Company Tax Matters Partner - Section 6231(a)(7) of the Code

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1 OPERATING AGREEMENT OF SportFit Nutrition LLC a Michigan Limited Liability Company THIS OPERATING AGREEMENT (this Agreement ) is made and entered into this day of, 2015, by and among the undersigned individuals and entities, as members (individually, a Member and collectively, the Members ) of SPORTFIT NUTRITION LLC, a Michigan Limited Liability Company (the Company ). As used in this Agreement, capitalized terms shall have the meanings ascribed to them in EXHIBIT B, unless they are expressly defined otherwise in this Agreement. R E C I T A L S WHEREAS, the Company was formed as of January 5 th WHEREAS, the Members of the Company desire to enter into this Agreement to define their rights and obligations. NOW, THEREFORE, in consideration of the premises, and the mutual covenants herein contained, the parties hereto agree as follows: 1.1 Formation. ARTICLE 1 ORGANIZATION The Company was formed as of January 5, 2014 as a Michigan Limited Liability Company pursuant to the Michigan Limited Liability Company Act (the Act ) by filing Articles of Organization (the Articles ) with the Michigan Department of Labor & Economic Growth, Bureau of Commercial Services, in accordance with the Act. 1.2 Name. The name of the Company shall be SportFit Nutrition LLC. The Company may also conduct its business under one or more assumed names. 1.3 Purposes. The Company is organized for the object and purpose of engaging in all such lawful transactions and business activities as may be determined from time to time by the Manager, subject to Section 6.2. The Company shall have any and all powers necessary or desirable to carry out the purposes and business of the Company, to the extent that limited liability companies under the Act may lawfully exercise the same.

2 1.4 Duration. The Company shall continue in existence for a perpetual term, or until the Company shall be sooner dissolved and its affairs wound up in accordance with the Act or this Agreement. 1.5 Offices and Resident Agent. The principal office of the Company shall be located at 5932 Belton Street Garden City Mi , or such other office within or without the State of Michigan as the Manager may from time to time determine. Unless and until the Manager decides to appoint another Resident Agent, the Resident Agent of the Company shall be William C. Koyl, whose address is Harman St, Melvindale, MI Books and Records. ARTICLE 2 BOOKS, RECORDS AND ACCOUNTING The Company shall maintain complete and accurate books and records of its business and affairs as required by the Act and such books and records shall be kept at the Company s principal office. 2.2 Fiscal Year; Accounting. The Company s fiscal year shall be the calendar year. The Manager shall choose the particular accounting methods and principles to be followed by the Company. 2.3 Capital Accounts. The Company shall maintain a separate Capital Account for each Member. Such Member s capital contributions and such Member s share of any Profits and items of income or gain of the Company shall increase the Capital Account of each Member. The Capital Account of each Member shall be decreased by distributions made to such Member and such Member s share of any Losses and items of expense or loss of the Company. In accordance with Section (b)(2)(iv)(q) of the Regulations, each Member s Capital Account shall be adjusted in a manner that maintains equality between the aggregate of all of the Members Capital Accounts and the amount of capital reflected on the Company s balance sheet as computed for book purposes. 2.4 Tax Matters Partner. The Manager is designated as the Company s Tax Matters Partner within the meaning of Section 6231(a)(7) of the Code, with full power and authority to act as such. The Tax Matters Partner (and the Units of the Tax Matters Partner) shall be free from all claims by the Company or the other Members by reason of any act performed for or on behalf of the Company as the Tax Matters Partner. The Company shall indemnify and hold harmless the Tax Matters Partner from any claim, demand or liability, and from any loss, cost or expense, including, but not limited to, 2

3 attorneys fees and court costs, which may be made or imposed upon the Tax Matters Partner by reason of any act performed for or on behalf of the Company as Tax Matters Partner. 2.5 Tax and Financial Information. As soon as reasonably practicable following the end of each fiscal year, the Manager, at the expense of the Company, shall cause to be prepared and furnished to the Members all information relating to the Company that is necessary for the preparation of the Members federal income tax returns, and such other financial information as the Manager decides to have prepared. All such financial statements shall be unaudited, unless the Manager determines otherwise. 3.1 Authorized Units. ARTICLE 3 CAPITAL CONTRIBUTIONS The Manager shall determine the total Units, which the Company has authority to issue, from time to time (which determination the Manager shall cause to be reflected as an addendum to the Unit Ownership Ledger maintained by the company). The total authorized Units shall initially be 2,000, Capital Contributions and Issuance of Units. (a) Prior to or contemporaneously with the execution of this Agreement, the Members have acquired (through the provision of services, a contribution of assets, or cash consideration, as applicable to each Member), and the Company has issued, 2,000,000 Units. (b) Subject to the reservation of Units pursuant to the terms of this Agreement or pursuant to any resolution of the Manager and to the other restrictions on issuance set forth herein and in the other agreements to which the Company is a party, the Company shall issue authorized but unissued Units of any class or series at such times and from time to time, to such Persons, in such amounts, at such price and on such other terms and conditions as shall be determined by the Manager and approved by a Supermajority in Interest. If any Units are repurchased, redeemed, or otherwise reacquired by the Company, such Units shall be returned to authorized but unissued Units, and such Units shall be available for reissuance in accordance with the terms of this Section 3.2. Other than as set forth in this Section 3.2(b), the Company shall not offer or issue any Units to any Person, without the approval of the Manager. (c) All Units issued hereunder shall be uncertificated; provided that the Manager may approve a specimen form of certificate and issue to the Unit holders such certificates specifying the number and type of Units held by each such Unit holder. (d) The Company shall create and maintain a ledger (the Unit Ownership Ledger ) setting forth the name of each Unit holder, the number of Units held by each such Unit holder and each Unit holder s Capital Account. The Unit Ownership Ledger is maintained at the company s headquarters. Upon any change in the number or ownership of outstanding Units 3

