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Medical Marijuana Business Templates in a Box
Chapter One:
SIX THINGS TO CONSIDER BEFORE YOU LAUNCH YOUR MEDICAL MARIJUANA BUSINESS
Chapter Two:
WHY USE A CERTIFICATE OF LIMITED PARTNERSHIP
Chapter Three:
EXECUTIVE SUMMARY TEMPLATE
Chapter Four:
COMMISSION AGREEMENT (FOR INDEPENDENT SALES REPRESENTATIVE) TEMPLATE
Chapter Five:
CONFIDENTIALITY AGREEMENT
Chapter Six:
LETTER OF INTENT TO PURCHASE A BUSINESS TEMPLATE (TO BE USED IN CONJUNCTION WITH A CONFIDENTIALY AGREEMENT)
Chapter Seven:
OPERATING AGREEMENT TEMPLATE
Chapter Eight: LETTER OF INTENT TO PURCHASE A BUSINESS TEMPLATE
Chapter Nine: AGEEMENT FOR A MEMBER-MANAGED LLC TEMPLATE
CHAPTER ONE
Six Things to Consider Before You Lauch Your Medical Marijuana Business
Ready to take the plunge? Good for you but beware of
what you are getting into. Before you jump in take a step
back and review this checklist to ensure that you have
done the proper research and planning for your new
business or you might be headed to the small business
graveyard.
1. Why do you want to start the business?
If you are looking for an easy way to make money or for a way to keep from going back to work, a small business is not the way. Small businesses require an inordinate amount of time and effort, especially up front. Passion is not enough. You should have a realistic understanding of how your small business concept will operate.
2. What is going on in the ganja industry today in the area you want to pursue?
It is important to do your homework before launching any business, learning about opportunities and threats and your market niche. Read everything you can about the industry. Understand the pitfalls plan for them.
3. What is your business plan?
You do not need to write a tome. A business plan is met to establish a plan of action to reach your target market. Putting your ideas in writing is critically important.
4. How will you get the money you need?
New businesses cost money. Will you seek funding from investors or friends and family? How much equity are you willing to give up in exchange for start-up capital?
5. How will you market your services or products?
Marketing is what generates sales. Without marketing, your business will quickly fail. You may manage your own social media marketing campaign at first, then branch into press releases and media buys as your budget grows.
6. What are the Legal and Tax Implications?
Find out the steps for filing your articles of incorporation or partnership documents and note the deadlines for quarterly taxes on your calendar. Missing a step here could cost you legal fees, so be extremely organized.
CHAPTER TWO
Why Use a Certificate of Limited Partnership?
A limited partnership differs from a general partnership in that the partners do not share equal responsibility or liability for the business. This may be the ideal business model if you have one or more partners who only wish to provide capital but not assume the responsibility of running a business.
Limited partners usually provide money and nothing else. These persons will not have any say in how the business is run and they will not have be responsibility should something go wrong.
In the case of more than one general partner, they will share the responsibilities. In a certificate of limited partnership, the general partners are named, while the limited partners are often kept anonymous. This can be a very good business model if some people want to merely inject cash, while others are more interested in providing the skills necessary to make the business grow.
A certificate of limited partnership should include the following:
The name of the partnership must include the words “limited partnership”
Cannot use the name of a limited partner
Address of the company office
Name, address and written permission for the agent for service of process
Name and business address of each general partner
A certificate of limited partnership will open doors for business bank accounts and other related legal activities.
CHAPTER THREE
Executive Summary Template
NAME OF COMPANY
STREET ADDRESS CITY, STATE ZIP CODEPhone: PHONE NUMBER
Facsimile: FAX NUMBEREmail: EMAIL ADDRESSWeb Site: WEBSITE ADDRESS
Management:
Industry: INDUSTRY OF COMPANY
Number of Employees: NUMBER OF EMPLOYEES
FINANCING SOUGHT DESCRIBE TYPE OF FINANCING YOU SEEK AND WHY YOU NEED IT
Use of Funds: DESCRIBE HOW YOUR COMPANY WILL USE THE MONEY
Mission: MISSION STATEMENT OF COMPANY
Business Description: DESCRIBE YOUR COMPANY AND ITS BUSINESS
Company Background: DESCRIBE YOUR COMPANY'S BACKGROUND
Products/Services: SUMMARIZE PRODUCTS OR SERVICES YOUR COMPANY OFFERS
Markets: IDENTIFY MARKETS YOUR COMPANY IS IN OR HOPES TO BE IN, AND SET FORTH A REVENUE MODEL
Distribution Channels: IDENTIFY DISTRIBUTION CHANNELS
Competition: IDENTIFY YOUR COMPANY'S COMPETITORS
Financial Projections:Year 1 Year 2 Year 3 Year 4
Revenue
EXPECTED REVENUE FOR FIRST YEAR
EXPECTED REVENUE FOR SECOND YEAR
EXPECTED REVENUE FOR THE THIRD YEAR
EXPECTED REVENUE FOR FOURTH YEAR
OF OPERATION
OF OPERATION
OF OPERATION
Operating Income
EXPECTED OPERATING INCOME FOR FIRST YEAR OF OPERATIONS
EXPECTED OPERATING INCOME FOR SECOND YEAR OF OPERATION
EXPECTED OPERATING INCOME FOR THIRD YEAR OF OPERATIONS
EXPECTED OPERATING INCOME FOR THE FOURTH YEAR OF OPERATIONS
CHAPTER FOUR
COMMISSION AGREEMENT (WITH INDEPENDENT SALES REPRESENTATIVE) TEMPLATE
This Commission Agreement (herein referred to as the "Agreement") is made and entered into this DATE (herein referred to as the “Effective Date”), by and between NAME OF AGENT (herein referred to as the "Agent") whose offices are located at STREET ADDRESS, CITY, STATE, ZIP and NAME OF COMPANY (herein referred to as the "Client") whose offices are located at STREET ADDESS, CITY, ZIP, hereinafter collectively referred to as the “Parties”.
WHEREAS the Client desires to retain the Agent to sell and market the goods listed on Schedule “A” attached hereto (the “Goods”).
AND WHEREAS the Agent wishes to sell and market the Goods on behalf of the Client in return for a commission fee (the “Commission”).
NOW, THEREFORE in consideration of the foregoing and of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties hereto agree as follows:
I. ENGAGEMENT
I.01 The Client and the Agent hereby agree that the Client shall retain the Agent to sell and market the Goods on behalf of the Client and the Agent shall have the exclusive right to sell and market the Goods on behalf of the Client.
I.02 The Agent hereby agrees that he/she shall sell and market the Goods in the following territories (the “Territories”) and the Agent hereby further agrees that he/she shall not attempt at any time to sell or market the Goods in any territories outside of the Territories listed hereunder:
I.03 If inquiries regarding the Goods are received by the Agent that originate from outside of the Territories, such inquiries shall be forwarded by the Agent to the Client. The Client, in the Client’s sole discretion, can refer the inquiry back to the Agent to attempt to complete the sale. Any resulting sale shall be under the terms of this Agreement. However, if the Client decides to refer the inquiry back to the Agent as allowed herein, such action shall not be deemed to expand the Territories as defined hereunder.
I.04 The Agent shall sell and market the Goods to the best of his/her abilities and shall provide to the Client, upon written request,
details of the Agent’s efforts in the sale and marketing of the Goods.
I.05 The Agent shall at all times, identify himself/herself as a duly authorized andappointed Agent of the Client for the purposes of selling or marketing the Goods.
