker, Attorney
Category: Business Law
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Please review my LLC Members Operating Agreement and tell

Customer Question

Please review my LLC Member's Operating Agreement and tell me where it may need improvement. Thank you, Jim
Submitted: 5 years ago.
Category: Business Law
Expert:  J.Hazelbaker replied 5 years ago.
So far, so good. Please post the next segment.

The information is provided for discussion and entertainment purposes only. I believe in helping people and answering their questions and providing information and solutions. To encourage and facilitate this practice, it is understood and agreed by the recipient that by opening, reading, accepting, and viewing this information, no attorney-client relationship has been discussed, agreed to or otherwise established. In legal matters, time is of the essence. As such, you should contact an experienced lawyer right away to protect your legal rights!


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Customer: replied 5 years ago.

GLOBAL FITNESS ASSOCIATION, LLC

OPERATING AGREEMENT

This Operating Agreement (the "Agreement") made and entered into this ______ day of _________________________, 2009 (the "Execution Date"),

BETWEEN:

Gary Hood of 849 Freels Peak, Incline Village, NV 89450

Gary Gresham of XXXXX Pittsburg, CA 94565

XXXXX XXXXX of XXXXX Rocklin, CA 95677

(Individually the "Member" and collectively the "Members").

BACKGROUND:

  • A. The Members wish to associate themselves as members of a Limited Liability Company.

 

  • B. The terms and conditions of this Agreement will govern the Members within the Limited Liability Company.

IN CONSIDERATION OF and as a condition of the Members entering into this Agreement and other valuable consideration, the receipt and sufficiency of which is acknowledged herewith, the parties to this Agreement agree as follows:

FORMATION

  1. By this Agreement the Members form a Limited Liability Company in accordance with the laws of the State of Nevada. The rights and obligations of the Members will be as stated in Chapter 86 of the Nevada Revised Statutes (the "Act") except as otherwise provided here.
  1. The name of the Company will be Global Fitness Association, LLC (hereinafter known as GFA)

PURPOSE

  • 3. A worldwide internet reciprocal membership association for owners and managers of health clubs, fitness centers, gyms, personal trainers and other interested parties.

TERMS

  1. GFA will continue until terminated as provided in this Agreement or may dissolve under conditions provided in the Act.

PLACE OF BUSINESS

  1. The Principal Office of GFA will be located at 849 Freels Peak, Incline Village, NV 89450 or such other place as the Members may from time to time designate.

CAPITAL CONTRIBUTIONS

  1. The following is a list of all Members and their Initial Capital Contributions to GFA. Each of the Members agree to make their Capital Contributions to GFA in full and on time, according to the following terms:

Member

Contribution Description

Value of
Contribution

Delivery
Date

Gary Hood

$1,000.00 cash and existing FitForms.com business.

$2,000.00

May 1, 2009

Gary Gresham

$1,000.00 cash

$1,000.00

May 1, 2009

XXXXX XXXXX

$1,000.00 cash

$1,000.00

May 1, 2009

DISTRIBUTION OF PROFITS/LOSSES

  1. Subject to the other provisions of this Agreement, the Net Profits or Losses of GFA, for both accounting and tax purposes, will be distributed to the Members in the following manner:

Member

Profit/Loss
Percentage

Gary Hood

50.00%

Gary Gresham

25.00%

XXXXX XXXXX

25.00%

  1. Distributions will be made at the end of each month following any month there are accumulated profits. (Member loans to GFA will be repaid prior to distribution of profits)
  2. Tax Allocations will be made in the same fixed proportions as the allocation of Net Profits or Losses described above.
  3. No Member will have priority over any other Member for the distribution of Net Profits or Losses.

VOTING

  1. Each Member will have a single equal vote on any matter.

NATURE OF INTEREST

  1. A Member's interest in GFA will be considered personal property, and will at no time be considered real property.
  2. A Member's ownership interest in GFA will be represented by a certificate issued by GFA.

WITHDRAWAL OF CONTRIBUTION

  1. No Member will withdraw any portion of their Capital Contribution without the unanimous consent of the other Members.

CAPITAL ACCOUNTS

  • 15. An individual capital account will be maintained for each Member and their initial Capital Contribution will be credited to this account. Any Additional Contributions made by any Member will be credited to that Member's individual Capital Account.

INTEREST ON CAPITAL CONTRIBUTIONS

  • 16. No borrowing charge or loan interest will be due or payable to any Member on their agreed Capital Contribution inclusive of any agreed Additional Contributions.

