HomeMy WebLinkAboutLIABILITY AGREEMENT 2 - 18-00080 - Approx 472 N Yellowstone Hwy - Thomson Farms Prelim. Plat
LIMITED LIABILITY COMPANY AGREEMENT
OF
RS17 REXBURG PREFERRED LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) is made as
of March 2, 2017, by and among RS17 Rexburg Manager LLC, a Delaware limited liability
company, as the managing member (the “Managing Member”), and the persons whose names
are set forth on Exhibit A as Series A Preferred Members (collectively, the “Series A Preferred
Members”), and RS17 Rexburg Preferred LLC, a Delaware limited liability company (the
“Company”).
In consideration of the covenants and conditions set forth in this Agreement, the parties
agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the following respective
meanings:
1.1 Accrual Period: means the period from and including a Distribution Date
to but excluding the next Distribution Date, except that the first Accrual Period shall be the
period from and including the date hereof to but excluding the first Distribution Date thereafter.
1.2 Act: Delaware Limited Liability Company Act, as amended from time to
time.
1.3 Adjusted Capital Account Deficit: With respect to any Member, the
deficit balance, if any, in such Member’s Capital Account as of the end of the relevant fiscal
year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Member is
obligated to contribute to the Company (pursuant to the terms of this
Agreement or otherwise) or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations Section 1.704-
2(g)(1) or Regulations Section 1.704-2(i)(5), as applicable; and
(b) Debit to such Capital Account the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of “Adjusted Capital Account Deficit” is intended to
comply with Regulations Section 1.704-1(b)(2)(ii)(d), and shall be interpreted consistently
therewith.
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1.4 Affiliate: With respect to a specified Person, a Person who, directly or
indirectly through one or more intermediaries, controls, is controlled by or is under common
control with, the specified Person (a “Controlled Affiliate”). With respect to an entity, a
Controlled Affiliate means any Person who, directly or indirectl y, is the beneficial owner of 50%
or more of any class of equity securities of, or otherwise has a substantial beneficial interest in,
the specified Person or of which the specified Person has a substantial beneficial interest. An
Affiliate does not include a Person who is a partner in a partnership or joint venture with the
Company or any Member if such Person is not otherwise an Affiliate of the Company or any
Member.
1.5 Available Cash: Means the excess, if any, of (i) the sum of (A) the
amount, if any, of all cash received by the Company during a period in question (excluding
Capital Contributions), (B) amounts released from reserves during such period, and (C) any other
working capital of the Company existing at the start of such period over (ii) the sum of (D) all
amounts accrued and payable in such period on account of expenses and capital expenditures
incurred in connection with the Company’s business (including, without limitation, normal
course general operating expenses and taxes to the extent provided for in the Operating Plan and
Budget but not amortization of or interest on any debt of the Company), (E) any amounts due
with respect to the debts and obligations of the Company, and (F) such reserves as may be
deemed necessary or prudent, in the reasonable judgment of the Managing Member, for the
working capital and future needs of the Company, if any.
1.6 Bankruptcy: With respect to any Member, (i) the filing by that Member of
a voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any
form, of his debts under Title 11 of the United States Code or any other Federal or state
insolvency law, or a Member’s filing an answer consenting to or acquiescing in any such
petition, (ii) the making by that Member of any assignment for the benefit of his creditors or
(iii) the expiration of 60 days after the filing of an involuntary petition under Title 11 of the
United States Code, an application for the appointment of a receiver, trustee or custodian for the
assets of that Member, or an involuntary petition seeking liquidation, reorganization,
arrangement or readjustment of its debts under any other Federal or state insolvency law,
provided that the same shall not have been vacated, set aside or stayed within such 60-day
period.
1.7 Capital Accounts: The capital accounts of the Members, maintained in
accordance with Article 4.
1.8 Capital Contributions: with respect to any Member, shall mean any
contribution of cash or property to the capital of the Company made by such Member as set forth
on Exhibit A.
1.9 Capital Proceeds: The meaning set forth in Section 5.2 hereof.
1.10 Changeover Event: The meaning set forth in Section 9.2.
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1.11 Code: The Internal Revenue Code of 1986, as amended from time to time,
or any similar Federal internal revenue law enacted in substitution for the Code.
1.12 Common Equity Member: Any Member other than the Series A Preferred
Members.
1.13 Company: RS17 Rexburg Preferred LLC, a Delaware limited liability
company.
1.14 Company Percentage: With respect to any Member, the Company
Percentage set forth opposite such Member’s name on Exhibit A.
1.15 Depreciation: With respect to each taxable year or other period, an
amount equal to the depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for Federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount that bears the same ratio to such beginning Gross
Asset Value as the Federal income tax depreciation, amortization, or other cost recovery
deduction for such year or other period bears to such beginning adjusted tax basis; provided,
however, that if the Federal income tax depreciation, amortization, or other cost recovery
deduction for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Managing Member.
1.16 Disposition (Dispose): Any sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation, encumbrance, disposition or other transfer, whether
absolute or as security (including transfers by operation of law and involuntary transfers).
1.17 Distributions: Any distributions of cash or other assets of the Company.
1.18 Distribution Date: In any calendar month, the ninth (9th) day of the month
1.19 Gross Asset Value: With respect to any asset of the Company, the asset’s
adjusted basis for Federal income tax purposes, except that the Gross Asset Values of all
Company assets shall be adjusted to equal their respective gross fair market values (taking into
account Section 7701(g) of the Code), as reasonably determined by the Managing Member,
(A) immediately before the acquisition of an additional interest in the Company by any new
or existing Member in exchange for more than a de minimis Capital Contribution, and
(B) immediately before the distribution by the Company to a Member of more than a de minimis
amount of Company assets as consideration for an interest in the Company, in either case if the
Managing Member reasonably determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Members, (C) immediately before the liquidation of
the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), and (D) in
connection with an election under Sections 734(b) or 743(b) of the Code, but only as provided in
Regulations Section 1.704-1(b)(2)(iv)(m), and, thereafter, shall be further adjusted by the
Depreciation taken into account with respect to such asset for purposes of computing Profits and
Losses.
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1.20 Majority: As to the Series A Preferred Members, a majority shall
constitute votes from Series A Preferred Members holding 51% or greater of the Series A
Preferred Units. A vote may be taken electronically or otherwise, as determined by the Managing
Member.
1.21 Members: The Managing Member, the Series A Preferred Members, and
any other Member admitted to the Company under this Agreement.
1.22 Membership Interest: The ownership interest of any Member in the
Company.
1.23 Nonrecourse Debt: Any “nonrecourse liability” as defined in Regulations
Section 1.752-1(a)(2).
1.24 Operating Plan and Budget: Has the meaning set forth in Section 7.4.
1.25 Partner Minimum Gain: As determined in accordance with Regulations
Section 1.704-2(i)(3) and 1.704-2(i)(4).
1.26 Partner Nonrecourse Debt: Has the meaning set forth in Regulations
Section 1.704-2(b)(4).
1.27 Partner Nonrecourse Deductions: Has the meaning set forth in
Regulations Section 1.704-2(i)(2).
1.28 Partnership Minimum Gain: Has the meaning set forth in Regulations
Section 1.704-2(d).
1.29 Partnership Nonrecourse Deductions: Has the meaning set forth in
Regulations Section 1.704-2(b)(1) and 1.704-2(c).
1.30 Person: An individual, trust, estate, partnership, joint venture, association,
company, corporation or other entity.
1.31 Preferred Return: means, with respect to any Accrual Period, an amount
equal to the product of (i) the outstanding Unreturned Capital Contribution of the Series A
Preferred Members during such period multiplied by (ii) the Preferred Return Rate for such
Accrual Period, multiplied by (iii) a fraction the numerator of which is the number of days in
such Accrual Period and the denominator of which is 360; it being understood that the Preferred
Return on any particular portion of the Series A Preferred Members’ Unreturned Capital shall
only accrue from the date on which it was funded.
1.32 Preferred Return Rate: means, for any Accrual Period, a rate equal to ten
percent (10%) per annum, cumulative and compounded annually to the extent not paid on a
Distribution Date.