I.06 The Agent shall sell and market the Goods at the prices set by the Client, and at no time shall the Agent sell the Goods for any other price(s), unless specified by the Client to the Agent in writing.
II. TERM
II.01 The Client and the Agent hereby agree that the term of this Agreement (the “Term”) shall commence on the Effective Date, and shall end on DATE.
III. COMMISSION
III.01 The Client shall pay to the Agent a commission (“Commission”) for all Goods sold by the Agent at the rate of ___ Percent of the selling price of the
Goods as invoiced to the buyer, exclusive of any and all applicable taxes and shipping and handling fees.
III.02 The Client hereby agrees that it shall forward all Commissions earned to the Agent on a monthly basis, on or before the 15th day of each and every month, by way of personal check, certified check, money order, wire transfer, direct deposit, or by such other means as the Client and the Agent in
writing may agree.
III.03 Commissions shall be deemed to be earned upon receipt of full payment by the Client for the Goods ordered.
III.04 The Client and the Agent hereby agree that the Agent shall not be entitled to any compensation for
any services or expenses incurred in connection with this Agreement, other than as set out herein.
IV. MATERIALS
IV.01 For the duration of this Agreement, the Client at its sole cost and in its sole discretion, shall supply to the Agent, marketing materials relating to the Goods to be sold and marketed to aid the Agent.
However, it is agreed by the Parties that it is to the benefit of both Parties that marketing materials be supplied to the Agent and therefore Client shall
make reasonable efforts to supply marketing materials to the Agent and will accommodate reasonable requests for marketing materials made by the Agent.
V. INTELLECTUAL PROPERTY RIGHTS
The Agent hereby acknowledges and agrees that he/she will not acquire any intellectual property rights (including, but not limited to trademarks and service marks) in or to any of the Goods and that Client owns all intellectual property rights to the Goods.
VI. NON-COMPETITION
VI.01 The Agent hereby agrees that he/she shall not at any time for the duration of this Agreement, sell or market any other goods for any other third party that compete with, that are similar to or may be confused with the Goods sold by the Client.
VI.02 The Client and the Agent hereby agree that the provisions of Article 6.01 shall survive for a
period of TWO YEARS upon the termination of this Agreement.
VII. TERMINATION
VII.01 Either Party has the right to terminate this Agreement if the other Party breaches or is in default of any of its obligations contained herein, and such default is incapable of cure or which, being capable of cure has not been cured by the breaching Party within THIRTY (30) days
after receipt of notice of such default.
VII.02 In the event that a Party becomes bankrupt or insolvent or is subject to any proceedings under any bankruptcy, receivership or insolvency laws,
whether domestic for foreign, the other Party may terminate this Agreement by written notice which shall be effective
immediately without further
compensation to either Party.
VII.03 In the event that either Party is unable to perform any of its/his/her obligations hereunder, or to enjoy any of its/his/her benefits due to a natural disaster or communications failure which is not the fault of the affected Party, the Party who has been so affected shall immediately give notice to the other Party and shall do and commence all reasonable actions to resume its/his/her performance under this Agreement.
VII.04 Should this Agreement terminate for any reason
whatsoever, the Agent hereby agree to return the Client immediately, any documentation and Goods in its/his/her possession that is the property of the Client.
VII.05 Either party may terminate this Agreement upon providing 30 days’ written notice the other party.
VIII. RELATIONSHIP
VIII.01 The Agent hereby acknowledges and agrees that he/she is an independent
contractor with respect to the services to be performed and at no time or times shall be considered an employee of the Client.
IX. CONFIDENTIALITY
IX.01 The Agent hereby agrees that he/she will not knowingly provide or distribute any
confidential information of the Client to any third party.
IX.02 During the Term of this Agreement and thereafter, the Agent and/or his/her representatives, contractors and/or employees shall maintain in confidence and use only for purposes of this Agreement any
information or documentation which the Client marks "Confidential". To the extent it is
reasonably necessary or appropriate to fulfill his/her obligations or exercise his/her rights under this Agreement, the Agent may disclose confidential information which he/she is otherwise obligated under this Article not to disclose to his/her affiliates and to prospective buyers, on a need-to-know basis, on condition that such entities or persons agree in writing to keep the confidential information confidential for the same time periods and to the same extent
as the Agent is required to keep the confidential information confidential as stated herein.
IX.03 The Agent hereby acknowledges that a breach of this Article IX and any of its subsections would cause the Client to suffer a loss which could not be adequately compensated for by damages and consents that in addition to any other remedy or relief available to it, the Client may enforce the performance of this Article by injunction or specific performance upon application to a court of competent jurisdiction without proof of actual damages to the Client and notwithstanding that damages
may be readily quantifiable and the Agent covenants that it will not plead sufficiency of damages as a defense to any proceeding for such injunctive relief brought by the Client.
X. SUCCESSORS AND ASSIGNS
X.01This Agreement shall inure to the benefit of the parties hereto and shall be binding upon the parties hereto and their respective heirs, executors, representatives, successors, and assigns. Except as otherwise set forth herein, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective heirs, executors, representatives, successors, and
assigns any rights, remedies, obligations, or other liabilities under or by reason of this Agreement.
XI. GENERAL PROVISIONS
XI.01 This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by the laws of the State of __________.
XI.02 This Agreement shall constitute the entire agreement between the parties.
XI.03 Any modification to this Agreement must be in writing, signed by the parties or it shall have no effect and be void.
XI.04 The headings utilized in this Agreement are for convenience only and are not to be construed in any way as additions to or limitations of the covenants and agreements contained in this Agreement.
XI.05 This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument and shall be effective as of the formal date hereof. This Agreement, including counterparts of this Agreement, in its final signed form may be executed and transmitted via e-mail and/or facsimile
transmission and deemed an original.
XI.06 If any provision of this Agreement is found by a court of competent jurisdiction to be unenforceable, such provision shall not affect the other provisions, but such unenforceable provision shall be deemed modified to the extent necessary to render it enforceable, preserving to the fullest extent permissible the intent by the parties set forth therein.
XI.07 Neither party may assign, transfer or delegate any of its rights or obligations hereunder without the prior written consent of the other party.
XI.08 Any notice or other communication required or permitted to be given under this Agreement shall be in writing and shall be sent via personal delivery, overnight delivery, U.S. Mail, facsimile transmission or electronic mail (“e-mail”) to the intended party at the addresses identified below. Any notice so given shall be deemed conclusively to have been given when received by the intended party as long as written proof of receipt can be evidenced. In the case of notice delivered by facsimile transmission, receipt shall be deemed to be evidenced by confirmation of a successful transmission. Any notice received after 5:00 p.m. shall be deemed to have been received
at 9:00 a.m. on the first business day following delivery. Any party may change its address, facsimile transmission number by notice to the other of them in the manner set out above.
Notices to the Client shall be sent to:
PERSONAL AND CONFIDENTIAL
NAME OF COMPANY
ADDRESS
Email: EMAIL OF COMPANY
Fax: COMPANY'S FAX
With a copy to:
NAME OF COMPANY'S ATTORNEY
Email: ATTORNEY'S EMAIL ADDRESS
Fax: ATTORNEY’S FAX NUMBER
Notices to the Agent shall be sent to:
PERSONAL AND CONFIDENTIAL
NAME OF AGENT
STREET ADDRESS
CITY, STATE, ZIP
Email: AGENT'S EMAIL ADDRESS
Fax: AGENT'S FAX NUMBER
with a copy to:
NAME OF ATTORNEY FOR THE AGENT
Email: AGENT'S ATTORNEY'S EMAIL ADDRESS
Fax: FAX NUMBER OF AGENT'S ATTORNEY
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written,
DATED: DATE
NAME OF COMPANY
Name: YOUR NAMETitle: YOUR TITLE
NAME OF AGENT Name: NAME OF AGENTTitle: TITLE OF AGENT CHAPTER FIVE
CONFIDENTIALITY AGREEMENT TEMPLATE
(DISCLOSURES BY _________________________
[COMPANY NAME
This Agreement is made and entered into, as of _________________, ______ (“hereinafter Effective Date”), by and between ____________________ [Company Name], having a principal place of business at ______________________________ [ADDRESS] and [RECIPIENT NAME] (“Recipient”)., a(n) individual,
partnership, limited liability partnership, corporation, limited liability company (check the appropriate box) of the State of _______________, having a principal place of business at ______________________________ [RECIPIENT ADDRESS].
