HomeMy WebLinkAboutLIMITED LIABILITY AGREEMENT - 21-00239 - Thomson Farms PUD - Commercial Park - The Market PH1 - PLAT
RS17 REXBURG MANAGER LLC
a Delaware Limited Liability Company
LIMITED LIABILITY COMPANY AGREEMENT
September 22, 2017
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THIS LIMITED LIABILITY
COMPANY AGREEMENT OR THE UNITS PROVIDED FOR HEREIN. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
THE UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”) NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. THE COMPANY IS UNDER NO OBLIGATION TO REGISTER OR QUALIFY THE UNITS
UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS.
NO UNITS MAY BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS
NOT REQUIRED. ANY TRANSFER (AS SUCH TERM IS DEFINED IN THIS LIMITED LIABILITY
COMPANY AGREEMENT) OF UNITS IS FURTHER SUBJECT TO OTHER RESTRICTIONS, THE
TERMS AND CONDITIONS OF WHICH ARE SET FORTH HEREIN.
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TABLE OF CONTENTS
Page DEFINITIONS ................................................................................................... 4 ARTICLE 1
1.1 Certain Defined Terms ............................................................................................ 4
1.2 Certain Additional Defined Terms........................................................................ 14
1.3 General Usage ....................................................................................................... 15
ORGANIZATIONAL MATTERS .......................................................................... 16 ARTICLE 2
2.1 Formation. ............................................................................................................. 16
2.2 Name ..................................................................................................................... 16
2.3 Term ...................................................................................................................... 16
2.4 Registered Office and Agent ................................................................................. 16
2.5 Principal Office ..................................................................................................... 16
2.6 Purpose .................................................................................................................. 16
2.7 Title to Company Property.................................................................................... 17
2.8 Member Information ............................................................................................. 17
2.9 Additional Documents .......................................................................................... 17
2.10 Taxation as a Partnership ...................................................................................... 17
2.11 Power of Attorney. ................................................................................................ 18
CAPITAL CONTRIBUTIONS................................................................................ 19 ARTICLE 3
3.1 SEP’s Common Units ........................................................................................... 19
3.2 Additional Capital Contributions .......................................................................... 19
3.3 Capital Accounts ................................................................................................... 19
3.4 Withdrawal and Return of Capital ........................................................................ 19
3.5 Loans to the Company .......................................................................................... 19
3.6 Interest on Capital ................................................................................................. 19
3.7 Contributed Property ............................................................................................. 19
MEMBERS .............................................................................................................. 19 ARTICLE 4
4.1 Admission of Members and Additional Members ................................................ 19
4.2 Limited Liability ................................................................................................... 20
4.3 Nature of Interest .................................................................................................. 20
4.4 Units ...................................................................................................................... 20
4.5 Powers of Members .............................................................................................. 21
4.6 Vote or Written Consent of the Members ............................................................. 21
4.7 Proxies................................................................................................................... 21
4.8 Meetings ................................................................................................................ 21
4.9 Transactions with the Company............................................................................ 23
4.10 Members Expenses ............................................................................................... 24
4.11 Members Compensation ....................................................................................... 24
4.12 Confidentiality ...................................................................................................... 24
MANAGEMENT AND CONTROL OF THE COMPANY ................................... 26 ARTICLE 5
5.1 Management of the Company by Manager ........................................................... 26
5.2 Election and Removal of Managers. ..................................................................... 26
5.3 Meetings ................................................................................................................ 27
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5.4 Action by Written Consent without a Meeting ..................................................... 27
5.5 Powers of the Manager ......................................................................................... 27
5.6 Limitations on Power of the Managers. ................................................................ 27
5.7 Performance of Duties .......................................................................................... 28
5.8 Payments to a Manager ......................................................................................... 30
5.9 Valuation of Company Assets .............................................................................. 31
5.10 Execution of Company Instruments...................................................................... 32
5.11 Limited Liability of the Managers ........................................................................ 32
5.12 Officers. ................................................................................................................ 32
ALLOCATIONS OF PROFIT AND LOSS ............................................................ 33 ARTICLE 6
6.1 Allocations of Profit and Loss .............................................................................. 33
6.2 Regulatory Allocations ......................................................................................... 33
6.3 Curative Allocations ............................................................................................. 35
6.4 Modifications to Preserve Underlying Economic Objectives ............................... 35
6.5 Other Allocation Rules ......................................................................................... 35
6.6 Allocations for Tax Purposes ................................................................................ 36
DISTRIBUTIONS ................................................................................................... 36 ARTICLE 7
7.1 Non-Liquidating Distributions .............................................................................. 36
7.2 Liquidating Distributions ...................................................................................... 37
7.3 Form of Distribution ............................................................................................. 37
7.4 Limitation on Distributions ................................................................................... 38
7.5 Return of Certain Distributions ............................................................................. 38
7.6 Offset..................................................................................................................... 38
7.7 Withholding/Special Taxes ................................................................................... 38
TRANSFERS AND WITHDRAWALS .................................................................. 39 ARTICLE 8
8.1 General Provisions on Transfers ........................................................................... 39
8.2 Restrictions on Transfers ...................................................................................... 40
8.3 Withdrawal/Removal of a Member ...................................................................... 41
8.4 Procedures Following Member Withdrawal ......................................................... 41
8.5 Status of Assignees ............................................................................................... 41
8.6 Right of First Refusal ............................................................................................ 43
8.7 Involuntary Transfers ............................................................................................ 44
8.8 Sales Proceeds ....................................................................................................... 45
ACCOUNTING, RECORDS, REPORTING TO MEMBERS ............................... 45 ARTICLE 9
9.1 Books and Records ............................................................................................... 45
9.2 Access to Books and Records ............................................................................... 45
9.3 Tax Information .................................................................................................... 46
9.4 Filings ................................................................................................................... 46
9.5 Bank Accounts ...................................................................................................... 46
9.6 Accounting Decisions and Reliance on Others ..................................................... 46
9.7 Tax Matters Partner............................................................................................... 46
DISSOLUTION AND WINDING UP .................................................................. 47 ARTICLE 10
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10.1 Dissolution ............................................................................................................ 47
10.2 Continuation Following Certain Dissolution Event .............................................. 47
10.3 Winding Up ........................................................................................................... 48
10.4 Distribution of Assets upon Dissolution ............................................................... 48
10.5 Deficit Capital Account Balance .......................................................................... 49
10.6 Recourse to Company Assets................................................................................ 49
10.7 Certificate of Cancellation .................................................................................... 49
10.8 Waiver of Partition ................................................................................................ 49
EXCULPATION AND INDEMNIFICATION ..................................................... 49 ARTICLE 11
11.1 Exculpation ........................................................................................................... 49
11.2 Indemnification ..................................................................................................... 50
11.3 Insurance ............................................................................................................... 51
11.4 Indemnification for Misrepresentations ................................................................ 51
MISCELLANEOUS .............................................................................................. 52 ARTICLE 12
12.1 Complete Agreement ............................................................................................ 52
12.2 Amendments ......................................................................................................... 52
12.3 Governing Law ..................................................................................................... 53
12.4 Severability ........................................................................................................... 53
12.5 Counterpart; Binding upon Members and Assignees ........................................... 53
12.6 Survival of Certain Obligations ............................................................................ 53
12.7 No Third-Party Beneficiaries ................................................................................ 54
12.8 Notices, Consents, Elections, Etc ......................................................................... 54
12.9 Withholding Tax Representation and Covenant ................................................... 54
12.10 Certain Member Representations .......................................................................... 54
12.11 Dispute Resolution ................................................................................................ 55
12.12 Remedies for Breach of Agreement ...................................................................... 56
12.13 Exhibits ................................................................................................................. 56
12.14 Timing ................................................................................................................... 56
12.15 Miscellaneous ....................................................................................................... 56
12.16 Legal Representation ............................................................................................ 57
EXHIBIT A MEMBER INFORMATION
* * * * *
LIMITED LIABILITY COMPANY AGREEMENT
OF
RS17 REXBURG MANAGER LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT OF RS17 REXBURG
MANAGER LLC is entered into effective the 22nd day of September, 2017, by and among
Stillwater Equity Partners, a Utah limited liability company (“SEP”), and such Persons who
become parties to this Agreement pursuant to the terms herein.
RECITALS
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A. The Company was formed as a Utah limited liability company on March 6, 2017
upon the filing of the Company’s initial certificate of organization with the Division of
Corporations and Commercial Code of the Utah Department of Commerce.
B. The Members desire to enter into a written limited liability company agreement as
to the affairs of the Company and the conduct of its business.
AGREEMENT
NOW, THEREFORE, in consideration of the agreements and obligations set forth herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Members, and such other Persons who are or become a party hereto, hereby
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Defined Terms. When used in this Agreement, the following terms shall
have the respective meanings assigned to them in this Section 1.1:
“Act” means the Delaware Limited Liability Company Act, Title 6, Chapter 18 of the
Delaware Code, Section 18-101 et seq., as the same may be amended from time to time (or any
corresponding provisions of succeeding law).
“Additional Member” means any Person, other than a Substitute Member, admitted to the
Company as a Member after the date of this Agreement.
“Adjusted Capital Account” means, with respect to any Member, such Member’s Capital
Account as of the end of the relevant Allocation Period, after giving effect to the following
adjustments: (a) credit to such Capital Account any amounts that such Member is obligated or
treated as obligated to restore with respect to any deficit balance in such Capital Account
pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) or any provision of this
Agreement, or is deemed to be obligated to restore with respect to any deficit balance pursuant to
the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Treasury Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of Treasury Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
“Adjusted Capital Account Deficit” means, as of the end of the relevant Allocation
Period, a deficit balance in the Adjusted Capital Account of a Member.
“Affiliate” means, with respect to any Person (a) any Person directly or indirectly
controlling, controlled by or under common control with such Person, (b) any Person owning or
controlling ten percent (10%) or more of the outstanding voting interests of such Person, (c) any
officer, director, or general partner of such Person, or (d) any Person who is an officer, director,
general partner, trustee, or holder of ten percent (10%) or more of the outstanding voting
interests of any Person described in item (a) or (b) of this sentence. For purposes of this
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definition, the term “controls,” “is controlled by,” or “is under common control with” shall mean
the possession, whether direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
“Agreement” means this Limited Liability Company Agreement of RS17 Rexburg
Manager LLC, a Delaware limited liability company, including all schedules and exhibits hereto,
as amended from time to time. For purposes of the Act, this Agreement is the “limited liability
company agreement” (as such term is defined in the Act) of the Company.
“Assignee” means a Person that holds or otherwise acquires an Interest in the Company
(including by means of a Transfer permitted under ARTICLE 8) but is not a Member whether as
a result of not being admitted as a Substitute Member, withdrawing as a Member or otherwise
ceasing to be a Member.
“Bankruptcy” means with respect to any Person, a Voluntary Bankruptcy or an
Involuntary Bankruptcy.
“Capital Account” means the capital account established by the Company for each
Member in accordance with the rules set forth in Code Section 704(b) and the Treasury
Regulations thereunder. In accordance therewith, each Member’s Capital Account shall be
increased by: (a) the amount of any money contributed by or on behalf of the Member to the
Company; (b) the Gross Asset Value of any property contributed by the Member to the Company
(net of any liabilities secured by such contributed property that the Company is considered to
assume or take subject to under Code Section 752); (c) the amount of any Profits allocated to the
Member and any special allocations of income and gain to such Member not included in the
definition of “Profits”; and (d) any other increases required by Treasury Regulations
Section 1.704-1. Each Member’s Capital Account shall be decreased by (i) the amount of any
money distributed to the Member by the Company; (ii) the Gross Asset Value of property, if any,
distributed to the Member by the Company (net of liabilities secured by such distributed property
that such Member is considered to assume or take subject to under Code Section 752); (iii) the
amount of any Losses allocated to the Member and any special allocations of loss to such
Member not included in the definition of “Losses”; and (iv) any other decreases required by
Treasury Regulations Section 1.704-1. This definition and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply with Section
704(b) of the Code and Treasury Regulations Section 1.704-1(b) and shall be interpreted and
applied in a manner consistent with such regulations. In the event that the Managers 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 Managers may make
such modification, provided that such modifications do not have a material adverse effect on the
amounts distributable to any Member pursuant to ARTICLE 10 upon Dissolution of the
Company. The Managers shall also (A) make any adjustments that are necessary or appropriate
to maintain equality between the aggregate Capital Accounts of the Members and the amount of
capital reflected on the Company’s balance sheet, as computed for book purposes in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(q), and (B) make any appropriate
modifications in the event unanticipated events might otherwise cause this Agreement not to
comply with Treasury Regulations Section 1.704-1(b), provided that, to the extent that any such
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adjustment is inconsistent with other provisions of this Agreement and would have a material
adverse effect on any Member, such adjustment shall require the consent of such Member.
“Capital Contribution” means, with respect to any Member, the sum of the amount of
cash and the Gross Asset Value of any other property (determined as of the time of contribution
and net of liabilities secured by such property that the Company assumes or to which the
Company’s ownership of the property is subject) contributed by such Member (in accordance
with the terms of the Agreement or any supplement hereto) to the capital of the Company with
respect to the Interest held by such Member. The principal amount of a promissory note that is
not readily traded on an established securities market and that is contributed to the Company by
the maker of the note (or a Person related to the maker of the note within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account
of any Member until the Company makes a taxable disposition of the note or until (and to the
extent) principal payments are made on the note, all in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(d)(2). For purposes of this Agreement, the Capital Contribution shall
be deemed to have been made at the later of (a) the Close of Business on the due date of such
Capital Contribution as determined in accordance with this Agreement, or (b) the Close of
Business on the date on which such capital contribution is actually received by the Company.
“Cash Available for Distribution” means the amount by which the total of cash on hand
and in the Company’s bank accounts is in excess of the reasonable cash requirements and other
reserves of the Company (as determined by the Manager). The cash and reserve requirements
shall include, but not be limited to, the amounts reasonably required for all taxes, insurance, debt
service, and other expenses of the Company, all as determined by the Manager. Cash Available
for Distribution will not be reduced by Depreciation, and will be increased by any reductions of
reserves previously established pursuant to the first two sentences of this definition.
“Cause” means, for purposes of removing of a Manager pursuant to the first sentence of
Section 5.2(d): (a) such Manager commits an intentional act of fraud, embezzlement, theft, or
any other material violation of law which is materially injurious to the Company, in each case
that occurs while serving as Manager; or (b) such Manager commits any material breach of this
Agreement, which breach, if capable of being cured, is not cured within thirty (30) days after
written notice to the Manager from a Member.
“Certificate” means the certificate of formation for the Company originally filed with the
Delaware Secretary of State on February 1, 2016, as the same may be amended, restated
modified or otherwise changed from time to time.
“Close of Business” means 5:00 p.m., local time, in Salt Lake City, Utah.
“Code” means the United States Internal Revenue Code of 1986, as amended from time
to time, and any corresponding federal income tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such specific section
but also to any corresponding provision of any federal income tax statute enacted after the date
of this Agreement as such specific section or corresponding provision is in effect on the date of
application of the provisions of this Agreement containing such reference.
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“Company” means RS17 Rexburg Manager LLC, a Delaware limited liability company.
“Company Minimum Gain” has the meaning ascribed to “partnership minimum gain” in
Treasury Regulations Section 1.704-2(b)(2).
“Depreciation” means, for each Allocation Period, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable for federal income tax purposes with
respect to an asset for such Allocation 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
Allocation 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 Allocation Period bears to such beginning adjusted tax basis; provided, that if
any property has a zero adjusted basis for federal income tax purposes, then Depreciation may be
determined under any reasonable method selected by the Manager.
“Disinterested Member” means, with respect to a specific transaction or arrangement, a
Member who does not have an economic or personal interest in such transaction or arrangement
(other than its interest as a Member).
“Dissolution” or “Dissolved” means, with respect to a legal entity other than a natural
person, that such entity has “dissolved” within the meaning of the partnership, corporation,
limited liability company, trust or other statute under which such entity was organized.
“Fiscal Year” means the Company’s taxable year, which shall be the calendar year,
except as otherwise required by the Code and Treasury Regulations, as determined by the
Manager.
“Governmental Body” means any of the following: (a) nation, principality,
commonwealth, province, territory, county, municipality, district, federal, State, local, foreign, or
other jurisdiction of any nature; (b) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer, official, representative, organization, unit,
body, or entity and any court or other tribunal); (c) multinational organization or body; or
(d) individual, entity, or body exercising, or entitled to exercise, any executive, legislative,
judicial, administrative, regulatory, police, military, or taxing authority or power of any nature.
“Gross Asset Value” means, with respect to any asset of the Company, such asset’s
adjusted basis for federal income tax purposes, except as follows: (a) the initial Gross Asset
Value of any asset contributed to the Company by a Member will be the gross fair market value
of such asset, as determined by the contributing Member and the Manager; (b) the Gross Asset
Values of all Company assets shall be adjusted to equal their respective gross fair market values,
as determined by the Managers and taking into account Code Section 7701(g), as of the
following times: (i) 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; (ii) the
distribution by the Company to a Member of more than a de minimis amount of Company
property as consideration for all or a portion of such Member’s Interest in the Company; (iii) the
grant of an interest in the Company (other than a de minimis interest) as consideration for the
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provision of services to, or for the benefit of, the Company by an existing Member acting in a
member capacity, or by a new Member acting in a member capacity in anticipation of being a
Member; and (iv) the liquidation of the Company within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g), provided, however, that adjustments pursuant to clauses (i), (ii), (iii)
and (iv) above shall be made only if the Managers reasonably determine that such adjustments
are necessary or appropriate to reflect the relative economic interests of the Members in the
Company; (c) the Gross Asset Value of any Company asset distributed to any Member shall be
adjusted to equal the gross fair market value of such asset on the date of distribution as
determined by the Managers and taking into account Code Section 7701(g); and (d) the Gross
Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Code Section 734(b) or 743(b), but only to the
extent that such adjustments are taken into account in determining Capital Accounts pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and item (f) of the definition of “Profits” and
“Losses” or Section 6.2(g), provided, however, that Gross Asset Values shall not be adjusted
pursuant to this item (d) to the extent the Managers determines that an adjustment pursuant to
item (b) above is necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this item (d). If the Gross Asset Value of an asset has been
determined or adjusted pursuant to items (a), (b), or (d), such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset for purposes of
computing Profits and Losses.
“Incompetency” means, with respect to an individual, that (a) such individual is an
unemancipated minor, (b) such individual is subject to a conservator or an estate acting on behalf
of such individual, (c) the court has determined that such individual is incompetent or lacks
capacity, or (d) a licensed physician has declared in writing under penalty of perjury that in his or
her opinion such individual is substantially unable to manage his or her financial resources or
resist fraud or undue influence.
“Indemnified Person” means, except as otherwise provided in Section 11.4, any of the
following Persons: (a) a Manager; (b) a Member (c) a Liquidator; and (d) each shareholder,
partner, member, director, manager, officer, employee, or agent of a Person described in clauses
(a), (b) and (c) above. In addition, “Indemnified Person” (i) with respect to Section 11.4, has the
meaning set forth in Section 11.4, and (ii) means any employee, independent contractor, or agent
of the Company to the extent determined by the Managers in their sole and absolute discretion.
A Person that has ceased to hold a position that previously qualified such Person as an
Indemnified Person shall be deemed to continue as an Indemnified Person with regard to all
matters arising or attributable to the period during which such Person held such position.
“Interest” means a “limited liability company interest” (as such term is defined in
Section 18-101(8) of the Act) in the Company, including any and all rights and benefits to which
the holder of such an interest may be entitled as provided in this Agreement and any applicable
supplement and/or addendum hereto (e.g., right to receive distributions of Company assets and
allocations of income, gain, loss, deduction, credit and similar items from the Company),
together with all obligations of such holder to comply with the terms and provisions of this
Agreement and any applicable supplement and/or addendum hereto.
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“Involuntary Bankruptcy” means, with respect to any Person, without the consent or
acquiescence of such Person, the entering of an order for relief or approving a petition for relief
or reorganization or any other petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, Dissolution, or other similar relief under any present or future
Bankruptcy, insolvency, or similar statute, law, or regulation, or the filing of any such petition
against such Person which petition shall not be dismissed within ninety (90) days, or, without the
consent or acquiescence of such Person, the entering of an order appointing a trustee, custodian,
receiver or liquidator of such Person or of all or any substantial part of the property of such
Person which order shall not be dismissed within sixty (60) days.
“Liquidators” means, in connection with winding up of the business and affairs of the
Company after a Dissolution Event, the Managers, or, if there be no Managers, then the Persons
appointed as such by the affirmative vote or written consent of a Majority-In-Interest of the
Members.
“Majority-In-Interest of the Disinterested Members” means, in connection with a
transaction or arrangement in which a Manager has an economic or personal interest in such
transaction or arrangement, a group of Disinterested Members who at the time of determination
hold more than fifty percent (50%) of the Units held by Disinterested Members.
“Majority-In-Interest of the Members” means, as of the date of determination, a group of
Members who at the time of determination hold more than fifty percent (50%) of the outstanding
Common Units held by Members.
“Manager” means any Person who (a) is referred to as such in Section 5.2(a) or has
become a Manager pursuant to the terms of this Agreement and (b) has not ceased to be a
Manager pursuant to the terms of this Agreement.