DRAWING ACCOUNTS

  • 17. An individual drawing account will be maintained for each Member. Each Member will be entitled to draw against their share of the profits in such amounts and at such time as will be agreed by the Members. Losses will also be credited to the individual drawing accounts and each Member will be required to maintain a positive balance in their Drawing Account at all times. Failure to maintain a positive balance may be deemed an Involuntary Withdrawal of the offending Member and may be treated accordingly by the remaining Members.

COMPENSATION OF MEMBERS FOR SERVICES RENDERED

  • 18. Members will not be compensated by GFA for services rendered to or on behalf of GFA, except reimbursement for expenses directly related to the operation of GFA.

MANAGEMENT

  • 19. Management of GFA is vested in all three Members.

AUTHORITY TO BIND GFA

  • 20. Only the three members, named herein, have authority to bind GFA in any contract.

DUTY OF LOYALTY

  • 21. No Member will engage in any business, venture or transaction, whether directly or indirectly, that might be competitive with the business of the GFA. This act would be in direct conflict of interest to GFA. Any potential conflicts of interest will be deemed an Involuntary Withdrawal of the offending Member and may be treated accordingly by the remaining Members. A withdrawing Member will not carry on a similar business to the businesses of GFA for a period of at least five (5) years after the date of withdrawal.

DUTY TO DEVOTE TIME

  • 22. Each Member will devote such time and attention to the business of GFA as the majority of the Members will from time to time reasonably determine is needed for the conducting of the GFA's business.

MEMBER MEETINGS

  • 23. In person Member meetings will be held initially in Vacaville, CA and at future locations to be decided by a majority of the Members on an as needed basis.
  1. Regular Member telephone conference call meetings will be held every week at 9:30 pm on Tuesday evenings, until changed by a majority vote of the Members. Day to day phone conversations and emails will be held on an as needed basis.
  2. Impending Member meetings will require at least seven (7) days notice to be given to all Members.
  3. A meeting may be called by any Member providing that appropriate notice has been provided to all of the other Members.
  4. There must be at least two (2) of the Members present at any meeting for any decisions to be binding. In order for these decisions to become binding they must have been presented in writing on a prior meeting's agenda.

ADMISSION OF NEW MEMBERS

  • 28. No new Members may be admitted into GFA without a prior unanimous approval of all current Members.

DISASSOCIATION OF A MEMBER

  • 29. Voluntary Withdrawal: No Member may voluntarily withdraw from GFA for a period of six (6) months from the execution date of this Agreement. After the expiration of this period, any Member (Disassociated Member) will have the right to voluntarily withdraw from GFA at the end of any ninety (90) day period. Written notice of intention to withdraw must be served upon the remaining Members at least ninety (90) days prior to the withdrawal. The withdrawal of such Member will have no effect upon the continuance of GFA's business. If the remaining Members elect to purchase the interest of the withdrawing Member, the remaining Members will serve written notice of such election upon the withdrawing Member within thirty (30) days after receipt of the withdrawing Member's notice of intention to withdraw. The remaining Members notice will include the purchase price, method and schedule of payments for the withdrawing Member's interest. The purchase amount of any buyout of a Member's interest will be determined as outlined in the Valuation of Interest section of this Agreement. It remains incumbent on the withdrawing Member to exercise this right in good faith and to minimize any present or future harm done to GFA and/or the remaining Members as a result of the withdrawal.

 