`1. Definition. “Confidential Information” means (a) any technical and non-technical information related to the Company’s business and current, future and proposed products and services of Company, including for example and without limitation, information concerning research, development, design details, and specifications, financial information, procurement
requirements, engineering and manufacturing information, customer lists, business forecasts, sales information, marketing plans, and business plans and (b) any information that may be made known to Recipient and which Company has received from others that Company is obligated to treat as confidential or proprietary, whether or not marked as confidential.
2. Nondisclosure and Nonuse Obligations. Recipient will not use, disseminate, or in any way disclose any Confidential Information to any person, firm or business, except to the extent necessary for the purpose described below the signatures to this Agreement
(hereinafter the “Purpose”). Furthermore, Recipient may not disclose the existence of any negotiations, discussions, or consultations in progress between the parties to any form of public media without the prior written approval of Company. Recipient shall treat all Confidential Information with the same degree of care as Recipient accords to Recipient’s own confidential information, but not less reasonable care. Recipient shall disclose Confidential Information only to those of its employees who have a need to know such information to assist Recipient with respect to the Purpose. Recipient certifies that each such employee will have
agreed, either as a condition of employment or in order to obtain the Confidential Information, to be bound by terms and conditions substantially similar to those terms and conditions applicable to Recipient under this Agreement. Recipient shall immediately give notice to Company of any unauthorized use or disclosure of the Confidential Information. Recipient shall assist Company in remedying any such unauthorized use or disclosure of such Confidential Information.
3. Exclusions from Nondisclosure and Nonuse Obligations. Recipient’s obligations under Section 2
(“Nondisclosure and Nonuse Obligations”) shall not apply to any Confidential Information that Recipient can document (a) was in the public domain at or subsequent to the time such Confidential Information was communicated to Recipient by Company through no fault of Recipient; (b) was rightfully in Recipient’s possession free of any obligation of confidence at or subsequent to the time such Confidential Information was communicated to Recipient by Company; or (c) was developed by employees, contractors or agents of Recipient independently of and without reference to any Confidential Information. A disclosure of any Confidential
Information (a) in response to a valid order by a court or other governmental body or (b) as otherwise required by law shall not be considered to be a breach of this Agreement or a waiver of confidentiality for other purposes; provided, however, that Recipient shall provide prompt prior written notice thereof to Company to enable Company to seek a protective order or otherwise prevent such disclosure.
4. Ownership and Return of Confidential Information and Other Materials. All Confidential Information, and any Derivatives (defined below) thereof, whether created by Company or Recipient, shall be the property
of Company and no license or other rights to Confidential Information or Derivatives is granted or implied hereby. For purposes of this Agreement, “Derivatives” means (a) for copyrightable or copyrighted material, any translation, abridgment, revision or other form in which an existing work may be recast, transformed or adapted; (b) for patentable or patented material, any improvement thereon; and (c) for material protected by trade secret, any new material derived from such existing trade secret material, including new material that may be protected under copyright, patent, and/or trade secret laws. Recipient hereby does and will assign to Company all
of Recipient’s rights, title in interest and interest in and to the Derivatives. All materials (including, without limitation, documents, drawings, papers, diskettes, tapes, models, apparatus, sketches, designs, and lists) that Company furnishes to Recipient (whether or not they contain or disclose Confidential Information) are the property of Company. Within five (5) [INSTRUCTION: INSERT ANY NUMBER] days after any request by Company, Recipient shall destroy or deliver to Company, at Company’s option, (a) all such Company-furnished materials and (b) all materials in Recipient’s possession or control (even if not Company-
furnished) that contain or disclose any Confidential Information. Recipient will provide Company a written certification of Recipient’s compliance with Recipient’s obligations under this Section.
5. No Warranty. All Confidential Information is provided “AS IS” and without any warranty, express implied, or otherwise, regarding such Confidential Information’s accuracy or performance.
6. No Export. Recipient will obtain any licenses or approvals the U.S. government or any agency thereof requires prior to exporting, directly or indirectly, any technical data acquired from Company
pursuant to this Agreement or any product utilizing any such data.
7. Term. This Agreement shall govern all communications from Company to Recipient that are made from the Effective Date to the date on which either party receives from the other party written notice that subsequent communications shall not be so governed; provided, however, that Recipient’s obligations under Section 2 (Nondisclosure and Nonuse Obligations) shall continue in perpetuity with respect to Confidential Information of Company that Recipient has previously received unless such obligations no longer
apply pursuant to Section 3 (Exclusions from Nondisclosure and Nonuse Obligations).
8. No Assignment. Recipient shall not assign or transfer any rights or obligations under this Agreement without the prior written consent of Company.
9. Injunctive Relief . A breach of this Agreement will cause irreparable and continuing damage to Company for which money damages are insufficient, and Company shall be entitled to injunctive relief and/or a decree for specific performance, and such other relief as may be proper (including money damages if appropriate).
10. Notices . Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows, with notice deemed given as indicated: (a) by personal delivery, when actually delivered; (b) by overnight courier, upon written verification of receipt; (c) by facsimile transmission, upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth above or to such other address as either party may provide in writing.
11. Amendment, Waiver; Modification. If Company
waives any term, provision or Recipient’s breach of this Agreement, such waiver shall not be effective unless it is in writing and signed by Company. No waiver shall constitute a waiver of any other or subsequent breach by Recipient. This Agreement may be modified or amended only if authorized representatives of both parties consent in writing.
12. Severability . If a court of law holds any provision of this Agreement to be illegal, invalid or unenforceable, (a) that provision shall be deemed amended to achieve an economic effect that is as near as possible to that provided by the original provision and (b) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected.
13. Governing Law; Forum; Legal Fees. This Agreement shall be governed in all respects by the laws of the State of _______________, without regard to any conflict of laws, as such laws are applied to Agreements entered into and to be performed entirely within
_______________ [SAME STATE] between _______________ [SAME STATE] residents. Each of the parties voluntarily consents to the exclusive personal jurisdiction of the federal and state courts located in the State of _______________ [SAME STATE], as applicable, for any matter arising out of or relating to this Agreement, except That in actions seeking to enforce any order or any judgment of such federal or state courts located in _______________ [SAME STATE], such personal jurisdiction shall be nonexclusive. Additionally, notwithstanding anything in the foregoing to the contrary, a claim for equitable relief arising out of
or related to this Agreement may be brought in any court of competent jurisdiction. If a proceeding is commenced to resolve any dispute that arises between the parties with respect to the matters covered by this Agreement, the prevailing party in such proceeding shall be entitled to receive reasonable attorneys’ fees, expert witness fees, and out-of-pocket costs incurred in connection with such proceeding, in addition to any other relief to which such prevailing party may be entitled.
