Warren's Forms of Agreements - Martin D. Fern [PDF]

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Publication Update Publication 770 Release 95, May 2015 Warren’s Forms of Agreements

Release 95 of Warren’s Forms of Agreements includes new forms and extended commentary to Chapter 5, “General Partnerships,” Chapter 6, “Limited Partnerships,” and Chapter 11A, “Sales Representatives.”

Chapter 5, “General Partnerships.” The current release updates the general commentary and added references to the Uniform Partnership Act. New forms include: 5.3.03, General Partnership Agreement (With Managing Partner); 5.3.07, Joint Venture In General Partnership Form; and 5.3.11, Assignment of General Partnership Interest. Chapter 6, “Limited Partnerships.” New information includes general commentary and added references to the Uniform Limited Partnership Act. Existing forms have been updated, and new forms include: 6.3.02, Limited Partnership Agreement (Basic Form); 6.3.07, Limited Communities);

Partnership

Agreement

(Housing

6.3.08, Limited Partnership Agreement (Real Estate Development;

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6.3.11, Delaware Certificate of Limited Partnership; and 6.3.12, Special Purpose Entity Provisions for Limited Partnership Agreement.

Chapter 11A, “Sales Representatives.” Finally, general commentary and additional forms have been added to Chapter 11A. New forms include: 11A.2.06, Sales Representative Agreement (Short Form); 11A.2.07, Form);

Sales

Representative

Agreement

(Alternate

11A.2.08, Independent Sales Representative Agreement; and 11A.2.12, Salesman Agreement.

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WARREN’S FORMS OF AGREEMENTS BUSINESS FORMS Martin D. Fern Fox Rothschild, LLP, Los Angeles, CA Member of the California and New York Bars and Associate Editor Danielle F. Fern Steptoe & Johnson, LLP, Los Angeles, CA Member of the California Bar

Volume 1 2015 Filed Through: RELEASE NO. 95,  MAY 2015

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QUESTIONS ABOUT THIS PUBLICATION? For questions about the Editorial Content appearing in these volumes or reprint permission, please call: Matthew Tobin Burke Legal Editor     Email . . . [email protected]     Phone . . . 1-800-424-0651 or 1-908-673-3362 For assistance with replacement pages, shipments, billing or other customer service matters, please call: Customer Services Department at     . . .(800) 833-9844 Outside the United States and Canada, please call     . . .(518) 487-3000 Fax Number     . . .(518) 487-3584 Customer Service Website     . . .http://www.lexisnexis.com/custserv/ For information on other Matthew Bender publications, please call Your account manager or     . . .(800) 223-1940 Outside the United States and Canada, please call     . . .(518) 487-3000 Library of Congress Card Number: 54-1863 ISBN: 978-0-8205-1770-4 (print) ISBN: 978-0-3271-6956-7 (eBook)

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Cite this publication as: [Vol. no.] Martin D. Fern, Warren’s Forms of Agreements § [sec. no.] (Matthew Bender)

Example: 7 Martin D. Fern, Warren’s Forms of Agreements § 72.1 (Matthew Bender) Because the section you are citing may be revised in a later release, you may wish to photocopy or print out the section for convenient future reference. This publication is designed to provide authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender and the Matthew Bender Flame Design are registered trademarks of Matthew Bender Properties Inc. Copyright © 2015 Matthew Bender & Company, Inc., a member of LexisNexis. Originally published in 1954. All Rights Reserved. No copyright is claimed by LexisNexis or Matthew Bender & Company, Inc., in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to copy material may be licensed for a fee from the Copyright Clearance Center, 222 Rosewood Drive, Danvers, Mass. 01923, telephone (978) 750-8400.

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Volume 1 Table of Contents A COMPLETE SYNOPSIS FOR EACH CHAPTER APPEARS AT THE BEGINNING OF THE CHAPTER Cover What's New Prefatory Material Title Page Copyright Volume 1 Table of Contents Preface PART I. INTRODUCTORY CHAPTER 1 — General Drafting Considerations § 1.1.  General Commentary 1.1.01  Introduction 1.1.02  Parties and Date 1.1.03  Parts of an Agreement 1.1.04  Recitals [1]  Placement of Recitals [2]  Evidentiary Effect of Recitals [3]  Common Recitals and Their Uses [a]  Parties’ Status [b]  Purpose of Agreement [c]  Authority and Capacity [d]  Representation by Counsel [e]  Property Ownership [f]  Brokers and Finders [g]  Arm’s-Length Negotiation [h]  Audit and Investigation [i]  Confidentiality [j]  Recitals of Facts [k]  Consideration [l]  Prior Agreements [m]  Effect of Agreement [n]  Location of Signing and Performance

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[o]  Common Recital Drafting Problems 1.1.05  Representations and Warranties 1.1.06  Covenants and Agreements 1.1.07  Boilerplate and Signatures [1]  Boilerplate [2]  Signatures and Seals [3]  Electronic and Digital Signatures [4]  Delivery [5]  Notarization and Witnesses to Signatures PART II. ORGANIZATION OF FIRM CHAPTER 2 — Limited Liability Companies § 2.1.  GENERAL COMMENTARY 2.1.01  Background and Overview [1]  What is an LLC? [2]  Advantages of an LLC 2.1.02  Business Law Aspects [1]  Limited Liability [2]  Control Over Management of the Business [3]  Finance and Management Structure 2.1.03  Formation, Documentation and Operations [1]  Comparison with Other Entities [a]  C Corporation. [b]  S Corporation. [c]  General Partnership. [d]  Limited Partnership. [e]  LLCs Well Suited for Certain Businesses. 2.1.04  Drafting, Structural and Operational Issues [1]  Basic Requirements [a]  Filing Articles of Organization. [b]  Operating Agreement. [c]  Number of Members. [d]  Capital Structure. [e]  Contributions of Members. [2]  Allocations and Distributions [a]  Generally. [b]  Limitation on Distributions to Members. [3]    Withdrawal or Resignation or Disassociation of a Member [4]  Dissolution Triggers and Effects of Dissolution [a]  Dissolution Triggers. [b]  Business Consequences of Dissolution.

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[c]    Tax Consequences Upon Liquidation after Dissolution. [5]  Management [6]  Voting Rights and Classes of Membership [a]  Classes of Membership. [b]  Voting Basis for Members. [7]    Fiduciary Duties and Liabilities of Members and Managers [8]  Unalterable Statutory Rights and Obligations 2.1.05  Formation and Conversion Strategies and Tax Effects [1]  What Can Be Converted to an LLC? [2]  How Do You Convert to an LLC? [a]  Statutory Conversion. [b]  Direct Contribution of Assets. [c]    Liquidation of Entity Followed by Contribution of Assets by Owners. [d]  Contribution of Ownership Interests. [e]  Statutory Merger. [3]  Tax Consequences of Various Conversion Methods [4]    State Law Consequences of Various Conversion Methods [a]  Statutory Conversion. [b]  Direct Contribution of Assets. [c]    Liquidation of Entity Followed by Contribution of Assets by Owners. [d]  Contribution of Ownership Interests. [e]  Merger of Other Entity into LLC. 2.1.06  Federal and State Securities Laws Issues [1]  Federal [2]  State § 2.2.  LIMITED LIABILITY COMPANIES: COMPLETE FORMS Form No. 2.2.01.    Checklist for Member Managed LLC Agreement (Delaware Or California) Form No. 2.2.02.    Checklist for Manager Managed LLC Agreement (Delaware or California) Form No. 2.2.03.    Delaware Manager Managed Limited Liability Company Operating Agreement (Comprehensive Form) Form No. 2.2.04.    Delaware Manager Managed Limited Liability Company Operating Agreement (Real Estate Development) (Comprehensive Form) Form No. 2.2.05.    Delaware Manager Managed Limited Liability Company Operating Agreement (Simple Form)

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Form No. 2.2.06.  Delaware Single Member Member Managed Operating Agreement (Simple Form) Form No. 2.2.07.  Delaware Single Member Member Managed Limited Liability Company Operating Agreement (with Springing Member) Form No. 2.2.08.    Basic Form of California LLC Operating Agreement Form No. 2.2.09.  California Member Managed LLC Operating Agreement Form No. 2.2.10.  California Manager Managed LLC Operating Form No. 2.2.11.  California Single Member Limited Liability Form No. 2.2.12.    Basic Form of Nevada Member Managed Limited Liability Company Agreement Form No. 2.2.13.    Basic Form for New York Single Member Limited Liability Company Agreement Form No. 2.2.14.    Texas Manager Managed Limited Liability Company Agreement Form No. 2.2.15.    Agreement to Roll Up Commercial Real Estate General Partnership into New Delaware ManagerManaged LLC Form No. 2.2.16.    Delaware Limited Liability Company Operating Agreement for Conversion from Limited Partnership Form No. 2.2.17.    Agreement to Form a Limited Liability Company to Engage in a Real Estate Joint Venture Form No. 2.2.18.  Subscription Agreement for Limited Liability Company Interests Form No. 2.2.19.  Agreement to Purchase Membership Interest in Limited Liability Company Form No. 2.2.20.    Agreement to Purchase All Membership Interests in Limited Liability Company Form No. 2.2.21.    Assignment of Limited Liability Company Interest (Short Form) CHAPTER 3 — The Corporation § 3.1.  General Commentary 3.1.01  Pre-Incorporation Agreements 3.1.02  Incorporation of a Going Business 3.1.03  Formation of the Corporation § 3.2.  Tax Consequences 3.2.01    Basic Tax Treatment of Entity and Owners of a Corporation 3.2.02  Contribution of Property to a Corporation [1]  Introduction

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[2]  General Rules [3]  The Property Requirement [4]  The “Solely for Stock” Requirement [5]  The “Control” Requirement [6]  Stock Exchanged for Services [7]  Receipt of Other Property by Transferor [8]  Basis to the Transferor 3.2.03  Taxation of Corporate Operations and Distributions of Earnings [1]  General Rules [2]  Distribution of Appreciated Property 3.2.04  Corporate Liquidations 3.2.05  Corporate Reorganizations [1]  Purpose of the Reorganization Provisions [2]  The Three Types of Tax-Free Reorganizations [3]  Hybrid Types of Reorganizations § 3.3.  Organizational Materials: Complete Forms Form No. 3.3.01.  Certificate of Organizer of Corporation Form No. 3.3.02.    Organizational Action Of Directors (Delaware) Form No. 3.3.03.    Organizational Action Of Directors (Delaware) (Alternate Form) Form No. 3.3.04.    Organizational Action Of Directors (California) Form No. 3.3.05.  Organizational Action Of Directors (Nevada) § 3.4.  Stock Subscription Agreements: Complete Forms Form No. 3.4.01.    Agreement to Subscribe for Stock (Letter Form) Form No. 3.4.02.  Stock Purchase Agreement for Corporation’s Founder Form No. 3.4.03.    Agreement By Corporation’s Founder to Contribute Property for Stock Form No. 3.4.04.    Subscription Agreement For Accredited Investors Form No. 3.4.05.  Stock Subscription Agreement Form No. 3.4.06.    Stock Subscription Agreement (Alternate Form) Form No. 3.4.07.    Agreement for Purchase of Newly Issued Shares from Public Corporation Form No. 3.4.08.    Agreement to Purchase Newly Issued Preferred Shares from Corporation Form No. 3.4.09.    Agreement to Purchase Newly Issued Preferred Shares from Corporation (Alternate Form)

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§

§

§

§

Form No. 3.4.10.  Stock Purchase Subscription Form No. 3.4.11.  Purchaser Questionnaire Form No. 3.4.12.    Acknowledgement Of Receipt for Consideration for Purchase of Stock Form No. 3.4.13.  Stock Investor Representation Letter 3.5.  Certificates of Incorporation: Complete Forms Form No. 3.5.01.  Certificate of Incorporation (Delaware) Form No. 3.5.02.    Certificate of Incorporation (Delaware) (Alternate Form) Form No. 3.5.03.  Articles of Incorporation (California) Form No. 3.5.04.    Certificate of Preferred Stock Designations (Cumulative Non-Voting Preferred) (Delaware) Form No. 3.5.05.    Certificate of Preferred Stock Designations (Cumulative Voting Preferred) (Delaware) 3.6.  Bylaws for Corporation: Complete Forms Form No. 3.6.01.  Bylaws for a Delaware Corporation Form No. 3.6.02.    Bylaws for a Delaware Corporation (Alternate Form) Form No. 3.6.03.  Bylaws for a California Corporation 3.7.  Corporate Governance: Complete Forms Form No. 3.7.01.    Directors Action to Establish Bank Accounts Form No. 3.7.02.  Agreement to Indemnify Director Form No. 3.7.03.  Agreement to Indemnify Director (Alternate Form) Form No. 3.7.04.  Waiver of Notice of Directors Meeting Form No. 3.7.05.  Directors Minutes Approving Loan Form No. 3.7.06.    Directors Action Authorizing Issuance of Stock Form No. 3.7.07.    Notice of Annual or Special Meeting of Shareholders Of California Corporation Form No. 3.7.08.  Notice of Annual Meeting of Shareholders of Delaware Corporation Form No. 3.7.09.  Notice of Annual Meeting (General Form) Form No. 3.7.10.  CERTIFICATE AS TO MAILING OF NOTICE OF SPECIAL SHAREHOLDERS’ MEETING Form No. 3.7.11.    Affidavit With Respect to List of Shareholders 3.8.  Shares and Shareholders: Complete Forms Form No. 3.8.01.  Agreement Among Shareholders for Co-Sale and Right of First Offer on Sale of Shares Form No. 3.8.02.    Stock Restriction Agreement Between Issuing Corporation and Shareholder

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Form No. 3.8.03.  Agreement Among Shareholders Form No. 3.8.04.  Shareholders’ Agreement Form No. 3.8.05.  Affidavit of Lost Stock Certificate Form No. 3.8.06.  Shareholder Voting Trust Agreement Form No. 3.8.07.  Ballot—Non-Cumulative Voting Form No. 3.8.08.  Authorization to Vote Shares Form No. 3.8.09.  Stock Proxy Form No. 3.8.10.  Stock Proxy (Alternate Form) Form No. 3.8.11.  Investors’ Rights Agreement Form No. 3.8.12.  Investor Rights Agreement (Alternate Form) Form No. 3.8.13.  Board Observation Rights Agreement Form No. 3.8.14.  Agreement to Register Shares Form No. 3.8.15.    Agreement to Register Shares (Alternate Form) § 3.9.  Dissolution of Corporation: Complete Forms Form No. 3.9.01.    Document Set for Dissolution of Corporation (Delaware) Form No. 3.9.02.    Document Set for Dissolution of Corporation (California) Form No. 3.9.03.  Plan of Complete Liquidation of Corporation Form No. 3.9.04.  Plan of Complete Liquidation of Corporation (Alternate Form) CHAPTER 4 — S Corporations § 4.1.  General Commentary 4.1.01  Introduction 4.1.02  Requirements [1]  Small Business Corporation [2]  Domestic Corporation [3]  Maximum of 100 Shareholders [4]  Qualified Shareholders [5]  One Class of Stock [6]  Shareholder Loans [7]  Limits on Passive Investment Income [8]  Subsidiaries 4.1.03  Election, Revocation and Termination [1]  Election [2]  Revocation [3]  Termination § 4.2.  “S” CORPORATIONS: COMPLETE FORMS Form 4.2.01.    SMALL BUSINESS CORPORATION ELECTION TO BE TREATED AS AN S CORPORATION (IRS FORM 2553)

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Form 4.2.02.  REQUEST FOR IRS CONSENT TO S ELECTION WITHIN FIVE YEARS OF PRIOR TERMINATION Form 4.2.03.  STATEMENT OF REVOCATION OF ELECTION Form 4.2.04.  RESOLUTIONS ADOPTING S STATUS Form 4.2.05.    ACQUISITION AGREEMENT REPRESENTATIONS OF SELLER CONCERNING S CORPORATION STATUS Form 4.2.06.    ACQUISITION AGREEMENT INDEMNITY FOR FAILURE TO MAINTAIN S CORPORATION STATUS Form 4.2.07.    PROVISIONS FOR SHAREHOLDERS’ AGREEMENT OF AN S CORPORATION CHAPTER 5 — General Partnerships § 5.1.  General Commentary 5.1.01  Partnership Defined 5.1.02  Partnership Property 5.1.03  Partner is Agent of Partnership 5.1.04  Statement of Partnership Authority 5.1.05  Partnership Liable for Partner’s Actionable Conduct 5.1.06  Partner’s Liability 5.1.07  Actions by and Against the Partnership and Partners 5.1.08  Partner’s Rights and Duties 5.1.09  Standards of Partner’s Conduct 5.1.10  Dissolution Of The Partnership 5.1.11    Limited Partnership and Limited Liability Company Compared § 5.2.  Tax Consequences of General Partnerships 5.2.01  Partnership Income Taxed to Partners 5.2.02  Taxable Year of Partnership 5.2.03  Contribution of Property To Partnership 5.2.04  Partnership Distributions 5.2.05  Transfer of a Partnership Interest § 5.3.  General Partnerships: Complete Forms Form 5.3.01.  General Partnership Agreement (Simple Form) Form 5.3.02.  General Partnership Agreement (Basic Form) Form 5.3.03.  General Partnership Agreement (With Managing Partner) Form 5.3.04.    General Partnership Agreement to Acquire, Develop and Exploit Real Property Project (With Provision for Managing Partner) Form 5.3.05.    General Partnership Agreement (Real Estate Investments) Form 5.3.06.    Agreement for General Partnership for Real Estate Investments (California)

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Form 5.3.07.  Joint Venture in General Partnership Form Form 5.3.08.  Agreement to Retire Partnership Interest Form 5.3.09.  Partnership Interest Security Agreement Form 5.3.10.  Agreement Admitting New General Partner Form 5.3.11.  Assignment of General Partnership Interest § 5.4.    General Partnerships: Specific Clauses (Organization and Purpose) Form 5.4.01.  Provision for Organization of Law Partnership Form 5.4.02.    Provision for Organization of Accountancy Partnership Form 5.4.03.    Provision for Organization of Investment Partnership Form 5.4.04.    Provision for Organization of Manufacturing Partnership Form 5.4.05.    Provision for Organization of Partnership to Engage in Business Previously Conducted by Corporation Form 5.4.06.    Provision for Amendment of Existing Partnerships § 5.5.    General Partnerships: Specific Clauses (Name of Partnership) Form 5.5.01.  Provision for Name of Law Partnership Form 5.5.02.    Provision for Right to Continue Use of Firm Name Form 5.5.03.    Provision for Use of Partnership Name in Case Business is Sold Form 5.5.04.    Provision for Filing Fictitious Business Name Statement § 5.6.    General Partnerships: Specific Clauses (Duration of Partnership) Form 5.6.01.  Indefinite Duration Form 5.6.02.    Provision for Continuance of Partnership Until the Death of Partner Form 5.6.03.    Provision for Continuance of Partnership Until Terminated by Notice Form 5.6.04.    Provision in Partnership Contract for Continuance from Year to Year Unless Terminated Form 5.6.05.    Provision for Continuance of Partnership Beyond Stated Term Form 5.6.06.    Provision for Extension of Term of Partnership Upon Agreement of Majority of Partnership Form 5.6.07.    Provision for Termination Upon Written Notice at Specified Yearly Date

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§ 5.7.    General Partnerships: Specific Clauses (Contributions to Capital) Form 5.7.01.    Capital to Consist of Cash and Property— Enumerated in Columnar Form Form 5.7.02.    Capital Contribution in Proportion to Share of Partnership Profits and Losses Form 5.7.03.  Additional Contributions Form 5.7.04.  Capital Accounts Form 5.7.05.    One Partner to Contribute Assets of Business and the Other to Contribute Money Form 5.7.06.    Provision to Fix Amount of Capital to be Contributed; Additional Amounts to be Regarded as Loans Form 5.7.07.    Provision for Capital to be Contributed in Installments Form 5.7.08.  Provision for Increase of Partnership Capital Form 5.7.09.  Provision for Additional Capital Contributions to Come from Profits Form 5.7.10.  Provision Requiring No Additional Contributions to Capital Form 5.7.11.  Provision Prohibiting Withdrawal of Capital Form 5.7.12.    Provision for No Interest on Capital Contributions Form 5.7.13.  Provision for Loans to Partnership Form 5.7.14.    Provision for Paying Interest on Capital Contributions Form 5.7.15.    Provision for Payment of Interest on Amount Contributed by One Partner § 5.8.  General Partnerships: Specific Clauses (Profits and Losses) Form 5.8.01.  Profits and Losses to be Shared Equally Form 5.8.02.  Allocation of Profits and Losses Enumerated in Columnar Form Form 5.8.03.  Allocation of Profits and Losses in Proportion to Capital Account § 5.9.    General Partnerships: Specific Clauses (Management of Partnership Affairs) Form 5.9.01.  Preparation of Annual Budget Form 5.9.02.    All Partners to Participate in Managing Partnership Form 5.9.03.    Provision Limiting Power of a Partner to Incur Liabilities On Behalf of the Partnership Form 5.9.04.  Provision Prohibiting Certain Acts by Partners Form 5.9.05.    Appointment of Managing Partner of Partnership

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Form 5.9.06.  Meetings of Partners Form 5.9.07.  Provision for Active and Silent Partner Form 5.9.08.  Provision for Payment of Salary to One Partner Form 5.9.09.    Provision that neither Partner shall Receive Salary Form 5.9.10.  Provision for Conduct of Business by Majority of Partners Form 5.9.11.    Provision Requiring Unanimous Approval of Partnership Acts Form 5.9.12.  Provision Requiring All Partners to be Consulted On Change of Policy Form 5.9.13.  Partner Not to Release Debts Form 5.9.14.  Provision Specifying Duties of Partners Form 5.9.15.  Duties of Partner with Provision for Damages for Breach Form 5.9.16.  Provision Requiring Checks and Contracts to be Signed by Two Out of Three Partners Form 5.9.17.  Provision that Money be Deposited in Bank and Checks Signed by All Parties Form 5.9.18.    Provision Limiting the Assumption of Personal Obligations by Partner Form 5.9.19.    Provision for Furnishing of Bond by Each Partner Form 5.9.20.    Provision for Bonding of Employees Handling Money Form 5.9.21.  Provision for Loan to Partners Form 5.9.22.  Provision for Partner Not to Pledge Partnership Credit Form 5.9.23.  Provision for Partners to Pay Personal Debts Form 5.9.24.    Provision Permitting Partners to Engage in Other Businesses § 5.10.  General Partnerships: Specific Clauses (Accounting) Form 5.10.01.  Provision for Method of Accounting Form 5.10.02.  Provision for Maintenance of Books Form 5.10.03.  Annual Accounting to be Furnished to Parties Form 5.10.04.  Provision for Maintenance of Partners’ Income and Capital Account Form 5.10.05.  Provision for Drawing Account Form 5.10.06.    Provision Requiring Books to be Kept by One Partner and Statement Rendered to Others Form 5.10.07.  Provision for Audit of Books Form 5.10.08.  Provision for Inspection of Books Form 5.10.09.  Provision for Maintenance of Income Accounts

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§ §

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Form 5.10.10.  Provision for Distributions to Partners Form 5.10.11.  Provision for Fiscal Year Form 5.10.12.  Provision for Maintenance of Capital Accounts Form 5.10.13.  Provision for Annual Financial Statements Form 5.10.14.  Provision for Annual Partnership Valuation 5.11.    General Partnerships: Specific Clauses (Action Taken By Individual Partner) Form 5.11.01.  Provision for Partners’ Vacations Form 5.11.02.  Provision for Reimbursement of Expenses Form 5.11.03.  Expenses Form 5.11.04.    Provision that Partner shall Not be Interested in Competing Business Form 5.11.05.  Provision that Partner shall not Engage in any Other Business Form 5.11.06.    Right to Engage in Other Business after Transfer of Interest 5.12.  General Partnerships: Specific Clauses (Admission of New Partners) Form 5.12.01.  Agreement of all Partners 5.13.    General Partnerships: Specific Clauses (Transfer of Partnership Interest) Form 5.13.01.  Provision for Right of First Refusal in Favor of Other Partners Upon Proposed Sale of a Partner’s Interest in Partnership Form 5.13.02.    Provision for Right of Partner to Sell his Interest in Partnership Form 5.13.03.  Partner Prohibited from Selling Interest Form 5.13.04.    Provision for Interest not to be Assigned, Mortgaged or Sold Form 5.13.05.    Provision Permitting Assignment of Partnership Interest to Trust Form 5.13.06.    Provision Restricting Transfer of Partnership Interest 5.14.    General Partnerships: Specific Clauses (Death, Disability and Retirement) Form 5.14.01.    Provision for Life Insurance on Lives of Partners Form 5.14.02.    Provision for Purchase by Survivor at Book Value in Case of Death of Partner Form 5.14.03.    Provision for Purchase by Survivor for Actual Sum Contributed by Decedent in Case of Death Of Partner Form 5.14.04.    Provision for Payment by Continuing Partnership to Decedent Partner’s Estate of Capital and

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Income Form 5.14.05.  Provision for Disability of Partner Form 5.14.06.  Provision for Continuance of Partnership after Death of Partner Form 5.14.07.  Provision for Purchase of Business by Survivor in Case of Death of Partner, Purchase Price to be Arbitrated if Necessary Form 5.14.08.  Provision for Retirement of Partner Form 5.14.09.    Provision for Withdrawal of Partner Due to Illness Form 5.14.10.    Provision for Assumption of Withdrawing Partner’s Partnership Obligation Form 5.14.11.  Provision for Insurance on Life of Partners Form 5.14.12.    Provision for Purchase of Deceased Partner’s Interest Form 5.14.13.    Provision Requiring Partners to Include Instructions to Executor in Will Form 5.14.14.  Provision for Assumption of Deceased Partner’s Obligations in Partnership Form 5.14.15.    Estate of Deceased Partner to Continue to Receive Share of Profits and Losses Form 5.14.16.  Provision for Expulsion of Partner Form 5.14.17.  Purchase of Withdrawing Partner’s Interest Form 5.14.18.  Purchase of Existing Partner’s Interest Form 5.14.19.    Purchase of Withdrawing Partner’s Interest— for a Note § 5.15.    General Partnerships: Specific Clauses (Dissolution and Termination Of Partnership) Form 5.15.01.  No Dissolution Upon Death or Withdrawal Form 5.15.02.  Dissolution Upon Demand of any Two Partners Form 5.15.03.    Dissolution Upon Demand of Majority in Interest of Partners Form 5.15.04.    Agreement to Buy Out Interest of Retiring Partner Form 5.15.05.    Provision for Business to be Incorporated on Death of Partner Form 5.15.06.  Option of Named Partner to Retire at any Time During the Continuance of Agreement Form 5.15.07.    Dissolution Upon Death Or Withdrawal of a Partner Form 5.15.08.  Distribution of Assets Upon Dissolution Form 5.15.09.  Provision for Right to Continue Business Upon Termination of the Partnership

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Form 5.15.10.  Provision Regarding Liquidation of Partnership Form 5.15.11.    Provision for Liquidation of Business on Dissolution of Partnership Form 5.15.12.    Provision for Repayment of Contribution to Partner in Case of Termination or Death § 5.16.    General Partnerships: Specific Clauses (Miscellaneous Provisions) Form 5.16.01.  Provision for Arbitration of Controversy Form 5.16.02.    Provision for Arbitration Barring Action for Dissolution Prior to Expiration of Partnership Form 5.16.03.    Provision for Appointment of Arbitrators by Court in Event Parties Refuse Form 5.16.04.  Provision that Trade Secrets Not be Divulged CHAPTER 6 — Limited Partnerships § 6.1.  General Commentary 6.1.01  Basic Characteristics 6.1.02  Use of Limited Partnerships § 6.2.  Tax Consequences Of Limited Partnerships § 6.3.  Limited Partnership Agreements: Complete Forms Form 6.3.01.  Limited Partnership Agreement (Short Form) Form 6.3.02.  Limited Partnership Agreement (Basic Form) Form 6.3.03.    Limited Partnership Agreement (Real Estate Investment) Form 6.3.04.  Limited Partnership Agreement With Provisions For Administrative And Managing General Partners Form 6.3.05.  Agreement For Limited Liability Partnership (For Law Partnership) Form 6.3.06.  Family Limited Partnership Agreement Form 6.3.07.    Limited Partnership Agreement (Housing Communities) Form 6.3.08.    Limited Partnership Agreement (Real Estate Development) Form 6.3.09 .  Assignment Of Limited Partnership Interests Form 6.3.10.    Limited Partnership Interest Purchase Agreement FORM 6.3.11.  Delaware Certificate Of Limited Partnership FORM 6.3.12.    Special Purpose Entity Provisions for Limited Partnership Agreement CHAPTER 7 — Joint Ventures § 7.1.  General Commentary § 7.2.  [Reserved] § 7.3.  Comprehensive Joint Venture Agreement: Complete Forms

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Form 7.3.01.  Letter of Intent for Joint Venture (LLC) (Quarry Project) Form 7.3.02.    Joint Venture Agreement for Submitting a Proposal Form 7.3.03.    Limited Liability Agreement to Develop a Shopping Center Form 7.3.04.  Internet Joint Venture Agreement (No Separate Entity Formed) Form 7.3.05.    Joint Venture Agreement for Development of Invention Form 7.3.06.    Joint Venture Agreement for Development of Technology and Facilities § 7.4.  Joint Ventures: Specific Clauses Form 7.4.01.  Purpose of Venture (Specific) Form 7.4.02.  Purpose of Venture (Specific – Respond to RFP) Form 7.4.03.    Purpose of Venture (Specific–Acquire and Manage Property) Form 7.4.04.  Purpose of Venture (General) Form 7.4.05.  Principal Place of Business of Venture (Specific) Form 7.4.06.  Principal Place of Business of Venture (Specific) (Alternate Form) Form 7.4.07.  Term of Venture Form 7.4.08.  Definitions of Certain Terms Form 7.4.09.    Additional Definitions of Certain Terms (Real Estate Joint Venture) Form 7.4.10.  Additional Capital Contributions Form 7.4.11.  No Additional Capital Contributions Required Form 7.4.12.  Failure to Make Agreed Contributions Form 7.4.13.  Loans to the Joint Venture Form 7.4.14.  Loans to the Joint Venture (Alternate Form) Form 7.4.15.  Duties of Managing Board Form 7.4.16.  Allocation of Income and Losses; Distribution Form 7.4.17.  Managing Venturer Form 7.4.18.  Expenses Form 7.4.19.  Restrictions on Transfer Form 7.4.20.    Reciprocal Right to Purchase Interests of a Venturer Form 7.4.21.    Allocations and Distributions in the Event of Capital Contribution Made Upon Default Form 7.4.22.  Withdrawal by Joint Venturer Prohibited Form 7.4.23.  Withdrawal by Joint Venturer Permitted Form 7.4.24.  Death of Venturer (Termination of Venture) Form 7.4.25.  Death of Venturer (No Termination of Venture)

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Form 7.4.26.  Liquidation of Venture Form 7.4.27.  Termination of the Venture Form 7.4.28.  Transfer of Interest CHAPTER 7A — Raising Capital § 7A.1.  GENERAL COMMENTARY [RESERVED] § 7A.2.  RAISING CAPITAL: COMPLETE FORMS Form No. 7A.2.01.  PRIVATE PLACEMENT MEMORANDUM Form No. 7A.2.02.    COMMON SHARES SUBSCRIPTION AGREEMENT Form No. 7A.2.03.    INTERNET COMPANY STOCK SUBSCRIPTION AGREEMENT FOR INSTITUTIONAL INVESTORS Form No. 7A.2.04.    INVESTOR’S RIGHTS AGREEMENT FOR START-UP INTERNET COMPANY Form No. 7A.2.05.  INVESTOR’S RIGHTS AGREEMENT Form No. 7A.2.06.    PREFERRED SHARES SUBSCRIPTION AGREEMENT Form No. 7A.2.07.    OPTION AGREEMENT FOR SHARES OF TECHNOLOGY COMPANY

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Preface This work is intended for use by the working business lawyer asked to represent clients in a considerable variety of business transactions. While the general purpose of these volumes is to supply forms of contracts used to document the most common business transactions, each section will be introduced by a commentary that will alert the practitioner to the legal, tax and business considerations which should normally be taken into account in a contract of the character at issue. Since this work is “national” in scope, this commentary will not, normally, refer to the laws or practices of a particular state, but rather will cite general principles of law which touch upon the subject. Moreover, the commentary is not intended to be a thorough treatise on the subject. It is to give the reader an introduction to the issues, with the implicit understanding that further research may be necessary in order to properly document and negotiate the transaction. Wherever possible, references will be given to other works which cover the subject in greater detail. Many volumes could not furnish enough forms for all the various combinations of activities in which a business may engage. Almost every contract has special features. However, the requirements of such contracts fit into more or less wellrecognized patterns and clauses, which vary in form but express substantially the same idea. This work will, therefore, attempt to supply those forms that are generally needed by the general business lawyer. With them, the attorney can readily prepare many contracts of the type most frequently required, by making changes in the form to suit the particular transaction with which he or she is concerned, by combining forms from different sections or by using portions of forms with forms otherwise available to the reader.

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Generally each section of forms will begin with a long form of contract which sets forth the customary requirements for a contract covering the particular subject matter. This form will frequently be rather simple, and probably would not satisfy the documentation needs of most transactions. Therefore, following each long form will be clauses covering specific issues inherent in the type of transaction covered by the section. These can be added to the general form, substituted for portions of it, or combined to form the contract. A detailed table of contents precedes each chapter. In addition to serving as a handy method for finding the form or provisions being sought, the table of contents itself should serve as a check-list to determine the issues normally raised by transactions of the type covered by the section. Los Angeles, California January 1985

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PART I INTRODUCTORY SYNOPSIS CHAPTER 1 — General Drafting Considerations

CHAPTER 1 General Drafting Considerations SYNOPSIS § 1.1.  General Commentary 1.1.01  Introduction 1.1.02  Parties and Date 1.1.03  Parts of an Agreement 1.1.04  Recitals [1]  Placement of Recitals [2]  Evidentiary Effect of Recitals [3]  Common Recitals and Their Uses [a]  Parties’ Status [b]  Purpose of Agreement [c]  Authority and Capacity [d]  Representation by Counsel [e]  Property Ownership [f]  Brokers and Finders [g]  Arm’s-Length Negotiation [h]  Audit and Investigation [i]  Confidentiality [j]  Recitals of Facts [k]  Consideration [l]  Prior Agreements [m]  Effect of Agreement [n]  Location of Signing and Performance

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[o]  Common Recital Drafting Problems 1.1.05  Representations and Warranties 1.1.06  Covenants and Agreements 1.1.07  Boilerplate and Signatures [1]  Boilerplate [2]  Signatures and Seals [3]  Electronic and Digital Signatures [4]  Delivery [5]  Notarization and Witnesses to Signatures

§ 1.1.  General Commentary 1.1.01  Introduction In the past, legal documents were often very long and used arcane language unfamiliar to most laymen. Elaborate recitals were often used. Today, best practices are to the contrary, with emphasis on clarity and precision, and with unnecessary recitals, archaic language and obsolete word usage to be avoided. “Legalese”, Latin terms and the like are disfavored and common words with clear meanings are to be employed. 1.1.02  Parties and Date Almost universally, a contract begins by setting forth the parties and the date upon which it has been executed and delivered. Sometimes, the parties may wish the agreement to become effective at some date other than the date on which it was executed and delivered. This is often indicated by stating that the agreement is dated “as of” the desired effective date or that it is executed and delivered on a specified date but it is to be “effective” as of the desired effective date. 1.1.03  Parts of an Agreement The provisions of an agreement can be divided into five major parts:

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recitals;1 representations and warranties; covenants and agreements; boilerplate; and signatures. In contract drafting, the terms “recitals” and “acknowledgements” are functionally equivalent and refer to factual statements the parties agree are true. They are sometimes labeled as “Background” or “Background Statements.” Recitals assist readers to understand the background of the contract and the intention of the parties. Readers may be employees of the parties responsible for administering the contract or a judge or arbitrator in a case brought to resolve the interpretation of a contractual provision or a party’s liability for a breach. Technically, recitals are not part of the contract. As one court stated: Although they do not ordinarily form any part of the real agreement, they do indicate the background of the contract, and may be referred to in determining the intent of the parties where its operative parts are ambiguous.2 When a contract is ambiguous, recitals may govern the contract’s construction and interpretation.3 But recitals cannot be used to argue that unambiguous provisions are ambiguous.4 Drafters who want to ensure that recitals are considered in any effort to interpret a contract can include a provision in the body of the contract incorporating the recitals by reference,5 stating that they are part of the parties’ agreement.

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1.1.04  Recitals [1]  Placement of Recitals6 Traditionally, recitals form a contract’s introductory paragraphs, each beginning with the word “Whereas”7 or which are placed under a heading entitled “Background” or “Background Statements.” [2]  Evidentiary Effect of Recitals Historically, recitals were binding on the parties to an agreement. Jurisdictions now differ on this point. The Restatement (Second) of Contracts (at § 218(1)) treats recitals as rebuttable by extrinsic evidence: “A recital of fact in an integrated agreement may be shown to be untrue.” This is clearly true of recitals of consideration, since a contract lacking consideration is itself invalid. Jurisdictions are divided as to whether other recitals are conclusive evidence of the facts stated in them, or can be contradicted.8 In some jurisdictions, all but consideration recitals are conclusively binding on the parties.9 Even where recitals may be contradicted, however, they are still considered some evidence of the facts recited. [3]  Common Recitals and Their Uses [a]  Parties’ Status10 Usually, the first paragraph of a contract identifies the parties and their status, such as: an individual a married man (or woman) a husband and wife (as a couple)

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a corporation (or limited liability company) (or limited partnership) organized under the laws of ________. Variations of these will be appropriate in some circumstances. For example, when a nonprofit corporation enters into a contract, the parties may want the status recital to include the phrase “a nonprofit corporation” or some specific designation required by the governing law. When government entities enter into contracts, they often identify the specific nature of their corporate status (for example, “________, a municipal corporation”). [b]  Purpose of Agreement11 Parties often recite the purpose of their agreement. Doing so is especially useful where the agreement’s title does not clearly reflect its purpose. An agreement’s purpose can usually be recited in a concise statement beginning with the phrase, “The purpose of this agreement is … .” [c]  Authority and Capacity12 Commonly, one or more contracting parties are legal entities—for example, corporations and limited liability companies. Entities enter into agreements by authorizing some person to sign on their behalf. Authority recitals are used to explicitly identify the relationship between the signer and the entity. This is typically shown in the signature block by setting forth the name of the entity and below that a signature line beginning with the word “By:” and below that a line to show the signer’s title, like this: “Title: ________.” [d]  Representation by Counsel13 Contracts can include recitals that certain or all parties were represented by counsel or had the opportunity to be represented by counsel. This type of recital is often in the body of the contract, although it could be at the beginning,

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when parties consider it important enough to place it there. Examples include a contract between parties, one of whom is at a financial or other disadvantage, as in an insurance settlement, or where an insolvent company is arranging for an emergency loan. This type of recital can minimize the possibility that a party will later attempt to defeat the contract on grounds such as mistake, unconscionability or some form of failure to understand the contract’s true nature. This type of recital is particularly important where the law requires that the parties have independent counsel, (e.g., prenuptial agreements), or in business agreements involving parties with conflicts of interest, as might be the case in a material transaction between a corporation and one of its directors. Frequently, recitals of representation by counsel state expressly that the parties have consulted with counsel regarding the nature and contents of the agreement. Care should be taken in utilizing such a recital, however, to avoid inadvertently waiving the attorney-client privilege by disclosing the subject matter of confidential attorney-client communications. When appropriate, a safer alternative is to state that the parties had the opportunity to consult with counsel regarding the agreement. [e]  Property Ownership14 Contracts to sell or lease personal or real property often begin with recitals spelling out ownership. Intellectual property licenses (for trademarks, patents, etc.) typically begin with recitals that the licensor owns the intellectual property, or that it is owned by a third party and that the licensor has the right to grant a license. [f]  Brokers and Finders15

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Many contracts for the sale of goods or services are facilitated by brokers or finders. Brokers and finders charge for their services, and it is useful for their contracts to recite their involvement, and the details of any fees to be paid. A contract may not involve a broker or finder although it is a type of contract in which brokers’ or finders’ participation is common (such as contracts to sell real estate or businesses). When this is the case, it may be wise to note in a recital that no broker or finder was used. [g]  Arm’s-Length Negotiation16 Recitals can be used to establish that the parties’ business relationship involves no special trust, confidence or reliance by one party on the other. Stating that all the parties’ negotiations have been at “arm’s length” reduces the risk that one party will later attempt to impose heightened duties on the other (e.g., the duties of a fiduciary, or one who has been the recipient of another’s special trust and confidence). [h]  Audit and Investigation17 Recitals can be used to confirm that each party has conducted, or has had the opportunity to conduct, an audit or investigation of the other party’s records. [i]  Confidentiality18 Parties often list in recitals the categories of information they have previously treated as confidential. These may be trade secrets or any other confidential information. The recitals are important because the legal protection for trade secrets and confidential information can be lost by careless categorization. Recitals listing information agreed to be confidential establish a foundation for protecting confidentiality. They are typically followed by a covenant to maintain the information’s confidentiality.

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[j]  Recitals of Facts19 Recitals may contain any number of factual statements, on any number of subjects. Examples include: historic statements about an aspect of the parties’ relationship addressed in the contract, such as the existence of a dispute being settled; or statements of circumstances that resulted in a need addressed by the contract, such as a company’s need for a new technology set forth in a joint research and development agreement or a corporation’s need for additional funds set forth in a loan or stock purchase agreement. [k]  Consideration20 To be binding and legally enforceable, a contract generally must be supported by consideration from each party. As a result, parties often include a recital stating that the contract is supported by valid consideration, and that the consideration has been received. Contracting parties who have not actually given consideration sometimes try to create an enforceable contract by including a recital that consideration has been given. But, since instruments lacking consideration are invalid, such a recital may not be effective, and lack of consideration can be shown by extrinsic evidence. As set forth in the Restatement (Second) of Contracts: Evidence is admissible to prove whether or not there is consideration for a promise, even though the parties have reduced their agreement to a writing which appears to be a completely integrated agreement.21 This is typically true, even where other types of recitals are considered conclusive between the parties.22 The majority rule

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appears to be that recitals of consideration create only a rebuttable presumption, one that may be overcome by evidence to the contrary.23 Cases in jurisdictions in which nominal consideration is sufficient have also held that a recital of nominal consideration is conclusive and cannot be contradicted.24 [l]  Prior Agreements25 Recitals which identify prior agreements between the parties can serve a number of purposes—identifying prior contractual relationships, clarifying the origin of the present contractual relationship, or stating whether the current agreement is in addition to or in lieu of an earlier agreement. For example, an agreement for the sale of a corporation’s assets may require and refer to various ancillary agreements, such as a bill of sale, assignment and assumption agreement and employment agreements. Each of these ancillary agreements may recite that it is entered into pursuant to the terms of the primary agreement. Merchants anticipating repeated sales transactions with particular customers often enter into master sale and purchase agreements with their customers so that routine purchase order forms may refer to and incorporate by reference the more detailed terms of the master agreement. [m]  Effect of Agreement26 A recital setting forth the effect of the agreement can be useful when the parties are aware that their intentions could be misconstrued. For example, letters of intent often recite that except for the provisions relating to confidentiality, exclusive dealing for a specified period and payment of expenses, the letter of intent is not intended to be legally binding, and neither party will have any obligation to reach agreement on the proposed transaction.

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[n]  Location of Signing and Performance27 When contracting parties have a dispute that results in litigation, one of the first issues they confront is the choice of jurisdiction and venue for their lawsuit. Typically, a statute makes jurisdiction and venue proper either where the contract was entered into, where the defendant resides or where the contract is to be performed. The parties may therefore wish to include a recital stating where the contract was entered into and where it is to be performed, or they may agree that the contract will be deemed to have been signed and performed in some location other than where those events actually took place. These recitals can prevent disputes over proper venue for an action on the contract.28 An even better approach is to specify in the agreement the jurisdiction and venue and state that it is exclusive. [o]  Common Recital Drafting Problems Some common problems that occur in drafting recitals are: making recitals containing erroneous statements of facts; omitting recitals that would be helpful to provide a full understanding of the contract; and reciting details of fact or history that are unnecessary and may complicate interpretation of the contract. A simple recital format can eliminate these problems. For a two-party contract, this format will have three paragraphs: (1) briefly introduces the subject matter of the contract, (2) states the objective of one party, and (3) states the objective of the other party. This basic format can be modified as appropriate, such as by combining all recitals in one paragraph, or by adding facts necessary to provide a full understanding.