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1.33 Profits and Losses: With respect to each taxable year or other period, an
amount equal to the Company’s taxable income or loss for such year or period, determined in
accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included
in taxable income or loss), with the following adjustments:
(i) Any income of the Company that is exempt from Federal income tax
and not otherwise taken into account in computing Profits or Losses pursuant to this definition
of Profits and Losses shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or
Losses pursuant to this definition of Profits and Losses shall be subtracted from such taxable
income or loss;
(iii) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to the definition of Gross Asset Value herein, (x) any difference between such Gross
Asset Value and the prior Gross Asset Value of such asset (as previously adjusted) shall be
treated as gain or loss, as the case may be, from the Disposition of such asset for purposes of
computing Profits or Losses and (y) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss, there shall
be taken into account Depreciation for such fiscal year or other period, computed in
accordance with the definition of Depreciation herein;
(iv) Gain or loss resulting from any Disposition of any Company asset with
respect to which gain or loss is recognized for Federal income tax purposes shall be computed
by reference to the Gross Asset Value of the asset Disposed of, notwithstanding that the
adjusted tax basis of such asset differs from its Gross Asset Value; and
(v) Notwithstanding any other provision of this definition of Profits and
Losses, any items that are specially allocated pursuant to Section 6.2 shall not be taken into
account in computing Profits or Losses.
1.34 Property: That certain real property known as 900 N Yellowstone
Highway, Rexburg, Idaho.
1.35 Regulations: The Treasury Regulations promulgated under the Code.
1.36 Unreturned Capital Contribution: With respect to any Member, such
Member’s Capital Contributions to the Company, reduced (but not below zero) by any
distributions to such Member pursuant to (or by reference to) Article 5 and Section 10.3(a)(iii).
ARTICLE 2
GENERAL PROVISIONS
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2.1 Formation. On March 2, 2017, the Managing Member, in accordance with
Section 18-201 of the Act, caused a certificate of formation to be filed with the Secretary of State
for the State of Delaware as File Number 6203412. The execution, delivery and filing of the
Certificate of Formation, and all actions taken in connection with the formation of the Company,
are hereby adopted, approved, ratified and confirmed by the Members. The provisions of the Act
shall govern the rights and obligations of, and the relationships among, the Members except as
modified by the provisions of this Agreement.
2.2 Further Action. The Members hereby agree to take any and all action as
may be required, from time to time, under the laws of the State of Delaware, to give effect to,
and continue in good standing, the Company in each jurisdiction where such qualification or
registration is required or desirable as determined by the Managing Member.
2.3 Name of the Company; Registered Office and Agent. The name of the
Company shall be “RS17 Rexburg Preferred LLC ” or such other name as the Managing Member
may from time to time determine. The Managing Member shall have the right to cause the
Company to operate under one or more assumed names where required to comply with the laws
of any states in which the Company is doing business. The Managing Member shall cause to be
filed on behalf of the Company such assumed or fictitious name certificate or certificates or other
similar documents as may from time to time be required by law for the formation and
continuation of the Company as a limited liability company under the laws of Delaware
applicable to limited liability companies and the laws of such other states in which the Company
is doing business regarding the qualification of foreign limited liability companies. The initial
address of the Company’s registered office in Delaware and its initial registered agent at such
address for service of process is Incorp Services, Inc., 919 North Market Street, Suite 425,
Wilmington, DE 19801.
2.4 Business of the Company. The business of the Company shall be to own
the Property, and to achieve current cash flow and long-term capital appreciation on the
Members’ capital by doing, directly or indirectly, any or all of the following: (i) acquire, lease,
operate, hold and otherwise deal with the Property; (iii) make, enter into, perform and carry out
any arrangements, contracts or agreements consistent with the foregoing and to do any and all
things necessary or incidental to any of the foregoing to carry out and further the business of the
Company as contemplated by this Agreement. The Company shall not engage in any business or
activity not authorized by this Agreement.
2.5 Place of Business. The Company’s principal place of business shall be at
such place as the Managing Member may, from time to time, determine.
2.6 Duration of the Company. The Company commenced as of the date of the
filing of a Certificate of Formation for the Company in accordance with the Act, and shall
continue indefinitely unless terminated at an earlier date in accordance with Article 9 of this
Agreement.
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2.7 Title to Company Property. All property owned by the Company, whether
real or personal, tangible or intangible, shall be owned by the Company as an entity, and no
Member, individually, shall have any ownership interest in that property.
2.8 No State-Law Partnership. The Members intend that the Company shall
not be a partnership (including a limited partnership) or joint venture, and that no Member or
Members shall be a partner or joint venturer of any other Member or Members, for any purposes
other than federal and, if applicable, state income tax purposes, and this Agreement shall not be
construed to the contrary. The Members intend that the Company shall be treated as a
partnership for federal and, if applicable, state income tax purposes, and each Member and the
Company shall file all tax returns and shall otherwise take all tax and financial reporting
positions in a manner consistent with such treatment and shall exercise commercially reasonable
efforts to cause the Company to remain classified as a partnership for federal and, if appli cable,
state income tax purposes.
ARTICLE 3
MANAGEMENT
3.1 Management of the Company. Subject to the terms and conditions of this
Agreement, the overall management and control of the day-to-day business and affairs of the
Company shall be vested in RS17 Rexburg Manager LLC, a Delaware limited liability company.
Except as otherwise expressly provided in this Agreement, all decisions with respect to any
matter set forth in this Agreement or otherwise affecting or arising out of the conduct of the
business of the Company shall be made by the Managing Member. Except as otherwise
expressly provided in this Agreement, with respect to all of its rights, powers and responsibilities
under this Agreement, the Managing Member is authorized to execute and deliver, in the name
and on behalf of the Company, all such agreements, documents and other instruments as it deems
proper, all on such terms and conditions as it deems necessary or appropriate for the purposes of
the Company.
3.2 Specific Responsibilities of the Managing Member. In addition to the
general rights of the Managing Member, the Managing Member shall also provide or cause the
property manager to provide the following services:
(a) Review bills for real estate taxes, improvements assessments and
other like charges which are or may become liens against the Property and, as part of the
Operating Plan and Budget recommend payment, appeal or application for abatement as in its
reasonable judgment it shall determine; and assist the Company in the preparation and
prosecution of any such appeal or application for abatement;
(b) At the Managing Member’s discretion, the Company may issue a
loan to a developer to perform certain entitlement and development activities, including but not
limited to preliminary studies, engineering, architecture, planning and rezoning efforts intended
to enhance the value of the Property;
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3.3 Limitations on the Managing Member’s Authority. Notwithstanding any
provision of this Agreement to the contrary, the Managing Member shall not, without the prior
written consent of a Majority of the Series A Preferred Members, engage in any of the following
actions with respect to the Company (each, a “Major Decision”); provided, however, that the
Managing Member shall promptly and timely notify each Series A Preferred Member of the
Managing Member’s proposed course of action with respect to any such Major Decision and
(except as may otherwise be provided in this Agreement), if a Series A Preferred Member fails to
object in writing within fifteen (15) business days of such notice, such failure to timely object
shall mean that the Managing Member’s proposed course of action shall have been accordingly
consented to by the Series A Preferred Member:
(a) Admit any Person as a Member except as provided in Section
4.2(b) or require any Capital Contribution except as provided in Article 4;
(b) Amend this Agreement in any manner materially adverse to the
Series A Preferred Members’ interest herein.
(c) To sell or otherwise dispose of any of the assets of the Company,
or to sell or otherwise dispose of the Property;
(d) To enter into any joint venture investment with any Person;
(e) To merge the Company with or to consolidate the Company with
any Person, or otherwise cause the Company to participate in any reorganization with any
Person;
(f) To admit any Person as a new Member, exercise an option to
repurchase any Member’s interest pursuant to this Agreement, or appoint an additional
Managing Member of the Company;
(g) To dissolve the Company;
(h) To file a voluntary petition in bankruptcy or liquidation, or appoint
a receiver for the Company;
(i) Except (i) in the ordinary course of business of the Company, (ii)
in connection with the acquisition or refinance of the Property, and (iii), to execute on behalf of
the Company any instruments and documents, including, without limitation, checks, drafts, notes
and other negotiable instruments, mortgages or deeds of trust, security agreements, and financing
statements, providing for the acquisition, mortgage or disposition of the Company’s property;
(j) To borrow money from banks, other lending institutions, or
Members (except for loans made pursuant to Section 3.3.3), or in connection therewith to
encumber and grant security interests in the assets of the Company to secure payments of the
borrowed sum other than to secure a new loan for the Property;
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(k) To acquire by purchase, ground lease, or otherwise, any real or
personal tangible property other than the Property;
(l) To enter into a ground lease of the entire Property;
(m) To confess a judgment against the Company.