4 (whether upon an issuance of Units, a transfer of Units, a cancellation of Units or otherwise), the Company shall amend and update the Unit Ownership Ledger and shall deliver a copy of such updated ledger to each holder of Units upon request. Absent manifest error, the ownership interests recorded on the Unit Ownership Ledger shall be the conclusive record of the Units that have been issued and are outstanding. 3.3 Additional Capital Contributions. (a) After the Initial Issuance, subject to the provisions of this Section 3.3, the Manager, with the approval of a Supermajority in Interest, may cause the Company to issue additional Units of any series or class to any person or entity on such terms and for such consideration as the Manager in good faith deems appropriate. Any amendments to this Agreement, which are required in connection with such an issuance of additional Units, will be made in the sole and absolute discretion of the Manager, and the Members will execute any documents, which are reasonably required by the Manager in order to effectuate such amendments in connection with such issuances. In the event the Manager determines to effect such an offering of Units to obtain financing for the Company, the holders of the Units on the date hereof (collectively, the Pre-emptive Rights Holders ) shall have the pre-emptive right to purchase all or part of such Units on the identical terms and conditions (including the identical time for closing) as provided for in the offering. Prior to selling Units in an offering which is subject to the foregoing pre-emptive right, the Manager shall notify the Pre-emptive Rights Holders of the terms and conditions of the offering and each Pre-emptive Rights Holder shall have 15 business days within which to provide to the Company in writing notice of its election to purchase all or part of such Units. Each Pre-emptive Rights Holder will have the right to purchase its pro rata share of such Units solely in exchange for cash and its exercise notice will identify the number of Units it wishes to purchase. Any such Units which the Pre-emptive Rights Holders (or their permitted assignees) do not elect to purchase within the 15 business day election period may be sold to other investors on the prescribed terms and conditions provided that such Units are sold within 90 days following the expiration of the aforementioned 15-day period. ARTICLE 4 ALLOCATIONS AND DISTRIBUTIONS 4.1 Allocations of Profit and Loss. (a) After giving effect to the allocations set forth in Sections 4.1(b) and 4.1(c) hereof, Profit and Loss for any fiscal year shall be allocated among the Members pro rata, in accordance with their Units; provided, however, that no Loss shall be allocated to any Member for any fiscal year to the extent that such Loss would create or increase a deficit in such Member s Adjusted Capital Account (as hereinafter defined). (b) If, for a fiscal year, there is an increase in the amount by which any liability of the Company exceeds the Book Value of the assets of the Company which are subject to such liability (as determined under Section (d)(2)(ii) of the Regulations), such 4