  • 30. Involuntary Withdrawal: Events leading to the involuntary withdrawal of a Member (Disassociated Member) from GFA will include but not be limited to: XXXXX XXXXX a Member; Member mental incapacity; Member disability preventing reasonable participation in GFA; Member incompetence; breach of fiduciary duties by a Member; criminal conviction of a Member; Operation of Law against a Member or a legal judgment against a Member that can reasonably be expected to bring the business or societal reputation of GFA into disrepute. The expulsion of a Member can also occur on application by GFA, where it has been judicially determined that the Member: has engaged in wrongful conduct that adversely and materially affected GFA's business; has willfully or persistently committed a material breach of this Operating Agreement or of a duty owed to GFA; or has engaged in conduct relating to GFA's business that makes it not reasonably practicable to carry on the business with the Member. Ninety (90) days prior to the expulsion a written notice will be served by GFA upon the Member being expulsed, their executor, administrator, trustee, committee or analogous fiduciary of the intention of the proposed expulsion. If the remaining Members elect to purchase the interest of the Member who is involuntarily withdrawing, the election will be included in the ninety (90) day written expulsion notice served by GFA. The notice will also include the purchase price, method and schedule of payments for the withdrawing Member's interest. The purchase amount of any buyout of a Member's interest will be determined as outlined in the Valuation of Interest section of this Agreement. The involuntary withdrawal of a Member will have no effect upon the continuance of GFA's business.
  1. On any purchase and sale made pursuant to this section, a Disassociated Member will only have liability for GFA's obligations that were incurred during their time as a Member. Immediately upon purchase of a withdrawing Member's interest, GFA will prepare, file, serve, and publish all notices required by law to protect the withdrawing Member from liability for future GFA obligations. Where the remaining Members have purchased the interest of a disassociated Member, the purchase amount will be paid in full, but without interest, within 90 days of the date of withdrawal. GFA will retain exclusive rights to use of the trade name and firm name and all related brand and model names of GFA.
  2. In the event the remaining Members are unwilling or unable to purchase the interest of the Disassociated Member due to a voluntary or involuntary withdrawal from GFA or where the withdrawal of a Member results in only one Member remaining then GFA will proceed in a reasonable and timely manner to dissolve GFA, with all debts being paid first, prior to any distribution of the remaining funds. Valuation and distribution will be determined as described in the Valuation of Interest section of this Agreement.
  3. The remaining Members retain the right to seek damages from a disassociated Member where the dissociation resulted from a malicious or criminal act by the disassociated Member or where the disassociated Member had breached their fiduciary duty to GFA or was in breach of this Agreement or had acted in a way that could reasonably be foreseen to bring harm or damage to GFA or to the reputation of GFA.

BUYOUT AGREEMENT

  • 34. In the event a Member wishes to sell any part of their interest in GFA, for any reason, the remaining Members of GFA will have a Right of First Refusal to purchase the interest. The value of the interest in GFA will be determined as outlined in the Valuation of Interest section of this Agreement.

ASSIGNMENT OF INTEREST

  • 35. A Member may not voluntarily assign their financial interest in GFA to any other party, except for the Members listed on page one hereto.

VALUATION OF INTEREST

  • 36. In the absence of a written agreement setting a value, the value of GFA will be based on the fair market value appraisal of all of GFA's assets (less liabilities) determined in accordance with generally accepted accounting procedures. This appraisal will be conducted by an independent accounting firm agreed to by all Members. An appraiser will be appointed within a ninety (90) day period of the date of notification of withdrawal or dissolution. The results of the appraisal will be binding on all Members. A withdrawing Member's interest will be in proportion to their profit and loss share in GFA, less any outstanding liabilities a Member may have to GFA. The intent of this section is to ensure the survival of GFA despite the withdrawal of any individual Member.
  1. No allowance will be made for goodwill, trade name, patents or other intangible assets, except where those assets have been reflected on GFA's books immediately prior to valuation. These valuations will be updated upon closing of GFA's books by GFA's Certified Public Accountant at the end of each calendar year.

DISSOLUTION

  • 38. The Company may be dissolved by a unanimous vote of the Members. GFA will also be dissolved on the occurrence of events specified in the Act.
  1. Upon Dissolution of GFA and liquidation of GFA's property, and after payment of all selling costs and expenses, the liquidator will distribute GFA's assets to the following groups according to the following order of priority:
    1. In satisfaction of liabilities to creditors except GFA's obligations to current Members;
    2. In satisfaction of GFA's obligations to current Members to pay debts;
    3. To the Members in proportion to the remaining funds in their GFA capital accounts.
  2. The claims of each priority group will be satisfied in full before satisfying any claims of a lower priority group. Any excess of GFA's assets after liabilities or any insufficiency in GFA's assets in resolving liabilities under this section will be resolved by the Members in proportion to the profit and loss share of each Member as set out in this Agreement.

RECORDS

41. GFA will maintain an up-to-date and at all times accurate records of the following:

    1. Information regarding the status of the business and the financial condition of GFA.
    2. A copy of GFA's Balance Sheet and Profit and Loss Statements for each year
    3. Name and last known business, residential, or mailing address of each Member, as well as the date that person became a Member.
    4. A copy of this Agreement and any articles or certificate of formation, as well as all amendments, together with any executed copies of any written powers of attorney pursuant to which this Agreement, articles or certificate, and any amendments have been executed.
    5. The cash and property contributed to GFA by each Member, along with a description and value, and any contributions that have been agreed to be made in the future.
  • 42. Each Member has the right to demand, within thirty (30) days of their preparation, a copy of any of the above documents for any purpose reasonably related to their interest as a Member of GFA.