(n) To terminate any property management agreement previously
approved by the Series A Preferred Members.
(o) With respect to the Company, the approval and adoption of any
construction budget and/or any amendments thereto in excess of $100,000.
(p) The delegation by the Managing Member of any of its duties.
(q) With respect to the Company, entering into, terminating, or
amending contracts representing over One Hundred Thousand Dollars ($100,000.00) annually
(“Major Contracts”), including without limitation the property management agreement to be
entered into with the management company.
(r) With respect to the Company, undertake any action the costs of
which would exceed the Operating Plan and Budget, including any ground lease, except where
the particular expense relates to a budgeted item and it exceeds the budgeted amount by no more
than Fifty Thousand Dollars ($60,000.00), and it can be passed through as an operating expense;
(s) the particular expense is no more than Twenty-Five Thousand
Dollars ($25,000.00), of a capital nature, cannot be passed through (because it is reasonably
determined by Managing Member that by passing it through the operating costs would exceed
market), but the expense is deemed to be non-discretionary by the Managing Member acting
reasonably and as verified by an independent third party. In addition, the capital expenditure
must be of similar type and quality to the item(s) currently existing at the Property.Transfer the
Managing Member’s interest, or install a Substitute Managing Member, without the consent of a
Majority of the Series A Preferred Members.Hold the Property for a period of greater than five
(5) years from the date of this Agreement, Payment of any fees, salaries, draws, or similar
amounts to Managing Member (or any affiliate thereof), except for any fees approved by the
Series A Preferred Members.Take any Bankruptcy action with respect to the Company.
3.3 Limitations on Series A Preferred Members. Except as specifically set
forth above or elsewhere in this Agreement, the Series A Preferred Members, in their capacities
as Series A Preferred Members, shall have the authority or power to vote with respect to any
action of the Company, or to act as agent for or on behalf of the Company or any other Member,
to do any act that would be binding on the Company or any other Member or to incur any
expenditures on behalf of or with respect to the Company.
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3.4 Services of the Managing Member. The Managing Member shall devote
sufficient time and effort to the business of the Company as may be necessary to prom ote the
best interests of the Company and the mutual interests of the Members; however, it is
specifically understood and agreed that the Managing Member and its officers and directors and
their Affiliates shall not be required to devote full time to the business of the Company and that
the Managing Member and its Affiliates may at any time and from to time engage in and possess
interests in other business ventures of any and every type and description, independently or with
others, and neither the Company nor any Member shall by virtue of this Agreement or otherwise
have any right, title or interest in or to such independent ventures.
3.5 Managing Member Duties.
(a) The Members acknowledge that the Managing Member is the
designee of all of the Members and has fiduciary obligations or other duties to all of the
Members, other than as expressly provided in the Act or this Agreement. The Managing
Member shall not, in any way, be deemed to guarantee the return of the Members’ Capital
Contributions or a profit for the Members from the operations of the Company, and the
Managing Member shall not be liable to the Company or to any Member, or to any successor,
assignee, or transferee of the Company or of any Member, for any losses, claims, damages, or
liabilities sustained by the Company or any Member.
(b) The Managing Member shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other financial data, in each
case prepared in good faith or presented by: (i) one or more officers, agents or employees of the
Company; or (ii) counsel, public accountants or other Persons as to matters that the Managing
Member believes to be within such Person’s professional or expert competence.
(c) The Managing Member, in its capacity as such, shall not be liable
to the Company or the Members for any debts, obligations or liabilities of the Company or any
other Managing Member or Member, whether arising in tort, contract or otherwise, solely by
reason of being the Managing Member or agent or acting (or omitting to act) in such capacities
or participating in the conduct of the business of the Company; provided, however, that the
liability of the Managing Member shall not be eliminated or limited if a judgment or other final
adjudication adverse to the Managing Member establishes (i) that its acts were committed in bad
faith or were the result of active and deliberate dishonesty and were material to the cause of
action so adjudicated or (ii) that the Managing Member personally gained in fact a financial
profit or other advantage to which the Managing Member was not legally entitled.
(d) The failure of the Company to observe any formalities or
requirements relating to the exercise of its powers or management of its business or affairs under
this Agreement or the Act shall not be a ground for imposing personal liability on the Managing
Member for the obligations or liabilities of the Company, except to the extent that such failure
cause a material adverse effect to the Property or the Company or its or their financial condition
or results of operations.
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3.6 Other Activities of the Managing Member. Neither the Managing
Member nor any Affiliate thereof shall be prohibited from having other business interests or
engaging in other business ventures or business or activity of any nature or description
whatsoever, whether currently existing or hereafter created, including without limitation those
interests, ventures, businesses or activities which are or may be competitive with the Company’s
business.
3.7 Liability and Indemnification. To the fullest extent permitted by
applicable law, the managers, officers, employees, attorneys and agents of the Company, each
Member and each Member’s respective Affiliates, and their respective members, managers,
partners, stockholders, directors, officers, employees, attorneys and agents (each, an
“Indemnitee”) shall each be indemnified and held harmless by the Company from and against
any damages, losses, penalties, fines, settlement payments, obligations, liabilities, claims, actions
and causes of action (actual or threatened, matured or unmatured, known or unknown, contingent
or otherwise) and reasonable costs and expenses suffered, sustained, incurred or required to be
paid by any Indemnitee, including, without limitation, any reasonable costs of investigation and
attorneys’ or experts’ fees and disbursements, based upon or arising from any and all claims,
demands, actions, suits or proceedings, civil, criminal, administrative or investigative, which
arise primarily out of or relate primarily to the operations of the Company after the date hereof,
in which the Indemnitee may be involved, or threatened to be involved, as a party, irresp ective of
whether the Indemnitee continues to be a manager, officer, employee, attorney or agent of the
Company or a Member or an Affiliate of a Member, or a member, manager, partner, stockholder,
director, officer, employee, attorney and agent of any of t hem at the time any such obligation,
liability or expense is paid or incurred, if (i) the Indemnitee acted in good faith and in a manner it
reasonably believed to be in, or not opposed to, the best interests of the Company, and, with
respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful,
and (ii) the Indemnitee’s conduct did not constitute fraud, misappropriation, reckless disregard of
the Indemnitee’s duties, misconduct materially injurious to the Company, or a material violation
of this Agreement that is not promptly cured. The termination of any third -party action, suit or
proceeding by order, settlement, or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that the Indemnitee acted in a manner contrary to that specified in
clauses (i) or (ii) above.
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(a) To the fullest extent permitted by applicable law, reasonable
expenses (including attorneys’ and experts’ fees and disbursements) incurred by an Indemnitee
in defending any claim, demand, action, suit or proceeding subject to this Section 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
Indemnitee to repay such amount if it shall be determined that such Person is not entitled to be
indemnified as authorized in this Section, provided, that (i) such advance will not cause the
Company to fail to meet its normal operating expenses or its debts as they become due (in view
of the then current Operating Plan and Budget) and/or (ii) if it shall be ultimately determined that
such person is not entitled to such monies pursuant to this Section, the Company shall use its best
efforts to obtain a refund and such Indemnitee shall so refund such amounts so received.
(b) The indemnification provided by this Section shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement, vote of the
Members, as a matter of law or otherwise, both as to action in the Indemnitee’s capacity as a
manager, officer, employee, attorney or agent of the Company, or a Member or an Affiliate of a
Member, or a member, manager, partner, stockholder, director, officer, employee, attorney and
agent of any of them, or in any other capacity, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and
administrators of such Indemnitee.