5 that there is a net increase in partnership minimum gain or partner nonrecourse debt minimum gain of the Company, then (i) any nonrecourse deductions related to an increase partnership minimum gain for such year shall be allocated among the Members pro rata, in accordance with their Units, and (ii) any partner nonrecourse deductions related to an increase in partner nonrecourse debt minimum gain shall be allocated to the Member who bears the economic risk of loss with respect to the liability to which such partner nonrecourse deductions are attributable. If, for any fiscal year, there is a decrease in the amount by which any liability of the Company exceeds the Book Value of the assets of the Company subject to such liability (as determined under Section (d)(2)(ii) of the Regulations), then (i) each Member shall be specially allocated gross income in the amount of such Member s share of any net decrease in partnership minimum gain in accordance with Section (f) of the Regulations and (ii) each Member shall be specially allocated gross income in the amount of such Member s share of any net decrease in partner nonrecourse debt minimum gain in accordance with Section (i)(4) of the Regulations. The foregoing provisions of this Section 4.1(b) are intended to comply, and shall be interpreted consistently, with Section of the Regulations. Moreover, in the event any Member receives any distribution which creates or increases a deficit (negative balance) in its Adjusted Capital Account, items of income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such deficit as quickly as possible, provided that an allocation pursuant to this sentence shall be made only if and to the extent that such Member would have such a deficit after all other allocations provided for in this Section 4.1 have been tentatively made as if this sentence were not in the Agreement. The preceding sentence, and the proviso of Section 4.1(a), are intended to comply, and shall be interpreted consistently, with the alternate test for economic effect of Section (b)(2)(ii)(d) of the Regulations. (c) The proviso of Section 4.1(a) and the provisions of Section 4.1(b) above (collectively, the Regulatory Provisions ) are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, subject to the Regulatory Provisions, all allocations pursuant to the Regulatory Provisions shall be offset either with other allocations pursuant to the Regulatory Provisions or, if necessary, with curative allocations of other items of income, gain, loss or deduction pursuant to this Section 4.1(c). Therefore, notwithstanding any other provision of this Agreement, other than the Regulatory Provisions, allocations pursuant to the Regulatory Provisions shall be taken into account in allocating other items of income, gain, expense or loss among the Members so that, to the extent possible, the net amount of such allocations of other items and the allocations pursuant to the Regulatory Provisions to each Member are equal to the net amount that would have been allocated to such Member if the Regulatory Provisions were not part of this Agreement. In applying this Section 4.1(c), there shall be taken into account future allocations under the second sentence of Section 4.1(b) that, although not yet made, are likely to offset other allocations previously made under the first sentence of Section 4.1(b). (d) For purposes of this Agreement: (1) Adjusted Capital Account means, with respect to any Member, such Member s Capital Account, (i) reduced by those anticipated distributions described in Section l(b)(2)(ii)(d)(4)-(6) of the Regulations, and (ii) increased by the amount of any deficit in such Member s Capital Account that such Member is deemed obligated 5

6 to restore under any provision of the Regulations (including, without limitation, the amount of such Member s share of partnership minimum gain and share of partner nonrecourse debt minimum gain ). (2) Profit and Loss each means, for each fiscal year of the Company or other period, the Company s profit or loss for Federal income tax purposes, adjusted as follows: (i) add any tax-exempt income of the Company described in Section 705(a)(1)(B) of the Code; (ii) subtract any nondeductible expenditures of the Company described in Section 705(a)(2)(B) of the Code; and (iii) any preceding provision of this Section 4.1(d)(2) to the contrary notwithstanding, disregard any items of income, gain, expense or loss specially allocated pursuant to Section 4.1(b) or 4.1(c) hereof. (iv) The depreciation, amortization, or other cost recovery deduction (if any) taken into account for such fiscal year or other period with respect to any asset the Book Value of which differs from its adjusted basis for federal income tax purposes at the beginning of such fiscal year or other period shall be, in lieu of the depreciation, amortization or cost recovery deduction taken into account in computing such taxable income or loss, an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or cost recovery deduction bears to such beginning adjusted tax basis, in accordance with Section (b)(2)(iv)(g)(3) of the Regulations; (v) Any gain or loss realized by the Company upon the sale or other disposition of any property or asset of the Company shall be computed by reference to the Book Value of such property or asset, notwithstanding that its Book Value differs from its adjusted basis for federal income tax purposes; and (vi) If the Book Value of any Company property is adjusted as provided in the definition of Book Value, then the amount of such adjustment shall be treated as an item of gain or loss and included in the computation of such Profit or Loss. (3) Regulations mean the regulations promulgated by the U.S. Department of Treasury under Section 704(b) of the Code. (4) All items set off in quotation marks and not otherwise defined shall have the meanings ascribed to them in the Regulations. 6

7 4.2 Tax Allocations. (a) Except as provided in the following subsections of this Section 4.2, the income, gains, losses, deductions and credits of the Company will be allocated, for U.S. federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses, deductions and credits among the Members for computing their Capital Accounts; provided that, if any such allocation is not permitted by the Code or other applicable law, the Company s subsequent income, gains, losses, deductions and credits will be allocated among the Members so as to reflect as nearly as possible the allocation set forth herein in computing the Members Capital Accounts. (b) Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall be allocated among the Members in accordance with Section 704(c) of the Code so as to take account of any variation between the adjusted basis of such property to the Company for U.S. federal income tax purposes and its Book Value using any permissible method chosen by the Tax Matters Partner. (c) If the Book Value of any Company asset is adjusted pursuant to Section (b)(2)(iv)(f) of the Regulations, subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for U.S. federal income tax purposes and its Book Value in the same manner as under Section 704(c) of the Code using any permissible method chosen as reasonably determined by the Tax Matters Partner. (d) Allocations of tax credits, tax credit recapture, and any items related thereto shall be allocated among the Members according to their interests in such items as determined by the Tax Matters Member taking into account the principles of Section (b)(4)(ii) of the Regulations. (e) Allocations pursuant to this Section 4.2 are solely for purposes of U.S. federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member s Capital Account or share of Profits, Losses, distributions or other Company items pursuant to any provision of this Agreement. (f) The Tax Matters Partner may reasonably determine, but shall not be obligated, to elect to adjust the basis of the assets of the Company for U.S. federal income tax purposes in accordance with Section 754 of the Code. 4.3 Distributions. (a) The Excess Cash of the Company shall be distributed to the Members at such times as the Manager shall determine. All such distributions of Excess Cash shall be apportioned among the Members pro rata, based on their Units. (b) As used in this Agreement, Excess Cash means all cash and cash equivalent assets of the Company less any Reserves. 7