BOOKS OF ACCOUNT

  • 43. Accurate and complete books of account of the transactions of GFA will be kept and at all reasonable times be available and open to inspection and examination by any Member. The Books of Account will be kept on the cash basis method of accounting.

CALENDER YEAR END

  • 44. The accounting year end for GFA will be the 31st day of December.

MONTHLY REPORTS

45. On or before the end of each month following, XXXXX XXXXX, or his designee, will furnish to each Member a report showing a full and complete account of the financial condition of GFA. This report will consist of at least:

    1. A cash basis profit and loss statement.
    2. A balance sheet.
    3. A cash flow detail report.

ANNUAL REPORTS

46. On or before the end of each month following a calendar year end (or as soon as the accounting firm's review is finalized), XXXXX XXXXX, or his designee, will furnish to each Member a report showing a full and complete account of the financial condition of GFA. This report will include all information as will be necessary for the preparation of each Member's income tax returns. This report will consist of at least:

    1. Supporting cash basis profit and loss statement.
    2. A balance sheet.
    3. A cash flow detail report.
    4. The annual reports will be reviewed by an accounting firm approved by a unanimous vote of all Members.

TAX TREATMENT

  • 47. GFA is intended to be treated as a partnership, for the purposes of Federal and State Income Tax.

GOODWILL

  • 48. The goodwill of GFA will be assessed at an amount to be determined by appraisal using generally accepted accounting procedures.

BANKING AND COMPANY FUNDS

  • 49. The funds of GFA will be placed in such investments and banking accounts as will be designated by the Members. All withdrawals from these accounts will be made by the duly authorized Members as agreed by unanimous consent of the Members. GFA's funds will be held in the name of GFA and will not be commingled with those of any other person or entity.

AUDIT

  • 50. Any of the Members will have the right to request an audit of GFA's books. The cost of the audit will be borne by requesting Member. The audit will be performed by an accounting firm acceptable to all the Members.

GOVERNING LAW

  • 51. The Members submit to the jurisdiction of the courts of the State of Nevada for the enforcement of this Agreement or any arbitration award or decision arising from this Agreement.

MEDIATION

  • 52. In the event a dispute arises out of or in connection with this Agreement, the parties will attempt to resolve the dispute through friendly consultation. If the dispute is not resolved within a reasonable period then any or all outstanding issues may be submitted to mediation in accordance with any statutory rules of mediation. If mediation is not successful in resolving the entire dispute or is unavailable, any outstanding issues will be submitted to final and binding arbitration in accordance with the laws of the State of Nevada. The arbitrator's award will be final, and judgment may be entered upon it by any court having jurisdiction within the State of Nevada.

FORCE MAJEURE

  • 53. A Member will be free of liability to GFA where the Member is prevented from executing their obligations under this Agreement in whole or in part due to force majeure, such as earthquake, typhoon, flood, fire, and war or any other unforeseen and uncontrollable event where the Member has communicated the circumstance of said event to any and all other Members and taken any and all appropriate action to mitigate said event.

FORBIDDEN ACTS

  • 54. No Member may partake in any act with the intent of breaking of this Agreement.
  1. No Member may permit, intentionally or unintentionally, the assignment of express, implied or apparent authority to a third party that is not a Member of GFA.
  2. No Member may do any act that would make it impossible to carry on the ordinary business of GFA.
  3. No Member will have the right or authority to bind or obligate GFA to any extent with regard to any matter outside the intended purpose of GFA.
  4. No Member may confess a judgment against GFA.
  5. Any violation of the above forbidden acts will be deemed an Involuntary Withdrawal of the offending Member and may be treated accordingly by the remaining Members.

INDEMNIFICATION

  • 60. All Members will be indemnified and held harmless by GFA from and against any and all claims of any nature, whatsoever, arising out of a Member's participation in GFA's affairs. A Member will not be entitled to indemnification under this section for liability arising out of gross negligence or willful misconduct of the Member or the breach by the Member of any provisions of this Agreement.

LIABILITY

  • 61. A Member or any employee will not be liable to GFA or to any other Member for any mistake or error in judgment or for any act or omission believed in good faith to be within the scope of authority conferred or implied by this Agreement or GFA. The Member or employee will be liable only for any and all acts and omissions involving intentional wrongdoing.