(c) All indemnifications set forth in this Section 3.9 shall be paid out
of, and shall be limited to, the assets of the Company.
3.8 Expenses. The Company will pay, or reimburse the Managing Member
for, all reasonable expenses to the extent attributable to the activities of the Company following
the consummation of this Agreement including but not limited to legal, accounting and other
consultant expenses, expenses associated with the preparation of financial statements, tax returns
and tax information forms, the allocable portion of expenses related to the general Director and
Officer and similar insurance policies maintained by affiliates of the Managing Member, and
litigation and other extraordinary expenses, in each case to the extent reflected in the Operating
Plan and Budget.
3.9 Compensation. Except as expressly provided in this Article 3 of this
Agreement, no Member shall receive any salary, fee or draw for services rendered to or on behalf
of the Company.
3.10 Liability of Members; Action by Written Consent
(a) Fiduciary Relationship. To the extent permitted by applicable law,
no Member shall have any duty (including any fiduciary duty) to the Company or its Members
other than as provided in the Act or this Agreement, including without limitation, any fiduciary
duty associated with self-dealing or corporate opportunities, so long as such Member conducts
himself, herself, or itself in a manner consistent with the Act and this Agreement.
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(b) Action by Written Consent. Any action which may be taken at a
meeting of the Members may be taken without a meeting if all Members consent to such action
in writing, including but not limited to action on Major Decisions.
3.11 Officers: The Managing Member may, from time to time, designate one or
more persons to be officers of the Company (each, an “Officer”). Any Officer so designated
shall have such authority and perform such duties as the Managing Member may, from time to
time, prescribe or as may be provided in this Agreement. The Managing Member may assign
titles to each Officer. Unless the Managing Member otherwise specifies, if the title is one
commonly used for officers of a corporation, the assignment of such title shall constitute the
delegation to such Officer of the authority and duties that are normally associated with that
office, including the authority to sign documents and execute agreements on behalf of the
Company, if applicable, subject in each case to any specific delegation of authority and duties
made to such Officer by the Managing Member. Each Officer shall hold office until his
successor shall be duly designated or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided. Any Officer may resign at any time by giving
written notice to the Managing Member. The resignation of such Officer shall take effect upon
receipt of notice of such resignation or at such later time as shall be specified in such notice; and,
unless otherwise specified in such notice, the acceptance of such resignation shall not be
necessary to make it effective. Any Officer may be removed at any time, with or without cause,
by action of the Managing Member.
ARTICLE 4
CAPITAL CONTRIBUTIONS: MEMBERSHIP INTERESTS
4.1 Capital. The capital of the Company shall consist of amounts contributed
to the Company pursuant to this Article 4.
4.2 Capital Contributions. The initial Capital Contribution of each of the
Members is as set forth on Exhibit A.
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4.3 Protective Capital. In the event that the Company requires additional
funds (i) (ii) to pay real estate taxes, insurance premiums, any other operating expenses, (iv) to
make any capital expenditures (including, without limitation, to fund the costs of any
environmental remediation) or other disbursements to third parties that are necessary to preserve
the Property or (v) to protect the Property from waste (any additional funds required for purposes
of funding any of the foregoing items are referred to herein as “Protective Capital”) as
determined by the Managing Member, the Managing Member may contribute to the Company
additional capital, in cash, in an amount sufficient to enable the Company to meet the obligation
giving rise to such need on a timely basis. The Managing Member shall have the right, power
and authority, but not the obligation, to make such payments on the Company’s behalf and to
take any other actions relating thereto in the Company’s name and on the Company’s behalf to
fulfill the purpose for which the Protective Capital was needed, and the amount of any advance
made by the Managing Member, shall constitute an additional Capital Contribution by the
Managing Member, which, together with the other Capital Contributions, shall be returned in full
prior to any distributions to the other Members.
4.4 Capital Accounts.
(a) A Capital Account shall be maintained for each Member in
accordance with the following provisions:
(i) To each Member’s Capital Account there shall be credited such
Member’s Capital Contributions, such Member’s allocable share of the Profits, and any items
of income or gain that are specially allocated to such Member pursuant to Article 5.
(ii) To each Member’s Capital Account there shall be debited the amount
of cash and the Gross Asset Value of any Company property (net of any liabilities assumed or
taken subject to by such Member in connection therewith) distributed to such Member
pursuant to any provision of this Agreement, such Member’s allocable share of Losses, and
any items of deductions or loss that are specially allocated to such Member pursuant to
Article 5.
(iii) In the event any Membership Interest is transferred in accordance with
the terms of this Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Membership Interest.
The foregoing provisions and the other provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations. In the event the Managing
Member shall determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto, are computed in order to comply with such Regulations, the
Managing Member may make such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Member pursuant to Section 10.3 upon the dissolution
of the Company. The Managing Member also shall make any appropriate modifications in the
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event unanticipated events (for example, the Company making an election under Code Section
754) might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).
(b) Except as specifically provided herein, no interest shall be paid by
the Company on any Capital Contribution or on the balance of any Member’s Capital Account.
A Member shall not be entitled to demand the return of, or to withdraw, any part of its Capital
Contribution or any balance in its Capital Account, or to receive any Distribution, except as
provided for in this Agreement. No Member shall be liable for the return of the Capital
Contributions of any other Member and no Member shall have any obligation to restore the
amount of any deficit in its Capital Account to the Company.
ARTICLE 5
CASH MANAGEMENT; DISTRIBUTIONS
5.1 Distributions of Available Cash
(a) Except as set forth in Section 5.8 hereof (with respect to a
Changeover Event), the Managing Member shall cause the Company to distribute all Available
Cash (other than proceeds from a sale or refinancing of the Property, or proceeds from any
casualty or condemnation of the Property (“Capital Proceeds”), which shall be distributed in
accordance with Section 5.6 hereof) monthly on each Distribution Date as follows:
(i) First, 100% to the Managing Member until the Managing Member
shall have been reimbursed for its Protective Advances, if any; and
(ii) Second, 100% to the Series A Preferred Members until such
persons have received cumulative distributions equal to the Preferred Return, which shall be
equal to a 10% per annum cumulative return, compounded annually, on the Unreturned
Capital Contributions of such persons; and
(iii) Third, 100% to the Series A Preferred Members until such persons
have received cumulative distributions equal to such persons’ aggregate capital contributions;
and
(iv) Thereafter, 100% to the Members (Managing Member, Series A
Preferred Members, and others, if any) pro rata in accordance with their respective Percentage
Interests.
5.2 Approved Sale; Approved Refinancing. In the event of a sale, transfer,
assignment or other disposition of the Property or of any of the Company’s interests in any
Property, as applicable, the Capital Proceeds after deduction of reasonable third-party costs (such
proceeds, the “Net Sale Proceeds”), shall be distributed as provided in Section 5.4.
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5.3 Distribution of Capital Event Proceeds. Capital Proceeds shall be
distributed immediately upon receipt as follows:
(i) First, 100% to the Managing Member until the Managing Member
shall have been reimbursed for its Protective Advances, if any; and
(ii) Second, 100% to the Series A Preferred Members until such
persons have received cumulative distributions equal to the Preferred Return, which shall be
equal to a 10% per annum cumulative return, compounded annually, on the Unreturned
Capital Contributions of such persons; and
(iii) Third, 100% to the Series A Preferred Members until such persons
have received cumulative distributions equal to such persons’ aggregate capital contributions;
and
(iv) Thereafter, 100% to the Members (Managing Member, Series A
Preferred Members, and others, if any) pro rata in accordance with their respective Percentage
Interests.
5.4 Form of Distribution. A Member, regardless of the nature of the Member’s
Capital Contribution, has no right to demand and receive any distribution from the Company in
any form other than money. No Member may be compelled to accept from the Company a
distribution of any asset in kind in lieu of a proportionate distribution of money being made to
other Members. Except upon a dissolution and the winding up of the Company, no Member may
be compelled to accept a distribution of any asset in kind.