14. Entire Agreement. This Agreement constitutes the entire integrated agreement with respect to the
Confidential Information disclosed hereunder and supersedes all prior or contemporaneous agreements concerning such Confidential Information, written or oral.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.
“Company”
[COMPANY NAME]
By:
Name:
Title:
“Recipient”
______________ [RECIPIENT NAME]
By:
Name:
Title:
CHAPTER SIX
PROS & CONS OF A NON-DISCLOSURE AGREEMENT
Cons of a Non-Disclosure Agreement
Asking investors or business partners to sign a non-disclosure agreement may cause them to walk away. They may feel that asking them to sign a confidentiality agreement is the equivalent of asking a lover to sign a prenuptial: it may insinuate distrust.
It is difficult to enforce a non-disclosure agreement.
Pros of a Non-Disclosure Agreement
Any investor should be prepared to sign the agreement in order to move forward.
The key is presenting it at the right moment.
CHAPTER SEVEN
Mutual Non-Disclosure Agreement Template
This Mutual Nondisclosure Agreement (the “Agreement”) is made and entered into on DATE (the “Effective Date”), by and between FIRST PARTY'S NAME (hereinafter, "FIRST PARTY") and SECOND PARTY (hereinafter, "SECOND PARTY"). Hereinafter the above named parties may sometimes be referred to individually as a “Party” or may be collectively referred to as the “Parties.”
It is understood and agreed that the FIRST PARTY and SECOND PARTY would like to exchange certain valuable
information that is confidential. To protect this information and in consideration of the Agreement to exchange this information, the Parties agree as follows:
1. The Confidential Information to be disclosed by the Parties under this Agreement (“Confidential Information”) can be described as any information, technical data or know-how, including, but not limited to, that which relates to research, products, services, customers, markets, software, developments, inventions, processes, designs, drawings, engineering, marketing or finances, disclosed orally or in written or electronic form, and which is marked or identified by the disclosing party as “proprietary” or
“confidential”. Confidential Information does not include information, technical data or know-how which
a. is in the possession of the receiving Party at the time of disclosure as shown by the receiving Party's files and records immediately prior to the time of disclosure; or
b. prior or after the time of disclosure becomes part of the public knowledge or literature, not as a result of any inaction or action of the receiving Party; or
c. is approved for release by the disclosing Party; or
d. is independently developed by the receiving Party without the use of any Confidential Information of the other Party.
In addition, Confidential Information shall also include other information which is (a) disclosed by a Party in writing and marked as confidential at the time of disclosure; and/or (b) disclosed by Party in any other manner and identified as confidential at the time of disclosure and is also summarized and designated as confidential in a written memorandum delivered to the non-disclosing Party within (30) days of the disclosure.
2. A Party who receives any Confidential Information under this Agreement shall use the Confidential Information only for
the purpose of evaluating potential business and investment relationships with the disclosing Party. Such potential business and investment relationships are further described as follows:
3. DESCRIPTION OF BUSINESS RELATIONSHIP (Hereinafter the “Business Relationship”).
4. FIRST PARTY and SECOND PARTY each warrant that he/she/it has the right to disclosure the Confidential Information as described in this Agreement.
5. FIRST PARTY and SECOND PARTY each agree that he/she/it shall use the Confidential Information solely for the purpose of evaluating opportunities and transactions
related to the Business Relationship. FIRST PARTY and SECOND PARTY each agree that he/she/it shall limit the disclosure of the Confidential Information within its own organization to its directors, officers, partners and/or employees having a need to know and shall not disclose Confidential Information to any third party without the prior written consent of the disclosing Party. The Parties also agree to inform and educate his/her/its employees, agents, consultants and others who are permitted access to or use of the Confidential Information as to the restrictions of the use of the Confidential Information and shall be responsible and expressly liable for the use of the Confidential Information by his/her/its
employees, agents, consultants and others who are permitted access to or use of the Confidential Information. A rebuttable presumption that a Party has satisfied his/her/its obligations under this paragraph shall exist if he/she/it can show evidence that he/she/it took affirmative measures to ensure compliance with these confidentiality obligations by his/her/its employees, agents, consultants and others who permitted access to or use of the Confidential Information.
6. A Party will not have violated this Agreement if a Party discloses information that (a) is or becomes a matter of public knowledge
through no fault of the disclosing Party; (b) is rightfully received by a Party from a third party not owing a duty of confidentiality to the non-disclosing Party; (c) is disclosed without a duty of confidentiality to a third party by, or with the authorization of, the Party who owns the confidential information; or (d) is independently developed by the disclosing Party.
7. Neither Party shall be liable to the other in any manner whatsoever for any decisions, obligations, costs or expenses incurred, changes in business practices, plans, organization, products, services, or otherwise, based on either Party’s decision to use or rely on any
information exchanged under this Agreement.
8. This Agreement does not, in and of itself, create an obligation on either Party to purchase any service, goods, or intangibles from the other Party. Nothing in this Agreement prohibits a Party from offering products and/or services of the type that are the subject of the Business Relationship for sale to third parties or to modify them or discontinue sale of the same at any time. The Parties acknowledge and agree that the exchange of information under this Agreement shall not commit or bind either Party to any present or future contractual relations nor shall the exchange of information
be construed as an inducement to act or not to act in any given manner. Each Party reserves the right, in its sole discretion, to terminate the discussions contemplated by this Agreement concerning the opportunity.
9. If there is a breach or threatened breach of any provision of this Agreement, it is agreed and understood that the non-breaching Party shall have no adequate remedy in money or other damages and shall be entitled to injunctive relief; provided however, no specification in this Agreement of any particular remedy shall be construed as a waiver or prohibition of any other remedies in the event of a breach
or threatened breach of this Agreement.
10. The obligations of the Parties hereunder survive any termination of this Agreement and shall continue indefinitely or until such time that the Confidential Information becomes publically known.
11. Breach : In the event that this Agreement is breached by either Party, any and all disputes must be settled in a court of competent jurisdiction in the State of California.
12. Severability : If any provisions of this Agreement are found to be
unenforceable, the remainder shall be enforced as fully as possible and the unenforceable provision(s) shall be deemed modified to the limited extent required to permit enforcement of the Agreement as a whole.
13. Governing Law and Consent to Jurisdiction: This Agreement is made under and shall be construed according to the laws of the State of California, without regard to conflict of law principles. Both Parties voluntarily consent to the jurisdiction of a court of competent jurisdiction in the State of California to govern, interpret and enforce this Agreement.
14. Entire Agreement : This Agreement states the entire agreement between the Parties concerning the disclosure of Confidential Information and supersedes any prior agreements, understandings, or representations with respect thereto. Any addition or modifications to this Agreement must be made in writing and signed by authorized representatives of the Parties.
WHEREFORE, the parties acknowledge that they have read and understand this Agreement and voluntarily accept the duties and obligations set forth herein.
FIRST PARTY’S NAME
TITLE
STREET ADDRESS
CITY, STATE, ZIP CODE
Signature: __________________________________
Date: _______________________
SECOND PARTY'S NAME
TITLE
STREET ADDRESS
CITY, STATE, ZIP CODE
Signature: __________________________________
Date: ______________________
CHAPTER EIGHT
Letter of Intent to Purchase a Business Template
This letter is to be used in conjunction with a Confidentiality Agreement. It confirms your company’s intent to acquire another business entity or organization, providing an official, professional method for making the intent of your party clear to the other party or both party’s intent clear to a third party.
[Name & Address of Offering Party]
[Date]
[Name & Address of Seller]
RE: [Describe nature of business to be acquired]
Dear: [Name of Seller]:
This confirms that we intend to acquire all business assets, good will, and properties of [Name of Seller] (“Seller”). This Letter establishes the terms and
conditions of this proposed transaction. This Letter is non-binding. This letter is not an offer nor does it impose any obligation on either party.