LIABILITY INSURANCE

  • 62. GFA may acquire insurance on behalf of GFA and any Member, employee, agent or other person engaged in the business interest of GFA against any liability asserted against them or incurred by them while acting in good faith on behalf of GFA.

LIFE INSURANCE

  • 63. GFA will have the right to acquire life insurance on the lives of any one or all of the Members, whenever it is deemed necessary by GFA. Each Member will cooperate fully with GFA in obtaining any such policies of life insurance.

ACTIONS REQUIRING UNANIMOUS CONSENT

  • 64. The following actions will require the unanimous consent of all Members:
    1. Incurring GFA liabilities over $250.00.
    2. Incurring a single transaction expense over $250.00.
    3. The sale of any GFA asset with a fair market value over $100.00.
    4. Hiring an employee with an annual compensation over $1,000.00.
    5. Firing any employee.
    6. Assignment of ownership rights of GFA property.
    7. Endangering the ownership or possession of GFA property.
    8. Assignment of check signing authority.
    9. Releasing any GFA claim except for payment in full.

AMENDMENT OF OPERATING AGREEMENT

  • 65. This agreement can only be amended with the unanimous written consent of all Members.

TITLE TO COMPANY PROPERTY

  • 66. Title to all GFA property will remain in the name of GFA. No Member or group of Members will have any ownership interest in GFA property in whole or in part.

MISCELLANEOUS

  • 67. Time is of the essence in this Agreement.
  1. This Agreement may be executed in counterparts.
  2. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in a neutral gender include the masculine gender and the feminine gender and vice versa.
  3. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
  4. This Agreement contains the entire agreement between the parties. All negotiations and understandings have been included in this Agreement. Statements or representations that may have been made by any party to this Agreement in the negotiation stages of this Agreement may in some way are inconsistent with this final written Agreement. All such statements have no force or effect in respect to this Agreement. Only the written terms of this Agreement will bind the parties.
  5. This Agreement and the terms and conditions contained in this Agreement apply to and are binding upon the Member's successors, assigns, executors, administrators, beneficiaries, and representatives.
  6. Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid and a return receipt requested, to the parties at the addresses contained in this Agreement or as the parties may later designate in writing.
  7. All of the rights, remedies and benefits provided by this Agreement will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.

DEFINITIONS

  • 75. For the purpose of this Agreement, the following terms are defined as follows:
    1. "Additional Contribution" means Capital Contributions, other than Initial Contributions, made by Members to GFA.
    2. "Capital Contribution" means the total amount of cash, property, or services contributed to GFA by any one Member.
    3. "Initial Contribution" means Capital Contributions made by any Member to acquire an interest in GFA.
    4. "Net Profits or Losses" means the net profits or losses of GFA as determined by generally accepted accounting principles.
    5. "Operation of Law" means rights or duties that are cast upon a party by the law, without any act or agreement on the part of the individual including, but not limited to, an assignment for the benefit of creditors, a divorce, or a bankruptcy.
    6. "Principal Office" means the office whether inside or outside the State of Nevada where the executive or management of GFA maintains their primary office.

IN WITNESS WHEREOF the parties have duly affixed their signatures under hand and seal on this _______ day of _____________________, 2009.

 

__________________________________________________
Gary Hood (Member)

__________________________________________________
Gary Gresham (Member)

__________________________________________________
XXXXX XXXXX (Member)

 

__________________________________________________
(Witness)

__________________________________________________
(Witness)

__________________________________________________
(Witness)

Expert:  J.Hazelbaker replied 5 years ago.
Excellent. I only have 5 comments:

1) you are essentially valuing the contribution of your existing FitForms.com business as $0;

2) member meeting subsections by letter, not number;

3) I might make the reasonable cost of the notices to eliminate disassociated member liability deductible from any interest payment owed to that member;

4) might include personal bankruptcy as an event leading to involuntary withdrawal;

5) Might change title of Section 52 Medition, to "Dispute Resolution".

J.Hazelbaker, Attorney
Category: Business Law
Satisfied Customers: 4385
Experience: Experienced and trained in the area of business law.
J.Hazelbaker and 6 other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
Thank you J. I appreciate your work. I am writing you from Sacramento, CA and my wife is visiting Columbus, OH this weekend for her 40th reunion for graduation from Nursing School. Have a good day, Jim
Expert:  J.Hazelbaker replied 5 years ago.
Thank you for the Accepts. I'm glad to say the rain held off for the most part for your wife this weekend. I hope she enjoyed our "big" city. And I hope your new venture is a great success.

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