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1.1.05  Representations and Warranties Representations and warranties are often given by the parties to each other. While the term “warranties” is often used together with the term “representations” (i.e. “the parties hereby make the following representations and warranties …”) and the two terms are often viewed as synonymous, there is a difference. Representations are statements by one party to the other party that something is the case. Representations generally relate to a past fact or an existing circumstance. Warranties are promises that specified facts or circumstances are or shall be as promised and are in effect agreements that obligate the party giving the warranty to indemnify the other party if it turns out that the facts or circumstances being warranted turn out not to be true. In either case, the party receiving the representation or warranty may not have any knowledge of the matter represented or warranted, and is entitled to rely on the representation or warranty as being true. 1.1.06  Covenants and Agreements Covenants and the equivalent terms “agreements,” “promises,” “undertakings,” and “commitments” are the essence of a contract. They are what the parties’ agree to do or refrain from doing. They are a contract’s “action words.”29 Much of most contracts consists of covenants. 1.1.07  Boilerplate and Signatures [1]  Boilerplate After the parties and date, recitals, representations and warranties and covenants, most contracts contain various provisions that are routine and can be used in contracts of all types with little or no change. These are often called “boilerplate,” a term which comes from an old method of printing.30 Typical boilerplate provisions deal with subjects

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such as choice of law and jurisdiction for suits, waiver of jury trial, methods of giving notice, amendments, severability of provisions, specific performance, force majeure, assignment and the like. [2]  Signatures and Seals Signatures are how parties demonstrate their intention to be bound by the terms of a written contract. Signatures not only show the parties’ intent to be bound, they also identify the persons or entities that will be bound by the contract, and the capacity in which each person or entity is signing. In earlier times, contracts were authenticated not by signatures, but by seals. Seals were generally made of wax or other adhesive material affixed to the document and imprinted with a motto or symbol generally unique to the seal’s owner.31 Over time the practice of authenticating documents by seal has diminished, in part because of the ability of most people to write, and the fact that coats of arms and similar symbols are no longer commonly used.32 Seals have been abolished either by statutory enactment or judicial decision in many states, and where this is not the case, the tendency of modern decisions is to minimize the old distinction between sealed and unsealed instruments.33 However, in some states, using a seal or reciting that the contract is under seal creates a “sealed instrument,” or a “contract under seal,” thereby turning a contract otherwise enforceable for the usual statute of limitations period of three, four, five or six years into a contract with a far longer enforcement period (often 20 years).34 Corporate law statutes sometimes provide that the presence of a corporation’s seal on a document attested by the secretary or other appropriate officers shall attest that the execution of the document was

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duly authorized by the corporation and the officer’s signature thereon is genuine.35 As a matter of law, signatures need not appear at the end of a contract.36 But from the drafter’s point of view, it is preferable to place the signatures at the end. Since that is the typical place for them, placing them there avoids questions of whether the signatures were intended to be the authenticating signatures for the contract. The signature portion of the contract typically includes the following: —  language indicating that the intent of the signers is to be bound to the contract;37 —  identification of the persons or entities who are to sign the contract or a blank space where this identification is to be written; —  identification of the party to be bound by the signature; and —  space (such as a line) for a signature to be written. At common law, a signature sufficient to obligate a person can include not only the unique handwriting of his or her name, but also any other mark or symbol made with the intent to authenticate a writing.38 Even a company’s letterhead can, in proper circumstances, constitute a signature.39 According to the Restatement, the signature may be any symbol made or adopted with an intention, actual or apparent, to authenticate the writing as that of the signer.40 The Uniform Commercial Code is in accord.41 Notwithstanding the law’s flexibility in allowing a wide range of marks to constitute a signature, the most common form of signature is the signer’s own distinctive longhand writing to spell out his or her name.

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In the United States, the typical way to indicate that a signature is made on behalf of an entity is to set forth the name of the entity and below that include a line for a signature preceded by the word “By”, with the title or name and title of the individual signer’s representative capacity below that. The following is an example:  

ACME CORPORATION

 

 

By: ____________

 

 

Name: ____________  

 

Title: ____________

 

 

____________

 

However, there is no single format which a corporation or other entity must use to sign contracts. Any signature that identifies the entity and clearly reflects that the individual is signing in a representative capacity should be sufficient to bind the entity, and avoid personally binding the individual signer.42 The failure of a person to indicate as part of the signature that he or she is signing a contract in a representative capacity may cause the person to be personally liable on the contract.43 Errors in the signature portion of a contract can result in a person or entity being held not to be a party to the contract,44 or a signer unintentionally being personally bound.45 A signature may be made in any manner that demonstrates the intent to authenticate the writing.46 Thus, as stated by the Supreme Court of Oklahoma: In the absence of a statute prescribing the method of affixing a signature, it may be affixed in many different ways. It may be written by hand and, generally, in the absence of a statute otherwise providing, it may be printed, stamped, typewritten, engraved, photographed, or

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cut from one instrument and attached to another. A signature lithographed on an instrument by a party may be sufficient for the purpose of signing it, and it has been held or recognized that it is immaterial with what kind of instrument a signature is made.47 Modern technology is making available new methods for signing documents. For example, the exchange of a signature by facsimile or email may be a sufficient method of signing a contract.48 [3]  Electronic and Digital Signatures As computers, smart phones and other means of electronic commerce have developed, methods of signing documents have kept pace. There are various United States federal and state laws that specifically authorize various forms of electronic and digital signatures.49 In addition, legislation passed in Canada, the United Kingdom, the European Union, Australia and most nations around the world establishes the legality of electronic signatures. Documents signed electronically in compliance with these laws are as valid and binding as traditional pen and ink signed documents.50 [4]  Delivery In order to be binding, a written agreement must not only be signed, but it must also be delivered.51 Delivery consists of some manifestation that the signing party intends the agreement to be operative. Generally, delivery takes place by putting the written agreement into the possession of the other party.52 But delivery can occur by acts, words or both.53 [5]  Notarization and Witnesses to Signatures Most kinds of agreements do not need to be notarized to be binding.54 The use of a notary serves to assure the parties that the signatures are authentic.55 In some circumstances,

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notarization may be required by statute.56 For example, real property recording statutes of many states require signatures to be notarized and in some cases witnesses by another party as a condition to the recorder accepting an instrument for recordation. Contracts are rarely required to be witnessed these days and the use of the phrase, “In Witness Whereof …” is archaic. A simple, more modern ending is “The parties, intending to be legally bound, have executed this Agreement as of the date first set forth above”, followed by appropriate spaces for the signatures of the parties. However, wills typically need to be witnessed in order to be effective. Similarly, in the absence of statute, there is no necessity for an agreement to be acknowledged. Generally, any competent person can serve as a witness to a contract. Most states empower notaries public to attest to the signing of documents and to certify the signatures thereon.57 Some drafters provide for notarization or for the signatures of witnesses to impress on a signing party the significance of the document being signed. Summary Report: Litéra® Change-Pro TDC 7.0.0.280 Document Comparison done on 12/18/2013 12:51:27 PM Style Name: Default Style Original DMS:iw://AODMS/SUTHERLAND/22254468/1 Modified DMS: iw://AODMS/SUTHERLAND/22254468/4 Changes: Add

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Footnotes — § 1.1: 1    See,

e.g., Taylor v. Taylor, 240 Ark. 376, 399 S.W.2d 498 (1966) (distinguishing a recital from an operative provision of a contract). See also Ohio Valley Gas, Inc. v. Blackburn, 445 N.E.2d 1378,1383 (Ind. Ct. App. 1983) (recitals are not contractual provisions and are never permitted to control the express provisions of the contract; in the event of a conflict, the express provisions prevail). 2  Ohio

App. 1983).

Valley Gas, Inc. v. Blackburn, 445 N.E.2d 1378, 1383 (Ind. Ct.

3  Wilson

v. Wilson, 217 Ill. App. 3d 844, 160 Ill. Dec. 752, 577 N.E.2d 1323 (1991); Stech v. Panel Mart, Inc., 434 N.E.2d 97 (Ind. Ct. App. 1982). 4    See,

e.g., Fidelity Bank v. Lutheran Mutual Life Ins. Co. 465 F.2d 211 (10th Cir. 1972). 5  For

an example, see Form 90.17.01 infra.

6    The

balance of the chapter will use the term “recital” rather than “recitals and/or acknowledgments,” but should be read to include both. 7    Thanks

disappearing.

to the “plain English” movement, the use of this term is

8    See,

e.g., Thompson v. Soles, 42 N.C. App. 462, 257 S.E.2d 59 (1979) (recital in a deed conclusive, since it went to the “essence” of the contract). Compare Carter v. Girasuolo, 373 A. 2d 560, 34 Conn. Supp. 507 (1976) (recital was only prima facie evidence, subject to rebuttal); Bank of North Carolina v. Cranfill, 245 S.E.2d 538 (N.C. 1978) (whether parties intended the word “seal” to, in fact, seal their agreement was subject to extrinsic evidence). 9  See,

e.g., Cal. Evid. Code § 622.

10  See

§ 90.3 infra.

43

11  See

§ 90.4 infra.

12  See

§ 90.5 infra.

13  See

§ 90.6 infra.

14  See

§ 90.7 infra.

15  See

§ 90.8 infra.

16  See

§ 90.9 infra.

17  See

§ 90.10 infra.

18  See

§ 90.11 infra.

19  See

§ 90.12 infra.

20  See

§ 90.13 infra.

21  Restatement

(Second) of Contracts § 218(2).

22  See

e.g., Cal. Evid. Code § 622; Restatement (Second) of Contracts § 214(d); 9 Wigmore on Evidence § 2433. 23    See,

1983).

e.g., In re Weinsaft’s Estate, 647 S.W.2d 179 (Mo. Ct. App.

24  See

W. Page, The Law of Contracts § 647.

25  See

§ 90.14 infra.

26  See

§ 90.15, infra.

27  See

§ 90.16, infra.

28  See,

e.g., Schwartz v. Pillsbury, Inc., 969 F.2d 840 (9th Cir. 1992) (enforcing recital that contract was deemed to be made in New York). 29  See,

e.g., Hunt v. United States Bank & Trust, 210 Cal. 108, 114– 115, 291 P. 184, 187 (1930) (“[Appellant’s] argument is based upon the premises that the alleged covenants … are but mere recitals or preambles prefixed to the agreement … There is no merit in the contention”). 30 

  Printing plates of text for widespread reproduction such as advertisements were cast or stamped in steel and distributed to

44

newspapers around the United States ready for the printing press. These looked like parts of boilers and were known as ‘boilerplates’. 31  See

1A Corbin on Contracts §§ 10.3–10.5.

32  Corbin

on Contracts § 10.3.

33  Monroe

Park v. Metropolitan Life Ins. Co., 457 A.2d 734, 736 (Del. 1983) (quoting 9 Thompsen, Commentaries on the Modern Law of Real Property, § 4669 (1958)). 34  Monroe

1983).

35  See,

Park v. Metropolitan Life Ins. Co., 457 A.2d 734, 737 (Del.

e.g., Official Code of Georgia § 14-2-151.

36  Restatement

(Second) of Contracts § 134, comment b.

37  See,

e.g., Centredale Investment Co. v Prudential Insurance Co. of America, 540 F.2d 16, 18–19 (1st Cir. 1976); Moritt v. Fine, 242 F.2d 128 (5th Cir. 1957); MacKnight v. Pansey, 412 A.2d 236 (R.I. 1980). 38  See,

e.g., Kroeze v. Chloride Group Ltd., 572 F.2d 1099, 1105 (5th Cir. 1978); Clark v. Coats & Suits Unlimited, 352 N.W.2d 349 (Mich. App. 1984) (typewritten signature); Bishop v. Norell, 353 P.2d 1022 (Az. 1960) (writing, printing, lithographing or other modes); State v. Williamson, 352 P. 2d 394 (Ok. 1960); Maricopa County v. Osborn, 136 P.2d 270 (Az. 1943); Smith v. Greenville County, 199 S.E. 416 (S.C. 1938). 39    See,

(Miss. 1992).

e.g., Dawkins & Co. v. L & L Planting Co., 602 So.2d 838

40  Restatement

(Second) of Contracts § 134.

41  U.C.C.

§ 1-201(37) (“signed” includes using any symbol executed or adopted with present intention to adopt or accept a writing). 42    See,

e.g., FDIC v. Tennesseans for Tyree, 886 F.2d 771 775 (6th Cir. 1989) (under Tennessee law, use of the word “by” preceding signature suffices to establish that the signature is in a representative capacity if the principal is fully disclosed.); FDIC v. Tennessee Wildcat Services Inc., 839 F.2d 251 253 (6th Cir. 1988). 43    See,

e.g., FDIC v. Woodside Construction, Inc., 979 F.2d 172, 175 (9th Cir. 1992). But see U.C.C. § 3-402(c): (“If a representative signs the name of the representative as drawer of a check without indication of the

45

representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.”) 44  Hall’s

Safe Co. v. Herring-Hall-Marvin Safe Co., 146 F. 37 (6th Cir. 1906); modified 208 U.S. 554 (1908). Bankers’ Trust Co. v. Dockham, 181 N.E. 174 (Mass. 1932); California Linoleum & Shades Supplies, Inc. v. Schultz, 287 P. 980 (Cal. 1930). 45  FDIC

v. Woodside Construction, Inc., 979 F.2d 172 (9th Cir. 1992); Lightning Rod, Inc. v. Rischall Electric Co., 192 A.2d 50 (Conn. 1963); In Re Brooks, 4 B.R. 237 (Bk. Fla. 1980). See also U.C.C. § 3-402. 46  5U.C.C.

§ 1-201(37). See 2 Corbin on Contracts § 522; Restatement (Second) of Contracts § 134. 47    State

of Oklahoma ex rel. Independent School Dist. No. One v. Williamson, 352 P.2d 394, 395 (Ok. 1960) (quoting 80 C.J.S. Signatures § 7, p. 1292). See also Ragge v. Bryan, 458 S.W.2d 403, 407 (Ark. 1970); Maricopa County v. Osborn, 136 P.2d 270, 274 (Az. 1943); Smith v. Greenville County, 199 S.E. 416, 418–419 (S.C. 1938). 48  Bazak

International Corp. v. Mast Industries, Inc., 538 N.Y.S.2d 503 (1989). Cf., American Multimedia Inc. v. Dalton Packaging, Inc., 540 N.Y.S.2d 410 (1989) (accepting faxed purchase order as creating binding agreement). 49  See,

e.g., Uniform Electronic Transactions Act (“UETA”); Electronic Signature in Global and National Commerce Act (“E-SIGN”); The Federal Records and Signatures in Commerce Act; New York Electronic Signatures and Records Act (“ESRA”); State of Washington Electronic Authentication Act (“EAA”). 50 

  Personal Information Protection and Electronic Documents Act (Canada); Electronic Communications Act (United Kingdom); European Directive 1999/93/EC (European Union); Electronic Transactions Act (Australia). 51  See,

17A Am. Jur.2d Contracts § 190.

52  Corbin 53  See,

on Contracts § 10.6.

17A Am. Jur.2d Contracts § 190.

46

54 

  Statutes may require other instruments, such as deeds and mortgages, to be notarized and witnessed in order to be recorded. 55    See,

e.g., Ardis v. State, 380 So.2d 301 (Ala. App. 1979); Bare v. Gorton, 526 P.2d 379 (Wash. 1974); Greenough v. Greenough, 51 Am. Dec. 567 (Pa. 1849). 56  See,

e.g., Werner v. Werner, 526 P.2d 370, 375 (Wash. 1974).

57    See

e.g., Matter of Estate of Martinez, 664 P.2d 1007 (N.M. App.

1983).

47

PART II ORGANIZATION OF FIRM SYNOPSIS CHAPTER 2 — Limited Liability Companies

CHAPTER 2 Limited Liability Companies SYNOPSIS § 2.1.  GENERAL COMMENTARY 2.1.01  Background and Overview [1]  What is an LLC? [2]  Advantages of an LLC 2.1.02  Business Law Aspects [1]  Limited Liability [2]  Control Over Management of the Business [3]  Finance and Management Structure 2.1.03  Formation, Documentation and Operations [1]  Comparison with Other Entities [a]  C Corporation. [b]  S Corporation. [c]  General Partnership. [d]  Limited Partnership. [e]  LLCs Well Suited for Certain Businesses. 2.1.04  Drafting, Structural and Operational Issues [1]  Basic Requirements [a]  Filing Articles of Organization. [b]  Operating Agreement. [c]  Number of Members. [d]  Capital Structure. [e]  Contributions of Members.

48

[2]  Allocations and Distributions [a]  Generally. [b]  Limitation on Distributions to Members. [3]   Withdrawal or Resignation or Disassociation of a Member [4]  Dissolution Triggers and Effects of Dissolution [a]  Dissolution Triggers. [b]  Business Consequences of Dissolution. [c]  Tax Consequences Upon Liquidation after Dissolution. [5]  Management [6]  Voting Rights and Classes of Membership [a]  Classes of Membership. [b]  Voting Basis for Members. [7]  Fiduciary Duties and Liabilities of Members and Managers [8]  Unalterable Statutory Rights and Obligations 2.1.05  Formation and Conversion Strategies and Tax Effects [1]  What Can Be Converted to an LLC? [2]  How Do You Convert to an LLC? [a]  Statutory Conversion. [b]  Direct Contribution of Assets. [c]  Liquidation of Entity Followed by Contribution of Assets by Owners. [d]  Contribution of Ownership Interests. [e]  Statutory Merger. [3]  Tax Consequences of Various Conversion Methods [4]  State Law Consequences of Various Conversion Methods [a]  Statutory Conversion. [b]  Direct Contribution of Assets. [c]  Liquidation of Entity Followed by Contribution of Assets by Owners. [d]  Contribution of Ownership Interests. [e]  Merger of Other Entity into LLC. 2.1.06  Federal and State Securities Laws Issues [1]  Federal [2]  State § 2.2.  LIMITED LIABILITY COMPANIES: COMPLETE FORMS Form No. 2.2.01.    Checklist for Member Managed LLC Agreement (Delaware Or California)

49

Form No. 2.2.02.    Checklist for Manager Managed LLC Agreement (Delaware or California) Form No. 2.2.03.    Delaware Manager Managed Limited Liability Company Operating Agreement (Comprehensive Form) Form No. 2.2.04.    Delaware Manager Managed Limited Liability Company Operating Agreement (Real Estate Development) (Comprehensive Form) Form No. 2.2.05.    Delaware Manager Managed Limited Liability Company Operating Agreement (Simple Form) Form No. 2.2.06.    Delaware Single Member Member Managed Operating Agreement (Simple Form) Form No. 2.2.07.  Delaware Single Member Member Managed Limited Liability Company Operating Agreement (with Springing Member) Form No. 2.2.08.  Basic Form of California LLC Operating Agreement Form No. 2.2.09.    California Member Managed LLC Operating Agreement Form No. 2.2.10.  California Manager Managed LLC Operating Form No. 2.2.11.  California Single Member Limited Liability Form No. 2.2.12.    Basic Form of Nevada Member Managed Limited Liability Company Agreement Form No. 2.2.13.    Basic Form for New York Single Member Limited Liability Company Agreement Form No. 2.2.14.  Texas Manager Managed Limited Liability Company Agreement Form No. 2.2.15.    Agreement to Roll Up Commercial Real Estate General Partnership into New Delaware Manager-Managed LLC Form No. 2.2.16.    Delaware Limited Liability Company Operating Agreement for Conversion from Limited Partnership Form No. 2.2.17.  Agreement to Form a Limited Liability Company to Engage in a Real Estate Joint Venture Form No. 2.2.18.    Subscription Agreement for Limited Liability Company Interests Form No. 2.2.19.    Agreement to Purchase Membership Interest in Limited Liability Company Form No. 2.2.20.  Agreement to Purchase All Membership Interests in Limited Liability Company Form No. 2.2.21.    Assignment of Limited Liability Company Interest (Short Form)

50

§ 2.1.  GENERAL COMMENTARY 2.1.01  Background and Overview The following discussion is intended to provide an overview of the limited liability company (“LLC”). LLCs are the creation of state law and have existed in the United States only since 1977, when Wyoming became the first state to enact an LLC statute. The adoption of LLC statutes by other states proliferated after 1988, when the Internal Revenue Service issued Revenue Ruling 88-76, 1988-2 C.B. 360, which favorably classified a Wyoming LLC as a partnership for federal income tax purposes despite the entity’s corporate-like liability shield. The IRS contributed further to the popularity of LLCs with its 1996 “check the box” regulations (Treasury Decision 8697), allowing non-corporate entities to choose what kind of entity they wanted to be for tax purposes. All fifty states and the District of Columbia have enacted laws providing for LLCs. Most state LLC statutes are patterned after the Revised Uniform Limited Liability Company Act (“RULLCA”), which was adopted in 2006 by the National Conference of Commissioners on Uniform State Laws, or its predecessor, the Uniform Limited Liability Company Act, which was adopted in 1994. [1]  What is an LLC? The LLC is a hybrid entity that is designed to provide the limited liability of a corporation and the tax advantages and operation flexibility and other advantages of a partnership. By statute, members of an LLC enjoy limited liability for obligations of the LLC; and by making a federal tax election, the same members enjoy the same pass-through tax treatment as partners in a partnership.

51

LLCs have been used in a great variety of businesses, primarily those that do not have a large number of owners. As a general matter, they are not attractive for use by widely-held or publicly traded businesses. [2]  Advantages of an LLC The primary advantage of an LLC is that it provides the limited liability of a corporation with the pass-through tax attributes of a partnership. And it is not subject to the various limitations and rules applicable to S corporations and partnerships. For example, unlike an S corporation, members of an LLC may be allocated income, loss or other tax attributes in a manner other than according to the members’ percentage interest in the LLC. And unlike a limited partnership, members may participate in management of the LLC’s business and there is no need to have an owner with unlimited liability, as is the case with a general partner. The concept overriding LLCs is freedom of contract—with respect to an LLC’s organization and operation, the operating agreement may be written to provide almost anything. For example, § 18-1101 of the Delaware LLC statute provides as follows: (b) It is the policy of this chapter to give the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements. 2.1.02  Business Law Aspects LLCs are non-corporate legal entities that provide their owners, called “members,” with limited liability and permit them to participate actively in the management of the business. Although specific provisions of state LLC statutes vary, most have the following features in common: [1]  Limited Liability

52

One of the primary benefits of an LLC is that it provides an alternative to the corporation as an entity that provides the owners with limited liability. As with shareholders of a corporation, members of an LLC are generally not liable for the debts, obligations, or other liabilities of the LLC, whether arising in contract, tort, or otherwise. See, e.g., RULLCA § 304. This limited liability feature differentiates an LLC from a general partnership, in which all of the partners are liable for the debts and obligations of the partnership, and from a limited partnership, in which at least one partner (the general partner) is liable for the debts and obligations of the partnership. [2]  Control Over Management of the Business LLC statutes allow the members to manage the business of the LLC. See, e.g., RULLCA § 407(a). In addition, the LLC statutes allow the members to appoint managers to manage the business who may, but are not required to, be members. See, e.g., RULLCA § 407(a). The ability of LLC members to directly manage an LLC differentiates an LLC from both corporations, in which shareholders as such are essentially passive investors, and from limited partnerships, in which limited partners are statutorily precluded from participating in management (with very limited exceptions). [3]  Finance and Management Structure An LLC is generally not subject to the same financial and management limitations that traditionally bind a corporation. For example, an LLC is not required to create a surplus account for dividends, provide for management by a board of directors, issue stock or hold shareholder or board of director meetings. 2.1.03  Formation, Documentation and Operations

53

[1]  Comparison with Other Entities [a]  C Corporation. Like shareholders of corporations, members of an LLC will enjoy limited liability even if they participate in management. Both corporations and LLCs may have different classes of members with different rights, and there are no limitations on the number or types of owners. State LLC acts allow members to manage the business of the LLC or to elect member or non-member managers and officers to manage the business. The ability of the members to manage an LLC differentiates LLCs from corporations, in which shareholders have no management powers (other than to elect directors and vote at shareholders meetings) and are passive investors unless they are also officers or directors. Moreover, LLCs are not subject to the same finance and management limitations that traditionally bind corporations— LLCs are not required to create a surplus account for dividends, provide for management by a board of directors, issue stock or hold member or manager meetings. Further, in forming an LLC, membership interests may be issued in consideration of the members’ promises to provide future services, while many corporation laws prohibit the issuance of stock by a corporation in exchange for such consideration from its shareholders. LLCs may also provide corporations with an attractive alternative to the formation of corporate subsidiaries because the parent corporation may take advantage of limitations on liability and pass-through tax treatment while avoiding the complexity of the federal tax law’s consolidated return regulations. Unlike a C corporation, an LLC does not suffer double taxation on income for federal purposes. Income and losses flow through to members’ individual returns. Distributions of

54

cash and property (including appreciated property) by LLCs are tax-free except to the extent that they exceed a member’s adjusted basis in his membership interest. On the sale of the business, any gain is taxed only once to the members. If an LLC makes an election under Internal Revenue Code § 754, it can have asset basis adjustments upon the death of a member or upon the sale or exchange of a membership interest. An LLC’s losses are subject to passive loss rules and at-risk rules. [b]  S Corporation. LLCs are similar to S corporations because they offer all of their owners limited liability (whether or not they participate in management) and also offer pass-through taxation treatment. Losses of S corporations, like LLCs, are subject to passive loss and at-risk rules. LLCs, however, offer advantages over S corporations. Unlike an S corporation, an LLC may have more than 100 members, and there is no restriction on the type of members (e.g., partnerships, corporations or non-resident aliens) owning interests in an LLC. Also, LLCs may have more customized economic arrangements than are permitted for S corporations, such as special allocations of profits and losses and multiple classes of ownership interests entitled to different rights, powers and distributions. LLCs may have more favorable state tax treatment than S corporations in certain circumstances. Other advantages that LLCs have over S corporations include the fact that (i) a member’s basis in the LLC includes not only any payments made for the interest and any property contributed by such member but also his proportionate share of liabilities incurred by the LLC, thereby allowing the member to claim additional losses and/or allowing a member to receive more cash distributions tax-free, (ii) an LLC can

55

make an election under Internal Revenue Code § 754 to get an asset basis adjustment upon the death of a member or upon the sale or exchange of an interest to reduce future gains on the sale of assets, while shareholders of an S corporation would recognize such gains, (iii) distributions of appreciated property by an LLC are generally tax-free, (iv) contributions of appreciated property to an LLC are tax-free, while contributions to an S corporation are tax-free only under certain circumstances, and (v) an LLC does not need to be managed by a board of directors or have annual meetings of a board of directors or shareholders. Another difference between an LLC and an S corporation is that LLCs are not allowed some favorable exceptions available to S corporations, such as those under the passive loss rules of Internal Revenue Code § 469. An S corporation may be a member of an LLC and, thus, effectively have a “subsidiary LLC,” while it is prohibited from holding 80% or more of the stock of a C corporation. However, members of an LLC are subject to employment tax on the entire net income of the business. On the other hand, only the wages of the S corporation shareholder who is an employee are subject to employment tax. The remaining income is paid to the owner as a ‘distribution’ which is taxed at a lower rate if at all. Therefore, it may make sense for an LLC whose members are employees to elect to be treated as an S corporation for tax purposes. [c]  General Partnership. Both general partnerships and LLCs may have passthrough tax treatment, and all owners may participate in management. There are no restrictions on the types of owners of either entity, nor are there any restrictions on classes of owners. Owners of both types of entities may deduct their respective allocable shares of losses to the extent of their tax

56

basis in their ownership interests (which includes their respective allocable share of equity debt). If either entity makes an election under Internal Revenue Code § 754, it may obtain basis adjustment upon the death or an owner or the sale or exchange of an interest. Distributions of appreciated property by either general partnerships or LLCs are generally not taxable. In the case of both entities, losses are subject to passive loss rules and at risk limitations. The most significant difference between an LLC and a general partnership is that the members of an LLC are not personally liable for the debts, obligations and liabilities of the LLC, while general partners are liable for the debts, obligations and liabilities of the partnership. In many states an LLC doing business in such states must pay an annual minimum franchise tax and an annual fee based on gross receipts, whereas general partnerships pay no such minimum taxes. LLC members are also more vulnerable to passive loss treatment than are general partners because all members are treated as limited partners under Internal Revenue Code § 469. [d]  Limited Partnership. LLCs are similar to limited partnerships because both receive pass-through tax treatment, and there are no restrictions on the classes or number of owners for either entity. Like the partners in a limited partnership, LLC members can deduct their allocable share of losses to the extent of their tax basis in their ownership interest (which includes their allocable share of entity debt). Both entities can make an election under Internal Revenue Code § 754 to obtain basis adjustment upon the death of an owner or the sale or exchange of an interest. As with limited partnerships, distributions of appreciated property by LLCs are generally not taxable, losses are subject to at-risk rules and passive loss rules, and passive loss treatment is similar because all

57

members are treated as limited partners for purposes of Internal Revenue Code § 469. The ability of members to participate in management of an LLC differentiates LLCs from limited partnerships, in which limited partners risk losing their limited liability protection by participating in management. Limited partnerships require at least one general partner who remains liable for the partnership’s debts, liabilities and obligations, while all members of an LLC enjoy limited liability. The use of an LLC, therefore, eliminates the need for a corporate general partner, which typically adds cost and complexity to a limited partnership while decreasing the tax advantages of that vehicle. Although LLCs and limited partnerships both enjoy passthrough tax treatment, an LLC doing business in many states may be subject to greater state taxes and fees than a limited partnership. Other differences between LLCs and limited partnerships include the following: (i) all LLC debts that are not personally guaranteed by a member are nonrecourse and can be allocated among the members to increase each member’s basis in his interest, as compared to a limited partnership in which limited partners share only nonrecourse debts and general partners receive all the recourse debts, (ii) losses are less likely to be classified as passive losses since members are able to “materially participate” in management for passive loss tests, and (iii) because all LLC members have limited liability, the association test is more difficult to meet. [e]  LLCs Well Suited for Certain Businesses. LLCs may be well-suited for certain real estate ventures, joint ventures, foreign investment, venture capital, entertainment and technology transactions, as well as familyowned and other closely-held businesses and estate planning because members of LLCs enjoy limited liability and flexibility

58

in structuring management, and pass-through tax treatment and flexibility in allocating economic rights. An LLC, however, may not be the best vehicle for every business venture. In particular, LLCs may be ill-suited for entities with numerous participants, such as widely-held or publicly traded entities. The reason LLCs may not be attractive in such circumstances is that some limitations must often be placed on transferability of ownership interests, on continuity of life and/or on the LLC’s management structure to ensure partnership tax treatment. For instance, the consent of some or all of the members is often required for transfer of membership interests and for the continuation of an LLC upon the bankruptcy, death or other withdrawal of a member. These restrictions may make the use of an LLC impractical. LLCs may ordinarily engage in any lawful business activity, with certain exceptions. For example, in California, an LLC may engage in any lawful business other than the banking, insurance or trust company business, subject to any limitations in the articles of organization or under applicable law. (Cal. Corp. Code, § 17701.04(b)). Furthermore, in California, a domestic or foreign limited liability company may not render “professional services” (Cal. Corp. Code, § 17701.4 (e)). This prohibition extends to attorneys, accountants, architects, real estate brokers, doctors, nurses, even hairdressers and manicurists, and over 60 other types of professionals licensed, certified or registered with the State of California. California does authorize limited liability partnerships to render professional services (Cal. Corp. Code § 16951 et seq.). 2.1.04  Drafting, Structural and Operational Issues [1]  Basic Requirements

59

[a]  Filing Articles of Organization. In order to form an LLC typically articles of organization or a similar document (a certificate of organization under the RULLCA, and a “certificate of formation” in Delaware and Texas among other states) must be executed and filed with a state agency, often the Secretary of State’s office). [b]  Operating Agreement. In a corporation, articles of incorporation and bylaws, and often shareholders’ agreements are the documents governing the relationship among the shareholders and the corporation, and set forth rules concerning the operation of the corporation. By contrast, relationship among the members and the LLC and the rules concerning the operation of the LLC are governed by an agreement among the members commonly referred to as an “operating agreement” (called a “limited liability agreement” in Delaware and other states). Under the typical state LLC statute, various so-called “default rules” are provided which govern the operations of the LLC, from the voting rights of members, the duties of managers and the actions resulting in dissolution, among many others, but virtually all of the provisions prescribed by the LLC statute may be changed by contrary provisions in the operating agreement. The RULLCA specifies certain of its provisions that may not be modified by an operating agreement. RULLCA § 110(c). In many states, the operating agreement among the members of the LLC may be oral as well as written, but a written agreement is almost always preferable. Many LLC statutes do not prescribe any particular provisions of the operating agreement. [c]  Number of Members. Most state LLC acts now permit a single member LLC. However, for federal tax purposes, if a single-member LLC

60

does not elect to be treated as a corporation, the LLC is a “disregarded entity,” and the LLC’s activities should be reflected on its owner’s federal tax return. [d]  Capital Structure. LLCs generally afford more flexibility in capital structure than corporations. For example, LLC statutes do not have rules relating to the issuance of member interests, required consideration, form of share certificates, etc. A member’s interest in an LLC need not be evidenced by any type of certificate (but it may be if the operating agreement so provides); instead, the receipt of an LLC membership interest is merely recited as consideration for the capital contribution recorded in the LLC’s records. [e]  Contributions of Members. The members of an LLC may contribute money, property, services or the obligation to contribute the same. Unless the articles of organization or operating agreement provide otherwise, members are not required to make additional capital contributions to the LLC. The operating agreement may include provisions for failure to make required contributions, such as loss of voting, approval or other rights, loss of ability to actively participate in management of the LLC, liquidated damages, reduction of economic rights or the elimination of the defaulting member’s interest in the LLC. The statutory authorization of such forfeiture provisions is significant in light of the fact that state courts have in the past invalidated forfeiture provisions in partnership agreements (see, e.g., Hill v. Hearron, 249 P.2d 54 (Cal. Dist. Ct. App. 1952) (forfeiture provision in partnership agreement was invalidated on public policy grounds); but see Feiger v. Winchell, 22 Cal. Rptr. 901 (Cal. Ct. App. 1962) (court

61

enforced a provision requiring 20% reduction of profit share for contribution default)). However, it is unclear how broadly or narrowly state courts will interpret these forfeiture provisions given many states’ longstanding public policy against forfeiture. [2]  Allocations and Distributions [a]  Generally. A member’s share of income and losses is generally determined by the operating agreement, which may provide that all such items are to be allocated according to the members’ ownership interests in the LLC. In the alternative, the operating agreement may provide for special allocations disproportionate to the members’ percentage interests in the LLC. The ability to make such special allocations is restricted by complex Treasury Regulations (§ 1.704-1), which, in general, mandate that all such special allocations reflect the actual economic relationship among the members and the LLC, that is to say, that the tax treatment is the same as the economic treatment. For example, distributions of cash or property are generally nontaxable except to the extent that cash distributions exceed the member’s adjusted basis in his LLC interest immediately before the distribution (Internal Revenue Code § 731). As with allocations, the operating agreement may specify the method of distributions to members. If the operating agreement does not otherwise provide, distributions that are a return of capital must be made in proportion to the contributions made by each member and distributions that are not a return of capital must be made in proportion to the allocation of profits. [b]  Limitation on Distributions to Members.

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Many LLC statutes contain additional limitations on distributions similar to the limitations on corporate dividends and distributions. For example, in Delaware, an LLC may not make a distribution to a member if, after giving effect to the distribution, all liabilities of the LLC, other than liabilities to members on account of their limited liability company interests and liability for which the recourse of creditors is limited to specified property of the LLC, exceed the fair value of the assets of the LLC, except that the fair value of property which is subject to a liability for which the recourse of creditors is limited shall be included in the assets of the LLC only to the extent that the fair value of that property exceeds that liability. Del. Code § 18-607(a). See also Cal. Corp. Code § 17704.05; RULLCA §405. Some LLC statutes provide details as to how value is determined in this situation. For example, the California LLC statute provides that the LLC may base its determination that a distribution is permissible on any of the following: (i) financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances, (ii) a fair valuation, or (iii) any other method that is reasonable in the circumstances. See Cal. Corp. Code § 17704.05(b); see also RULLCA §405(b). Members are generally obligated to return improper distributions if they violated the statutory restriction on distributions, although in some cases only if the member knew at the time that the distribution violated the statutory restriction (see Del. Code § 18-607(b)) and under some LLC statutes a member or manager who votes for a distribution in violation of the statutory restrictions or the operating agreement is personally liable to the LLC for the amount of the distribution that exceeds the amount of any distribution which would have been permitted under the test set forth above (see Georgia Code § 14-11-408); see, e.g., RULLCA §406.

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[3]    Withdrawal or Resignation or Disassociation of a Member Under many LLC statutes, the articles of organization or operating agreement may prohibit the resignation or withdrawal or “disassociation” of a member or specify the terms and conditions of the members’ resignation or withdrawal or disassociation rights. If the articles of organization or operating agreement do not specify the time or the events upon which a member may withdraw, the LLC statute will specify when a member may resign or withdraw from the LLC. Some LLC statutes allow disassociation at any time, but distinguish between “rightful” and “wrongful” disassociation. For example, in California, under Cal. Corp. Code § 17706.01, a person has the power to dissociate as a member at any time, rightfully or wrongfully; a person’s dissociation from an LLC is wrongful only if it is in breach of an express provision of the operating agreement, the person withdraws as a member by express will, is expelled as a member by judicial order, the person is dissociated by becoming a debtor in bankruptcy, in the case of a person that is not a trust other than a business trust, an estate, or an individual, the person is expelled or otherwise dissociated as a member because it dissolved or terminated; and a person that wrongfully dissociates as a member is liable to the LLC and to the other members for any damages caused by the dissociation. This provision is based upon RULLCA §601. Other statutes are more restrictive, preventing resignation or withdrawal only as provided in the LLC agreement. See Del. Code § 18-603. [4]  Dissolution Triggers and Effects of Dissolution [a]  Dissolution Triggers. Under many LLC statutes, an LLC will ordinarily be dissolved upon the happening of the first to occur of the

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following: 1. At the time specified in the articles of organization or operating agreement. 2. Upon the happening of events specified in the articles of organization or a operating agreement. 3. At a time approved by all the members or by the vote or written consent of holders of a specified percentage of interests in the LLC, often a majority or two-thirds. 4. Entry of a decree of judicial dissolution. See RULLCA § 701. Some LLC statutes also provide for administrative dissolution if an LLC fails to pay its fees or file the required reports, with provision for automatic reinstatement relating back to the date of dissolution if the fees are paid or reports are filed within a specified period, such as two years. See, e.g., RULLCA § 705. [b]  Business Consequences of Dissolution. If an event of dissolution occurs, and the members do not elect to continue as provided in the articles of organization or the operating agreement, winding up of the LLC should occur. The managers, or, if none, the members, may wind up the LLC unless dissolution was by judicial decree (in which case winding up is to occur as provided in the decree). Under some LLC statutes a filing is made at the beginning and the end of the dissolution process (a “statement of commencing of winding up” and “certificate of termination” in Georgia and a “certificate of dissolution” and a “certificate of cancellation” in California) while under other statutes a filing is made only upon completion of the process (a “certificate of cancellation” in Delaware for example). See RULLCA §702(b)(2)(A) under which the filing of a certificate of dissolution is permitted but not required.

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The dissolved LLC continues to exist for the purpose of winding up its affairs, prosecuting and defending actions by or against it, disposing of and conveying its property, and collecting and dividing its assets, but it shall not continue business except as necessary for its winding up (e.g., Cal. Corp. Code § 17707.06(a)) or to wind up its affairs and “complete transactions begun but not then finished” (e.g. Georgia Code § 14-11-604(b)). Under some LLC statutes, the managers or members give written notice of winding up to all known creditors and claimants whose addresses appear in the LLC’s records (e.g., Cal. Corp. Code § 17707.04(a)). All known debts and liabilities are satisfied, and then the remaining assets are distributed to the members according to rights and preferences set forth in the applicable LLC statute. Upon completion of winding up, the managers must file with the appropriate state agency a certificate of cancellation of articles of organization (e.g., Cal. Corp. Code § 17707.08(b)). [c]  Tax Consequences Upon Liquidation after Dissolution. Liquidation and distribution of an LLC’s assets after dissolution and winding up will generally be tax-free to an LLC classified as a partnership and to the members. The LLC would not recognize gain or loss on the liquidating distribution of property (Internal Revenue Code § 731(b)). The members of the LLC will recognize no gain or loss on distributions received unless cash received exceeds his adjusted basis in his membership interest (Internal Revenue Code § 731(a)). Loss will be recognized if the distribution received consists only of cash, unrealized receivables or inventory (Internal Revenue Code § 731(a)(2)). The member’s tax basis in the property received in the distribution will equal his adjusted basis in his membership interest, reduced by any cash received (Internal Revenue Code § 732(b)). [5]  Management

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In general, if an LLC is member-managed, each member is an agent of the LLC in conducting its business and affairs and the act of any member for the apparent purpose of carrying on in the usual way the business and affairs of the LLC, binds the LLC unless the member has no actual authority and the person with whom that member is dealing has actual knowledge of such lack of authority. In managermanaged LLCs, on the other hand, no non-manager member is an agent of the LLC or may bind, or execute any instrument on behalf of, the LLC. LLC statutes also authorize the election of officers for an LLC if the operating agreement so provides and, if officers are elected, they are the agents of and have authority to bind the LLC. An officer may, but need not be, a member or manager of the LLC. Most LLC statutes, either expressly or impliedly authorize entities to act as managers. [6]  Voting Rights and Classes of Membership [a]  Classes of Membership. Different classes of members may be established having those relative rights, powers and duties as the articles of organization or the operating agreement may provide, including rights, powers and duties senior to other classes of members. For example, subject to certain unalterable rights (discussed below), the members of an LLC may have different voting rights, such that virtually all of the decision-making authority is vested in certain members. Note that the Act specifies that a transferor of an economic interest retains voting rights. [b]  Voting Basis for Members. Voting by members may be based on a per capita, number, financial interest, class, group or any other basis. If the voting basis is not specified in the articles of organization or the

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operating agreement, the members will vote in proportion to their interests in current profits of the LLC. [7]    Fiduciary Duties and Liabilities of Members and Managers In many LLC statutes, the fiduciary duties of the manager of an LLC to the LLC and its members include the fiduciary duties of loyalty and care. RULLCA § 409. However, no manager or officer of an LLC will ordinarily be personally liable under any judgment of a court, or in any other manner, for any debt, obligation or liability of the LLC, whether the liability or obligation arises in contract, tort or otherwise, solely by reason of being a manager or officer or both of the LLC. Some LLC statutes provide different rules. See Del. Code §§ 18-1101(c) and 1104 (no express standard of care but the Delaware LLC statute expressly recognizes that members or managers may have fiduciary duties); N.Y. Limited Liability Company Act § 409(a) (manager shall perform his or her duties as a manager, including his or her duties as a member of any class of managers, in good faith and with that degree of care that an ordinarily prudent person in a like position would use under similar circumstances); Ga. Code § 14-11305 (duty to act in good faith and in the best interests of the LLC and with the care an ordinarily prudent person in a like position would exercise under similar circumstances); Va. Code § 13.1-1024.1(A)(duty to act in accordance with good faith business judgment of the best interests of the LLC)). In addition, common law duties, such as the business opportunity doctrine and the duty to avoid self-dealing, may be imposed no matter where an LLC is formed unless the state in which the LLC is organized permits the restriction or elimination of such duties and the operating agreement nullifies or curtails such duties. In some states, unless a member is also a manager of the LLC, the member has no

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fiduciary duties to the LLC or its members (See, e.g., Ga. Code § 14-11-305(1)). Most states’ LLC statutes permit, subject to specified exceptions, the expansion, restriction or elimination of members’ or managers’ duties and liabilities in the operating agreement (See, e.g., Del. Code § 18-1101(c), Ga. Code § 1411-305(4)(A). See RULLCA § 110. [8]  Unalterable Statutory Rights and Obligations Many LLC statutes provide that neither the articles of organization, nor the operating agreement of an LLC can modify certain rights of members. For example, RULLCA § 110 provides a long list of provisions that cannot be varied or eliminated and other provisions that may be altered or eliminated if not manifestly unreasonable. 2.1.05    Formation and Conversion Strategies and Tax Effects Although there are various methods of conversion, the most favorable method is by merger because most states allow it, it is simpler from a state law perspective and it is typically nontaxable, at least for conversions from partnerships. [1]  What Can Be Converted to an LLC? Most state LLC statutes allow partnerships, corporations and other entities to convert to LLCs. RULLCA § 1006 allows conversion to an LLC by any organization other than a limited liability company or a foreign limited liability company, and Delaware Code § 18-214 allows conversion by “any other entity,” which is defined to include “a corporation, a statutory trust, a business trust, an association, a real estate investment trust, a common-law trust or any other unincorporated business or entity, including a partnership

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(whether general (including a limited liability partnership) or limited (including a limited liability limited partnership)) or a foreign limited liability company.” [2]  How Do You Convert to an LLC? [a]  Statutory Conversion. Some states allow conversion from another entity to an LLC merely by meeting specified statutory requirements, such as entering into a conversion agreement, filing a certificate of conversion and amending the agreement. See, e.g., RULLCA § 1006; Cal. Corp. Code § 17710.08; Del. Code § 18-214. [b]  Direct Contribution of Assets. Another way to convert an entity to an LLC is for the existing entity to form a new LLC with nominal capitalization. The existing entity contributes all of its assets and liabilities to the new LLC as a capital contribution in exchange for an ownership interest in the LLC. The old entity liquidates and distributes the LLC interest pro rata to the owners of the liquidated entity. [c]    Liquidation of Entity Followed by Contribution of Assets by Owners. Under this conversion method, a new LLC is formed with nominal capitalization. The existing entity liquidates and distributes all of its assets and liabilities pro rata to its owners. The owners transfer the assets and liabilities to the LLC as a contribution to capital in exchange for ownership interests in the LLC. [d]  Contribution of Ownership Interests. Another conversion method involves a contribution of ownership interests followed by a liquidation. Under this conversion method, the owners of the existing entity form a

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new LLC with nominal capitalization. The owners of the existing entity contribute their ownership interests to the new LLC as a capital contribution in exchange for ownership interests in the LLC. The old entity liquidates and distributes all of its assets and liabilities to the LLC. [e]  Statutory Merger. In a statutory merger, the existing entity’s owners form a new LLC with nominal consideration. Typically, a majority in interest of the LLC members and the other entity’s owners must approve the merger. The old entity then merges into the LLC under state law and the LLC succeeds to all rights and obligations of the old entity. New LLC interests are issued to the owners of the old entity. Typically, a document of merger is filed with the state. [3]  Tax Consequences of Various Conversion Methods Set forth below are the tax consequences common to the five conversion methods described above given the facts assumed: Revenue Ruling 84-52, 1984-1 C.B. 157 treats as tax-free conversions of general partnerships into limited partnerships as tax-free under IRC Code § 721. Revenue Ruling 95-37, 1995-17 I.R.B. 10, clarifies that, in fact, the partnership conversion ruling in, Revenue Ruling 84-52 applies equally to conversion of U.S. partnerships into U.S. LLCs which elect to be treated as partnerships. The federal tax results will be the same regardless of whether the LLC is formed in the same or a different state than the partnership and regardless of which form the conversion takes under state law. As a result of this treatment, the conversion would be a nontaxable transaction (no gain or loss to partners, partnership or LLC) (Internal Revenue Code §§ 721, 731). No “sale or exchange” would occur to trigger gain or loss under

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Internal Revenue Code § 741. There would be no termination of the partnership under Internal Revenue Code § 708(b) (Treas. Reg., § 1.708-1(b)(1)(ii)). The LLC would be treated as a continuation of the old partnership and would assume the benefits and burdens of its elections, depreciation methods and other tax attributes. The LLC’s tax basis in LLC property would be equal to the terminating partnership’s tax basis. (Internal Revenue Code § 723). Each member’s tax basis in his LLC interests should be equal to his basis in his partnership interest immediately before the deemed distribution (which may be affected by the deemed assumption of liabilities of the partnership by the LLC) (Internal Revenue Code § 732(b)). There would be no change in tax treatment of liabilities which were nonrecourse to the partnership. In contrast, recourse liabilities assumed by the LLC could, depending on the terms of the operating agreement and provisions of state law, trigger gain to the former partners under Internal Revenue Code § 752(b). Upon assumption by the LLC, the former recourse liabilities arguably become “nonrecourse” for income tax purposes since no member is personally liable for them. Such an argument presumes that the partners who were formerly liable (most likely general partners) would be “relieved” of liability as a matter of state law. If they were relieved, the old partners who were liable would be deemed to have been distributed from the partnership an amount equal to the recourse liabilities assumed by the LLC. Such a partner can offset this “deemed distribution” with his “deemed contribution” to the LLC, which is equal to the portion of the “nonrecourse” liabilities that are subsequently allocated to this partner as a member of the LLC. There could be a net deemed distribution because the partner’s share of the recourse liabilities when he only (or a few other general partners) were liable would be less than his share after the liabilities are allocated to all of the LLC members. If the

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partner had a small or zero basis in the old partnership, he may no have enough basis to absorb gain from a net deemed distribution (Internal Revenue Code § 752(a),(b); Treas. Regs. §§ 1.752-1(b), (c), (f) and 1.752-4(a)). On the other hand, if the partners who were formerly liable would not be “relieved” of liability as a matter of state law (absent an agreement with the lender), gain recognition would not immediately occur. In addition to clarifying the tax consequences of a partnership to LLC conversion, Revenue Ruling 95-37 also clarified several other matters. First, as under Revenue Ruling 86-101, 1986-2 C.B. 94, and Internal Revenue Code § 706(c) (2)(A) the taxable year of the converted partnership does not close as to all or any of the partners. This holds true because so long as each partner continues to hold as interest in the resulting LLC, the conversion is not a “sale or exchange or liquidation” of any partner’s interest that would trigger the closure rules under § 706(c). Presumably, if some of the former partners “dropped out” and chose not to have interests in the new LLC, the partnership tax year would close as to those partners (and as to all the partners if a termination occurs). Also, because the conversion does not terminate the partnership under Internal Revenue Code § 708(b), the LLC does not need to obtain a new tax ID number. [4]    State Law Consequences of Various Conversion Methods [a]  Statutory Conversion. For state law purposes following a statutory conversion, the entity may be considered the same entity. Thus, assets, debts, liabilities, rights, powers, etc. are deemed vested in the new entity. Transfer documents such as deeds, assignments or bills of sale are not necessary. Lender consent may be necessary depending on the terms of loan agreements.