8 (c) In the event of any inconsistency between the foregoing provisions of this Section 4.3 and the provisions of Section 7.2 below, the latter provisions shall govern and control. 4.4 Tax Distributions. In addition to any distributions described in Section 4.3, the Company will, subject to applicable laws and any covenant or restriction contained in the Company's loan agreements and other agreements or obligations to which the Company or its properties are subject, cause the Company to distribute to the Members, within 60 days of the end of each fiscal year of the Company, 40% of the taxable income allocated to the Members in respect of such fiscal year (excluding any income allocated pursuant to Section 4.1(b) or 4.1(c)), as may be adjusted to account for the combined maximum federal and state income tax rate applicable to individuals (taking into account the deductibility of state income tax for federal income tax purposes) for individuals residing in Michigan, with such distribution to be made to the Members pro rata according to their Units. 4.5 Withholding. (a) Notwithstanding any provision herein to the contrary, each Member hereby authorizes the Company to withhold and to pay over, or otherwise pay, withholding tax or other similar taxes payable (pursuant to the Code or any provision of U.S. federal, state or local or non-u.s. tax law) by the Company. If and to the extent that the Company shall be required to withhold or pay any such withholding taxes or other similar taxes attributable to a Member, such Member shall be deemed for all purposes of this Agreement to have received a payment as of the time that such withholding tax or other similar tax is required to be withheld, which payment shall be deemed to be a distribution pursuant to Section 4.3 to the extent that such Member would have received a distribution but for such withholding, and otherwise shall be treated as an advance against any future distribution pursuant to such section. In the event that the Company withholds any amounts from distributions to any Member pursuant to this Section 4.5, the Company shall indicate the amount so withheld to such Member. (b) Any withholding referred to in this Section 4.5 shall be made at the maximum applicable statutory rate under the applicable tax law unless the Company shall have received evidence, satisfactory to the Company, to the effect that a lower rate is applicable, or that no withholding is applicable. 5.1 Restrictions on Transfer. ARTICLE 5 ASSIGNMENT OF UNITS The Members shall not Transfer any Units unless such Transfer is expressly authorized by the terms of this Agreement. Any purported Transfer in violation of the terms of this Agreement will be null and void and of no force and effect whatsoever. 8

9 5.2 Permitted Transfers. Notwithstanding anything in this Agreement to the contrary, each of the following Transfers are permitted under this Agreement (each, a Permitted Transfer ), (i) pursuant to Section 5.3 or 5.4 below, or (ii) any trust solely for the benefit of the Unit holder and/or the Unit holder's spouse and/or descendants; provided that in each case the restrictions, conditions, and obligations contained in this Agreement and any other agreement to which such Unit holder is a party shall continue to be applicable to such securities after any such Permitted Transfer, and the transferee(s) of such securities shall have agreed in writing to be bound by the provisions of such agreements. 5.3 Right of First Refusal. Any Member (a Selling Member ) may sell its Units pursuant to a bona fide written cash offer from an unrelated third party (a Bona Fide Offer ); provided such Member first offers the Units to the other Members and to the Company as follows: (a) The Selling Member shall offer to sell its Units first to the other Members in writing upon the same per-unit terms and conditions contained in the Bona Fide Offer (the Member Offer ). The Member Offer shall include a summary of all material terms of the Bona Fide Offer and attach a true and complete copy of the Bona Fide Offer and true and complete copies of all related documents. (b) The Member Offer shall be kept open for 30 days after the Member Offer is received by the other Members. The other Members may accept the Member Offer with respect to any or all of the Units by providing written notice thereof to the Selling Member within 30 days after its receipt of the Member Offer. To the extent the aggregate number of Units that the other Members desire to purchase exceed the number of Units included in the Member Offer, each Member shall be entitled to purchase such number of Units as will most closely preserve the Unit ownership ratio between such Members. (c) If the Members do not accept the Member Offer with respect to all of the Units, following the expiration of the 30-day period for accepting the Member Offer, the Selling Member shall offer to sell the remaining Units to the Company in writing upon the same per Unit terms and conditions contained in the Member Offer (the Company Offer ). The Company Offer shall include a summary of all material terms of the Bona Fide Offer and attach a true and complete copy of the Bona Fide Offer and true and complete copies of all related documents. (d) The Company Offer shall be kept open for 15 days after the Company Offer is received by the Company. The Company may accept the Company Offer with respect to all, but not less than all, of the remaining Units by providing written notice thereof to the Selling Member within 15 days after its receipt of the Company Offer. (e) Such purchase by any Member and/or the Company shall then be consummated within the time frame set forth in the Bona Fide Offer (but in any event not less than 60 days following later of (i) the date the Member Offer is received by the Members, or (ii) the date the Company Offer is received by the Company, if any). 9