ARTICLE 6
ALLOCATIONS
6.1 Allocations of Profits and Losses.
(a) For each fiscal year of the Company, after adjusting each
Member’s Capital Account for all Capital Contributions and distributions during such fiscal year
and all special allocations pursuant to Section 6.2 with respect to such fiscal year, all Profits and
Losses (other than Profits and Losses specially allocated pursuant to Section 6.2) shall be
allocated to the Members’ Capital Accounts in a manner such that, as of the end of such fiscal
year, the Capital Account of each Member (which may be either a positive or negative balance)
shall be equal to (a) the amount which would be distributed to such Member, determined as if the
Company were to sell all of its assets for the Gross Asset Value thereof, pay all liabilities
allocable to such assets according to their terms (limited, with respect to each nonrecourse
liability, to the Gross Asset Value of the assets securing such liability) and distribute the
proceeds thereof pursuant to Section 10.3, hereof, minus (b) the sum of (i) such Member’s share
of Partnership Minimum Gain (as determined according to Regulation Section 1.704-2(d) and
(g)(3)) and Partner Nonrecourse Debt Minimum Gain (as determined according to Regulation
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Section 1.704-2(i)) and (ii) the amount, if any, which such Member is obligated to contribute to
the capital of the Company as of the last day of such fiscal year.
(b) Notwithstanding anything to the contrary in this Section 6.1, the
amount of items of Company expense and loss allocated pursuant to this Section 6.1 to any
Member shall not exceed the maximum amount of such items that can be so allocated without
causing such Member to have an Adjusted Capital Account Deficit at the end of any taxable
year. All such items in excess of the limitation set forth in this Section 6.1(b) shall be allocated
first to Members who would not have an Adjusted Capital Account Deficit, pro rata in proportion
to their Capital Account balances as adjusted in accordance with the definition of Adjusted
Capital Account Deficit.
6.2 Special Allocations. Except as otherwise provided, the following special
allocations shall be made:
(a) Qualified Income Offset. If a Member unexpectedly receives any
adjustments, allocations, or distributions described in Regulations Sections 1.704-l(b)(2)(ii)(d)
(4), (5), or (6), or otherwise has an Adjusted Capital Account Deficit as of the end of a taxable
year, items of Company income and gain shall be specially allocated to the Member in an
amount and manner sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of the Member as quickly as possible, provided that an
allocation pursuant to this Section 6.2(a) shall be made only if and to the extent that such
Member would have an Adjusted Capital Account Deficit after all other allocations provided for
in this Article have been tentatively made as if this Section 6.2(a) were not in the Agreement.
(b) Minimum Gain Chargeback. Notwithstanding the preceding
provisions of this Article 6, except as otherwise provided in Regulation Section 1.704-2(f) if
there is a net decrease in the Partnership Minimum Gain (as defined in Regulations Section
1.704-2(d)) during a fiscal year, each Member with a share of Partnership Minimum Gain shall
be allocated items of Company income and gain for that year (and, if necessary, subsequent
years), in accordance with Regulations Sections 1.704-2(f) and 1.704-2(j)(2)(i), in an amount
equal to such Member’s share of the net decrease in the Partnership Minimum Gain. This
Section 6.2(b) is intended to comply with the minimum gain chargeback requirement in
Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
(c) Partner Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 6, except as otherwise provided in Regulation Section 1.704-2(i)(4) if
there is a net decrease in the Partner Minimum Gain during a fiscal year, after the allocation
required by Section 6.2(b), but prior to any other allocation for the year, each Member with a
share of the Partner Minimum Gain shall be allocated items of Company income and gain for
that year (and, if necessary, subsequent years), in accordance with Regulations Section 1.704-
2(j)(2)(ii), in an amount equal to such Member’s share of the net decrease in the Partner
Minimum Gain. This Section 6.2(c) is intended to comply with the partner minimum gain
chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
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(d) Partnership Nonrecourse Deductions. Partnership Nonrecourse
Deductions for each fiscal year shall be allocated among the Members in proportion to their
Company Percentages.
(e) Partner Nonrecourse Deductions. Notwithstanding anything to the
contrary herein, Partner Nonrecourse Deductions for each fiscal year shall be allocated to the
Member who bears the economic risk of loss with respect to the Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704 -
2(i)(1).
6.3 Regulatory Allocations. The allocations set forth in Section 6.2 (the
“Regulatory Allocations”) are intended to comply with certain requirements of Regulations
Section 1.704-l(b) and 1.704-2. The Regulatory Allocations may not be consistent with the
manner in which the Members intend to divide Company distributions. Accordingly, the
Managing Member on advice of tax counsel or independent accountant to the Company is hereby
authorized to allocate Profits, Losses, and other items among the Members so as to prevent the
Regulatory Allocations from distorting the manner in which Company Distributions will be
made among the Members pursuant to Sections 5.1 and 10.3. In general, the Members anticipate
that this will be accomplished by specially allocating other Profits, Losses, and items of income,
gain, loss, and deduction among the Members so that the net amount of the Regulatory
Allocations and such special allocations to each such Member is zero. However, the Managing
Member shall have discretion to accomplish this result in any reasonable manner permitted under
Regulations Section 1.704-1(b).
6.4 Other Allocations Rules. 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 allocated among the Members in the same proportions as they share Profits
or Losses, as the case may be, for the year.
6.5 Tax Allocations: Code Section 704(c). Income, gain, loss and deduction
with respect to Company property shall be allocated among the Members for federal income tax
purposes in accordance with the principles of Section 704(c) of the Code and the Regulations
promulgated thereunder so as to take into account the variation, if any, between the adjusted tax
basis of such property and its Gross Asset Value. Any elections or other decisions relating to
such allocations shall be made by the Managing Member in a manner that reasonably reflects the
purpose and intention of this Agreement, and may include a decision to use the “traditional
method” of allocation described in Regulation Section 1.704-3(b)(1). Allocations pursuant to
this Section are solely for purposes of federal, state and local income taxes and shall not affect,
or in any way be taken into account in computing, any Member’s Capital Account or share of
Distributions.
6.6 Tax Elections. The Managing Member may in its sole discretion elect in
accordance with Section 754 of the Code to adjust the basis of the assets of the Company for
Federal income tax purposes in the event of a distribution of Company property as described in
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Section 734 of the Code or a transfer by any Member of its Membership Interest as described in
Section 734 of the Code.
6.7 Transfers. If any Membership Interest is transferred pursuant to and in
compliance with Article 8, Profits and Losses and other items allocable to the transferred
Membership Interest shall be divided and allocated between the transferor and the transferee by
taking into account their varying interest during the relevant period in accordance with Section
706(d) of the Code using any conventions permitted by law and reasonably selected by the
Managing Member.
ARTICLE 7
BOOKS AND RECORDS: ACCOUNTS
7.1 Books and Records. True and correct books of account with respect to the
operations of the Company shall be kept at the principal place of business of the Company. The
Managing Member shall be responsible for keeping the books of account. The Company shall
also maintain at its principal place of business the following records: (a) a current list of the full
name and last known business address of each Member set forth in alphabetical order, (b) a copy
of the Certificate of Formation and all certificates of amendment thereto, together with executed
copies of any powers of attorney pursuant to which any certificate has been executed, (c) copies
of the Company’s Federal, state and local income tax returns and reports, if any, for the three
most recent years and (d) copies of any then effective operating agreements and of any financial
statements of the Company for the three most recent years.
Any Member shall have the right, at such Member’s expense, to examine, or have
its duly authorized representative examine, the books of account of the Company and such other
information reasonably related to such Member’s Membership Interest, and the Managing
Member shall make them available at any reasonable time at the office at which those books are
maintained.
7.2 Accounting Basis and Fiscal Year. The Company’s books shall be kept on
the accrual method of accounting. The fiscal year of the Company shall be the calendar year.
7.3 Reports. . The Managing Member shall provide each Member with such
reports as are necessary, in the reasonable discretion of the Managing Member, to inform the
Members of material developments relating to the Company, and/or the Property.
7.5 Tax Returns. The Managing Member shall prepare or cause to be
prepared and shall file or cause to be filed on or before the due date (or any extension thereof)
any Federal, state or local tax returns required to be filed by the Company. Within 60 days after
the end of each fiscal year, the Managing Member shall furnish each Member with such
information as may be needed to enable each Member to file its Federal income tax return and
any required state income tax return, along with a copy of the information return fil ed by the
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Company. All decisions regarding tax elections shall be made by the Managing Member (after
consultation with the Company’s accountants or tax advisors).