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Owners remain liable for debts and obligations to the same extent they were before the conversion. [b]  Direct Contribution of Assets. The direct contribution of assets conversion is more document-intensive than a statutory conversion. Transfer documents, such as assignments and bills of sale, have to be prepared. Lender consent may be needed depending upon the terms of loan agreements, and consent requirements under anti-assignment provisions in other contracts may be triggered. [c]    Liquidation of Entity Followed by Contribution of Assets by Owners. This approach may be even more document-intensive than the direct contribution of assets conversion method. Transfer documents, such as deeds, assignments and bills of sale must be prepared (even two sets may be needed; one from the partnership to the partners, and one from the partners to the LLC). Lender consent may be required and consent requirements under anti-assignment clauses in other contracts may be triggered. [d]  Contribution of Ownership Interests. This approach is also document-intensive. Transfer documents, such as deeds, assignments, or bills of sale have to be prepared to transfer the assets from the entity to the LLC. Lender consent may be required depending on the terms of loan agreements. Consent requirements under antiassignment clauses in other contracts may be triggered. [e]  Merger of Other Entity into LLC. In a merger, all entities except for the surviving entity terminate. All assets, liabilities, obligations, rights and powers

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vest in the surviving LLC. Separate transfer documents are not necessary as assets are conveyed by operation of law. Lender consent may be necessary depending upon the terms of loan agreements. Contract assignment consent clauses may be triggered, if the contract prohibits transfer of the contract by operation of law; in general mergers have been held not to trigger clauses that prohibit assignment or transfer unless the clause also prohibits transfer “by operation of law”, and some merger statutes have been drafted to avoid even this result. See Georgia Code § 14-21106(a)(2): “The title to all real estate and other property owned by, and every contract right possessed by, each corporation or entity party to the merger is vested in the surviving corporation or entity without reversion or impairment, without further act or deed, and without any conveyance, transfer, or assignment having occurred.” 2.1.06  Federal and State Securities Laws Issues [1]  Federal The definition of a “security” under Section 2(a)(1) of the federal Securities Act of 1933, as amended is very broad and includes, in relevant part, the following: any “stock,” “certificate of interest or participation in a profit sharing agreement,” “pre-organization certificate or subscription,” “transferable share,” “investment contract,” or “in general, any interest or instrument commonly known as a ‘security.’ ” Most of the commentators who have addressed the issue of whether an LLC interest is a security have done so under the investment contract analysis, analogizing to limited partnerships and general partnerships, as appropriate. An investment contract has been defined by the Supreme Court as an investment of money in a common enterprise with the expectation of profits to come from the managerial or entrepreneurial efforts of others. (SEC v. W.J. Howey Co., 328

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U.S. 293 (1946).) Under this “efforts of others” approach, also known as the “Howey test,” limited partnership interests are almost always found to be securities because limited partners are passive investors, while general partnership interests are usually not found to be securities because under the Uniform Partnership Act and under most partnership agreements, each partner has a substantial voice in management, can bind the partnership vis a vis third parties, has full access to partnership information, books and records and is personally liable for partnership debts. However, in some cases, general partnership interests have been found to be securities if the partners’ interests can be expected to be essentially passive or dependent on the management of others for reasons such as (i) the terms of the partnership agreement effectively allocate managerial powers to a managing partner or third party; (ii) the partner in question is inexperienced in business affairs so that he is incapable of intelligently exercising his partnership powers or (iii) the partner in question is so dependent upon the unique managerial or business abilities of the promoter or manager that he could not replace the manager of the enterprise or exercise meaningful supervision or control (See, e.g., Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981); Hocking v. Dubois, 885 F.2d 1449 (9th Cir. 1989), cert. denied, 494 U.S. 1078, 110 S.Ct. 1805, 108 L.Ed.2d 936 (1990); see also Koch v. Hankins, 928 F.2d 1471 (9th Cir. 1991); Holden v. Hagopian, 978 F.2d 1115 (9th Cir. 1991)). Under the investment contract analysis, managermanaged LLCs may be most analogous to limited partnerships while member-managed LLCs may be most analogous to general partnerships, notwithstanding the fact that general partners do not enjoy the limitation on liability afforded to LLC members. However, the determination of whether an LLC interest is a security for purposes of federal securities law does not necessarily stop with the investment

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contract analysis. In 1990, the U.S. Supreme Court stated that Congress “enacted a definition of ‘security’ sufficiently broad to encompass virtually any instrument that might be sold as an investment” (Reves v. Ernst & Young, 494 U.S. 56, 61, 110 S.Ct. 945, 108 L.Ed.2d 47, 57 (1990)). Thus, LLC interests may be analogized to other categories of securities, such as stock or participation in profit sharing agreements, as well as investment contracts. [2]  State Some, but not all, states have adopted laws relating to the issue whether an interest in an LLC is a security. Some states’ statutory definitions of “security” include membership interests in LLCs or state that an LLC interest may be a security or an investment contract. See, e.g., Alaska Stat. § 45.55.990(32); Kan. Stat. § 17-12a102(28)(E); N.H. Rev. Stat. Ann. § 421-B:2, XX(a); South Dakota Compiled Laws Ann. § 47-31B-102(28)(E). In California, Section 25019 of the California Corporations Code provides that an LLC interest is a security but provides a detailed exception for membermanaged LLCs: “interest in a limited liability company and any class or series of those interests (including any fractional or other interest in that interest), except a membership interest in a limited liability company in which the person claiming this exception can prove that all of the members are actively engaged in the management of the limited liability company; provided that evidence that members vote or have the right to vote, or the right to information concerning the business and affairs of the limited liability company, or the right to participate in management, shall not establish, without more, that all members are actively engaged in the management of the limited liability company. …”

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§ 2.2.    LIMITED LIABILITY COMPANIES: COMPLETE FORMS Form No. 2.2.01.    Checklist for Member Managed LLC Agreement  (Delaware Or California) 1.  Name of LLC: 2.  Names and addresses of Members: a.   b.   c.   d.   3.  Fiscal year of LLC: 4.  Name of Tax Matters Partner: 5.    Date of filing of Certificate of Formation or Articles of Organization: 6.  Principal place of business of LLC: 7.    Name and address of Delaware agent for service of process (Delaware LLC only): 8.  Primary business purpose of LLC: 9.    Capital Contribution of Each Member and Percentage Interests: Form of Percentage Capital Contribution Contribution Interest

10.    Will additional capital contributions be required? If so, describe procedures for calls and limits, if any:

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11.    What are remedies for failure to contribute required additional capital? 12.  Prior notice required for Member’s withdrawal: ______ days 13.  How are decisions of the Members to be made? a.  By unanimous approval? ________________ b.  By a majority in interest? ________________ c.  By a majority in number? ________________ d.  Other? ________ e.  May lesser decisions be delegated to one or more Members? If so, what Dollar amount defines these lesser decisions ________________ 14.    Are officers ________________;

to

be

appointed

at

inception?

a.    If so, who are the officers and what are their titles? 15.  Specified actions require: a.  unanimous Members’ vote ______ b.  supermajority (in number) (in Percentage Interest) of Members’ vote ______ c.  other: 16.  Specified actions requiring Members’ vote: a.  borrowing in excess of $ ________ b.  loans to third parties in excess of $ ________ c.    investments in third parties in excess of $ ________ d.  other:

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17.  Are any affiliated party transactions contemplated? If so, describe: 18.  Are Members required to offer business opportunities to the LLC, or allowed to conduct other activities without limitation? 19.    a. Are allocations of tax items to be according to percentage interests or are there to be special allocations? b. ________________ If the latter, describe: c. Are allocations different between ordinary gains and losses and capital event gains and losses? 20.  Distributions: a.    Are Members who contribute capital entitled to receive their capital back before service members receive distributions? b.    Are capital Members to receive, in addition, a priority return on their capital contributions? c.    Do distributions differ between ordinary distributions and distributions arising from capital events? 21.    a. Are Transfers of Membership Interests to be prohibited without consent of all other Members or some lesser percentage of Members? (or see (iv) below) b. Are there permitted persons? If so, describe:

Transfers

to

specified

c. Is there to be a standstill period? d. Are there to be Transfers, subject to rights of first refusal?

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e. Are there to be Repurchase Rights upon the occurrence of certain events? ________. If so, describe events and purchase price (i.e. capital account balance, fair market value or other) (See Medium Form): f. Are there to be put, call, tag-along, drag-along, or shotgun provisions? If so, describe: 22.    Upon the occurrence of a Dissolution Event, will the LLC continue upon the vote of all the other Members or some lesser vote? 23.    Are the LLC’s books to be kept on a cash basis or accrual basis? 24.  What vote of the Members will dissolve the LLC? Unanimous 25.    What other events will cause the dissolution of the LLC: a.  The sale of the LLC’s assets? b.  The LLC’s Bankruptcy? c.  Other? ________________ 25.  Are investment representations required? 26.    What vote of the Members is required for an amendment of the Agreement? a.  Unanimous ________________ b.  Other: 27.  Is there to be an arbitration clause? 28.    Where is the required venue for litigation or arbitration? 29.  Are there spouses of the California-resident Members? If so, what are their names?

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Form No. 2.2.02.    Checklist for Manager Managed LLC Agreement  (Delaware or California) I.  Name of LLC: II.  Names and addresses of Members: (i)   (ii)   (iii)   (iv)   III.  Fiscal year of LLC: IV.  Name of Tax Matters Partner: V.    Date of filing of Certificate of Formation or Articles of Organization: VI.  Principal place of business of LLC: VII.    Name and address of Delaware agent for service of process (Delaware LLC only): VIII.  Primary business purpose of LLC: IX.    Initial Capital Contribution of Each Member and Percentage Interests: Capital Form of Percentage   Contribution Contribution Interest (i)

 

 

 

(ii)

 

 

 

(iii)

 

 

 

(iv)

 

 

 

X.  Will additional capital contributions be required? If so, describe procedures for calls and limits, if any

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What are remedies for failure to contribute required additional capital? XI.    Prior notice required for Member’s withdrawal: ________________days XII.    Prior notice required to call meetings of Members: ________________days XIII.  Number of members of Management Committee: 1. How are Managers elected: (i)  Each Member may elect ____ managers; (ii)    Managers elected unanimously; ____

by

all

Members,

(iii)  Managers elected by a majority (in number) of Members; ____ (iv)    Other (e.g. elected by majority in interest or supermajority of Members); ____ 2. What is term of office of each Manager? (i)  indefinite: ____ (ii)  fixed term: ____ 3. Decisions of Management Committee are to be taken by: (i)  all Managers, unanimously ________; (ii)  majority (in number) of Managers ________; (iii)  Other: ________________ 4. Meetings of Management Committee may be called upon ____ days’ notice. 5. Are officers to ________________;

be

83

appointed

at

inception?

If so, who are the officers and what are their titles? 6. Specified Management below) require:

Committee

actions

(see

(i)  unanimous Members’ vote ____ (ii)  majority (in number) of Members’ vote ____ (iii)  other: 7. Specified actions requiring Members’ vote: (i)  borrowing in excess of $ ________ (ii)  loans to third parties in excess of $ ________ (iii)    investments in third parties in excess of $ ________ (iv)  other: XIV.  Are any affiliated party transactions contemplated? If so, describe: XV.  Are Members required to offer business opportunities to the LLC, or allowed to conduct other activities without limitation? XVI.    1. Are allocations of tax items to be according to percentage interests or are there to be special allocations? ________________ If the latter, describe: (i)  Are allocations different between ordinary gains and losses and capital event gains and losses? XVII.  Distributions: (i)    Are Members who contribute capital entitled to receive their capital back before service members receive distributions?

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(ii)    Are capital Members to receive, in addition, a priority return on their capital contributions? (iii)    Do distributions differ between ordinary distributions and distributions arising from capital events? XVIII.    1. Are Transfers of Membership Interests to be prohibited without consent of all other Members or some lesser percentage of Members? (or see (iv) below) (i)    Are there permitted Transfers to specified persons? If so, describe: (ii)  Is there to be a standstill period? (iii)  Are there to be Transfers, subject to rights of first refusal? (iv)    Are there to be Repurchase Rights upon the occurrence of certain events? ________. If so, describe events and purchase price (i.e. capital account balance, fair market value or other) (See Medium Form): (v)    Are there to be put, call, tag-along, drag-along, or shotgun provisions? If so, describe: XIX.  Upon the occurrence of a Dissolution Event, will the LLC continue upon the vote of all the other Members or some lesser vote? XX.    Are the LLC’s books to be kept on a cash basis or accrual basis? XXI.  What vote of the Members will dissolve the LLC? Unanimous ______

Other: ______

XXII.    What other events will cause the dissolution of the LLC: (i)  The sale of the LLC’s assets?

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(ii)  The LLC’s Bankruptcy? (iii)  Other? ________________ XXIII.  Are investment representations required? XXIV.    What vote of the Members is required for an amendment of the Agreement? Unanimous Other: XXV.  Is there to be an arbitration clause? XXVI.    Where is the required venue for litigation or arbitration? XXVII.  Are there spouses of California-resident Members? If so, what are their names?

Form No. 2.2.03.    Delaware Manager Managed Limited Liability Company Operating Agreement (Comprehensive Form) LIMITED LIABILITY COMPANY AGREEMENT This Limited Liability Company Agreement of ABC Holdings, LLC, a Delaware limited liability company (the “Company”), is entered into as of ___ ___, 20___ by and among the Company, the Initial Members executing this Agreement as of the date hereof and each other Person who after the date hereof becomes a Member of the Company and becomes a party to this Agreement by executing a Joinder Agreement.

RECITALS WHEREAS, the Company was formed under the laws of the State of Delaware by the filing of a Certificate of

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Formation with the Secretary of State of the State of Delaware on ___ ___, 20___ (the “Certificate of Formation”); WHEREAS, Sponsor and each of the Initial Management Members have, concurrently with their execution of this Agreement, entered into Subscription Agreements and/or Award Agreements, pursuant to which they have acquired their respective Units in the Company on the terms and conditions fully set forth therein. NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I. DEFINITIONS Section 1.01 Definitions. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in this Section 1.01: “Acceptance Notice” has the meaning set forth in Section 9.01(d). “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (a)  crediting to such Capital Account any amount which such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i); and

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(b)    debiting to such Capital Account the items described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). “Adjusted Taxable Income” of a Member for a Fiscal Year (or portion thereof) with respect to Units held by such Member means the federal taxable income allocated by the Company to the Member with respect to such Units (as adjusted by any final determination in connection with any tax audit or other proceeding) for such Fiscal Year (or portion thereof); provided, that such taxable income shall be computed (i) minus any excess taxable loss or excess taxable credits of the Company for any prior period allocable to such Member with respect to such Units that were not previously taken into account for purposes of determining such Member’s Adjusted Taxable Income in a prior Fiscal Year to the extent such loss or credit would be available under the Code to offset income of the Member (or, as appropriate, the direct or indirect members of the Member) determined as if the income, loss, and credits from the Company were the only income, loss, and credits of the Member (or, as appropriate, the direct or indirect members of the Member) in such Fiscal Year and all prior Fiscal Years, and (ii) taking into account any special basis adjustment with respect to such Member resulting from an election by the Company under Code Section 754. “Affiliate” means, with respect to any Person, any other Person who, directly or indirectly (including through one or more intermediaries), controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control,” when used with respect to any specified Person, shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or partnership or other ownership interests, by contract or

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otherwise; and the terms “controlling” and “controlled” shall have correlative meanings. “Agreement” means this Limited Liability Company Agreement, as executed and as it may be amended, modified, supplemented or restated from time to time, as provided herein. “Applicable Law” means all applicable provisions of (a) constitutions, treaties, statutes, laws (including the common law), rules, regulations, decrees, ordinances, codes, proclamations, declarations or orders of any Governmental Authority; (b) any consents or approvals of any Governmental Authority; and (c) any orders, decisions, advisory or interpretative opinions, injunctions, judgments, awards, decrees of, or agreements with, any Governmental Authority. “Award Agreements” has the meaning set forth in Section 3.04(a). “Bankruptcy” means, with respect to a Member, the occurrence of any of the following: (a) the filing of an application by such Member for, or a consent to, the appointment of a trustee of such Member’s assets; (b) the filing by such Member of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing such Member’s inability to pay its debts as they come due; (c) the making by such Member of a general assignment for the benefit of such Member’s creditors; (d) the filing by such Member of an answer admitting the material allegations of, or such Member’s consenting to, or defaulting in answering a bankruptcy petition filed against such Member in any bankruptcy proceeding; or (e) the expiration of sixty (60) days following the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Member a bankrupt or appointing a trustee of such Member’s assets.

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“Board” has the meaning set forth in Section 8.01. “Book Depreciation” means, with respect to any Company asset for each Fiscal Year, the Company’s depreciation, amortization, or other cost recovery deductions determined for federal income tax purposes, except that if the Book Value of an asset differs from its adjusted tax basis at the beginning of such Fiscal Year, Book Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero and the Book Value of the asset is positive, Book Depreciation shall be determined with reference to such beginning Book Value using any permitted method selected by the Board in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g)(3). “Book Value” means, with respect to any Company asset, the adjusted basis of such asset for federal income tax purposes, except as follows: (a)  the initial Book Value of any Company asset contributed by a Member to the Company shall be the gross Fair Market Value of such Company asset as of the date of such contribution; (b)  immediately prior to the Distribution by the Company of any Company asset to a Member, the Book Value of such asset shall be adjusted to its gross Fair Market Value as of the date of such Distribution; (c)  the Book Value of all Company assets shall be adjusted to equal their respective gross Fair Market Values, as determined by the Board, as of the following times:

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(i)  the acquisition of an additional Membership Interest in the Company by a new or existing Member in consideration of a Capital Contribution of more than a de minimis amount; (ii)  the Distribution by the Company to a Member of more than a de minimis amount of property (other than cash) as consideration for all or a part of such Member’s Membership Interest in the Company; (iii)  the grant to a Service Provider of any Incentive Units; and (iv)  the liquidation of the Company within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g); provided, that adjustments pursuant to clauses (i), (ii) and (iii) above need not be made if the Board reasonably determines that such adjustment is not necessary or appropriate to reflect the relative economic interests of the Members and that the absence of such adjustment does not adversely and disproportionately affect any Member; (d)  the Book Value of each Company asset shall be increased or decreased, as the case may be, to reflect any adjustments to the adjusted tax basis of such Company asset pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Account balances pursuant to Treasury Regulation Section 1.7041(b)(2)(iv)(m); provided, that Book Values shall not be adjusted pursuant to this paragraph (d) to the extent that an adjustment pursuant to paragraph (c) above is made in conjunction with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d); and (e)    if the Book Value of a Company asset has been determined pursuant to paragraph (a) or adjusted

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pursuant to paragraphs (c) or (d) above, such Book Value shall thereafter be adjusted to reflect the Book Depreciation taken into account with respect to such Company asset for purposes of computing Net Income and Net Losses. “Budget” has the meaning set forth in Section 12.03. “Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in the City of Wilmington, Delaware are authorized or required to close. “Call Purchase Price” means the Cause Purchase Price or Fair Market Value, as applicable pursuant to Section 10.06(a). “Capital Account” has the meaning set forth in Section 5.03. “Capital Contribution” means, for any Member, the total amount of cash and cash equivalents and the Book Value of any property contributed to the Company by such Member. “Cause” with respect to any particular Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “Cause” means any of the following: (a)    such Service Provider’s repeated failure to perform substantially his duties as an employee or other associate of the Company or any of the Company Subsidiaries (other than any such failure resulting from his Disability) which failure, whether committed willfully or negligently, has continued unremedied for more than thirty (30) days after the Company has provided written notice thereof; provided, that a failure to meet financial performance

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expectations shall not, by itself, constitute a failure by the Service Provider to substantially perform his duties; (b)  such Service Provider’s fraud or embezzlement; (c)    such Service Provider’s material dishonesty or breach of fiduciary duty against the Company or any of the Company Subsidiaries; (d)    such Service Provider’s willful misconduct or gross negligence which is injurious to the Company or any of the Company Subsidiaries; (e)  any conviction of, or the entering of a plea of guilty or nolo contendere to, a crime that constitutes a felony (or any state-law equivalent) or that involves moral turpitude, or any willful or material violation by such Service Provider of any federal, state or foreign securities laws; (f)  any conviction of any other criminal act or act of material dishonesty, disloyalty or misconduct by such Service Provider that has a material adverse effect on the property, operations, business or reputation of the Company or any of the Company Subsidiaries; (g)  the unlawful use (including being under the influence) or possession of illegal drugs by such Service Provider on the premises of the Company or any of the Company Subsidiaries while performing any duties or responsibilities with the Company or any of the Company Subsidiaries; (h)  the material violation by such Service Provider of any rule or policy of the Company or any of the Company Subsidiaries; or (i)    the material breach by such Service Provider of any covenant undertaken in Article XI herein, any effective Award Agreement, employment agreement or any written

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non-disclosure, non-competition, or non-solicitation covenant or agreement with the Company or any of the Company Subsidiaries. “Cause Purchase Price” has the meaning set forth in Section 10.06(a)(i). “Certificate of Formation” has the meaning set forth in the Recitals. “Change of Control” means: (a) the sale of all or substantially all of the consolidated assets of the Company and the Company Subsidiaries to a Third Party Purchaser; (b) a sale resulting in no less than a majority of the Common Units on a Fully Diluted Basis being held by a Third Party Purchaser; or (c) a merger, consolidation, recapitalization or reorganization of the Company with or into a Third Party Purchaser that results in the inability of the Members to designate or elect a majority of the Managers (or the board of directors (or its equivalent) of the resulting entity or its parent company). “Code” means the Internal Revenue Code of 1986, as amended. “Common Tag-along Portion” has the meaning set forth in Section 10.05(d)(i). “Common Units” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Common Units” in this Agreement. “Company” has the meaning set forth in the Preamble. “Company Interest Rate” has the meaning set forth in Section 7.05(c). “Company Minimum Gain” means “partnership minimum gain” as defined in Section 1.704-2(b)(2) of the Treasury

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Regulations, substituting the term “Company” for the term “partnership” as the context requires. “Company Opportunity” has the meaning set forth in Section 11.03. “Company Option Period” has the meaning set forth in Section 10.03(d)(ii). “Company ROFR Exercise Notice” has the meaning set forth in Section 10.03(d)(ii). “Company Company.

Subsidiary”

means

a

Subsidiary

of

the

“Competitor” has the meaning set forth in Section 11.02(a). “Confidential Information” has the meaning set forth in Section 11.01(a). “Covered Person” has the meaning set forth in Section 14.01(a). “Delaware Act” means the Delaware Limited Liability Company Act, Title 6, Chapter 18, §§ 18-101, et seq., and any successor statute, as it may be amended from time to time. “Delay Condition” means any of the following conditions: (a) the Company is prohibited from purchasing any Incentive Units by any Financing Document or by Applicable Law; (b) a default has occurred under any Financing Document and is continuing; (c) the purchase of any Incentive Units would, or in the good-faith opinion of the Board could, result in the occurrence of an event of default under any Financing Document or create a condition that would or could, with notice or lapse of time or both, result in such an event of default; or (d) the purchase of any Incentive Units would, in the good-faith opinion of the Board, be imprudent in view of

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the financial condition of the Company, the anticipated impact of the purchase of such Incentive Units on the Company’s ability to meet its obligations under any Financing Document or otherwise in connection with its business and operations. “Disability,” with respect to any Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “Disability” means such Service Provider’s incapacity due to physical or mental illness that: (a) shall have prevented such Service Provider from performing his duties for the Company or any of the Company Subsidiaries on a full-time basis for more than ninety (90) or more consecutive days or an aggregate of one hundred eighty (180) days in any 365-day period; or (b)(i) the Board determines, in compliance with Applicable Law, is likely to prevent such Service Provider from performing such duties for such period of time and (ii) thirty (30) days have elapsed since delivery to such Service Provider of the determination of the Board and such Service Provider has not resumed such performance (in which case the date of termination in the case of a termination for “Disability” pursuant to this clause (b) shall be deemed to be the last day of such 30-day period). “Distribution” means a distribution made by the Company to a Member, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided, that none of the following shall be a Distribution: (a) any redemption or repurchase by the Company or any Member of any Units or Unit Equivalents; (b) any recapitalization or exchange of securities of the Company; (c) any subdivision (by a split of Units or otherwise) or any combination (by a reverse split of Units or otherwise) of any outstanding Units; or (d) any fees or remuneration paid to any

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Member in such Member’s capacity as a Service Provider for the Company or a Company Subsidiary. “Distribute” when used as a verb shall have a correlative meaning. “Drag-along Member” has the meaning set forth in Section 10.04(a). “Drag-along Notice” has the meaning set forth in Section 10.04(c). “Drag-along Sale” has the meaning set forth in Section 10.04(a). “Dragging Member” has the meaning set forth in Section 10.04(a). “Electronic Transmission” means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process. “Estimated Tax Amount” of a Member for a Fiscal Year means the Member’s Tax Amount for such Fiscal Year as estimated in good faith from time to time by the Board. In making such estimate, the Board shall take into account amounts shown on Internal Revenue Service Form 1065 filed by the Company and similar state or local forms filed by the Company for the preceding taxable year and such other adjustments as in the reasonable business judgment of the Board are necessary or appropriate to reflect the estimated operations of the Company for the Fiscal Year. “Excess Amount” has the meaning set forth in Section 7.04(c). “Exercise Period” has the meaning set forth in Section 9.01(d).

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“Exercising Member” has the meaning set forth in Section 9.01(e). “Fair Market Value” of any asset as of any date means the purchase price that a willing buyer having all relevant knowledge would pay a willing seller for such asset in an arm’s length transaction, as determined in good faith by the Board based on such factors as the Board, in the exercise of its reasonable business judgment, considers relevant. “Family Members” has the meaning set forth in Section 10.02(b). “Financing Document” means any credit agreement, guarantee, financing or security agreement or other agreements or instruments governing indebtedness of the Company or any of the Company Subsidiaries. “Fiscal Year” means the calendar year, unless the Company is required to have a taxable year other than the calendar year, in which case Fiscal Year shall be the period that conforms to its taxable year. “Forfeiture Allocations” has the meaning set forth in Section 6.02(e). “Fully Diluted Basis” means, as of any date of determination, (a) with respect to all the Units, all issued and outstanding Units of the Company and all Units issuable upon the exercise of any outstanding Unit Equivalents as of such date, whether or not such Unit Equivalent is at the time exercisable, or (b) with respect to any specified type, class or series of Units, all issued and outstanding Units designated as such type, class or series and all such designated Units issuable upon the exercise of any outstanding Unit Equivalents as of such date, whether or not such Unit Equivalent is at the time exercisable.

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“GAAP” means United States generally accounting principles in effect from time to time.

accepted

“Good Reason,” with respect to any Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “Good Reason” means any of the following actions taken without the Service Provider’s written consent: (a)  a material reduction in the Service Provider’s base salary or the Service Provider’s ability to participate in Company incentive or bonus plans (other than a general reduction in base salary or bonuses that affects all salaried Service Providers equally); (b)  the failure by the Company to pay to the Service Provider any material portion of the salary, bonus or other benefits owed to such Service Provider; (c)    a substantial adverse change in the Service Provider’s duties and responsibilities or a material diminution in the Service Provider’s title, responsibility, or authority; or (d)  a transfer of the Service Provider’s primary workplace by more than fifty (50) miles from the current workplace; provided, that Good Reason shall not be deemed to exist unless (a) the Company fails to cure the event giving rise to Good Reason within thirty (30) days after written notice thereof given by the Service Provider to the Board, which notice shall (i) be delivered to the Board no later than twenty (20) days following the Service Provider’s initial detection of the condition, and (ii) specifically set forth the nature of such event and the corrective action reasonably sought by the Service Provider; and (b) the Service Provider

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terminates his employment within thirty (30) following the last day of the foregoing cure period.

days

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other nongovernmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction. “Incentive Liquidation Value” means, as of the date of determination and with respect to the relevant new Incentive Units to be issued, the aggregate amount that would be Distributed to the Members pursuant to Section 7.02, if, immediately prior to the issuance of the relevant new Incentive Units, the Company sold all of its assets for Fair Market Value and immediately liquidated, the Company’s debts and liabilities were satisfied and the proceeds of the liquidation were Distributed pursuant to Section 13.03(c). “Incentive Plan” has the meaning set forth in Section 3.04(a). “Incentive Units” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Incentive Units” in this Agreement and includes both Restricted Incentive Units and Unrestricted Incentive Units. “Initial Cost” means, with respect to any Unit, the purchase price paid to the Company with respect to such Unit by the Member to whom such Unit was originally issued. “Initial Management Member” means each Person identified as a Management Member as of the date hereof.

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“Initial Member” has the meaning set forth in the term Member. “Initial Public Offering” has the meaning set forth in Section 15.18(a). “Intended Call Closing Date” has the meaning set forth in Section 10.06(c)(i). “Intended Put Closing Date” has the meaning set forth in Section 10.07(c)(i). “IPO Entity” has the meaning set forth in Section 15.18(a). “Issuance Notice” has the meaning set forth in Section 9.01(c). “Joinder Agreement” means the joinder agreement in form and substance attached hereto. “Liquidator” has the meaning set forth in Section 13.03(a). “Losses” has the meaning set forth in Section 14.03(a). “Management Member” means any Member other than Sponsor. “Manager” has the meaning set forth in Section 8.01. “Member” means (a) each Person identified on the Members Schedule as of the date hereof as a Member and who has executed this Agreement or a counterpart thereof (each, an “Initial Member”); and (b) and each Person who is hereafter admitted as a Member in accordance with the terms of this Agreement and the Delaware Act, in each case so long as such Person is shown on the Company’s books and records as the owner of one or more Units. The Members shall

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constitute the “members” (as that term is defined in the Delaware Act) of the Company. “Member Nonrecourse Debt” means “partner nonrecourse debt” as defined in Treasury Regulation Section 1.704-2(b)(4), substituting the term “Company” for the term “partnership” and the term “Member” for the term “partner” as the context requires. “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 Regulation Section 1.704-2(i)(3). “Member Nonrecourse Deduction” means “partner nonrecourse deduction” as defined in Treasury Regulation Section 1.704-2(i), substituting the term “Member” for the term “partner” as the context requires. “Member ROFR Exercise Notice” has the meaning set forth in Section 10.03(d)(iii). “Members Schedule” has the meaning set forth in Section 3.01. “Membership Interest” means an interest in the Company owned by a Member, including such Member’s right (based on the type and class of Unit or Units held by such Member), as applicable, (a) to a Distributive share of Net Income, Net Losses and other items of income, gain, loss and deduction of the Company; (b) to a Distributive share of the assets of the Company; (c) to vote on, consent to or otherwise participate in any decision of the Members as provided in this Agreement; and (d) to any and all other benefits to which such Member may be entitled as provided in this Agreement or the Delaware Act.

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“Misallocated Item” has the meaning set forth in Section 6.05. “Net Income” and “Net Loss” mean, for each Fiscal Year or other period specified in this Agreement, an amount equal to the Company’s taxable income or taxable loss, or particular items thereof, determined in accordance with Code Section 703(a) (where, 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 taxable loss), but with the following adjustments: (a)  any income realized by the Company that is exempt from federal income taxation, as described in Code Section 705(a)(1)(B), shall be added to such taxable income or taxable loss, notwithstanding that such income is not includable in gross income; (b)    any expenditures of the Company described in Code Section 705(a)(2)(B), including any items treated under Treasury Regulation Section 1.704-1(b)(2)(iv)(i) as items described in Code Section 705(a)(2)(B), shall be subtracted from such taxable income or taxable loss, notwithstanding that such expenditures are not deductible for federal income tax purposes; (c)    any 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 Book Value of the property so disposed, notwithstanding that the adjusted tax basis of such property differs from its Book Value; (d)    any items of depreciation, amortization and other cost recovery deductions with respect to Company property having a Book Value that differs from its adjusted tax basis shall be computed by reference to the property’s Book Value (as adjusted for Book Depreciation) in

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accordance with Treasury Regulation Section 1.704-1(b)(2) (iv)(g); (e)  if the Book Value of any Company property is adjusted as provided in the definition of Book Value, then the amount of such adjustment shall be treated as an item of gain or loss and included in the computation of such taxable income or taxable loss; and (f)    to the extent an adjustment to the adjusted tax basis of any Company property pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulation Section 1.704 1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the 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). “New Common Securities” has the meaning set forth in Section 9.01(b)(ii). “New Interests” has the meaning set forth in Section 3.05. “New Preferred Securities” has the meaning set forth in Section 9.01(b)(i). “New Securities” has the meaning set forth in Section 9.01(b)(iii). “Non-Exercising Member” has the meaning set forth in Section 9.01(e). “Nonrecourse Liability” has the meaning set forth in Treasury Regulations Section 1.704-2(b)(3). “Offered Common Units” has the meaning set forth in Section 10.03(a).

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“Offered Preferred Units” has the meaning set forth in Section 10.03(a). “Offered Units” has the meaning set forth in Section 10.03(a). “Offered Unrestricted Incentive Units” has the meaning set forth in Section 10.07(b)(i). “Offering Member” has the meaning set forth in Section 10.03(a). “Offering Member Notice” has the meaning set forth in Section 10.03(c)(i). “Offering Service Provider” has the meaning set forth in Section 10.07(a). “Officers” has the meaning set forth in Section 8.09. “Other Business” has the meaning set forth in Section 11.03. “Over-allotment Exercise Period” has the meaning set forth in Section 9.01(e). “Over-allotment Notice” has the meaning set forth in Section 9.01(e). “Permitted Transfer” means a Transfer of Preferred Units or Common Units carried out pursuant to Section 10.02. “Permitted Transferee” means a recipient of a Permitted Transfer. “Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

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“Pre-emptive Member” has the meaning set forth in Section 9.01(a). “Preferred Capital Value” means, for any Preferred Unit at any time, the sum of the Capital Contributions attributable in respect of the acquisition of such Preferred Unit. “Preferred Tag-along Portion” has the meaning set forth in Section 10.05(d)(i). “Preferred Units” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Preferred Units” in this Agreement. “Preferred Unpaid Yield” means, for any Preferred Unit at any time, the amount equal to the excess, if any, of (a) the aggregate Preferred Yield accrued on such Preferred Unit as of such time, over (b) the aggregate amount of all Distributions made by the Company in respect of such Preferred Unit pursuant to Section 7.02(a) as of such time. “Preferred Unreturned Capital Value” means, for any Preferred Unit at any time, the amount of the Preferred Capital Value for such Preferred Unit, reduced by the aggregate amount of all Distributions made by the Company in respect of such Preferred Unit pursuant to Section 7.02(b) prior to such time. “Preferred Yield” means, for any Preferred Unit at any time, the amount accrued as of such time in respect of such Preferred Unit (commencing with respect to such Preferred Unit on the date the Company issues or issued such Preferred Unit) at a rate of 8% per annum, compounded annually, on the sum of (a) the Preferred Unreturned Capital Value from time to time for such Preferred Unit through such time and (b) the Preferred Unpaid Yield from time to time on such Preferred Unit accumulated for all prior annual compounding periods.

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“Profits Interest” has the meaning set forth in Section 3.04(e). “Profits Interest Hurdle” means an amount set forth in each Award Agreement reflecting the Incentive Liquidation Value of the relevant Incentive Units at the time the units are issued. “Proposed Transferee” has the meaning set forth in Section 10.05(a). “Pro Rata Portion” means: (g)  for purposes of Section 9.01, with respect to any Preemptive Member, on any issuance date for New Securities, a fraction determined by dividing (i) the aggregate number of Common Units and number of Preferred Units on a Fully Diluted Basis owned by such Pre-emptive Member immediately prior to such issuance by (ii) the total aggregate number of Common Units and number of Preferred Units on a Fully Diluted Basis held by the Members on such date immediately prior to such issuance; and (h)  for purposes of Section 10.03, with respect to a ROFR Rightholder, on any date of a proposed Transfer by an Offering Member, a fraction determined by dividing (i) the aggregate number of Common Units and number of Preferred Units on a Fully Diluted Basis owned by such ROFR Rightholder immediately prior to such Transfer by (ii) the total aggregate number of Common Units and number of Preferred Units on a Fully Diluted Basis held by the Members on such date immediately prior to such Transfer. “Prospective Purchaser” has the meaning set forth in Section 9.01(c).

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“Public Offering” means any underwritten public offering pursuant to a registration statement filed in accordance with the Securities Act. “Purchasing Rightholders” has the meaning set forth in Section 10.03(e)(ii). “Put Purchase Price” has the meaning set forth in Section 10.07(a). “Qualified Member” has the meaning set forth in Section 12.01. “Qualified Public Offering” means the sale, in a firm commitment underwritten public offering led by a nationally recognized underwriting firm pursuant to an effective registration statement under the Securities Act, of Units (or common stock of the Company or an IPO Entity) having an aggregate offering value (net of underwriters’ discounts and selling commissions) of at least $100,000,000, following which at least 50% of the total Units (or common stock of the Company or an IPO Entity) on a Fully Diluted Basis shall have been sold to the public and shall be listed on any national securities exchange or quoted on the NASDAQ Stock Market System. “Qualifying Incentive Units” has the meaning set forth in Section 7.03(b). “Quarterly Estimated Tax Amount” of a Member for any calendar quarter of a Fiscal Year means the excess, if any of (a) the product of (i) a quarter (¼) in the case of the first calendar quarter of the Fiscal Year, half (½) in the case of the second calendar quarter of the Fiscal Year, three-quarters (¾) in the case of the third calendar quarter of the Fiscal Year, and one (1) in the case of the fourth calendar quarter of the Fiscal Year and (ii) the Member’s Estimated Tax Amount for

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such Fiscal Year over (b) all Distributions previously made during such Fiscal Year to such Member. “Regulatory Allocations” has the meaning set forth in Section 6.02(d). “Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person. “Repurchase Notice” has the meaning set forth in Section 10.06(b)(i). “Repurchased Incentive Units” has the meaning set forth in Section 10.06(b)(i). “Restricted Incentive Units” has the meaning set forth in Section 3.04(c)(i). “Restricted Period” has the meaning set forth in Section 11.02(a). “ROFR Rightholders” has the meaning set forth in Error! Reference source not found. “ROFR Rightholder Option Period” has the meaning set forth in Section 10.03(d)(iii). “Sale Notice” has the meaning set forth in Section 10.05(c). “Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect at the time. “Selling Member” has the meaning set forth in Section 10.05(a).

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“Service Provider” has the meaning set forth in Section 3.04(a). “Service Provider Sale Notice” has the meaning set forth in Section 10.07(b)(i). “Shortfall Amount” has the meaning set forth in Section 7.04(b). “Sponsor” means _________, L.P. “Sponsor Majority Unitholders” means the holders of a majority of the Voting Units held by Sponsor and any of its Permitted Transferees. “Sponsor Managers” has the meaning set forth in Section 8.02(a)(i). “Subscription Agreements” means, collectively, those certain Subscription Agreements, each dated as of the date hereof and a form of which is attached hereto as, by and between the Company and the respective Member named therein, pursuant to which the named Member has acquired that number of Preferred Units set forth opposite such Member’s name on the Members Schedule as of the date hereof. “Subsidiary” means, with respect to any Person, any other Person of which a majority of the outstanding shares or other equity interests having the power to vote for directors or comparable managers are owned, directly or indirectly, by the first Person. “Tag-along Member” has the meaning set forth in Section 10.05(a). “Tag-along Notice” has the meaning set forth in Section 10.05(d)(ii).

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“Tag-along Period” has the meaning set forth in Section 10.05(d)(ii). “Tag-along Sale” has the meaning set forth in Section 10.05(a). “Tax Advance” has the meaning set forth in Section 7.04(a). “Tax Amount” of a Member for a Fiscal Year means the product of (a) the Tax Rate for such Fiscal Year and (b) the Adjusted Taxable Income of the Member for such Fiscal Year with respect to its Units. “Tax Matters Member” has the meaning set forth in Section 12.04. “Tax Rate” of a Member, for any period, means the highest marginal blended federal, state and local tax rate applicable to ordinary income, qualified dividend income or capital gains, as appropriate, for such period for an individual residing in New York, New York, taking into account for federal income tax purposes, the deductibility of state and local taxes and any applicable limitations on such deductions. “Taxing Authority” has the meaning set forth in Section 7.05(b). “Third Party Purchaser” means any Person who, immediately prior to the contemplated transaction, (a) does not directly or indirectly own or have the right to acquire any outstanding Preferred Units or Common Units (or applicable Unit Equivalents) or (b) is not a Permitted Transferee of any Person who directly or indirectly owns or has the right to acquire any Preferred Units or Common Units (or applicable Unit Equivalents). “Transfer” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of,

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either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Units owned by a Person or any interest (including a beneficial interest) in any Units or Unit Equivalents owned by a Person. “Transfer” when used as a noun shall have a correlative meaning. “Transferor” and “Transferee” mean a Person who makes or receives a Transfer, respectively. “Treasury Regulations” means the final or temporary regulations issued by the United States Department of Treasury pursuant to its authority under the Code, and any successor regulations. “Unallocated Item” has the meaning set forth in Section 6.05. “Unit” means a unit representing a fractional part of the Membership Interests of the Members and shall include all types and classes of Units, including the Preferred Units, the Common Units and the Incentive Units; provided, that any type or class of Unit shall have the privileges, preference, duties, liabilities, obligations and rights set forth in this Agreement and the Membership Interests represented by such type or class or series of Unit shall be determined in accordance with such privileges, preference, duties, liabilities, obligations and rights. “Unit Equivalents” means any security or obligation that is by its terms, directly or indirectly, convertible into, exchangeable or exercisable for Units, and any option, warrant or other right to subscribe for, purchase or acquire Units. “Unrestricted Incentive Units” has the meaning set forth in Section 3.04(c)(ii).

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“Voting Members” has the meaning set forth in Section 4.07(b). “Voting Units” has the meaning set forth in Section 4.07(a). “Withholding Advances” has the meaning set forth in Section 7.05(b).

Section 1.02 Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. The definitions given for any defined terms in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Unless the context otherwise requires, references herein: (x) to Articles, Sections, and Exhibits mean the Articles and Sections of, and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Exhibits referred to herein shall be construed

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with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

ARTICLE II. ORGANIZATION Section 2.01 Formation. (a) The Company was formed on ___ ___, 20___, pursuant to the provisions of the Delaware Act, upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware.

(b) This Agreement shall constitute the “limited liability company agreement” (as that term is used in the Delaware Act) of the Company. The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Delaware Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than they would be under the Delaware Act in the absence of such provision, this Agreement shall, to the extent permitted by the Delaware Act, control.

Section 2.02 Name. The name of the Company is “ABC Holdings, LLC” or such other name or names as the Board may from time to time designate; provided, that the name shall always contain the

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words “Limited Liability Company” or the abbreviation “L.L.C.” or the designation “LLC.”

Section 2.03 Principal Office. The principal office of the Company is located at ____________, or such other place as may from time to time be determined by the Board. The Board shall give prompt notice of any such change to each of the Members.

Section 2.04 Registered Office; Registered Agent. (a) The registered office of the Company shall be the office of the initial registered agent named in the Certificate of Formation or such other office (which need not be a place of business of the Company) as the Board may designate from time to time in the manner provided by the Delaware Act and Applicable Law.

(b) The registered agent for service of process on the Company in the State of Delaware shall be the initial registered agent named in the Certificate of Formation or such other Person or Persons as the Board may designate from time to time in the manner provided by the Delaware Act and Applicable Law.

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(a) The purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be formed under the Delaware Act and to engage in any and all activities necessary or incidental thereto.

(b) The Company shall have all the powers necessary or convenient to carry out the purposes for which it is formed, including the powers granted by the Delaware Act.

Section 2.06 Term. The term of the Company commenced on the date the Certificate of Formation was filed with the Secretary of State of the State of Delaware and shall continue in existence perpetually until the Company is dissolved in accordance with the provisions of this Agreement.