“Material Misconduct” means, with respect to an Indemnified Person, conduct or inaction
that constitutes fraud, gross negligence, reckless or intentional misconduct, willful and material
breach of this Agreement, or a knowing violation of law by such Indemnified Person. For
purposes of the preceding sentence: (a) an Indemnified Person shall be deemed to have acted in
good faith and without negligence with regard to any action or inaction that is taken in
accordance with the reasonable advice or opinion of an attorney, accountant, investment bank, or
valuation firm so long as such advisor was selected with reasonable care and the Indemnified
Person made a good faith effort to inform such advisor of all the facts pertinent to such advice or
opinion; and (b) an Indemnified Person’s reliance upon the truth and accuracy of any written
statement, representation or warranty of a Member shall be deemed to have been reasonable and
in good faith absent such Indemnified Person’s actual knowledge that such statement,
representation or warranty was not, in fact, true and accurate.
“Member” means any Person admitted to the Company as a “member” (as such term is
defined in Section 18-101(11) of the Act) in accordance with the terms of this Agreement so long
as such Person remains a “member” of the Company. Except where the context requires
otherwise, a reference in this Agreement to the “Members” shall mean all of the Members (taken
together or acting unanimously, as appropriate).
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“Member Nonrecourse Debt” has the meaning ascribed to “partner nonrecourse debt” in
Treasury Regulations Section 1.704-2(b)(4).
“Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if the
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance
with Treasury Regulations Section 1.704-2(i)(3).
“Member Nonrecourse Deductions” has the meaning ascribed to “partner nonrecourse
deductions” in Treasury Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).
“Nonrecourse Deductions” means “nonrecourse deductions,” within the meaning of
Treasury Regulations Sections 1.704-2(b)(1) and 1.704-2(c).
“Nonrecourse Liability” has the meaning ascribed to such term in Treasury Regulations
Section 1.752-1(b)(3).
“Organizational Documents” means, for any Person, (a) if such Person is a corporation,
the certificate or articles of incorporation or formation and bylaws of such Person, (b) if such
Person is a limited liability company, the certificate or articles of organization or formation and
operating agreement or limited liability company agreement (or other similar governing
document) of such Person, (c) if such Person is a limited partnership, the certificate of limited
partnership or formation and limited partnership agreement of such Person, or (d) if such Person
is not a corporation, limited liability company or limited partnership, the documents under which
such Person was created and is governed.
“Percentage Interest” means, with respect to a holder of one or more Units, as of the date
of determination, the percentage obtained by dividing (a) the aggregate number of the
outstanding Common Units held by such holder, by (b) the aggregate number of the outstanding
Common Units. Notwithstanding anything to the contrary, the aggregate of all Percentage
Interests shall at all times be equal to one hundred percent (100%).
“Permitted Transferee” means: (a) with respect to a Member transferring its Units, (i) in
the case of any Member that is an individual, (A) such Member’s spouse, parents, lineal
descendants (including adopted individuals whenever the terms “lineal descendent” is used),
(B) spouses of lineal descendants, (C) lineal descendants of such spouse, (D) any entity, such as
a corporation, partnership, limited liability company, or trust, which is controlled by, or for the
primary benefit of, such Member or the Persons identified in items (i)(A), (i)(B) or (i)(C), (ii) in
the case of any Member that is an entity, any other entity that wholly-owns, or is wholly-owned
by, such entity, (iii) in the case of any Member that is a trustee of a trust, to any successor trustee
of such trust, or (iv) any other Member; and (b) with respect to an Assignee transferring Units,
(i) in the case of any Assignee that is a trustee of a trust, to any successor trustee of such trust, or
(ii) any Member.
“Person” means an individual, partnership, corporation, limited liability company,
unincorporated organization, trust, joint venture, governmental agency, or other entity, whether
domestic or foreign.
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“Prime Rate” means the rate of interest published or announced from time to time as the
U.S. “prime rate” in the “Money Rates” section of The Wall Street Journal.
“Proceeding” means any action, suit, litigation, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing, or other proceeding (including any civil,
criminal, administrative, investigative, or appellate proceeding) that is, has been, or may in the
future be commenced, brought, conducted, threatened, or heard by or before any Governmental
Body or any arbitrator or arbitration panel in which the Person seeking indemnification therefor
is a party or non-party or is seeking to enforce its rights to indemnification pursuant to
ARTICLE 11.
“Profits” and “Losses” mean, for each Allocation Period, an amount equal to the
Company’s taxable income or loss for such Allocation 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 (without duplication): (a) 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 shall be added to such taxable income or loss; (b) 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 Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not
otherwise taken into account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss; (c) if the Gross Asset Value of any Company asset
is adjusted pursuant to the definition of Gross Asset Value (other than an adjustment with respect
to Depreciation), then the amount of such adjustment shall be treated as an item of gain or loss
and included in the computation of Profits and Losses; (d) gain or loss resulting from any
disposition of Company property 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 property
disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross
Asset Value; (e) if the Gross Asset Value of any asset differs from its adjusted tax basis for
federal income tax purposes, then the amount of depreciation, amortization or cost recovery
deductions with respect to such asset shall, for purposes of determining Profits and Losses, be an
amount which bears the same ratio to such Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deductions bears to such adjusted tax (provided
that if the federal income tax depreciation, amortization or other cost recovery deduction is zero,
then the Managers may use any reasonable method for purposes of determining depreciation,
amortization or other cost recovery deductions in calculating Profits and Losses); (f) to the extent
an adjustment to the adjusted basis of any Company asset pursuant to Code Section 734(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into
account in determining Capital Accounts as a result of a distribution other than in complete
liquidation of a Member’s Interest, the amount of such adjustment to Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken
into account for purposes of computing Profits or Losses; and (g) notwithstanding any other
provision of this definition, any items of Company income, gain, loss and deduction specially
allocated pursuant to Sections 6.2 and 6.3 shall not be taken into account in computing Profits
and Losses. The amounts of the items of Company income, gain, loss and deduction specially
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allocated pursuant to Sections 6.2 and 6.3 shall be determined by applying rules analogous to
those set forth in items (a) through (f) above.
“Redemption Price” means, with respect to the redemption by the Company of an
Assignee’s Interest pursuant to Section 8.5(g), the purchase price for the Interest being purchased
or sold (for purposes of this definition, the “Redeemed Interest”). The Redemption Price shall be
the fair market value of the Redeemed Interest as agreed upon by the Company and the
Assignee. If the Company and the Assignee are unable to agree upon the fair market value of the
Redeemed Interest within ten (10) days after the Managers deliver written notice to the Assignee
of the Company’s election to redeem the Redeemed Interest pursuant to Section 8.5(g), then the
Company and the Assignee shall, within ten (10) days after the delivery of the election notice
(for purposes of this definition, the “Election Date”), select and agree upon an appraiser to
determine the fair market value of the Redeemed Interest. Such appraiser shall use its best
efforts to render the appraisal to the Company and the Assignee on or before thirty (30) days
after its selection and such appraisal shall be final and binding upon the parties. In the event the
Company and the Assignee cannot agree upon an appraiser within ten (10) days after the
Election Date, then each of the Company and the Assignee shall, within fifteen (15) days of the
Election Date, each select an appraiser. Such appraisers shall use their best efforts to render their
appraisals on or before thirty (30) days after their selection. If the highest appraisal determined
by such appraisers does not exceed the lowest appraisal by more than thirty percent (30%), then
the average of such appraisals shall be the fair market value of the Redeemed Interest and such
average shall be final and binding upon the parties. In the event that the highest appraisal
exceeds the lowest appraisal by more than thirty percent (30%), then the two appraisers shall
select a third appraiser. Such third appraiser shall use its best efforts to render the appraisal to
the Company and the Assignee on or before thirty (30) days after its selection. The appraised
value determined by such third appraiser shall be the fair market value of the Redeemed Interest
and such third appraisal shall be final and binding upon the parties. The cost of the appraiser
appointed by the Company shall be borne by the Company, the cost of the appraiser appointed
by the Assignee shall be borne by the Assignee, and the cost of the third appraiser or, if the
Company and the Assignee shall have jointly selected one appraiser, the jointly-selected
appraiser, shall be borne one-half (½) by the Company and one-half (½) by the Assignee. For
purposes of this definition, each appraiser shall be a regional or national recognized investment
banking, accounting or appraisal firm experienced in valuing similar businesses.
“RE Project” means, in connection with the acquisition of real property by the Company
or any of its Subsidiaries, any real property not otherwise used as collateral for a Loan.
“Securities Act” means the Securities Act of 1933, as amended, including the rules and
regulations promulgated thereunder.
“Service Contribution” means the total value of all Services contributed by a given
Member. Service Contribution values shall be determined by the Managers and recorded in a
memo account for each Member for the purposes of calculating each Member’s Percentage
Interest.
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“Services” means time and energy devoted to the furtherance of the Company’s
objectives by any of the Members. The dollar value of Services for purposes of determining a
Service Contribution shall be determined by the Managers, in their sole discretion.
“State” means any constituent state of the United States, as well as the District of
Columbia.
“Subsidiary” means, with respect to a Person, a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the shares of securities
or other interests having voting power for the election of directors or other governing body (other
than securities or interest having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise
specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary
or Subsidiaries of the Company.
“Substitute Member” means an Assignee of all or a portion of a Member’s Interest in the
Company who becomes a Member and succeeds, to the extent of the Interest assigned, to the
rights and powers and becomes subject to the restrictions and liabilities of the assignor Member.
“Super-Majority-In-Interest of the Members” means, for purposes of removing a
Manager pursuant to the first sentence of Section 5.2(d), as of the date of determination, a group
of Members who at the time of determination hold more than seventy five percent (75%) of the
Common Units held by Members.
“Tax Percentage” means, with respect to a Fiscal Year, the approximate percentage (as
determined by the Managers in their sole and absolute discretion) of federal and State income
taxes which must be paid by the Member having the highest combined (State and federal)
income tax bracket of all of the Members on that Member’s allocated share Profit for such Fiscal
Year.
“Term” means the period commencing on the date that the initial Certificate was filed
with the Delaware Secretary of State and ending on the date that the Company is Dissolved.
Where not capitalized, “term” shall mean the entire period of the Company’s existence,
including any period of winding up and liquidating the Company following the Dissolution of
the Company pursuant to ARTICLE 10.
“Termination” or “Terminated” means, with respect to a legal entity other than a natural
person, that such entity has Dissolved, completed its process of winding up and liquidating and
otherwise ceased to exist.
“Transfer” means, (a) as a noun, any sale, exchange, transfer, gift, encumbrance,
assignment, pledge, mortgage, hypothecation, or other disposition, including any transfer of
beneficial ownership, whether voluntary or involuntary, and (b) as a verb, to sell, exchange,
transfer, give, encumber, assign, pledge, mortgage, hypothecate, or otherwise dispose of,
whether voluntarily or involuntarily.
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“Treasury Regulations” means the temporary and final regulations issued by the United
States Department of the Treasury and relating to a matter arising under the Code, as such
regulations may be amended from time to time (including corresponding provisions of
succeeding regulations).
“United States” means the United States of America. “Unreturned Contributions” means,
with respect to a holder of one or more Common Units, as of the date of determination, the
excess, if any of (a) such holder’s aggregate Capital Contributions and Service Contributions,
over (b) the aggregate amount of prior distributions to such holder pursuant to Sections 7.1(b)(i)
and 10.4(b)(i).
“Voluntary Bankruptcy” means, with respect to any Person, (a)(i) the inability of such
Person generally to pay its debts as such debts become due, (ii) the failure of such Person
generally to pay its debts as such debts become due, or (iii) an admission in writing by such
Person of its inability to pay its debts generally or a general assignment by such Person for the
benefit of creditors; (b) the filing of any petition or answer by such Person seeking to adjudicate
it as bankrupt or insolvent, or seeking for itself any liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of such Person or its debts under any
law relating to Bankruptcy, insolvency, or reorganization or relief of debtors, or seeking,
consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for such Person or for any substantial part of its
property; or (c) corporate action taken by such Person to authorize any of the actions set forth
above.
1.2 Certain Additional Defined Terms. In addition to such terms as are defined in
Section 1.1, the following terms are used in this Agreement as defined in the sections or other
subdivisions of this Agreement or elsewhere as referenced opposite such terms below:
Defined Term Reference
“Allocation Period” Section 6.1(a)
“Buyer Election Notice” Section 8.6(b)(iii)
“Claim” Section 11.2(a)
“Common Units” Section 4.4
“Company Election Notice” Section 8.6(b)(ii)
“Company Expenses” Section 5.8(c)
“Company Opportunity” Section 5.7(e)
“Confidential Information” Section 4.12(b)
“Dissolution Events” Section 10.1
“Last Member” Section 10.2
“Loan” Section 2.6(b)
“New Tax Guidance” Section 12.2(c)
“Notice” Section 8.6(b)(i)
“Order” Section 8.7
“Permitted Buyer” Section 8.6(a)
“Principal Office” Section 2.5
“Pro Rata Share” Section 8.6(c)(iii)
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“Regulatory Allocations” Section 6.3
“Sale Interest” Section 8.6(a)
“Sales Proceeds” Section 8.8
“Seller” Section 8.6(a)
“SEP” Preamble
“Tax Amount” Section 7.1(a)(i)
“Tax Matters Partner” Section 9.7(a)
“Transferee” Section 8.6(a)
“Units” Section 4.4
“Withdrawal Event” Section 8.4
“Withdrawn Member” Section 8.4
1.3 General Usage. The section headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of this Agreement.
Except where the context clearly requires to the contrary: (a) all references in this Agreement to
designated “Sections” are to the designated Sections and other subdivisions of this Agreement;
(b) words such as “herein”, “hereinafter”, “hereof”, “hereto”, and “hereunder” refer to this
Agreement as a whole, unless the context otherwise requires; (c) instances of gender or entity-
specific usage (e.g., “his”, “her”, “its”, “person”, or “individual”) shall not be interpreted to
preclude the application of any provision of this Agreement to any individual or entity; (d) the
word “or” shall not be applied in its exclusive sense, unless the context otherwise requires;
(e) “including” shall mean “including, without limitation”; (f) references to laws, regulations,
and other governmental rules, as well as to contracts, agreements, and other instruments, shall
mean such rules and instruments as in effect at the time of determination (taking into account any
amendments thereto effective at such time without regard to whether such amendments were
enacted or adopted after the effective date of this Agreement) and shall include all successor
rules and instruments thereto; (g) references to “$”, “cash”, or “dollars” shall mean the lawful
currency of the United States; (h) references to “federal” shall be to laws, agencies, or other
attributes of the United States (and not to any State or locality thereof); (i) the meaning of the
terms “domestic” and “foreign” shall be determined by reference to the United States;
(j) references to “days” shall mean calendar days; references to “business days” shall mean all
days other than Saturdays, Sundays, and days that are legal holidays in the State of Utah;
(k) references to monthly or annual anniversaries shall be to the actual calendar months or years
at issue (taking into account the actual number of days in any such month or year); (l) days,
business days, and times of day shall be determined by reference to local time in Salt Lake City,
Utah; (m) the English language version of this Agreement shall govern all questions of
interpretation relating to this Agreement, notwithstanding that this Agreement may have been
translated into, and executed in, other languages; (n) whenever in this Agreement a Person is
permitted or required to make a decision in its “discretion” or under a grant of similar authority
or latitude, such Person shall be entitled to consider only such interests and factors as it desires,
including its own interests, and shall have no duty or obligation to give any consideration to any
interests of, or factors affecting, the Company or any other Person; and (o) whenever in this
Agreement a Person is permitted or required to make a decision in its “good faith” or under
another express standard, the Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Agreement or other applicable law.
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ARTICLE 2
ORGANIZATIONAL MATTERS
2.1 Formation.
(a) On March 6, 2017, the Company was originally formed as a Utah limited
liability company by filing with the Utah Division of Corporations and Commercial Code of the
Utah Department of Commerce articles of organization in accordance with the Utah Revised
Limited Liability Company Act.
(b) The rights and liabilities of the Members shall be determined pursuant to
the Act and this Agreement. To the extent that the rights or obligations of any Member or
Manager are different by reason of any provision of this Agreement than they would be in the
absence of such provision, then this Agreement shall, to the extent permitted by the Act, control.
2.2 Name. The name of the Company shall be “RS17 Rexburg Manager LLC”. The
business of the Company may be conducted under that name or, upon compliance with
applicable laws, any other name that the Managers deem appropriate or advisable. The
Managers shall file or cause to be filed any fictitious name certificates and similar filings, and
any amendments thereto, that the Managers consider appropriate or advisable.
2.3 Term. The Term of the Company shall commence at the time of the Effective
Date and shall continue for so long as allowed by the Act or otherwise dissolved as provided
herein.
2.4 Registered Office and Agent. The Company shall continuously maintain a
Delaware registered office and a registered agent for service of process as required by the Act.
The initial registered office and agent of the Company shall be as stated in the Certificate. If the
registered agent ceases to act as such for any reason, or the registered office shall change, then
the Managers shall promptly designate a replacement registered agent or file or cause to be filed
a notice of change of address, as the case may be.
2.5 Principal Office. The Company shall have a single principal office (the “Principal
Office”) which initially shall be located at 160 West Canyon Crest Road, Alpine, Utah 84004,
and may thereafter be changed from time to time by the Managers upon notice to the Members.
The Company may have such other offices and in such locations as the Managers from time to
time may determine, or the business of the Company may require.
2.6 Purpose. The purposes of the Company is to:
(a) Manage RS17 Rexburg Preferred LLC as it holds real property in
Rexburg, Idaho. ;
(b) Manage and direct the business operations and affairs of its Subsidiaries
(including the development, adoption and implementation of strategies, business plans and
policies concerning the conduct of such Subsidiaries’ businesses);
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(c) Exercise all rights and powers granted to the Company under this
Agreement, its Subsidiaries’ Organizational Documents and the other agreements contemplated
herein and therein, as the same may be amended from time to time; and
(d) Engage in such other lawful activities determined by the Managers to be
necessary, advisable, or appropriate in furtherance of the foregoing activities.
2.7 Title to Company Property. Title to any property acquired by or contributed to
the Company shall be placed in the name of the Company and shall remain in the Company’s
name for as long as the Company owns the property. Nothing in this Section 2.7 shall be
construed as prohibiting the Company from acquiring or holding property in a Subsidiary.
2.8 Member Information.
(a) Each Member shall provide the Company with appropriate contact
information for such Member (including such Member’s mailing address, telephone number,
facsimile number, and e-mail address (if available), as well as, in the case of a Member that is an
entity, the name or title of an individual to whom notices and other correspondence should be
directed). Each Member shall provide the Company with such information at the time of its
execution of this Agreement, and shall thereafter promptly notify the Company in writing of any
change to such information. The respective contact information of the Members is set forth on
Exhibit A. The Managers shall update Exhibit A from time to time to reflect accurately the
information set forth thereon, which updates shall not require the consent or approval of the
Members.
(b) Each Member shall furnish to the Company upon request any information
with respect to such Member reasonably determined by the Managers to be necessary or
convenient for the formation, operation, Dissolution, winding up, or Termination of the
Company.
2.9 Additional Documents. The Managers shall cause to be executed, filed, recorded,
published, or amended in the name of the Company any documents, as the Managers in their sole
and absolute discretion determines to be necessary or advisable, (a) in connection with the
formation, operation, Dissolution, winding up, or Termination of the Company pursuant to
applicable law, or (b) to otherwise give effect to the terms of this Agreement. The terms and
provisions of each document described in the preceding sentence shall be initially established
and shall be amended from time to time as necessary to cause such terms and provisions to be
consistent with the terms and provisions of this Agreement.
2.10 Taxation as a Partnership. It is the intent of the Members that the Company shall
be, to the extent permissible by applicable law, treated as a “partnership” for federal and
applicable State income tax purposes and, accordingly, (a) no Member shall file any election
with any taxing authority to have the Company treated otherwise, and (b) each Member hereby
represents, covenants, and warrants that it shall not maintain a position inconsistent with such
treatment. The Managers, except as otherwise required by applicable law or approved by all of
the Members, (i) shall not cause or permit the Company to elect (A) to be excluded from the
provisions of Subchapter K of the Code, or (B) to be treated as a corporation (or association
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treated as a corporation) for any federal, State, or local income tax purposes; (ii) shall cause the
Company to make any election reasonably determined to be necessary or appropriate in order to
ensure the treatment of the Company as a partnership for all income tax purposes; (iii) shall
cause the Company to file any required tax returns in a manner consistent with its treatment as a
partnership for income tax purposes; and (iv) shall not take, any action that would be inconsistent
with the treatment of the Company as a partnership for such purposes.