7.6 Tax Matters Member. Pursuant to Section 6231(a)(7)(A) of the Code, the
Managing Member is hereby designated as the Tax Matters Member of the Company for all
purposes of the Code and for the corresponding provision of any state or local statute. Each of
the Members hereby consents to such designation and agrees to take any such further action as
may be required by Regulations or otherwise to effectuate such designation. The Tax Matters
Member is authorized and required to represent the Company (at the Company’s expense) in
connection with all examinations of the Company’s affairs by any tax authorities, including
resulting judicial and administrative proceedings, and to expend Company funds for professional
services and costs associated therewith. The decisions of the Tax Matters Member shall be final
and binding as to all Members except to the extent that any Member files a statement not to be
bound by a settlement pursuant to Code Section 6224(c)(3).
ARTICLE 8
ASSIGNABILITY OF INTERESTS;
ADDITIONAL MEMBERS
8.1 General Conditions. Except as otherwise permitted by this Agreement, no
Member shall sell, exchange, convey, mortgage, hypothecate, grant, bargain, encumber, grant
options with respect to, transfer, assign, pledge or otherwise Dispose (directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise, and whether or not for
consideration or of record) (as the case may be, a “Transfer”) of all or any portion of its
Membership Interest or any right to receive any Distributions under this Agreement
(“Distributive Rights”) unless the Transfer will not, in the opinion of counsel satisfactory to the
Company, (a) result in the termination of the Company for purposes of Section 708 of the Code
or the corresponding provisions of any subsequent Federal tax law, or prevent the Company from
being treated as a partnership for Federal income tax purposes; (b) cause the termination or
dissolution of the Company under the Act; (c) require registration under the Securities Act of
1933, as amended (the “Securities Act”), or under any other securities law or result in the
violation of any applicable state securities laws; (d) cause the Company or any Member to be
subject to any additional regulatory requirements.
8.2 Transfer by Managing Member. The Managing Member may Transfer all
or any portion of its Membership Interest or any of its Distributive Rights to any Person. Any
transferee of all of the Membership Interest of the Managing Member shall become a substitute
Managing Member (“Substitute Managing Member”) only upon compliance with the provisions
of Section 8.3.
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8.3 Substitute Managing Member. A transferee of the entire Membership
Interest of the Managing Member permitted under this Agreement shall be admitted to the
Company as a Substitute Managing Member only if the transferee (a) executes and delivers an
agreement, reasonably satisfactory to a Majority of the Series A Preferred Members, to assume,
to be bound by and to comply with all of the terms and conditions of this Agreement applicable
to the Managing Member, (b) has satisfied a Majority of the Series A Preferred Members as to its
qualifications and preparedness to operate as the Managing Member, including its familiarity
with the local market in which the Property is situated, and obtained the consent of a Majority of
the Series A Preferred Members to becoming a Substitute Managing Member, which consent
shall not be unreasonably withheld, delayed or conditioned, (c) executes, delivers and files all
necessary certificates or other documents and performs such other acts as may be required under
the Act or other applicable laws and regulations to effectuate the withdrawal of the predecessor
Managing Member and the substitution of the Substitute Managing Member and preserve the
status and legal compliance of the Company and (d) pays all reasonable expenses of the
Company and the Members connected with the substitution including, but not limited to,
reasonable legal and accounting fees and disbursements. The admission of any Substitute
Managing Member shall be deemed to have occurred immediately prior to the withdrawal of the
predecessor Managing Member. Upon the withdrawal of the predecessor Managing Member,
the Substitute Managing Member shall be the Managing Member for all purposes of this
Agreement.
8.4 Transfer by Series A Preferred Members. No Series A Preferred Member
shall be entitled to Transfer its Membership Interest without the prior written approval of the
Managing Member, in its sole and absolute discretion.
8.5 Treatment. Until compliance with the provisions of this Section 8, the
Company shall be entitled to treat the record owner of any Membership Interest as the absolute
owner of such Membership Interest in all respects and shall incur no liability for Distributions
made to such owner.
8.6 Other Transfers Void. Any Transfer made in violation of the provisions of
this Article 8 shall be null and void and shall not bind the Company or any Member.
ARTICLE 9
RESIGNATION OF MANAGING MEMBER; CHANGEOVER EVENTS
9.1 Resignation of Managing Member. The Managing Member shall have the
right to resign or withdraw from the Company, including, without limitation, by t erminating its
existence as a limited liability company.
9.2 Changeover Events. There may be a Changeover Event under this
Agreement if the following events or circumstances shall exist and be accompanied by a 75%
vote of the outstanding Series A Preferred Members.
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(a) Fraud, Gross Negligence or Willful Misconduct. The Managing
Member shall commit an act involving fraud, willful misconduct, waste or negligence in
connection with any of its obligations hereunder.
ARTICLE 10
DISSOLUTION AND TERMINATION
10.1 Events of Dissolution. The Company shall be dissolved upon the
happening of any of the following events:
(a) The Disposition of all or substantially all of the assets of the
Company;
(b) The determination of the Members to dissolve the Company;
(c) The happening of any other event causing the dissolution of the
Company under the laws of Delaware;
Dissolution of the Company shall be effective on the day the event occurs giving
rise to the dissolution, but the Company shall not terminate until the Certificate of Formation of
the Company has been cancelled and the assets of the Company have been distributed as
provided herein.
10.2 Limited Return of Capital Contributions Upon Dissolution. Each
Member shall look solely to the assets of the Company for all distributions with respect to the
Company and its Capital Contribution, and shall have no recourse therefor (upon dissolution or
otherwise) against any Member. Notwithstanding the dissolution of the Company, the business
of the Company and the affairs of the Members, as such, shall continue to be governed by this
Agreement until termination of the Company, as provided in this Agreement. Upon dissolution
of the Company, the Managing Member, or, if there is no Managing Member, a liquidator
appointed by a Majority vote of Series A Preferred Members shall liquidate the assets of the
Company, apply and distribute the proceeds thereof as contemplated by this Agreement and
cause the cancellation of the Company’s Certificate of Formation.
10.3 Distributions Upon Liquidation. Upon dissolution of the Company, the
Managing Member, or if there is none, the liquidator appointed pursuant to Section 10.2, shall
liquidate the assets of the Company as promptly as is consistent with obtaining the fair value
thereof, and apply and distribute the proceeds thereof:
(i) First, to creditors, in the order of priority provided by law;
(ii) Second, to the establishment of any reserves for contingencies which
the Managing Member (or the liquidator) may consider reasonably necessary;
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(iii) Third, to the Members in proportion to their Unreturned Capital
Contributions until each Member’s Unreturned Capital Contributions is reduced to zero; and
(iv) The balance in accordance with Section 5.2.
It is intended that the Distributions set forth in this Section 10.3 comply with the
intention of Regulations Section 1.704-1(b)(2)(ii)(b)(2) that liquidating Distributions be made in
accordance with positive Capital Accounts. However, if the balances in the Capital Accounts do
not result in such requirement being satisfied, no change in the amounts of Distributions pursuant
to Section 10.3(a) shall be made, but rather, Profits and Losses will be reallocated among the
Members so as to cause the balances in the Capital Accounts to be in the amounts necessary so
that such result is achieved.
(a) Notwithstanding the foregoing, in the event the Managing Member
(or liquidator) shall reasonably determine that an immediate sale of part or all of the Company
assets would cause undue loss to the Members, the Managing Member (or liquidator), in order to
avoid such loss, may, to the extent not then prohibited by the limited liability company law of
any jurisdiction in which the Company is then formed or qualified and applicable in the
circumstances, defer liquidation of and withhold from distribution for a reasonable time any
assets of the Company except those necessary to satisfy the Company’s debts and obligations.
(b) After the proceeds of the liquidation of the assets of the Company
have been distributed (which shall occur as soon as practical), the Managing Member (or
liquidator) shall cause the Certificate of Formation of the Company to be cancelled.