Section 2.07 No State-Law Partnership. The Members intend that the Company shall be treated as a partnership for federal and, if applicable, state and local income tax purposes, and, to the extent permissible, the Company shall elect to be treated as a partnership for such purposes. The Company and each Member shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment and no Member shall take any action inconsistent with such treatment. The Members intend that the Company shall not be a partnership (including, without limitation, a

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limited partnership) or joint venture, and that no Member, Manager or Officer of the Company shall be a partner or joint venturer of any other Member, Manager or Officer of the Company, for any purposes other than as set forth in the first sentence of this Section 2.07.

ARTICLE III. UNITS Section 3.01 Units Generally. The Membership Interests of the Members shall be represented by issued and outstanding Units, which may be divided into one or more types, classes or series. Each type, class or series of Units shall have the privileges, preference, duties, liabilities, obligations and rights, including voting rights, if any, set forth in this Agreement with respect to such type, class or series. The Board shall maintain a schedule of all Members, their respective mailing addresses and the amount and series of Units held by them (the “Members Schedule”), and shall update the Members Schedule upon the issuance or Transfer of any Units to any new or existing Member. A copy of the Members Schedule as of the execution of this Agreement is attached hereto as Schedule A.

Section 3.02 Authorization and Issuance of Preferred Units. Subject to compliance with Section 4.06(b), Section 9.01 and Section 10.01(b), the Company is hereby authorized to issue a class of Units designated as Preferred Units. As of the date hereof and after giving effect to the transactions contemplated by the Subscription Agreements, [NUMBER]

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Preferred Units are issued and outstanding to the Members in the amounts set forth on the Members Schedule opposite each Member’s name.

Section 3.03 Authorization and Issuance of Common Units. Subject to compliance with Section 9.01 and Section 10.01(b), the Company is hereby authorized to issue a class of Units designated as Common Units. As of the date hereof and after giving effect to the transactions contemplated by the Subscription Agreements and the Award Agreements, [NUMBER] Common Units are issued and outstanding in the amounts set forth on the Members Schedule opposite each Member’s name.

Section 3.04 Authorization and Issuance of Incentive Units. (a) Subject to Section 3.04(b), the Company is hereby authorized to issue Incentive Units to Managers, Officers, employees, consultants or other service providers of the Company or any Company Subsidiary (collectively, “Service Providers”). As of the date hereof, [NUMBER] Incentive Units are issued and outstanding in the amounts set forth on the Members Schedule opposite each Member’s name. The Board is hereby authorized and directed to adopt a written plan pursuant to which all Incentive Units shall be granted in compliance with Rule 701 of the Securities Act or another applicable exemption (such plan as in effect from time to time,

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the “Incentive Plan”). In connection with the adoption of the Incentive Plan and issuance of Incentive Units, the Board is hereby authorized to negotiate and enter into award agreements with each Service Provider to whom it grants Incentive Units (such agreements, “Award Agreements”). Each Award Agreement shall include such terms, conditions, rights and obligations as may be determined by the Board, in its sole discretion, consistent with the terms herein.

(b) Notwithstanding anything contained herein to the contrary, the number of Incentive Units that the Company may issue pursuant to the Incentive Plan, when combined with any Restricted Incentive Units and any Unrestricted Incentive Units already issued and outstanding, shall not exceed [10]% of the aggregate total of Preferred Units and Common Units outstanding on a Fully Diluted Basis as of the date of the proposed grant.

(c) The Board shall establish such vesting criteria for the Incentive Units as it determines in its discretion and shall include such vesting criteria in the Incentive Plan and/or the applicable Award Agreement for any grant of Incentive Units. As of the date hereof, none of the issued and outstanding Incentive Units shall be deemed vested. As used in this Agreement:

(i) any Incentive Units that have not vested pursuant to the terms of the Incentive Plan and any associated Award Agreement are referred to as “Restricted Incentive Units”; and

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(ii) any Incentive Units that have vested pursuant to the terms of the Incentive Plan and any associated Award Agreement are referred to as “Unrestricted Incentive Units.”

(d) Immediately prior to each subsequent issuance of Incentive Units following the initial issuance described in the second sentence of Section 3.04(a), the Board shall determine in good faith the Incentive Liquidation Value. In each Award Agreement that the Company enters into with a Service Provider for the issuance of new Incentive Units, the Board shall include an appropriate Profits Interest Hurdle for such Incentive Units on the basis of the Incentive Liquidation Value immediately prior to the issuance of such Incentive Units.

(e) The Company and each Member hereby acknowledge and agree that, with respect to any Service Provider, such Service Provider’s Incentive Units constitute a “profits interest” in the Company within the meaning of Rev. Proc. 93-27 (a “Profits Interest”), and that any and all Incentive Units received by a Service Provider are received in exchange for the provision of services by the Service Provider to or for the benefit of the Company in a Service Provider capacity or in anticipation of becoming a Service Provider. The Company and each Service Provider who receives Incentive Units hereby agree to comply with the provisions of Rev. Proc. 2001-43, and neither the Company nor any Service Provider who receives Incentive Units shall perform any act or take any position inconsistent with the application of Rev. Proc. 2001-43 or any future Internal Revenue Service guidance or other Governmental

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Authority that supplements or supersedes the foregoing Revenue Procedures.

(f) Incentive units shall receive the following tax treatment:

(i) the Company and each Service Provider who receives Incentive Units shall treat such Service Provider as the owner of such Incentive Units from the date of their receipt, and the Service Provider receiving such Incentive Units shall take into account his Distributive share of Net Income, Net Loss, income, gain, loss and deduction associated with the Incentive Units in computing such Service Provider’s income tax liability for the entire period during which such Service Provider holds the Incentive Units.

(ii) each Service Provider that receives Incentive Units shall make a timely and effective election under Code Section 83(b) with respect to such Incentive Units and shall promptly provide a copy to the Company. Except as otherwise determined by the Board, both the Company and all Members shall (A) treat such Incentive Units as outstanding for tax purposes, (B) treat such Service Provider as a partner for tax purposes with respect to such Incentive Units and (C) file all tax returns and reports consistently with the foregoing. Neither the Company nor any of its Members shall deduct any amount (as wages, compensation or otherwise) with respect to the receipt of such Incentive Units for federal income tax purposes.

(iii)

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in accordance with the finally promulgated successor rules to Proposed Regulations Section 1.83-3(l) and IRS Notice 2005-43, each Member, by executing this Agreement, authorizes and directs the Company to elect a safe harbor under which the fair market value of any Incentive Units issued after the effective date of such Proposed Regulations (or other guidance) will be treated as equal to the liquidation value (within the meaning of the Proposed Regulations or successor rules) of the Incentive Units as of the date of issuance of such Incentive Units. In the event that the Company makes a safe harbor election as described in the preceding sentence, each Member hereby agrees to comply with all safe harbor requirements with respect to Transfers of Units while the safe harbor election remains effective.

(g) For the avoidance of doubt:

(i) no Incentive Units, including Unrestricted Incentive Units, shall have any pre-emptive right to acquire New Securities pursuant to Section 9.01(a);

(ii) no Unrestricted Incentive Units, shall have any right to participate as a Tag-along Member in any Tag-along Sale pursuant to Section 10.05; and

(iii) all Incentive Units, including Unrestricted Incentive Units, shall be subject to the rights of the holders of Common Units to drag along the holders of Incentive Units pursuant to Section 10.04.

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Section 3.05 Other Issuances. In addition to the Preferred Units, Common Units and Incentive Units, the Company is hereby authorized, subject to compliance with Section 4.06(b), Section 9.01 and Section 10.01(b), to authorize and issue or sell to any Person any of the following (collectively, “New Interests”): (i) any new type, class or series of Units not otherwise described in this Agreement, which Units may be designated as classes or series of the Preferred Units, Common Units or Incentive Units but having different rights; and (ii) Unit Equivalents. The Board is hereby authorized, subject to Section 15.09, to amend this Agreement to reflect such issuance and to fix the relative privileges, preference, duties, liabilities, obligations and rights of any such New Interests, including the number of such New Interests to be issued, the preference (with respect to Distributions, in liquidation or otherwise) over any other Units and any contributions required in connection therewith.

Section 3.06 Certification of Units. (a) The Board in its sole discretion may, but shall not be required to, issue certificates to the Members representing the Units held by such Member.

(b) In the event that the Board shall issue certificates representing Units in accordance with Section 3.06(a), then in addition to any other legend required by Applicable Law, all

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certificates representing issued and outstanding Units shall bear a legend substantially in the following form: THE UNITS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LIMITED LIABILITY COMPANY AGREEMENT AMONG THE COMPANY AND ITS MEMBERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH LIMITED LIABILITY COMPANY AGREEMENT. THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER SUCH ACT AND LAWS, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER.

ARTICLE IV. MEMBERS Section 4.01 Admission of New Members. (a) New Members may be admitted from time to time (i) in connection with an issuance of Units by the Company, subject to compliance with the provisions of Section 4.06(b), Section 9.01 and Section 10.01(b), as applicable, and (ii) in connection with a Transfer of Units, subject to compliance

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with the provisions of Article X, and in either case, following compliance with the provisions of Section 4.01(b).

(b) In order for any Person not already a Member of the Company to be admitted as a Member, whether pursuant to an issuance or Transfer of Units, such Person shall have executed and delivered to the Company a written undertaking substantially in the form of the Joinder Agreement. Upon the amendment of the Members Schedule by the Board and the satisfaction of any other applicable conditions, including, if a condition, the receipt by the Company of payment for the issuance of the applicable Units, such Person shall be admitted as a Member and deemed listed as such on the books and records of the Company and thereupon shall be issued his, her or its Units. The Board shall also adjust the Capital Accounts of the Members as necessary in accordance with Section 5.03.

Section 4.02 Representations and Warranties of Members. By execution and delivery of this Agreement or a Joinder Agreement, as applicable, each of the Members, whether admitted as of the date hereof or pursuant to Section 4.01, represents and warrants to the Company and acknowledges that:

(a) The Units have not been registered under the Securities Act or the securities laws of any other jurisdiction, are issued in reliance upon federal and state exemptions for transactions not involving a public offering and cannot be disposed of

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unless (i) they are subsequently registered or exempted from registration under the Securities Act and (ii) the provisions of this Agreement have been complied with;

(b) Such Member is an “accredited investor” within the meaning of Rule 501 promulgated under the Securities Act, as amended by Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and agrees that it will not take any action that could have an adverse effect on the availability of the exemption from registration provided by Rule 501 promulgated under the Securities Act with respect to the offer and sale of the Units;

(c) Such Member’s Units are being acquired for its own account solely for investment and not with a view to resale or distribution thereof;

(d) Such Member has conducted its own independent review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and the Company Subsidiaries and such Member acknowledges that it has been provided adequate access to the personnel, properties, premises and records of the Company and the Company Subsidiaries for such purpose;

(e) The determination of such Member to acquire Units has been made by such Member independent of any other Member and independent of any statements or opinions as to the advisability of such purchase or as to the business,

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operations, assets, liabilities, results of operations, financial condition and prospects of the Company and the Company Subsidiaries that may have been made or given by any other Member or by any agent or employee of any other Member;

(f) Such Member has such knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of an investment in the Company and making an informed decision with respect thereto;

(g) Such Member is able to bear the economic and financial risk of an investment in the Company for an indefinite period of time;

(h) The execution, delivery and performance of this Agreement have been duly authorized by such Member and do not require such Member to obtain any consent or approval that has not been obtained and do not contravene or result in a default in any material respect under any provision of any law or regulation applicable to such Member or other governing documents or any agreement or instrument to which such Member is a party or by which such Member is bound;

(i) This Agreement is valid, binding and enforceable against such Member in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws of general applicability relating to or affecting creditors’ rights or general equity

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principles (regardless of whether considered at law or in equity); and

(j) Neither the issuance of any Units to any Member nor any provision contained herein will entitle the Member to remain in the employment of the Company or any Company Subsidiary or affect the right of the Company or any Company Subsidiary to terminate the Member’s employment at any time for any reason, other than as otherwise provided in such Member’s employment agreement or other similar agreement with the Company or Company Subsidiary, if applicable. None of the foregoing shall replace, diminish or otherwise adversely affect any Member’s representations and warranties made by it in any Subscription Agreement or Award Agreement, as applicable.

Section 4.03 No Personal Liability. Except as otherwise provided in the Delaware Act, by Applicable Law or expressly in this Agreement, no Member will be obligated personally for any debt, obligation or liability of the Company or of any Company Subsidiaries or other Members, whether arising in contract, tort or otherwise, solely by reason of being a Member.

Section 4.04 No Withdrawal. A Member shall not cease to be a Member as a result of the Bankruptcy of such Member or as a result of any other events specified in § 18-304 of the Delaware Act. So long as a

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Member continues to hold any Units, such Member shall not have the ability to withdraw or resign as a Member prior to the dissolution and winding up of the Company and any such withdrawal or resignation or attempted withdrawal or resignation by a Member prior to the dissolution or winding up of the Company shall be null and void. As soon as any Person who is a Member ceases to hold any Units, such Person shall no longer be a Member; provided, however, that this Agreement shall continue to apply with respect to any Units that have been called in accordance with Section 10.06 until full payment is made therefor in accordance with the terms of this Agreement.

Section 4.05 Death. The death of any Member shall not cause the dissolution of the Company. In such event the Company and its business shall be continued by the remaining Member or Members and the Units owned by the deceased Member shall automatically be Transferred to such Member’s heirs; provided, that within a reasonable time after such Transfer, the applicable heirs shall sign a written undertaking substantially in the form of the Joinder Agreement.

Section 4.06 Voting. (a) Except as otherwise provided by this Agreement (including Section 4.06(b) and Section 15.09) or as otherwise required by the Delaware Act or Applicable Law:

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(i) each Member shall be entitled to one vote per Preferred Unit and one vote per Common Unit on all matters upon which the Members have the right to vote under this Agreement; and

(ii) the Incentive Units (including the Unrestricted Incentive Units) shall not entitle the holders thereof to vote on any matters required or permitted to be voted on by the Members.

(b) Notwithstanding anything to the contrary contained in this Agreement, at any time that there are any Preferred Units outstanding, the Company shall not, and shall not permit any of the Company Subsidiaries to, engage in or cause any of the following transactions or take any of the following actions, and the Board shall not permit or cause the Company or any of the Company Subsidiaries to engage in, take or cause any such action except with the prior approval of the holders of a majority of the outstanding Preferred Units voting separately as a class:

(i) the issuance of any Preferred Units beyond those issued and outstanding as of the date hereof pursuant to Section 3.02 or the issuance of any Units that are senior in any respect to the Preferred Units;

(ii) the issuance of any securities by any Company Subsidiary beyond those issued and outstanding as of the date hereof;

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(iii) a merger, consolidation, conversion or other similar transaction involving the Company or any of the Company Subsidiaries in which the holders of the Units (or equivalent Company Subsidiary securities) immediately prior to such transaction hold in the aggregate less than a majority of the outstanding voting equity securities of the surviving entity immediately after such transaction;

(iv) the sale, lease or conveyance of all or substantially all of the assets of the Company and the Company Subsidiaries on a consolidated basis; or

(v) any action that results in a liquidation or dissolution of the Company or any Company Subsidiary.

Section 4.07 Meetings. (a) Voting Units. As used herein, the term “Voting Units” shall mean:

(i) the Common Units, for purposes of calling or holding any meeting of the Members holding Common Units, providing notice of such a meeting, forming a quorum for such a meeting, or taking any action by vote at a meeting or by written consent without a meeting, in all cases to take any

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action or conduct any business not described in Section 4.06(b); and

(ii) the Preferred Units, for purposes of calling or holding any meeting of the Members holding Preferred Units, providing notice of such a meeting, forming a quorum for such a meeting, or taking any action by vote at a meeting or by written consent without a meeting, in all cases to take any action or conduct any business described in Section 4.06(b).

(iii) the Preferred Units and the Common Units, for purposes of calling or holding any meeting of the Members holding Preferred Units and Common Units, providing notice of such a meeting, forming a quorum for such a meeting, or taking any action by vote at a meeting or by written consent without a meeting, in all cases to take any action or conduct any business described in Section 4.06(b).

(b) Calling the Meeting. Meetings of the Members may be called by (i) the Board or (ii) by a Member or group of Members holding more than 25% of the then-outstanding votes attributable to the relevant Voting Units. Only Members who hold the relevant Voting Units (“Voting Members”) shall have the right to attend meetings of the Members.

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Written notice stating the place, date and time of the meeting and, in the case of a meeting of the Members not regularly scheduled, describing the purposes for which the meeting is called, shall be delivered not fewer than ten (10) days and not more than thirty (30) days before the date of the meeting to each Voting Member, by or at the direction of the Board or the Member(s) calling the meeting, as the case may be. The Voting Members may hold meetings at the Company’s principal office or at such other place as the Board or the Member(s) calling the meeting may designate in the notice for such meeting.

(d) Participation. Any Voting Member may participate in a meeting of the Voting Members by means of conference telephone or other communications equipment by means of which all Persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

(e) Vote by Proxy. On any matter that is to be voted on by Voting Members, a Voting Member may vote in person or by proxy, and such proxy may be granted in writing, by means of Electronic Transmission or as otherwise permitted by Applicable Law. Every proxy shall be revocable in the discretion of the Voting Member executing it unless otherwise provided in such proxy; provided, that such right to revocation shall not invalidate or otherwise affect actions taken under such proxy prior to such revocation.

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(f) Conduct of Business. The business to be conducted at such meeting need not be limited to the purpose described in the notice and can include business to be conducted by Voting Members holding Common Units and Voting Members holding Preferred Units; provided, that the appropriate Voting Members shall have been notified of the meeting in accordance with Section 4.07(c); and provided, further, that any Voting Member holding the appropriate Voting Units shall have the right to request removal from the meeting of any Voting Member holding only Preferred Units or only Common Units prior to any discussion of business at the meeting for which such Units do not have a vote pursuant to the provisions of this Agreement. Attendance of a Member at any meeting shall constitute a waiver of notice of such meeting, except where a Member attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 4.08 Quorum. A quorum of any meeting of the Voting Members shall require the presence of the Members holding a majority of the appropriate Voting Units held by all Members. Subject to Section 4.09, no action at any meeting may be taken by the Members unless the appropriate quorum is present. Subject to Section 4.09, no action may be taken by the Members at any meeting at which a quorum is present without the affirmative vote of Members holding a majority of the appropriate Voting Units held by all Members.

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Section 4.09 Action Without Meeting. Notwithstanding the provisions of Section 4.08, any matter that is to be voted on, consented to or approved by Voting Members may be taken without a meeting, without prior notice and without a vote if consented to, in writing or by Electronic Transmission, by a Member or Members holding not less than a majority of the appropriate Voting Units held by all Members. A record shall be maintained by the Board of each such action taken by written consent of a Member or Members.

Section 4.10 Power of Members. The Members shall have the power to exercise any and all rights or powers granted to Members pursuant to the express terms of this Agreement and the Delaware Act. Except as otherwise specifically provided by this Agreement or required by the Delaware Act, no Member, in its capacity as a Member, shall have the power to act for or on behalf of, or to bind, the Company.

Section 4.11 No Interest in Company Property. No real or personal property of the Company shall be deemed to be owned by any Member individually, but shall be owned by, and title shall be vested solely in, the Company. Without limiting the foregoing, each Member hereby irrevocably waives during the term of the Company any right that such Member may have to maintain any action for partition with respect to the property of the Company.

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ARTICLE V. CAPITAL CAPITAL ACCOUNTS

CONTRIBUTIONS;

Section 5.01 Initial Capital Contributions. Contemporaneously with the execution of this Agreement and as set forth in the respective Subscription Agreements, each Member owning Units has made the Capital Contribution giving rise to such Initial Member’s initial Capital Account and is deemed to own the number, type, series and class of Units, in each case, in the amounts set forth opposite such Member’s name on the Members Schedule as in effect on the date hereof.

Section 5.02 Additional Capital Contributions. (a) No Member shall be required to make any additional Capital Contributions to the Company. Any future Capital Contributions made by any Member shall only be made with the consent of the Board and in connection with an issuance of Units made in compliance with Section 9.01.

(b) No Member shall be required to lend any funds to the Company and no Member shall have any personal liability for the payment or repayment of any Capital Contribution by or to any other Member.

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Maintenance of Capital Accounts. The Company shall establish and maintain for each Member a separate capital account (a “Capital Account”) on its books and records in accordance with this Section 5.03. Each Capital Account shall be established and maintained in accordance with the following provisions:

(a) Each Member’s Capital Account shall be increased by the amount of:

(i) such Member’s Capital Contributions, including such Member’s initial Capital Contribution;

(ii) any Net Income or other item of income or gain allocated to such Member pursuant to Article VI; and

(iii) any liabilities of the Company that are assumed by such Member or secured by any property Distributed to such Member.

(b) Each Member’s Capital Account shall be decreased by:

(i) the cash amount or Book Value of any property Distributed to such Member pursuant to Article VII and Section 13.03(c);

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(ii) the amount of any Net Loss or other item of loss or deduction allocated to such Member pursuant to Article VI; and

(iii) the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

Section 5.04 Succession Upon Transfer. In the event that any Units are Transferred in accordance with the terms of this Agreement, the Transferee shall succeed to the Capital Account of the Transferor to the extent it relates to the Transferred Units and, subject to Section 6.04, shall receive allocations and Distributions pursuant to Article VI, Article VII and Article XIII in respect of such Units.

Section 5.05 Negative Capital Accounts. In the event that any Member shall have a deficit balance in his, her or its Capital Account, such Member shall have no obligation, during the term of the Company or upon dissolution or liquidation thereof, to restore such negative balance or make any Capital Contributions to the Company by reason thereof, except as may be required by Applicable Law or in respect of any negative balance resulting from a withdrawal of capital or dissolution in contravention of this Agreement.

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Section 5.06 No Withdrawal. No Member shall be entitled to withdraw any part of his, her or its Capital Account or to receive any Distribution from the Company, except as provided in this Agreement. No Member shall receive any interest, salary or drawing with respect to its Capital Contributions or its Capital Account, except as otherwise provided in this Agreement. The Capital Accounts are maintained for the sole purpose of allocating items of income, gain, loss and deduction among the Members and shall have no effect on the amount of any Distributions to any Members, in liquidation or otherwise.

Section 5.07 Treatment of Loans From Members. Loans by any Member to the Company shall not be considered Capital Contributions and shall not affect the maintenance of such Member’s Capital Account, other than to the extent provided in Section 5.03(a)(iii), if applicable.

Section 5.08 Modifications. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Section 1.704-1(b) of the Treasury Regulations and shall be interpreted and applied in a manner consistent with such Treasury Regulations. If the Board determines that it is prudent to modify the manner in which the Capital Accounts, or any increases or decreases to the Capital Accounts, are computed in order to comply with

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such Treasury Regulations, the Board may authorize such modifications.

ARTICLE VI. ALLOCATIONS Section 6.01 Allocation of Net Income and Net Loss. For each Fiscal Year (or portion thereof), except as otherwise provided in this Agreement, Net Income and Net Loss (and, to the extent necessary, individual items of income, gain, loss or deduction) of the Company shall be allocated among the Members in a manner such that, after giving effect to the special allocations set forth in Section 6.02, the Capital Account balance of each Member, immediately after making such allocations, is, as nearly as possible, equal to (i) the Distributions that would be made to such Member pursuant to Section 13.03(c) if the Company were dissolved, its affairs wound up and its assets sold for cash equal to their Book Value, all Company liabilities were satisfied (limited with respect to each Nonrecourse Liability to the Book Value of the assets securing such liability), and the net assets of the Company were Distributed, in accordance with Section 13.03(c), to the Members immediately after making such allocations, minus (ii) such Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets.

Section 6.02 Regulatory and Special Allocations. Notwithstanding the provisions of Section 6.01:

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(a) If there is a net decrease in Company Minimum Gain (determined according to Treasury Regulations Section 1.7042(d)(1)) during any Fiscal Year, each Member shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g). The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.02(a) is intended to comply with the “minimum gain chargeback” requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.

(b) Member Nonrecourse Deductions shall be allocated in the manner required by Treasury Regulations Section 1.704-2(i). Except as otherwise provided in Treasury Regulations Section 1.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Fiscal Year, each Member that has a share of such Member Minimum Gain shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to that Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain. Items to be allocated pursuant to this paragraph shall be determined in accordance with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.02(b) is intended to comply with the “minimum gain chargeback” requirements in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(c) 141

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), Net Income shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or Distributions as quickly as possible. This Section 6.02(c) is intended to comply with the qualified income offset requirement in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(d) The allocations set forth in paragraphs (a), (b) and (c) above (the “Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations under Code Section 704. Notwithstanding any other provisions of this Article VI (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating Net Income and Net Losses among Members so that, to the extent possible, the net amount of such allocations of Net Income and Net Losses and other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to such Member if the Regulatory Allocations had not occurred.

(e) The Company and the Members acknowledge that allocations like those described in Proposed Treasury Regulation Section 1.704-1(b)(4)(xii)(c) (“Forfeiture Allocations”) result from the allocations of Net Income and Net Loss provided for in this Agreement. For the avoidance of doubt, the Company is entitled to make Forfeiture Allocations and, once required by applicable final or temporary guidance,

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allocations of Net Income and Net Loss will be made in accordance with Proposed Treasury Regulation Section 1.7041(b)(4)(xii)(c) or any successor provision or guidance.

Section 6.03 Tax Allocations. (a) Subject to Section 6.03(b) through Section 6.03(e), all income, gains, losses and deductions of the Company shall be allocated, for federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses and deductions among the Members for computing their Capital Accounts, except that if any such allocation for tax purposes is not permitted by the Code or other Applicable Law, the Company’s subsequent income, gains, losses and deductions shall be allocated among the Members for tax purposes, to the extent permitted by the Code and other Applicable Law, so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.

(b) Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall be allocated among the Members in accordance with Code Section 704(c) and the traditional method of Treasury Regulations Section 1.704-3(b), so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Book Value.

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If the Book Value of any Company asset is adjusted pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) as provided in clause (c) of the definition of Book Value, subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c).

(d) Allocations of tax credit, tax credit recapture and any items related thereto shall be allocated to the Members according to their interests in such items as determined by the Board taking into account the principles of Treasury Regulations Section 1.704-1(b)(4)(ii).

(e) The Company shall make allocations pursuant to this Section 6.03 in accordance with the traditional method in accordance with Treasury Regulations Section 1.704-3(d).

(f) Allocations pursuant to this Section 6.03 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Losses, Distributions or other items pursuant to any provisions of this Agreement.

Section 6.04 Allocations in Respect of Transferred Units.

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In the event of a Transfer of Units during any Fiscal Year made in compliance with the provisions of Article X, Net Income, Net Losses and other items of income, gain, loss and deduction of the Company attributable to such Units for such Fiscal Year shall be determined using the interim closing of the books method.

Section 6.05 Curative Allocations. In the event that the Tax Matters Member determines, after consultation with counsel experienced in income tax matters, that the allocation of any item of Company income, gain, loss or deduction is not specified in this Article VI (an “Unallocated Item”), or that the allocation of any item of Company income, gain, loss or deduction hereunder is clearly inconsistent with the Members’ economic interests in the Company (determined by reference to the general principles of Treasury Regulations Section 1.704-1(b) and the factors set forth in Treasury Regulations Section 1.704-1(b)(3)(ii)) (a “Misallocated Item”), then the Board may allocate such Unallocated Items, or reallocate such Misallocated Items, to reflect such economic interests; provided, that no such allocation will be made without the prior consent of each Member that would be adversely and disproportionately affected thereby; and provided, further, that no such allocation shall have any material effect on the amounts distributable to any Member, including the amounts to be distributed upon the complete liquidation of the Company.

ARTICLE VII. DISTRIBUTIONS Section 7.01 General. 145

(a) Subject to Section 7.01(b), Section 7.02 and Section 7.04, the Board shall have sole discretion regarding the amounts and timing of Distributions to Members, including to decide to forego payment of Distributions in order to provide for the retention and establishment of reserves of, or payment to third parties of, such funds as it deems necessary with respect to the reasonable business needs of the Company (which needs may include the payment or the making of provision for the payment when due of the Company’s obligations, including, but not limited to, present and anticipated debts and obligations, capital needs and expenses, the payment of any management or administrative fees and expenses, and reasonable reserves for contingencies).

(b) Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make any Distribution to Members if such Distribution would violate § 18-607 of the Delaware Act or other Applicable Law.

Section 7.02 Priority of Distributions. After making all Distributions required for a given Fiscal Year under Section 7.04 and subject to the priority of Distributions pursuant to Section 13.03(c), if applicable, all Distributions determined to be made by the Board pursuant to Section 7.01 shall be made in the following manner:

(a) first, to the Members pro rata in proportion to their holdings of Preferred Units, until Distributions under this

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Section 7.02(a) equal the Preferred Unpaid Yield in respect of all the Preferred Units owned by the Members as of the time of such Distribution;

(b) second, to the Members pro rata in proportion to their holdings of Preferred Units, until Distributions under this Section 7.02(b) equal the aggregate amount of Capital Contributions attributable to the Members in respect of their acquisitions of Preferred Units;

(c) third, any remaining amounts to the Members holding Preferred Units, Common Units and Incentive Units (subject to Section 7.03) pro rata in proportion to their aggregate holdings of Preferred Units, Common Units and Incentive Units treated as one class of Units.

Section 7.03 Limitations on Distributions to Incentive Units. (a) Notwithstanding the provisions of Section 7.02(c), no Distribution (other than Distributions pursuant to Section 7.04) shall be made to a Member on account of its Restricted Incentive Units. Any amount that would otherwise be Distributed to such a Member but for the application of the preceding sentence shall instead be retained in a segregated Company account to be Distributed in accordance with Section 7.02(c) by the Company and paid to such Member if,

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as and when the Restricted Incentive Unit to which such retained amount relates vests pursuant to Section 3.04(c).

(b) It is the intention of the parties to this Agreement that Distributions to any Service Provider with respect to his Incentive Units be limited to the extent necessary so that the related Membership Interest constitutes a Profits Interest. In furtherance of the foregoing, and notwithstanding anything to the contrary in this Agreement, the Board shall, if necessary, limit any Distributions to any Service Provider with respect to his Incentive Units so that such Distributions do not exceed the available profits in respect of such Service Provider’s related Profits Interest. Available profits shall include the aggregate amount of profit and unrealized appreciation in all of the assets of the Company between the date of issuance of such Incentive Units and the date of such Distribution, it being understood that such unrealized appreciation shall be determined on the basis of the Profits Interest Hurdle applicable to such Incentive Unit. In the event that a Service Provider’s Distributions and allocations with respect to his Incentive Units are reduced pursuant to the preceding sentence, an amount equal to such excess Distributions shall be treated as instead apportioned to the holders of Common Units and Incentive Units that have met their Profits Interest Hurdle (such Incentive Units, “Qualifying Incentive Units”), pro rata in proportion to their aggregate holdings of Common Units and Qualifying Incentive Units treated as one class of Units.

Section 7.04 Tax Advances. (a) 148

Subject to any restrictions in any of the Company’s and/or any Company Subsidiary’s then applicable debt-financing arrangements, and subject to the Board’s sole discretion to retain any other amounts necessary to satisfy the Company’s and/or the Company Subsidiaries’ obligations, at least five (5) days before each date prescribed by the Code for a calendaryear corporation to pay quarterly installments of estimated tax, the Company shall use commercially reasonable efforts to Distribute cash to each Member in proportion to and to the extent of such Member’s Quarterly Estimated Tax Amount for the applicable calendar quarter (each such Distribution, a “Tax Advance”).

(b) If, at any time after the final Quarterly Estimated Tax Amount has been Distributed pursuant to Section 7.04(a) with respect to any Fiscal Year, the aggregate Tax Advances to any Member with respect to such Fiscal Year are less than such Member’s Tax Amount for such Fiscal Year (a “Shortfall Amount”), the Company shall use commercially reasonable efforts to Distribute cash in proportion to and to the extent of each Member’s Shortfall Amount. The Company shall use commercially reasonable efforts to Distribute Shortfall Amounts with respect to a Fiscal Year before the 75th day of the next succeeding Fiscal Year; provided, that if the Company has made Distributions other than pursuant to this Section 7.04, the Board may apply such Distributions to reduce any Shortfall Amount.

(c) If the aggregate Tax Advances made to any Member pursuant to this Section 7.04 for any Fiscal Year exceed such Member’s Tax Amount (an “Excess Amount”), such Excess Amount shall reduce subsequent Tax Advances that

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would be made to such Member pursuant to this Section 7.04, except to the extent taken into account as an advance pursuant to Section 7.04(d).

(d) Any Distributions made pursuant to this Section 7.04 shall be treated for purposes of this Agreement as advances on Distributions pursuant to Section 7.02 and shall reduce, dollar-for-dollar, the amount otherwise Distributable to such Member pursuant to Section 7.02.

Section 7.05 Tax Withholding; Withholding Advances. (a) Tax Withholding. If requested by the Board, each Member shall, if able to do so, deliver to the Board:

(i) an affidavit in form satisfactory to the Board that the applicable Member (or its members, as the case may be) is not subject to withholding under the provisions of any federal, state, local, foreign or other Applicable Law;

(ii) any certificate that the Board may reasonably request with respect to any such laws; and/or

(iii)

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any other form or instrument reasonably requested by the Board relating to any Member’s status under such law. If a Member fails or is unable to deliver to the Board the affidavit described in Section 7.05(a)(i), the Board may withhold amounts from such Member in accordance with Section 7.05(b).

(b) Withholding Advances. The Company is hereby authorized at all times to make payments (“Withholding Advances”) with respect to each Member in amounts required to discharge any obligation of the Company (as determined by the Tax Matters Member based on the advice of legal or tax counsel to the Company) to withhold or make payments to any federal, state, local or foreign taxing authority (a “Taxing Authority”) with respect to any Distribution or allocation by the Company of income or gain to such Member and to withhold the same from Distributions to such Member. Any funds withheld from a Distribution by reason of this Section 7.05(b) shall nonetheless be deemed Distributed to the Member in question for all purposes under this Agreement and, at the option of the Board, shall be charged against the Member’s Capital Account.

(c) Repayment of Withholding Advances. Any Withholding Advance made by the Company to a Taxing Authority on behalf of a Member and not simultaneously withheld from a Distribution to that Member shall, with interest thereon accruing from the date of payment at a rate equal to the prime rate published in the Wall Street

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Journal on the date of payment plus two percent (2.0%) per annum (the “Company Interest Rate”):

(i) be promptly repaid to the Company by the Member on whose behalf the Withholding Advance was made (which repayment by the Member shall not constitute a Capital Contribution, but shall credit the Member’s Capital Account if the Board shall have initially charged the amount of the Withholding Advance to the Capital Account); or

(ii) with the consent of the Board, be repaid by reducing the amount of the next succeeding Distribution or Distributions to be made to such Member (which reduction amount shall be deemed to have been Distributed to the Member, but which shall not further reduce the Member’s Capital Account if the Board shall have initially charged the amount of the Withholding Advance to the Capital Account). Interest shall cease to accrue from the time the Member on whose behalf the Withholding Advance was made repays such Withholding Advance (and all accrued interest) by either method of repayment described above.

(d) Indemnification. Each Member hereby agrees to indemnify and hold harmless the Company and the other Members from and against any liability with respect to taxes, interest or penalties which may be asserted by reason of the Company’s failure to deduct and withhold tax on amounts Distributable or allocable to such Member. The provisions of this Section

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7.05(d) and the obligations of a Member pursuant to Section 7.05(c) shall survive the termination, dissolution, liquidation and winding up of the Company and the withdrawal of such Member from the Company or Transfer of its Units. The Company may pursue and enforce all rights and remedies it may have against each Member under this Section 7.05, including bringing a lawsuit to collect repayment with interest of any Withholding Advances.

(e) Over-withholding. Neither the Company nor the Board shall be liable for any excess taxes withheld in respect of any Distribution or allocation of income or gain to a Member. In the event of an over-withholding, a Member’s sole recourse shall be to apply for a refund from the appropriate Taxing Authority.

Section 7.06 Distributions in Kind. (a) The Board is hereby authorized, in its sole discretion, to make Distributions to the Members in the form of securities or other property held by the Company; provided, that Tax Advances shall only be made in cash. In any non-cash Distribution, the securities or property so Distributed will be Distributed among the Members in the same proportion and priority as cash equal to the Fair Market Value of such securities or property would be Distributed among the Members pursuant to Section 7.02.

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Any Distribution of securities shall be subject to such conditions and restrictions as the Board determines are required or advisable to ensure compliance with Applicable Law. In furtherance of the foregoing, the Board may require that the Members execute and deliver such documents as the Board may deem necessary or appropriate to ensure compliance with all federal and state securities laws that apply to such Distribution and any further Transfer of the Distributed securities, and may appropriately legend the certificates that represent such securities to reflect any restriction on Transfer with respect to such laws.

ARTICLE VIII. MANAGEMENT Section 8.01 Establishment of the Board. A board of managers of the Company (the “Board”) is hereby established and shall be comprised of natural Persons (each such Person, a “Manager”) who shall be appointed in accordance with the provisions of Section 8.02. The business and affairs of the Company shall be managed, operated and controlled by or under the direction of the Board, and the Board shall have, and is hereby granted, the full and complete power, authority and discretion for, on behalf of and in the name of the Company, to take such actions as it may in its sole discretion deem necessary or advisable to carry out any and all of the objectives and purposes of the Company, subject only to the terms of this Agreement.

Section 8.02 Board Composition; Vacancies. (a) 154

The Company and the Members shall take such actions as may be required to ensure that the number of managers constituting the Board is at all times five (5). The Board shall be comprised as follows:

(i) three (3) individuals designated by the Sponsor Majority Unitholders (the “Sponsor Managers”), who shall initially be [NAMES]; and

(ii) two (2) individuals designated by all other Unitholders other than the Sponsor (the “Non-Sponsor Managers”), who shall initially be [NAMES]. At all times, the composition of any board of directors of any Company Subsidiary shall be the same as that of the Board.

(b) In the event that a vacancy is created on the Board at any time due to the death, Disability, retirement, resignation or removal of a Sponsor Manager, then the Sponsor Majority Unitholders shall have the right to designate an individual to fill such vacancy and the Company and each Member hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board. In the event that the Sponsor Majority Unitholders shall fail to designate in writing a representative to fill a vacant Sponsor Manager position on the Board, and such failure shall continue for more than thirty (30) days after notice from the Company to Sponsor with respect to such failure, then the vacant position shall be filled by an individual designated by the Sponsor Managers then in office; provided, that such individual shall be removed from such

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position if the Sponsor Majority Unitholders so direct and simultaneously designate a new Sponsor Manager.

(c) In the event that a vacancy is created on the Board at any time due to the death, Disability, retirement, resignation or removal of a Non-Sponsor Manager, then the Unitholders other than the Sponsor owning a majority of the Units held by all such Unitholders shall have the right to designate an individual to fill such vacancy and the Company and each Member hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board. In the event that such Unitholders shall fail to designate in writing a representative to fill a vacant Non-Sponsor Manager position on the Board, and such failure shall continue for more than thirty (30) days after notice from the Company to Sponsor with respect to such failure, then the vacant position shall be filled by an individual designated by the Non-Sponsor Managers then in office; provided, that such individual shall be removed from such position if the Unitholders other than the Sponsor owning a majority of the Units owned by all such Unitholders so direct and simultaneously designate a new Non-Sponsor Manager.

Section 8.03 Removal; Resignation. (a) A Manager may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the Unitholders entitled to designate such Manager.

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(b) A Manager may resign at any time from the Board by delivering his written resignation to the Board. Any such resignation shall be effective upon receipt thereof unless it is specified to be effective at some other time or upon the occurrence of some other event. The Board’s acceptance of a resignation shall not be necessary to make it effective.

Section 8.04 Meetings. (a) Generally. The Board shall meet at such time and at such place as the Board may designate. Meetings of the Board may be held either in person or by means of telephone or video conference or other communications device that permits all Managers participating in the meeting to hear each other, at the offices of the Company or such other place (either within or outside the State of Delaware) as may be determined from time to time by the Board. Written notice of each meeting of the Board shall be given to each Manager at least 24 hours prior to each such meeting.

(b) Special Meetings. Special meetings of the Board shall be held on the call of any three Managers upon at least five days’ written notice (if the meeting is to be held in person) or one day’s written notice (if the meeting is to be held by telephone communications or video conference) to the Managers, or upon such shorter

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notice as may be approved by all the Managers. Any Manager may waive such notice as to himself.

(c) Attendance and Waiver of Notice. Attendance of a Manager at any meeting shall constitute a waiver of notice of such meeting, except where a Manager attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting.

Section 8.05 Quorum; Manner of Acting. (a) Quorum. A majority of the Managers serving on the Board shall constitute a quorum for the transaction of business of the Board. At all times when the Board is conducting business at a meeting of the Board, a quorum of the Board must be present at such meeting. If a quorum shall not be present at any meeting of the Board, then the Managers present at the meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

(b)

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Participation. Any Manager may participate in a meeting of the Board by means of telephone or video conference or other communications device that permits all Managers participating in the meeting to hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. A Manager may vote or be present at a meeting either in person or by proxy, and such proxy may be granted in writing, by means of Electronic Transmission or as otherwise permitted by Applicable Law.

(c) Binding Act. Each Manager shall have one vote on all matters submitted to the Board or any committee thereof. With respect to any matter before the Board, the act of a majority of the Managers constituting a quorum shall be the act of the Board.

Section 8.06 Action By Written Consent. Notwithstanding anything herein to the contrary, any action of the Board (or any committee of the Board) may be taken without a meeting if either (a) a written consent of a majority of the Managers on the Board (or committee) shall approve such action; provided, that prior written notice of such action is provided to all Managers at least one day before such action is taken, or (b) a written consent constituting all of the Managers on the Board (or committee) shall approve such action. Such consent shall have the same force and effect as a vote at a meeting where a quorum was present and

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may be stated as such in any document or instrument filed with the Secretary of State of Delaware.

Section 8.07 Compensation; No Employment. (a) Each Manager shall be reimbursed for his reasonable outof-pocket expenses incurred in the performance of his duties as a Manager, pursuant to such policies as from time to time established by the Board. Nothing contained in this Section 8.07 shall be construed to preclude any Manager from serving the Company in any other capacity and receiving reasonable compensation for such services.

(b) This Agreement does not, and is not intended to, confer upon any Manager any rights with respect to continued employment by the Company, and nothing herein should be construed to have created any employment agreement with any Manager.

Section 8.08 Committees. (a) Establishment. The Board may, by resolution, designate from among the Managers one or more committees, each of which shall be comprised of one or more Managers; provided, that in no event may the Board designate any committee with all of the

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authority of the Board. Subject to the immediately preceding proviso, any such committee, to the extent provided in the resolution forming such committee, shall have and may exercise the authority of the Board, subject to the limitations set forth in Section 8.08(b). The Board may dissolve any committee or remove any member of a committee at any time.

(b) Limitation of Authority. No committee of the Board shall have the authority of the Board in reference to:

(i) authorizing or making Distributions to the Members;

(ii) authorizing the issuance of Preferred or Common Units;

(iii) approving a plan of merger or sale of the Company;

(iv) recommending to the Members a voluntary dissolution of the Company or a revocation thereof;

(v) filling vacancies in the Board; or

(vi) altering or repealing any resolution of the Board that by its terms provides that it shall not be so amendable or

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repealable.

Section 8.09 Officers. The Board may appoint individuals as officers of the Company (the “Officers”) as it deems necessary or desirable to carry on the business of the Company and the Board may delegate to such Officers such power and authority as the Board deems advisable. No Officer need be a Member or Manager. Any individual may hold two or more offices of the Company. Each Officer shall hold office until his successor is designated by the Board or until his earlier death, resignation or removal. Any Officer may resign at any time upon written notice to the Board. Any Officer may be removed by the Board (acting by majority vote of all Managers other than the Officer being considered for removal, if applicable) with or without cause at any time. A vacancy in any office occurring because of death, resignation, removal or otherwise, may, but need not, be filled by the Board.

Section 8.10 No Personal Liability. Except as otherwise provided in the Delaware Act, by Applicable Law or expressly in this Agreement, no Manager will be obligated personally for any debt, obligation or liability of the Company or of any Company Subsidiaries, whether arising in contract, tort or otherwise, solely by reason of being a Manager.

ARTICLE IX. PRE-EMPTIVE RIGHTS Section 9.01 162

Pre-emptive Right. (a) Issuance of New Securities. The Company hereby grants to each holder of Preferred Units or Common Units (each, a “Pre-emptive Member”) the right to purchase its Pro Rata Portion of any New Securities that the Company may from time to time propose to issue or sell to any party between the date hereof and the consummation of a Qualified Public Offering.

(b) Definition of New Securities. As used herein:

(i) the term “New Preferred Securities” shall mean any authorized but unissued Preferred Units and any Unit Equivalents convertible into Preferred Units, exchangeable or exercisable for Preferred Units, or providing a right to subscribe for, purchase or acquire Preferred Units;

(ii) the term “New Common Securities” shall mean any authorized but unissued Common Units and any Unit Equivalents convertible into Common Units, exchangeable or exercisable for Common Units, or providing a right to subscribe for, purchase or acquire Common Units; and

(iii)

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the term “New Securities” shall mean the New Preferred Securities and the New Common Securities, as applicable; provided, that neither the term “New Preferred Securities” nor the term “New Common Securities” shall include Units or Unit Equivalents issued or sold by the Company in connection with: (A) a grant to any existing or prospective Managers, Officers or other Service Providers pursuant to any Incentive Plan or similar equity-based plans or other compensation agreement; (B) the conversion or exchange of any securities of the Company into Units, or the exercise of any warrants or other rights to acquire Units; (C) any acquisition by the Company or any Company Subsidiary of any equity interests, assets, properties or business of any Person; (D) any merger, consolidation or other business combination involving the Company or any Company Subsidiary; (E) the commencement of any Public Offering or any transaction or series of related transactions involving a Change of Control; (F) any subdivision of Units (by a split of Units or otherwise), payment of Distributions or any similar recapitalization; (G) any private placement of warrants to purchase Membership Interests to lenders or other institutional investors (excluding the Members) in any arm’s length transaction in which such lenders or investors provide debt financing to the Company or any Company Subsidiary; (H) a joint venture, strategic alliance or other commercial relationship with any Person (including Persons that are customers, suppliers and strategic partners of the Company or any Company Subsidiary) relating to the operation of the Company’s or any Company Subsidiary’s business and not for the primary purpose of raising equity capital; or (I) any office lease or equipment lease or similar equipment financing transaction in which the Company or any Company Subsidiary obtains from a lessor or vendor the use of such office space or equipment for its business.