The proposed terms and conditions are as follows:
(a) Business to be acquired and liabilities to be assumed. We will acquire all of the assets,
tangible and intangible, owned by
Seller that are used in, or necessary for the conduct of, its development business, including
(i) software, subject to any obligations contained in disclosed license agreements and all related intellectual property;
(ii) the fixed assets of Seller;
(iii) any and all customer lists; and
(iv) the goodwill associated therewith,
all free and clear of any security interests, mortgages or other encumbrances.
(b) Consideration. The aggregate consideration for the assets and business to be purchased shall be $____________ , provided the working capital (current assets less current liabilities) of the business to
be purchased equals or exceeds $________, shown on a closing date balance sheet prepared in accordance with generally accepted accounting principles.
(c) Due Diligence Review. Following the execution of this letter of intent, you will allow us to complete our examination of your financial, accounting and business records and the contracts and other legal documents
necessary to complete due diligence. Any information obtained by us as a result thereof will be maintained by us in confidence subject to the terms of the Confidentiality Agreement executed by the parties and dated ______________ (the “Confidentiality Agreement”). The parties will cooperate to complete due diligence expeditiously.
(d) Conduct in Ordinary Course. In addition to the conditions discussed herein and any others to be contained in a definitive written purchase agreement (the “Purchase Agreement”), consummation of the acquisition would be subject to having conducted your business in the ordinary
course during the period between the date hereof and the date of closing and there having been no material adverse change in your
business, financial condition or prospects.
(e) Definitive Purchase Agreement. All of the terms and conditions of the proposed transaction would be stated in the Purchase Agreement,to be negotiated, agreed and executed by you and us. Neither party intends to be bound by any oral or written statements or correspondence concerning the Purchase Agreement arising during the course of negotiations, notwithstanding that the same may be expressed in terms
signifying a partial, preliminary or interim agreement between the parties.
Cordially,
By__________________[Name of Offering Party]
TO: [Name and Return Address of Offering Party]
The Terms and Conditions set forth in the above-signed letter are acceptable and reflect the intentions of [Name of Seller].
By_________________[Name of Seller]
Chapter Nine
Operating Agreement for a Member-Managed Limited Liability Company Template
This Agreement made on January 01, 2013, between NAME OFYOUR COMPANY, a limited liability company organized and existing under the laws of the State of YOUR STATE, with its principal office located at YOUR COMPANY ADDRESS, (referred to herein as the “Company”), and YOUR NAME (hereinafter the listed members will be jointly referred to as the “Members” and individually as a “Member”).
For and in consideration of the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
I. Definitions. Unless the context otherwise requires, the terms defined in this Article I shall, for the purposes of this Agreement, have the following meanings:
A. “California [OR YOUR STATE] Act” means the California [OR YOUR STATE] limited liability company statute, as amended from time to time.
B. “Additional Members” has the meaning set forth in Section XIII.
C. “Agreement” means this Operating Agreement of the Company, as amended,
modified, supplemented or restated from time to time.
D. “Capital Account” means, with respect to any Member, the account maintained for such Member in accordance with the provisions of Section IV-C.
E. “Capital Contribution” means, with respect to any Member, the aggregate amount of money and the fair market value of any property (other than money) contributed to the Company pursuant to Section IV-A with respect to such Member's Interest.
F. “Certificate” means the Certificate of Formation of the
Company and any and all amendments to the Certificate of Formation and restatements of the same filed on behalf of the Company with the office of the Secretary of State of California [OR YOUR STATE] pursuant to its limited liability company statute.
G. “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any corresponding federal tax statute enacted after the date of this Agreement. A reference to a specific section of the Code refers not only to such specific section but also to any corresponding
provision of any federal tax statute enacted after the date of this Agreement, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Agreement containing such reference.
H. “Company” means YOUR COMPANY, the limited liability company formed and continued under and pursuant to the California [OR YOUR STATE] Act and this Agreement.
I. “Covered Person” means a Member, any officers,
directors, shareholders, partners, employees, representatives or agents of a Member, or any employee or agent of the Company.
J. “Fiscal Year” means:
1. The period commencing upon the formation of the Company and ending on December 31, 2013 (the “Fiscal Year End Date”);
2. Any subsequent 12-month period that commences on the day of the year immediately after the day of the year that is identified as the Fiscal Year End Date; or
3. Any portion of the period described in Clause 2 of this subsection for which the Company is required to allocate Profits, Losses and other items of Company income, gain, loss or deduction pursuant to Section VIII.
K. “Interest” means a Member's limited liability company interest in the Company which represents such Member's share of the profits and losses of the Company and a Member's right to receive distributions of the Company's assets in accordance with the provisions of this Agreement
and the California [OR YOUR STATE] Act.
L. Member means each of the Members, and includes any Person admitted as an Additional Member pursuant to the provisions of this Agreement, in such Person's capacity as a member of the Company; Members means two (2) or more of such Persons when acting in their capacities as Members of the Company. For purposes of the California [OR YOUR STATE] Act, the Members shall constitute one class or group of members.
M. Net Cash Flow means, for each Fiscal Year or other period of the Company, the gross cash receipts of the Company from all sources, but excluding any amounts, such as gross receipts taxes, that are held by the Company as a collection agent or in trust for others or that are otherwise not unconditionally available to the Company, less all amounts paid by or for the account of the Company during the same Fiscal Year or other period (including, but not limited to, payments of principal and interest on any Company indebtedness and
expenses reimbursed to the Members under Section V-B, and less any amounts determined by the Members to be necessary to provide a reasonable reserve for working-capital needs or any other contingencies of the Company. Net Cash Flow shall be determined in accordance with the cash receipts and disbursements method of accounting and otherwise in accordance with generally accepted accounting principles, consistently applied. Net Cash Flow shall not be reduced by depreciation, amortization,
cost recovery deductions, depletion, similar allowances or other noncash items, but shall be increased by any reduction of reserves previously established.
N. Percentage Interest means the Interest of a Member, expressed as a portion of one hundred percent.
O. Person includes any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company or other legal entity or organization.
P. Profits and Losses means, for each Fiscal Year, an amount equal to the Company's taxable income or loss for such Fiscal Year, determined in accordance with Section 703(a) of the Code.
Q. Tax Matters Partner has the meaning set forth in Section XI-A.
R. Treasury Regulations means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
II. Formation and Term
A. Formation.
1. The Members have formed the Company as a limited liability company under and pursuant to the California [OR YOUR STATE] Act and agree that the rights, duties and liabilities of the Members shall be as provided in the California [OR YOUR STATE]Act, except as otherwise provided in this Agreement.
2. Upon the execution of this Agreement or a counterpart of this Agreement, all executing Members, as identified above,
shall be admitted as Members of the Company.
3. The name and mailing address of each Member and the amount contributed to the capital of the Company shall be listed on the attached Schedule “A”. The Members shall be required to update Schedule “A” from time to time as necessary to accurately reflect the information in the schedule. Any amendment or revision to Schedule “A” made in accordance with this Agreement shall not be deemed an amendment to this Agreement. Any reference in
this Agreement to Schedule “A” shall be deemed to be a reference to Schedule “A” as amended and in effect from time to time.
4. YOUR NAME, as an authorized person within the meaning of the California [OR YOUR STATE]Act, shall execute, deliver and file the Certificate.
B. Name. The name of the Company is YOUR COMPANY. The business of the Company may be conducted upon compliance with all applicable laws under any other name designated by the Members.