2.11 Power of Attorney.
(a) Grant of Power. Each Member, by the execution of this Agreement,
whether in counterpart, by separate instrument, by attorney-in-fact or otherwise, hereby
constitutes and appoints the Managers and each of their authorized representatives or officers
(and any successors thereto by assignment or otherwise and the authorized representatives
thereof) with full power of substitution and re-substitution as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place, and stead, to execute, swear to,
acknowledge, deliver, file, and record in the appropriate public offices, as applicable or
appropriate: (i) all certificates and other instruments and all amendments or restatements thereof
that the Managers deem reasonable and appropriate or necessary to qualify or register, or
continue the qualification or registration of, the Company as a limited liability company (or a
partnership in which the Members have limited liability) in all jurisdictions in which the
Company may conduct business or own property; (ii) all instruments, including an amendment or
restatement of this Agreement, that the Managers deem appropriate or necessary to reflect any
amendment, change, or modification of this Agreement in accordance with its terms; (iii) all
conveyances and other instruments or documents that the Managers deem appropriate or
necessary to reflect the Dissolution, liquidation and Termination of the Company pursuant to the
terms of this Agreement; (iv) all instruments relating to the admission or substitution of any
Member; (v) all ballots, consents, approvals, waivers, certificates, and other instruments
appropriate or necessary, in the sole discretion of the Managers, to make, evidence, give,
confirm, or ratify any vote, consent, approval, agreement, or other action that is made or given
by the Members hereunder, is deemed to be made or given by the Members hereunder, or is
consistent with the terms of this Agreement and appropriate or necessary, in the sole discretion
of the Managers, to effectuate the terms or intent of this Agreement, provided that, with respect
to any action that requires the vote, consent, or approval of a stated percentage of the Members
under the terms of this Agreement, the Managers may exercise the power of attorney granted in
this item (v) only after the necessary vote, consent, or approval has been made or given. Nothing
herein contained shall be construed as authorizing the Managers to amend this Agreement except
in accordance with Section 12.2.
(b) Irrevocability. 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
death, incompetency, incapacity, disability, Dissolution, bankruptcy or Termination of any
Member, or the transfer of all or any portion of its Units and shall extend to such Member’s
heirs, successors, assigns and legal representatives. Each Member agrees to be bound by any
representations made by the Managers acting in good faith pursuant to such power of attorney;
and each Member hereby waives any and all defenses that may be available to contest, negate or
disaffirm any action of the Managers taken in good faith under such power of attorney. Each
Member shall execute and deliver to the Managers within fifteen (15) days after receipt of the
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Managers’ request therefor, such further designations, powers of attorney, and other instruments
as the Managers deem necessary to effectuate this Agreement and the purposes of the Company.
ARTICLE 3
CAPITAL CONTRIBUTIONS
3.1 Common Units. Upon execution of this Agreement, and in connection with its
admission as a Member, SEP shall be issued 840 Common Units and North Rexburg LLC shall
be issued 160 Common Units, which respective Units are being issued in exchange for services
rendered to or on behalf of the Company in a “member” capacity or in anticipation of being a
“member”.
3.2 Additional Capital Contributions. Except as specifically provided in this
ARTICLE 3 or Section 7.7(d), no Member shall be required to make any additional Capital
Contributions.
3.3 Capital Accounts. The Company shall establish and maintain an individual
Capital Account for each Member in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv).
3.4 Withdrawal and Return of Capital. No Member may withdraw or demand
withdrawal of any portion of its Capital Contribution or Capital Account balance. Except as
otherwise provided in ARTICLE 7 or ARTICLE 10, no Member shall be entitled to return of
such Member’s Capital Contributions, a distribution in respect of such Member’s Capital
Account balance, or any other distribution in respect of such Member’s Interest.
3.5 Loans to the Company. No Member shall be required to lend any money to the
Company or to guaranty any Company indebtedness. A Member may make a loan to the
Company in any amount and on such terms as are agreed by the Managers and such Member,
and any such loan shall not be treated as a Capital Contribution.
3.6 Interest on Capital. No Member shall be entitled to interest on such Member’s
Capital Contributions, Capital Account balance, or share of unallocated Profits.
3.7 Contributed Property. With respect to property contributed by a Member to the
Company with the approval of the Managers, such Member shall provide the Company any
information reasonably requested by the Company for purposes of determining the Company’s
tax basis in such property.
ARTICLE 4
MEMBERS
4.1 Admission of Members and Additional Members.
(a) Each Person that has executed this Agreement and whose name is listed on
Exhibit A as a Member and who has made or makes a Capital Contribution or a Service
Contribution is hereby admitted as a Member.
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(b) Subject to the limitations set forth herein, the Managers may cause the
Company, from time to time, to issue additional Common Units and admit Additional Members
to the Company.
(c) A Person shall not be admitted as an Additional Member prior to the
execution by such Person of this Agreement or otherwise agreeing in writing to be bound by the
terms and provisions hereof.
(d) Notwithstanding the foregoing provisions of this Section 4.1, Substitute
Members may only be admitted in accordance with ARTICLE 8.
(e) The Managers are hereby authorized and directed, without any further
vote or consent of the Members, to amend Exhibit A from time to time to reflect the admission
of an Additional Member and the issuance of additional Common Units.
4.2 Limited Liability. Except as set forth in this Agreement or as required by
applicable law, no Member shall be personally liable for any debt, obligation, or liability of the
Company, whether that liability or obligation arises in contract, tort, or otherwise, solely by
reason of being a Member of the Company.
4.3 Nature of Interest. A Member’s Interest constitutes its personal property. No
Member has any interest in any specific asset or property of the Company.
4.4 Units. Limited liability company interests (as such term is defined in Section
18-101(8) of the Act) of the Company including their relative rights, powers, preferences,
privileges and duties shall be represented by “Units”). The Company is authorized to issue one
class of Units, “Common Units”.
(a) Common Units. Except for such rights, powers, preferences, privileges
and duties that are set forth elsewhere in this Agreement, the rights, powers, preferences,
privileges and duties granted to and imposed on the Common Units are set forth below in this
Section 4.4(a).
(i) Allocations. The rights to allocations of Profits and Losses with
respect to the Common Units shall be as provided in ARTICLE 6.
(ii) Distribution Rights. The distribution rights with respect to the
Common Units shall be as provided in ARTICLE 7 and ARTICLE 10.
(iii) Voting Rights. Each Member shall be entitled to one (1) vote for
each Common Unit held by such Member. With respect to any such vote and except as
otherwise expressly provided herein or as required by applicable law, the Members shall be
entitled to notice of any Members’ meeting in accordance with the provisions hereof, and shall
be entitled to vote, together with the other voting Members as a single class (on a per-Unit basis),
with respect to any matter upon which the Members have the right to vote. Except as
specifically provided herein or as required by law, under no circumstance shall the vote or
approval of the Members, voting as a single class, be required or allowed with respect to any
matters.
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4.5 Powers of Members. The Members shall have no powers or authority conferred
upon them pursuant to the Act except to the extent conferred upon them by this Agreement or as
required by this Act. Except as otherwise specifically provided to the contrary in this
Agreement, the management and control of the Company and its business and affairs is vested
exclusively in the Managers as more specifically provided in Section 5.1. No Member, acting
solely in the capacity of a Member, is an agent of the Company nor can any Member in such
capacity bind nor execute any instrument on behalf of the Company. Any Member, acting solely
in the capacity of a Member, who takes any action or binds the Company in violation of this
Section 4.5 shall be solely responsible for any loss, expense, damage, or injury suffered or
sustained by the Company and/or the other Members as a result of the unauthorized action and
shall indemnify and hold the Company harmless with respect to any such loss, expense, damage,
or injury. Further, upon any breach of a Member’s obligations under this Section 4.5, the
Company shall have a right of offset against any distribution or other amounts payable to such
Member under this Agreement for amounts owed to the Company pursuant to the
indemnification obligation described in the preceding sentence.
4.6 Vote or Written Consent of the Members. Except as otherwise expressly
provided in this Agreement or required by the Act, the Members shall have no voting, approval,
or consent rights. Unless otherwise specifically provided in this Agreement, each matter
requiring the vote or written consent of the Members shall be authorized or approved by the vote
or written consent of a Majority-In-Interest of the Members. Notwithstanding anything to the
contrary herein, the Managers may from time to time elect to submit a matter to the vote or
approval of the Members even though the Managers are not obligated to submit such matter to
the vote or approval of the Members, provided that the result of any such vote or approval of the
Members on any such submission shall be binding upon the Managers.
4.7 Proxies. Every Member entitled to vote or to execute consents shall have the
right to do so either in person or by an agent or agents authorized by a written proxy executed by
such Member or its duly authorized agent, which proxy shall be filed with the Managers at or
before the meeting at which the proxy is to be used. No proxy shall be voted on after three (3)
years from its date unless the proxy provides for a longer period. Unless and until voted, every
proxy shall be revocable at the pleasure of the Person who executed it or such Person’s legal
representatives or assigns, except in those cases where an irrevocable proxy has been given.
4.8 Meetings. No annual or regular meetings of the Members are required.
Notwithstanding the prior sentence, meetings of the Members may be held subject to the
following provisions:
(a) Place of Meeting. Meetings of the Members may be held at such place,
either within or without the State of Delaware, as may be designated from time to time by the
Managers, or, if not so designated, then at the Principal Office. The Managers may, in their sole
and absolute discretion, determine that the meeting shall not be held at any place, but may
instead be held solely by means of remote communication. Subject to such reasonable
guidelines and procedures as the Managers may adopt, the Members not physically present at a
meeting of the Members may, by means of remote communication: (i) participate in a meeting of
the Members; and (ii) be deemed present in person and vote at a meeting of the Members
whether such meeting is to be held at a designated place or solely by means of remote
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communication, provided that (A) the Company shall implement reasonable measures to verify
that each Person deemed present and permitted to vote at the meeting by means of remote
communication is a Member, (B) the Company shall implement reasonable measures to provide
such Members a reasonable opportunity to participate in the meeting and to vote on matters
submitted to the Members, including an opportunity to read or hear the proceedings of the
meeting substantially concurrently with such proceedings, and (C) if any Member votes or takes
other action at the meeting by means of remote communication, a record of such vote or other
action shall be maintained by the Company. For purposes of this Section 4.8(a), “remote
communication” shall include telephone or other voice communications and electronic mail or
other form of written, audio or visual electronic communications.
(b) Power to Call Meetings. Meetings of the Members may be called by the
Managers, or upon written demand of Members holding at least ten percent (10%) of the
outstanding Common Units.
(c) Notice of Meeting. The Managers shall send or cause to be sent or
otherwise delivered to each Member written notice of a meeting of the Members not less than ten
(10) days or more than sixty (60) days before the date of the meeting. The notice shall specify
the place, if any, date and hour of the meeting, the purpose or purposes of the meeting, and the
means of remote communication, if any, by which the Members may be deemed to be present in
person and vote at such meeting.
(d) Quorum. At all meetings of the Members, the presence, in person or by
proxy duly authorized, of a Majority-In-Interest of the Members shall constitute a quorum for the
transaction of business. In the absence of a quorum, any meeting of the Members may be
adjourned, from time to time, by vote of the holders of a majority of the Units represented
thereat, but no other business shall be transacted at such meeting.
(e) Voting. Except as otherwise required by applicable law or this
Agreement, any action taken by Members having no less than the minimum of votes that would
be necessary to authorize or take such action as specifically set forth in this Agreement, or, if not
specifically set forth herein, as set forth in Section 4.6, at any meeting at which a quorum is
present shall be valid and binding upon the Company.
(f) Adjourned Meeting. When any meeting of Members is adjourned to
another time or place, notice need not be given of the adjourned meeting if the time and place are
announced at a meeting at which the adjournment is taken, unless a new record date for the
adjourned meeting is subsequently fixed, or unless the adjournment is for more than thirty (30)
days from the date set for the original meeting, in which case the Managers shall set a new
record date. At any adjourned meeting, the Company may transact any business which might
have been transacted at the original meeting.
(g) Waiver of Notice or Consent.
(i) The actions taken at any meeting of Members called and noticed
other than in accordance with Sections 4.8(b) and 4.8(c), and wherever held, shall have the same
validity as if taken at a meeting duly called and noticed in accordance with Sections 4.8(b) and
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4.8(c), if a quorum is present, and if, either before or after the meeting, each of the Members
entitled to vote, who was not present in person or by proxy duly authorized, signs a written
waiver of notice or consents to the holding of the meeting or approves the minutes of the
meeting. All such waivers, consents, or approvals shall be filed with the Company’s records or
made a part of the minutes of the meeting.
(ii) Attendance of a Member at a meeting shall constitute a waiver of
notice of that meeting, except when the Member objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or convened, and except
that attendance at the meeting is not a waiver of any right to object to the consideration of
matters not included in the notice of meeting if that objection is expressly made at the meeting.
Neither the business to be transacted nor the purpose of any meeting of Members need be
specified in any written waiver of notice.
(h) Action by Written Consent without a Meeting. Any action that may be
taken at a meeting of Members may be taken without a meeting, without prior notice and without
a vote, if a consent in writing setting for the action so taken is signed by Members having no less
than the minimum of votes that would be necessary to authorize or take such action as
specifically set forth in this Agreement, or, if not specifically set forth herein, as set forth in
Section 4.6.
(i) Record Date. In order that the Company may determine the Members of
record entitled to notice of any meeting or to vote or to execute consents or to exercise any rights
in respect of any other lawful action, the Managers may fix, in advance, a record date that is not
more than sixty (60) days nor less than ten (10) days prior to the date of the meeting. If no
record date is fixed:
(i) The record date for determining the Members entitled to notice of
or to vote at a meeting of the Members shall be at the Close of Business on the business day
preceding the date on which notice is given, or, if notice is waived, at the Close of Business on
the business day preceding the day on which the meeting is held.
(ii) The record date for determining the Members entitled to give
consent to an action in writing without a meeting shall be the day on which the first written
consent is given.
(iii) The record date for determining the Members for any other
purpose shall be at the Close of Business on the day on which the Managers adopt a resolution
relating thereto.
(iv) The determination of the Members of record entitled to notice of or
to vote at a meeting of the Members shall apply to any adjournment of the meeting unless the
Managers fix a new record date for the adjourned meeting, but the Managers shall fix a new
record date if the meeting is adjourned for more than thirty (30) days from the date set for the
original meeting.
4.9 Transactions with the Company. Subject to any limitations set forth in this
Agreement and with the prior approval of the Managers, a Member may lend money to and
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transact other business with the Company. Subject to other applicable law, such Member has the
same rights and obligations with respect thereto as a Person who is not a Member.
4.10 Members Expenses. Except as otherwise provided in this Section 4.10, no
Member, in its capacity as such, shall be reimbursed for expenses incurred on behalf of, or
otherwise in connection with, the Company; provided, however, a Member may be reimbursed
for any such expenses with the approval of the Managers, which approval may be given or
withheld by the Managers in their sole and absolute discretion; provided, further, that no
Member shall be reimbursed for any expense unless and until such Member provides the
Company with reasonable documentation relating thereto. Any reimbursement paid by a third
party for expenses actually reimbursed by the Company shall be retained by (or paid over by the
recipient thereof to) the Company.
4.11 Members Compensation. The Company shall not be obligated to pay a salary,
bonus, or similar compensation to any Member in respect of services provided to the Company
by such Member, in its capacity as such, but the Company may pay salaries, bonuses, or similar
types of compensation to one or more Members as employees or service providers of the
Company at such times and in such amounts as shall be determined by the Managers in their sole
and absolute discretion (subject to Section 5.7).
4.12 Confidentiality.
(a) The Members hereby acknowledge that the Members will be in possession
of confidential information, the improper use or disclosure of which could have a material
adverse effect upon the Company or upon one or more Members.
(b) For purposes of this Agreement, “Confidential Information” means any
and all information and material disclosed by the Company to a Member or obtained by a
Member through inspection or observation of the Company’s or any of its Subsidiaries’ property
or facilities (before or after the signing of this Agreement, and whether in writing, or in oral,
graphic, electronic or any other form) that is (i) marked as confidential or proprietary, (ii) if
disclosed orally or in other intangible form or in any form that is not so marked, that is identified
as confidential at the time of such disclosure or within a reasonable time thereafter, or (iii) by its
nature, or based on circumstances under which they were disclosed, should reasonably be
considered to be confidential or proprietary in nature. Confidential Information, includes,
without limitation, any information provided to a Member by or on behalf of the Company
concerning the business or assets of the Company or any of its Subsidiaries (including their
respective employees, consultants, investors, affiliates, licensors, suppliers, vendors, customers,
clients and other persons and entities) or another Member. For purposes of this Section 4.12,
Confidential Information (including information relating to another Member) provided by one
Member to another shall be deemed to have been provided on behalf of the Company.
(c) A Member shall hold all Confidential Information in strict confidence and
shall not disclose any Confidential Information to any third party, other than to its employees,
agents, consultants, subsidiaries, and other affiliates who (i) need to know such information,
(ii) are informed of the existence of this Agreement and its restrictions on the disclosure and use
of Confidential Information, and (iii) are bound by employment, consulting or similar
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agreements restricting the disclosure and use of such information comparable to and no less
restrictive than those set forth herein. A Member shall not use any Confidential Information for
the benefit of itself or any third party or for any purpose other than for a Company purpose or a
purpose reasonably related to protecting such Member’s interest in the Company (in a manner
not inconsistent with the interests of the Company). A Member shall take the same degree of
care that it uses to protect its own confidential and proprietary information and materials of
similar nature and importance (but in no event less than reasonable care) to protect the
confidentiality and avoid the unauthorized use, disclosure, publication or dissemination of the
Confidential Information.
(d) The obligations of a Member under this Section 4.12, including the
restrictions on disclosure and use, shall not apply with respect to any Confidential Information to
the extent such Confidential Information: (i) is or becomes publicly known through no act or
omission of such Member or breach known to such Member of any other duty owed to or
agreement with the Company by any Person; (ii) was rightfully known by such Member before
receipt from the Company without breach known to such Member of any other duty owed to or
agreement with the Company by any Person; (iii) becomes rightfully known to such Member
without confidential or proprietary restriction from a source other than the Company that does
not owe a duty of confidentiality to the Company with respect to such Confidential Information;
or (iv) is independently developed by such Member without the use of or reference to the
Confidential Information of the Company and without breach known to such Member of any
other duty owed to or agreement with the Company by any Person, as evidenced by such
Member’s contemporaneous written records. In addition, a Member may use or disclose
Confidential Information to the extent (A) approved by the Managers (and with respect to
Confidential Information regarding another Member, the approval of such Member); or (B) the
Member legally compelled to disclose such Confidential Information, provided, however, that
prior to any such compelled disclosure, the Member shall, if legally permitted, give the Company
(and with respect to Confidential Information regarding another Member, such other Member)
reasonable advance notice of any such disclosure and shall cooperate with the Company (and
with respect to Confidential Information regarding another Member, such other Member) in
protecting against any such disclosure and/or obtaining a protective order narrowing the scope of
such disclosure and/or use of the Confidential Information.
(e) A Member shall promptly notify the Company of any unauthorized use,
disclosure, publication, or dissemination of Confidential Information to which the Member
becomes aware or reasonable believes has occurred.
(f) Notwithstanding anything to the contrary in this Section 4.12, the
Company and the Managers may disclose any information to the extent necessary or convenient
for the formation, operation, Dissolution, winding up, or Termination of the Company (as
determined by the Managers in their reasonable discretion).
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ARTICLE 5
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by Managers.
(a) Exclusive Management by the Managers. The business, property, and
affairs of the Company shall be managed exclusively by or under the direction of the Managers.
The Managers are and shall be a “manager” within the meaning of Section 18-101(10) of the
Act. Except for the express standards, qualifications, conditions and limitations set forth in this
Agreement, and for situations in which the approval, consent or vote of the Members or any
group or individual Member is expressly required by the Act, the Certificate or this Agreement,
the Managers shall have full, complete, and exclusive authority, power, and discretion to manage
and control the business, property, and affairs of the Company, to make all decisions regarding
those matters, and to perform any and all other acts or activities customary or incident to the
management of the Company’s business, property, and affairs.
(b) Agency Authority of Managers. Subject to Section 5.6, the Managers are
authorized to endorse checks, drafts, and other evidence of indebtedness made payable to the
Company, and may sign all checks, drafts, and other instruments obligating the Company to pay
money, and may sign contracts, agreements and obligations on behalf of the Company.
5.2 Election and Removal of Managers.
(a) Number and Term. The Company shall have two (2) Managers. The
initial Managers are: J. Brett Boren, an individual and Paul Bringhurst, an individual. A
Manager shall hold office until such Manager’s resignation, Termination, death (if an individual)
or removal.
(b) Qualification. A Manager need not be a natural person (i.e., a human
being), a Member, a resident of the State of Delaware, or a citizen of the United States.
(c) Resignation. Any Manager may resign at any time by giving written
notice to the Members. Any such resignation shall be without prejudice to the rights, if any, of
the Company under any contract to which the resigning Manager is a party. The resignation of
any Manager shall take effect upon receipt of that notice or at such later time as shall be
specified in the notice; and, unless otherwise specified in the notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a Manager who is also
a Member shall not affect the Manager’s rights as a Member and shall not constitute a
dissociation of the resigning Manager as a Member.
(d) Removal. A Manager may only be removed for Cause by the affirmative
vote of a Supermajority-In-Interest of the Members. Any such removal shall take effect upon
receipt of the notice or at such later time as shall be specified in the notice. Any removal shall be
without prejudice to the rights, if any, of the Manager under any contract to which such Manager
is a party, and, if the Manager is also a Member, shall not affect the Manager’s rights as a
Member or constitute a withdrawal of such Manager as a Member.