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(c) Additional Issuance Notices. The Company shall give written notice (an “Issuance Notice”) of any proposed issuance or sale described in Section 9.01(a) to the Pre-emptive Members within five (5) Business Days following any meeting of the Board at which any such issuance or sale is approved. The Issuance Notice shall, if applicable, be accompanied by a written offer from any prospective purchaser seeking to purchase New Securities (a “Prospective Purchaser”) and shall set forth the material terms and conditions of the proposed issuance or sale, including:

(i) the number and description of the New Securities proposed to be issued and the percentage of the Company’s Units then outstanding on a Fully Diluted Basis (both in the aggregate and with respect to each class or series of Units proposed to be issued) that such issuance would represent;

(ii) the proposed issuance date, which shall be at least ten (10) Business Days from the date of the Issuance Notice;

(iii) the proposed purchase price per unit of the New Securities; and

(iv) if the consideration to be paid by the Prospective Purchaser includes non-cash consideration, the Board’s good-

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faith determination of the Fair Market Value thereof. The Issuance Notice shall also be accompanied by a current copy of the Members Schedule indicating the Pre-emptive Members’ holdings of Preferred Units and Common Units in a manner that enables each Pre-emptive Member to calculate its Pro Rata Portion of any New Securities.

(d) Exercise of Pre-emptive Rights. Each Pre-emptive Member shall for a period of ten (10) Business Days following the receipt of an Issuance Notice (the “Exercise Period”) have the right to elect irrevocably to purchase all or any portion of its Pro Rata Portion of any New Securities at the purchase prices set forth in the Issuance Notice by delivering a written notice to the Company (an “Acceptance Notice”) specifying the number of New Securities it desires to purchase. The delivery of an Acceptance Notice by a Pre-emptive Member shall be a binding and irrevocable offer by such Member to purchase the New Securities described therein. The failure of a Pre-emptive Member to deliver an Acceptance Notice by the end of the Exercise Period shall constitute a waiver of its rights under this Section 9.01 with respect to the purchase of such New Securities, but shall not affect its rights with respect to any future issuances or sales of New Securities.

(e) Over-allotment. No later than five (5) Business Days following the expiration of the Exercise Period, the Company shall notify each Pre-emptive Member in writing of the number of New Securities that each Pre-emptive Member has agreed to

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purchase (including, for the avoidance of doubt, where such number is zero) (the “Over-allotment Notice”). Each Preemptive Member exercising its rights to purchase its Pro Rata Portion of the New Securities in full (an “Exercising Member”) shall have a right of over-allotment such that if any other Pre-emptive Member has failed to exercise its right under this Section 9.01 to purchase its full Pro Rata Portion of the New Securities (each, a “Non-Exercising Member”), such Exercising Member may purchase its Pro Rata Portion of such Non-Exercising Member’s allotment by giving written notice to the Company within five (5) Business Days of receipt of the Over-allotment Notice (the “Over-allotment Exercise Period”).

(f) Sales to the Prospective Purchaser. Following the expiration of the Exercise Period and, if applicable, the Over-allotment Exercise Period, the Company shall be free to complete the proposed issuance or sale of New Securities described in the Issuance Notice with respect to which Pre-emptive Members declined to exercise the preemptive right set forth in this Section 9.01 on terms no less favorable to the Company than those set forth in the Issuance Notice (except that the amount of New Securities to be issued or sold by the Company may be reduced); provided, that: (i) such issuance or sale is closed within ten (10) Business Days after the expiration of the Exercise Period and, if applicable, the Over-allotment Exercise Period (subject to the extension of such ten(10) Business Day period for a reasonable time not to exceed twenty (20) Business Days to the extent reasonably necessary to obtain any third-party approvals); and (ii) for the avoidance of doubt, the price at which the New Securities are sold to the Prospective Purchaser is at least equal to or higher than the purchase price described in the Issuance Notice. In

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the event the Company has not sold such New Securities within such time period, the Company shall not thereafter issue or sell any New Securities without first again offering such securities to the Members in accordance with the procedures set forth in this Section 9.01.

(g) Closing of the Issuance. The closing of any purchase by any Pre-emptive Member shall be consummated concurrently with the consummation of the issuance or sale described in the Issuance Notice. Upon the issuance or sale of any New Securities in accordance with this Section 9.01, the Company shall deliver the New Securities free and clear of any liens (other than those arising hereunder and those attributable to the actions of the purchasers thereof), and the Company shall so represent and warrant to the purchasers thereof, and further represent and warrant to such purchasers that such New Securities shall be, upon issuance thereof to the Exercising Members and after payment therefor, duly authorized, validly issued, fully paid and non-assessable. The Company, in the discretion of the Board pursuant to Section 3.06(a), may deliver to each Exercising Member certificates evidencing the New Securities. Each Exercising Member shall deliver to the Company the purchase price for the New Securities purchased by it by certified or bank check or wire transfer of immediately available funds. Each party to the purchase and sale of New Securities shall take all such other actions as may be reasonably necessary to consummate the purchase and sale including, without limitation, entering into such additional agreements as may be necessary or appropriate.

Section 9.02 168

Company’s Alternate Option. In lieu of complying with the provisions of Section 9.01(c)–(g), the Company may elect to issue New Securities and give notice to the Pre-emptive Members within 30 days after the issuance of New Securities. Such notice shall describe the type, price and terms of the New Securities, and each Member shall have thirty days from the date of receipt of such notice to elect to purchase up to the number of New Securities that would, if purchased by such Member, maintain such Member’s pro rata share of the total aggregate Units on a Fully Diluted Basis, prior to giving effect to the issuance of such New Securities. The closing of such sale shall occur within 60 days of the date of notice to the Preemptive Members.

ARTICLE X. TRANSFER

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Section 10.01 General Restrictions on Transfer. (a) Each Member acknowledges and agrees that, until the consummation of a Qualified Public Offering, such Member (or any Permitted Transferee of such Member) shall not Transfer any Units or Unit Equivalents except as permitted pursuant to Section 10.02 or in accordance with the procedures described in Section 10.03 through Section 10.07, as applicable. Notwithstanding the foregoing or anything in this Agreement to the contrary,

(i) Transfers of Incentive Units shall not be permitted prior to the consummation of a Qualified Public Offering except: (A)  pursuant to Section 10.02; (B)    when required of a Drag-along Member pursuant to Section 10.04; (C)  as set forth in Section 10.06 and Section 10.07; or (D)    upon the exercise of a tag-along right by a Tag-along Member pursuant to Section 10.05. (E)    as set forth in the Incentive Plan or applicable Award Agreement. No Transfer of Units or Unit Equivalents to a Person not already a Member of the Company shall be deemed completed until the prospective Transferee is admitted as a Member of the Company in accordance with Section 4.01(b) hereof.

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(b) Notwithstanding any other provision of this Agreement (including Section 10.02), prior to the consummation of a Qualified Public Offering, each Member agrees that it will not, directly or indirectly, Transfer any of its Units or Unit Equivalents, and the Company agrees that it shall not issue any Units or Unit Equivalents:

(i) except as permitted under the Securities Act and other applicable federal or state securities or blue sky laws, and then, with respect to a Transfer of Units or Unit Equivalents, if requested by the Company, only upon delivery to the Company of an opinion of counsel in form and substance satisfactory to the Company to the effect that such Transfer may be effected without registration under the Securities Act;

(ii) if such Transfer or issuance would cause the Company to be considered a “publicly traded partnership” under Section 7704(b) of the Code within the meaning of Treasury Regulation Section 1.7704-1(h)(1)(ii), including the lookthrough rule in Treasury Regulation Section 1.7704-1(h)(3);

(iii) if such Transfer or issuance would affect the Company’s existence or qualification as a limited liability company under the Delaware Act;

(iv) if such Transfer or issuance would cause the Company to lose its status as a partnership for federal income tax purposes;

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(v) if such Transfer or issuance would cause a termination of the Company for federal income tax purposes;

(vi) if such Transfer or issuance would cause the Company or any of the Company Subsidiaries to be required to register as an investment company under the Investment Company Act of 1940, as amended; or

(vii) if such Transfer or issuance would cause the assets of the Company or any of the Company Subsidiaries to be deemed “Plan Assets” as defined under the Employee Retirement Income Security Act of 1974 or its accompanying regulations or result in any “prohibited transaction” thereunder involving the Company or any Company Subsidiary. In any event, the Board may refuse the Transfer to any Person if such Transfer would have a material adverse effect on the Company as a result of any regulatory or other restrictions imposed by any Governmental Authority.

(c) Any Transfer or attempted Transfer of any Units or Unit Equivalents in violation of this Agreement shall be null and void, no such Transfer shall be recorded on the Company’s books and the purported Transferee in any such Transfer shall not be treated (and the purported Transferor shall continue be treated) as the owner of such Units or Unit Equivalents for all purposes of this Agreement.

(d) 172

For the avoidance of doubt, any Transfer of Units or Unit Equivalents permitted by Section 10.02 or made in accordance with the procedures described in Section 10.03 through Section 10.07, as applicable, and purporting to be a sale, transfer, assignment or other disposal of the entire Membership Interest represented by such Units or Unit Equivalents, inclusive of all the rights and benefits applicable to such Membership Interest as described in the definition of the term “Membership Interest,” shall be deemed a sale, transfer, assignment or other disposal of such Membership Interest in its entirety as intended by the parties to such Transfer, and shall not be deemed a sale, transfer, assignment or other disposal of any less than all of the rights and benefits described in the definition of the term “Membership Interest,” unless otherwise explicitly agreed to by the parties to such Transfer.

Section 10.02 Permitted Transfers. The provisions of Section 10.01(a), Section 10.03, Section 10.04 (with respect to the Dragging Member only) and Section 10.05 shall not apply to any of the following Transfers by any Member of any of its Units or Unit Equivalents:

(a) With respect to Sponsor, to (i) any Affiliate of Sponsor and (ii) in the event of a winding up of Sponsor, any of its limited partners in accordance with its constitutive documents;

(b) With respect to any Management Member, to (i) such Management Member’s spouse, parent, siblings, descendants

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(including adoptive relationships and stepchildren) and the spouses of each such natural persons (collectively, “Family Members”), (ii) a trust under which the distribution of Units may be made only to such Management Member and/or any Family Member of such Management Member, (iii) a charitable remainder trust, the income from which will be paid to such Management Member during his life, (iv) a corporation, partnership or limited liability company, the stockholders, partners or members of which are only such Management Member and/or Family Members of such Management Member, or (v) by will or by the laws of intestate succession, to such Management Member’s executors, administrators, testamentary trustees, legatees or beneficiaries; provided, that any Management Member who Transfers Units shall remain bound by the provisions of Section 11.01; or

(c) Pursuant to a Public Offering.

Section 10.03 Right of First Refusal. (a) Offered Units. At any time prior to the consummation of a Qualified Public Offering, and subject to the terms and conditions specified in Section 10.01, Section 10.02 and this Section 10.03, the Company, first, and each Member holding Preferred Units and/or Common Units (such Members other than the Offering Member, the “ROFR Rightholders”), second, shall have a right of first refusal if any other Member

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(the “Offering Member”) receives a bona fide offer that the Offering Member desires to accept to Transfer all or any portion of the Preferred Units (or applicable Unit Equivalents) (the “Offered Preferred Units”) and/or Common Units (or applicable Unit Equivalents) (the “Offered Common Units”) it owns (the Offered Preferred Units and the Offered Common Units, collectively, the “Offered Units”).

(b) Offering; Exceptions. Each time the Offering Member receives an offer for a Transfer of any of its Preferred Units and/or Common Units (or applicable Unit Equivalents) (other than Transfers that (i) are permitted by Section 10.02, (ii) are proposed to be made by a Dragging Member or required to be made by a Dragalong Member pursuant to Section 10.04, or (iii) are made by a Tag-along Member upon the exercise of its tag-along right pursuant to Section 10.05 after the Company and ROFR Rightholders have declined to exercise their rights in full under this Section 10.03), the Offering Member shall first make an offering of the Offered Units to the Company, first, and the ROFR Rightholders, second, all in accordance with the following provisions of this Section 10.03, prior to Transferring such Offered Units to the proposed purchaser.

(c) Offer Notice. (i) The Offering Member shall, within five (5) Business Days of receipt of the Transfer offer, give written notice (the “Offering Member Notice”) to the Company and the ROFR Rightholders

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stating that it has received a bona fide offer for a Transfer of its Preferred Units and/or Common Units (or applicable Unit Equivalents) and specifying: (A)    the number of Offered Units to be Transferred by the Offering Member; (B)  the proposed date, time and location of the closing of the Transfer, which shall not be less than 60 (sixty) days from the date of the Offering Member Notice; (C)    the purchase price per Offered Unit (which shall be payable solely in cash) and the other material terms and conditions of the Transfer; and (D)  the name of the Person who has offered to purchase such Offered Units.

(ii) The Offering Member Notice shall constitute the Offering Member’s offer to Transfer the Offered Units to the Company and the ROFR Rightholders, which offer shall be irrevocable until the end of the ROFR Rightholder Option Period described in Section 10.03(d)(iii).

(iii) By delivering the Offering Member Notice, the Offering Member represents and warrants to the Company and each ROFR Rightholder that: (A)    the Offering Member has full right, title and interest in and to the Offered Units; (B)    the Offering Member has all the necessary power and authority and has taken all necessary action to Transfer such Offered Units as contemplated by this Section 10.03; and

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(C)    the Offered Units are free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement.

(d) Exercise of Right of First Refusal. (i) Upon receipt of the Offering Member Notice, the Company and each ROFR Rightholder shall have the right to purchase the Offered Units in the following order of priority: first, the Company shall have the right to purchase all or any portion of the Offered Units in accordance with the procedures set forth in Section 10.03(d)(ii), and thereafter, the ROFR Rightholders shall have the right to purchase the Offered Units, in accordance with the procedures set forth in Section 10.03(d)(iii), to the extent the Company does not exercise its right in full. Notwithstanding the foregoing, the Company and the ROFR Rightholders may only exercise their right to purchase the Offered Units if, after giving effect to all elections made under this Section 10.03(d), no less than all of the Offered Units will be purchased by the Company and/or the ROFR Rightholders.

(ii) The initial right of the Company to purchase any Offered Units shall be exercisable with the delivery of a written notice (the “Company ROFR Exercise Notice”) by the Company to the Offering Member and the ROFR Rightholders within ten (10) Business Days of receipt of the Offering Member Notice (the “Company Option Period”), stating the number (including where such number is zero) and type of Offered Units the Company elects irrevocably to purchase on the

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terms and respective purchase prices set forth in the Offering Member Notice. The Company ROFR Exercise Notice shall be binding upon delivery and irrevocable by the Company.

(iii) If the Company shall have indicated an intent to purchase any less than all of the Offered Units, the ROFR Rightholders shall have the right to purchase the remaining Offered Units not selected by the Company. For a period of fifteen (15) Business Days following the receipt of a Company ROFR Exercise Notice in which the Company has elected to purchase less than all the Offered Units (such period, the “ROFR Rightholder Option Period”), each ROFR Rightholder shall have the right to elect irrevocably to purchase all or none of its Pro Rata Portion of the remaining Offered Units by delivering a written notice to the Company and the Offering Member (a “Member ROFR Exercise Notice”) specifying its desire to purchase its Pro Rata Portion of the remaining Offered Units, on the terms and respective purchase prices set forth in the Offering Member Notice. In addition, each ROFR Rightholder shall include in its Member ROFR Exercise Notice the number of remaining Offered Units that it wishes to purchase if any other ROFR Rightholders do not exercise their rights to purchase their entire Pro Rata Portions of the remaining Offered Units. If the Offered Units consists of both Offered Preferred Units and Offered Common Units, each ROFR Righholder will have the right to buy its Pro Rata Share of each class of such Offered Units. Any Member ROFR Exercise Notice shall be binding upon delivery and irrevocable by the ROFR Rightholder.

(iv) The failure of the Company or any ROFR Rightholder to deliver a Company ROFR Exercise Notice or Member ROFR

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Exercise Notice, respectively, by the end of the Company Option Period or ROFR Rightholder Option Period, respectively, shall constitute a waiver of their respective rights of first refusal under this Section 10.03 with respect to the Transfer of Offered Units, but shall not affect their respective rights with respect to any future Transfers.

(e) Allocation of Offered Units. Upon the expiration of the ROFR Rightholder Option Period, the Offered Units not selected for purchase by the Company pursuant to Section 10.03(d)(ii) shall be allocated for purchase among the ROFR Rightholders as follows:

(i) First, to each ROFR Rightholder having elected to purchase its entire Pro Rata Portion of such Units, such ROFR Rightholder’s Pro Rata Portion of such Units; and

(ii) Second, the balance, if any, not allocated under clause (i) above (and not purchased by the Company pursuant to Section 10.03(d)(ii)), shall be allocated to those ROFR Rightholders who set forth in their Member ROFR Exercise Notices a number of Offered Units that exceeded their respective Pro Rata Portions (the “Purchasing Rightholders”), in an amount, with respect to each such Purchasing Rightholder, that is equal to the lesser of: (A)    the number of Offered Units that such Purchasing Rightholder elected to purchase in excess of its Pro Rata Portion; or

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(B)    the product of (x) the number of Offered Units not allocated under clause (i) (and not purchased by the Company pursuant to Section 10.03(d)(ii)), multiplied by (y) a fraction, the numerator of which is the number of Offered Units that such Purchasing Rightholder was permitted to purchase pursuant to clause (i), and the denominator of which is the aggregate number of Offered Units that all Purchasing Rightholders were permitted to purchase pursuant to clause (i). The process described in clause (ii) shall be repeated until no Offered Units remain or until such time as all Purchasing Rightholders have been permitted to purchase all Offered Units that they desire to purchase.

(f) Consummation of Sale. In the event that the Company and/or the ROFR Rightholders shall have, in the aggregate, exercised their respective rights to purchase all and not less than all of the Offered Units, then the Offering Member shall sell such Offered Units to the Company and/or the ROFR Rightholders, and the Company and/or the ROFR Rightholders, as the case may be, shall purchase such Offered Units, within sixty (60) days following the expiration of the ROFR Rightholder Option Period (which period may be extended for a reasonable time not to exceed ninety (90) days to the extent reasonably necessary to obtain required approvals or consents from any Governmental Authority). Each Member shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 10.03(f), including, without limitation, entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate. At the closing of any sale and purchase

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pursuant to this Section 10.03(f), the Offering Member shall deliver to the Company and/or the participating ROFR Rightholders certificates (if any) representing the Offered Units to be sold, free and clear of any liens or encumbrances (other than those contained in this Agreement), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the purchase price therefor from the Company and/or such ROFR Rightholders by certified or official bank check or by wire transfer of immediately available funds.

(g) Sale to Proposed Purchaser. In the event that the Company and/or the ROFR Rightholders shall not have collectively elected to purchase all of the Offered Units, then, provided the Offering Member has also complied with the provisions of Section 10.05, to the extent applicable, the Offering Member may Transfer all of such Offered Units, at a price per Offered Unit not less than specified in the Offering Member Notice and on other terms and conditions which are not materially more favorable in the aggregate to the proposed purchaser than those specified in the Offering Member Notice, but only to the extent that such Transfer occurs within sixty (60) days following the expiration of the ROFR Rightholder Option Period (which period may be extended for a reasonable time not to exceed ninety (90) days to the extent reasonably necessary to obtain required approvals or consents from any Governmental Authority). Any Offered Units not Transferred within such 90-day period will be subject to the provisions of this Section 10.03 upon subsequent Transfer.

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Drag-along Rights. (a) Participation. At any time prior to the consummation of a Qualified Public Offering, if one or more Members (together with their respective Permitted Transferees) holding no less than a majority of all the Units on a Fully Diluted Basis (such Member or Members, the “Dragging Member”), proposes to consummate, in one transaction or a series of related transactions, a Change of Control (a “Drag-along Sale”), the Dragging Member shall have the right, after delivering the Drag-along Notice in accordance with Section 10.04(c) and subject to compliance with Section 10.04(d), to require that each other Member (each, a “Drag-along Member”) participate in such sale (including, if necessary, by converting their Unit Equivalents into the Units to be sold in the Dragalong Sale) in the manner set forth in Section 10.04(b).

(b) Sale of Units. Subject to compliance with Section 10.04(d):

(i) If the Drag-along Sale is structured as a sale resulting in a majority of the Units of the Company on a Fully Diluted Basis being held by a Third Party Purchaser, then each Drag-along Member shall sell, with respect to each class or series of Units proposed by the Dragging Member to be included in the Dragalong Sale, the number of Units and/or Unit Equivalents of such class or series (with Common Units and Incentive Units

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treated as one class for this purpose) equal to the product obtained by multiplying (i) the number of applicable Units on a Fully Diluted Basis held by such Drag-along Member (with Common Units and Incentive Units treated as one class) by (ii) a fraction (x) the numerator of which is equal to the number of applicable Units on a Fully Diluted Basis that the Dragging Member proposes to sell in the Drag-along Sale (with Common Units and Incentive Units treated as one class) and (y) the denominator of which is equal to the number of applicable Units on a Fully Diluted Basis held by the Dragging Member at such time (with Common Units and Incentive Units treated as one class); and

(ii) If the Drag-along Sale is structured as a sale of all or substantially all of the consolidated assets of the Company and the Company Subsidiaries or as a merger, consolidation, recapitalization, or reorganization of the Company or other transaction requiring the consent or approval of the Members, then notwithstanding anything to the contrary in this Agreement (including Section 4.06), each Drag-along Member shall vote in favor of the transaction and otherwise consent to and raise no objection to such transaction, and shall take all actions to waive any dissenters’, appraisal or other similar rights that it may have in connection with such transaction. The Distribution of the aggregate consideration of such transaction shall be made in accordance with Section 13.03(c).

(c) Sale Notice. The Dragging Member shall exercise its rights pursuant to this Section 10.04 by delivering a written notice (the “Drag-

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along Notice”) to the Company and each Drag-along Member no more than ten (10) Business Days after the execution and delivery by all of the parties thereto of the definitive agreement entered into with respect to the Drag-along Sale and, in any event, no later than twenty (20) Business Days prior to the closing date of such Drag-along Sale. The Dragalong Notice shall make reference to the Dragging Members’ rights and obligations hereunder and shall describe in reasonable detail:

(i) The name of the person or entity to whom such Units are proposed to be sold;

(ii) The proposed date, time and location of the closing of the sale;

(iii) The number of each class or series of Units to be sold by the Dragging Member, the proposed amount of consideration for the Drag-along Sale and the other material terms and conditions of the Drag-along Sale, including a description of any non-cash consideration in sufficient detail to permit the valuation thereof and including, if available, the purchase price per Unit of each applicable class or series (which may take into account the Profits Interest Hurdle of any Incentive Units to be sold); and

(iv) A copy of any form of agreement proposed to be executed in connection therewith.

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(d) Conditions of Sale. The obligations of the Drag-along Members in respect of a Drag-along Sale under this Section 10.04 are subject to the satisfaction of the following conditions:

(i) The consideration to be received by each Drag-along Member shall be the same form and amount of consideration to be received by the Dragging Member per Unit of each applicable class or series (the Distribution of which shall be made in accordance with Section 10.04(b)) and the terms and conditions of such sale shall, except as otherwise provided in Section 10.04(d)(iii), be the same as those upon which the Dragging Member sells its Units;

(ii) If the Dragging Member or any Drag-along Member is given an option as to the form and amount of consideration to be received, the same option shall be given to all Drag-along Members; and

(iii) Each Drag-along Member shall execute the applicable purchase agreement, if applicable, and make or provide the same representations, warranties, covenants, indemnities and agreements as the Dragging Member makes or provides in connection with the Drag-along Sale; provided, that each Drag-along Member shall only be obligated to make individual representations and warranties with respect to its title to and ownership of the applicable Units, authorization, execution and delivery of relevant documents, enforceability of such

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documents against the Drag-along Member, and other matters relating to such Drag-along Member, but not with respect to any of the foregoing with respect to any other Members or their Units; provided, further, that all representations, warranties, covenants and indemnities shall be made by the Dragging Member and each Drag-along Member severally and not jointly and any indemnification obligation shall be pro rata based on the consideration received by the Dragging Member and each Drag-along Member, in each case in an amount not to exceed the aggregate proceeds received by the Dragging Member and each such Drag-along Member in connection with the Dragalong Sale.

(e) Cooperation. Each Drag-along Member shall take all actions as may be reasonably necessary to consummate the Drag-along Sale, including, without limitation, entering into agreements and delivering certificates and instruments, in each case, consistent with the agreements being entered into and the certificates being delivered by the Dragging Member, but subject to Section 10.04(d)(iii).

(f) Expenses. The fees and expenses of the Dragging Member incurred in connection with a Drag-along Sale and for the benefit of all Drag-along Members (it being understood that costs incurred by or on behalf of a Dragging Member for its sole benefit will not be considered to be for the benefit of all Drag-along Members), to the extent not paid or reimbursed by the

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Company or the Third Party Purchaser, shall be shared by the Dragging Member and all the Drag-along Members on a pro rata basis, based on the consideration received by each such Member; provided, that no Drag-along Member shall be obligated to make any out-of-pocket expenditure prior to the consummation of the Drag-along Sale.

Section 10.05 Tag-along Rights. (a) Participation. At any time prior to the consummation of a Qualified Public Offering, and subject to the terms and conditions specified in Section 10.01, Section 10.02 and Section 10.03, if any Member (the “Selling Member”) proposes to Transfer any of its Preferred Units and/or Common Units (or any Unit Equivalents of such Units) to any Person (a “Proposed Transferee”), each other Member (each, a “Tagalong Member”) shall be permitted to participate in such sale (a “Tag-along Sale”) on the terms and conditions set forth in this Section 10.05.

(b) Application of Transfer Restrictions. The provisions of this Section 10.05 shall only apply to Transfers in which:

(i) The Company and ROFR Rightholders have not exercised their rights in full under Section 10.03 to purchase all of the

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Offered Units; and

(ii) The Dragging Member has elected to not exercise its dragalong right under Section 10.04.

(c) Sale Notice. Prior to the consummation of any Transfer of Units (or any Unit Equivalents of such Units) qualifying under Section 10.05(b), and after satisfying its obligations pursuant to Section 10.03, the Selling Member shall deliver to the Company and each other Member holding Units (or any Unit Equivalents of such Units) of the class or series proposed to be Transferred a written notice (a “Sale Notice”) of the proposed Tag-along Sale as soon as practicable following the expiration of the ROFR Rightholder Option Period, and in no event later than five (5) Business Days thereafter. The Sale Notice shall make reference to the Tag-along Members’ rights hereunder and shall describe in reasonable detail:

(i) The aggregate number of Units (or any Unit Equivalents of such Units) the Proposed Transferee has offered to purchase;

(ii) The identity of the Proposed Transferee;

(iii) The proposed date, time and location of the closing of the Tag-along Sale;

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(iv) The purchase price per applicable Unit (which shall be payable solely in cash) and the other material terms and conditions of the Transfer; and

(v) A copy of any form of agreement proposed to be executed in connection therewith.

(d) Exercise of Tag-along Right. (i) The Selling Member and each Tag-along Member timely electing to participate in the Tag-along Sale pursuant to Section 10.05(d)(ii) shall have the right to Transfer in the Tag-along Sale the number of Unrestricted Incentive Units, Common Units and/or Preferred Units (and applicable Unit Equivalents, if any), as the case may be and with the Common Units Unrestricted Incentive Units treated as one class for this purpose and Preferred units treated as separate class for purposes of this calculation, equal to the product of (x) the aggregate number of Common Units (with Common Units and Unrestricted Incentive Units treated as one class for this purpose) or Preferred Units (and applicable Unit Equivalents), as the case may be, that the Proposed Transferee proposes to buy as stated in the Sale Notice and (y) a fraction (A) the numerator of which is equal to the number of Common Units (with Common Units and Unrestricted Incentive Units treated as one class for this purpose) or Preferred Units, as the case may be, on a Fully Diluted Basis then held by the applicable Member, and (B) the denominator of which is equal to the number of Common Units (with

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Common Units and Unrestricted Incentive Units treated as one class for this purpose) or Preferred Units, as the case may be, on a Fully Diluted Basis then held by the Selling Member and all of the Tag-along Members timely electing to participate in the Tag-along Sale pursuant to Section 10.05(d)(ii) (such amount with respect to the Common Units (with Common Units and Unrestricted Incentive Units treated as one class for this purpose) (and applicable Unit Equivalents, if any), the “Common Tag-along Portion”, and with respect to the Preferred Units (and applicable Unit Equivalents, if any), the “Preferred Tag-along Portion”).

(ii) Each Tag-along Member shall exercise its right to participate in a Tag-along Sale by delivering to the Selling Member a written notice (a “Tag-along Notice”) stating its election to do so and specifying the number of Common Units (with Common Units and Unrestricted Incentive Units treated as one class for this purpose) and/or Unit Equivalents (up to its Common Tag-along Portion) and/or Preferred Units and/or Unit Equivalents (up to its Preferred Tag-along Portion), as the case may be, to be Transferred by it no later than ten (10) Business Days after receipt of the Sale Notice (the “Tag-along Period”).

(iii) The offer of each Tag-along Member set forth in a along Notice shall be irrevocable, and, to the extent such is accepted, such Tag-along Member shall be bound obligated to consummate the Transfer on the terms conditions set forth in this Section 10.05.

(iv)

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Tagoffer and and

The number of each class or series of Units to be sold by the Tag-Along Member, the proposed amount of consideration for the Tag-along Sale and the other material terms and conditions of the Tag-along Sale, including a description of any non-cash consideration in sufficient detail to permit the valuation thereof and including, if available, the purchase price per Unit of each applicable class or series (which may take into account the Profits Interest Hurdle of any Unrestricted Incentive Units to be sold); and

(e) Waiver. Each Tag-along Member who does not deliver a Tag-along Notice in compliance with Section 10.05(d)(ii) shall be deemed to have waived all of such Tag-along Member’s rights to participate in the Tag-along Sale with respect to the Common Units(with Common Units and Unrestricted Incentive Units treated as one class for this purpose) and/or Preferred Units (and/or Unit Equivalents) owned by such Tagalong Member, and the Selling Member shall (subject to the rights of any other participating Tag-along Member) thereafter be free to sell to the Proposed Transferee the Units and/or Unit Equivalents identified in the Sale Notice at a per Unit price that is no greater than the applicable per Unit price set forth in the Sale Notice and on other terms and conditions which are not in the aggregate materially more favorable to the Selling Member than those set forth in the Sale Notice, without any further obligation to the non-accepting Tag-along Members.

(f) Conditions of Sale.

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(i) Each Member participating in the Tag-along Sale shall receive the same consideration per Common Unit (with Common Units and Unrestricted Incentive Units treated as one class for this purpose) and/or Preferred Unit, as the case may be, after deduction of such Member’s proportionate share of the related expenses in accordance with Section 10.05(h) below; provided, however, the Tag-along Members and the Selling Member may take into account the Profits Interest Hurdle of any Unrestricted Incentive Units to be sold).

(ii) Each Tag-along Member shall make or provide the same representations, warranties, covenants, indemnities and agreements as the Selling Member makes or provides in connection with the Tag-along Sale; provided, that each Tagalong Member shall only be obligated to make individual representations and warranties with respect to its title to and ownership of the applicable Units, authorization, execution and delivery of relevant documents, enforceability of such documents against the Tag-along Member, and other matters relating to such Tag-along Member, but not with respect to any of the foregoing with respect to any other Members or their Units; provided, further, that all representations, warranties, covenants and indemnities shall be made by the Selling Member and each Tag-along Member severally and not jointly and any indemnification obligation shall be pro rata based on the consideration received by the Selling Member and each Tag-along Member, in each case in an amount not to exceed the aggregate proceeds received by the Selling Member and each such Tag-along Member in connection with the Tag-along Sale.

(iii) 192

Each holder of then currently exercisable Unit Equivalents with respect to a class or series of Units proposed to be Transferred in a Tag-along Sale shall be given an opportunity to convert such Unit Equivalents into the applicable class or series of Units prior to the consummation of the Tag-along Sale and participate in such sale as holders of such class or series of Units.

(g) Cooperation. Each Tag-along Member shall take all actions as may be reasonably necessary to consummate the Tag-along Sale, including, without limitation, entering into agreements and delivering certificates and instruments, in each case, consistent with the agreements being entered into and the certificates being delivered by the Selling Member, but subject to Section 10.05(f)(ii).

(h) Expenses. The fees and expenses of the Selling Member incurred in connection with a Tag-along Sale and for the benefit of all Tag-along Members (it being understood that costs incurred by or on behalf of a Selling Member for its sole benefit will not be considered to be for the benefit of all Tag-along Members), to the extent not paid or reimbursed by the Company or the Proposed Transferee, shall be shared by the Selling Member and all the participating Tag-along Members on a pro rata basis, based on the consideration received by each such Member; provided, that no Tag-along Member shall be obligated to make any out-of-pocket expenditure prior to the consummation of the Tag-along Sale.

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(i) Consummation of Sale. The Selling Member shall have sixty (60) days following the expiration of the Tag-along Period in which to consummate the Tag-along Sale, on terms not more favorable to the Selling Member than those set forth in the Tag-along Notice (which such 60-day period may be extended for a reasonable time not to exceed ninety (90) days to the extent reasonably necessary to obtain required approvals or consents from any Governmental Authority). If at the end of such period the Selling Member has not completed the Tag-along Sale, the Selling Member may not then effect a Transfer that is subject to this Section 10.05 without again fully complying with the provisions of this Section 10.05.

(j) Transfers in Violation of the Tag-along Right. If the Selling Member sells or otherwise Transfers to the Proposed Transferee any of its Units in breach of this Section 10.05, then each Tag-along Member shall have the right to sell to the Selling Member, and the Selling Member undertakes to purchase from each Tag-along Member, the number of Units of each applicable class or series that such Tag-along Member would have had the right to sell to the Proposed Transferee pursuant to this Section 10.05, for a per Unit amount and form of consideration and upon the terms and conditions on which the Proposed Transferee bought such Units from the Selling Member, but without indemnity being granted by any Tag-along Member to the Selling Member; provided, that nothing contained in this Section 10.05(j) shall preclude any Member from seeking alternative remedies against such Selling Member as a result of its

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breach of this Section 10.05. The Selling Member shall also reimburse each Tag-along Member for any and all reasonable and documented out-of-pocket fees and expenses, including reasonable legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of the Tag-along Member’s rights under this Section 10.05(j).

Section 10.06 Incentive Units Call Right. (a) Call Right. At any time prior to the consummation of a Qualified Public Offering or a Change of Control, following the termination of employment or other engagement of any Service Provider with the Company or any of the Company Subsidiaries, the Company may, at its election, require the Service Provider and any or all of such Service Provider’s Permitted Transferees to sell to the Company all or any portion of such Service Provider’s Incentive Units at the following respective purchase prices:

(i) For the Restricted Incentive Units, under all circumstances of termination, a price equal to the lesser of their Fair Market Value and their Initial Cost (the “Cause Purchase Price”).

(ii) For the Unrestricted Incentive Units, their Cause Purchase Price, in the event of:

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(A)  the termination of such Service Provider’s employment or other engagement by the Company or any of the Company Subsidiaries for Cause; or (B)    the resignation of such Service Provider for any reason other than Good Reason.

(iii) For the Unrestricted Incentive Units, a price equal to their Fair Market Value, in the event of: (A)  the termination of such Service Provider’s employment or other engagement by the Company or any of the Company Subsidiaries for a reason other than for Cause; the resignation of such Service Provider at any time for Good Reason; or (B)  the death or Disability of such Service Provider.

(b) Procedures. (i) If the Company desires to exercise its right to purchase Incentive Units pursuant to this Section 10.06, the Company shall deliver to the Service Provider, within ninety (90) days after the termination of such Service Provider’s employment or other engagement, a written notice (the “Repurchase Notice”) specifying the number of Incentive Units to be repurchased by the Company (the “Repurchased Incentive Units”) and the purchase price therefor in accordance with Section 10.06(a).

(ii) 196

Each applicable Service Provider shall, at the closing of any purchase consummated pursuant to this Section 10.06, represent and warrant to the Company that: (A)    such Service Provider has full right, title and interest in and to the Repurchased Incentive Units; (B)    such Service Provider has all the necessary power and authority and has taken all necessary action to sell such Repurchased Incentive Units as contemplated by this Section 10.06; and (C)  the Repurchased Incentive Units are free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement.

(iii) Subject to Section 10.06(c) below, the closing of any sale of Repurchased Incentive Units pursuant to this Section 10.06 shall take place no later than thirty (30) days following receipt by the Service Provider of the Repurchase Notice. Subject to the existence of any Delay Condition, the Company shall pay the Call Purchase Price for the Repurchased Incentive Units by certified or official bank check or by wire transfer of immediately available funds. The Company shall give the Service Provider at least ten (10) days’ written notice of the date of closing, which notice shall include the method of payment selected by the Company.

(c) Delay Condition. Notwithstanding the provisions of Section 10.06(b)(iii), the Company shall not be obligated to repurchase any Incentive Units if there exists a Delay Condition. In such event, the Company shall notify the Service Provider in

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writing as soon as practicable of such Delay Condition and the Company may thereafter:

(i) Defer the closing and pay the Call Purchase Price at the earliest practicable date on which no Delay Condition exists, in which case, the Call Purchase Price shall accrue interest at the Company Interest Rate from the latest date that the closing could have taken place pursuant to Section 10.06(b) (iii) above (the “Intended Call Closing Date”) to the date the Call Purchase Price is actually paid; or

(ii) Pay the Call Purchase Price with a subordinated note (fully subordinated in right of payment and exercise of remedies to the lenders’ rights under any Financing Document) bearing interest at the Company Interest Rate from the Intended Call Closing Date until paid in full.

(d) Cooperation. The Service Provider shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 10.06, including, without limitation, entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate.

(e) Closing. At the closing of any sale and purchase pursuant to this Section 10.06, the Service Provider shall deliver to the

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Company a certificate or certificates representing the Incentive Units to be sold (if any), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the Call Purchase Price.

Section 10.07 Incentive Units Put Right. (a) Put Right. At any time prior to the consummation of a Qualified Public Offering or a Change of Control, if a Service Provider’s employment or other engagement with the Company or any of the Company Subsidiaries is terminated as a result of such Service Provider’s death, Disability, termination by the Company without Cause or resignation from the Company for Good Reason, and the Company has not delivered a Repurchase Notice pursuant to Section 10.06(b)(i) within ninety (90) days of such termination, then, subject to the other provisions of this Section 10.07, such Service Provider and any or all of his Permitted Transferees (collectively, the “Offering Service Provider”) may elect to sell to the Company all or any percentage of the Unrestricted Incentive Units held by such Person at a price equal to the Fair Market Value of such Unrestricted Incentive Units as of the date of termination (the “Put Purchase Price”).

(b) Procedures. (i) 199

If the Offering Service Provider desires to sell Unrestricted Incentive Units pursuant to this Section 10.07, such Offering Service Provider shall deliver to the Company not more than ninety (90) days after the date of termination of the Service Provider’s employment or other engagement a written notice (the “Service Provider Sale Notice”) specifying the number of Unrestricted Incentive Units to be sold (the “Offered Unrestricted Incentive Units”) by such Offering Service Provider.

(ii) By delivering the Service Provider Sale Notice, the Offering Service Provider represents and warrants to the Company that: (A)    the Offering Service Provider has full right, title and interest in and to the Offered Unrestricted Incentive Units; (B)  the Offering Service Provider has all the necessary power and authority and has taken all necessary action to sell such Offered Unrestricted Incentive Units as contemplated by this Section 10.07; and (C)  the Offered Unrestricted Incentive Units are free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement.

(iii) Promptly following receipt of the Service Provider Sale Notice, the Company shall deliver to the Offering Service Provider a calculation of the Put Purchase Price for the Offered Unrestricted Incentive Units. The Offering Service Provider shall have the right to irrevocably rescind the Service Provider Sale Notice for a period of ten (10) days following the delivery of such calculation.

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(iv) Subject to Section 10.07(c) below, the closing of any sale of Offered Unrestricted Incentive Units pursuant to this Section 10.07 shall take place no later than thirty (30) days following receipt by the Company of the Service Provider Sale Notice, if not otherwise rescinded pursuant to Section 10.07(b)(iii) above. Subject to the existence of any Delay Condition, the Company shall pay the Put Purchase Price for the Offered Unrestricted Incentive Units by certified or official bank check or by wire transfer of immediately available funds. The Company shall give the Offering Service Provider at least ten (10) days’ written notice of the date of closing, which notice shall include the method of payment selected by the Company.

(c) Delay Condition. Notwithstanding the provisions of Section 10.07(b)(iv), the Company shall not be obligated to purchase any Offered Unrestricted Incentive Units if there exists a Delay Condition. In such event, the Company shall notify the Offering Service Provider in writing as soon as practicable of such Delay Condition and shall permit the Offering Service Provider, within ten (10) days of receipt thereof, to rescind the Service Provider Sale Notice. If the Offering Service Provider does not rescind the Service Provider Sale Notice, the Service Provider Sale Notice shall remain outstanding and the Company may thereafter:

(i) Defer the closing and pay the Put Purchase Price at the earliest practicable date on which no Delay Condition exists,

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in which case, the Put Purchase Price shall accrue interest at the Company Interest Rate from the latest date that the closing could have taken place pursuant to Section 10.07(b) (iv) (the “Intended Put Closing Date”) to the date the Put Purchase Price is actually paid; or

(ii) Pay the Put Purchase Price with a subordinated note (fully subordinated in right of payment and exercise of remedies to the lenders’ rights under any Financing Document) bearing interest at the Company Interest Rate from the Intended Put Closing Date until paid in full.

(d) Cooperation. The Offering Service Provider shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 10.07, including, without limitation, entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate.

(e) Closing. At the closing of any sale and purchase pursuant to this Section 10.07, the Offering Service Provider shall deliver to the Company a certificate or certificates representing the Offered Unrestricted Incentive Units to be sold (if any), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the Put Purchase Price.

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ARTICLE XI. COVENANTS Section 11.01 Confidentiality. (a) Each Management Member acknowledges that during the term of this Agreement, he will have access to and become acquainted with trade secrets, proprietary information and confidential information belonging to the Company, the Company Subsidiaries and their Affiliates that are not generally known to the public, including, but not limited to, information concerning business plans, financial statements and other information provided pursuant to this Agreement, operating practices and methods, expansion plans, strategic plans, marketing plans, contracts, customer lists or other business documents which the Company treats as confidential, in any format whatsoever (including oral, written, electronic or any other form or medium) (collectively, “Confidential Information”). In addition, each Management Member acknowledges that: (i) the Company has invested, and continues to invest, substantial time, expense and specialized knowledge in developing its Confidential Information; (ii) the Confidential Information provides the Company with a competitive advantage over others in the marketplace; and (iii) the Company would be irreparably harmed if the Confidential Information were disclosed to competitors or made available to the public. Without limiting the applicability of any other agreement to which any Management Member is subject, no Management Member shall, directly or indirectly, disclose or use (other than solely for the purposes of such Management Member monitoring and analyzing his investment in the Company or performing his duties as a Manager, Officer, employee, consultant or

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other service provider of the Company) at any time, including, without limitation, use for personal, commercial or proprietary advantage or profit, either during his association or employment with the Company or thereafter, any Confidential Information of which such Management Member is or becomes aware. Each Management Member in possession of Confidential Information shall take all appropriate steps to safeguard such information and to protect it against disclosure, misuse, espionage, loss and theft.

(b) Nothing contained in Section 11.01(a) shall prevent any Management Member from disclosing Confidential Information: (i) upon the order of any court or administrative agency; (ii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Management Member; (iii) to the extent compelled by legal process or required or requested pursuant to subpoena, interrogatories or other discovery requests; (iv) to the extent necessary in connection with the exercise of any remedy hereunder; (v) to other Members; (vi) to such Management Member’s Representatives who, in the reasonable judgment of such Management Member, need to know such Confidential Information and agree to be bound by the provisions of this Section 11.01 as if a Management Member; or (vii) to any potential Permitted Transferee in connection with a proposed Transfer of Units from such Management Member, as long as such Transferee agrees to be bound by the provisions of this Section 11.01 as if a Management Member; provided, that in the case of clause (i), (ii) or (iii), such Management Member shall notify the Company and other Members of the proposed disclosure as far in advance of such disclosure as practicable (but in no event make any such disclosure before notifying the Company and other Members) and use reasonable efforts

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to ensure that any Confidential Information so disclosed is accorded confidential treatment satisfactory to the Company, when and if available.

(c) The restrictions of Section 11.01(a) shall not apply to Confidential Information that: (i) is or becomes generally available to the public other than as a result of a disclosure by a Management Member in violation of this Agreement; (ii) is or becomes available to a Management Member or any of its Representatives on a non-confidential basis prior to its disclosure to the receiving Management Member and any of its Representatives in compliance with this Agreement; (iii) is or has been independently developed or conceived by such Management Member without use of Confidential Information; or (iv) becomes available to the receiving Management Member or any of its Representatives on a non-confidential basis from a source other than the Company, any other Member or any of their respective Representatives; provided, that such source is not known by the recipient of the Confidential Information to be bound by a confidentiality agreement with the disclosing Member or any of its Representatives.

Section 11.02 Non-compete; Non-solicit. (a) Non-compete. In light of each Management Member’s access to Confidential Information and position of trust and confidence with the Company, each Management Member hereby agrees

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that, during the period of his continued employment or other engagement with the Company or any Company Subsidiary and for a period of one (1) year, running consecutively, beginning on the last day of the Management Member’s employment or other engagement with the Company or any Company Subsidiary for any reason or no reason (the “Restricted Period”), such Management Member shall not (x) render services or give advice to, or affiliate with (as employee, partner, consultant or otherwise), or (y) directly or indirectly through one or more of any of their respective Affiliates, own, manage, operate, control or participate in the ownership, management, operation or control of, any Competitor or any division or business segment of any Competitor; provided, that nothing in this Section 11.02(a) shall prohibit such Management Member or any of his Permitted Transferees or any of their respective Affiliates from acquiring or owning, directly or indirectly:

(i) Up to 2% of the aggregate voting securities of any Competitor that is a publicly traded Person; or

(ii) Up to 2% of the aggregate voting securities of any Competitor that is not a publicly traded Person, so long as neither such Management Member nor any of its Permitted Transferees, directly or indirectly through one or more of their respective Affiliates, designates a member of the board of directors (or similar body) of such Competitor or its Affiliates or is granted any other governance rights with respect to such Competitor or its Affiliates (other than customary governance rights granted in connection with the ownership of debt securities).