C. Term. The term of the Company shall commence on the date the Certificate is filed in the office of the Secretary of State of California [OR YOUR STATE]and shall continue until December 31, 2015, unless the Company is dissolved before such date in accordance with the provisions of this Agreement. The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate in the manner required by the California [OR YOUR STATE] Act.
D. Registered Agent and Office. The Company's registered agent and office in California shall be YOUR NAME at YOUR STREET
ADDRESS, YOUR HOME TOWN, YOUR STATE, YOUR ZIP. At any time, the Members may designate another registered agent or registered office.
E Principal Place of Business. The principal place of business of the Company shall be at YOUR COMPANY ADDRESS. At any time, the Members may change the location of the Company's principal place of business.
F. Qualification in Other Jurisdictions. The Members shall, if required by law or if deemed advisable by the Members, cause the Company to be qualified, formed or registered under
assumed or fictitious name statutes or similar laws in any jurisdiction in which the Company transacts business. YOUR NAME, as an authorized person within the meaning of the California [OR YOUR STATE]Act, shall execute, deliver and file any certificates (and any amendments or restatements of such certificates) necessary for the Company to qualify to do business in a jurisdiction in which the Company may wish to conduct business.
III. Purpose and Powers of the Company
A. Purpose. The Company is formed for the object and purpose
of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the California Act and engaging in any and all activities necessary, convenient, desirable or incidental to the foregoing, including, but not limited to, acquiring, holding, managing, operating and disposing of securities of corporations, partnerships, limited liability companies and trusts.
B. Powers of the Company.
1. The Company shall have the power and authority to
take any and all actions necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purpose set forth in Section III-A, including, but not limited to, the power:
a. To conduct its business, carry on its operations and have and exercise the powers granted to a limited liability company by the California [OR YOUR STATE]Act in any state, territory, district or possession of the United States, or in any foreign
country that may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;
b. To acquire by purchase, contribution of property or otherwise, own, hold, operate, maintain, finance, sell, convey, transfer, or dispose of any securities or other personal property that may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;
c. To enter into, perform and carry out contracts of any kind, including, but not limited to, contracts with any Member, or any agent of the Company necessary to, in connection with, convenient to, or incidental to the accomplishment of the purpose of the Company;
d. To purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise
use and deal in and with, shares or other interests in or obligations of domestic or foreign corporations, associations, general or limited partnerships (including, but not limited to, the power to be admitted as a partner and to exercise the rights and perform the duties created by such partnerships), trusts, limited liability companies (including, but not limited to, the power to be admitted as a member or appointed as a manager
and to exercise the rights and perform the duties created by such admission or appointment), or individuals or direct or indirect obligations of the United States or of any government, state, territory, governmental district or municipality or of any instrumentality of any of them;
e. To lend money for its proper purpose, to invest and reinvest its funds, to take and hold real and personal property for the payment of funds so loaned or invested;
f. To sue and be sued, complain and defend, and participate in administrative or other proceedings, in its name;
g. To appoint employees and agents of the Company, and define their duties and fix their compensation;
h. To indemnify any Person in accordance with the California Act and to obtain any and all types of insurance;
i. To cease its activities and cancel its Certificate;
j. To negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend, waive, execute, acknowledge or take any other action with respect to any lease, contract or security agreement in respect of any assets of the Company;
k. To borrow money and issue evidences of indebtedness, and to secure the same by a mortgage, pledge or other lien on the assets of the Company;
l. To pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and all other claims or demands of or against the Company or to hold such proceeds against the payment of contingent liabilities;
m. To make, execute, acknowledge and file any and all documents or instruments necessary, convenient or incidental to the accomplishment of the purpose of the Company; and
n. The Company may merge with, or consolidate into, another California limited liability company or other business entity upon the approval of all of the Members.
IV. Capital Contributions; Interests; Capital Accounts; Advances
A. Capital Contributions.
1. Each Member has contributed or is deemed to have contributed to the capital of the Company the amount set forth opposite the Member's name on the attached Schedule “A”. The
agreed value of the Capital Contributions made or deemed to have been made by each Member shall be set forth on Schedule “A”.
2. No Member shall be required to make any additional capital contribution to the Company. However, a Member may make additional capital contributions to the Company with the written consent of all of the Members.
3. Member's Interest. A Member's Interest shall for all purposes be personal property. A Member has no
interest in specific Company property.
B. Status of Capital Contributions.
1. Except as otherwise provided in this Agreement, the amount of a Member's Capital Contributions may be returned to it, in whole or in part, at any time, but only with the consent of all of the Members. Any such returns of Capital Contributions shall be made to all Members in proportion to the Percentage Interests. Notwithstanding the foregoing, no return of a Member's Capital
Contributions shall be made if such distribution would violate applicable state law. Under circumstances requiring a return of any Capital Contribution, no Member shall have the right to demand or receive property other than cash, except as may be specifically provided in this Agreement.
2. No Member shall receive any interest, salary or drawing with respect to its Capital Contributions or its Capital Account or for services rendered on behalf of the Company or otherwise in its capacity as a Member, except
as otherwise specifically provided in this Agreement.
3. Except as otherwise provided in this Agreement and by applicable state law, the Members shall be liable only to make their capital contributions pursuant to Section IV-A, and no Member shall be required to lend any funds to the Company or, after a Member's Capital Contributions have been fully paid pursuant to Section IV, to make any additional capital contributions to the Company. No Member shall have any personal liability for the repayment of any Capital
Contribution of any other Member.
C. Capital Accounts.
1. An individual Capital Account shall be established and maintained for each Member.
2. The Capital Account of each Member shall be maintained in accordance with the following provisions:
a. To such Member's Capital Account there shall be credited such Member's Capital Contributions (consisting of cash or the fair market
value of any property net of any liabilities secured by such contributed property that the Company is considered to assume or take subject to under 26 U.S.C.A. § 752 of the Code); such Member's distributive share of Profits; and such Member's distributive share of other items of income, gain or credits; and
b. To such Member's Capital Account there shall be debited the amount of cash and the fair market value of
property distributed by the Company to such Member (net of liabilities secured by such distributed property which the Member is considered to assume or take subject to under 26 U.S.C.A. § 752 of the Code); such Member's distributive share of Losses; and such Member's distributive share of other items of loss or deduction.
D. Advances. If any Member shall advance any funds to the Company in excess of its Capital Contributions, the amount of such
advance shall neither increase its Capital Account nor entitle it to any increase in its share of the distributions of the Company. The amount of any such advance shall be a debt obligation of the Company to such Member and shall be subject to such terms and conditions acceptable to the Company and each Member. Any such advance shall be payable and collectible only out of Company assets, and the other Members shall not be personally obligated to repay any part of such advance. No Person who makes any nonrecourse loan to the Company shall have or acquire, as a result of making such loan, any direct or
indirect interest in the profits, capital or property of the Company, other than as a creditor.
V. Members
A. Powers of Members. The Members shall have the power to exercise any and all rights or powers granted to the Members pursuant to the express terms of this Agreement and the California Act.
B. Reimbursements. The Company shall reimburse the Members, for all ordinary and necessary out-of-pocket expenses incurred by the Members on behalf of the Company. Such reimbursement shall be treated as
an expense of the Company that shall be deducted in computing the Net Cash Flow and shall not be deemed to constitute a distributive share of Profits or a distribution or return of capital to any Member.
C. Partition. Each Member waives any and all rights that it may have to maintain an action for partition of the Company's property.