10 (f) In the event the Members and/or the Company do not elect, in the aggregate, to purchase all of the Units, the Selling Member shall not be obligated to sell any Units to the Members or the Company and the Selling Member may then sell the Units to the third party pursuant to the Bona Fide Offer, but only upon the precise terms and conditions as stated in the Bona Fide Offer; provided, that such transaction is consummated within 120 days following the expiration of the last of the Member Offer or the Company Offer and such third party executes and delivers to the Company an instrument, in a form satisfactory to the Company, acknowledging and agreeing that such purchased Units shall remain subject to all of the other terms and conditions of this Agreement. In the event of any change in the terms and conditions of the Bona Fide Offer or in the event such transaction is not consummated within such 120-day period, then such Units shall not be sold or otherwise transferred to such third party without again complying with the terms of this Section 5.3 and offering the same to the non-selling Members and the Company in the same manner as set forth above. 5.4 Drag Along Rights. (a) If the Manager or a Majority in Interest (the Selling Group ) elects to consummate a Complete Sale Transaction, the Manager shall notify all other Members in writing of such election at least one week prior to the consummation thereof. Except as otherwise provided herein, upon request by the Selling Group, each Member will consent to and raise no objections to the proposed Complete Sale Transaction, waive any appraisal or dissenters rights in respect of such transaction, and take all other actions reasonably necessary or desirable to cause the consummation of the Complete Sale Transaction on the terms proposed by the Selling Group, including, without limitation, the execution of any merger, redemption, sale or other such agreement designed to facilitate such sale of the Company which is approved by the Selling Group in connection with such Complete Sale Transaction, except that no Member shall be required to sign any non-compete, non-disclosure, non-solicitation or other agreement or covenant that contains terms more onerous than those applicable to each Member under this Agreement, and no more than those imposed upon the Selling Group in connection with such Complete Sale Transaction; provided that, with respect to such sale: (x) no Member shall be required to make any representations and warranties, except as to valid title and the absence of liens with respect to such Units being transferred by such Member, the valid existence of such Member, the authority of such Member to enter into the transaction, the binding effect of such agreement upon such Member, and the absence of any conflicts under the charter documents of such Member with respect to the sale; (y) no Member shall be responsible for indemnities for damages except in the case of a breach of the covenants, representations and warranties made by such Member; and (z) no Member shall have any liability in excess of the net proceeds actually received by such Member in connection with such sale. (b) The obligations of the Members with respect to a sale of the Company are subject to the satisfaction of the following conditions: (i) the consideration payable upon consummation of such sale of the Company to all Members shall be allocated among the Members in the manner provided in Section 7.2; (ii) upon the consummation of the sale of the Company, all of the Members shall receive the same form of consideration per Unit, or if any Members are given an option as to the form of consideration to be received, all Members will be given the same option, and (if applicable) (iii) all holders of then currently exercisable options to acquire Units will either be given an opportunity to (A) exercise such options prior to the 10