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For purposes of this Section 11.02(a), “Competitor” means any other Person engaged, directly or indirectly, in whole or in part, in the same or similar business as the Company, including those engaged in the business of owning and operating [DESCRIPTION OF COMPETITIVE BUSINESS] in the United States. As of the date of this Agreement, the Persons regarded by the Company as its primary, but not exclusive, competitors are listed on Schedule B attached hereto.

(b) Non-solicit of Employees. In light of each Management Member’s access to Confidential Information and position of trust and confidence with the Company, each Management Member further agrees that, during the Restricted Period, he shall not, directly or indirectly through one or more of any of their respective Affiliates, hire or solicit, or encourage any other Person to hire or solicit, any individual who has been employed by the Company or any Company Subsidiary within one (1) year prior to the date of such hiring or solicitation, or encourage any such individual to leave such employment. This Section 11.02(b) shall not prevent a Management Member from hiring or soliciting any employee or former employee of the Company or any Company Subsidiary who responds to a general solicitation that is a public solicitation of prospective employees and not directed specifically to any Company or Company Subsidiary employees.

(c) Non-solicit of Clients.

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In light of each Management Member’s access to Confidential Information and position of trust and confidence with the Company, each Management Member further agrees that, during the Restricted Period, he shall not, directly or indirectly through one or more of any of their respective Affiliates, solicit or entice, or attempt to solicit or entice, any clients, customers or suppliers of the Company or any Company Subsidiary for purposes of diverting their business or services from the Company.

(d) Blue Pencil. If any court of competent jurisdiction determines that any of the covenants set forth in this Section 11.02, or any part thereof, is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to modify any such unenforceable provision in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Section 11.02 or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by Applicable Law. The parties hereto expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them.

Section 11.03 Other Business Activities. The parties hereto expressly acknowledge and agree that: (i) Sponsor and its Affiliates are permitted to have, and may

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presently or in the future have, investments or other business relationships, ventures, agreements or arrangements with entities engaged in the business of the Company, other than through the Company and the Company Subsidiaries (an “Other Business”); (ii) the Sponsor and its Affiliates have or may develop a strategic relationship with businesses that are or may be competitive with the Company and the Company Subsidiaries; (iii) none of the Sponsor or its Affiliates will be prohibited by virtue of the Sponsor’s investment in the Company from pursuing and engaging in any such activities; (iv) none of the Sponsor or its Affiliates will be obligated to inform the Company or any Management Member of any such opportunity, relationship or investment (a “Company Opportunity”) or to present Company Opportunity, and the Company hereby renounces any interest in a Company Opportunity and any expectancy that a Company Opportunity will be offered to it; (v) nothing contained herein shall limit, prohibit or restrict any Board designee of the Sponsor Majority Unitholders from serving on the board of directors or other governing body or committee of any Other Business; and (vi) the Management Members will not acquire, be provided with an option or opportunity to acquire, or be entitled to any interest or participation in any Other Business as a result of the participation therein of any of the Sponsor or its Affiliates. The parties hereto expressly authorize and consent to the involvement of the Sponsor and/or its Affiliates in any Other Business; provided, that any transactions between the Company and/or the Company Subsidiaries and an Other Business will be on terms no less favorable to the Company and/or the Company Subsidiaries than would be obtainable in a comparable arm’s-length transaction. The parties hereto expressly waive, to the fullest extent permitted by Applicable Law, any rights to assert any claim that such involvement breaches any fiduciary or other duty or obligation owed to the Company or any Member or to assert that such

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involvement constitutes a conflict of interest by such Persons with respect to the Company or any Member.

ARTICLE XII. ACCOUNTING; TAX MATTERS Section 12.01 Financial Statements. The Company shall furnish to each Member holding 5% or more of the aggregate Units, on a Fully Diluted Basis, of the Company (each, a “Qualified Member”) the following reports:

(a) Annual Financial Statements. As soon as available, and in any event within one hundred twenty (120) days after the end of each Fiscal Year, audited consolidated balance sheets of the Company and Company Subsidiaries as at the end of each such Fiscal Year and audited consolidated statements of income, cash flows and Members’ equity for such Fiscal Year, in each case setting forth in comparative form the figures for the previous Fiscal Year, accompanied by the certification of independent certified public accountants of recognized national standing selected by the Board, certifying to the effect that, except as set forth therein, such financial statements have been prepared in accordance with GAAP, applied on a basis consistent with prior years, and fairly present in all material respects the financial condition of the Company and Company Subsidiaries as of the dates thereof and the results of their operations and changes in their cash flows and Members’ equity for the periods covered thereby.

(b) 210

Quarterly Financial Statements. As soon as available, and in any event within forty-five (45) days after the end of each quarterly accounting period in each Fiscal Year (other than the last fiscal quarter of the Fiscal Year), unaudited consolidated balance sheets of the Company and Company Subsidiaries as at the end of each such fiscal quarter and for the current Fiscal Year to date and unaudited consolidated statements of income, cash flows and Members’ equity for such fiscal quarter and for the current Fiscal Year to date, in each case setting forth in comparative form the figures for the corresponding periods of the previous fiscal quarter, all in reasonable detail and all prepared in accordance with GAAP, consistently applied (subject to normal year-end audit adjustments and the absence of notes thereto), and certified by the principal financial or accounting officer of the Company.

(c) Monthly Financial Statements. As soon as available, and in any event within thirty (30) days after the end of each monthly accounting period in each fiscal quarter (other than the last month of the fiscal quarter), unaudited consolidated balance sheets of the Company and Company Subsidiaries as at the end of each such monthly period and for the current Fiscal Year to date and unaudited consolidated statements of income, cash flows and Members’ equity for each such monthly period and for the current Fiscal Year to date, all in reasonable detail and all prepared in accordance with GAAP, consistently applied (subject to normal year-end audit adjustments and the absence of notes thereto).

Section 12.02 211

Inspection Rights. Upon reasonable notice from a Qualified Member, the Company shall, and shall cause its Managers, Officers and employees to, afford each Qualified Member and its Representatives reasonable access during normal business hours to (i) the Company’s and the Company Subsidiaries’ properties, offices, plants and other facilities, (ii) the corporate, financial and similar records, reports and documents of the Company and the Company Subsidiaries, including, without limitation, all books and records, minutes of proceedings, internal management documents, reports of operations, reports of adverse developments, copies of any management letters and communications with Members or Managers, and to permit each Qualified Member and its Representatives to examine such documents and make copies thereof, and (iii) the Company’s and the Company Subsidiaries’ Officers, senior employees and public accountants, and to afford each Qualified Member and its Representatives the opportunity to discuss and advise on the affairs, finances and accounts of the Company and the Company Subsidiaries with their Officers, senior employees and public accountants (and the Company hereby authorizes said accountants to discuss with such Qualified Member and its Representatives such affairs, finances and accounts).

Section 12.03 Budget. Not later than thirty (30) days prior to the commencement of each Fiscal Year, the Company shall prepare, submit to and obtain the approval of the Board of a business plan and monthly and annual operating budgets for the Company and Company Subsidiaries in detail for the upcoming Fiscal Year, including capital and operating expense budgets, cash flow

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projections, covenant compliance calculations of all outstanding and projected indebtedness, and profit and loss projections, all itemized in reasonable detail (including itemization of provisions for Officers’ compensation) (the “Budget”). The Company and the Subsidiaries shall use commercially reasonable efforts to operate in all material respects in accordance with the Budget. The Company shall review the Budget periodically and shall not make any material changes thereto without the approval of the Board.

Section 12.04 Tax Matters Member. (a) Appointment. The Members hereby appoint Sponsor as the “Tax Matters Member” who shall serve as the “tax matters partner” (as such term is defined in Code Section 6231) for the Company.

(b) Tax Examinations and Audits. The Tax Matters Member is authorized and required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by Taxing Authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. Each Member agrees to cooperate with the Tax Matters Member and to do or refrain from doing any or all things reasonably requested by the Tax Matters Member with respect to the conduct of examinations by Taxing Authorities and any

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resulting proceedings. Each Member agrees that any action taken by the Tax Matters Member in connection with audits of the Company shall be binding upon such Members and that such Member shall not independently act with respect to tax audits or tax litigation affecting the Company.

(c) Income Tax Elections. The Tax Matters Member shall have sole discretion to make any income tax election it deems advisable on behalf of the Company; provided, that the Tax Matters Member will make an election under Section 754 of the Code, if requested in writing by Members holding a majority of the outstanding Common Units. All determinations as to tax elections and accounting principles shall be made solely by the Tax Matters Member.

(d) Tax Returns and Tax Deficiencies. Each Member agrees that such Member shall not treat any Company item inconsistently on such Member’s federal, state, foreign or other income tax return with the treatment of the item on the Company’s return. The Tax Matters Member shall have sole discretion to determine whether the Company (either on its own behalf or on behalf of the Members) will contest or continue to contest any tax deficiencies assessed or proposed to be assessed by any Taxing Authority. Any deficiency for taxes imposed on any Member (including penalties, additions to tax or interest imposed with respect to such taxes) will be paid by such Member and if required to be paid (and actually paid) by the Company, will be recoverable from such Member as provided in Section 7.05(d).

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(e) Resignation. The Tax Matters Member may resign at any time. If Sponsor ceases to be the Tax Matters Member for any reason, the holders of a majority of the Common Units of the Company shall appoint a new Tax Matters Member.

Section 12.05 Tax Returns. At the expense of the Company, the Board (or any Officer that it may designate pursuant to Section 8.09) shall endeavor to cause the preparation and timely filing (including extensions) of all tax returns required to be filed by the Company pursuant to the Code as well as all other required tax returns in each jurisdiction in which the Company and the Company Subsidiaries own property or do business. As soon as reasonably possible after the end of each Fiscal Year, the Board or designated Officer will cause to be delivered to each Person who was a Member at any time during such Fiscal Year, IRS Schedule K-1 to Form 1065 and such other information with respect to the Company as may be necessary for the preparation of such Person’s federal, state and local income tax returns for such Fiscal Year.

Section 12.06 Company Funds. All funds of the Company shall be deposited in its name, or in such name as may be designated by the Board, in such checking, savings or other accounts, or held in its name in the form of such other investments as shall be designated by the Board. The funds of the Company shall not be

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commingled with the funds of any other Person. All withdrawals of such deposits or liquidations of such investments by the Company shall be made exclusively upon the signature or signatures of such Officer or Officers as the Board may designate.

ARTICLE XIII. LIQUIDATION

DISSOLUTION

AND

Section 13.01 Events of Dissolution. The Company shall be dissolved and is affairs wound up only upon the occurrence of any of the following events:

(a) The determination of the Board to dissolve the Company;

(b) An election to dissolve the Company made by holders of a majority of the outstanding Preferred Units;

(c) The sale, exchange, involuntary conversion, or other disposition or Transfer of all or substantially all the assets of the Company; or

(d) The entry of a decree of judicial dissolution under § 18-802 of the Delaware Act.

Section 13.02 216

Effectiveness of Dissolution. Dissolution of the Company shall be effective on the day on which the event described in Section 13.01 occurs, but the Company shall not terminate until the winding up of the Company has been completed, the assets of the Company have been distributed as provided in Section 13.03 and the Certificate of Formation shall have been cancelled as provided in Section 13.04.

Section 13.03 Liquidation. If the Company is dissolved pursuant to Section 13.01, the Company shall be liquidated and its business and affairs wound up in accordance with the Delaware Act and the following provisions:

(a) Liquidator. The Board, or, if the Board is unable to do so, a Person selected by the holders of a majority of the Common Units, shall act as liquidator to wind up the Company (the “Liquidator”). The Liquidator shall have full power and authority to sell, assign, and encumber any or all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and business-like manner.

(b) Accounting. As promptly as possible after dissolution and again after final liquidation, the Liquidator shall cause a proper

217

accounting to be made by a recognized firm of certified public accountants of the Company’s assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable.

(c) Distribution of Proceeds. The Liquidator shall liquidate the assets of the Company and Distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of Applicable Law:

(i) First, to the payment of all of the Company’s debts and liabilities to its creditors (including Members, if applicable) and the expenses of liquidation (including sales commissions incident to any sales of assets of the Company);

(ii) Second, to the establishment of and additions to reserves that are determined by the Board in its sole discretion to be reasonably necessary for any contingent unforeseen liabilities or obligations of the Company; and

(iii) Third, to the Members in the same Distributions are made under Section 7.02.

(d) Discretion of Liquidator. 218

manner

as

Notwithstanding the provisions of Section 13.03(c) that require the liquidation of the assets of the Company, but subject to the order of priorities set forth in Section 13.03(c), if upon dissolution of the Company the Liquidator determines that an immediate sale of part or all of the Company’s assets would be impractical or could cause undue loss to the Members, the Liquidator may defer the liquidation of any assets except those necessary to satisfy Company liabilities and reserves, and may, in its absolute discretion, Distribute to the Members, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.03(c), undivided interests in such Company assets as the Liquidator deems not suitable for liquidation. Any such Distribution in kind will be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operating of such properties at such time. For purposes of any such Distribution, any property to be Distributed will be valued at its Fair Market Value.

Section 13.04 Cancellation of Certificate. Upon completion of the Distribution of the assets of the Company as provided in Section 13.03(c) hereof, the Company shall be terminated and the Liquidator shall cause the cancellation of the Certificate of Formation in the State of Delaware and of all qualifications and registrations of the Company as a foreign limited liability company in jurisdictions other than the State of Delaware and shall take such other actions as may be necessary to terminate the Company.

Section 13.05 219

Survival of Rights, Duties and Obligations. Dissolution, liquidation, winding up or termination of the Company for any reason shall not release any party from any Loss which at the time of such dissolution, liquidation, winding up or termination already had accrued to any other party or which thereafter may accrue in respect of any act or omission prior to such dissolution, liquidation, winding up or termination. For the avoidance of doubt, none of the foregoing shall replace, diminish or otherwise adversely affect any Member’s right to indemnification pursuant to Section 14.03.

Section 13.06 Recourse for Claims. Each Member shall look solely to the assets of the Company for all Distributions with respect to the Company, such Member’s Capital Account, and such Member’s share of Net Income, Net Loss and other items of income, gain, loss and deduction, and shall have no recourse therefor (upon dissolution or otherwise) against the Board, the Liquidator or any other Member.

ARTICLE XIV. EXCULPATION INDEMNIFICATION Section 14.01 Exculpation of Covered Persons. (a) Covered Persons. 220

AND

As used herein, the term “Covered Person” shall mean (i) each Member, (ii) each officer, director, shareholder, partner, member, controlling Affiliate, employee, agent or representative of each Member, and each of their controlling Affiliates, and (iii) each Manager, Officer, employee, agent or representative of the Company.

(b) Standard of Care. No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any action taken or omitted to be taken by such Covered Person in good-faith reliance on the provisions of this Agreement, so long as such action or omission does not constitute fraud or willful misconduct by such Covered Person.

(c) Good Faith Reliance. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, Net Income or Net Losses of the Company or any facts pertinent to the existence and amount of assets from which Distributions might properly be paid) of the following Persons or groups: (i) another Manager; (ii) one or more Officers or employees of the Company; (iii) any attorney, independent accountant, appraiser or other expert or professional employed or engaged by or on behalf of the Company; or (iv) any other Person selected in good faith by or on behalf of the

221

Company, in each case as to matters that such relying Person reasonably believes to be within such other Person’s professional or expert competence. The preceding sentence shall in no way limit any Person’s right to rely on information to the extent provided in § 18-406 of the Delaware Act.

Section 14.02 Liabilities and Duties of Covered Persons. (a) Limitation of Liability. This Agreement is not intended to, and does not, create or impose any fiduciary duty on any Covered Person. Furthermore, each of the Members and the Company hereby waives any and all fiduciary duties that, absent such waiver, may be implied by Applicable Law, and in doing so, acknowledges and agrees that the duties and obligation of each Covered Person to each other and to the Company are only as expressly set forth in this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Covered Person.

(b) Duties. Whenever in this Agreement a Covered Person is permitted or required to make a decision (including a decision that is in such Covered Person’s “discretion” or under a grant of similar authority or latitude), the Covered Person shall be entitled to consider only such interests and factors as such Covered

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Person desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Company or any other Person. Whenever in this Agreement a Covered Person is permitted or required to make a decision in such Covered Person’s “good faith,” the Covered Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or any other Applicable Law.

Section 14.03 Indemnification. (a) Indemnification. To the fullest extent permitted by the Delaware Act, as the same now exists or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than the Delaware Act permitted the Company to provide prior to such amendment, substitution or replacement), the Company shall indemnify, hold harmless, defend, pay and reimburse any Covered Person against any and all losses, claims, damages, judgments, fines or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending against such losses, claims, damages, judgments, fines or liabilities, and any amounts expended in settlement of any claims (collectively, “Losses”) to which such Covered Person may become subject by reason of:

(i) 223

Any act or omission or alleged act or omission performed or omitted to be performed on behalf of the Company, any Member or any direct or indirect Subsidiary of the foregoing in connection with the business of the Company; or

(ii) The fact that such Covered Person is or was acting in connection with the business of the Company as a partner, member, stockholder, controlling Affiliate, manager, director, officer, employee or agent of the Company, any Member, or any of their respective controlling Affiliates, or that such Covered Person is or was serving at the request of the Company as a partner, member, manager, director, officer, employee or agent of any Person including the Company or any Company Subsidiary; provided, that (x) such Covered Person acted in good faith and in a manner believed by such Covered Person to be in, or not opposed to, the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful, and (y) such Covered Person’s conduct did not constitute fraud or willful misconduct, in either case as determined by a final, nonappealable order of a court of competent jurisdiction. In connection with the foregoing, the termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Covered Person did not act in good faith or, with respect to any criminal proceeding, had reasonable cause to believe that such Covered Person’s conduct was unlawful, or that the Covered Person’s conduct constituted fraud or willful misconduct.

(b)

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Reimbursement. The Company shall promptly reimburse (and/or advance to the extent reasonably required) each Covered Person for reasonable legal or other expenses (as incurred) of such Covered Person in connection with investigating, preparing to defend or defending any claim, lawsuit or other proceeding relating to any Losses for which such Covered Person may be indemnified pursuant to this Section 14.03; provided, that if it is finally judicially determined that such Covered Person is not entitled to the indemnification provided by this Section 14.03, then such Covered Person shall promptly reimburse the Company for any reimbursed or advanced expenses.

(c) Entitlement to Indemnity. The indemnification provided by this Section 14.03 shall not be deemed exclusive of any other rights to indemnification to which those seeking indemnification may be entitled under any agreement or otherwise. The provisions of this Section 14.03 shall continue to afford protection to each Covered Person regardless of whether such Covered Person remains in the position or capacity pursuant to which such Covered Person became entitled to indemnification under this Section 14.03 and shall inure to the benefit of the executors, administrators, legatees and distributees of such Covered Person.

(d) Insurance. To the extent available on commercially reasonable terms, the Company may purchase, at its expense, insurance to

225

cover Losses covered by the foregoing indemnification provisions and to otherwise cover Losses for any breach or alleged breach by any Covered Person of such Covered Person’s duties in such amount and with such deductibles as the Board may determine; provided, that the failure to obtain such insurance shall not affect the right to indemnification of any Covered Person under the indemnification provisions contained herein, including the right to be reimbursed or advanced expenses or otherwise indemnified for Losses hereunder. If any Covered Person recovers any amounts in respect of any Losses from any insurance coverage, then such Covered Person shall, to the extent that such recovery is duplicative, reimburse the Company for any amounts previously paid to such Covered Person by the Company in respect of such Losses.

(e) Funding of Indemnification Obligation. Notwithstanding anything contained herein to the contrary, any indemnity by the Company relating to the matters covered in this Section 14.03 shall be provided out of and to the extent of Company assets only, and no Member (unless such Member otherwise agrees in writing) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity by the Company.

(f) Savings Clause. If this Section 14.03 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify

226

and hold harmless each Covered Person pursuant to this Section 14.03 to the fullest extent permitted by any applicable portion of this Section 14.03 that shall not have been invalidated and to the fullest extent permitted by Applicable Law.

(g) Amendment. The provisions of this Section 14.03 shall be a contract between the Company, on the one hand, and each Covered Person who served in such capacity at any time while this Section 14.03 is in effect, on the other hand, pursuant to which the Company and each such Covered Person intend to be legally bound. No amendment, modification or repeal of this Section 14.03 that adversely affects the rights of a Covered Person to indemnification for Losses incurred or relating to a state of facts existing prior to such amendment, modification or repeal shall apply in such a way as to eliminate or reduce such Covered Person’s entitlement to indemnification for such Losses without the Covered Person’s prior written consent.

Section 14.04 Survival. The provisions of this Article XIV shall survive the dissolution, liquidation, winding up and termination of the Company.

ARTICLE XV. MISCELLANEOUS Section 15.01

227

Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof, and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

Section 15.02 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, the Company and each Member hereby agrees, at the request of the Company or any other Member, to execute and deliver such additional documents, instruments, conveyances and assurances and to take such further actions as may be required to carry out the provisions hereof and give effect to the transactions contemplated hereby.

Section 15.03 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by

228

certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 15.03): To Company: ABC Holdings, LLC [ADDRESS] If to a Member, to such Member’s respective mailing address as set forth on the Members Schedule.

Section 15.04 Headings. The headings in this Agreement are inserted for convenience or reference only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision of this Agreement.

Section 15.05 Severability. If any term or provision of this Agreement is held to be invalid, illegal or unenforceable under Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Subject to Section 11.02(d), upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a

229

mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

Section 15.06 Entire Agreement. (a) This Agreement, together with the Certificate of Formation, the Incentive Plan, each Award Agreement, the Subscription Agreements, and all related Exhibits and Schedules, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.

(b) In the event of an inconsistency or conflict between the provisions of this Agreement and any provision of the Incentive Plan or an applicable Award Agreement with respect to the subject matter of the Incentive Plan or Award Agreement, the Board shall resolve such conflict in its sole discretion.

Section 15.07 Successors and Assigns. Subject to the restrictions on Transfers set forth herein, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns.

230

Section 15.08 No Third-party Beneficiaries. Except as provided in Article XIV, which shall be for the benefit of and enforceable by Covered Persons as described therein, this Agreement is for the sole benefit of the parties hereto (and their respective heirs, executors, administrators, successors and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any creditor of the Company, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 15.09 Amendment. No provision of this Agreement may be amended or modified except by an instrument in writing executed by the Company and Members holding a majority of the outstanding Units. Any such written amendment or modification will be binding upon the Company and each Member; provided, that an amendment or modification modifying the rights or obligations of any Member in a manner that is disproportionately adverse to (i) such Member relative to the rights of other Members in respect of Units of the same class or series or (ii) a class or series of Units relative to the rights of another class or series of Units, shall in each case be effective only with that Member’s consent or the consent of the Members holding a majority of the Units in that class or series, as applicable. Notwithstanding the foregoing, amendments to the Members Schedule following any new issuance, redemption, repurchase or Transfer of Units in accordance with this Agreement may be made by the Board without the consent of or execution by the Members.

231

Section 15.10 Waiver. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. For the avoidance of doubt, nothing contained in this Section 15.10 shall diminish any of the explicit and implicit waivers described in this Agreement, including in Section 4.07(f), Section 8.04(c), Section 9.01(d), Section 10.03(d)(iv), Section 10.04(b)(ii), Section 10.05(e) and Section 15.13.

Section 15.11 Governing Law. All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

232

Section 15.12 Submission to Jurisdiction. The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort or otherwise, shall be brought in the United States District Court for the District of Delaware or in the Court of Chancery of the State of Delaware (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Delaware), so long as one of such courts shall have subject-matter jurisdiction over such suit, action or proceeding, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Delaware. Each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient form. Service of process, summons, notice or other document by registered mail to the address set forth in Section 15.03 shall be effective service of process for any suit, action or other proceeding brought in any such court.

Section 15.13 Waiver of Jury Trial. Each party hereto hereby acknowledges and agrees that any controversy which may arise under this Agreement is

233

likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 15.14 Equitable Remedies. Each party hereto acknowledges that a breach or threatened breach by such party of any of its obligations under this Agreement would give rise to irreparable harm to the other parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

Section 15.15 Attorneys’ Fees. In the event that any party hereto institutes any legal suit, action or proceeding, including arbitration, against another party in respect of a matter arising out of or relating to this Agreement, the prevailing party in the suit, action or proceeding shall be entitled to receive, in addition to all other damages to which it may be entitled, the costs incurred by such party in conducting the suit, action or proceeding,

234

including reasonable attorneys’ fees and expenses and court costs.

Section 15.16 Remedies Cumulative. The rights and remedies under this Agreement are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise, except to the extent expressly provided in Section 14.02 to the contrary.

Section 15.17 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of Electronic Transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

Section 15.18 Initial Public Offering. (a) Initial Public Offering. If at any time the Board desires to cause (i) a Transfer of all or a substantial portion of (x) the assets of the Company or (y) the Units to a newly organized corporation or other business entity (an “IPO Entity”), (ii) a merger or

235

consolidation of the Company into or with a IPO Entity as provided under § 18-209 of the Delaware Act or otherwise, or (iii) another restructuring of all or substantially all the assets or Units of the Company into an IPO Entity, including by way of the conversion of the Company into a Delaware corporation as provided under § 18-216 of the Delaware Act (any such corporation also herein referred to as an “IPO Entity”), in any such case in anticipation of or otherwise in connection with an Initial Public Offering of securities of an IPO Entity or its Affiliate (an “Initial Public Offering”), each Member shall take such steps to effect such Transfer, merger, consolidation, conversion or other restructuring as may be reasonably requested by the Board, including, without limitation, executing and delivering all agreements, instruments and documents as may be reasonably required and Transferring or tendering such Member’s Units to an IPO Entity in exchange or consideration for shares of capital stock or other equity interests of the IPO Entity, determined in accordance with the valuation procedures set forth in Section 15.18(b).

(b) Fair Market Value. In connection with a transaction described in Section 15.18(a), the Board shall, in good faith but subject to the following sentence, determine the Fair Market Value of the assets and/or Units Transferred to, merged with or converted into shares of the IPO Entity, the aggregate Fair Market Value of the IPO Entity and the number of shares of capital stock or other equity interests to be issued to each Member in exchange or consideration therefor. In determining Fair Market Value, (i) the offering price of the Initial Public Offering shall be used by the Board to determine the Fair Market Value of the capital stock or other equity interests of the IPO Entity and (ii) the Distributions that the Members would have

236

received with respect to their Units, including Incentive Units, if the Company were dissolved, its affairs wound up and Distributions made to the Members in accordance with Section 13.03(c) shall determine the Fair Market Value of the Units. In addition, any Units (including Incentive Units) to be converted into or redeemed or exchanged for shares of the IPO Entity shall receive shares with substantially equivalent economic, governance, priority and other rights and privileges as in effect immediately prior to such transaction (disregarding the tax treatment of such transaction).

(c) Appointment of Proxy. Each Member hereby makes, constitutes and appoints the Company, with full power of substitution and resubstitution, its true and lawful attorney, for it and in its name, place and stead and for its use and benefit, to act as its proxy in respect of any vote or approval of Members required to give effect to this Section 15.18, including any vote or approval required under § 18-209 or § 18-216 of the Delaware Act. The proxy granted pursuant to this Section 15.18(c) is a special proxy coupled with an interest and is irrevocable.

(d) Lock-up Agreement. Each Member hereby agrees that in connection with an Initial Public Offering, and upon the request of the managing underwriter in such offering, such Member shall not, without the prior written consent of such managing underwriter, during the 90 days prior to the effective date of such registration and ending on/until the date specified by such managing underwriter (such period not to exceed 180 days in

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the case of an Initial Public Offering or 120 days in the case of any registration other than an Initial Public Offering), (i) offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, hedge the beneficial ownership of or otherwise dispose of, directly or indirectly, any Units or Unit Equivalents (including any equity securities of the IPO Entity) held immediately before the effectiveness of the registration statement for such offering, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Units or Unit Equivalents (including equity securities of the IPO Entity) or such other securities, in cash or otherwise. The foregoing provisions of this Section 15.18(d) shall not apply to sales of securities to be included in such Initial Public Offering or other offering if otherwise permitted. Each Member agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. The Company: ABC Holdings, LLC By: ____________ Name:              Title:              The Members: ____________

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By:____________ Name:              Title:              ____________ By:____________ Name:              Title:             

SCHEDULE A MEMBERS SCHEDULE Member Name and Address

Preferred Units

Common Units

Incentive Units

 

[NUMBER]

[NUMBER]

[NUMBER]

 

[NUMBER]

[NUMBER]

[NUMBER]

Total:

[NUMBER]

[NUMBER]

[NUMBER]

SCHEDULE B PRIMARY COMPETITORS Form No. 2.2.04.    Delaware Manager Managed Limited Liability Company Operating Agreement (Real Estate Development) (Comprehensive Form) LIMITED LIABILITY COMPANY AGREEMENT OF APARTMENT DEVELOPMENT LLC

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THIS LIMITED LIABILITY COMPANY AGREEMENT of APARTMENT DEVELOPMENT LLC, a Delaware limited liability company (the “Company”), is entered into as of ___ ___, 20___ (the “Effective Date”), by and between Apartment Developer, L.P., a Delaware limited partnership, as a member and the initial manager of the Company (“Developer Member”), and ABC Company, a Delaware corporation (“Investor”), as a member of the Company.

WITNESSETH: WHEREAS, the Developer Member and Investor desire to form the Company for the purpose of developing the _________ Apartments, an approximately [___]-unit multifamily apartment building (the “Apartment Building”) on a [___] acre tract in _________ (the “Site”), and to manage, maintain, operate, lease and otherwise deal with the same, in each case in accordance with the terms set forth herein; WHEREAS, the Company was formed pursuant to the laws of the State of Delaware by the filing of a certificate of formation (the “Certificate of Formation”) with the office of the Secretary of State of the State of Delaware on ___ ___, 20___; and WHEREAS, the Members desire to set forth the manner in which the business and affairs of the Company shall be managed and their respective rights, duties and obligations with respect to the Company. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

ARTICLE I. DEFINITIONS

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Section 1.1 Capitalized Terms. Except where otherwise specified or if the context otherwise requires, the following terms shall have the meanings set forth below for all purposes of this Agreement: “Acquisition [_________].

Agreement”

shall

mean

that

certain

“Acquisition Budget” shall mean the acquisition budget for the acquisition of the Site setting forth by line item the estimated costs to be incurred in connection with the acquisition of the Site. The Acquisition Budget shall include the purchase price, closing costs, legal fees and expenses and any other costs of such acquisition, and shall also include an estimate of the costs and expenses reasonably expected to be incurred by the Company during the period beginning on the Effective Date and ending on the closing date of the Construction Financing. The Acquisition Budget is attached hereto as Exhibit H, and is hereby approved by each Member. “Act” shall have the meaning given in Section 2.1. “Additional Capital Contribution” shall mean, with respect to any Member, any amount contributed or required to be contributed to the capital of the Company by such Member pursuant to (a) the Development Capital Call, (b) a Shortfall Capital Call or (c) the agreement of the Members pursuant to Section 4.1(d) or the determination of the Executive Committee.

“Adjusted Capital Account” shall mean, as to each Member, as of any relevant time, such Member’s Capital Account, increased by the sum of (i) such Member’s share of Company Minimum Gain and (ii) such Member’s share of partner

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nonrecourse debt minimum gain, as determined pursuant to Section 1.704-2(i)(5) of the Treasury Regulations. “Affiliate” shall mean, with respect to any Member, any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Member. The term “control” as used herein (including the terms “controlling,” “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the ability (a) to vote twenty-five percent (25%) or more of the outstanding voting securities of or voting interests in a Person, or (b) otherwise to direct the management policies of such Person, by contract or otherwise. “Agreement” shall mean this Limited Liability Company Agreement, including the exhibits hereto. “Annual Business Plan” shall have the meaning given in Section 8.1(a).

“Apartment Building” shall have the meaning given in the recitals to this Agreement. “Auditor” means a nationally recognized accounting firm of independent certified public accountants which shall be selected by Investor and engaged on behalf of the Company by the Company annually to audit the books and records of the Company, prepare the tax returns of the Company and any other functions or services requested by Manager with respect to the Company, all at the Company’s cost and expense. The Auditor shall report to the Company. “Authorized Representatives” shall have the meaning given in Section 9.5. “Business Day” shall mean any day other than a Saturday, Sunday or a holiday on which national banking associations in New York, NY are closed or are authorized or required to close.

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“Capital Account” shall have the meaning given in Section 11.1. “Capital Contributions” shall mean the amount of money and the agreed fair market value of other property (net of any liabilities that the Company is deemed to assume, or to which the property remains subject) contributed by a Member to the Company. “Capital Proceeds” shall mean funds of the Company arising from a Capital Transaction, net of (a) the actual costs incurred by the Company in consummating the Capital Transaction, (b) any condemnation, insurance or financing proceeds used by the Company to acquire, develop, repair, replace or redevelop the Property pursuant to this Agreement or the Annual Business Plan and (c) any indebtedness of the Company paid and satisfied with the proceeds of such Capital Transaction. “Capital Ratio” shall mean the percentages in which the Members participate in, and bear, certain Company items. The Capital Ratios of the Members are: Developer Member

10%

Investor

90%

“Capital Transaction” shall mean (a) any sale, exchange, taking by eminent domain, damage, destruction or other disposition of all or any part of the assets of the Company, other than tangible personal property disposed of in the ordinary course of business; or (b) any financing or refinancing of any Company indebtedness. “Cash Amount” shall mean, with respect to any Membership Interest to be purchased in accordance with Section 13.3, an amount, in cash, equal to the amount of cash that would be available for distribution to the applicable Member if the Company sold all of its assets for cash at a

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purchase price equal to the Fair Market Value of the Property and paid all closing costs and expenses customarily paid by a seller of real estate, and all of such remaining cash was paid or distributed in the following order: (a) first, to creditors of the Company other than the Members and their Affiliates, in the order of priority provided by law; (b) then, to the Members and their respective Affiliates for any fees or other compensation or unreimbursed costs or expenses owing to the Members or their respective Affiliates in accordance with the terms of this Agreement or the Management Agreements, and then to repayment of any loans (with interest at the rate or rates determined pursuant to Section 4.4 or 4.5) made by any Member to the Company in accordance with the terms of this Agreement; (c) then, to contingency reserves that the non-Insolvent Member deems reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company (it being understood and agreed that, to the extent that such reserves are not used, the Insolvent Member shall receive its share thereof upon the non-Insolvent Member’s determination that such reserves are no longer needed); and (d) then, to the Members in accordance with the provisions of Section 5.3(c) through (e).

If the purchasing Member and the selling Member are unable to agree on the Cash Amount within thirty (30) days after the later of an Insolvent Member’s receipt of the Purchase Notice or the determination of the Fair Market Value of the Property, the Cash Amount shall be determined by a nationally recognized accounting firm selected by the purchasing Member and the selling Member (or, if applicable with respect

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to an Insolvent Member, the Personal Representative) or, if they cannot agree to such appointment within forty-five (45) days after receipt of such Purchase Notice, then by a nationally recognized accounting firm selected by the purchasing Member at random. The accounting firm so appointed shall determine the Cash Amount for the Membership Interest to be sold as provided herein. “Certificate of Formation” shall have the meaning given in the recitals to this Agreement. “Code” shall mean the Internal Revenue Code of 1986, as amended. “Company” shall have the meaning given in the preamble to this Agreement. “Compliance Certificate” shall mean a certificate issued in favor of the Company and the Members wherein the certifying Person: (a) certifies that, as of the date of the certificate, the representations and warranties contained in (i) Section 12.1, with respect to a transferee of a direct or indirect interest in Developer Member’s interest in the Company, or (ii) Section 12.2, with respect to a transferee of a direct or indirect interest in Investor’s interest in the Company, are true, correct and complete; (b) agrees to be bound by the provisions of this Agreement; and (c) certifies as to other information reasonably requested by the Members to the extent necessary to verify compliance with, as applicable, OFAC Laws and Regulations, the Patriot Act, any other law of similar import, and any regulations promulgated under any of them, including whether the transferee is a Financial Institution or an Entity majority-owned by a Financial

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Institution, and if so whether an appropriate anti-money laundering policy and procedure and customer identification program has been adopted. “Company Minimum Gain” shall have the meaning given in Section 11.5(a)(i).

“Construction Agreement” shall have the meaning given in Section 8.3(a). “Construction Financing” shall have the meaning given in Section 4.6(b). “Controllable Items” shall mean any and all of the items set forth on Exhibit J. “Cost Overrun” shall mean, with respect to the development of the Apartment Building pursuant to the Development Budget, the amount by which the total costs and expenses (including the Development Withdrawal, but excluding interest payable in connection with the Construction Financing and Land Financing, if any, and any operating expenses during the lease-up of the Apartment Building, marketing expenses, real estate taxes incurred, and any shortfalls in Operating Revenue) actually incurred to complete such development exceed the total of such costs and expenses set forth in the Development Budget for such development (including any contingency amounts). “Cost Savings” shall mean, with respect to the development of the Apartment Building pursuant to the Development Budget, the amount by which the total costs and expenses set forth in the Development Budget (including any contingency amounts, but excluding interest payable in connection with the Construction Financing and Land Financing, if any, and any operating expenses during the lease-up of the Apartment Building, marketing expenses, real estate taxes incurred, and any shortfalls in Operating

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Revenue) (without regard to the Contractor Fee (as defined in the Construction Agreement)) exceed the total costs and expenses actually incurred to complete such development (including the Development Withdrawal and the fee paid to the General Contractor under the Construction Agreement, but excluding interest payable in connection with the Construction Financing and Land Financing, if any, and any operating expenses during the lease-up of the Apartment Building, marketing expenses, real estate taxes incurred, and any shortfalls in Operating Revenue). “Debt” shall mean all indebtedness for borrowed money, whether secured or unsecured, incurred by the Company. “Default Loan” shall have the meaning given in Section 4.4(b).

“Default Rate” shall mean the greater of (a) eighteen percent (18%) per annum, compounded monthly, or (b) a per annum rate equal to the sum of five (5) percentage points plus the Prime Rate, as it may change from time to time; provided that in no event shall the Default Rate exceed the highest rate permitted by applicable law. “Defaulting Member” shall mean a Member designated as such in accordance with Section 16.1. “Developer” shall have the meaning given in Section 8.3(a). “Development Agreement” shall have the meaning given in Section 8.3(b). “Development Budget” shall mean the development budget prepared by the Manager and approved by the Executive Committee for the development of the Apartment Building setting forth by line item the costs to be incurred in connection with such development. The Development Budget shall include the construction budget, FF&E budget, initial working capital requirements and expected fees and other

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costs (including legal fees and other soft costs). The preliminary Development Budget is attached hereto as Exhibit D, and is hereby approved by each Member. “Development Capital Call” shall have the meaning given in Section 4.1(b).

“Development Withdrawal” shall mean an amount to be paid to Developer Member on the 1st day of each month equal to three percent (3%) of the total actual costs and expenses incurred during such month for the development of the Apartment Building, exclusive of any amounts paid by Developer Member in connection with a Developer Member Cost Overrun Obligation and any interest payable in connection with the Construction Financing and Land Financing. “Developer Member” shall have the meaning given in the preamble to this Agreement. “Developer Member’s Cost Overrun Obligation” shall have the meaning given in Section 8.2. “Developer Representatives” shall have the meaning given in Section 9.5. “Developer Restricted Loss Allocations” means, as to Developer Member, the amount of any Net Loss (or items of loss or deduction) for each Fiscal Year (or other period, as applicable) that are allocated to Developer Member pursuant to the final sentence of Section 11.4, to the extent that, as a result of the limitations set forth in Section 11.4, Investor is not permitted to be allocated any part of such Net Loss (or items of loss or deduction). “Dispose,” “Disposing” or “Disposition” shall mean, with respect to any asset (including a Membership Interest or any portion thereof), a sale, assignment, transfer, lease, conveyance, gift, pledge, encumbrance, exchange or other

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disposition of such asset; provided that such term does not refer to the lease of any space in the Apartment Building to a tenant in the ordinary course.

“Effective Date” shall have the meaning given in the preamble to this Agreement. “Emergency Situation Responses” shall mean actions, in light of the circumstances, taken in direct response to emergency situations that create an imminent and substantial threat of property damage or personal injury or death, in order to maintain the value of the Property or mitigate the threat of such injury or death. “Encumbrances” shall have the meaning given in Section 13.1(a). “Entity” shall mean any Person other than a natural person. “ERISA” shall mean the Employee Retirement Income Security Act of 1974. “Event of Default” shall have the meaning given in Section 16.1. “Executive Committee” shall have the meaning given in Section 9.5. “Extraordinary Costs” shall mean development costs of an extraordinary or unforeseeable nature arising from (a) a Force Majeure Event occurring after the time the Development Budget is approved by the Executive Committee, (b) a change order mandated by a Governmental Authority after such Governmental Authority has granted initial approval of the project plans and has issued all required permits or (c) a new or an increase in inspection fees or assessments mandated by a Governmental Authority after such Governmental Authority has granted initial approval of the project plans.

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“Fair Market Value” shall mean the fair market value of the Property taken as a whole, determined as follows: (a) by the written agreement of the Members (or, if applicable with respect to an Insolvent Member, its Personal Representative); (b) if the Members (or, with respect to an Insolvent Member, its Personal Representative) fail to agree on such a value in writing within fifteen (15) Business Days, then the Members (or, with respect to an Insolvent Member, its Personal Representative) shall jointly select an independent appraiser with at least ten (10) years’ experience in the appraisal and valuation of commercial real estate (the “Independent Appraiser”); the Independent Appraiser shall, within thirty (30) days following its appointment, determine the fair market value of the Property, without taking into account any liabilities associated with the Property, and shall deliver to each of the Members and the Manager its written report as to such value;

(c) if the Members (or, with respect to an Insolvent Member, its Personal Representative) fail to agree on an independent appraiser pursuant to clause (b) above within fifteen (15) Business Days, then the Manager shall deliver to each Member a written notice stating that no such appraiser has been selected and: (i) within five (5) Business Days after such written notice is given, each Member (or, with respect to an Insolvent Member, its Personal Representative) shall choose an independent appraiser with at least ten (10) years’ experience in the appraisal and valuation of commercial real estate (each, a “Member Appraiser”) to value the Property and shall provide written notice of such appointment to the other Member(s);

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(ii) within thirty (30) days following its appointment, each Member Appraiser shall determine the fair market value of the Property taken as a whole, without taking into account any liabilities associated with the Property, and shall deliver to each Member and the Manager its written report as to such fair market value; (iii) if the highest valuation in such reports differs from the lowest valuation in such reports by five percent (5%) of such lowest valuation or less, the Fair Market Value of the Property shall be equal to the average of such highest and lowest valuations; (iv) if the highest valuation differs from the lowest valuation by more than five percent (5%) of such lowest valuation, then the Member Appraisers shall jointly select another independent appraiser with at least ten (10) years’ experience in the appraisal and valuation of commercial real estate (the “Final Independent Appraiser”) to value the Property;

(v) within twenty-five (25) days following its appointment, the Final Independent Appraiser shall determine the fair market value of the Property, without taking into account any liabilities associated with the Property, and shall deliver to each Member and the Manager its written report as to such fair market value; (vi) if the fair market value of the Property as determined by the Final Independent Appraiser is within five percent (5%) of the average of the valuations determined by the Member Appraisers, the value of the Property shall be determined by calculating the average of all three values; otherwise, the value of the Property shall be determined by calculating the average of the two numerically closest values determined by the Member Appraisers and the Final Independent Appraiser; and

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(vii) notwithstanding clauses (ii) through (vi) above, in the event any Member (or Personal Representative) fails to choose an appraiser pursuant to clause (i), the valuation of the sole chosen Member Appraiser shall be binding upon the Members and any Personal Representative.

(d) The costs of the Independent Appraiser jointly selected in accordance with clause (b) above shall be a Company expense. If the Members (or Personal Representative) fail to agree on an Independent Appraiser, each Member shall be responsible for paying the cost of its own Member Appraiser, and the costs of the Final Independent Appraiser, if required, shall be a Company expense. “Final Independent Appraiser” shall have the meaning given in the definition of Fair Market Value. “Financial Institution” shall mean a “financial institution” as defined in the Patriot Act, any other law of similar import, or any regulations promulgated under any of them. “Financial Rights” shall mean the right to receive distributions of funds and allocations of income, gain, loss, deduction and credit. “Financing Documents” shall mean documents executed by the Company in connection any Mortgage Loan or financing or loan transaction. “Fiscal Year” shall mean each fiscal year of the Company as provided in Section 10.2. “Force Majeure Event” shall mean the occurrence of an earthquake, flood, tornado, hurricane or other unforeseeable act of God, war, riot, commotion, insurrection, fire, explosions, epidemics, quarantine restrictions, freight

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embargoes, power failures, strikes, slowdowns or work stoppages. “General Contractor” shall have the meaning given in Section 8.3(a).