D. Resignation. A Member may not resign from the Company without the written consent of all of the other Members.
VI. Management
A. Management of the Company.
1. In accordance with the California [OR YOUR STATE]Act, management of the Company shall be vested in the Members. Except as otherwise expressly provided in this Agreement, whenever this Agreement requires or permits actions to be taken by the Members, the majority decision by Members owning more than Fifty Percent(50%)% of the Percentage Interests shall control.
2. Subject to Section VI-A, the Members shall have full,
exclusive and complete discretion to manage the business and affairs of the Company, to make all decisions affecting the business and affairs of the Company and to take such actions as they deem necessary or appropriate to accomplish the purpose of the Company as set forth in this Agreement.
3. Subject to Section VI-A, with respect to third parties, each Member is an agent of the Company's business, and each Member may bind the Company. If a Member binds the Company, but did not have
the authority to so act under this Agreement (including by failing to obtain necessary consents from other Members), in addition to any other remedy (at law or in equity) that may be available against such Member, such Member shall be liable for all damages caused by breaching this Agreement.
B. Reliance by Third Parties. Any Person dealing with the Company or any Member may rely upon a certificate signed by any Member as to:
1. The identity of a Member;
2. The existence or nonexistence of any fact or facts which constitute a condition precedent to acts by the Members or in any other manner germane to the affairs of the Company;
3. The Persons who are authorized to execute and deliver any instrument or document of, or on behalf of, the Company; or
4. Any act or failure to act by the Company or as to any other matter whatsoever involving the Company or any Member.
VII. Amendments and Meetings
A. Amendments. Any amendment to this Agreement shall be adopted and be effective as an amendment to the Agreement if it receives the affirmative vote of all of the Members, provided that such amendment be in writing and executed by all of the Members.
B. Meetings of the Members.
1. Meetings of the Members may be called at any time by any Member. Notice of any meeting shall be given to all Members not less than 5 days nor more than 90 days prior to the date of such meeting. Each Member may authorize any
Person to act for it by proxy on all matters in which a Member is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Member or its attorney-in-fact.
2. The Members shall establish all other provisions relating to meetings of Members, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Members, waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote.
3. The Company may take any action contemplated by this Agreement as approved by the unanimous written consent of the Members.
VIII. Allocations
A. Profits and Losses.
1. Subject to the allocation rules of Section VIII-B, Profits for any Fiscal Year shall be allocated among the Members
in proportion to the Percentage Interests.
2. Subject to the allocation rules of Section VIII-B, Losses for any Fiscal Year shall be allocated among the Members in proportion to the Percentage Interests.
B. Allocation Rules.
1. For purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily, monthly or other basis, as determined by the Members using any method that is
permissible under 26 U.S.C.A. § 706 of the Code and the Treasury Regulations under that Section.
2. Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as they share Profits and Losses for the Fiscal Year in question.
3. The Members are aware of the income tax consequences of the
allocations made by this Section VIII and agree to be bound by the provisions of this Section VIII in reporting their shares of Company income and loss for income tax purposes.
4. The Members intend that the allocation provisions set forth in this Agreement are intended to comply with 26 U.S.C.A. § 704(b) of the Code and the Treasury Regulations issued under that Section and the provisions are to be interpreted in a manner consistent with those Treasury Regulations.
C. Tax Allocations; 26 U.S.C.A. § 704(c) of the Code. In accordance with Section 704(c) of the Code and the Treasury Regulations under that Section, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for income tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial fair market value.
IX. Distributions
A. Net Cash Flow. Except as otherwise provided in Section XV
(relating to the dissolution of the Company), any distribution of the Net Cash Flow during any Fiscal Year shall be made to the Members in proportion to the Percentage Interests.
B. Distribution Rules. All distributions pursuant to this Section IX shall be at such times and in such amounts as shall be determined by the Members.
C. Limitations on Distribution. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to any Member on account of its interest in the Company if such distribution
would violate California Act or other applicable law.
X. Books and Records
A. Books, Records and Financial Statements.
1. At all times during the continuance of the Company, the Company shall maintain, at its principal place of business, separate books of account for the Company that shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received and all income derived in connection with the operation of the Company
business in accordance with generally accepted accounting principles consistently applied, and, to the extent inconsistent with such principles, in accordance with this Agreement. Such books of account, together with a copy of this Agreement and of the Certificate, shall at all times be maintained at the principal place of business of the Company and shall be open to inspection and examination at reasonable times by each Member and its duly authorized representative for any purpose reasonably
related to such Member's interest in the Company.
2. The Members shall prepare and maintain, or cause to be prepared and maintained, the books of account of the Company. The Members shall prepare and file, or cause to be prepared and filed, all applicable federal and state tax returns.
C. Accounting Method. For both financial and tax reporting purposes and for purposes of determining Profits and Losses, the books and records of the Company shall be kept on the accrual method of accounting applied in a
consistent manner and shall reflect all Company transactions and be appropriate and adequate for the Company's business.
D. Annual Audit. At any time at a Member's sole discretion, the financial statements of the Company may be audited by an independent certified public accountant, selected by such Member, with such audit to be accompanied by a report of such accountant containing its opinion. The cost of such audits will be an expense of the Company. A copy of any such audited financial statements and accountant's report will be made available for inspection by the Members.
XI. Tax Matters
A. Tax Matters Partner.
1. YOUR NAME is designated as Tax Matters Partner of the Company for purposes of 26 U.S.C.A. § 6231(a)(7) of the Code. The Tax Matters Partner may not choose a forum for the resolution of tax matters or extend any statute of limitation without the written consent of all of the Members.
2. The Tax Matters Partner shall, within ten (10) business days of the receipt (or within any such shorter time as required) of any notice from
the Internal Revenue Service in any administrative proceeding at the Company level relating to the determination of any Company item of income, gain, loss, deduction or credit, mail or otherwise deliver a copy of such notice to each Member.
B. Taxation as Partnership. The Company shall be treated as a partnership for U.S. federal income tax purposes.
XII. Liability; Exculpation; Indemnification
A. Liability. Except as otherwise provided by the California [OR
YOUR STATE] Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Covered Person.
B. Exculpation.
1. No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's gross negligence or willful misconduct.
2. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports
or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, Profits, Losses or Net Cash Flow or any other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
C. Fiduciary Duty. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and related liabilities to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any Member for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the parties
to replace such other duties and liabilities of such Covered Person.
D. Indemnification. To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by
such Covered Person by reason of gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section XII-D shall be provided out of and to the extent of Company assets only, and no Covered Person shall have any personal liability on account of the same.
E. Expenses. To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in Section XII-D.
F. Insurance. The Company may purchase and maintain insurance, to the extent and in such amounts as the Members shall, in its sole discretion, deem reasonable, on behalf of Covered Persons and such other Persons as the Members shall determine, against any liability that may be asserted against or expenses that may be
incurred by any such Person in connection with the activities of the Company or such indemnities, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement. The Members and the Company may enter into indemnity contracts with Covered Persons and such other Persons as the Members shall determine and adopt written procedures pursuant to which arrangements are made for the advancement of expenses and the funding of obligations under Section XII-E and containing such other procedures regarding indemnification as are appropriate.
G. Outside Businesses. Any Member may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Company, and the Company and the Members shall have no rights by virtue of this Agreement in and to such independent ventures or the income or profits derived from such ventures, and the pursuit of any such venture, even if competitive with the business of the Company, shall not be deemed wrongful or improper. No Member shall be obligated to present any particular investment opportunity
to the Company even if such opportunity is of a character that, if presented to the Company, could be taken by the Company, and any Member shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity.