10.4 Final Accounting. Upon the dissolution of the Company, a proper
accounting shall be made by the Company’s accountants from the date of the la st previous
accounting to the date of dissolution.
ARTICLE 11
MEMBER REPRESENTATIONS
In addition, but not in place of, any representations and warranties otherwise contained in
this Agreement or any subscription agreement, each Member, severally and not jointly, hereby
represents and warrants to and covenants with each other Member and the Company that:
11.1 Such Member has all requisite power to enter into this Agreement and to
consummate the transactions contemplated by this Agreement and, if such Member is not a
natural person, such Member is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. This Agreement has been duly executed and delivered by
such Member, has been effectively authorized by all necessary acti on and constitutes the legal,
valid and binding obligation of such Member, enforceable against such Member in accordance
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with its terms, except as enforceability may be subject to the application of general equitable
principles and to bankruptcy, insolvenc y, moratorium or other similar laws affecting creditors’
rights generally.
11.2 Neither the execution nor the delivery of this Agreement, nor the
consummation of the transactions contemplated by this Agreement, will conflict with or
constitute a violation of any law or regulation to which such Member is subject, or conflict with,
result in a breach of, give rise to a right of termination of, accelerate the performance required
by, or constitute a default under, any terms of any agreement to which such Member is a party or
any judgment, decree, order or award of any court, governmental body, governmental authority
or arbitrator by which such Member is bound, or result in the creation of any lien upon any of the
property of such Member.
11.3 There are no actions, suits or proceedings commenced or threatened
against such Member before any court, board or governmental or administrative agency which, if
adversely determined to it, would materially affect such Member’s ability to enter into this
Agreement or to consummate the transactions contemplated by this Agreement.
11.4 No governmental approval or approval of any other Person is required to
be obtained by such Member in connection with such Member’s execution and delivery of this
Agreement or the consummation of the transactions contemplated by this Agreement.
11.5 Such Member is acquiring the Membership Interest in the Company
pursuant to this Agreement for such Member’s own account, for investment, and not in
connection with the offer or sale of such Interest, or any portion of such Membership Interest, to
others or with a view to the distribution of such Interest, or any portion of such Membership
Interest. Such Member acknowledges that such Membership Interest may have to be held
indefinitely and that such Member can afford to do so, and to lose such Member’s entire
investment in such Membership Interest.
11.6 Such Member acknowledges that an investment in the Company is highly
speculative and subject to very substantial risks. Such Member acknowledges that such Member
has received all information concerning the Company requested by such Member and has had a
full opportunity to ask questions with respect to the Company’s proposed operations and the
Membership Interest and all such questions have been answered to such Member’s full
satisfaction.
11.7 Such Member acknowledges that the Membership Interests have not been
registered under the Securities Act, or under any other applicable securities laws, and that such
Membership Interests may not be Disposed of at any time without effective registration under
such Act and laws or exemption therefrom, and compliance with the other restrictions on
Disposition set forth herein. Such Member recognizes that there has been no public market for
the Membership Interests and that after such Member’s acquisition of such Member’s
Membership Interests there will be no such market, and such Member understands that such
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Member cannot expect to be able to freely liquidate such Membership Interests in case of
emergency.
11.8 Such Member has such knowledge and experience in financial and
business matters that such Member is capable of evaluating the merits and risks of this
Agreement and any transactions contemplated under this Agreement and of forming an informed
investment decision relating to such Member’s investment. Such Member has consulted with
such Member’s own legal, accounting, tax, investment and other advisers with respect to the tax
treatment of an investment by such Member in a Membership Interest in the Company and the
merits and risks of an investment in a Membership Interest in the Company.
11.9 No representations or warranties have been made to such Member by the
Company or the Managing Member or by any agent, employee, director or Affiliate of the
Company and, in entering into the transactions contemplated by this Agreement, such Member is
not relying upon any information other than the results of his or her own independent
investigation.
11.10 Such Member hereby accepts all of the terms and conditions of this
Agreement. Such Member also accepts the Company Percentage attributable to such Member as
specified in Exhibit A.
11.11 Such Member agrees that such Member shall hold the terms and
provisions of this Agreement and all Company trade secrets and confidential information in strict
confidence except for disclosures by the Member that are required by applicable law, regulation
or judicial process or are otherwise reasonably necessary for bona fide business purposes of the
Company.
ARTICLE 12
MISCELLANEOUS
12.1 Notices. Any notices, elections or demands permitted or required to be
made under this Agreement shall be in writing, signed by the Member giving such notice,
election or demand, shall be sent by personal delivery, nationally recognized overnight courier
service or telecopier and addressed (i) if to the Company or the Managing Member, c/o Jed
Robinson, 160 West Canyon Crest Rd, Alpine, UT 84004, or to such other address as may be
supplied by written notice given in conformity with the terms of this Section 12.1, and (ii) if to
any other Member, at the last address recorded for such Member on the books and records of the
Company. All notices shall be deemed to have been delivered on the date of their delivery if
personally delivered or if transmitted by telecopier (provided receipt of such transmission is
confirmed) or on the first business day after deposit with the courier service if delivered by
courier.
12.2 Successors and Assigns. Subject to the restrictions on transfer set forth in
this Agreement, this Agreement, and each provision of this Agreement, shall be binding upon
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and shall inure to the benefit of the Members, their respective successors, successors-in-title,
heirs and permitted assigns, and each successor-in-interest to any Member, whether such
successor acquires such interest by way of gift, purchase, foreclosure or by any other method,
shall hold such interest subject to all of the terms and provisions of this Agreement.
12.3 Power of Attorney. The Members hereby constitute and appoint the
Managing Member and, if a liquidator (other than the Managing Member) shall have been
selected pursuant to Section 10.2, the liquidator, severally and each of their authorized officers
and attorneys-in-fact, with full power of substitution, as their true and lawful agent and attorney-
in-fact, with full power and authority in their name, place and stead, to execute, swear to,
acknowledge, deliver, file and record in the appropriate public offices all certificates, documents
and other instruments (including without limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the Managing Member or the liquidator deems
necessary or appropriate solely for the purpose of forming, qualifying or continuing the existence
or qualification of the Company as a limited liability company (or a partnership in which the
Members have limited liability) in the State of Delaware, and in all other jurisdictions in which
the Company may conduct business or own property or to reflect or to effect, in accordance with
its terms: (i) any permitted amendment, change, modification or restatement of this Agreement,
(ii) the dissolution of the Company or (iii) the permitted admission, withdrawal or substitution of
any Member to or from the Company in accordance with the terms of this Agreement. With
respect to matters on which this Agreement expressly provides for the vote, consent or approval
of the Series A Preferred Members, the Managing Member or the liquidator may exercise the
power of attorney made in this Section only after the necessary vote, consent or approval of the
Series A Preferred Members.
(a) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and not be affected by the
subsequent death, incompetency, dissolution, bankruptcy or termination of a Member and the
transfer of all or any portion of such Member’s Membership Interest and shall extend to such
Member’s successors and assigns.
12.4 Amendments. Except as specifically provided in this Agreement, this
Agreement may be amended only by a written document approved by and duly executed by the
Managing Member, subject to the condition that such amendment shall not increase the Capital
Contribution of any Member or adversely affect any Distribution or allocation to any Member
without such Member’s written consent, provided that the Members agree that Exhibit A hereto
shall be modified to reflect any relevant transaction consistent with the terms of this Agreement
and such revisions shall not constitute an amendment of this Agreement and that the Managing
Member may make any minor administrative amendments without the consent of the other
Members.
12.5 Partition. No Member or any successor-in-interest to any Member shall
have the right while this Agreement remains in effect to have any Company assets partitioned,
and each Member, on behalf of itself, its successors, representatives, heirs and assigns, hereby
waives any such right. It is the intention of the Members that during the term of this Agreement
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the rights of the Members and their successors-in-interest, as among themselves, shall be
governed by the terms of this Agreement, and that the rights of any Member or successor-in-
interest to assign, transfer, sell or otherwise Dispose of any interest in the Company shall be
subject to the limitations and restrictions of this Agreement.