“Governmental Authority” shall mean the United States of America, the state, county or municipality in which the Property is located, and any agency, authority, court, department, commission, board, bureau or instrumentality of any of them. “Government Lists” shall mean (a) the SDN List, (b) the Denied Persons List and the Entity List maintained by the United States Department of Commerce, (c) the List of Terrorists and List of Disbarred Parties maintained by the United States Department of State, (d) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the OFAC Laws and Regulations, (e) any other similar list maintained by the United States Department of State, the United States Department of Commerce or any other Governmental Authority or pursuant to any Executive Order of the President of the United States of America, and (f) any list or qualification of “Designated Nationals” as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, as all such Government Lists may be updated from time to time. “Governmental Requirements” shall mean, collectively, all applicable laws, statutes, ordinances, regulations, tariffs, judicial or administrative orders and procedural requirements imposed by any Governmental Authority regulating or affecting the applicable Person or the Property. “Gross Development Cost” shall mean the total costs and expenses (excluding interest payable in connection with the Construction Financing and any shortfall in Operating

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Revenue) actually incurred to complete the development of the Apartment Building. “Indemnified Parties” shall mean (a) the Manager, the Members, their respective Affiliates and any officer, partner, member, shareholder, director, manager, general partner or other agent of or advisor to such Persons, (b) any Person who serves at the request of the Company or any Member as an officer, director, trustee, manager or agent of the Company or any Entity in which the Company has an interest as an owner, security holder, creditor or otherwise, and (c) each Authorized Representative. “Independent Appraiser” shall have the meaning given in the definition of Fair Market Value. “Insolvent Member” shall mean any Member: (a) who has voluntarily initiated proceedings of any nature under the Federal Bankruptcy Code, or any similar state or federal law for the relief of debtors; (b) who has made a general assignment for the benefit of creditors; (c) against whom an involuntary proceeding under the Federal Bankruptcy Code, or any similar federal or state law for the relief of debtors, has been initiated, and (i) with respect to such proceeding, an order for relief has been entered under the Bankruptcy Code (or comparable order under any similar federal or state law), or (ii) which proceeding is not dismissed or discharged within sixty (60) days after the filing thereof; (d) who has admitted in writing its inability to pay its debts as they mature; or (e) all or any substantial part of whose assets, or whose interest in the Company or any part thereof, has been the subject of attachment or other judicial seizure. “Insolvency Option” shall have the meaning given in Section 13.3(b).

“Internal Rate of Return” or “IRR” shall mean the annual discount rate that results in a net present value equal to zero

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when such discount rate is applied to (a) with respect to Developer Member, (i) Developer Member’s Capital Contributions, as an outflow, and (ii) all distributions made (or deemed to have been made) by the Company to Developer Member, as an inflow and (b) with respect to Investor, (i) Investor’s Capital Contributions, as an outflow, and (ii) all distributions made (or deemed to have been made) by the Company to Investor, as an inflow. The Internal Rate of Return shall be calculated using the XIRR function in Microsoft Excel. At the time of each distribution of Capital Proceeds, the Manager shall provide the Members with a calculation of the IRR through the date of such distribution. Any cost and expense reimbursements paid to a Member, any fees paid to a Member (or an Affiliate thereof) and any interest or principal payments made to a Member on account of a Default Loan or a Priority Loan shall not be considered distributions to such Member for purposes of calculating such Member’s Internal Rate of Return. An example of the method of calculating an Internal Rate of Return is set forth on Exhibit B attached hereto. “Investment Advisor” shall mean Acme Capital Advisors LLC or any replacement thereto designated by Investor in accordance with Section 6.4. “Investor” shall have the meaning given in the preamble to this Agreement. “Investor Override” shall have the meaning given in Section 7.2(b).

“Investor Representatives” shall have the meaning given in Section 9.5. “Key Persons” shall mean ____________. “Key Person Event” shall mean that any two (2) Key Persons (i) have ceased to devote sufficient time and effort to

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the activities of the Company as is reasonably necessary to maintain the quality of the Apartment Building and otherwise manage the affairs of the Company on a day-to-day basis prudently and in accordance with this Agreement, as determined after review and consideration by Investor in its sole discretion, or (ii) have ceased to be involved on a day-today basis as a senior executive of the Manager, as determined after review and consideration by Investor in its sole discretion; provided that no event described in any of clauses (a) or (b) shall be deemed a Key Person Event unless, after review and consideration, Investor determines, in its sole discretion, that any proposed replacement for a Key Person or the new management team is unacceptable.

“Land Financing” shall have the definition set forth in Section 4.6(a). “Lockout Period” shall mean the period beginning on the Effective Date and ending on the date that is twenty-four (24) months after the date the Company receives all required certificates of occupancy with respect to the Apartment Building (whether temporary or permanent). “Loss” or “Losses” shall mean any and all losses, liabilities, costs, claims, damages, judgments, fines, penalties or expenses (including expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding, whether involving a third-party claim or a claim solely between the Members). “Major Decisions” shall mean the matters set forth in Section 7.2(a). “Management Agreements” shall mean, collectively, the Construction Agreement, the Development Agreement and the Property Management Agreement.

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“Management Rights” shall mean the right of a Member to participate in the management of the Company to the extent herein expressly provided. “Manager” shall mean Developer Member or any Person that is designated to act as the Manager of the Company as provided herein. “Marketing Notice” shall have the meaning given in Section 13.2(a).

“Marketing Right” shall have the meaning given in Section 13.2(a). “Marketing Right Offer” shall have the meaning given in Section 13.2(a). “Marketing Right Offer Price” shall have the meaning given in Section 13.2(a). “Member” shall mean any one of the Members. “Member Appraiser” shall have the meaning given in the definition of Fair Market Value. “Members” shall mean (a) collectively, at any time, the Persons who are members in the Company as provided in this Agreement and under the Act, such Persons being, on the date of this Agreement, the Persons listed as Members on Exhibit A (or such Persons’ respective successors), and at any time thereafter those Persons admitted as a Member in the Company in accordance with this Agreement in substitution of such Persons and any other Person admitted as an additional member in the Company, in each case in accordance with this Agreement and the Act, each in its capacity as a member in the Company and (b) for purposes of Article XI, the Persons described in clause (a) and the Manager.

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“Membership Interests” shall mean all of the rights and interests of whatsoever nature of the Members in the Company, including each Member’s respective Management Rights and Financial Rights. “Mortgage Loan” shall mean any Debt secured by an interest in the Property or any portion thereof or proceeds therefrom. “Net Income” means, the excess of the gross items of income and gain recognized for a Fiscal Year (or other period, as applicable) over the gross items of loss and deduction recognized for the Fiscal Year (or other period, as applicable), each as determined for purposes of Section 704 of the Code, provided, that any gross items of income, gain, loss or deduction as determined for purposes of Section 704 of the Code that are specially allocated pursuant to Sections 11.2, 11.3, 11.4 or 11.5 (or otherwise pursuant to this Agreement) shall not be taken account in computing Net Income. “Net Loss” means, the excess of the items of loss and deduction recognized for a Fiscal Year (or other period, as applicable), over the items of gross income recognized for the Fiscal Year (or other period, as applicable), each as determined for purposes of Section 704 of the Code, provided, that any gross items of income, gain, loss or deduction as determined for purposes of Section 704 of the Code that are specially allocated pursuant to Sections 11.2, 11.3, 11.4 or 11.5 (or otherwise pursuant to this Agreement) shall not be taken account in computing Net Loss. “Non-Controllable Items” shall mean all costs that are not Controllable Items. “Non-Defaulting Member” shall have the meaning given in Section 4.4.

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“Non-Triggering Member” shall have the meaning given in Section 13.2(a).

“OFAC” shall mean the Office of Foreign Assets Control, United States Department of the Treasury, or any other office, agency or department that succeeds to the duties of OFAC. “OFAC Laws and Regulations” shall mean: (a) any lists, laws, rules, sanctions and regulations maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation, including the Trading with the Enemy Act, 50 U.S.C. App. § 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., the Iraq Sanctions Act, Pub. L. 101-513, Title V, §§ 586 to 586J, 104 Stat. 2047, the National Emergencies Act, 50 U.S.C. §§ 1601 et seq., the Antiterrorism and Effective Death Penalty Act of 1996, Pub. L. 104132, 110 Stat. 1214-1319, the United Nations Participation Act, 22 U.S.C. § 287c, the International Security and Development Cooperation Act, 22 U.S.C. § 2349aa-9, the Nuclear Proliferation Prevention Act of 1994, Pub. L. 103-236, 108 Stat. 507, the Foreign Narcotics Kingpin Designation Act, 21 U.S.C. §§ 1901 et seq., the Iran Freedom Support Act of 2006, Pub. L. 109-293, 120 Stat. 1344, the Cuban Democracy Act, 22 U.S.C. §§ 6001 et seq., the Cuban Liberty and Democratic Solidarity Act, 22 U.S.C. §§ 6021-91, and the Foreign Operations, Export Financing and Related Programs Appropriations Act, 1997, Pub. L. 104-208, 110 Stat. 3009-172 and all amendments thereto; (b) all regulations, executive orders or administrative orders of any kind issued under these statutes; (c) any other applicable civil or criminal federal or state laws, regulations, or orders that (i) limit the use of and/or seek the forfeiture of proceeds from illegal transactions, (ii) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the interests of the United States or (iii) are designed to

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disrupt the flow of funds to terrorist organizations; and (d) any other civil or criminal federal or state laws, regulations or orders of similar import. “OFAC Regulations” shall have the meaning given in the definition of Prohibited Person. “Operating Budget” shall have the meaning given in Section 8.1(a).

“Operating Cash” shall mean, with respect to any period for which such calculation is being made, the positive difference of (a) Operating Revenues, minus (b) the sum of the following (without duplication): (i) all Operating Expenses; (ii) all interest, scheduled or required principal payments (including loan amortization or satisfaction, if applicable) and other debt and escrow and reserve account payments and deposits (including prepayment of any debt) made during such period by the Company on account of or with respect to the Company’s indebtedness for money borrowed (other than Priority Loans or Default Loans), if any; (iii) all cash expenditures made or to be made by the Company during such period (including all operating and capital expenditures, leasing commissions and fees), except in the case of each of the preceding clauses (i), (ii) and (iii) to the extent funded from sources that are not Operating Revenues; and (iv) the amount of any Reserves (including Reserves for working capital, operating deficits and capital) established or increased during such period. “Operating Expenses” shall mean, as for any period, the current obligations of the Company for such period, determined in accordance with generally accepted accounting principles applicable to commercial real estate and consistently applied, for (a) operating expenses of the Property, including fees paid hereunder (including any Property Management Fees), (b) capital expenditures, and (c)

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increases in Reserves for working capital, operating deficits and capital items (notwithstanding whether such increases would be considered Operating Expenses under generally accepted accounting principles). Operating Expenses shall not include any debt service (principal or interest) on loans to the Company or any non-cash expenses such as depreciation or amortization. “Operating Revenues” shall mean, as for any period, the gross revenues of the Company arising from the ownership and operation of the Property during such period, rental income, interest income, proceeds of any business interruption insurance and amounts advanced by the Company to fund Reserves, and decreases in Reserves, but specifically excluding (a) Capital Proceeds, (b) Capital Contributions made by the Members and (c) tenant security deposits until the Company becomes entitled to such deposit in accordance with the applicable tenant lease. “Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Public Law 107-56 (October 26, 2001), as the same may be amended from time to time, and corresponding provisions of future similar laws. “Payment Default” shall have the meaning given in Section 4.4. “Person” (whether the initial letter of the word is capitalized or in lower case type) shall mean any individual, corporation, sole proprietorship, partnership, limited liability company, association, trust, joint venture or other Entity or organization, including a government or political subdivision or an agency or instrumentality thereof. “Personal Representative” shall have the meaning given in Section 13.3(a).

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“Pre-Development Costs” shall mean all of the due diligence costs, impact fees, permit fees, fees of third party consultants, title and survey costs and such other fees and expenses associated with any entitlements in connection with the proposed development of the Apartment Building and prior to closing on any Construction Financing or Land Financing. “Prime Rate” shall mean the highest prime rate (or base rate) reported in the Money Rates column or section of The Wall Street Journal published on the second Business Day of each month as having been the rate in effect for corporate loans at large United States money center commercial banks (whether or not such rate has actually been charged by any such bank) as of the first Business Day of such month for which such rate is published. The Prime Rate shall change monthly and shall be effective for the entire calendar month. If The Wall Street Journal ceases publication of the Prime Rate, the “Prime Rate” shall mean the prime rate (or base rate) announced by JPMorgan Chase & Co., New York, New York or its successors (whether or not such rate has actually been charged by such bank). If such bank discontinues the practice of announcing the Prime Rate, the “Prime Rate” shall mean the highest rate charged by such bank on short-term, unsecured loans to its most creditworthy large corporate borrowers. “Priority Loan” shall have the meaning given in Section 4.5. “Prohibited Person” shall mean: (a) a person who (i) has been determined by competent authority to be subject to the prohibitions in any of the OFAC Laws and Regulations or (ii) is on any of the Government Lists; (b) a person who is a “designated national,” “specially designated national,” “specially designated terrorist,” “specially designated global terrorist,” “foreign terrorist organization,” “specially designated narcotics trafficker,” or “blocked person” within the definitions set forth in the Foreign Assets Control

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Regulations contained in 31 C.F.R., Subtitle B, Chapter V (the “OFAC Regulations”) or who otherwise appears on the list of Specially Designated Nationals and Blocked Persons, Appendix A to the OFAC Regulations; (c) the government, including any political subdivision, agency, instrumentality, or national thereof, of any country against which the United States maintains economic sanctions or embargos; (d) a person who is described in section 1 of Executive Order 13224—Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support Terrorism, effective September 24, 2001; (e) a Person owned or controlled by any of the Persons listed in clauses (a) through (d) above; or (f) a Person who has been (i) convicted of an offense or (ii) determined by a Governmental Authority to be subject to criminal or civil penalties under any other civil or criminal federal or state law, regulation or order of similar import to those set forth in clauses (a) through (d) above, as each such law, regulation or order has been or may be amended, adjusted, modified or revised from time to time.

“Promote Distributions” shall mean the amounts distributable to Developer Member pursuant to Section 5.3(d). “Property” shall mean the Company’s direct and indirect interests in real property, together with all buildings, structures and improvements located thereon, fixtures contained therein, appurtenances attached thereto and all personal property owned directly or indirectly in connection therewith. “Property Management Agreement” shall have the meaning given in Section 8.3(c). “Property Management Fee” shall have the meaning given in Section 8.3(c). “Property Manager” shall have the meaning given in Section 8.3(c).

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“Purchase Notice” shall have the meaning given in Section 13.3(b).

“Regulatory Allocations” shall have the meaning given in Section 11.6(e). “Related Parties” shall have the meaning given in Section 3.3. “Reserves” shall mean, at any time, the total amount of the reserves established and maintained by the Company at that time, in amounts set forth in the annual Operating Budget or otherwise approved by the Executive Committee to be adequate and appropriate for current and future operating and working capital and for capital expenditures and other costs and expenses incident to the Company’s business. “Response Period” shall have the meaning given in Section 13.2(a). “Restricted Area” shall have the meaning given in Section 3.3 and generally depicted In Exhibit G. “Restricted Person” shall mean (a) Developer Member, (b) any Key Person and (c) any Entity that, directly or indirectly, controls, is under common control with or is controlled by Developer Member or any Key Person. As used in the preceding sentence, the term “controlled by” means the possession, directly or indirectly, of the ability (i) to vote ten percent (10%) or more of the outstanding voting securities of or voting interests in an Entity or (ii) otherwise to direct the management policies of such Entity, by contract or otherwise. “Sale Period” shall have the meaning given in Section 13.2(c). “SDN List” shall mean the Specially Designated Nationals and Blocked Persons Lists maintained by OFAC, as such list is amended from time to time.

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“Securities Act” shall mean the U.S. Securities Act of 1933. “Shortfall” shall mean, at any given time, the aggregate amount of (a) costs and expenses that the Members specifically authorize in the Operating Budget for the applicable Fiscal Year and that are specified in the Operating Budget to be funded by Additional Capital Contributions and (b) additional funds that are necessary and required by the Company, after receipt of all cash available to the Company from whatever sources and all payments from Reserves designated for such purposes, to pay (i) Operating Expenses that are set forth in the Operating Budget, (ii) NonControllable Items, (iii) Emergency Situation Responses and (iv) all debt service of the Company. For the avoidance of doubt, a Shortfall shall not include any amounts that are payable by Developer Member in accordance with Developer Member’s Cost Overrun Obligation. “Shortfall Capital Call” shall have the meaning given in Section 4.1(c).

“Site” shall have the meaning given in the recitals to this Agreement. “Tax Returns” shall have the meaning given in Section 10.4. “Terrorism Law Offense” shall mean any violation of the applicable civil and criminal laws of any Governmental Authority, or that would be a civil or criminal violation if committed within the jurisdiction of the United States of America or any of the several states, and relating to terrorism or the laundering of monetary instruments, including any offense under (a) the criminal laws against terrorism, (b) the criminal laws against money laundering, (c) the Money Laundering Control Act of 1986, (d) the Patriot Act or (e) a civil violation of the International Emergency Economic Powers Act. “Terrorism Law Offense” also includes the crimes

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of conspiracy to commit, or aiding and abetting another to commit, a Terrorism Law Offense. “Transfer” shall have the meaning given in Section 13.1(a).

“Treasury Regulations” shall mean the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). “Triggering Member” shall have the meaning given in Section 13.2(a). “Unpermitted Transfer” shall mean a Transfer or Encumbrance with respect to a Member that is not permitted by the terms of this Agreement and to which the nontransferring Member has not otherwise consented. “U.S. GAAP” shall mean generally accepted accounting principles in the United States of America, as in effect from time to time.

Section 1.2 Rules of Interpretation. (a) The use of the masculine, feminine or neuter gender or the singular or plural form of words herein shall not limit any provision of this Agreement. The use of the term “including” or “include” shall in all cases herein mean “including, without limitation” or “include, without limitation,” respectively. Underscored references to Articles, Sections or Exhibits shall refer to those portions of this Agreement, and any underscored reference to a clause shall, unless otherwise identified, refer to the appropriate clause within the same Section in which such reference occurs. The use of the terms

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“hereunder,” “hereof,” “hereto” and words of similar import shall refer to this Agreement as a whole and not to any particular Article, Section or clause of, or Exhibit to, this Agreement. All references in this Agreement to dollar amounts shall refer to United States currency.

(b) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement), other contractual instruments and organizational documents shall mean such agreements, instruments and documents as the same may be amended and/or modified from time to time in accordance with the terms thereof, and (ii) references to any statute or regulation shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such statute or regulation.

ARTICLE II. FORMATION LIABILITY COMPANY

OF

LIMITED

Section 2.1 Formation. The Company has been formed by the filing of the Certificate of Formation pursuant to the provisions of the Delaware Limited Liability Company Act (the “Act”). To the extent permitted by the Act, the provisions of this Agreement shall override the provisions of the Act in the event of any inconsistency between them. The Members hereby adopt and ratify the Certificate of Formation and all acts taken in connection therewith.

Section 2.2 267

Name and Offices. (a) The name of the Company shall be “APARTMENT DEVELOPMENT LLC.” The Company shall do business under such name, or under any other name or names that the Members shall agree upon from time to time. If the Company does business under a name other than “APARTMENT DEVELOPMENT LLC”, the Manager shall file or cause to be filed an assumed name or fictitious name certificate or any other document as required by applicable law in appropriate jurisdictions and the Members shall execute such certificates, documents or other writings as may be reasonably requested by the Manager in connection therewith.

(b) The address of the registered office of the Company in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801. The name of its registered agent at that address is The Corporation Trust Company. The Manager may, from time to time, upon written notice to each Member and without amending this Agreement, change the Company’s registered agent and the address of its registered office.

(c) The Company’s principal office shall be located at ____________, or such other address as may be designated from time to time by the Manager.

(d) The Manager shall cause the Company to register to do business as a foreign Entity in any jurisdiction where the

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Company will conduct registration is required.

its

business

and

where

such

Section 2.3 Business of the Company. The purpose of the Company shall be to own, construct, operate, manage, maintain, repair and otherwise deal with the Property and any other property owned by the Company and to carry on any other business which may be agreed to by the Members. Without limiting the generality of the foregoing, subject to the terms of this Agreement, the Company is hereby authorized to engage in the following activities:

(a) to negotiate, execute, deliver and perform each of the Management Agreements, and in each case all documents, agreements and certificates contemplated thereby or related thereto;

(b) to negotiate, execute, deliver and perform agreements relating to the acquisition of the Site, and to assume the rights and obligations (subject to the terms of this Agreement) of either Developer Member (or their Affiliate) under the Acquisition Agreement;

(c) to acquire, hold, use, operate, lease, own, construct, improve, manage and otherwise deal with all or any portion of the Property;

(d) 269

to mortgage, sell, lease, assign, transfer, exchange or otherwise encumber or dispose of all of the Property, or any portion thereof or interest therein, including in connection with a Mortgage Loan;

(e) to obtain temporary or permanent financing in the form of the Land Financing, Construction Financing and any other participating loans, working capital loans and intermediate and long-term debt for the purposes recited in this Section 2.3;

(f) to make any investment and expenditure, to borrow money and to take any and all other actions which are incidental or reasonably related to any of the purposes recited in this Section 2.3;

(g) to pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and all other claims or demands of or against the Company or hold such proceeds against the payment of contingent liabilities; and

(h) to engage in any lawful act or activity and to exercise any powers permitted to limited liability companies under the Act that are incidental to and necessary, suitable or desirable for the accomplishment of the purposes specified in this Section 2.3.

Section 2.4

270

Term. The term of the Company commenced on the date of the filing of the Certificate of Formation in the office of the Secretary of State of the State of Delaware and shall continue until the Company is dissolved and liquidated in accordance with Section 17.2 and Articles of Termination have been filed pursuant to Section 17.4.

Section 2.5 Admission of Members. (a) The Developer Member and Investor have been admitted as Members in the Company. As of the Effective Date, the Developer Member and Investor are the only Members in the Company and shall constitute a single class or group of Members in the Company for all purposes of the Act. The Manager shall notify the Members of changes in Exhibit A, which shall constitute the record list of the Members for all purposes of this Agreement.

(b) Additional Members may be admitted at such time and upon such terms and conditions as may be determined by the written consent of all of the Members pursuant to Article XIII.

ARTICLE III. SITE ACQUISITION; BUSINESS OPPORTUNITIES Section 3.1 Site Acquisition. 271

(a) As of the Effective Date, the Developer Member shall assign (or cause its Affiliate to assign) all of its (and its Affiliates’) rights in and to the Site to the Company, including all of its (and its Affiliates’) rights in and to the Acquisition Agreement (it being understood that in no event shall the Company assume any liability or obligation with respect to the Acquisition Agreement to the extent such liability or obligation relates to any representation, warranty, covenant or other undertaking that was made or required to be performed prior to the Effective Date). Each Member hereby approves the terms of the Acquisition Agreement and hereby authorizes the Company to acquire the Site pursuant to the terms of the Acquisition Agreement. Upon the closing of the purchase of the Site under the Acquisition Agreement, Developer Member and Investor shall each be entitled to reimbursement by the Company of the costs and expenses set forth in the Acquisition Budget incurred by them or their Affiliates in connection with the acquisition of the Site prior to such closing.

(b) Manager shall work diligently to obtain approval of the site plan for the Project, as approved by the Executive Committee, from all applicable governmental authorities. Manager shall have ninety (90) days following the receipt of such site plan approval to prepare and deliver to the Executive Committee for approval the final Development Budget. The Executive Committee shall have a period of thirty (30) days to approve or disapprove the final Development Budget. If the gross cost of the Project set forth on the Development Budget is not greater than 105% of the amount set forth on the preliminary Development Budget attached hereto as Exhibit D, the Executive Committee shall approve such proposed

272

Development Budget, subject to reasonable objections to any line items therein.

Section 3.2 Restriction on New Investments. During the period beginning on the Effective Date and ending on the date that the Company receives the final certificate of occupancy with respect to the Apartment Building, the Developer Member shall not, nor shall it permit any Restricted Person to, acquire, construct, own, operate, lease in its entirety or make any investment of debt or equity in, directly or indirectly, or manage or otherwise provide management or consulting services to, any apartment or condominium (or similar) building, or real property on which Developer Member or such Restricted Person (or any other Person with an interest therein) intends to develop an apartment or condominium (or similar) building, that is within the restricted area set forth in Exhibit G (the “Restricted Area”)

Section 3.3 Business Opportunities. Each Member recognizes that the other Member and their respective members, partners, shareholders, officers, directors, employees, agents, representatives and Affiliates (collectively, “Related Parties”) have, or may in the future have, other business interests, activities and investments, some of which may be in conflict or competition with the business of the Company, and each of the other Members and its Related Parties are entitled to carry on such other business interests, activities and investments, subject to Section 3.2. Except as set forth in Section 3.2, each Member

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and its Related Parties may engage in or possess an interest in any other business or venture of any kind, independently or with others, including owning, financing, acquiring, leasing, promoting, developing, improving, operating, managing and servicing real property on its own behalf or on behalf of other entities with which any Member or its Related Parties is affiliated or otherwise, and each Member and its Related Parties may engage in any such activities, whether or not in competition with the Company, without any obligation to offer any interest in such activities to the Company or to any Member, and the engagement in any such activities shall not be deemed wrongful or improper. Except as set forth in Section 3.2, neither of the Company nor any Member shall have any right, by virtue of this Agreement, in or to such activities, or the income or profits derived therefrom, and the pursuit of such activities, even if in competition with the business of the Company, shall not be deemed wrongful or improper.

ARTICLE IV. FINANCING

CAPITAL

CONTRIBUTIONS;

Section 4.1 Capital Contributions. (a) Each Member shall make Capital Contributions from time to time in accordance with this Section 4.1. All Capital Contributions shall be made in cash unless otherwise expressly approved by all of the Members.

(b)

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Each Member shall make a Capital Contribution to fund the acquisition of the Site and the development of the Apartment Building, as well as costs and expenses described in Section 3.1, in each case in accordance with this Section 4.1(b). In connection with the acquisition of the Site, on the Effective Date, each Member shall make a Capital Contribution in an amount equal to its Capital Ratio multiplied by the amount set forth in the Acquisition Budget for the cost of acquiring the Site (less any Pre-Development Costs and any earnest money funded by any Member in connection with the Acquisition Agreement which shall be credited toward such Member’s Capital Contribution). In connection with the development of the Apartment Building, on or prior to the date of the closing of the Construction Financing, each Member shall make a Capital Contribution in an amount equal to its Capital Ratio multiplied by the amount set forth in the Development Budget to complete such development in excess of any Construction Financing proceeds (the “Development Capital Call”). The Manager shall provide the Members a minimum of ten (10) Business Days’ notice of the required Capital Contribution related to the Development Capital Call. The amount of the Development Capital Call shall not exceed the amount set forth in the Development Budget (or updates thereof approved by the Executive Committee).

(c) If, at any time or from time to time, the Manager determines that additional funds are required by the Company to fund a Shortfall, the Manager may request that each Member make additional Capital Contributions to fund the amount of such Shortfall by delivering written notice to all Members identifying the amount of the Shortfall and providing a reasonably detailed explanation of the cause of such Shortfall (each such notice, a “Shortfall Capital Call”).

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Each Member shall, within ten (10) Business Days of receipt of a Shortfall Capital Call, contribute its pro rata share (based upon its Capital Ratio) of the amount of the applicable Shortfall as specified in the Shortfall Capital Call. In lieu of requesting Capital Contributions for any Shortfall, the Manager may obtain unsecured, short-term financing to cover any Shortfall on terms approved by the Executive Committee in accordance with Section 4.6.

(d) Other than as set forth in this Section 4.1 or as may be determined by the Executive Committee, the Members shall make additional Capital Contributions only to the extent that the Members agree that such additional Capital Contributions shall be made and at such time as agreed to by the Members. Each Member shall contribute a portion of any such additional Capital Contribution equal to its Capital Ratio multiplied by the aggregate of any such Capital Contribution.

(e) The Manager shall deliver written notices with respect to all Capital Contributions pursuant to this Section 4.1 or determined by the Executive Committee identifying the amount of the Capital Contribution and providing a reasonably detailed explanation of the purpose of such Capital Contribution, in each case no less than eleven (11) Business Days prior to the payment date specified in the notice (except as otherwise set forth in Section 4.1(b)). Additional Capital Contributions shall be paid by the Members on or before the payment date specified in the notice.

(f)

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All Capital Contributions pursuant to the Development Capital Call shall be made in immediately available funds, which shall be made in cash by wire transfer to an account administered by the lender of the Construction Financing.

Section 4.2 No Additional Capital Contributions. Other than Capital Contributions required pursuant to this Article IV or determined by the Executive Committee or as may otherwise be required by applicable law, no Member shall be required to lend any funds to the Company or to make any additional Capital Contributions to the Company.

Section 4.3 Company Capital. The Manager shall cause the Company’s books and records to contain entries indicating the type and amount of Capital Contributions made to the Company by each Member and, if applicable, the return thereon. No Member shall have the right to withdraw all or any part of its Capital Contribution or to receive any return on or of any portion of its Capital Contribution except as specifically provided in this Agreement.

Section 4.4 Defaulting Members. if at any time any Member fails to make all or any portion of any required Capital Contribution on the date specified therefor in accordance with Section 4.1 and such failure shall continue beyond ten (10) Business Days from the date such Capital Contribution is due (each, a “Payment Default”), the

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Member failing to pay such amounts shall not be deemed to be a Defaulting Member for purposes of Article XVI (but such Member shall be a Defaulting Member for all other purposes of this Agreement). Upon the occurrence of any Payment Default, the non-defaulting Member that made its portion of the applicable required Capital Contribution (the “NonDefaulting Member”) may, upon written notice to the Defaulting Member and the Company, exercise, as its sole and exclusive remedy, one, or more, of the following rights or remedies:

(a) Request a refund of its share of the applicable Capital Contribution within ten (10) days after the default by the Defaulting Member, in which case the Company shall immediately refund such amount to the Non-Defaulting Member; or

(b) Cause the Company to retain the Non-Defaulting Member’s share of such requested Capital Contribution and elect to contribute to the Company the Defaulting Member’s share of such requested amount, in which case the Non-Defaulting Member shall designate all of such amount made by the NonDefaulting Member in respect of the related request therefor (including both the Non-Defaulting Member’s and, if it elects to contribute such amount, the Defaulting Member’s portion thereof) as a loan by the Non-Defaulting Member to the Company (a “Default Loan”). The making of a Default Loan by a Non-Defaulting Member shall not constitute a cure of the breach by the Defaulting Member of its obligations pursuant to this Article IV. Each Default Loan (i) shall be a loan by the Non-Defaulting Member to the Company, (ii) shall bear interest at the Default Rate, and (iii) shall be repaid on a

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priority basis from Operating Cash and Capital Proceeds (with all costs associated with the Default Loan being the responsibility of the Defaulting Member, except that the repayment of principal and interest shall be a Company obligation). The Capital Account of the Non-Defaulting Member shall not be credited with the amount of any Capital Contribution designated as a Default Loan. The repayment of a Default Loan and payment or reimbursement of any interest or expenses thereunder shall not constitute a return of Capital Contributions, shall not reduce the Non-Defaulting Member’s Capital Account, and shall not, with respect to Investor, be considered for purposes of determining whether Investor has obtained an applicable Internal Rate of Return as provided, however, that contemplated hereunder; notwithstanding the foregoing, if any Member fails to make a required Capital Contribution to fund the Development Capital Call after the acquisition of the Site pursuant to the Acquisition Agreement (it being understood that in such case such Member shall be deemed to be a Defaulting Member and the Member making its required Capital Contribution shall be deemed to be a Non-Defaulting Member), the Non-Defaulting Member shall have the right to cause the Company sell the Property to an unrelated third party (provided such thirdparty purchaser shall not be a Restricted Person) and any net proceeds from the sale shall be distributed pursuant to Section 5.3; or

(c) Suspend the rights of the Defaulting Member to receive any distributions under Section 5.3(d), such that all Capital Proceeds otherwise distributable to such Defaulting Member under Section 5.3(d) shall be distributed to the NonDefaulting Member.

Section 4.5 279

Loans by Members or Affiliates. Any Member or Affiliate may (but shall not be obligated to) at any time lend money or guarantee a loan to the Company to finance any Shortfall or any Extraordinary Costs or any other amounts reasonably necessary to fund Company operations or to pay the debts and obligations of the Company as they become due; provided that, unless a loan or guarantee is specifically contemplated pursuant to this Agreement, such Member or Affiliate shall deliver prior written notice to the Manager and each Member of its intent to make any such loan or guarantee, and each other Member shall have the right (but not any obligation) to participate (pro rata based on the Members’ Capital Ratios) in any such loan or guaranty. If any Member or their respective Affiliates lends funds to the Company (any such loan, a “Priority Loan”), except as otherwise approved by the Executive Committee, such Member or Affiliate shall be entitled to receive interest on such Priority Loan at an interest rate of eighteen percent (18%) per annum, compounded monthly, and any such Priority Loan shall otherwise be treated in the same manner as “Default Loans” for purposes of Sections 5.2 and Section 5.3. In no event shall the Company pay any fee to a Member or any Affiliate of a Member for providing any loan (including a Priority Loan) or guaranty to the Company.

Section 4.6 Nonrecourse Financing. (a) The Members anticipate that the Manager may cause the Company to obtain non-recourse financing for the acquisition of the Site (the “Land Financing”); provided that the Land Financing and any other Mortgage Loan shall be on terms and

280

conditions approved by the Executive Committee. Each Member hereby acknowledges that Investor will not approve (and will cause the Investor Representatives to not approve) any Land Financing that causes the aggregate Debt of the Company to exceed fifty percent (50%) of the cost of the Site. The Company shall execute and deliver all applicable Financing Documents in connection with the Land Financing or such other Mortgage Loan, each of which shall comply with the provisions of this Section 4.6 and include such additional terms and conditions as may be approved by the Executive Committee. No application, commitment or other loan document obligating the Company to pay any nonrefundable fees, costs or other amounts shall be executed without the prior approval of the Executive Committee.

(b) The Members anticipate that the Manager shall cause the Company to obtain construction financing for the Apartment Building (the “Construction Financing”); provided that the Construction Financing and any other Mortgage Loan shall be on terms and conditions approved by the Executive Committee. Each Member hereby acknowledges that Investor will not approve (and will cause the Investor Representatives to not approve) any Mortgage Loan (including the Construction Financing) that causes the aggregate Debt of the Company to exceed [sixty-five percent (65%)] of the Gross Development Cost. The Company shall execute and deliver all applicable Financing Documents in connection with the Construction Financing or such other Mortgage Loan, each of which shall comply with the provisions of this Section 4.6 and include such additional terms and conditions as may be approved by the Executive Committee. No application, commitment or other loan document obligating the Company to pay any nonrefundable fees, costs or other amounts shall

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be executed without the prior approval of the Executive Committee.

(c) Each Mortgage Loan shall be nonrecourse to the Members unless otherwise approved by the Executive Committee. If the Manager, any Key Person or any of their respective Affiliates becomes an indemnitor or guarantor under any Mortgage Loan for any nonrecourse carve-outs required by the terms thereof relating to “bad boy” acts or environmental matters, the Company shall indemnify such Person for any Losses incurred in connection therewith subject to the remainder of this Section 4.6(c); provided that no Member shall be required to make any Capital Contribution or otherwise contribute any capital to fund any such indemnification. Notwithstanding any provision of this Agreement to the contrary, in no event shall the Company have any obligation to indemnify (nor shall the Company indemnify) the Manager, any Key Person or any of their respective Affiliates with respect to any Losses (i) in connection with any payment, performance or other type of guaranty or indemnity (other than any nonrecourse guaranty relating to “bad boy” acts or environmental matters unless such Loss arises from the following clause (ii)) or (ii) to the extent caused by the willful misconduct, fraud, negligence or bad faith or uncured (as provided in Section 16.1) breach of this Agreement by the Manager, the Key Person or any of their respective Affiliates.

(d) The Manager shall use efforts consistent with the standard of care set forth in Section 7.3 to cause the loan documents for all third party loans to the Company to require that a separate copy of all notices of default thereunder be delivered to the Members at the same time such notices are delivered to

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the Company. In the absence of such provision, the Manager shall deliver to the Members a copy of any notice of default under any such loan documents promptly after the Company’s receipt of the same.

(e) Investor agrees that it will not, and will cause its Affiliates not to, intentionally interfere with the exercise by the lender of any Mortgage Loan (from and after the occurrence of an event of default under such Mortgage Loan) of rights or remedies under any of the loan documents of such Mortgage Loan in a manner that would reasonably be expected to cause Developer Member or an Affiliate of Developer Member to incur liability under any guaranty provided by such persons under such Mortgage Loan. Investor further agrees that any such intentional interference shall be non-binding on the Company, and Investor agrees, subject to Section 6.2(d), to indemnify such Developer Member or its Affiliate for any and all damages suffered by such person in connection with any such guaranty as a result of such intentional interference except to the extent such damages are caused by the willful misconduct, fraud, negligence or bad faith or uncured (as provided in Section 16.1) breach of this Agreement by Developer Member or its Affiliate.

ARTICLE V. DISTRIBUTIONS Section 5.1 Distributions in General. To the maximum extent permitted by the Act and except as otherwise provided in this Article V, the Company shall distribute all Operating Cash for each calendar month to the Members by the fifteenth (15th) day of the following month

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and shall distribute Capital Proceeds to the Members as soon as reasonably practicable after its receipt of such amounts unless reinvestment of such Capital Proceeds has been approved by the Members. To the extent permitted by the Act, the Company may make additional distributions to Members at any time. All distributions shall be made concurrently to all Members on the date set for purposes of such distribution. The Manager’s calculation of Operating Cash (whether actual or estimated) for the purpose of determining distributions pursuant to Section 5.2 shall be reviewed and approved by the Executive Committee prior to such distribution.”

Section 5.2 Distributions of Operating Cash. Subject to Section 4.4(c), distributions of Operating Cash shall be made in the following order and priority:

(a) first, to the Members, pro rata and pari passu based on the outstanding principal and accrued but unpaid interest of the Members’ outstanding Default Loans (including Priority Loans), in repayment of all outstanding principal and accrued interest on the Members’ Default Loans, until each Default Loan has been repaid in full; and

(b) thereafter, to the Members, pro rata and pari passu, based on the Members’ respective Capital Ratios.

Section 5.3 Distributions of Capital Proceeds. 284

Subject to Section 4.4(c), distributions of Capital Proceeds shall be made in the following order and priority:

(a) first, to the Members, pro rata and pari passu based on the outstanding principal and accrued but unpaid interest of the Members’ outstanding Default Loans (including Priority Loans), in repayment of all outstanding principal and accrued but unpaid interest on the Members’ Default Loans, until each Default Loan has been repaid in full;

(b) second, to the Members, pro rata and pari passu based on the Members’ respective Capital Ratios, until each Member has received pursuant to this Section 5.3(b), Sections 5.2(b) and (c) and Section 5.3(b) the return of all Capital Contributions made by such Member;

(c) third, to the Members, pro rata and pari passu based on the Members’ respective Capital Ratios, until each Member has received an Internal Rate of Return equal to 11.0%; and

(d) thereafter, (i) if Developer Member has not been removed as Manager pursuant to Section 16.1, pro rata and pari passu ___% to Investor and ___% to Developer Member, or (ii) if Developer Member has been removed as Manager pursuant to Section 16.1, pro rata and pari passu based on the Members’ respective Capital Ratios.

Section 5.4

285

Development Withdrawal. for so long as the Construction Agreement and the Development Agreement remain in effect, the Company shall make, in such amounts as provided in the Development Budget, payments to Developer Member in an aggregate amount of the Development Withdrawal. The Development Withdrawal shall be paid to Developer Member in proportion to payments of the costs contemplated by the Construction Agreement (e.g., a Development Withdrawal of $30,000 would be payable concurrently with the Company expending $1,000,000 in costs). The Members intend for each Development Withdrawal payment, if any, to be a “guaranteed payment” under Section 707(c) of the Code, and each Member and the Company shall report each Development Withdrawal payment for federal income tax purposes in a manner consistent with such treatment.

Section 5.5 Distributions in Kind. No distributions of assets other than cash shall be made without the consent of the Members. If assets other than cash are distributed, such assets shall be deemed to be equal to their fair market value as reasonably determined by the Members (net of any liabilities securing such distributed assets that the recipient Members are considered to assume or take subject to). Any gain or loss associated with such assets shall be allocated to the Members’ Capital Accounts in accordance with Article XI and adjustments to Capital Accounts in respect of distributions of such assets shall reflect its fair market value in accordance with Section 1.7041(b)(2)(iv)(e) of the Treasury Regulations.

Section 5.6 286

Distributions upon Dissolution and Termination. Subject to Section 4.4(c), upon dissolution and termination of the Company, the final distribution of the Company’s assets shall be made pursuant to the provisions of Section 17.2.

Section 5.7 Limitation on Distributions. Notwithstanding any provision to the contrary in this Agreement, the Company shall not knowingly make any distribution that would violate the Act or other applicable law.

Section 5.8 Annual Reconciliation. Upon the expiration of each Fiscal Year, the Executive Committee shall cause the Auditor to audit the reconciliation of the annual distributions to the Partners pursuant to Sections 5.2 and 5.3 (the “Reconciliation Calculation”). Based upon the Reconciliation Calculations, the Members shall reconcile between themselves any overpayments or underpayments of Operating Cash or Capital Proceeds received by the Partners during the applicable Fiscal Year. Such reconciliation shall be made within thirty (30) days after the Auditor completes the Reconciliation Calculation.

ARTICLE VI. MEMBERS Section 6.1 Registered Members. 287

The Company may treat the holder of record of any Membership Interest as the holder in fact of the Membership Interest for all purposes and, accordingly, is not bound to recognize any equitable or other claim to or interest in the Membership Interest on the part of any other Person, whether or not it has express or other notice of the claim or interest, except as expressly provided by this Agreement or the laws of the State of Delaware.

Section 6.2 Limited Liability of Members. (a) No Member, in such capacity or as a Manager, shall (i) be liable for the debts, liabilities, contracts or any other obligation of the Company, except to the extent expressly provided herein or in the Act, (ii) be liable for the debts or liabilities of any other Member, (iii) be required to contribute to the capital of, or loan, the Company any funds other than as expressly required in this Agreement, (iv) be liable, except required by the Act, for the return of all or any portion of the Capital Contributions of any Member, or (v) except as otherwise expressly provided herein, have any priority over any other Member as to the return of its contributions to capital or as to compensation by way of income. Except as expressly provided in the Act or this Agreement, all debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member.

(b)

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Except as expressly required by law, a Member shall not have any liability in excess of (i) the amount it has committed to contribute or pay hereunder and (ii) the amount of any distributions wrongfully distributed to it (and then only to the extent required by law).

(c) Notwithstanding anything herein to the contrary, the Members agree that if they are required by law to recontribute to the Company any amounts previously distributed to them, that, as between the Members, such recontributions shall be made in the reverse order that distributions were most recently made under the waterfall set forth in Section 5.2 or 5.3, as the case may be.

(d) Notwithstanding anything to the contrary contained in this Agreement or in any exhibits attached hereto or in any documents executed in connection herewith, it is expressly understood and agreed by and between the parties hereto that: (a) the recourse of Manager, any Member or any of their respective successors or assigns against Investor in connection with this Agreement or any action taken by the Company pursuant to this Agreement, including, without limitation, with respect to any alleged act or omission of Investor, the Investment Advisor or any other representative of Investor, any misrepresentation (whether allegedly intentional or unintentional) by or on behalf of Investor, or any breach by or on the part of Investor of any representation, warranty, covenant, undertaking, indemnity or agreement contained in this Agreement (collectively, “Investor’s Undertakings”), will not exceed the aggregate investment of Investor in the Company, and (b) no personal liability or personal responsibility of any sort with respect to any of

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Investor’s Undertakings or any alleged breach thereof is assumed by, or will at any time be asserted or enforceable against any of Investor’s or Investment Advisors’ respective shareholders, directors, officers, employees, agents, advisors, constituent partners, members, beneficiaries, trustees or representatives.

Section 6.3 Limitation on Member Actions. Except as expressly authorized by this Agreement, no Member shall, directly or indirectly, do any of the following without the written consent or approval of all of the other Members: (a) withdraw from the Company; (b) voluntarily dissolve, terminate or liquidate the Company; (c) petition a court for the dissolution, termination or liquidation of the Company; or (d) cause any property of the Company to be subject to the authority of any court, trustee or receiver (including suits for partition and bankruptcy, insolvency and similar proceedings). Except for approvals of Members or matters to be determined by Members as provided in this Agreement, no Member, in such capacity, may (i) act for or on behalf of the Company or take part in the operation, management or control of the Company’s business, (ii) transact any business in the name of the Company or (iii) have the authority or power to sign documents for or otherwise bind the Company; provided that such restriction shall not apply to any action taken by a Member who is the Manager and takes such action in its capacity as Manager.

Section 6.4 Investment Advisor; Appraiser.

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Investor has appointed the Investment Advisor as its agent with the full power, authority and discretion to act on behalf of Investor with respect to all matters contemplated in this Agreement. Any action taken by the Investment Advisor pursuant to this Agreement shall be binding upon Investor to the same extent as though Investor had taken such action directly. The foregoing appointment is revocable at any time by written notice from Investor to Manager and upon such revocation, the Authorized Representatives of Investor, ipso facto, shall be removed from their position on the Executive Committee and the Executive Committee shall have no power to take any action under this Agreement until such time as Investor has designated replacement Authorized Representatives to serve on the Executive Committee. Investor agrees that Investor will appoint such Authorized Representatives within five (5) days after the date of the revocation notice to Manager. At the election of Investor, Investor may appoint a replacement Investment Advisor with the same power, authority and discretion to act on Investor’s behalf. The Members acknowledge and agree that from time to time Investor, independently or through its Investment Advisor, may retain an independent, third party consultant or appraiser to determine the value of its investment in the Company at the sole cost and expense of Investor (without any credit to the Capital Account of Investor, and such cost or expense shall not be deemed to be a Capital Contribution by Investor). The Members shall cooperate with Investor, the Investment Advisor and/or such third party in connection therewith and will make available upon request such information, documentation and records as such party may deem necessary, desirable or appropriate in connection with performing such evaluation. Manager may conclusively rely, without any duty to investigate the Investment Advisor’s authority, on any act or instruction of the Investment Advisor (other than the amendment of this Agreement), prior to receipt of written notice revoking the appointment of

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Investment Advisor, as if such act or instruction was performed by Investor.