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(e) Vacancies. Any vacancy occurring in the position of manager as a result
of a Manager ceasing to be a constituent Manager shall be filled by a successor Manager elected
by a Majority-In-Interest of the Members (by affirmative vote or written consent).
Notwithstanding anything to the contrary herein, a Person elected as a successor Manager shall
not become a Manager hereunder unless and until such Person has executed and delivered to the
Company an Acceptance of Appointment as Managers, in substantially the form attached to this
Agreement.
5.3 Meetings. No annual or regular meeting of the Managers is required.
5.4 Action by Written Consent without a Meeting. Any action that may be taken by
the Managers may be taken without a meeting, and without prior notice, if the Managers
evidence their consent in a writing setting forth the action so taken.
5.5 Powers of the Managers. Without limiting the generality of Section 5.1, but
subject to Section 5.6 and to the express standards, qualifications, conditions and limitations set
forth elsewhere in this Agreement, the Managers shall possess and may exercise all powers and
privileges necessary, appropriate, or convenient to manage and carry out the purposes, business,
property, and affairs of the Company and to make all decisions affecting such business and
affairs, including, without limitation, the power to exercise on behalf of the Company all powers
and privileges described in the Act. The expression of any power or privilege of the Managers in
this Agreement shall not in any way limit or exclude any other power or privilege which is not
specifically or expressly set forth herein.
5.6 Limitations on Power of the Managers.
(a) Generally. Notwithstanding any other provision of this Agreement to the
contrary, the Company shall not (by amendment, merger, consolidation or otherwise), do, and
the Managers (in their capacity as Managers) shall not have the authority hereunder to cause the
Company to do, any of the following without first obtaining the approval (by affirmative vote or
written consent) of a Majority-In-Interest of the Members (in addition to any other consent(s) as
may be specifically required herein):
(i) sell, exchange, or otherwise dispose of all, or substantially all, of
the Company’s assets occurring as part of a single transaction or series of related transactions,
except in the orderly liquidation and winding up of the business of the Company pursuant to
ARTICLE 10 following the Company’s Dissolution;
(ii) merge or consolidate the Company with or into one or more “other
business entities” as such term is defined in Section 18-209(a) of the Act, provided, that with
respect to a merger or consolidation of the Company with a general or limited partnership that is
the surviving or resulting entity, in no event shall a Member be required to become a general
partner or become personally liable for any obligations as a result of the merger or consolidation
without such Member’s express written consent;
(iii) convert the Company to an “other entity”, as such term is defined
in Section 18-214(a) of the Act, provided, that with respect to a conversion of the Company to a
general or limited partnership, in no event shall a Member be required to become a general
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partner or become personally liable for any obligations as a result of the conversion without such
Member’s express written consent; or
(iv) effect any transaction or take any action described in this
Agreement as requiring the vote, consent or approval of the Members, provided, that if the
provision of this Agreement requiring such vote, consent or approval calls for the vote, consent
or approval of a higher level of approval of the Members or the vote, consent or approval of
certain specified Members, then such transaction or action shall require the vote, consent or
approval of such higher level of approval of the Members or such specified Members.
(b) Member Consent. Notwithstanding any other provision of this Agreement
to the contrary, so long as there are any Members, the Company shall not (by amendment,
merger, consolidation or otherwise), do, and the Managers (in their capacity as Managers) shall
not have the authority hereunder to cause the Company to do, any of the following without first
obtaining the approval (by affirmative vote or written consent) of a Majority-In-Interest of the
Members (in addition to any other consent(s) as may be specifically required herein):
(i) amend, repeal, waiver, modify, alter or change this Agreement or
the Company’s other Organizational Document so as to adversely affect the preferences, rights,
privileges or powers of, or restrictions provided for the benefit of, the Members;
(ii) authorize or issue, or obligate the Company to create or issue, any
equity security of the Company, including any other security convertible into or exercisable for
any equity security of the Company, having preferential rights to distributions (liquidating or
non-liquidating) superior to the Common Units; or
(iii) agree or commit to any of the foregoing.
5.7 Performance of Duties. Notwithstanding anything to the contrary in the Act, the
only duties that Managers owe to the Company and its Members are those duties specifically set
forth in this Agreement and all other duties (other than the implied contractual covenant of good
faith and fair dealing under Section 18-1101(c) of the Act) are specifically disclaimed and
eliminated. In furtherance thereof, the Members hereby acknowledge and agree that no other
duties, fiduciary or otherwise, are to be implied or inferred. The Members acknowledge that the
limitations and/or eliminations of all or any portion of the Managers’ duties as set forth in this
Section 5.7 and elsewhere in this Agreement are fair and reasonable in the context of the nature
of the Company’s business and the relationship of the parties hereto. The Members further
acknowledge that Managers would not have accepted appointment as a “manager” of the
Company in the absence of such limitations.
(a) Duty of Care. The Managers’ duty of care to the Company and the
Members in the conduct and winding up of the Company’s business is limited to refraining from
conduct or inaction that constitutes fraud, gross negligence, reckless or intentional misconduct,
or a knowing violation of law by such Manager.
(b) Duty of Loyalty. Except as otherwise specifically permitted herein, the
Managers’ duty of loyalty to the Company and the Members is limited to the following:
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(i) To account to the Company and hold as trustee for it any property,
profit, or benefit inappropriately or improperly derived by a Manager in the conduct or winding
up of the Company’s business or derived from the use by the Manager of Company property,
unless a Majority-In-Interest of the Disinterested Members, knowing the material facts of the
property, profit or benefit to be derived by a Managers, consents thereto; and
(ii) To refrain from dealing with the Company in the conduct or
winding up of the Company business as or on behalf of a party having an interest adverse to the
Company, unless a Majority-In-Interest of the Disinterested Members, knowing the material
facts of the adverse interest, consent thereto.
(c) Reliance on Others. In performing their duties, the Managers may rely on
information, opinions, reports, or statements, including financial statements and other financial
data, presented to the Company by any Person, including, without limitation, attorneys,
accountants, investment bankers, and consultants, as to matters that the Managers reasonably
believe are within such Person’s professional or expert competence.
(d) Devotion of Time. A Manager is not obligated to devote all of its time or
business efforts to the business and affairs of the Company. A Manager shall devote whatever
time, effort, and skill as it deems reasonably necessary or appropriate to manage the Company’s
business and affairs.
(e) Company Opportunities. Notwithstanding anything to the contrary herein,
a Manager shall have no duty to the Company or its Members to present any investment
opportunity or prospective economic advantage to the Company (a “Company Opportunity”),
even if (i) the Company Opportunity is of the character that, if presented to the Company, could
be taken by the Company, or (ii) the Company Opportunity arose out of, or was derived by the
Manager in, the conduct or winding up of the Company’s business. A Manager shall have the
right to hold any such Company Opportunity for its own account or to recommend such
Company Opportunity to Persons other than the Company and/or its Members. Neither the
Company nor any Member shall have any right in or to such Company Opportunity, or to the
income or proceeds derived therefrom. THE MEMBERS HEREBY WAIVE ANY AND ALL
RIGHTS AND CLAIMS TO ANY SUCH COMPANY OPPORTUNITY OR WHICH
THEY MAY OTHERWISE HAVE AGAINST THE MANAGERS AS A RESULT OF
ANY SUCH COMPANY OPPORTUNITY.
(f) Other Ventures and Activities.
(i) The Members acknowledge that the Managers and their Affiliates
are or may be involved in other financial, investment and professional activities including,
without limitation, serving as officers, directors, managers, advisors and agents of other
companies and businesses. THE MEMBERS HEREBY WAIVE ANY CONFLICT OF
INTEREST ARISING WITH RESPECT TO ANY SUCH FINANCIAL, INVESTMENT
AND PROFESSIONAL ACTIVITIES.
(ii) The Members agree that the Managers and their Affiliates may
engage or invest, independently or with others, in any business activity of any type or
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description, including those that might be the same as or similar to the Company’s business or
that might be in direct or indirect competition with the Company. Neither the Company nor any
Member shall have any right in or to such other ventures or activities, or to the income or
proceeds derived therefrom and the Managers shall have no duty or obligation to make any
reports to the Members or the Company with respect to any such ventures or activities. THE
MEMBERS ACKNOWLEDGE THAT THE MANAGERS AND THEIR AFFILIATES
MAY OWN AND/OR MANAGE OTHER BUSINESSES, INCLUDING BUSINESSES
THAT MAY COMPETE WITH THE COMPANY AND FOR THE MANAGERS’ TIME.
EACH MEMBER HEREBY WAIVES ANY AND ALL RIGHTS AND CLAIMS WHICH
IT MAY OTHERWISE HAVE AGAINST THE MANAGERS AND THEIR AFFILIATES
AS A RESULT OF ANY SUCH VENTURES OR ACTIVITIES.
(g) Transactions between the Company and a Manager. Notwithstanding that
it may constitute a conflict of interest, a Manager may, and may cause its Affiliates to, engage in
any transaction (including, without limitation, the purchase, sale, lease, or exchange of any
property, or the lending of funds, or the rendering of any service, or the establishment of any
salary, other compensation, or other terms of employment or service) with the Company so long
as such transaction is not expressly prohibited by this Agreement and the terms and conditions of
such transaction on an overall basis are fair and reasonable to the Company. In a Proceeding
challenging any such transaction, the Member(s) challenging such transaction shall have the
burden to prove that the terms and conditions of such transaction on an overall basis were not
fair and reasonable to the Company. A transaction between a Manager and/or its Affiliates, on
the one hand, and the Company, on the other hand, shall be conclusively determined to constitute
a transaction on terms and conditions, on an overall basis, fair and reasonable to the Company if
the material facts as to the Manager’s relationship or interest as to the transaction are disclosed or
are known to the Disinterested Members, and the transaction is specifically approved by the
affirmative vote or written consent of a Majority-In-Interest of the Disinterested Members.
(h) Acknowledgement and Waiver. The Members (in their own names and in
the name and on behalf of the Company):
(i) agree that (A) the terms of this Section 5.7, to the extent that they
modify or limit a duty or other obligation, if any, that a Manager may have to the Company or
any Member under this Agreement, the Act or other applicable law are reasonable in form, scope
and content; and (B) the terms of this Section 5.7 shall control to the fullest extent possible if it is
in conflict with a duty, if any, that the Manager may have to the Company or another Member,
under this Agreement, the Act or any other applicable law; and
(ii) waive to the fullest extent permitted by the Act, any duty or other
obligation, if any, that a Manager may have to the Company or any Member, pursuant to this
Agreement, the Act or any other applicable law, to the extent necessary to give effect to the
terms of this Section 5.7.
5.8 Payments to a Manager. Except as specified in this Agreement including this
Section 5.8, a Manager shall not be entitled to remuneration for services rendered or goods
provided to the Company. The Managers shall receive only the following payments:
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(a) Services Performed. A Manager or its Affiliate may be compensated for
services performed for or on behalf of the Company in such amounts as may be approved by the
Manager or as otherwise provided in Section 5.7(g). Generally, if such Manager is also a
Member or otherwise treated as a “partner” for federal income tax purposes, such compensation,
if any, shall be deemed to be a guaranteed payment within the meaning of Code Section 707(c).
(b) Goods Provided. The Company shall pay a Manager and his Affiliates for
goods provided to the Company to the extent that the Manager is not required to provide such
goods without charge to the Company.
(c) Expenses. The Company will pay, or reimburse a Manager and its
Affiliates (to the extent actually paid by the Manager or its Affiliates and not reimbursed by
another Person) for, all fees, costs, and expenses incurred or paid on behalf of the Company
relating to the formation, operation, Dissolution, winding up, or Termination of the Company
(collectively, “Company Expenses”), including, without limitation, the following: (i) all out-of-
pocket expenses associated with the organization of the Company and any of their Subsidiaries;
(ii) all costs and expenses related to the day-to-day operations of the Company and any of their
Subsidiaries; (iii) legal, accounting, audit, bookkeeping, custodial, consulting, and other
professional fees and expenses; (iv) insurance premiums (including liability insurance and other
coverages for the benefit of the Company, its Subsidiaries, the Managers and their respective
officers, managers and employees), indemnification payments, costs of litigation, and other
extraordinary expenses; (v) costs of financial statements and other reports to the Members as
well as costs of all governmental returns, reports, and other filings; (vi) costs of meetings of, and
communications with, the Members; (vii) public notice costs and other costs incurred to comply
with applicable law; (viii) fees and expenses to protect or preserve any property held by the
Company as determined by the Managers; (ix) all fees related to the Company’s or its
Subsidiaries’ use of third party advisors; and (x) all fees and other expenses incurred in
connection with the investigation, prosecution or defense of any claims by or against the
Company or any of its Subsidiaries. Notwithstanding anything to the contrary in this
Section 5.8(c), neither the Managers nor any of their Affiliates (except as otherwise provided in a
separate agreement between the Company, on the one hand, and the Manager and/or one or more
Affiliates, on the other hand, including, without limitation, the Administrative Services
Agreement, the Servicing Agreement No.1 and the Servicing Agreement No.2) shall be
reimbursed for the following expenses: (A) salaries, wages, and other compensation paid, and the
cost of benefits attributable, to the managers, officers, employees and consultants of the
Managers or their Affiliates; (B) overhead expenses of the Managers and their Affiliates
including, without limitation, rent, telephone, utilities, office furniture, equipment, machinery
and other general office expenses; and (C) any other cost or expense incurred by the Managers or
one of their Affiliates in connection with providing any service or good for which the Managers
or Affiliate is otherwise entitled to compensation.
5.9 Valuation of Company Assets.
(a) The Managers shall value the Company’s assets whenever the Gross Asset
Value of such assets are adjusted pursuant to the terms of this Agreement (e.g., upon the
Dissolution of the Company and upon a distribution in kind of any Company assets) and
whenever a determination of Gross Asset Value or fair market value of such assets is otherwise
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required by this Agreement or deemed necessary by the Managers in their sole and absolute
discretion.
(b) Except as otherwise provided in this Agreement, in determining the value
of Company property or an Interest, or in any accounting among any or all of the Members, the
Managers may use any reasonable valuation method, as determined by the Managers in good
faith. In addition, the Managers may, but are not required to, place a value on the goodwill,
going concern value, name, records, files, statistical data, or similar assets of the Company not
normally reflected in the Company’s accounting records, taking into consideration any items of
income earned but not yet received, expenses incurred but not yet paid, liabilities fixed or
contingent and prepaid expenses to the extent not otherwise reflected in the books of account as
well as the fair market value of options or commitments to purchase or sell securities pursuant to
agreements entered into on or prior to the valuation date.
(c) The Managers’ determination of fair market value of an asset or Interest
when required or otherwise permitted pursuant to this Agreement or applicable law, shall in the
absence of bad faith, be binding and conclusive for all purposes.
5.10 Execution of Company Instruments.
(a) The Managers may in their discretion determine the method and designate
the Person or Persons to execute any Company instrument or document, or to sign the Company
name without limitation, except where otherwise provided by law, and such execution or
signature shall be binding upon the Company.
(b) Also, execution of any Company instrument may be effected in such form,
including manual, facsimile or electronic signature, as may be authorized by the Managers.
5.11 Limited Liability of the Managers. No Person who is a Manager of the Company
shall be personally liable under any judgment of a court, or in any other manner, for any debt,
obligation, or liability of the Company, whether that liability or obligation arises in contract, tort,
or otherwise, solely by reason of being a Manager of the Company.
5.12 Officers. The Managers may, from time to time and in their discretion, appoint
officers of the Company and delegate those day-to-day operational decisions of the Company to
such officers that the Managers may have hereunder. The initial officers of the Company shall
be the following: (1) President: Michael Burke; (2) Vice President: Chris Crittenden; (3)
Treasurer: Bryant Armstrong; and (4) Secretary: Jed Robinson. The Managers may terminate
and appoint new officers at any time for any reason, with or without cause. The Managers also
may determine to provide such officers reasonable compensation for their services, which
amount may be set by the uninterested Managers.
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ARTICLE 6
ALLOCATIONS OF PROFIT AND LOSS
6.1 Allocations of Profit and Loss.
(a) Generally. After giving effect to the special allocations set forth in
Sections 6.2 and 6.3 but subject to Section 6.1(b), the Company shall allocate Profits, Losses,
and any items of Company income gain, loss, or deduction for each Fiscal Year or shorter period
for which it is necessary to make such an allocation (an “Allocation Period”) to the Members in a
manner such that, as of the end of such Allocation Period, the sum of (i) the Capital Account of
each Member, and (ii) such Member’s share of Company Minimum Gain and Minimum Gain
Attributable to Member Nonrecourse Debt, shall be equal to the respective net amounts, whether
positive or negative, which would be distributed to them or for which they would be liable to the
Company under the Act or this Agreement, determined as if the Company were to (x) sell its
assets for an amount equal to their Gross Asset Values, (y) pay off its liabilities, and
(z) distribute the net proceeds of such liquidation to the Members in the order and priority set
forth in Section 10.4(b).
(b) Excess Losses Otherwise Allocable to a Member. To the extent that
Losses or an item in the nature of loss or deduction otherwise allocable to a Member under
Section 6.1(a) or any other provision of this Agreement would cause such Member to have an
Adjusted Capital Account Deficit or cause an existing Adjusted Capital Account Deficit of such
Member to become more negative as of the end of the period to which such allocations relate,
then such Losses or item in the nature of loss or deduction shall not be allocated to such Member
but shall instead be specially allocated to the other Members with positive Adjusted Capital
Accounts pro rata in proportion to their respective positive Adjusted Capital Accounts. This
Section 6.1(b) is intended to implement the “alternate test for economic effect” within the
meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and
applied consistently therewith.
6.2 Regulatory Allocations. The following special allocations shall be made in the
following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Treasury
Regulations Section 1.704-2(f), notwithstanding anything to the contrary in this ARTICLE 6, if
there is a net decrease in Company Minimum Gain for any Allocation Period, each Member shall
be specially allocated items of Company income and gain for such Allocation Period (and, if
necessary, subsequent Allocation Periods) in an amount equal to that Member’s share of the net
decrease in Company Minimum Gain, determined in accordance with Treasury Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence will be made in proportion to
the respective amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated will be determined in accordance with Treasury Regulations Sections 1.704-
2(f)(6) and 1.704-2(j)(2). This Section 6.2(a) is intended to comply with the minimum gain
chargeback requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
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(b) Member Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations Section 1.704-2(i)(4), notwithstanding anything to the contrary in this
ARTICLE 6, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable
to a Member Nonrecourse Debt during any Allocation Period, each Member who has the share of
the Member Nonrecourse Debt Minimum Gain attributable to the Member Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(5), shall be specially
allocated items of Company income and gain for such Allocation Period (and, if necessary,
subsequent Allocation Periods) in an amount equal to that Member’s share of the net decrease in
the Member Nonrecourse Debt Minimum Gain attributable to the Member Nonrecourse Debt,
determined in accordance with Treasury Regulations Sections 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2).
This Section 6.2(b) is intended to comply with the minimum gain chargeback requirement in
Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations or distributions described in Treasury Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), and such Member has an Adjusted Capital Account Deficit, items of
Company income and gain will be allocated to the Member in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of the Member as quickly as possible, provided that an allocation pursuant to this
Section 6.2(c) will be made only if and to the extent that the Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in this ARTICLE 6 have been
tentatively made as if this Section 6.2(c) were not in this Agreement. This Section 6.2(c) is
intended to constitute a “qualified income offset” under Treasury Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(d) Gross Income Allocation. In the event any Member has an Adjusted
Capital Account Deficit at the end of any Allocation Period, the Member shall be allocated items
of Company income and gain in the amount of the deficit as quickly as possible, provided that an
allocation pursuant to this Section 6.2(d) will be made only if and to the extent that the Member
would have an Adjusted Capital Account Deficit after all other allocations provided for in this
ARTICLE 6 have been made as if Section 6.2(c) and this Section 6.2(d) were not in this
Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation
Period shall be allocated to the Members in any manner permitted under applicable Treasury
Regulations, as reasonably determined by the Managers.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
for any Allocation Period will be specially allocated to the Member who bears the economic risk
of loss with respect to the Member Nonrecourse Debt to which the Member Nonrecourse
Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1).
(g) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or 743(b) is required,
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pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or (4), to be taken into account
in determining Capital Accounts, the amount of the adjustment to Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m).
6.3 Curative Allocations. To the extent necessary to avoid any economic distortions
which may result from application of Sections 6.1(a) and/or 6.2 (the “Regulatory Allocations”),
future items of income, gain, loss, expense and deduction shall be allocated as appropriate in the
reasonable discretion of the Managers in order to remedy any economic distortions that the
Regulatory Allocations might otherwise cause. In exercising its discretion under this
Section 6.3, the Managers shall take into account future Regulatory Allocations under
Sections 6.2(a) and 6.2(b) that, although not yet made, are likely to offset other Regulatory
Allocations previously made under Sections 6.2(e) and 6.2(f).
6.4 Modifications to Preserve Underlying Economic Objectives. In the event that
(i) there is a change in the Code, the Treasury Regulations or otherwise under federal income tax
law, (ii) the Company borrows money or property on a nonrecourse basis or borrows money for
which a Member bears the economic risk of loss, or (iii) the Company makes an election to
adjust the basis of the Company’s assets under Code Section 754 (it being acknowledged that the
Managers’ determination as to whether or not to make such an election shall be made in its sole
discretion), the Managers, acting in their reasonable discretion after consultation with tax counsel
to the Company, shall make the minimum modifications to the allocation provisions of this
Agreement necessary to preserve the underlying economic objectives of the Members as
reflected in this Agreement and, in the case of such a borrowing or election, to properly allocate
the tax items relating to such borrowing or election in accordance with the Code and the
Treasury Regulations.