12.6 No Waiver. The failure of any Member to insist upon strict performance
of a covenant under this Agreement or of any obligation under this Agreement, irrespective of
the length of time for which such failure continues, shall not be a waiver of that Member’s right
to demand strict compliance in the future. No consent or waiver, express or implied, to or of any
breach or default in the performance of any obligation under this Agreement shall constitute a
consent or waiver to or of any other breach or default in the performance of the same or any
other obligation under this Agreement. No waiver or consent shall be effective unless in writing.
12.7 Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties with respect to the subject matter of this Agreement and all other
agreements or understandings, whether written or oral, are hereby superseded.
12.8 Captions. The titles or captions of Articles or Sections contained in this
Agreement are inserted only as a matter of convenience and for reference, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision of this Agreement.
12.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall for all purposes constitute one agreement, binding on
all the Members, notwithstanding that all Members have not signed the same counterpart.
12.10 Separability. In case any of the provisions contained in this Agreement
or any application of any of those provisions shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions contained in this
Agreement and other applications of those provisions shall not in any way be affected or
impaired thereby.
12.11 Applicable Law. This Agreement and the rights and obligations of the
parties under this Agreement shall be governed by and interpreted, construed and enforced in
accordance with the Act, and the law of the State of Delaware applicable to agreements made
and to be performed in the State of Delaware.
12.12 Rights of Creditors and Third Parties. This Agreement is entered into
among the Members for the exclusive benefit of the parties to this Agreement. This Agreement
is expressly not intended for the benefit of any creditor of the Company or of any Member or any
other Person other than the parties to this Agreement. No such creditor or other Person shall
have any rights under this Agreement or any agreement between the Company and any Member
with respect to any Capital Contribution, any Member’s Membership Interest in the Company or
otherwise. This Agreement shall be binding upon and shall inure to the benefit of the parties to
this Agreement and their respective heirs, personal representatives, executors, successors and
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permitted assigns. No party to this Agreement may assign, transfer or otherwise Dispose of this
Agreement or any interest in this Agreement or any right, remedy, duty or obligation under this
Agreement whether voluntarily, involuntarily, by operation of law or otherwise, except to the
extent specifically provided in Article 8 of this Agreement with respect to the Disposition of a
Member’s Membership Interest in the Company.
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12.13 Certain Disputed Matters. Except as otherwise provided in this Agreement
where a speedy resolution is of the essence (e.g., within 30 days) for (i) a controversy or dispute
arising out of this Agreement, (ii) the interpretation of any of the provisions hereof, or (iii) the
action or inaction of any Member hereunder, the matter shall be submitted to arbitration in
Chicago, Illinois. Any Member may institute this procedure by notifying in writing the other
Members (or, if the dispute is solely among two Members, such other Member). Within five (5)
business days after the delivery of the notice, the Members shall either (a) agree upon a single
arbitrator, or (b) each select an arbitrator of their choice. If the Members agree upon a single
arbitrator, the deadlock shall be broken by single arbitrator arbitration. If the parties cannot
agree upon a single arbitrator, the deadlock shall be broken by arbitration before a three
arbitrator panel. If the parties do not agree upon a single arbitrator, Investor shall select one
arbitrator and the other Members shall also select an arbitrator, and the parties shall exchange the
names of their respective arbitrators within the initial five (5) business day period, and the two
arbitrators shall select a third arbitrator within five (5) business days thereafter. All arbitrators
must either be (a) experienced real estate developers having at least ten (10) years’ experience in
real estate development in the environs of the Property or (b) attorneys practicing primarily in
real estate law in Illinois or the state where the Property is located, or with at least ten (10) years
real estate law experience and a Martindale-Hubbell rating of AV. Within ten (10) days after the
single arbitrator or all three arbitrators have been selected, the parties shall hold the arbitration in
Chicago, Illinois and each Member, as the case may be, may present such evidence and
witnesses as it sees fit. The arbitrator or arbitrators shall announce its/their decision in writing
within five (5) business days after such hearing. The decision of the arbitrator, and in the case of
a three arbitrator panel the decision of two of the three arbitrators, shall be binding upon the
Members. In the case of a single arbitrator, fees shall be divided equally. If three arbitrators are
utilized, each Member shall pay the fees and costs of the arbitrator it selects, and the fees and
costs of the third arbitrator shall be divided equally between the parties.
12.14 Rights and Remedies Cumulative. 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 the right to use any or all other remedies. Such rights and remedies are given
in addition to any other rights the parties may have by law, statute, ordinance or otherwise.
12.15 Specific Performance. The parties acknowledge that they will be
irreparably damaged if the provisions of this Agreement are not specifically enforced. Should
any controversy arise concerning a breach of any provision of this Agreement, an order or
injunction may be issued restraining the breach pending the determination of such controversy
(without the requirement of posting a bond or indemnity), and the resolution of the controversy
shall be enforceable in a court of equity by a decree of specific performance. Notwithstanding
Section 12.14 hereof, each party shall be permitted to enforce specifically the terms and
provisions hereof in any court of the United States located in Chicago, Illinois, this being in
addition to any other remedy to which such party may be entitled at law or in equity or
otherwise.
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12.16 Further Assurances. Each Member shall execute and deliver such
documents, instruments and agreements and take such further actions as may be reasonably
required or desirable to carry out the provisions of this Agreement and the transactions
contemplated hereby, and each of the parties hereto shall cooperate with each other in connection
with the foregoing.
12.17 Certain Interpretive Matters.
(a) Unless the context otherwise requires, (i) "or" is disjunctive but not
necessarily exclusive, (ii) words in the singular include the plural and vice versa, and (iii) the use
in this Agreement of a pronoun in reference to a party hereto includes the masculine, feminine or
neuter, as the context may require and (iv) the word “including” shall mean “including without
limitation.”
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such party or its counsel
participated in the drafting thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof and no rule of strict construction will be applied against
any party hereto.
12.18 Waiver of Jury Trial. THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, INCLUDING WITHOUT LIMITATION, ANY COUNTERACTION OR
COUNTERCLAIM, WHETHER IN CONTRACT, STATUTE, TORT (INCLUDING,
WITHOUT LIMITATION, NEGLIGENCE) OR OTHERWISE.
12.19 Confidentiality.
(a) To the extent that, in connection with this Agreement or the
transactions contemplated hereby, any Member comes into possession of any proprietary or
confidential information of the Company (“Confidential Information”), such Member agrees
not to disclose such Confidential Information to any third party without the Managing Member’s
prior written consent. Each Member shall maintain the Confidential Information of the Company
in confidence using at least the same degree of care as it employs in maintaining in confidence
its own proprietary and confidential information, but in no event less than a reasonable degree of
care.
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(b) Confidential Information shall not include information that (i) shall
have otherwise become publicly available other than as a result of disclosure by the Participating
Member in breach hereof, (ii) was disclosed to Member on a non-confidential basis from a
source other than the Company, which the Member believes is not prohibited from disclosing
such information as a result of an obligation in favor of the Company, (iii) is developed by the
Member independently of, or was known by the Member prior to, any disclosure of such
information made by the Company, (iv) is required to be disclosed by order of a court of
competent jurisdiction, administrative agency or governmental body, or by any law, rule or
regulation, or by subpoena, summons or any other administrative or legal process, or by
applicable regulatory standards, or (v) is disclosed with the written consent of the Company.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, this Agreement has been executed as of March 2, 2017.
COMPANY:
RS17 Rexburg Preferred LLC,
a Delaware limited liability company
By: RS17 Rexburg Manager LLC, a Delaware
limited liability company, its Managing Member
By: ________________________________
Name: Jed Robinson
Title: Manager
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IN WITNESS WHEREOF, this Agreement has been executed as of _____________,
2017.
SERIES A PREFERRED MEMBERS:
By: RS17 Rexburg Manager LLC, a Delaware
limited liability company
By: ________________________________
Name: Jed Robinson
Title: Manager
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Exhibit A
Managing Member:
Name Address
Common
Units
Series A
Preferred Units
Company
Percentage
RS17 Rexburg Manager LLC 160 West Canyon Crest
Rd, Alpine, UT 84004
3,575,000 0 55%
Series A Preferred Members:
Name Address
Common
Units
Series A
Preferred Units
Company
Percentage
0
0
0
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