11 consummation of the sale of the Company and participate in such sale as holders of such Units or (B) upon the consummation of the sale of the Company, receive in exchange for such options consideration equal to the amount determined by multiplying (1) the same amount of consideration per Unit the holder would have received had the holder exercised such options, less the exercise price per Unit, by (2) the number of Units purchasable upon exercise of such options. (c) If the Company enters into any negotiation or transaction for which Rule 506 promulgated by the SEC (or any similar rule then in effect) may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), each Member who is not an accredited investor (within the meaning of Rule 501(a) promulgated by the SEC) will, at the request of the Manager, appoint a purchaser representative (as such term is defined in Rule 501 promulgated by the SEC) approved by the Manager and the Company will pay the fees of such purchaser representative. If any such Member declines to appoint the purchaser representative approved by the Manager, such Member will appoint another purchaser representative, and such Member will be responsible for the fees of the purchaser representative so appointed. (d) Each Member will bear its pro rata share (based upon the relative amount of proceeds received with respect to Units sold) of the reasonable out-of-pocket costs of any sale of Units pursuant to a sale of the Company (but only if such sale of the Company is actually consummated) to the extent such costs are incurred for the benefit of all holders of Units and are not otherwise paid by the Company or the acquiring party. Costs incurred by or on behalf of a Member for its sole benefit will not be considered costs of the transaction hereunder. 5.5 Tag-Along Rights. In the event that any Selling Member proposes to sell their Units pursuant to a Bona Fide Offer to which the other Members and the Company do not, in the aggregate, exercise their rights under Section 5.3 to purchase all of the Units being offered for sale, it shall be a condition to the Transfer that the Selling Member cause the Bona Fide Offer to be extended to each other Member (the Remaining Members ) and that each Remaining Member have the opportunity to sell its Units pursuant to the Bona Fide Offer for the same consideration and otherwise on the same terms and conditions (including the giving of representations, warranties, covenants and indemnifications) to be received or given by the Selling Member (the Remaining Member Offer ). In order to exercise its rights under this Section 5.5, the Remaining Member must notify the Selling Member in writing, within 20 days after the waiver or expiration of the Remaining Member Offer, whether it desires to transfer its Units pursuant to the terms and conditions set forth in the Bona Fide Offer. Failure by any Remaining Member to provide such written notice within such 20-day period will be deemed to constitute an election by the Remaining Member not to exercise its rights under this Section 5.5. In the event that the number of Units the Members desire to sell exceeds the number of Units to be purchased in the Bona Fide Offer, the number of Units to be purchased shall be allocated to the selling Members on a pro rata basis according to the number of Units outstanding held by each Member desiring to sell its Units pursuant to the Bona Fide Offer. 11

12 5.6 Admission of Substitute Members. An assignee of a Member s Units shall be admitted as a substitute member and shall be entitled to all the rights and powers of the assignor, provided that (i) a Majority in Interest consents to the admission of such assignee as a substitute member and (ii) the assignee accepts, adopts, approves and agrees, in writing, to be bound by all of the terms and provisions of this Agreement. If admitted, the assignee, as a substitute member, shall have, to the extent assigned, all of the rights and powers, and shall be subject to all of the restrictions and liabilities, of the assigning Member. The assignor shall not thereby be relieved of any of his unperformed obligations to the Company. 5.7 Withdrawal. Subject to the other provisions of this Article 5, no Member shall have any right to withdraw from the Company. A Member who withdraws in violation of this Agreement shall not be repaid his capital contribution or receive the value of his Units. 5.8 Death, Insolvency or Bankruptcy of a Member. (a) Upon the death, incompetency, insolvency, bankruptcy or any other event, which terminates the continued membership in the Company of a Member ( Disabled Member ), the Company shall not dissolve. (b) The successor in interest of a Disabled Member shall not become a Member, shall not have any of the rights of a Member, and shall be regarded merely as an assignee of the Disabled Member s Units. Without limiting the foregoing, the successor in interest of a Disabled Member shall not have any right to vote on whether to remove the Manager under Section 6.1(a) or on any other decision under Section 6.2. (c) The estate of a Disabled Member (and all persons who are liable for the obligations of such Disabled Member) shall continue to be liable for the obligations of such Disabled Member. (d) Neither the death, incompetency, insolvency, nor bankruptcy of the trustee of a trust, which is a Member, shall cause such Member to be a Disabled Member. Instead, such trust shall continue to be the Member with the successor Trustee of such trust exercising all rights of such Member. 6.1 Management. ARTICLE 6 MANAGEMENT (a) The business and affairs of the Company shall be managed by a manager, who shall initially be William C. Koyl (the Manager ). The Manager shall be the Manager until his death, resignation or removal. The Manager may resign at any time by notice to the Members. The Manager shall not be subject to removal for cause except by a Supermajority in Interest for cause. For this purpose, cause means the failure by the Manager to discharge his 12

13 duties as a manager in the manner prescribed by Section 404 of the Act. In the even of the resignation or removal of the Manager, a Majority in Interest shall select his replacement. (b) Subject to Section 6.2 below and this Section 6.1(b), the Manager is authorized and empowered to act for and manage the Company to the fullest extent permitted by law. No Member (other than in his capacity as Manager) shall take or purport to take any action on behalf of the Company. Subject to Section 6.2 below, the Manager may bind the Company in any manner whatsoever. Subject to and without limiting the foregoing, the Manager and any officer of the Company authorized in writing by the Manager, shall have the power to: (i) open one or more depository accounts and make deposits into and checks and withdrawals against such accounts; (ii) borrow money and incur liabilities and other obligations; (iii) enter into any and all agreements and execute any and all contracts, documents and instruments; (iv) engage employees and agents, define their respective duties, and establish their compensation or remuneration; (v) obtain insurance covering the business and affairs of the Company and its property and the lives and well being of its employees and agents; (vi) commence, prosecute or defend any proceeding in the Company s name, and (vii) participate with others in partnerships or joint ventures, (viii) sell, exchange, lease, license or otherwise transfer of all or substantially all of the assets and property of the Company, (ix) merge or dissolve the Company; and (x) issue additional equity interests in the Company. (c) No person dealing with the Company shall be required to investigate or inquire into either Manager s authority to execute agreements, instruments or documents, or to take actions, on behalf of the Company, and any person dealing with the Company shall be entitled to rely upon any agreement, instrument or document executed, and any action taken, by either Manager on behalf of the Company, and the Company shall be bound thereby. 6.2 Matters Reserved to Members. Any other provision of this Agreement to the contrary notwithstanding, the Manager shall not, without the written consent of a Supermajority in Interest, do any of the following: (a) (b) (c) (d) ordinary course; (e) liquidate, dissolve or wind-up the affairs of the Company; amend, alter, or repeal any provision of this Agreement; purchase or redeem or pay for any outstanding Units; sell any material assets of the Company other than inventory in the consummate any Complete Sale Transaction; or (f) make any loan or advance to any person, including any employee or officer, except advances and similar expenditures in the ordinary course of business or under the terms of an employee incentive plan approved by a Supermajority in Interest. 13