6.5 Other Allocation Rules.
(a) Profits, Losses, and any other items of income, gain, loss, or deduction
will be allocated to the Members pursuant to this ARTICLE 6 as of the last day of each Fiscal
Year; provided that Profits, Losses, and such other items will also be allocated at such times as
the Gross Asset Values of Company assets are adjusted pursuant to item (b) of the definition of
“Gross Asset Value” in Section 1.1.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any Allocation Period, Profits, Losses, and any other items will be determined on a
daily, monthly, or other basis, as determined by the Managers (in their sole and absolute
discretion) using any permissible method under Code Section 706 and the Treasury Regulations
thereunder.
(c) The Members are aware of the income tax consequences of the allocations
made pursuant to the provisions of this ARTICLE 6 and hereby agree to be bound by the
provisions of this ARTICLE 6 in reporting their shares of Company income and loss for income
tax purposes.
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(d) Solely for purposes of determining a Member’s proportionate share of the
“excess nonrecourse liabilities” of the Company relating to the Company assets within the
meaning of Treasury Regulations Section 1.752-3(a)(3), the Members’ interests in Company
profits shall be equal to their Percentages Interests.
6.6 Allocations for Tax Purposes.
(a) In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, income, gain, loss, and deduction with respect to any property contributed to the
capital of the Company by the Members will, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted basis of the property to the
Company for federal income tax purposes and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any Company asset is adjusted,
subsequent allocations of income, gain, loss, and deduction with respect to the asset will take
into account any variation between the adjusted basis of the asset for federal income tax purposes
and its Gross Asset Value in the same manner as under Code Section 704(c) and the Treasury
Regulations thereunder.
(c) Any elections or other decisions relating to the allocations to the Members
will be made by the Managers in any manner that reasonably reflects the purpose and intention
of this Agreement. Allocations pursuant to this Section 6.6 are solely for purposes of federal,
state, and local taxes and will not affect, or in any way be taken into account in computing, any
Member’s Capital Account or share of Profits, Losses, other items, or distributions pursuant to
any provision of this Agreement
ARTICLE 7
DISTRIBUTIONS
7.1 Non-Liquidating Distributions. Except as otherwise provided in ARTICLE 7,
distributions prior to the Dissolution of the Company shall be made in accordance with the
provisions of this Section 7.1.
(a) Mandatory Tax Distributions.
(i) Subject to Section 7.4, the Company shall be required to distribute
to each Member with respect to each Fiscal Year an aggregate amount (the “Tax Amount”) out
of Cash Available for Distribution equal to (A) Tax Percentage, multiplied by (B) such
Member’s allocated share of Profit for such Fiscal Year.
(ii) Each Member’s Tax Amount with respect to any Fiscal Year as
described above shall be paid by the Company to such Member in four quarterly installments, on
such quarterly payment dates and in such estimated amounts as to be determined by the
Managers in their sole and absolute discretion. To the extent the actual Tax Amount of any
Member calculated with respect to any Fiscal Year (as determined by reference to the actual
federal income tax return of the Company filed with respect to such Fiscal Year) exceeds the
amount of the aggregate tax installments paid to such Member with respect to such Fiscal Year,
the Company shall pay an additional tax installment equal to the amount of such deficiency to
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such Member within thirty (30) days of the filing of such tax return (to the extent of Cash
Available for Distribution). To the extent any Member receives aggregate tax installments with
respect to any Fiscal Year in excess of the actual Tax Amount of such Member calculated with
respect to such Fiscal Year (as determined by reference to the actual federal income tax return of
the Company filed with respect to such Fiscal Year), the amount of such Member’s subsequent
tax installments shall be reduced in the aggregate by such excess amount.
(iii) For purposes of determining whether the Company has satisfied its
distribution obligation under Section 7.1(a), all cash distributions made during a Fiscal Year (or
through a particular tax installment date) shall be treated as distributions made pursuant to
Section 7.1(a) in respect of such Fiscal Year (except to the extent that such distributions were
required to satisfy the obligations of the Company under Section 7.1(a) in respect of one or more
prior Fiscal Years, in which case such distributions shall be treated solely for purposes of this
Section 7.1(a)(iii) as having been made pursuant to Section 7.1(a) in respect of such prior Fiscal
Year or Years).
(iv) Amounts distributed to a Member pursuant to this Section 7.1(a)
shall be treated as advances on distributions under Section 7.1(b) and Section 10.4(b) and
credited against any future distributions made pursuant to Section 7.1(b) or Section 10.4(b), as
applicable, to such Member, provided that any amounts distributed pursuant to this
Section 7.1(a) shall not reduce distributions otherwise distributable under Sections 7.1(b)(i) and
10.4(b)(i).
(b) Discretionary Distributions. In addition to the distributions provided for
in Section 7.1(a), but subject to Section 7.1(a)(iv) and applicable law and any limitations
contained elsewhere in this Agreement, the Managers shall cause the Company to distribute Cash
Available for Distribution at such times and in such amounts as determined by the Managers in
their sole and absolute discretion to the Members in the following order and priority:
(i) First, an amount, if any (as determined by the Managers in their
sole and absolute discretion, but in no event an amount greater than the then aggregate
Unreturned Contributions of the holders of Common Units), to the holders of Common Units pro
rata in proportion to their respective Unreturned Contributions;
(ii) Second, an amount, if any (as determined by the Managers in their
sole and absolute discretion, to the Members in accordance to their Percentage Interest.
7.2 Liquidating Distributions. Notwithstanding the provisions of Section 7.1, cash or
property of the Company available for distribution upon the Dissolution of the Company
(including cash or property received upon the sale or other disposition of assets in anticipation of
or in connection with such Dissolution) shall be distributed in accordance with the provisions of
Section 10.4.
7.3 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 cash. Except upon the Dissolution and winding-up of the Company or as
otherwise provided herein, a Member may not be compelled to accept a distribution of any asset
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in kind from the Company. The Company shall not under any provision of this Agreement
distribute notes or other securities in violation of any securities law.
7.4 Limitation on Distributions. Notwithstanding anything to the contrary herein, the
Company shall not make a distribution to any Member in respect of its Interest if that distribution
would violate Section 18-607 of the Act or any other applicable law, or would render a Member
liable for a return of such distribution under applicable law.
7.5 Return of Certain Distributions. A Member that receives a distribution (a) in
violation of this Agreement, or (b) that is required to be returned to the Company under
applicable law, shall return such distribution within thirty (30) days after demand therefor by the
Managers.
7.6 Offset. In the Managers’ sole and absolute discretion, any distribution otherwise
payable to a Member may be withheld and offset against any amounts owed by such Member to
the Company or any of its Affiliates and applied or paid against the amounts so owed. Any such
offset amounts will be deemed to have been distributed to such Member.
7.7 Withholding/Special Taxes.
(a) The Company shall withhold taxes from distributions to, and allocations
among, the Members to the extent required by law (as determined by the Managers in their
reasonable discretion). Except as otherwise provided in this Section 7.7, any amount so withheld
by the Company with regard to a Member shall be treated for purposes of this Agreement as an
amount actually distributed to such Member pursuant to Section 7.1. An amount shall be
considered withheld by the Company if and at the time such amount is remitted to a
governmental agency without regard as to whether such remittance occurs at the same time as
the distribution or allocation to which it relates; provided, however, that an amount actually
withheld from a specific distribution or designated by the Managers as withheld from a specific
allocation shall be treated as if distributed at the time such distribution or allocation occurs.
(b) To the extent that the operation of Section 7.7(a) would cause a Member
to have an Adjusted Capital Account Deficit or cause an existing Adjusted Capital Account
Deficit of a Member to become more negative, then the amount of the deemed distribution shall
instead be treated as a loan by the Company to such Member, which loan shall be payable upon
demand by the Company and shall bear interest at a floating rate equal to the Prime Rate,
compounded daily.
(c) In the event that the Managers determine in their reasonable discretion that
the Company lacks sufficient cash available to pay withholding taxes in respect of a Member,
one or more of the Members may, in their sole and absolute discretion (but only with the consent
of the Managers), make a loan or Capital Contribution to the Company or to enable the Company
to pay such taxes. Any such loan shall be full-recourse to the Company and shall bear interest at
a floating rate equal to the Prime Rate, compounded daily. Notwithstanding any provision of the
Agreement to the contrary, any loan (including interest accrued thereon) or Capital Contribution
made to the Company by a Member pursuant to this Section 7.7(c) shall be repaid or returned as
promptly as is reasonably possible.
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(d) Notwithstanding anything to the contrary in this Section 7.7, if the
Company is required to withhold taxes from in respect of a Member pursuant to the first sentence
of Section 7.7(a), then the Managers may (in their sole discretion) upon not less than fifteen (15)
days written notice require such Member to contribute cash to the capital of the Company to
enable the Company to pay such taxes. No additional Interest shall be issued to a Member
making a Capital Contribution pursuant to this Section 7.7(d).
(e) Each Member hereby agrees to indemnify the Company and the other
Members for any liabilities that such other Members and the Company may incur for failure to
properly withhold taxes in respect of such Member. Moreover, each Member hereby agrees that
neither the Company nor any other Member shall be liable for any excess taxes withheld in
respect of such Member’s Interest and that, in the event of over-withholding, a Member’s sole
recourse shall be to apply for a refund from the appropriate governmental authority.
(f) Taxes withheld by third parties from payments to the Company shall be
treated as if withheld by the Company for purposes of this Section 7.7. Such withholding shall
be deemed to have been made in respect to all the Members in proportion to their respective
distributions under Section 7.7. In the event that the Company receives a refund of taxes
previously withheld by a third party from one or more payments to the Company, the economic
benefit of such refund shall be apportioned among the Members in a manner reasonably
determined by the Managers to offset the prior operation of this Section 7.7(f) in respect of such
withheld taxes.
ARTICLE 8
TRANSFERS AND WITHDRAWALS
8.1 General Provisions on Transfers.
(a) Prohibition. Any Transfer in violation of this ARTICLE 8 (including
Section 8.2): (i) shall be null and void as against the Company and the other Members and
(ii) shall not be recognized or permitted by, or duly reflected in the official books and records of,
the Company. The preceding sentence shall not be applied to prevent the Company from
enforcing any rights it may have in respect of a transferee arising under this Agreement or
otherwise (including any rights arising under Section 12.5).
(b) Transferee Rights. Unless admitted as a Member in accordance with the
provisions of this Agreement, (i) the transferee of all or any portion of a Member’s Interest shall
not be a Member, but instead shall be an Assignee and subject to the provisions of Section 8.5,
and (ii) the non-economic rights, if any, associated with the transferred Interest (including
without limitation, the rights of a Member to vote or participate in the management of the
Company) shall, as of the date of such transfer, be automatically forfeited back to the Company.
(c) Admission as a Substitute Member. An Assignee may be admitted as a
Substitute Member only upon obtaining the written consent of the Managers, which consent may
be given or withheld by the Managers in their sole and absolute discretion.
(d) Required Documentation. In connection with each Transfer of an Interest:
(i) the transferor and transferee shall execute and deliver to the Company a written instrument of
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transfer in form and substance reasonably satisfactory to the Managers, and (ii) the transferee
shall execute and deliver to the Company a written instrument pursuant to which the transferee
assumes all obligations of the transferor associated with the transferred Interest and otherwise
agrees to comply with the terms and provisions of this Agreement.
(e) Fractional Units. In no event shall fractional Units be issued or transferred
hereunder.
8.2 Restrictions on Transfers.
(a) Consent. Except as otherwise provided in this Section 8.2, no Person shall
Transfer all or any portion of its Interest without the prior written consent of the Managers,
which consent may be given, withheld or conditioned in the sole and absolute discretion of the
Managers.
(b) Permitted Transfers. Notwithstanding Section 8.2(a), but subject to the
other provisions of this ARTICLE 8, any Member may Transfer, with or without consideration,
all or any portion of such Member’s Units outright or in trust, to one or more Permitted
Transferees without the prior written consent of the Managers, provided, that a Permitted
Transferee shall only be admitted as a Substitute Member in accordance with Section 8.1(c).
(c) Written Notice/Opinion of Counsel. In the case of a voluntary Transfer,
the transferring Member shall provide to the Managers written notice that such Member wishes
to make a Transfer. If the Interest being Transferred has not been registered under the Securities
Act nor qualified under applicable State securities laws, it must be entitled to an exemption
thereunder and, if requested by the Managers, an opinion of counsel for such transferring
Member satisfactory in form and substance to counsel for the Company that no such registration
or qualification is necessary may be required.
(d) Expenses. If a Person Transfers (or proposes to Transfer) all or any
portion of its Interest, all reasonable legal and other out-of-pocket expenses incurred by the
Company on account of the Transfer (or proposed Transfer) shall be paid by such Person.
Following the effective date of any Transfer, the transferor and transferee jointly and severally
shall be liable for all such expenses.
(e) Carry Over of Economic Attributes. Except as otherwise specifically
provided in this Agreement or with the consent of the Managers, all economic attributes of a
transferor’s Interest (such as the transferor’s Capital Contribution, Capital Account balance and
obligation to return distributions or make other payments to the Company) shall carry over to a
transferee in proportion to the percentage of the Interest so Transferred.
(f) Relief of Transferor. Notwithstanding any provision of this Agreement to
the contrary, a Member or Withdrawn Member shall not, by virtue of having Transferred all or
any portion of his, her or its Interest, be relieved of any obligations arising under this Agreement;
provided, however, that a Member or Withdrawn Member shall be relieved of such obligations to
the extent that: (i) such relief is approved by the Managers (which approval may be given or
withheld by the Managers in their sole and absolute discretion), and (ii) such obligations are
assumed by another Member or Person admitted to the Company as a Substitute Member.
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(g) Effective Date. Once all conditions in this ARTICLE 8 to the Transfer of
a Person’s Interest have been satisfied (including the approval of the Managers as described in
Section 8.2(a)), such Transfer shall be effective as of: (i) the Close of Business on the last day of
the next ending calendar month of the Company, or (ii) such other time as shall be jointly
selected by the Managers, the transferor, and the transferee.
8.3 Withdrawal/Removal of a Member.
(a) Except as otherwise provided in this Section 8.3, a Member shall not
withdraw or resign from the Company or otherwise cease to be a Member without the prior
consent of the Managers, which consent may be given or withheld by the Managers in their sole
and absolute discretion.
(b) A Member that is an individual shall be deemed to have withdrawn from
the Company with the consent of the Managers upon such Member’s death or Incompetency.
Except as otherwise determined by the Managers, a Member shall be deemed to have withdrawn
without the consent of the Managers upon such Member’s Bankruptcy, Dissolution, or
Termination.
(c) The Managers may require the complete or partial withdrawal of a
Member if the Managers determine that continued undiminished membership of the Member in
the Company would (i) constitute or give rise to a violation of applicable law, or (ii) otherwise
subject the Company or the Managers to material onerous legal, tax or regulatory requirements
that could not reasonably be avoided without material adverse consequences to any other
Member or the Company.
(d) Except as otherwise provided in this Agreement, a Member shall not be
removed from the Company without its consent.
8.4 Procedures Following Member Withdrawal. Except as otherwise provided in this
Section 8.4, a Member that withdraws from the Company in accordance with the provisions of
Section 8.3 or otherwise ceases to be a Member of the Company under this Agreement or the Act
(each a “Withdrawal Event” and “Withdrawn Member”) shall be treated as an Assignee and,
accordingly, shall have only the rights and obligations of an Assignee as described in
Section 8.5. A Withdrawn Member shall not be entitled to any redemption of its Interest in the
Company, distribution, or other payment in connection with its withdrawal or removal or any
other circumstance pursuant to which it has become a Withdrawn Member.
8.5 Status of Assignees.
(a) Notwithstanding any provision of this Agreement to the contrary, an
Assignee shall only be admitted to the Company as a Substitute Member in accordance with
Section 8.1(c).
(b) Notwithstanding any provision of this Agreement to the contrary but
subject to Section 8.5(a): (i) all rights and privileges associated with an Assignee’s Interest shall
be derived solely from the Interest of which such rights and privileges were previously a
component part; and (ii) no Assignee shall hold, by virtue of such Assignee’s Interest, any rights
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and privileges that were not specifically Transferred to such Assignee by the prior holder of such
Interest.
(c) Subject to Section 6.5(b), an Assignee that holds an Interest shall be
entitled to receive the allocations attributable to such Interest pursuant to ARTICLE 6, to receive
the distributions attributable to such Interest pursuant to ARTICLE 7 and ARTICLE 10, and to
Transfer such Interest in accordance with the terms of this ARTICLE 8. Notwithstanding the
preceding sentence, neither the Company nor any Manager shall incur any liability for
allocations and distributions made in good faith to a transferor until all Transfer requirements set
forth in this ARTICLE 8 (including, without limitation, a written instrument of assignment,
consents, and, if requested, opinion letters) have been complied with and the effective date of the
assignment has passed.
(d) To the extent otherwise applicable to the Interest that has been Transferred
to an Assignee, the Assignee shall be subject to, and bound by, all of the terms and provisions of
this Agreement that inure to the benefit of the Company or other Members (without regard to
whether such Assignee has executed a written instrument of assignment as described in
Section 8.5(c)). Without limitation on the preceding sentence, an Assignee that holds an Interest
shall be responsible for any obligation to return distributions or make other payments to the
Company associated with such Interest.
(e) Solely to the extent necessary to give effect to the Assignee rights and
obligations set forth in Section 8.5(c) and Section 8.5(d), an Assignee shall be treated as a
Member for purposes of this Agreement.
(f) An Assignee shall not, solely by virtue of its status as such, hold any non-
economic rights in respect of the Company. Without limitation on the preceding sentence, an
Assignee’s Interest shall not entitle such Assignee to participate in the management, control, or
operation of the Company or its business, act for the Company, bind the Company under
agreements or arrangements with third parties, or vote on Company matters. An Assignee shall
not have any right to receive or review Company books, records, reports, or other information.
An Assignee shall not hold itself out as a Member in any forum or for any purpose; provided,
however, that, to the extent necessary to maintain consistency with the Company’s income tax
returns, reports and other filings, an Assignee shall take the position that it is a “partner” solely
for income tax purposes.
(g) The Company may, at any time in the sole and absolute discretion of the
Managers, elect by delivering written notice thereof to an Assignee to redeem (or cause the sale
of) such Assignee’s Interest for cash equal to the Redemption Price determined as of the Close of
Business on the date of such election.
(h) Each Assignee shall deliver to the Managers, promptly following such
time as it becomes an Assignee, appropriate contact information for such Assignee (including
such Assignee’s mailing address, telephone number, facsimile number, and e-mail address (if
available), as well as, in the case of an Assignee that is an entity, the name or title of an
individual to whom notices and other correspondence should be directed), and thereafter
promptly notify the Company of any change to such information.
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8.6 Right of First Refusal.
(a) Grant of Right of First Refusal. In the event a holder of an Interest (a
“Seller”) proposes to Transfer any of its Interest (the “Sale Interest ”) to any proposed purchaser
or transferee (the “Transferee”), other than a Permitted Transferee, each Member other than the
Seller (each, a “Permitted Buyer”) shall have, subject to the prior right of the Company, a right
of first refusal on the terms described in Section 8.6(c) below to purchase such Permitted Buyer’s
Pro Rata Share of the Sale Interest.
(b) Notice and Election.
(i) Each Seller of a Sale Interest shall deliver a written notice
(“Notice”) to the Company and each Permitted Buyer stating, in reasonable detail, (i) its bona
fide intention to Transfer the Sale Interest, (ii) a description of the Sale Interest, including, as
applicable, the number of Units to be Transferred, (iii) the price and material terms and
conditions upon which the proposed Transfer is to be made, (iv) the name of the Transferee and
(v) all other information reasonably necessary to fully describe the proposed Transfer. The
Notice shall include a copy of any written proposal, letter of intent, Order or other agreement
relating to the proposed Transfer.
(ii) Within fifteen (15) days after delivery of the Notice, the Company
shall indicate to the Seller and to each Permitted Buyer in writing whether it elects to purchase
some or all of the Sale Interest referred to in the Notice, at the price and on the terms and
conditions specified in the Notice, by delivery of a notice of exercise (the “Company Election
Notice”) to the Seller, with a copy to each Permitted Buyer, within such 15–day period. The
Company’s failure to deliver such Company Election Notice within such 15–day period shall be
deemed a delivery of a Company Election Notice indicating the Company’s election to purchase
none of such Sale Interest.
(iii) Within thirty (30) days after delivery of the Notice, each Permitted
Buyer shall indicate to the Seller and the Company in writing whether it elects to purchase its
Pro Rata Share of the Sale Interest referred to by the Notice which the Company has not elected
to purchase, at the price and on the terms and conditions specified in the Notice, by delivery of a
notice of exercise (an “Buyer Election Notice”) to the Seller, with a copy to the Company, within
such 30–day period. Any Permitted Buyer’s failure to deliver a Buyer Election Notice with
respect to such Sale Interest within such 30–day period shall be deemed to be delivery of a Buyer
Election Notice indicating such Permitted Buyer’s election to purchase none of such Sale
Interest.
