Ultra Bikers, Llc Operating Agreement

EXHIBIT 10.1


ULTRA BIKERS, LLC


LIMITED LIABILITY COMPANY
OPERATING AGREEMENT 2
ULTRA BIKERS, LLC


TABLE OF CONTENTS

Page
---- ARTICLE I - FORMATION OF LIMITED LIABILITY COMPANY . . . . . . . . . . . . . . 1
1.1 Formation and Effective Date of Agreement . . . . . . . . . . . . 1
1.2 Name and Principal Place of Business . . . . . . . . . . . . . . . 1
1.3 Agent for Service of Process . . . . . . . . . . . . . . . . . . . 1
1.4 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II - MEMBERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Initial Members . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 3
2.3 LLC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Additional Members . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Admission of Substitute Members . . . . . . . . . . . . . . . . . . 4
2.6 Resignation or Withdrawal of a Member . . . . . . . . . . . . . . . 4
2.7 Dissociation of a Member . . . . . . . . . . . . . . . . . . . . . 4
2.8 Rights of Dissociating Member . . . . . . . . . . . . . . . . . . . 4
ARTICLE III - CONTRIBUTIONS TO CAPITAL . . . . . . . . . . . . . . . . . . . . 4
3.1 Initial Contributions . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Additional Contributions . . . . . . . . . . . . . . . . . . . . . 5
3.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV - MANAGEMENT AND RESTRICTIONS . . . . . . . . . . . . . . . . . . . 5
4.1 Management by Management Board . . . . . . . . . . . . . . . . . . 5
4.2 Authority of Management Board . . . . . . . . . . . . . . . . . . 5
4.3 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 Action without Meeting . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Compensation of Members . . . . . . . . . . . . . . . . . . . . . 7
4.8 Amendment of Articles or Agreement . . . . . . . . . . . . . . . . 7
4.9 Member Representatives . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V - NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . 7


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ARTICLE VI - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Required Officers . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Compensation of Officers . . . . . . . . . . . . . . . . . . . . . . 8
6.4 Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.5 Duties of President . . . . . . . . . . . . . . . . . . . . . . . . 8
6.6 Duties of Vice-President . . . . . . . . . . . . . . . . . . . . . . 8
6.7 Duties of Secretary . . . . . . . . . . . . . . . . . . . . . . . . 8
6.8 Duties of Assistant Secretary . . . . . . . . . . . . . . . . . . . 8
6.9 Duties of Treasurer . . . . . . . . . . . . . . . . . . . . . . . . 8
6.10 Duties of Assistant Treasurer . . . . . . . . . . . . . . . . . . . 9
6.11 Other Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII - ACCOUNTING AND RECORDS . . . . . . . . . . . . . . . . . . . . . 9
7.1 Financial and Tax Reporting . . . . . . . . . . . . . . . . . . . . 9
7.2 Supervision; Inspection of Books . . . . . . . . . . . . . . . . . . 9
7.3 Reliance on Records and Books of Account . . . . . . . . . . . . . . 9
7.4 Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VIII - ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1 Allocation of Net Income or Net Loss . . . . . . . . . . . . . . . . 10
8.2 Time of Allocations . . . . . . . . . . . . . . . . . . . . . . . . 10
8.3 Special Tax Provisions . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IX - DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Distribution Shares . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE X - NO TRANSFER OF MEMBERSHIP . . . . . . . . . . . . . . . . . . . . . 11
10.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.2 Transfer Void . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.3 Rights of Assignees . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE XI - OPTIONS; BUY-OUT . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Purchase of UKC and UKP . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE XII - INDEMNIFICATION AND LIMITATION OF LIABILITY . . . . . . . . . . . 12
12.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12.2 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE XIII - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.2 Authority to Wind Up . . . . . . . . . . . . . . . . . . . . . . . . 14
13.3 Winding Up and Certificate of Cancellation . . . . . . . . . . . . . 14
13.4 Distribution of Assets . . . . . . . . . . . . . . . . . . . . . . . 15


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ARTICLE XIV - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XV - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.2 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . 16
15.3 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.4 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . 17
15.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 17
15.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.10 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
EXECUTION PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


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ULTRA BIKERS, LLC


LIMITED LIABILITY COMPANY AGREEMENT


THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the "Agreement") is entered into this 13th day of September, 1996, among Bikers Dream, Inc., a California corporation ("Bikers Dream") and Mull Acres Investments, Inc., a California corporation ("Mull Acres"), as members (the "Members") of Ultra Bikers, LLC, a California limited liability company (the "LLC").


ARTICLE I


FORMATION OF LIMITED LIABILITY COMPANY


1.1 FORMATION AND EFFECTIVE DATE OF AGREEMENT. The members have formed the LLC pursuant to the Beverly-Killea Limited Liability Company Act (the "Act") by causing Articles of Organization conforming to the requirements of the Act to be filed with the office of the Secretary of State of the State of California.


1.2 NAME AND PRINCIPAL PLACE OF BUSINESS. Unless and until amended in accordance with this Agreement and the Act, the name of the LLC will be "Ultra Bikers, LLC." The principal place of business of the LLC in California shall be 11651 Stirling Avenue, Suite H, Riverside, California 92503, or in such other place or places as the Members from time to time determine.


1.3 AGENT FOR SERVICE OF PROCESS. Until such time as the Members have appointed a different person to act in the State of California as the agent of the LLC for service of process, the LLC's agent or service of process in the State of California shall be Rowland W. Day II, whose address is Day Campbell & McGill, 3070 Bristol, Suite 650, Costa Mesa, California 92626.