14 6.3 Duties of Manager; Liability. (a) The Manager shall devote such time and attention to the business of the Company as the Manager shall determine, in his sole and absolute discretion, to be necessary or appropriate for the conduct of such business. (b) The Manager (and affiliates of the Manager), subject to Section 6.2, shall have the right to contract and otherwise deal with the Company with respect to the sale or lease of real and/or personal property, the rendition of services, the lending of money, and for other purposes, and to receive therefor such purchase price, costs, fees, commissions, interest, compensation and/or other amounts and/or forms of consideration as such Manager may deem appropriate, without being subject to claims of self-dealing. (c) The Manager shall not be liable for monetary damages to the Company for any act, or omission to act, on behalf of the Company, except for (i) receipt of a financial benefit to which such Manager is not entitled, (ii) a knowing violation of law or (iii) a distribution which renders the Company insolvent in violation of Section 308 of the Act. 6.4 Indemnification. To the fullest extent allowed by law, the Company shall indemnify, defend and hold harmless the Manager from any claim or liability, and from any loss, cost or expense, including, but not limited to, attorneys fees and court costs, which may be made or imposed upon the Manager by reason of any act performed for or on behalf of the Company or in furtherance of the Company s business, or any omission to act, except for (i) the receipt of a financial benefit to which the Manager is not entitled, (ii) a knowing violation of law or (iii) a distribution which renders the Company insolvent in violation of Section 308 of the Act. 7.1 Dissolution. ARTICLE 7 DISSOLUTION AND WINDING UP The Company shall dissolve and its affairs shall be wound up on the first to occur of the following events: (a) at any time specified in the Articles or this Agreement; (b) upon the happening of any event specified in the Articles or this Agreement as causing a dissolution; or (c) the decision of the Manager to dissolve the Company upon the approval of a Supermajority in Interest. 7.2 Winding Up. Upon dissolution, the Company shall cease carrying on its business and affairs and shall commence the winding up of the Company s business and affairs and the liquidation of its assets. 14

15 Upon the winding up of the Company, the assets of the Company shall be distributed first to creditors to the extent permitted by law, in satisfaction of the Company s debts, liabilities and obligations, and then among the Members pro rata, in accordance with their Units. Such proceeds shall be paid to such Members within ninety (90) days after the date of winding up. ARTICLE 8 NONCOMPETITION/INTELLECTUAL PROPERTY 8.1 Noncompetition. Each Member (each a Restricted Person and collectively the Restricted Persons ) hereby acknowledges that such Member is familiar with the Company's trade secrets and with other Confidential Information. Except as provided below, each Restricted Person acknowledges and agrees that the Company would be irreparably damaged if such Restricted Person were to provide services to any Person competing with the Company or engaged in a similar business and that such competition by such Restricted Person would result in a significant loss of goodwill by the Company. Each Restricted Person further acknowledges and agrees that the covenants and agreements set forth in this Section 8.1 were a material inducement to the other Members to enter into this Agreement and that the Members would not obtain the benefit of the bargain set forth in this Agreement as specifically negotiated by the parties hereto if any of the Restricted Persons breached the provisions of this Section 8.1. Therefore, each of the Restricted Persons agrees that, for so long as such Restricted Person holds any Units in the Company and for a period of 3 years thereafter, such Restricted Person shall not (and shall cause each of its Affiliates not to) directly or indirectly own any interest in, manage, control, participate in (whether as an officer, director, employee, partner, agent, representative or otherwise), consult with, render services for, or in any other manner engage anywhere in the Restricted Territories in any business engaged directly or indirectly in the business of manufacturing or distributing nutritional beverages as currently conducted or contemplated by the Company as of the date hereof; provided, that nothing herein shall prohibit any of the Restricted Persons or their Affiliates from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded so long as none of such Persons has any active participation in the business of such corporation. For purposes of this Agreement, Restricted Territories shall mean all states, possessions, territories or jurisdictions of the United States and any other territory in which the Company sells products. Each of the Restricted Persons acknowledges that the Company's business has been conducted or is presently proposed to be conducted throughout the Restricted Territories and that the geographic restrictions set forth above are reasonable and necessary to protect the goodwill of the Company's business. (a) If, at the time of enforcement of the covenants contained in this Article 8 (the Restrictive Covenants ), a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed and directed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. Each of the Restricted Persons has consulted with legal counsel regarding the Restrictive Covenants and based on such consultation has determined and hereby acknowledges that the Restrictive Covenants are reasonable in terms of duration, scope and area restrictions and are 15