(c) Right of First Refusal.
(i) In the event the Company elects to acquire any or all of the Sale
Interest referred to in the Notice, settlement thereof shall be made in cash within thirty (30) days
after delivery to the Company of the Notice on such terms and conditions as contained in the
Notice; provided, however, that if the terms of payment set forth in the Notice were other than
cash against delivery or promissory notes payable over time, the Company shall pay the fair
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market value of such Sale Interest as determined by the Managers in good faith within such 30–
day period.
(ii) In the event the Company elects not to purchase all of the Sale
Interest, the Permitted Buyers shall have thirty (30) days after delivery of the original Notice
within which to elect to purchase, by delivery of a Buyer Election Notice, any such unpurchased
portion of the Sale Interest, at the price and on substantially the same terms and conditions as
specified in the Notice. In the event any Permitted Buyer elects to purchase all or any portion of
the Sale Interest as specified in the Notice, such Permitted Buyer shall specify in its Buyer
Election Notice the portion of the Sale Interest (up to its Pro Rata Share) that it desires to
purchase. Settlement thereof shall be made in cash within sixty (60) days after delivery to such
Permitted Buyer of the Notice; provided, however, that if the terms of payment set forth in the
Notice were other than cash against delivery or promissory notes payable over time, such
Permitted Buyer shall pay the fair market value of such Sale Interest as determined by the
Managers in good faith.
(iii) Each Permitted Buyer’s “Pro Rata Share” for purposes of the right
of first refusal granted herein is that portion of the Sale Interest determined by multiplying the
Sale Interest by a fraction (A) the numerator of which is the number of Units then held by such
Permitted Buyer and (B) the denominator of which is the sum of the total number of Units held
by all Permitted Buyers. Each Permitted Buyer shall have a right of reallotment such that, if any
other Permitted Buyer fails to exercise the right to purchase its full Pro Rata Share, the other
participating Permitted Buyers may exercise an additional right to purchase, on a pro rata basis,
the remaining portion of the Sale Interest not purchased.
(d) Transfer of Units upon Failure to Exercise Right of First Refusal. Subject
to the Company’s right of first refusal and the Permitted Buyers’ right of first refusal, the Seller
may, not later than ninety (90) days following delivery to the Permitted Buyers and the Company
of the Notice, conclude a Transfer of all or any portion of the Sale Interest covered by the Notice
on terms and conditions no more favorable to the Transferee than as those described in the
Notice. A Transferee that acquires Units pursuant to this Section 8.6(d) shall only have the
rights of an Assignee as set forth in Section 8.5 unless and until such Transferee becomes a
Substitute Member in accordance with the terms set forth in this Agreement.
(e) Binding Effect of Rights of First Refusal. The rights of first refusal set
forth in this Section 8.6 shall be binding upon any transferee of all or any portion of a Sale
Interest including without limitation, a Permitted Transferee.
(f) Compliance. The Company shall not transfer any of the Units on its books
without first taking reasonable steps to ascertain compliance with all of the applicable provisions
of this Section 8.6 with respect to such transfer.
8.7 Involuntary Transfers. In the event of any (a) receivership, Bankruptcy, stay or
creditors proceeding regarding a holder of an Interest, or (b) taking of all or any portion of a
holder’s Interest by legal process (such as levy of execution), then all (in the event of clause (a)
above) or the portion subject to the taking (in the event of clause (b) above) of the Interest owned
by such holder (or a trust for his, her or its benefit) shall be subject to the terms of Section 8.6.
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In the event a Transfer is proposed pursuant to a judicial order or action (the “Order”), a copy of
the Order shall be delivered to the Company and the Permitted Buyers together with the Notice.
8.8 Sales Proceeds. In connection with sale of the Company or the merger or
consolidation of the Company with or into another entity where Interests of the Company are
exchanged or sold for equity, cash or other consideration (the “Sales Proceeds”), the Members
hereby acknowledge and agree that the entire Sales Proceeds shall be allocated and apportioned
among the Members in the same amounts that would be distributed to the Members if: (a) the
Company’s property and assets had been liquidated for an amount equal to the Sales Proceeds;
(b) the proceeds from such liquidation had been applied and distributed in accordance with
Section 10.4(b); and (c) it is assumed that the Company has no liabilities and therefore no
amounts are paid or otherwise set aside or reserved for payment under Section 10.4(a).
ARTICLE 9
ACCOUNTING, RECORDS, REPORTING TO MEMBERS
9.1 Books and Records. The Managers shall keep or cause to be kept complete and
accurate books of account and records that shall reflect all transactions and other matters and
include all documents and other materials with respect to the Company’s business that are
usually entered into and maintained by Persons engaged in similar businesses. In connection
therewith, the books of accounts shall be kept, and the financial position and the results of its
operations shall be recorded, in accordance with any appropriate accounting method selected by
the Managers in their sole discretion and consistently applied. The books of accounts and
records (a) may be maintained in other than written form, provided that such form is capable of
conversion to written form within a reasonable time and (b) shall at all times be maintained at the
Principal Office of the Company.
9.2 Access to Books and Records. During regular business hours of the Company at
the Principal Office, a Member shall have the right to inspect and copy, at the expense of such
Member, full information regarding the activities, affairs, financial condition, and other
circumstances of the Company as is just and reasonable, as reasonably determined by the
Managers, if: (a) the Member seeks the information for a purpose reasonably related to the
Member’s interest as a “member”; (b) the Member gives the Company written notice of demand
thereof at least five (5) business days before the inspection is to occur, describing with
reasonable particularity the information sought and the purpose for seeking the information; and
(c) the information sought is directly connected to the Member’s purpose. Notwithstanding
anything to the contrary in this Section 9.2, the Company shall not be obligated to provide access
to any information that the Managers reasonably believe: (i) the disclosure of such information to
such Member likely would have a material adverse effect upon the Company or another Member
due to an actual or likely conflict of business interests between the Member seeking the
information and one or more other parties or an actual or likely imposition of additional statutory
or regulatory constraints upon the Company or another Member; or (ii) to be in the nature of a
trade secret or other information the disclosure of which the Managers in good faith believe is
not in the best interest of the Company or could damage the Company or its business or which
the Company is required by law or by agreement with a third party to keep confidential.
Notwithstanding the prior sentence, any information obtained through inspection or copying of
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records pursuant to this Section 9.2 constitutes Confidential Information and is subject to the
confidentiality obligations of Section 4.12.
9.3 Tax Information. Within ninety (90) days after the end of each taxable year, or as
soon as possible thereafter, the Company shall send to each Person who was a Member at any
time during such taxable year a report that will include all information necessary for preparation
of such Person’s federal, State, and local income tax returns for that year. If the Company has
not timely received all information necessary to deliver a Schedule K-1 to such Person within
ninety (90) days after the end of a taxable year, the Company shall provide or cause to be
provided to such Person a timely estimate of the information that would be on such Person’s
Schedule K-1, and a Schedule K-1 as promptly as practicable thereafter.
9.4 Filings. The Managers, at the Company’s expense, shall cause the income tax
returns for the Company to be prepared and timely filed with the appropriate authorities. The
Managers, at the Company’s expense, shall also cause to be prepared and timely filed, with
appropriate federal and State regulatory and administrative bodies, amendments to, or
restatements of, the Certificate and all reports required to be filed by the Company with those
entities under the Act or other then current applicable laws, rules, and Treasury Regulations.
9.5 Bank Accounts. The Managers shall maintain the funds of the Company in one or
more separate bank accounts in the name of the Company, and shall not permit the funds of the
Company to be commingled in any fashion with the funds of any other Person.
9.6 Accounting Decisions and Reliance on Others. All decisions as to accounting
matters, except as otherwise specifically set forth herein, shall be made by the Managers. The
Managers may rely upon the advice of the Company’s accountants as to whether such decisions
are in accordance with accounting methods followed for federal income tax purposes.
9.7 Tax Matters Partner.
(a) General. SEP is hereby designated the “Tax Matters Partner” of the
Company within the meaning of Code Section 6231(a)(7), and shall have all the authority
granted a Tax Matters Partner by the Code and the Treasury Regulations promulgated
thereunder, provided that the Tax Matters Partner shall not have the authority, without first
obtaining the consent of a Majority-In-Interest of the Members, to do any of the following:
(i) enter into a settlement agreement with the Internal Revenue Service that purports to bind the
Members; (ii) file a petition as contemplated in Code Section 6226(a) or 6228; (iii) intervene in
any action as contemplated in Code Section 6226(b)(5); (iv) file any request contemplated in
Code Section 6227(b); or (v) enter into any agreement extending the period of limitations as
contemplated in Code Section 6229(b)(1)(B).
(b) Classification for Tax Purposes. Except to the extent otherwise required
by applicable law (disregarding for this purpose any requirement that can be avoided through the
filing of an election or similar administrative procedure), the Tax Matters Partner shall cause the
Company to take the position that the Company is a “partnership” for federal, State, and local
income tax purposes and shall cause to be filed with the appropriate tax authorities any elections
or other documents necessary to give due legal effect to such position.
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(c) Notice of Inconsistent Treatment of Company Item. No Member shall file
a notice with the Internal Revenue Service under Code Section 6222(b) in connection with such
Member’s intention to treat an item on such Member’s federal income tax return in a manner
which is inconsistent with the treatment of such item on the Company’s federal income tax
return unless such Member has, not less than thirty (30) days prior to the filing of such notice,
provided the Tax Matters Partner with a copy of the notice and thereafter in a timely manner
provides such other information related thereto as the Tax Matters Partner shall reasonably
request.
(d) Notice of Settlement Agreement. Any Member entering into a settlement
agreement with the United States Department of the Treasury that concerns a Company item
shall notify the Tax Matters Partner of such settlement agreement and its terms, with respect to
the Company item, within thirty (30) days after the date thereof unless such disclosure is
prohibited by law.
(e) Replacement Tax Matters Partner. If for any reason a Person serving as
the Tax Matters Partner can no longer serve in that capacity or ceases to be a Member, then a
Majority-In-Interest of the Members may designate another to be Tax Matters Partner.
ARTICLE 10
DISSOLUTION AND WINDING UP
10.1 Dissolution. The Company shall be Dissolved, its affairs wound up and its assets
disposed of on the first to occur of the following (collectively, “Dissolution Events”):
(a) Upon the affirmative vote or written consent of a Majority-In-Interest of
the Members and a Majority-In-Interest of the Members to dissolve, wind up, and liquidate the
Company;
(b) The sale or other disposition of all or substantially all of the assets of the
Company;
(c) Upon the entry of a decree of judicial dissolution pursuant to Section 18-
802 of the Act; or
(d) The termination of the legal existence of the last remaining Member of the
Company or the occurrence of any other event which terminates the continued membership of
the last remaining Member of the Company in the Company unless the Company is continued in
a manner permitted by this Agreement or the Act.
The Members hereby agree that, to the fullest extent permitted by law, the Company shall not
Dissolve upon the death, retirement, resignation, expulsion, Bankruptcy or Dissolution of any
Member or the occurrence of any other event that terminates the continued membership of any
Member.
10.2 Continuation Following Certain Dissolution Event. If at any time there is no
Member, the Company shall not Dissolve but the “personal representative” (as such term is
defined in the Section 18-101(13) of the Act) of the last remaining Member (the “Last Member”)
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shall, within ninety (90) days of the event that terminated the continued membership of the Last
Member, agree in writing to continue the Company and to the admission of such personal
representative or its nominee or designee as a Member, effective as of the occurrence of the
event that terminated the continued membership of the Last Member.
10.3 Winding Up.
(a) Generally. Upon the Dissolution of the Company, the Liquidators shall
promptly wind up the affairs of, liquidate and terminate the Company. In furtherance thereof,
the Liquidators shall (i) have all of the administrative and management rights and powers of the
Managers (including the power to prosecute and defend suits, whether civil, criminal, or
administrative, gradually settle and close the Company’s business, dispose of, and convey the
Company’s property, discharge, or make reasonable provision for the Company’s liabilities, and
distribute to the Members any remaining assets); (ii) be reimbursed for any costs and expenses
they incur in connection with the winding-up and liquidation of the Company; and (iii) if the
Liquidators were not Managers immediately prior to the Dissolution, be entitled to compensation
for winding up and liquidating the Company in the amount agreed to between each Liquidator
and a Majority-In-Interest of the Members. Following Dissolution, the Company shall sell or
otherwise dispose of assets determined by the Liquidators to be unsuitable for distribution to the
Members as promptly as is consistent with obtaining the fair market value thereof, but shall
engage in no other business activities except as may be necessary, in the reasonable discretion of
the Liquidators, to preserve the value of the Company’s assets during the period of winding-up
and liquidation.
(b) Books and Records. At the conclusion of winding up and liquidating the
Company, the Liquidators shall designate one or more Persons to hold the books and records of
the Company (and to make such books and records available to the Members on a reasonable
basis) for not less than six (6) years (or such longer period as required by law) following the
Termination of the Company under the Act.
(c) Distributions In Kind. Distributions to the Members in liquidation may be
made in cash or in kind, or partly in cash and partly in kind, as determined by the Liquidators.
Distributions in kind shall be valued at fair market value as determined by the Liquidators in
accordance with the provisions of Section 5.9 and shall be subject to such conditions and
restrictions as may be necessary or advisable in the reasonable discretion of the Liquidators to
preserve the value of the property so distributed or to comply with applicable law.
(d) Profits and Losses. The Profits and Losses and other items of the
Company during the period of Dissolution and liquidation shall be allocated among the Members
in accordance with the provisions of ARTICLE 6.
10.4 Distribution of Assets upon Dissolution. Upon Dissolution, the assets of the
Company (including proceeds from the sale or other disposition of any assets), shall be applied
or otherwise distributed in the following order:
(a) First, to creditors, including Members and Managers who are creditors, to
the extent otherwise permitted by applicable law, in satisfaction of liabilities of the Company
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(whether by payment or the making of reasonable provision for payment thereof), in the order of
priority as required by law;
(b) Thereafter, to the Members in accordance with the following order and
priority:
(i) First, one hundred percent (100%) to the holders of Common Units
pro rata in proportion to their respective Unreturned Contributions until each such holder’s
Unreturned Contributions has been reduced to zero;
(ii) Second, one hundred percent (100%) to the Members in
accordance to their Percentage Interests.
10.5 Deficit Capital Account Balance. No Member shall be obligated to make any
contribution to the capital of the Company with respect to any deficit balance in its Capital
Account, and such deficit shall not be considered a debt owed to the Company or to any other
Person for any purposes whatsoever.
10.6 Recourse to Company Assets. Except as otherwise set forth in this Agreement,
the Members shall look solely to the assets of the Company for the return of their Capital
Contributions or returns thereon. Except as otherwise set forth in this Agreement, if the assets
remaining after the payment or discharge of the debts and liabilities of the Company are
insufficient to return a Member’s Capital Contribution or returns thereon, the Member shall have
no recourse against any other Member or any Manager of the Company.
10.7 Certificate of Cancellation. Upon the completion of winding up of the affairs and
distributing all of the assets of the Company as provided in this ARTICLE 10, the Liquidators
shall file or cause to be filed a certificate of cancellation in the office of, and on a form
prescribed by, the Delaware Secretary of State.
10.8 Waiver of Partition. Except as otherwise expressly provided in this Agreement, to
the fullest extent permitted by law, each Member hereby irrevocably waives any right or power
that such Person might have to cause the Company or any of its assets to be partitioned, to cause
the appointment of a receiver for all or any portion of the assets of the Company, to compel any
sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a
complaint or to institute any proceeding at law or in equity to cause the Dissolution, liquidation,
winding up or Termination of the Company. No Member shall have any interest in any specific
assets of the Company.
ARTICLE 11
EXCULPATION AND INDEMNIFICATION
11.1 Exculpation.
(a) Except as otherwise specifically provided in this Agreement, no
Indemnified Person shall be personally liable for the return of any contributions made to the
capital of the Company by the Members or the distribution of Capital Account balances. Except
to the extent that Material Misconduct on the part of an Indemnified Person shall have given rise
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to the matter at issue, such Indemnified Person shall not be liable to the Company or the
Members for any act or omission concerning the Company. Without limitation on the preceding
sentence, except to the extent that such action constitutes Material Misconduct, an Indemnified
Person shall not be liable to the Company or to any Member in consequence of voting for,
approving or otherwise participating in the making of a distribution by the Company pursuant to
ARTICLE 7 or ARTICLE 10. An Indemnified Person shall not be liable to the Company or the
Members for losses due to the acts or omissions of any independent contractor, employee, or
other agent of the Company unless such Indemnified Person was or should have been directly
involved with the selection, engagement, or supervision of such Person, and the actions or
omissions of such Indemnified Person in connection therewith constituted Material Misconduct.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Company and upon such information, opinions, reports, or statements
presented to the Company by any Person as to matters the Indemnified Person reasonably
believes are within the professional or expert competence of such Person and who has been
selected with reasonable care by or on behalf of the Company, including information, opinions,
reports, or statements as to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which distributions to the
Member might properly be paid. The foregoing provision shall in no way be deemed to reduce
the limitation on liability of an Indemnified Person provided in Section 11.1(a).
11.2 Indemnification.
(a) Except to the extent that Material Misconduct on the part of an
Indemnified Person shall have given rise to the matter at issue, the Company shall indemnify and
hold such Indemnified Person harmless from and against any loss, expense, damage, or injury
suffered or sustained by such Indemnified Person by reason of any actual or threatened claim,
demand, or Proceeding (civil, criminal, administrative or investigative) (a “Claim”) in which
such Indemnified Person may be involved, as a party or otherwise, by reason of its actual or
alleged management of, or involvement in, the affairs of the Company; provided, however, that
any indemnification under this Section 11.2 shall be provided out of, and to the extent of,
Company assets only, and no other Person shall have any personal liability on account thereof.
This indemnification shall include, but shall not be limited to (i) payments as incurred or
reasonable attorneys’ fees and other out-of-pocket expenses incurred in investigating or settling
any claim or threatened action, or incurred in preparing for, or conducting a defense pursuant to,
any Proceeding up to and including a final non-appealable adjudication; (ii) payment of fines,
damages or similar amounts required to be paid by an Indemnified Person; and (iii) removal of
liens affecting the property of an Indemnified Person.
(b) The Company shall not be liable under this Section 11.2 to make any
indemnification payment in connection with any Claim made against any Indemnified Person to
the extent the Indemnified Person has otherwise actually received payment (under any insurance
policy, third party indemnification, or otherwise) of the amounts otherwise indemnifiable
hereunder. If, however, the Managers (or, if a Manager is the Indemnified Person, a Majority-In-
Interest of the Disinterested Members) determines that an Indemnified Person would be entitled
to receive indemnification payments from the Company but for the operation of the preceding
sentence, the Managers may cause the Company to advance indemnification payments to the
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Indemnified Person (with repayment of such advance to be secured by the Indemnified Person’s
right to receive indemnification payments from the applicable third party).
(c) As a condition to receiving an indemnification payment pursuant to this
Section 11.2, an Indemnified Person shall execute an undertaking in form and substance
acceptable to the Managers (or, if a Manager is the Indemnified Person, a Majority-In-Interest of
the Disinterested Members) providing that, if it is subsequently determined that such Person was
not entitled to receive such payment (whether by virtue of such Person’s Material Misconduct or
otherwise), such Person shall return such payment to the Company promptly upon demand
therefor by the Managers (or, if a Manager is the Indemnified Person, a Majority-In-Interest of
the Disinterested Members).
(d) Notwithstanding the foregoing provisions of this Section 11.2, the
Company shall be under no obligation to indemnify an Indemnified Person from and against any
reduction in the value of such Indemnified Person’s Interest in the Company that is attributable
to losses, expenses, damages, or injuries suffered by the Company or to any other decline in the
value of the Company’s assets.
(e) The indemnification provided by this Section 11.2 shall not be deemed to
be exclusive of any other rights to which any Indemnified Person may be entitled under any
agreement, as a matter of law, in equity or otherwise.
11.3 Insurance. The Company shall have the power to purchase and maintain
insurance (at its own expense), to the extent and in such amounts as the Managers shall, in their
sole discretion, deem reasonable, on behalf of Indemnified Persons and such other Persons as the
Managers shall determine, against any liability that may be asserted against or expense that may
be incurred by any such Person in connection with the activities of the Company or such
indemnities, whether or not the Company would have the power to indemnify such Person
against such liability under the provisions of this ARTICLE 10 or under applicable law.
11.4 Indemnification for Misrepresentations. Each Member hereby agrees to
indemnify and hold harmless the Company, the Managers, the other Members, and any officers,
directors, shareholders, managers, members, employees, partners, agents, attorneys, registered
representatives, and control persons of any such entity who was or is a party or is threatened to
be made a party to any Proceeding (each, for purposes of this Section 11.4, an “Indemnified
Person”), by reason of or arising from any misrepresentation or misstatement of facts or
omission to represent or state facts made by such Member including, without limitation, the
information in this Agreement against any losses, liabilities, damages, deficiencies, taxes, costs
or expenses, including interest and penalties imposed or assessed by a judicial or administrative
body and reasonable attorneys’ fees, whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the foregoing incurred by
the Indemnified Person in connection with such Proceeding.
