Operating Agreement Template Page 3
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16Membership Interest held by a Member arising from the transfer of Membership Interests to or
by such Member.
3.3 Capital Accounts. A capital account shall be maintained for each Member, in
accordance with tax accounting principles, which shall reflect his or her initial capital
contribution as set forth in Schedule A, and shall be adjusted and maintained as follows:
(a)
As of the end of each fiscal year of the Company, each Member's
opening capital account for such year shall be increased by an amount
equal to: (i) the cash and the agreed fair market value of property (net of
any liabilities assumed by the Company or to which such property is
subject) contributed to the capital of the Company by such Member for
such year; and (ii) such Member's allocable share of Company taxable
income for such year, including income and gain exempt from tax; and
(b)
As of the end of each fiscal year of the Company, each Member's
opening capital account for such year shall be decreased by an amount
equal to: (i) the aggregate amount of cash distributions and the agreed fair
market value of any property (net of any liabilities assumed by such
Member or to which such property is subject) distributed to such Member
during each year, (ii) his or her share of expenditures of the Company not
deductible and not properly chargeable as capital expenditures; and (iii)
his or her share of Company losses for such year.
Provided, however, that if it is necessary to determine the capital account of any Member
during the fiscal year, the capital account of the Member shall be determined after giving effect
to all allocations of taxable income, gain, and loss attributable to transactions effected prior to
the time such determination is made and all distributions of cash theretofore made for such year.
3.4 Change in Tax Law. Notwithstanding anything to the contrary herein, it is the
intention of the Company that it be classified as a partnership for federal and, if applicable, state
income tax purposes and that it conform to the requirements of the Internal Revenue Code with
respect to the validity of the allocation of items, income, gain, loss, and tax credits. In the event
of a change in the Internal Revenue Code or Treasury Regulations, the Members hereby agree to
consult with tax counsel and advisers to determine whether an amendment to this Operating
Agreement is required and, if it is, to adopt such amendment. The parties do not intend that the
Company be classified or treated as a partnership for any other reason.
3.5 Interest on Capital; Loans by or to Members. No interest or other compensation shall
be allowed to any Member with respect to his or her capital account, except his or her share of
the profits, losses and distributions of the Company as hereinafter provided.
3.6 Withdrawal of Capital. Except as may be specifically provided in this Operating
Agreement, no Member shall have the right to withdraw from the Company all or any part of his
or her capital contribution nor shall he or she have any right to demand and receive property or
cash of the Company in return of his or her capital contribution.
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