XIII. Additional Members
A. Admission. By approval of all of the Members, the Company is authorized to admit any Person as an additional member of the Company (each, an Additional Member and collectively, the Additional Members). Each such
Person shall be admitted as an Additional Member at the time such Person:
1. Executes this Agreement or a counterpart of this Agreement; and
2. Is named as a Member on the attached Schedule “A”. The legal fees and expenses associated with such admission shall be borne by the Company.
C. Allocations. Additional Members shall not be entitled to any retroactive allocation of the Company's income, gains, losses, deductions, credits or other items; provided that, subject to the
restrictions of 26 U.S.C.A. § 706(d) of the Code, Additional Members shall be entitled to their respective share of the Company's income, gains, losses, deductions, credits and other items arising under contracts entered into before the effective date of the admission of any Additional Members to the extent that such income, gains, losses, deductions, credits and other items arise after such effective date. To the extent consistent with 26 U.S.C.A. § 706(d) of the Code and Treasury Regulations promulgated under that Section, the Company's books may be closed at the time Additional Members are admitted
(as though the Company's tax year had ended) or the Company may credit to the Additional Members pro rata allocations of the Company's income, gains, losses, deductions, credits and items for that portion of the Company's Fiscal Year after the effective date of the admission of the Additional Members.
XIV. Assignability and Substitute Members
A. Assignability of Interests. No Member may assign the whole or any part of its Interests without the unanimous approval of all Members.
B. Recognition of Assignment by Company. No assignment or pledge of any Interest, or any part of an Interest, that is in violation of this Section XIV shall be valid or effective, and neither the Company nor the Members shall recognize the same for the purpose of making distributions pursuant to this Agreement. Neither the Company nor the Members shall incur any liability as a result of refusing to make any such distributions to the assignee of any such invalid assignment.
C. Pledge. No Member may pledge or otherwise encumber the whole or any part of its Interests.
XV. Dissolution, Liquidation and Termination
A. No Dissolution. The Company shall not be dissolved by the admission of Additional Members in accordance with the terms of this Agreement.
B. Events Causing Dissolution. The Company shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following events:
1. The expiration of the term of the Company, as provided in Section II-C;
2. The written consent of all Members;
3. The death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event under the (name of state) Act that terminates the continued membership of a Member in the Company unless, within thirty (30) days after the occurrence of such an event, all of the remaining Members agree in writing to continue the business of the Company; or
4. The entry of a decree of judicial dissolution.
C. Liquidation. Upon dissolution of the Company, the Members shall carry out the winding up of the Company and shall immediately commence to wind up the Company's affairs; provided, however, that a reasonable time shall be allowed for the orderly liquidation of the assets of the Company and the satisfaction of liabilities to creditors so as to enable the Members to minimize the normal losses attendant upon a liquidation. The Members shall continue to share Profits and Losses during liquidation in the same proportions, as specified in Section VIII, as before liquidation. The proceeds of liquidation shall
be distributed in the following order and priority:
1. To creditors of the Company, including Members who are creditors, to the extent otherwise permitted by law, in satisfaction of the liabilities of the Company (whether by payment or the making of reasonable provision for payment); and
2. To the Members in accordance with their Capital Account balances, after giving effect to all contributions, distributions and allocations for all periods.
C. Termination. The Company shall terminate when all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company, shall have been distributed to the Members in the manner provided for in this Section XV and the Certificate shall have been canceled in the manner required by the CaliforniaAct.
D. Claims of the Members. The Members and former Members shall look solely to the Company's assets for the return of their Capital Contributions, and if the assets of the Company remaining after payment of or due provision for all debts, liabilities and
obligations of the Company are insufficient to return such Capital Contributions, the Members and former Members shall have no recourse against the Company or any other Member.
XVI. Miscellaneous
A. Notices. All notices provided for in this Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, mailed via an overnight courier service, telecopied or mailed by registered or certified mail, as follows:
1. If given to the Company, at the address specified in
Section II-E of this Agreement; or
2. If given to any Member, at the address set forth opposite its name on the attached Schedule “A”, or at such other address as such Member may designate in the future by written notice to the Company.
3. All such notices shall be deemed to have been given when received.
B. Failure to Pursue Remedies. The failure of any party to seek redress for violation of, or to insist upon the strict performance of, any provision of this Agreement
shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation.
C. Cumulative Remedies. 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 its right to use any or all other remedies. The rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.
D. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, legal representatives and assigns.
E. Interpretation. Throughout this Agreement, nouns, pronouns and verbs shall be construed as masculine, feminine, neuter, singular or plural, whichever shall be applicable. All references in this Agreement to “Articles,” “Sections” and “Paragraphs” shall refer to corresponding provisions of this Agreement.
F. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall
not affect the other provisions of this Agreement, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted.
G. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all parties had signed the same document. All counterparts shall be construed together and shall constitute one instrument.
H. Integration. This Agreement constitutes the entire agreement among the parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements and understandings pertaining to such subject matter.
I. Governing Law. This Agreement and the rights of the parties under this Agreement shall be interpreted in accordance with the laws of (name of state), and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws.
WITNESS our signature(s) as of the day and date first above stated.
By:_____________________
________________________
(Printed name)
Member of YOUR COMPANY
Schedule “A”
Members’ Names, Capital Contribution and Ownership Interest:
YOUR NAME – ________ Dollars ($_______) ______ Percent (___%)
IN WITNESS WHEREOF, the Members have executed, or caused this
Schedule “A” to be executed, as of the date set forth hereinabove.
“MEMBERS”
_________________
Member Signature
ABOUT THEAUTHOR
He was the founding editor and long term publisher of Insurance Litigation Reporter (with Bills Gates Sr. on the original editorial advisory board), Professional Liability Reporter, Medical Liability Reporter, Pleadings and Briefs and Construction Litigation Reporter, titles initially purchased by McGraw-Hill, Inc., and now published by Thomson-Reuters. More recently, he was the founding editor and publisher of Securities Enforcement Reporter and Blue Sky Chronicle.
Doug practiced real estate and finance law at Pillsbury, Madison & Sutro (now Pillsbury Winthrop) after graduating from Stanford Law School. He was honored to serve as an A BA rul
Web sites and blogs that Douglas Slain has managed for the last several years includePrivatePlacementAdvisors.com, RegDConsumersReport.com, RegDLaw.com, and Startup-Seed-Capital.com. Books he has authored include Real Estate Blind Pools, Delivery Services, and EB-5 and U.S. Securities Law.
Doug is the manager of a LinkedIn discussion group focusing on state securities enforcement and private placement law with over 950 members, styled Securities Enforcement Group/Securities Enforcement Law. He is available as an expert witness in litigation involving compliance with Regulation D and private placement law.e of law consultant to the Ministry of Economy for the Republic of Latvia as its secured transactions adviser. He has taught at Stanford Law School as an
adjunct clinical law professor. He has served as chairman of the American Bar Association’s Professional Responsibility Committee (for two terms). His first job out of college was as a reporter for The Wall Street Journal.
He initiated (and then associated with Lieff Cabraser Heimann & Bernstein to pursue) a class action against the infamous Fund America, where $37 million was recovered 10 months after the class was certified. He was also the lead plaintiff’s lawyer in the largest consumer class action filed against the even more infamous WorldCom, Inc.
Doug received a JD from Stanford Law School, a MA from the University of Chicago (working with Hannah Arendt and Saul Bellow in the Social Thought Committee), and a BA from DePauw University (Phi Beta Kappa), a diploma
from University College London, and a certificate from the Goethe Institute.
He can be reached at [email protected] or via Skype at dslain2134.