1.4 AGREEMENT. For and in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Members executing this Agreement hereby agree to the terms and conditions of this Agreement, as it may from time to time be amended. It is the express intention of the parties hereto that this Agreement shall be the sole statement of agreement among them, and, except to the extent a provision of this Agreement expressly incorporates federal income tax rules by reference to sections of the Code or Treasury Regulations or is expressly prohibited or ineffective under the Act, the Agreement shall govern even when inconsistent with or different from the provisions of the Act or any other law or rule. To the extent any provision of the Agreement is prohibited or ineffective under the Act, the Agreement shall be considered amended to the smallest degree possible in order to make the agreement effective under the Act. In the event the Act is subsequently amended or interpreted in such a way to make valid any provision of the Agreement that was formerly invalid, such provision shall be considered to be a part of this Agreement from and after the date of such interpretation or amendment. 6
1.5 BUSINESS.


(a) The purpose of the LLC is to (i) distribute and sell motorcycles and related parts and accessories manufactured by the Ultra Kustom Cycles division ("UKC") of Mull Acres to retail establishments, and (ii) engage in any other lawful act or activity for which an LLC may be organized under the Beverly-Killea Limited Liability Company Act, provided that the LLC shall not engage in the practice of any profession requiring a license under the laws of the State of California obtaining such license.


(b) The business of the LLC shall be conducted as follows:


(i) Bikers Dream shall loan (the "Initial Loan") Two Million Dollars ($2,000,000) to the LLC pursuant to a note (the "Initial Note"), which Initial Loan shall be non-interest bearing and shall be payable by the LLC, but payable in no event later than September 30, 1997, with One Million Dollars ($1,000,000) of the Initial Loan to be funded and paid by September 18, 1996 and an additional One Million Dollars ($1,000,000) to be funded and paid by Bikers Dream within ninety days thereafter;


(ii) The LLC shall loan to Mull Acres, for distribution to UKC, promptly upon receipt of the Initial Loan described in Section 1.5(b)(i) hereof from Bikers Dream, the amount of such Initial Loan, pursuant to the terms of a note, which shall be non-interest bearing and payable in no event later than September 30, 1997, the proceeds of which shall be used by UKC to manufacture motorcycles;


(iii) Mull Acres must sell all motorcycles manufactured by it to the LLC, and may not sell any motorcycles to any other retailer, distributor, or any other person, and Mull Acres shall contribute all its dealers to the LLC;


(iv) The LLC shall be the exclusive distributor of motorcycles manufactured by Mull Acres world wide;


(v) Mull Acres shall sell its motorcycles to the LLC at a cost of $14,000 for a standard bike, and the LLC shall sell the motorcycles to Bikers Dream at a cost of $14,400 for such standard bikes;


(vi) The LLC will be the exclusive distributor of Bikers Dream for new motorcycles manufactured by third parties, and the LLC shall sell such motorcycles to Bikers Dream at cost;


(vii) Sales of motorcycles by the LLC to retailers other than Bikers Dream will be at prices as determined by the Management Board of the LLC, but shall not be at a price below the invoice price to Bikers Dream; and


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(viii) Mull Acres shall not engage in any retail sales of motorcycles, and shall present to Bikers Dream all opportunities for all such retail sales.


1.6 DEFINITIONS. Terms not otherwise defined in this Agreement shall have the meanings set forth in Article XIII.


1.7 TERM. The term of the LLC shall begin upon the filing of the Articles of Organization and shall continue until September 30, 1997 unless its existence is sooner terminated pursuant to Article XII of this Agreement, or unless its term is extended by agreement of the Members. The provisions of Article XI may extend beyond the term of the LLC according to their terms.


ARTICLE II

MEMBERSHIP

2.1 INITIAL MEMBERS. The Members of the LLC are Bikers Dream and Mull Acres, each of whom is admitted to the LLC as a Member as of the effective date this Agreement becomes effective.


2.2 REPRESENTATIONS AND WARRANTIES. Each Member hereby represents and warrants to the LLC and each other Member as follows:


(a) Authorization. It is duly organized, validly existing, and in good standing under the law of its state of organization and that it has full power and authority to execute and enter into this Agreement and to perform its obligations hereunder and that all actions necessary for the due authorization, execution, delivery and performance by that Member of this Agreement have been duly taken;


(b) Compliance with Other Instruments. The Member's authorization, execution, delivery, and performance of this Agreement do not conflict with any other agreement or arrangement to which such Member is a party or by which it is bound;


(c) Purchase Entirely for Own Account. The Member is acquiring its interest in the LLC for the Member's own account for investment purposes only and not with a view to or for the resale, distribution, subdivision or fractionalization thereof and has no contract, understanding, undertaking, agreement or arrangement of any kind with any Person to sell, transfer or pledge to any Person its interest or any part thereof nor does such Member have any plans to enter into any such agreement;


(d) Investment Experience. By reason of their business or financial experience, the Members have the capacity to protect their own interests in connection with the transactions contemplated hereunder, are able to bear the risks of an investment in the LLC, and at the present time could afford a complete loss of such investment;


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(e) Disclosure of Information. The Member is aware of the LLC's business affairs and financial condition and has acquired sufficient information about the LLC to reach an informed and knowledgeable decision to acquire an interest in the LLC;


(f) Federal and State Securities Laws. Assuming federal and state securities laws apply to the interests described herein, the Member acknowledges that the interests have not been registered under the Securities Act of 1933 or any state securities laws, inasmuch as they are being acquired in a transaction not involving a public offering, and, under such laws, may not be resold or transferred by the Member without appropriate registration or the availability of an exemption from such requirements. In this connection ...