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ARTICLE 12
MISCELLANEOUS
12.1 Complete Agreement. This Agreement (together with terms and provisions of
any written agreement executed by a Member and the Company and designating therein as
relating to this Agreement) constitute the complete and exclusive statement of agreement among
the Members, the Managers, and the Company with respect to the subject matter herein and
therein and replace and supersede all prior written and oral agreements or statements by and
among the Members, the Managers, and the Company, or any of them. There are no
representations, agreements, arrangements or understandings, oral or written, by the Company,
any Manager or any Member relating to the Company that are not fully expressed in this
Agreement (or, to the extent provided in the preceding sentence, any related agreement).
12.2 Amendments.
(a) Subject to Section 5.6(b)(i) and except as otherwise provided in this
Section 12.2, this Agreement, or any provision hereof, may be amended, modified, or waived, in
whole or in part, only in writing with the consent of a Majority-In-Interest of the Members and a
Majority-In-Interest of the Members. Each Member shall be promptly notified of any
amendment, modification or waiver of this Agreement (or any provision hereof) made pursuant
to this Section 12.2.
(b) An amendment to or wavier of any provision of this Agreement that calls
for a higher level of approval of the Members or the approval of certain specified Members or
group of Members shall, in addition to the execution percentage set forth in Section 12.2(a),
require the same form of approval as is set forth in such provision. The consent of all of the
Members shall be required to amend this Section 12.2.
(c) Notwithstanding the foregoing provisions of this Section 12.2, the
Managers may, without the consent of the Members, amend this Agreement in any manner
determined by the Managers to be necessary or convenient to (i) reflect changes validly made in
the membership of the Company and the Capital Contributions or Unit holdings of the Members;
(ii) cure any ambiguity, correct, or supplement any provision in this Agreement that would be
inconsistent with any other provision in this Agreement, make any other provision with respect
to matters or questions arising under this Agreement that will not be inconsistent with the
provisions of this Agreement or make any other change that does not materially and adversely
affect the Members; (iii) reflect a change in the name of the Company; (iv) make a change that is
necessary or, in the opinion of the Managers, advisable to qualify the Company as a limited
liability company under the laws of any State; (v) make a change in any provision of this
Agreement that requires any action to be taken by or on behalf of the Managers or the Company
pursuant to the requirements of applicable Delaware law if the provisions of applicable Delaware
law are amended, modified or revoked so that the taking of such action is no longer required; (vi)
ensure that this Agreement complies with (A) any rulings, regulations, notices, announcements
or other guidance regarding compensatory partnership interests issued after the date hereof
(“New Tax Guidance”) and (B) any elections that the Managers determine to be necessary or
advisable in respect of any such New Tax Guidance; or (vii) make any other amendments similar
to the foregoing. A Member’s right to object to an amendment pursuant to item (ii) above on the
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grounds that such amendment is materially adverse to such Member shall expire at the Close of
Business on the thirtieth (30th) day following written notice to such Member of such amendment.
Without limiting the generality of item (vi) above, any such amendment may include, without
limitation, (x) a provision authorizing the Managers in their sole discretion to make any election
under the New Tax Guidance, (y) a provision whereby the Company and the Members agree to
comply with the requirements of the New Tax Guidance and any election made by the Managers
with respect thereto and (z) an amendment to the allocation provision of this Agreement for the
purpose of complying with the New Tax Guidance and any election made by the Managers with
respect thereto, including without limitation, a provision requiring “forfeiture allocations” as
appropriate. Any such amendments to this Agreement shall be binding upon all Members.
12.3 Governing Law. The interpretation and enforceability of this Agreement and the
rights and liabilities of the Members as such shall be governed by the laws of the State of
Delaware. To the extent permitted by the Act and other applicable laws, the provisions of this
Agreement shall supersede any contrary provisions of the Act or other applicable laws.
12.4 Severability. In the event any provision of this Agreement is determined to be
invalid or unenforceable, such provision shall be deemed severed from the remainder of this
Agreement and replaced with a valid and enforceable provision as similar in intent as reasonably
possible to the provision so severed and shall not cause the invalidity or unenforceability of the
remainder of this Agreement.
12.5 Counterpart; Binding upon Members and Assignees. This Agreement may be
executed in any number of counterparts and, when so executed, all of such counterparts shall
constitute a single instrument binding upon all parties notwithstanding the fact that all parties are
not signatory to the original or to the same counterpart. This Agreement may be executed and
delivered by facsimile, or by email in portable document format (.pdf) and delivery of the
executed signature page by such method will be deemed to have the same effect as if the original
signature had been delivered to other the parties. In addition, to the maximum extent permitted
by applicable law, a Person shall become bound in accordance with the terms of this Agreement
as an Assignee if such Person (or a representative authorized by such Person) (a) executes any
writing evidencing, or otherwise demonstrating, the intent of such Person in becoming an
Assignee (such as the payment for an Interest), (b) complies with the conditions for becoming an
Assignee as set forth in this Agreement, or (c) seeks to exercise, assert, confirm or enforce any of
its rights as an Assignee under this Agreement or the Act.
12.6 Survival of Certain Obligations. Except as specifically provided in this
Agreement to the contrary (including Section 8.2(f)), or to the extent specifically approved by
the Managers (which approval may be given or withheld by the Managers in their sole and
absolute discretion), a Member shall continue to be subject to all of its obligations to make
Capital Contributions or other payments arising under this Agreement (including obligations
attributable to a breach of this Agreement), as well as its obligations to maintain the
confidentiality of information pursuant to Section 4.12 and to provide information pursuant to
Section 2.8, without regard to any Transfer of all or any portion of such Member’s Interest or
any event that terminates such Member’s status as such (including the Termination of the
Company).
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12.7 No Third-Party Beneficiaries. Except with regard to the Company’s obligation to
Indemnified Persons as set forth in ARTICLE 11 and as otherwise specifically provided in this
Agreement, (a) none of the provisions of this Agreement shall be for the benefit of or
enforceable by any third party and shall not give rise to a right on the part of any third party to
enforce or demand enforcement of a Member’s Capital Contribution, obligation to return
distributions or obligation to make other payments to the Company as set forth in this
Agreement, and (b) nothing in this Agreement shall be deemed to create any right in any Person
(other than an Indemnified Persons) not a party hereto, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any third person.
12.8 Notices, Consents, Elections, Etc. Subject to the provisions of Section 12.5, all
notices, consents, agreements, elections, amendments and approvals provided for or permitted by
this Agreement or otherwise relating to the Company shall be in writing and copies thereof shall
be retained with the books of the Company.
(a) Notice to Members. Except as otherwise specifically provided in this
Agreement, notice to a Member shall be in writing and shall be deemed effectively given upon
the earliest to occur of the following: (i) upon personal delivery to such Member; (ii) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then
on the next business day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; (iv) one (1) business day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of receipt;
or (v) upon actual receipt by the party to be notified via any other means (including public or
private mail, electronic mail or telegram); provided, however, that notice sent via electronic mail
shall be deemed received upon the sending party’s receipt of confirmation of successful
transmission (e.g., such as the receipt confirmation from the “return receipt requested” function),
provided, that if the day on which such electronic mail is received is not a business day or is after
five (5:00) p.m. local time at the Member’s address for receiving notice pursuant to this
Section 12.8, then such electronic mail shall be deemed to have been received on the next
succeeding business day. All communications to be sent to a Member shall be sent to the
address set forth for such Member on the books of the Company, or to the most recent address
which such Member has provided to the Company for purposes of this Section 12.8(a).
(b) Notice to the Company. Except as otherwise specifically provided in this
Agreement, notice to the Company shall be deemed duly given when clearly identified as such
and addressed to the Managers at the most recent Principal Address of the Company in
accordance with the procedures set forth in Section 12.8(a).
12.9 Withholding Tax Representation and Covenant. Except to the extent set forth in a
notice provided to the Managers, each Member hereby represents that allocations, distributions
and other payments to such Member by the Company are not subject to tax withholding under
the Code. Each Member hereby agrees to promptly notify the Managers, in the event that any
allocation, distribution or other payment previously exempt from such withholding becomes or is
anticipated to become subject thereto.
12.10 Certain Member Representations.
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(a) Except to the extent set forth in a notice provided to the Company, each
Member hereby represents that allocations, distributions and other payments to such Member by
the Company are not subject to tax withholding under the Code. Each Member hereby agrees to
promptly notify the Company or, if officers have been appointed, to the president or chief
operating officer (if any) of the Company, in the event that any allocation, distribution or other
payment previously exempt from such withholding becomes or is anticipated to become subject
thereto.
(b) Each Member hereby acknowledges that certain provisions of the
Agreement (including Sections 5.7 and 11.1) have the effect of limiting the fiduciary duties or
obligations of the Managers to the Members. EACH MEMBER HEREBY REPRESENTS
THAT HE, SHE, OR IT HAS CAREFULLY CONSIDERED AND FULLY
UNDERSTANDS EACH SUCH PROVISION AND HAS MADE AN INFORMED
DECISION TO CONSENT THERETO.
12.11 Dispute Resolution.
(a) Arbitration of Disputes. Any dispute between or among the parties under
or relating to this Agreement shall be exclusively and finally resolved by arbitration. Any
arbitration shall be governed by the Arbitration Provisions set forth in Exhibit B to this
Agreement.
(b) WAIVER OF RIGHT TO JURY TRIAL. TO THE EXTENT
PERMITTED BY LAW, EACH PARTY HEREBY WAIVES ITS RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
EACH PARTY HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR
IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT, OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT.
(c) Fees and Costs. The prevailing party or parties in any arbitration,
mediation, court action or other adjudicative proceeding arising out of or relating to this
Agreement shall be reimbursed by the party or parties who do not prevail for their reasonable
attorneys’, accountants’ and experts’ fees (including reasonable charges for in-house legal
counsel and related personnel) and for the costs of such proceeding. In the event that two or
more parties are deemed liable for a specific amount payable or reimbursable under this
Section 12.11(c), such parties shall be jointly and severally liable therefore. The provisions set
forth in this Section 12.11(c) shall survive the merger of these provisions into any judgment.
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12.12 Remedies for Breach of Agreement.
(a) General. Except as otherwise specifically provided in this Agreement, the
remedies set forth in this Agreement are cumulative and shall not exclude any other remedies to
which a Person may be lawfully entitled.
(b) Specific Performance. Without limiting the rights and remedies otherwise
available to the Company or any Member, each Member hereby: (i) acknowledges that the
remedy at law or damages resulting from a breach under ARTICLE 3 or Section 2.8, 4.12, or
12.11 is inadequate, and (ii) consents to an immediate injunction and other equitable relief
enjoining any such breach of the provisions of this Agreement (or threatened breach of
Section 4.12) without the necessity of posting any bond or other security.
(c) Penalty Provisions. Each Member hereby acknowledges that certain
provisions of this Agreement provide for specified penalties in the event of a breach of this
Agreement by a Member. Each Member hereby agrees that the penalty provisions of this
Agreement are fair and reasonable and, in light of the difficulty of determining actual damages,
represent a prior agreement among the Members as to appropriate liquidated damages.
(d) Exercise of Discretion by the Manager. In determining what action, if any,
shall be taken against a Member in connection with such Member’s breach of this Agreement,
the Managers shall seek to obtain the best result (as determined by the Managers in their sole and
absolute discretion) for the Company and the other Members, but may decide to waive any or all
of the remedies that the Company may have against a defaulting Member. Each Member hereby
specifically agrees that, in the event such Member violates the terms of this Agreement, such
Member shall not be entitled to claim that the Company, the Managers or any of the other
Members are precluded, on the basis of any fiduciary or other duty arising in respect of such
Member’s status as such, from seeking any of the penalties or other remedies permitted under
this Agreement or applicable law.
12.13 Exhibits. All Exhibits attached to this Agreement are incorporated and shall be
treated as if set forth herein.
12.14 Timing. All dates and times specified in this Agreement are of the essence and
shall be strictly enforced. Except as otherwise specifically provided in this Agreement, all
actions that occur after the Close of Business on a given day shall be deemed for purposes of this
Agreement to have occurred at 9:00 a.m. on the following day. In the event that the last day for
the exercise of any right or the discharge of any duty under this Agreement would otherwise be a
day that is not a business day, the period for exercising the right or discharging such duty shall
be extended until the Close of Business on the next succeeding business day.
12.15 Miscellaneous. No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof; any actual waiver shall be
contained in a writing signed by the party against whom enforcement of such waiver is sought.
This Agreement shall not be construed for or against any party by reason of the authorship or
alleged authorship of any provisions hereof or by reason of the status of the respective parties.
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12.16 Legal Representation. Each Member hereby acknowledges that such Member has
been advised that the Member should seek and has had the opportunity to seek independent legal
counsel to review this Agreement on the Member’s behalf and to obtain the advice of such legal
counsel relating to this Agreement. Each Member further acknowledges and agrees that the law
firm of J.Freeman Legal, LLC, is legal counsel solely to SEP with respect to this Agreement.
[SIGNATURES TO FOLLOW]
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SIGNATURE PAGE
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
RS17 REXBURG MANAGER LLC
IN WITNESS WHEREOF, the parties have executed this Limited Liability Company
Agreement of RS17 Rexburg Manager LLC as of the date first written above.
“MEMBERS”
STILLWATER EQUITY PARTNERS LLC,
a Utah limited liability company
By:
Name: Jed Robinson
Title: President
NORTH REXBURG LLC,
a Utah limited liability company
By:
Name:
Title:
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ACCEPTANCE OF APPOINTMENT
AS MANAGER
OF
RS17 REXBURG MANAGER LLC
ACCEPTANCE OF APPOINTMENT
WHEREAS, the undersigned hereby accept appointments as Managers of RS17 Rexburg
Manager LLC and agree to be bound by the terms and conditions applicable to such as set forth
in this Limited Liability Company Agreement, as the same may be amended, restated or
otherwise modified from time to time in accordance with the provisions hereof.
“MANAGER”
J. Brett Boren, an individual
Paul Bringhurst, an individual
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A-1
EXHIBIT A
RS17 REXBURG MANAGER LLC
MEMBER INFORMATION
as of
September 22, 2017
Member Information
Capital
Contribution
Common
Units
Percentage
Interest
Stillwater Equity Partners
160 West Canyon Crest Road
Alpine, UT 84004
Attn: Jed Robinson, President
Phone: (801) 216-8850
$0 825 82.500%
North Rexburg LLC
10260 S 600 E
Rexburg, ID 83440
Attn: Ashley Barton
Phone:
$0 175 17.500%
TOTAL $ 0 __1,000__ 100.00% 1
1 Total may not add up to 100% due to rounding.
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208-403-1335
B-1
EXHIBIT B
ARBITRATION PROVISIONS
1. Dispute Resolution. For purposes of this Exhibit B, the term “Claims” means any disputes, claims, demands,
causes of action, requests for injunctive relief, requests for specific performance, liabilities, damages, losses, or
controversies whatsoever arising from, related to, or connected with the transactions contemplated in the LLC
Agreement (the “Agreement”), and any communications between the parties related thereto, including without
limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure of
consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission, and any
statutory claims, tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these
Arbitration Provisions (defined below)). The term “Claims” specifically excludes a dispute over Calculations.
The parties to the Agreement (the “Parties”) hereby agree that the arbitration provisions set forth in this Exhibit
B (“Arbitration Provisions”) are binding on each of them. As a result, any attempt to rescind the Agreement
(or these Arbitration Provisions) or declare the Agreement (or these Arbitration Provisions) invalid or
unenforceable for any reason is subject to these Arbitration Provisions. These Arbitration Provisions shall also
survive any termination or expiration of the Agreement. Any capitalized term used but not otherwise not
defined in these Arbitration Provisions shall have the meaning set forth in the Agreement.
2. Arbitration. Except as otherwise provided herein, all Claims must be submitted to arbitration (“Arbitration”)
to be conducted exclusively in Salt Lake County or Utah County, Utah and pursuant to the terms set forth in
these Arbitration Provisions. Subject to the arbitration appeal right provided for in Paragraph 5 below (the
“Appeal Right”), the Parties agree that the award of the arbitrator rendered pursuant to Paragraph 4 below (the
“Arbitration Award”) shall be (a) final and binding upon the Parties, (b) the sole and exclusive remedy
between them regarding any Claims, counterclaims, issues, or accountings presented or pleaded to the
arbitrator, and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect to
monetary awards). Subject to the Appeal Right, any costs or fees, including without limitation attorneys’ fees,
incurred in connection with or incident to enforcing the Arbitration Award shall, to the maximum extent
permitted by law, be charged against the Party resisting such enforcement. The Arbitration Award shall include
interest at the rate of 12% per annum both before and after the Arbitration Award. Judgment upon the
Arbitration Award will be entered and enforced by any state or federal court sitting in Salt Lake County, Utah.
3. The Arbitration Act. The Parties hereby incorporate herein the provisions and procedures set forth in the Utah
Uniform Arbitration Act, U.C.A. § 78B-11-101 et seq. (as amended or superseded from time to time, the
“Arbitration Act”). Notwithstanding the foregoing, pursuant to, and to the maximum extent permitted by,
Section 105 of the Arbitration Act, in the event of conflict or variation between the terms of these Arbitration
Provisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions shall control and
the Parties hereby waive or otherwise agree to vary the effect of all requirements of the Arbitration Act that may
conflict with or vary from these Arbitration Provisions.
4. Arbitration Proceedings. Arbitration between the Parties will be subject to the following:
a. Initiation of Arbitration. Pursuant to Section 110 of the Arbitration Act, the Parties agree that a Party
may initiate Arbitration by giving written notice to the other Party (“Arbitration Notice”) in the same
manner that notice is permitted under Section Error! Reference source not found. of the Agreement;
provided, however, that the Arbitration Notice may not be given by email or fax. Arbitration will be
deemed initiated as of the date that the Arbitration Notice is deemed delivered to such other Party
under Section Error! Reference source not found. of the Agreement (the “Service Date”). After the
Service Date, information may be delivered, and notices may be given, by email or fax pursuant to
Section Error! Reference source not found. of the Agreement or any other method permitted
thereunder. The Arbitration Notice must describe the nature of the controversy, the remedies sought,
and the election to commence Arbitration proceedings. All Claims in the Arbitration Notice must be
pleaded consistent with the Utah Rules of Civil Procedure.
b. Selection and Payment of Arbitrator.
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i. Within ten (10) calendar days after the Service Date, Lender or Borrower, as applicable, shall
select and submit to Agent the names of three (3) arbitrators that are designated as “neutrals”
or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such three
(3) designated persons hereunder are referred to herein as the “Proposed Arbitrators”). For
the avoidance of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah
ADR Services. Within five (5) calendar days after Lender or Borrower, as applicable has
submitted to Agent the names of the Proposed Arbitrators, Agent must select, by written
notice to Lender or Borrower, as applicable, one (1) of the Proposed Arbitrators to act as the
arbitrator for the Parties under these Arbitration Provisions. If Agent fails to select one of the
Proposed Arbitrators in writing within such 5-day period, then Lender or Borrower, as
applicable, may select the arbitrator from the Proposed Arbitrators by providing written notice
of such selection to Agent.
ii. If Lender or Borrower, as applicable, fails to submit to Agent the Proposed Arbitrators within
ten (10) calendar days after the Service Date pursuant to subparagraph (a) above, then Agent
may at any time prior to Lender or Borrower, as applicable, so designating the Proposed
Arbitrators, identify the names of three (3) arbitrators that are designated as “neutrals” or
qualified arbitrators by Utah ADR Service by written notice to Lender or Borrower, as
applicable. Lender or Borrower, as applicable, may then, within five (5) calendar days after
Agent has submitted notice of its Proposed Arbitrators to Lender or Borrower, as applicable,
select, by written notice to Agent, one (1) of the Proposed Arbitrators to act as the arbitrator
for the Parties under these Arbitration Provisions. If Lender or Borrower, as applicable, fails
to select in writing and within such 5-day period one (1) of the three (3) Proposed Arbitrators
selected by Agent, then Agent may select the arbitrator from its three (3) previously selected
Proposed Arbitrators by providing written notice of such selection to Lender or Borrower, as
applicable.
iii. If a Proposed Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve
as arbitrator, then the Party that selected such Proposed Arbitrator may select one (1) of the
other three (3) Proposed Arbitrators within three (3) calendar days of the date the chosen
Proposed Arbitrator declines or notifies the Parties he or she is unable to serve as arbitrator. If
all three (3) Proposed Arbitrators decline or are otherwise unable to serve as arbitrator, then
the arbitrator selection process shall begin again in accordance with this Paragraph 4.2.
iv. The date that the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing
(including via email) delivered to both Parties to serve as the arbitrator hereunder is referred
to herein as the “Arbitration Commencement Date”. If an arbitrator resigns or is unable to
act during the Arbitration, a replacement arbitrator shall be chosen in accordance with this
Paragraph 4.2 to continue the Arbitration. If Utah ADR Services ceases to exist or to provide
a list of neutrals, then the arbitrator shall be selected under the then prevailing rules of the
American Arbitration Association.
v. Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both
Parties. Subject to Paragraph 4.10 below, if one Party refuses or fails to pay its portion of the
arbitrator fee, then the other Party can advance such unpaid amount (subject to the accrual of
interest at the rate of 12% per annum thereupon), with such amount being added to or
subtracted from, as applicable, the Arbitration Award.
c. Applicability of Certain Utah Rules. The Parties agree that the Arbitration shall be conducted
generally in accordance with the Utah Rules of Civil Procedure and the Utah Rules of Evidence. More
specifically, the Utah Rules of Civil Procedure shall apply, without limitation, to the filing of any
pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The
Utah Rules of Evidence shall apply to any hearings, whether telephonic or in person, held by the
arbitrator. Notwithstanding the foregoing, it is the Parties’ intent that the incorporation of such rules
will in no event supersede these Arbitration Provisions. In the event of any conflict between the Utah
Rules of Civil Procedure or the Utah Rules of Evidence and these Arbitration Provisions, these
Arbitration Provisions shall control.