16 necessary to protect the goodwill of the Company's business and the substantial investment in the Company made by the Members. (b) If any of the Restricted Persons breaches, or threatens to commit a breach of, any of the Restrictive Covenants, the Company shall have the right and remedy to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, without the need to prove irreparable injury or post bond, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. The foregoing rights and remedies shall be independent of the others and severally enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. 8.2 Intellectual Property. Each Member acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, analyses, reports, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information which relate to the Company's or any of its subsidiaries actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by the Company or its employees ( Work Product ), belong to the Company or such subsidiary and each Member hereby assigns, and agrees to assign, all of the above Work Product to the Company or such subsidiary. ARTICLE 9 SECURITIES LAWS 9.1 Compliance with State and Federal Securities Laws. (a) Each of the Members acknowledges that he is aware that the Units have not been registered for sale under the Securities Act of 1933, as amended (the Federal Act ), or under the securities laws of any state, but have been sold in reliance upon exemptions under said laws. (b) Notwithstanding any provisions contained in this Agreement to the contrary, no Member s Units may be offered or sold and no transfer of such interest will be made by any Member unless (at the expense of the transferring Member): (i) such Unit is registered under the Federal Act and/or any applicable state securities laws, or (ii) an exemption from such registration applies. 9.2 Legend. If at any time the Members Units are evidenced by certificates or other documents, each such certificate or other document shall contain a legend stating that (a) such Units (i) have not been registered under the Federal Act, the Michigan Uniform Securities Act (the Michigan 16

17 Act ) and, if applicable, the securities laws of any other state, (ii) have been issued pursuant to a claim of exemption from the registration provisions of the Federal Act, the Michigan Act and, if applicable, the securities laws of other states, and (iii) may not be sold, transferred or assigned without compliance with the registration provisions of the Federal Act, the Michigan Act, and any other applicable federal or state securities laws or compliance with applicable exemptions therefrom, and (b) the sale, transfer or assignment of such Units is further subject to restrictions contained in this Agreement, and such Units may not be sold, transferred or assigned, except to the extent permitted by, and in accordance with, the provisions of this Agreement Terms. ARTICLE 10 MISCELLANEOUS PROVISIONS Nouns and pronouns will be deemed to refer to the masculine, feminine, neuter, singular and plural, as the identity of the person or persons, firm or corporation may in the context require Article and Section Headings. The Article and Section headings contained in this Agreement have been inserted only as a matter of convenience and for reference, and in no way shall be construed to define, limit or describe the scope or intent of any provision of this Agreement Counterparts. This Agreement may be executed in several counterparts, each of which will be deemed an original but all of which will constitute one and the same Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. This Agreement supersedes any and all other agreements, either oral or written, among the parties hereto with respect to the subject matter hereof Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted Amendment. This Agreement may be amended only by consent of a Supermajority in Interest. 17

18 10.7 Notices. Any notice permitted or required under this Agreement shall be conveyed in writing to the party at the address set forth in the signature pages attached hereto or at such other address as a party may provide pursuant to a notice given to the other parties hereunder and will be deemed to have been given, when deposited in the United States mail, postage prepaid, or when delivered in person, or by courier, by.pdf or by facsimile transmission Binding Effect. Subject to the provisions of this Agreement relating to transferability, this Agreement will be binding upon and shall inure to the benefit of the parties, and their respective heirs, successors and assigns Governing Law. This Agreement is being executed and delivered in the State of Michigan and shall be governed by, and construed and enforced in accordance with, the laws of the State of Michigan Consent to Jurisdiction/Waiver of Jury Trial. Each of the Members hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of Michigan located in Oakland County and the United States District Court for the Eastern District of Michigan for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each Member hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the Members hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each Member hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE MEMBERS HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. [Signatures on following pages] 18

19 EXHIBIT A TO AMENDED AND RESTATED OPERATING AGREEMENT OF SportFit Nutrition, LLC a Michigan Limited Liability Company This page left intentionally blank. Exhibit A-1

20 This page left intentionally blank. Exhibit B-20