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d. Answer and Default. An answer and any counterclaims to the Arbitration Notice shall be required to
be delivered to the Party initiating the Arbitration within twenty (20) calendar days after the
Arbitration Commencement Date. If an answer is not delivered by the required deadline, the arbitrator
must provide written notice to the defaulting Party stating that the arbitrator will enter a default award
against such Party if such Party does not file an answer within five (5) calendar days of receipt of such
notice. If an answer is not filed within the five (5) day extension period, the arbitrator must render a
default award, consistent with the relief requested in the Arbitration Notice, against a Party that fails to
submit an answer within such time period.
e. Related Litigation. The Party that delivers the Arbitration Notice to the other Party shall have the
option to also commence concurrent legal proceedings with any state or federal court sitting in Salt
Lake County, Utah (“Litigation Proceedings”), subject to the following: (a) the complaint in the
Litigation Proceedings is to be substantially similar to the claims set forth in the Arbitration Notice,
provided that an additional cause of action to compel arbitration will also be included therein, (b) so
long as the other Party files an answer to the complaint in the Litigation Proceedings and an answer to
the Arbitration Notice, the Litigation Proceedings will be stayed pending an Arbitration Award (or
Appeal Panel Award (defined below), as applicable) hereunder, (c) if the other Party fails to file an
answer in the Litigation Proceedings or an answer in the Arbitration proceedings, then the Party
initiating Arbitration shall be entitled to a default judgment consistent with the relief requested, to be
entered in the Litigation Proceedings, and (d) any legal or procedural issue arising under the
Arbitration Act that requires a decision of a court of competent jurisdiction may be determined in the
Litigation Proceedings. Any award of the arbitrator (or of the Appeal Panel (defined below)) may be
entered in such Litigation Proceedings pursuant to the Arbitration Act.
f. Discovery. Pursuant to Section 118(8) of the Arbitration Act, the Parties agree that discovery shall be
conducted as follows:
i. Written discovery will only be allowed if the likely benefits of the proposed written discovery
outweigh the burden or expense thereof, and the written discovery sought is likely to reveal
information that will satisfy a specific element of a claim or defense already pleaded in the
Arbitration. The Party seeking written discovery shall always have the burden of showing that
all of the standards and limitations set forth in these Arbitration Provisions are satisfied. The
scope of discovery in the Arbitration proceedings shall also be limited as follows:
1. To facts directly connected with the transactions contemplated by the Agreement.
2. To facts and information that cannot be obtained from another source or in another
manner that is more convenient, less burdensome or less expensive than in the
manner requested.
ii. No Party shall be allowed (i) more than fifteen (15) interrogatories (including discrete
subparts), (ii) more than fifteen (15) requests for admission (including discrete subparts), (iii)
more than ten (10) document requests (including discrete subparts), or (iv) more than three (3)
depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition.
The costs associated with depositions will be borne by the Party taking the deposition. The
Party defending the deposition will submit a notice to the Party taking the deposition of the
estimated attorneys’ fees that such Party expects to incur in connection with defending the
deposition. If the Party defending the deposition fails to submit an estimate of attorneys’ fees
within five (5) calendar days of its receipt of a deposition notice, then such Party shall be
deemed to have waived its right to the estimated attorneys’ fees. The Party taking the
deposition must pay the Party defending the deposition the estimated attorneys’ fees prior to
taking the deposition, unless such obligation is deemed to be waived as set forth in the
immediately preceding sentence. If the Party taking the deposition believes that the estimated
attorneys’ fees are unreasonable, such Party may submit the issue to the arbitrator for a
decision. All depositions will be taken in Utah.
iii. All discovery requests (including document production requests included in deposition
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notices) must be submitted in writing to the arbitrator and the other Party. The Party
submitting the written discovery requests must include with such discovery requests a detailed
explanation of how the proposed discovery requests satisfy the requirements of these
Arbitration Provisions and the Utah Rules of Civil Procedure. The receiving Party will then be
allowed, within five (5) calendar days of receiving the proposed discovery requests, to submit
to the arbitrator an estimate of the attorneys’ fees and costs associated with responding to such
written discovery requests and a written challenge to each applicable discovery request. After
receipt of an estimate of attorneys’ fees and costs and/or challenge(s) to one or more
discovery requests, consistent with subparagraph (c) above, the arbitrator will within three (3)
calendar days make a finding as to the likely attorneys’ fees and costs associated with
responding to the discovery requests and issue an order that (i) requires the requesting Party to
prepay the attorneys’ fees and costs associated with responding to the discovery requests, and
(ii) requires the responding Party to respond to the discovery requests as limited by the
arbitrator within twenty-five (25) calendar days of the arbitrator’s finding with respect to such
discovery requests. If a Party entitled to submit an estimate of attorneys’ fees and costs and/or
a challenge to discovery requests fails to do so within such 5-day period, the arbitrator will
make a finding that (A) there are no attorneys’ fees or costs associated with responding to
such discovery requests, and (B) the responding Party must respond to such discovery
requests (as may be limited by the arbitrator) within twenty-five (25) calendar days of the
arbitrator’s finding with respect to such discovery requests. Any Party submitting any written
discovery requests, including without limitation interrogatories, requests for production
subpoenas to a Party or a third party, or requests for admissions, must prepay the estimated
attorneys’ fees and costs, before the responding Party has any obligation to produce or
respond to the same, unless such obligation is deemed waived as set forth above.
iv. In order to allow a written discovery request, the arbitrator must find that the discovery
request satisfies the standards set forth in these Arbitration Provisions and the Utah Rules of
Civil Procedure. The arbitrator must strictly enforce these standards. If a discovery request
does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah
Rules of Civil Procedure, the arbitrator may modify such discovery request to satisfy the
applicable standards, or strike such discovery request in whole or in part.
v. Each Party may submit expert reports (and rebuttals thereto), provided that such reports must
be submitted within sixty (60) days of the Arbitration Commencement Date. Each Party will
be allowed a maximum of two (2) experts. Expert reports must contain the following: (i) a
complete statement of all opinions the expert will offer at trial and the basis and reasons for
them; (ii) the expert’s name and qualifications, including a list of all the expert’s publications
within the preceding ten (10) years, and a list of any other cases in which the expert has
testified at trial or in a deposition or prepared a report within the preceding ten (10) years; and
(iii) the compensation to be paid for the expert’s report and testimony. The Parties are entitled
to depose any other Party’s expert witness one (1) time for no more than four (4) hours. An
expert may not testify in a Party’s case-in-chief concerning any matter not fairly disclosed in
the expert report.
g. Dispositive Motions. Each Party shall have the right to submit dispositive motions pursuant Rule 12 or
Rule 56 of the Utah Rules of Civil Procedure (a “Dispositive Motion”). The Party submitting the
Dispositive Motion may, but is not required to, deliver to the arbitrator and to the other Party a
memorandum in support (the “Memorandum in Support”) of the Dispositive Motion. Within seven
(7) calendar days of delivery of the Memorandum in Support, the other Party shall deliver to the
arbitrator and to the other Party a memorandum in opposition to the Memorandum in Support (the
“Memorandum in Opposition”). Within seven (7) calendar days of delivery of the Memorandum in
Opposition, as applicable, the Party that submitted the Memorandum in Support shall deliver to the
arbitrator and to the other Party a reply memorandum to the Memorandum in Opposition (“Reply
Memorandum”). If the applicable Party shall fail to deliver the Memorandum in Opposition as
required above, or if the other Party fails to deliver the Reply Memorandum as required above, then the
applicable Party shall lose its right to so deliver the same, and the Dispositive Motion shall proceed
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regardless.
h. Confidentiality. All information disclosed by either Party (or such Party’s agents) during the
Arbitration process (including without limitation information disclosed during the discovery process or
any Appeal (defined below)) shall be considered confidential in nature. Each Party agrees not to
disclose any confidential information received from the other Party (or its agents) during the
Arbitration process (including without limitation during the discovery process or any Appeal) unless
(a) prior to or after the time of disclosure such information becomes public knowledge or part of the
public domain, not as a result of any inaction or action of the receiving Party or its agents, (b) such
information is required by a court order, subpoena or similar legal duress to be disclosed if such
receiving Party has notified the other Party thereof in writing and given it a reasonable opportunity to
obtain a protective order from a court of competent jurisdiction prior to disclosure, or (c) such
information is disclosed to the receiving Party’s agents, representatives and legal counsel on a need to
know basis who each agree in writing not to disclose such information to any third party. Pursuant to
Section 118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed to issue a
protective order to prevent the disclosure of privileged information and confidential information upon
the written request of either Party.
i. Authorization; Timing; Scheduling Order. Subject to all other portions of these Arbitration Provisions,
the Parties hereby authorize and direct the arbitrator to take such actions and make such rulings as may
be necessary to carry out the Parties’ intent for the Arbitration proceedings to be efficient and
expeditious. Pursuant to Section 120 of the Arbitration Act, the Parties hereby agree that an Arbitration
Award must be made within one hundred twenty (120) calendar days after the Arbitration
Commencement Date. The arbitrator is hereby authorized and directed to hold a scheduling conference
within ten (10) calendar days after the Arbitration Commencement Date in order to establish a
scheduling order with various binding deadlines for discovery, expert testimony, and the submission of
documents by the Parties to enable the arbitrator to render a decision prior to the end of such 120-day
period.
j. Relief. The arbitrator shall have the right to award or include in the Arbitration Award (or in a
preliminary ruling) any relief which the arbitrator deems proper under the circumstances, including,
without limitation, specific performance and injunctive relief, provided that the arbitrator may not
award exemplary or punitive damages.
k. Fees and Costs. As part of the Arbitration Award, the arbitrator is hereby directed to require the losing
Party (the Party being awarded the least amount of money by the arbitrator, which, for the avoidance
of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges
awarded to any Party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration, and
(b) reimburse the prevailing Party for all reasonable attorneys’ fees, arbitrator costs and fees,
deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by
the prevailing Party in connection with the Arbitration.
5. Arbitration Appeal.
a. Initiation of Appeal. Following the entry of the Arbitration Award, either Party (the “Appellant”)
shall have a period of thirty (30) calendar days in which to notify the other Party (the “Appellee”), in
writing, that the Appellant elects to appeal (the “Appeal”) the Arbitration Award (such notice, an
“Appeal Notice”) to a panel of arbitrators as provided in Paragraph 5.2 below. The date the
Appellant delivers an Appeal Notice to the Appellee is referred to herein as the “Appeal Date”. The
Appeal Notice must be delivered to the Appellee in accordance with the provisions of Paragraph 4.1
above with respect to delivery of an Arbitration Notice. In addition, together with delivery of the
Appeal Notice to the Appellee, the Appellant must also pay for (and provide proof of such payment to
the Appellee together with delivery of the Appeal Notice) a bond in the amount of 110% of the sum
the Appellant owes to the Appellee as a result of the Arbitration Award the Appellant is appealing. In
the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of
the applicable bond) in compliance with the provisions of this Paragraph 5.1, the Appeal will occur as
a matter of right and, except as specifically set forth herein, will not be further conditioned. In the
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event a Party does not deliver an Appeal Notice (along with proof of payment of the applicable bond)
to the other Party within the deadline prescribed in this Paragraph 5.1, such Party shall lose its right to
appeal the Arbitration Award. If no Party delivers an Appeal Notice (along with proof of payment of
the applicable bond) to the other Party within the deadline described in this Paragraph 5.1, the
Arbitration Award shall be final. The Parties acknowledge and agree that any Appeal shall be
deemed part of the Parties’ agreement to arbitrate for purposes of these Arbitration Provisions and the
Arbitration Act.
b. Selection and Payment of Appeal Panel. In the event an Appellant delivers an Appeal Notice to the
Appellee (together with proof of payment of the applicable bond) in compliance with the provisions
of Paragraph 5.1 above, the Appeal will be heard by a three (3) person arbitration panel (the “Appeal
Panel”).
i. Within ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to
the Appellant the names of five (5) arbitrators that are designated as “neutrals” or qualified
arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such five (5) designated
persons hereunder are referred to herein as the “Proposed Appeal Arbitrators”). For the
avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with
Utah ADR Services, and shall not be the arbitrator who rendered the Arbitration Award being
appealed (the “Original Arbitrator”). Within five (5) calendar days after the Appellee has
submitted to the Appellant the names of the Proposed Appeal Arbitrators, the Appellant must
select, by written notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as
the members of the Appeal Panel. If the Appellant fails to select three (3) of the Proposed
Appeal Arbitrators in writing within such 5-day period, then the Appellee may select such
three (3) arbitrators from the Proposed Appeal Arbitrators by providing written notice of such
selection to the Appellant.
ii. If the Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators
within ten (10) calendar days after the Appeal Date pursuant to subparagraph (a) above, then
the Appellant may at any time prior to the Appellee so designating the Proposed Appeal
Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or
qualified arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by
written notice to the Appellee. The Appellee may then, within five (5) calendar days after the
Appellant has submitted notice of its selected arbitrators to the Appellee, select, by written
notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If
the Appellee fails to select in writing within such 5-day period three (3) of the arbitrators
selected by the Appellant to serve as the members of the Appeal Panel, then the Appellant
may select the three (3) members of the Appeal Panel from the Appellant’s list of five (5)
arbitrators by providing written notice of such selection to the Appellee.
iii. If a selected Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the
Party that selected such Proposed Appeal Arbitrator may select one (1) of the other five (5)
designated Proposed Appeal Arbitrators within three (3) calendar days of the date a chosen
Proposed Appeal Arbitrator declines or notifies the Parties he or she is unable to serve as an
arbitrator. If at least three (3) of the five (5) designated Proposed Appeal Arbitrators decline
or are otherwise unable to serve, then the Proposed Appeal Arbitrator selection process shall
begin again in accordance with this Paragraph 5.2; provided, however, that any Proposed
Appeal Arbitrators who have already agreed to serve shall remain on the Appeal Panel.
iv. The date that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2
agree in writing (including via email) delivered to both the Appellant and the Appellee to
serve as members of the Appeal Panel hereunder is referred to herein as the “Appeal
Commencement Date”. No later than five (5) calendar days after the Appeal
Commencement Date, the Appellee shall designate in writing (including via email) to the
Appellant and the Appeal Panel the name of one (1) of the three (3) members of the Appeal
Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal
Panel shall be deemed an arbitrator for purposes of these Arbitration Provisions and the
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Arbitration Act, provided that, in conducting the Appeal, the Appeal Panel may only act or
make determinations upon the approval or vote of no less than the majority vote of its
members, as announced or communicated by the lead arbitrator on the Appeal Panel. If an
arbitrator on the Appeal Panel ceases or is unable to act during the Appeal proceedings, a
replacement arbitrator shall be chosen in accordance with Paragraph 5.2 above to continue the
Appeal as a member of the Appeal Panel. If Utah ADR Services ceases to exist or to provide
a list of neutrals, then the arbitrators for the Appeal Panel shall be selected under the then
prevailing rules of the American Arbitration Association.
v. Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the
Appellant.
c. Appeal Procedure. The Appeal will be deemed an appeal of the entire Arbitration Award. In
conducting the Appeal, the Appeal Panel shall conduct a de novo review of all Claims described or
otherwise set forth in the Arbitration Notice. Subject to the foregoing and all other provisions of this
Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers
appropriate for a fair and expeditious disposition of the Appeal, may hold one or more hearings and
permit oral argument, and may review all previous evidence and discovery, together with all briefs,
pleadings and other documents filed with the Original Arbitrator (as well as any documents filed with
the Appeal Panel pursuant to Paragraph 5.4(a) below). Notwithstanding the foregoing, in connection
with the Appeal, the Appeal Panel shall not permit the Parties to conduct any additional discovery or
raise any new Claims to be arbitrated, shall not permit new witnesses or affidavits, and shall not base
any of its findings or determinations on the Original Arbitrator’s findings or the Arbitration Award.
d. Timing.
i. Within seven (7) calendar days of the Appeal Commencement Date, the Appellant (i) shall
deliver or cause to be delivered to the Appeal Panel copies of the Appeal Notice, all discovery
conducted in connection with the Arbitration, and all briefs, pleadings and other documents
filed with the Original Arbitrator (which material Appellee shall have the right to review and
supplement if necessary), and (ii) may, but is not required to, deliver to the Appeal Panel and
to the Appellee a Memorandum in Support of the Appellant’s arguments concerning or
position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded
in the Arbitration. Within seven (7) calendar days of the Appellant’s delivery of the
Memorandum in Support, as applicable, the Appellee shall deliver to the Appeal Panel and to
the Appellant a Memorandum in Opposition to the Memorandum in Support. Within seven
(7) calendar days of the Appellee’s delivery of the Memorandum in Opposition, as applicable,
the Appellant shall deliver to the Appeal Panel and to the Appellee a Reply Memorandum to
the Memorandum in Opposition. If the Appellant shall fail to substantially comply with the
requirements of clause (i) of this subparagraph (a), the Appellant shall lose its right to appeal
the Arbitration Award, and the Arbitration Award shall be final. If the Appellee shall fail to
deliver the Memorandum in Opposition as required above, or if the Appellant shall fail to
deliver the Reply Memorandum as required above, then the Appellee or the Appellant, as the
case may be, shall lose its right to so deliver the same, and the Appeal shall proceed
regardless.
ii. Subject to subparagraph (a) above, the Parties hereby agree that the Appeal must be heard by
the Appeal Panel within thirty (30) calendar days of the Appeal Commencement Date, and
that the Appeal Panel must render its decision within thirty (30) calendar days after the
Appeal is heard (and in no event later than sixty (60) calendar days after the Appeal
Commencement Date).
e. Appeal Panel Award. The Appeal Panel shall issue its decision (the “Appeal Panel Award”) through
the lead arbitrator on the Appeal Panel. Notwithstanding any other provision contained herein, the
Appeal Panel Award shall (a) supersede in its entirety and make of no further force or effect the
Arbitration Award (provided that any protective orders issued by the Original Arbitrator shall remain
in full force and effect), (b) be final and binding upon the Parties, with no further rights of appeal, (c)
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be the sole and exclusive remedy between the Parties regarding any Claims, counterclaims, issues, or
accountings presented or pleaded in the Arbitration, and (d) be promptly payable in United States
dollars free of any tax, deduction or offset (with respect to monetary awards). Any costs or fees,
including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the
Appeal Panel Award shall, to the maximum extent permitted by law, be charged against the Party
resisting such enforcement. The Appeal Panel Award shall include Default Interest (with respect to
monetary awards) at the rate specified in applicable Note for Default Interest both before and after the
Arbitration Award. Judgment upon the Appeal Panel Award will be entered and enforced by a state or
federal court sitting in Salt Lake County, Utah.
f. Relief. The Appeal Panel shall have the right to award or include in the Appeal Panel Award any
relief which the Appeal Panel deems proper under the circumstances, including, without limitation,
specific performance and injunctive relief, provided that the Appeal Panel may not award exemplary or
punitive damages.
g. Fees and Costs. As part of the Appeal Panel Award, the Appeal Panel is hereby directed to require the
losing Party (the Party being awarded the least amount of money by the arbitrator, which, for the
avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other
charges awarded to any Party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration
and the Appeal Panel, and (b) reimburse the prevailing Party (the Party being awarded the most
amount of money by the Appeal Panel, which, for the avoidance of doubt, shall be determined without
regard to any statutory fines, penalties, fees, or other charges awarded to any part) the reasonable
attorneys’ fees, arbitrator and Appeal Panel costs and fees, deposition costs, other discovery costs, and
other expenses, costs or fees paid or otherwise incurred by the prevailing Party in connection with the
Arbitration (including without limitation in connection with the Appeal).
6. Miscellaneous.
a. Severability. If any part of these Arbitration Provisions is found to violate or be illegal under
applicable law, then such provision shall be modified to the minimum extent necessary to make such
provision enforceable under applicable law, and the remainder of the Arbitration Provisions shall
remain unaffected and in full force and effect.
b. Governing Law. These Arbitration Provisions shall be governed by the laws of the State of Utah
without regard to the conflict of laws principles therein.
c. Interpretation. The headings of these Arbitration Provisions are for convenience of reference only and
shall not form part of, or affect the interpretation of, these Arbitration Provisions.
d. Waiver. No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the
form of a writing signed by the Party granting the waiver.
e. Time is of the Essence. Time is expressly made of the essence with respect to each and every provision
of these Arbitration Provisions.
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