ARTICLE VII. THE MANAGER Section 7.1 Powers and Responsibilities. The Manager of the Company shall be Developer Member or such other Person as may be appointed to serve as the Manager from time to time by agreement of all of the Members or pursuant to Investor’s rights under Sections 13.3 or 16.2. The Manager shall have the duty, responsibility, power and authority to manage and administer the day-to-day business and affairs of the Company and the Property in order to implement the Major Decisions of the Executive Committee. The Manager shall regularly report to the Executive Committee as to the status of and compliance with the Annual Business Plan and Major Decisions as well as the other business affairs of the Company. The Manager shall conduct the ordinary and usual business affairs of the Company as provided in this Agreement, in each case using the standard of care set forth in Section 7.3. Subject to the foregoing (and subject to and limited by the provisions of this Agreement, including Section 7.2), the Manager shall have full power and authority to do each of the following to the extent necessary for the conduct of the Company’s business:

(a) to supervise or arrange for the supervision of day-to-day operations of the Company;

(b)

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to institute, prosecute, defend or settle any legal, arbitration or administrative actions or proceedings on behalf of or against the Company, subject to the provisions of Section 7.2(a)(ix) and Section 7.2(a)(xiv); provided that with respect to any such action or proceeding involving a claim or series of related claims against the Company totaling more than $10,000 and not covered by insurance, the Manager shall give the Members prompt written notice of such lawsuit or proceeding, and all Members shall have the opportunity to consult with the Manager regarding the Company’s defense of the action;

(c) retain attorneys, consultants and other independent contractors to the extent such professional services are required to carry on the business of the Company; provided that any such attorney has been pre-approved by Investor;

(d) to deliver all ordinary course reports, compliance certificates or other documents required to be delivered by the Company under any Financing Document;

(e) to enter into or renew lease agreements for the lease of space to tenants of the Apartment Building, substantially in a form of lease agreement that has previously been approved by the Executive Committee;

(f) to collect all rents and other payments due and owing to the Company;

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(g) to incur operating expenses and capital expenditures of the Company in accordance with the Development Budget or the Operating Budget or as otherwise permitted by Article VIII, as applicable, and to pay the obligations of the Company and to cause the Company to enter into, perform and carry out contracts and agreements for the conduct of the Company’s business;

(h) to obtain and maintain insurance coverage for the Apartment Building and other assets of the Company in such amounts and with such coverages as set forth in the Annual Business Plan;

(i) subject to the provisions of Section 7.2 and Investor’s rights under Section 8.4, to perform, or cause to be performed, all of the obligations of the Company and to exercise, or cause to be exercised, all rights of the Company, under any agreement (including the Financing Documents and any limited liability company agreement, partnership agreement, joint venture agreement, shareholder’s agreement or other similar agreement) to which the Company or any nominee of the Company is a party;

(j) to cause the Company to pay all taxes, assessments, rents and other impositions applicable to assets of the Company and undertake, when appropriate, any action or proceeding seeking to reduce such taxes, assessments, rents or other impositions;

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(k) to open and maintain bank accounts for the Company in accordance with Section 8.7, provided that withdrawals from any such bank accounts may be made only upon the Manager’s signature or instructions or any other signature that all of the Members designate;

(l) to coordinate the preparation and filing of tax returns on behalf of the Company in each federal, state, local or foreign tax jurisdiction in which such filings are required;

(m) to do any and all acts which may be necessary or desirable for the proper management and maintenance of the Apartment Building, including any matters provided for in the Property Management Agreement;

(n) to execute and deliver such documents on behalf of the Company as it reasonably deems necessary or desirable in connection with the foregoing provisions;

(o) to approve any draws under the Construction Financing or from the account referenced in Section 4.1(f), provided that the Manager has provided Investor with a copy of the documentation required by the lender of the Construction Financing for any such draw;

(p)

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to do any act which is reasonably necessary or desirable to carry out any of the foregoing. The Manager shall not be required to devote a particular amount of time to the Company’s business, but shall devote sufficient time and effort to the Company’s business and operation as is necessary to perform its duties hereunder. All costs and expenses incurred by the Manager that are exclusively and directly related to the conduct and operations of the Company’s business shall be borne by the Company to the extent set forth in the Operating Budget, the Acquisition Budget or the Development Budget or to the extent such costs and expenses are Extraordinary Costs or are incurred in payment for Non-Controllable Items or Emergency Response Situations.

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Section 7.2 Major Decisions. (a) Notwithstanding any contrary provision contained herein, the Manager shall not cause the Company to take any of the following actions (each, a “Major Decision”) without the approval of the Executive Committee, and the Executive Committee may direct the Manager to cause the Company to take any of the following actions:

(i) amend the Acquisition Budget or Development Budget;

(ii) adopt or amend any approved Annual Business Plan or Operating Budget (or any update thereto);

(iii) purchase or acquire, or contract or commit to purchase or acquire, any real property;

(iv) purchase or acquire, or contract or commit to purchase or acquire, any asset other than in the ordinary course of business;

(v) (A) execute or deliver any Financing Document (other than ordinary course reports, compliance certificates or other

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documents pursuant to Section 7.1(d)), (B) borrow any money or enter into any financing, refinancing or loan transaction, including any Mortgage Loan, or grant a security interest in all or any portion of the Property, or (C) amend the terms and conditions of any existing Financing Document, or make elections with respect to interest periods, interest rates, prepayment or other material provisions under any Financing Document; this shall be subject to an Investor Override decision; provided, however, (i) the exercise of any extension options or rights contained within any Financing Document shall not be subject to a Major Decision and (ii) no Investor Override may extend any guaranty by Developer Member or its Affiliate or impose any new material obligations under such guarantor;

(vi) enter into any management and development services agreement, property management agreement, lease agreement, construction management agreement, franchise agreement or other material agreement related to the Property not substantially in a form approved by the Executive Committee;

(vii) enter into the Construction Agreement or the Development Agreement other than in a form approved by the Executive Committee, or amend, waive or make elections under any material provision under, or terminate the Construction Agreement or the Development Agreement or any other development or construction management agreement

(viii) enter into any change order under the executed Construction Agreement that would materially change the

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quality of the Apartment Building or any of the components, fixtures or equipment to be installed therein or otherwise delay construction by more than twenty (20) business days and would change the unit mix or number of units, or which would individually exceed $50,000 or in the aggregate exceed $300,000; this is subject to an Investor Override decision;

(ix) enter into or amend any contract between the Company, on the one hand, and the Manager or an Affiliate of the Manager, on the other hand, except as provided in this Agreement;

(x) settle any uninsured legal, arbitration or administrative claim or proceeding asserted or brought against the Company, or confess a judgment against the Company, unless such settlement or confession is (A) at a cost to the Company equal to or less than the amount expressly provided in the Operating Budget as a separate line item specifically identifying the particular claim or proceeding, or (B) if no amount is provided therefor in the Operating Budget, equal to or less than $10,000 (for purposes of this paragraph, a claim does not become “uninsured” solely because of the deductible under an insurance policy maintained by the Company, and the Manager shall be authorized, without the consent of the Executive Committee and on the recommendation of the insurer, to settle any such claims that are otherwise insured and in connection therewith cause the Company to pay the deductible; provided such deductible does not exceed $10,000);

(xi)

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obtain and maintain insurance coverage for the Property and other assets of the Company, including any insurance to protect the Manager against liability from third parties, except as set forth in the Annual Business Plan; this is subject to an Investor Override decision to the extent, but only to the extent, that such insurance or modification does not adversely affect, or result in the reduction of, the coverages afforded to the Members and their Affiliates as provided by the then-current insurance program;

(xii) commit the Company to any expenditures for Controllable Items in excess of 105% of the applicable amounts set forth in the Operating Budget;

(xiii) seek or consent to any material change in (A) the zoning or other land use regulations affecting the Property or (B) any permits or approvals granted thereunder;

(xiv) rebuild or reconstruct the improvements on the Property if they are substantially (i.e. more than 10% of the gross leasable area of the Apartment Building or more than 10% of the value of the Apartment Building) damaged by a fire or other casualty if the applicable insurance proceeds are sufficient to pay off the Construction Financing or other applicable Mortgage Loan, provided, that notwithstanding the forgoing provisions of this clause (xiv), if the insurance proceeds are insufficient to pay off the Construction Financing or other applicable Mortgage Loan and Developer Member (or an Affiliate of Developer Member) is liable under a completion or performance guaranty for the Construction Financing or other applicable Mortgage Loan, Developer

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Member shall determine, in its sole and absolute discretion, whether the Company shall rebuild or reconstruct the improvements on the Property); this is subject to an Investor Override decision (except to the extent the proviso of this cause (xiv) applies);

(xv) file or settle lawsuits or other proceedings (including, without limitation, in the capacity as the “tax matters partner” under Section 10.5), except for (A) actions to recover rents (including the imposition and execution of liens on tenants’ property) and other amounts payable to the Company under leases and other occupancy agreements affecting the Apartment Building, or to enforce rights for nonmonetary breaches or defaults under such leases or other occupancy agreements, (B) the defense by insurers of insured claims, (C) actions against vendors, suppliers and subcontractors in the ordinary course of business, or (D) settling suits brought by a tenant and other liability claims for which the Company maintains insurance; this is subject to an Investor Override decision;

(xvi) retain counsel to represent the Company, except for routine landlord/tenant proceedings; this is subject to an Investor Override decision;

(xvii) enter into any construction or renovation contract with a cost to the Company in excess of $10,000 (unless the economic terms of such contract are contemplated by an Operating Budget and the contractor or subcontractor is of good reputation, experienced and insured), other than the

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Construction Agreement, the Development Agreement and the Property Management Agreement;

(xviii) make any change of the Company’s Auditor or accounting firm, determining the scope of the Auditor’s engagement, and accepting and implementing any audited financial report; this is subject to an Investor Override decision;

(xix) change the name of the Company;

(xx) require or permit any Member to make a Capital Contribution other than as set forth in Article IV;

(xxi) consolidate or merge with or into any other Entity, or purchase or otherwise acquire all or substantially all of the assets or any stock or shares of any class of any Entity, or otherwise engage in any recapitalization, joint venture or other business combination, or otherwise form or acquire any equity interest in any Entity;

(xxii) except as provided in Section 11.12, make any tax elections or decisions required or permitted by any federal, state or local laws (including, without limitation, any election to make adjustments permitted by Treasury Regulations Section 1.704 1(b)(2)(iv)(f)); this is subject to an Investor Override decision;

(xxiii) 302

change the elections or choices of methods of reporting income or loss for federal or state income tax purposes provided for in this Agreement unless required by applicable law; this is subject to an Investor Override decision;

(xxiv) approve and file any federal, state or local tax return prepared by the Company’s Auditor or accounting firm on behalf of the Company; this is subject to an Investor Override decision;

(xxv) except in accordance with the provisions of Section 13.2, dispose of all or any portion of, or any estate or interest in, the Property or any other asset (including goodwill) of the Company other than a Disposition of tangible personal property in the ordinary course of business having a value of less than $10,000;

(xxvi) remove or replace the Manager (except as permitted pursuant to Section 13.3 or 162);

(xxvii) to the fullest extent permitted by law, dissolve or liquidate, in whole or in part, make an assignment for the benefit of any creditor, file or otherwise initiate on behalf of the Company a petition in bankruptcy, petition or apply to any tribunal for the appointment of a custodian, receiver or any trustee for it or for a substantial part of its property, commence any proceeding under any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereinafter

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in effect, consent or acquiesce in the filing of (or invoke or cause any person to file) any such petition, application or proceeding, or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any substantial part of its property, or admit its inability to pay its debts generally as they become due or authorize any of the foregoing to be done or taken on behalf of the Company, or consent to or acquiesce in (A) the filing or other initiation of an involuntary petition for relief against the Company under any Chapter of the Bankruptcy Code or (B) the appointment of any trustee, receiver, conservator, assignee, sequestrator, custodian, liquidator (or other similar official) for the Company of all or substantially all of its respective assets; or

(xxviii) consent to any rezoning or subdivision of the Property or any other change in the legal status thereof not otherwise consistent with the management and ownership of the Property;

(xxix) extend loans or other credit to any Person, other than account receivables created in the ordinary course of business, or to guaranty any loans or other obligations;

(xxx) execute any declaration, property owner’s agreement or other encumbrance, or amendment thereto, affecting the Property, in each case excluding any easements, licenses, dedications or similar rights as may be contemplated by the Annual Business Plan;

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consent to any request or making any election under any declaration, property owner’s agreement, or other encumbrance affecting the Property, in each case excluding any easements, licenses, dedications, or similar rights as may be contemplated by the Approved Business Plan; and

(xxxii) take any other action not in the ordinary course of the Company’s business.

(b) Except as otherwise provided in this Agreement, no action shall be taken, sum expended, decision made or obligation incurred by the Company with respect to a matter that is a Major Decision, unless such matter has been approved by the Executive Committee. The Executive Committee shall be deemed to have approved, and no additional approval shall be required hereunder with respect to, any action or expenditure specifically set forth in the Annual Business Plan and Operating Budget or the Development Budget, in each case as approved by the Executive Committee. Notwithstanding anything contained herein to the contrary, in the event that the Authorized Representatives appointed by Investor do not approve a Major Decision set forth in [Section 7.2(a) (v) (viii), (xi), (xiv), (xv), (xvi), (xviii), (xxii), (xxiii), and (xxiv) (but only to the extent provided in such subsections) or any decision whether to make an Additional Capital Contribution], then upon written notice by Investor, Manager shall implement the decision of the Authorized Representatives of the Executive Committee appointed by Investor (such election being defined as the “Investor Override”) so long as any such Investor Override decision does not result in a default under any Financing Document unless Investor also pays off such financing. The decision whether to implement an Investor

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Override shall be subject to the sole and absolute discretion of Investor, and Investor shall have no liability whatsoever to the Company, the Manager or any other Member, if any, with respect to the implementation of the Investor Override. The foregoing limitation shall not limit any liability Investor may have hereunder for the breach of any other express provision of this Agreement (such as a failure to make an required Capital Contribution). If Investor elects to exercise an Investor Override, then Investor shall bear all cost increases and increased obligations under any guaranty resulting from such Investor Override without contribution by Developer Member or Manager, and Investor shall be obligated to fund Additional Capital Contributions equal to 100% of such cost increases and such increased obligations (but not any other Additional Capital Contributions), and such obligation of Investor shall supersede the obligation of Manger or Developer Member to fund any cost overruns to the extent such cost overruns directly result from such Investor Override.

(c) Approval of the Executive Committee may be obtained at a meeting of the Executive Committee duly called pursuant to Section 9.5 or by written consent. Each Member shall use reasonable efforts to cause its Authorized Representatives to respond to any written request for written consent to a Major Decision within five (5) Business Days after the date of such request. If all of a Member’s Authorized Representatives fail to respond to such written request within such five (5) Business Day period, such failure shall be deemed a disapproval of the requested Major Decision by such Member and its Authorized Representatives.

Section 7.3 Liability of the Manager. 306

As set forth in Section 7.1, the Manager shall undertake its activities under this Agreement with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent expert acting in a like capacity and familiar with such matters would use in the conduct of its own business and the conduct of an enterprise of like character and with like goals and investment objectives. Manager acknowledges Investor’s fiduciary capacity under its Florida constitutional and statutory investment duties. Manager acknowledges that Investor is the fiduciary of a tax-exempt public employees’ pension fund and generally recognizes the standard of care and performance with which Investor is required to observe in dealing with the Company’s assets. Notwithstanding the foregoing, Investor acknowledges and agrees that Manager shall not be liable or responsible for any breach by Investor of its fiduciary duties mandated by the State of Florida or otherwise as described in this Section as long as Manager is not in breach of the standard of care expressly set forth in this Section 7.3. Manager agrees that it has a duty of loyalty to Investor under the Delaware Act, with such express modification as specifically set forth in this Agreement, and will not use its position, power, or discretion under this Agreement to realize a personal gain at the expense of Investor. For the avoidance of doubt, the preceding sentence (i) does not prohibit the compensation or reimbursement of, or any other payment to, Manager by the Company in accordance with the terms of this Agreement, and (ii) does not apply to the selection of Authorized Representatives on the Executive Committee by Manager or the voting of, or any actions or omissions by, such Authorized Representatives on the Executive Committee matters. It shall not constitute a breach of the standard of care for the Manager or its Affiliates to:

(a) 307

contract or enter into any agreement or arrangement with the Company with respect to any aspect of the operations of the Company if approved by all of the Members after full disclosure of the relationship and the material terms of such agreement or arrangement;

(b) devote time to other matters not related to the operations of the Company to the extent permitted hereunder, as long as the Manager devotes such time and attention to the business and affairs of the Company as is necessary to reasonably conduct the business and affairs of the Company as set forth herein; or

(c) lend funds to the Company to the extent permitted hereunder pursuant to Section 4.4(b) or Section 4.5.

Notwithstanding anything in this Agreement to the contrary, there shall be no fiduciary relationship between any Member and any other Member.

Section 7.4 Resignation and Removal. The Manager may not resign as manager of the Company without the written consent of the Members. The Manager may be removed by the Members or by Investor, as applicable, only as permitted pursuant to Section 13.3 or 16.2. Upon any such resignation or removal, Investor shall (a) appoint a replacement Manager (or assume the duties of Manager hereunder for itself or its Affiliate) and (b) allocate any future amounts payable to the Manager or its Affiliates, including

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the Development Withdrawal, Property Management Fee and Promote Distributions, to the new Manager.

Section 7.5 Compensation and Expenses. The Manager shall not receive any compensation or expense reimbursement for serving as Manager other than as set forth in Sections 7.1 and 8.3.

Section 7.6 Delegation of Authority. The Manager may from time to time delegate in writing to one or more Members (or, with the consent of the Members, other Persons) such authority as the Manager may deem advisable.

Section 7.7 Notification of Key Person Event. The Manager shall deliver prompt written notice to Investor of the occurrence of any Key Person Event.

ARTICLE VIII. OPERATION AND EXPENSES Section 8.1 Annual Business Plan and Operating Budget. The Manager shall operate the Company in accordance with the Annual Business Plan, in each case as approved in accordance with this Section 8.1.

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(a) The strategic business plan that is in effect with respect to any Fiscal Year, as it may be amended, is called the “Annual Business Plan.” The Annual Business Plan shall include the items identified in Exhibit C. The executive summary shall outline the business strategy and budgeted and forecasted financial information for the upcoming period and shall contain a comprehensive statement setting forth the overall plan for the business of the Company to the extent known at that point in time, including proposed Property financings and refinancings and repair or renovation (in all cases, to the extent then known or reasonably anticipated), and shall set forth the following criteria for the operation of the Company during the Fiscal Year to which it relates based on information that is known: (i) an annual operating budget for the Company (the “Operating Budget”); and (ii) for forecasting purposes only, an estimated schedule of calls for Capital Contributions for the Fiscal Year. In preparing and approving each Annual Business Plan and any revisions or amendments thereto, the Manager shall consider, among other things, the previous years’ experience, current and projected market conditions and anticipated future needs in light of such projections. The Operating Budget shall include anticipated revenues, capital improvements, financing needs, insurance coverage (including coverage types and policy limits), and all other operating expenditures of the Company (including the Property Management Fee, as applicable), and shall separately set forth all capital expenditures and any costs and expenses that would be funded with Additional Capital Contributions.

(b) The Manager shall use commercially reasonable efforts to cause the Company to be operated consistent with the

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Development Budget until the Company obtains a certificate of occupancy with respect to the Apartment Building. The Annual Business Plan and Operating Budget for the period beginning on the date on which the Company obtains a certificate of occupancy with respect to the Apartment Building and ending December 31 of such year shall be prepared by the Manager and approved by the Executive Committee no later than the issuance of such certificate. No later than October 15 of each calendar year, the Manager shall present a proposed Annual Business Plan and Operating Budget for the following year to the Executive Committee for its consideration and approval. Following delivery of a proposed Annual Business Plan and Operating Budget, the Executive Committee shall approve or disapprove the Annual Business Plan and Operating Budget no later than thirty (30) days after the date on which the Manager has met with, or attempted in good faith to meet with, the Executive Committee to discuss the proposed Annual Business Plan and Operating Budget. The Executive Committee shall review the Operating Budget on a line-by-line basis. Unless otherwise mutually agreed:

(i) If the Executive Committee disapproves or raises any objections to any line items contained in the proposed Operating Budget or any amendments thereto, the undisputed portions of the proposed Operating Budget shall be deemed to be adopted and approved.

(ii) Failure to agree or disagree in writing within such thirty (30) day period shall be deemed a disapproval, and any such disputed line item(s) of the Operating Budget, other than capital expenditures and Non-Controllable Items, shall be set

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at one hundred five percent (105%) of the amount shown for such line item(s) in the Operating Budget for the preceding year; for Non-Controllable Items, any such disputed line item(s) shall be set at the amount actually incurred for such item during the preceding year or one hundred five percent (105%) of the amount shown for such line item(s) in such preceding year’s Operating Budget, whichever is greater; and for capital expenditures, no expenditures shall be made for capital items until approval is received, unless such expenditures were approved in the Operating Budget for the current year but not yet incurred in which case such expenditures, as previously approved, may be incurred.

(c) Notwithstanding the foregoing, with respect to the Property and without the consent of the Executive Committee, the Manager shall have the right, in its reasonable discretion, to expend funds for Emergency Situation Responses.

(d) The Manager shall exercise efforts consistent with the standard of care set forth in Section 7.3 to cause the Company to be operated in substantial compliance with the Operating Budget. The Manager shall secure the Executive Committee’s prior approval for any expenditure (other than any expenditure that is for the payment of Non-Controllable Items or Emergency Response Situations) that will cause any expense item for the Company to exceed the greater of $5,000 or one hundred five percent (105%) of such annual expense item set forth in the Operating Budget. During the calendar year, the Manager shall promptly inform the Executive Committee of any material increases or decreases in costs, expenses or income that were not reflected in the Operating Budget.

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(e) The Manager shall have the right, from time to time during each Fiscal Year, to submit a proposed amendment to the Operating Budget to the Executive Committee for approval. The Executive Committee shall review all proposed amendments to the Operating Budget on a line-by-line basis in the same manner as the Operating Budget. Following delivery of any proposed amendment to an Operating Budget, the Executive Committee shall be required to approve or disapprove such proposed amendment to the Operating Budget no later than ten (10) Business Days after the date on which the Manager has met with the Executive Committee regarding the proposed amendment. If the Executive Committee disapproves or fails to approve a proposed amendment to the Operating Budget, the Manager shall continue to use all reasonable efforts to comply with the Operating Budget in accordance with the foregoing provisions until a proposed amendment has been approved.

(f) The Manager shall be deemed not to have made any guarantee or warranty of the fiscal estimations set forth in the Annual Business Plan or Operating Budget. The parties acknowledge that the Annual Business Plan and Operating Budget is intended to set forth objectives and goals based on the Manager’s best judgment of the facts and circumstances known by the Manager at the time of preparation.

Section 8.2 Cost Overruns and Cost Savings. Developer Member shall be responsible for, and shall pay directly or reimburse the Company for, any and all Cost Overruns incurred in completing the development of the

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Apartment Building pursuant to the Development Budget (“Developer Member’s Cost Overrun Obligations”); provided, the Company shall be responsible to the extent such Cost Overruns are solely Extraordinary Costs. Upon completion of the development of the Apartment Building, the Manager shall deliver a statement setting forth the final construction and development costs incurred and comparing such costs and expenses to the Development Budget. Notwithstanding anything in this Agreement to the contrary, the Manager may use funds in the contingency line items contained in the Development Budget and Exhibit B to the Construction Agreement in connection with the development and construction of the Apartment Building without obtaining the prior consent of Investor or the Executive Committee.

Section 8.3 Construction Agreement, Development Agreement and the Property Management Agreement. (a) The Company shall enter into a construction management agreement (the “Construction Agreement”) with [_________] and an Affiliate of the Manager (the “General Contractor”), under which the General Contractor shall provide construction management services to the Company in connection with the construction of the Apartment Building. The General Contractor shall be paid a monthly contracting fee (the “Contractor Fee”) in an amount equal to five percent (5%) of all costs included as part of the construction budget as set forth in the approved Development Budget. The Construction Agreement will be substantially in the form of Exhibit F.

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(b) The Company shall enter into a development services agreement (the “Development Agreement”) with [_________] and an Affiliate of the Manager (the “Developer”), under which the Developer shall provide development services to the Company in connection with the development of the Apartment Building. The Development Agreement will be substantially in the form of Exhibit I.

(c) The Company shall enter into a property management agreement (the “Property Management Agreement’) with the Manager or an Affiliate of the Manager acceptable to Investor, in its sole discretion (the “Property Manager”), under which the Property Manager shall provide property management and leasing services to the Company with respect to the Apartment Building. The Property Manager shall be paid a monthly property management fee (the “Property Management Fee”) in an amount equal to the greater of $ ______ or ___% of the operating revenues of the Apartment Building for the applicable month commencing, as more fully set forth in the Property Management Agreement. The Property Management Agreement will be substantially in the form of Exhibit F.

Section 8.4 Contracts With Affiliates. Investor shall have the sole and exclusive right to direct, acting reasonably and in good faith, the Company’s actions with regard to enforcing the Management Agreements and any other contracts, agreements or arrangements between the Company, on one hand, and the Manager or any Affiliate of the Manager (other than the Company), on the other hand. The Company shall not enter into any other contracts with

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the Manager or any Affiliate of the Manager (other than the Company) or amend any Management Agreement or any other contract, agreement or arrangement between the Company, on the one hand, and the Manager or any Affiliate of the Manager (other than the Company), on the other hand, without the specific prior written approval of Investor.

Section 8.5 Third-Party Contracts. The Company shall not enter into any agreement or other arrangement with any third party requiring the continued ownership, control, employment or other involvement of the Manager or any Affiliate of the Manager with the Company or the Property without the specific prior written consent of Investor.

Section 8.6 Employees and Contractors. The Company shall conduct its business exclusively through independent contractors and shall not hire any employees. The Manager shall supervise and administer all services rendered to the Company by independent contractors. If any Management Agreement shall be terminated, Investor shall select a qualified third party, which is unaffiliated with any Member, to perform the development, management and leasing services (as applicable) required by the Company pursuant to such Management Agreement.

Section 8.7 Bank Account Requirements; Custody.

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(a) Subject to Section 7.2, Manager shall from time to time open bank accounts in the name of the Company, and the Executive Committee shall designate the Persons who will serve as the signatories thereon. Each bank account of the Company shall have no more than six (6) individuals employed by Manager as signatories, provided that up to six (6) individuals employed by the property manager under the Property Management Agreement may also be signatories to each bank account. To the extent possible, all bank accounts of the Company shall be in accounts fully insured by the FDIC.

(b) To the extent that the Company shall hold any securities, the Company’s securities shall be held on behalf of the Company by [_________] or another third-party custodian or financial institution (a “Substitute Custodian”) which is not affiliated with Manager and which is at least as creditworthy as measured by accepted industry standards, and which has substantial experience in the business of acting as a custodian or otherwise holding securities and related assets. Manager agrees to notify Investor of the identity of any such Substitute Custodian.

Section 8.8 Insurance Matters. The Manager shall cause the Company to obtain and maintain insurance coverage for the Property and other assets of the Company, in such amounts and with such coverages as set forth in the Development Budget and the Annual Business Plan, as applicable (and, to the extent the Annual Business Plan, or the insurance amounts and coverages set forth

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therein, have not been approved in any year in accordance with Section 8.1(b), in such amounts and with such coverages as set forth in the most recent Annual Business Plan approved in accordance herewith or as required by the lenders under any Mortgage Loan or Financing Document).

ARTICLE IX. MEETINGS OF MEMBERS Section 9.1 Place of Meetings. All meetings of the Members shall be held at the principal office of the Company or at such other place within or without the State of Delaware as may be determined by all of the Members and set forth in the respective notice or waivers of notice of such meeting.

Section 9.2 Meetings of Members. No periodic meetings of the Members shall be required. Meetings of the Members may be called by the Manager or any Member. The Manager shall hold meetings with the Members through the Authorized Representatives to review and discuss the Company and the performance of the Property from time to time to time as reasonably requested by any Member. So long as Developer Member is the Manager of the Company, any Authorized Representative designated by Developer Member shall serve as chairperson of the meetings unless all of the Members determine otherwise.

Section 9.3 Notice of Meetings of Members. 318

Written notice stating the place, day and hour of the meeting shall be delivered not later than fourteen (14) nor earlier than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Manager or Members, through the Authorized Representatives, calling the meeting, to each Member of record entitled to vote at such meeting. Notice of any meeting may be waived by the Members.

Section 9.4 Actions With or Without a Meeting and Telephone Meetings. Notwithstanding any provision contained in this Article IX, all actions of the Members provided for herein shall be taken either at a meeting of the Members (and evidenced by written minutes thereof (which may take the form of email) executed by an Authorized Representative of each Member attending such meeting) or by written consent without a meeting. Any meeting of the Members may be held by means of a telephone conference. Any action that may be taken by the Members without a meeting shall be effective only if the written consent (or consents) sets forth the action so taken, and is signed by all of the Members necessary to have approved such action if such a meeting had occurred. Any written consent signed by less than all of the Members shall be delivered promptly to each other Member.

Section 9.5 Executive Committee. The Members shall form a committee (the “Executive Committee”) to oversee the operations of the Company. Except as otherwise set forth in Section 16.2(a), the Executive

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Committee shall have four (4) members, consisting of two (2) members appointed by Investor (the “Investor Representatives”) and two (2) members appointed by Developer Member (the “Developer Representatives” and, together with the Investor Representatives, the “Authorized Representatives”); provided that so long as Developer Member is the Manager, the Developer Representatives shall be Key Persons. Each approval, consent and decision of a Member pursuant to this Agreement shall be made by its Authorized Representatives. The approval of each Annual Business Plan (including the Operating Budget) and each Major Decision shall be made by the Executive Committee. The vote cast by the Investor Representatives shall be equal to two (2) votes on a collective basis, such that the vote cast by the Investor Representatives shall collectively be deemed to be two (2) votes cast (regardless of the number of Investor Representatives actually casting votes), and the vote cast by the Developer Representatives shall be deemed to be two (2) votes cast on a collective basis (regardless of the number of Developer Representatives actually casting votes). Any consent, approval or other action shall require the affirmative vote of a majority of the votes eligible to be cast by the Authorized Representatives to be deemed the consent, approval or other action of the Executive Committee. Such vote may be taken at a meeting duly called by either the Manager or Investor and written notice of such meeting shall be provided to the Manager and each of the Authorized Representatives at least two (2) Business Days prior to the occurrence of such meeting or by written consent executed by such Authorized Representatives as may be necessary to effect such consent, approval or action at a meeting of the Executive Committee. Investor or Developer Member may replace an Authorized Representative designated by such Person by delivering written notice to the Company and the other Members of the removal of such Authorized Representative and designating a new Authorized

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Representative (subject to the requirement set forth above regarding the Key Persons as Developer Representatives). The Manager, the Members and the Authorized Representatives may rely absolutely on the vote, consent, approval, disapproval or execution and delivery of any instrument by an Authorized Representative as having been fully authorized and approved by the person so designating such individual as its Authorized Representative.

ARTICLE X. BOOKS AND RECORDS Section 10.1 Books and Records. At all times during the existence of the Company, the Manager shall cause the Company to keep at the Company’s principal office true and complete books of account, prepared on a consistent basis from year to year, including: (a) a current list of the full name and business address of each Member; (b) a copy of the Certificate of Formation and all certificates of amendment thereto; (c) copies of the Company’s federal, state and local income tax returns and reports for the most recent five (5) years; (d) copies of this Agreement, all amendments to this Agreement and any financial statements of the Company for the five (5) most recent years; and (e) all documents and information required under the Act. The Manager shall keep the books and records of the Company on the accrual method of accounting in accordance with U.S. GAAP; provided that the Capital Accounts shall be maintained in accordance with Article XI and, for purposes of determining distributions to Members, Operating Cash and Capital Proceeds shall be determined on a cash basis. Such books and records shall be available for examination and copying (and the Company shall, at its expense, make such copies and deliver them to any Member who requests them at

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reasonable intervals) at such office by any Member and its duly authorized representatives. Such documents may also be examined at the Company’s office by any potential transferee of a Membership Interest or any portion thereof where a Member authorizes such proposed transferee to examine the same in a writing addressed to the Manager and copies of which are sent to all other Members and such proposed transferee has executed and delivered to the Company a confidentiality agreement with provisions substantially identical to the provisions set forth in Section 18.13. Any Member, at its own expense, may cause an audit of the books and records of the Company during regular business hours and shall furnish a written report thereof to the other Members. The Manager shall cause the Company to furnish promptly to the Members such other information bearing on the financial condition and operations of the Company or the status of the Property as any Member from time to time may reasonably request.

Section 10.2 Fiscal Year. The Fiscal Year (“Fiscal Year”) of the Company shall end on December 31. Any change to the Fiscal Year shall be agreed upon by all of the Members.

Section 10.3 Reports. (a) Within ten (10) days after the expiration of each calendar month, Manager shall deliver or cause to be delivered to Investor and/or its designees in a mutually acceptable format

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showing, among other things, the results of the operations of the Property for the immediately preceding calendar month and year-to-date, together with an analysis of actual results for such Property compared to the Annual Budget for such Property on a month-to-date and year-to-date basis. Schedule 10.3 sets forth certain information to be included in the forgoing monthly reports.

(b) Within thirty (30) days after the expiration of each calendar quarter, Manager, at its sole cost and expense, shall deliver to Investor and/or its designee such other reports, statements and information regarding the Company and the Property as Investor may reasonably request from time to time in Investor’s discretion. Schedule 10.3 sets forth certain information to be included in the foregoing quarterly reports.

(c) Within sixty (60) days after the expiration of each taxable year, the Manager will provide to Investor a draft of year-end tax returns for the immediately preceding taxable year for the Company. The financial statements of the Company for each Fiscal Year shall be audited annually at the expense of the Company. Each annual audit shall be conducted and certified to by the Auditor. All financial statements shall be accurate in all material respects, shall reflect all necessary elections, corrections, adjustments or policy changes and shall present fairly the financial position and results of the operations of the Company. No change may be made in any of the foregoing as to any Fiscal year more than ninety (90) days after the close of such Fiscal Year, at which time the annual audit must be complete.

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Within ninety (90) days after the expiration of each taxable year the Manager will shall deliver to Investor final tax returns for the preceding taxable year for the Company and financial statements for the Company prepared by the Auditor.

(e) The Manager shall comply (or shall cause its Affiliate to comply) with the procedures established pursuant to the Property Management Agreement to facilitate the automatic and electronic transmission of data to Investor. The Manager shall use commercially reasonable efforts to facilitate the electronic delivery of such data on a monthly basis (if reasonably practicable by the tenth (10th) day of each calendar month, but in no event later than the fifteenth (15th) day of each calendar month) and make such reasonable modifications as may be necessary to support electronic data transmission to Investor.

(f) The Manager shall cause the Company to prepare and promptly deliver to each Member such other reports and information as may be required or requested by any lender or any other Person under any Mortgage Loan or any other Financing Document (other than any financial information regarding any guarantor).

(g) Investor shall have the right, at Investor’s sole cost and expense, to audit the books, records and operations of the Company. Manager shall cooperate with Investor and its representatives in connection with any such audit.

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Returns. Subject to Section 7.2, the Manager (together with the Company’s accountants) shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business. The Members agree that the Company shall be taxed as a partnership. The Manager shall provide to each Member, upon request, information with respect to the Property in such a manner that each Member requesting such information would be able to calculate the Net Income or Net Loss and any items are specially allocated pursuant to Sections 11.2, 11.3, 11.4 or 11.5 (or otherwise pursuant to this Agreement).

Section 10.5 Tax Matters Partner. The Manager shall be the “tax matters partner” of the Company pursuant to Section 6231 (a)(7) of the Code. The Manager shall take such action as may be necessary to cause each Member to become a “notice partner” within the meaning of Section 6231(a)(8) of the Code. The Manager shall inform each Member of all significant matters that may come to its attention in its capacity as “tax matters partner” by giving notice thereof within five (5) Business Days after the Manager becomes aware thereof and, within that time, shall forward to each Member copies of all significant written communications it may receive in that capacity. The tax matters partner shall keep the Members fully apprised of any action required to be taken or that may be taken by the tax matters partner for the Company and shall not take any such action in contravention of Section 11.8. Subject to prior approval by the Executive Committee, the Tax Matters Partner

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shall have the authority, on behalf of the Company, to do all or any of the following: (i) enter into a settlement agreement or make any election with the IRS which purports to bind any other Partner; (ii) file a petition as contemplated in Code Sections 6226(a) or 6228; (iii) intervene in any action as contemplated in Code Section 6226(b); (iv) file any request contemplated in Code Section 6227(b); and (iv) enter into an agreement extending the period of limitations as contemplated in Code Section 6229(b)(1)(B). Should the Tax Matters Partner wish to resign, the Executive Committee shall promptly appoint a replacement, upon which such resignation shall be effective.

Section 10.6 Accountants. The Manager shall cause the Company to retain [_________] (or such other a firm of independent certified public accountants as Investor may designate from time to time) to perform the functions specified in this Agreement to be performed by the Company’s accountants, including to prepare Tax Returns. The Manager shall, and shall cause the Company to, provide [_________] (or such other designated accounting firm) with information necessary to complete new client acceptance, which may include background checks on the Manager, the Company or key employees of the Manager. The Manager shall cause the Company’s accountants to cooperate with each Member’s accountants, including answering queries and providing copies of invoices, contracts and other Company-related materials. Notwithstanding anything to the contrary hereunder, the Manager shall not be in breach of any of its obligations under Section 10.3(a) or Section 10.4 if the Manager timely delivers to the Company’s accountants all information required or reasonably requested by the Company’s accountants to comply with the Company’s

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obligations hereunder and uses all commercially reasonable efforts to cause the Company’s accountants to produce the reports required by Section 10.3(a) and prepare and timely file the Tax Returns required by Section 10.4.

Section 10.7 Environmental Investigations. The Manager shall promptly notify Investor if the Manager becomes actually aware of any discharge of contaminants at the Property or any other circumstances or condition which indicates that the Property is not in compliance with all applicable environmental laws and regulations. The Manager shall require the Property Manager to notify the Manager of any such discharges, circumstances or conditions of which the Property Manager becomes aware. If any Member reasonably determines, on the basis of such notice, that it is appropriate to undertake investigations regarding the compliance of the Property and the activities at the Property with applicable environmental laws, or the existence of and potential for contamination, such Member may require that the Company conduct such investigation (and the Operating Budget shall be deemed to be amended to include the reasonable costs thereof). The results of any such investigation shall be provided to Investor promptly after receipt by the Company.

ARTICLE XI. ALLOCATIONS Section 11.1 Capital Accounts; Section 704(b). (a) 327

A separate capital account (each, a “Capital Account”) shall be maintained for each Member in accordance with Section 704(b) of the Code and the Treasury Regulations thereunder. Whenever the Company would be permitted to adjust the Capital Accounts of the Members pursuant to Treasury Regulations Section 1.704 1(b)(2)(iv)(f) to reflect revaluations of Company property, the Company may so adjust the Capital Accounts of the Members if the Executive Committee determines that such an adjustment is appropriate, provided any such adjustment is consistent with the requirements of Treasury Regulations Section 1.704 1(b) (2)(iv)(f). In the event that the Capital Accounts of the Members are adjusted pursuant to Treasury Regulations Section 1.704 1(b)(2)(iv)(f) to reflect revaluations of Company property, (i) the Capital Accounts of the Members shall be adjusted in accordance with Treasury Regulations Section 1.704 1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain or loss, as computed for book purposes, with respect to such property, (ii) the Members’ distributive shares of depreciation, depletion, amortization and gain or loss, as computed for tax purposes, with respect to such property shall be determined so as to take account of the variation between the adjusted tax basis and book value (as determined under Regulations Section 1.704-1(b)(2)(iv)) of such property in the same manner as under Code Section 704(c) and (iii) the amount of upward and/or downward adjustments to the book value (as determined under Regulations Section 1.704-1(b)(2)(iv)) of the Company property shall be treated as income, gain, deduction and/or loss for purposes of applying the allocation provisions of Article XI hereof. In the event that Code Section 704(c) applies to Company property, the Capital Accounts of the Members shall be adjusted in accordance with Treasury Regulations Section 1.704 1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain and loss, as computed for book purposes, with respect to such property.

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(b) In furtherance of Section 11.1(a), the following additional rules shall apply in maintaining Capital Accounts.

(i) In determining the amount of any liability, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and the Treasury Regulations.

(ii) Upon the sale, transfer, assignment or other disposition of any interest in the Company, the Capital Account of the transferor that is attributable to the transferred interest will be carried over to the transferee.

(iii) In accordance with Regulation Section 1.704-1(b)(2)(iv)(i) (2), amounts described in Section 709 of the Code (other than amounts with respect to which an election is in effect under Section 709(b) of the Code) shall be treated as described in Section 705(a)(2)(B) of the Code.

(iv) In accordance with Regulation Section 1.704-1(b)(2)(iv)(d) (2), in the case of a contribution to the Company of a promissory note (other than a note that is readily tradable on an established securities market) by a Member who is the maker of such note, the Capital Account of the Member contributing such note shall not be increased until (a) the Company makes a taxable disposition of such note, or (b) principal payments are made on such note.

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(c) It is the intention of the Members that the Capital Accounts of the Members be maintained in accordance with Code Section 704(b) and the Regulations thereunder, and the provisions of this Section 11.1 shall be interpreted consistently therewith.

Section 11.2 Net Income and Net Loss. (a) Net Income. After giving effect to the special allocations set forth in Section 11.4 and Section 11.5, and subject to Section 4.4(c), Section 11.8, and the flush language of Section 17.2(b)(iv), Net Income for each Fiscal Year (or other period, as applicable) shall be allocated in the following order of priority:

(i) first, to the Members, in the same ratio and reverse order as Net Loss and any items of loss or deduction were allocated to each Member pursuant to Section 11.2(b)(ii) and Section 11.3 (other than Developer Restricted Loss Allocations) for all prior Fiscal Years (and other periods, as applicable), until the aggregate amount of Net Income allocated to each such Member pursuant to this Section 11.2(a)(i) for the current Fiscal Year (or other period, as applicable) and all prior Fiscal Years (and other periods, as applicable) is equal to the aggregate Net Loss and items of loss or deduction allocated to such Member pursuant to Section 11.2(b)(ii) and Section 11.4 (other than Developer Restricted Loss Allocations) for all prior Fiscal Years (and other periods, as applicable);

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(ii) second, to the Members, pro rata and pari passu based on the Members’ respective Capital Ratios, until the amount of Net Income allocated to Investor pursuant to this Section 11.2(a)(ii) for the current Fiscal Year (or other period, as applicable) causes the Adjusted Capital Account of Investor (determined taking into account all adjustments thereto for the current Fiscal year (or other period, as applicable) pursuant Section 11.4 to equal an amount, that, if distributed on the date of computation, would result in Investor receiving an Internal Rate of Return of 11%;

(iii) third, 100% to Developer Member, in reverse order as (x) any items of loss or deduction were allocated to Developer Member pursuant to Section 11.4(a) and (y) any Developer Limited Loss Allocations were allocated pursuant to Section 8.4, in each case, for all prior Fiscal Years (and other periods, as applicable), until the aggregate amount of Net Income allocated to Developer Member pursuant to this Section 11.2(a)(iii) for the current Fiscal Year (or other period, as applicable) and all prior Fiscal Years (and other periods, as applicable) is equal to the aggregate of any items of loss or deduction allocated to Developer Member pursuant to Section 11.4(a) and any Developer Limited Loss Allocations allocated pursuant to Section 8.3, in each case, for all prior Fiscal Years (and other periods, as applicable); and

(iv) thereafter, to the Members, pro rata and pari passu 69.72% to Investor and 30.28% to Developer Member; provided, however, that if Developer Member has been removed as Manager pursuant to Section 16.1, allocations of Net Income pursuant to this Section 11.2(a)(iv) shall be made

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to the Members, pro rata and pari passu based on the Members’ respective Capital Ratios. Allocations of Net Income pursuant to the proviso of Section 11.2(a)(iv) shall be effective from the first day of the Fiscal Year (or other period, as applicable) in which the removal of the Manager occurs, unless such removal occurs prior to the due date (not including any extension of time) prescribed by law for the filing of Company’s federal income tax return for the immediately preceding Fiscal Year (or other period, as applicable), in which case the allocations of Net Income pursuant to the proviso of Section 11.2(a)(iv) shall be effective from the first day of the immediately preceding Fiscal Year (or other period, as applicable).

(b) Net Loss. After giving effect to the special allocations set forth in Section 11.4 and Section 11.5, and subject to Section 11.3, Section 11.8, the flush language of Section 17.2(b)(iv), Net Loss for each Fiscal Year (or other period, as applicable) shall be allocated in the following order of priority:

(i) first, to the Members, pro rata and pari passu 99.72% to Investor and 30.28% to Developer Member, until the aggregate amount of Net Loss allocated to each Member pursuant to this Section 11.2(b)(i) for the current Fiscal Year (or other period, as applicable) and all prior Fiscal Years (and other periods, as applicable) is equal to the aggregate Net Income allocated to such Member pursuant to Section 11.2(a) (iv) for all prior Fiscal Years (and other periods, as applicable) (excluding any allocations of Net Income pursuant to the proviso of Section 11.2(a)(iv)); and

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(ii) thereafter, to the Members, pro rata and pari passu, based on the Member’s respective Capital Ratios.

(c) Proration of Items. In applying this Section 11.2, each item of income, gain, loss and deduction taken into account in computing Net Income or Net Loss for the Fiscal Year (or other period, as applicable) shall be allocated among the Members in the same proportions as they share Net Income or Net Loss for such Fiscal Year (or other period, as applicable).

Section 11.3 Loss Limitations. Neither Net Loss (nor any item of loss or deduction) shall be allocated to a Member for a Fiscal Year (or other period, as applicable) to the extent such allocation would cause a deficit balance in such Member’s Capital Account in excess of (i) any amount such Member is obligated to restore, plus (ii) any amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g) (1) and 1.704-2(i)(5) of the Treasury Regulations. For purposes of this Section 11.3, the balance of a Member’s Capital Account shall be determined after taking into account any adjustments, allocations, or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Treasury Regulations. Any amounts not allocated to a Member pursuant to the limitations set forth in this Section 11.3 shall be allocated to the other Members, pro rata and pari passu in accordance with their respective Capital Ratios relative to one another, to the extent possible without violating the

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limitations set forth in this Section 11.3; provided, however, that, in respect of any Net Loss (or items of loss or deduction) that if made would constitute Developer Loss Allocations, such amounts shall be allocated to 100% to Developer Member to the extent possible without violating the limitations set forth in this Section 11.3.

Section 11.4 Special Allocations. Subject to Section 8.4, Section 8.13, and the flush language of Section 17.2(b)(iv), the following special allocations shall be made in respect of each Project:

(a) Developer Cost Overruns. All gross items of loss and deduction attributable to Cost Overruns giving rise to Developer Cost Overrun Obligations, including, without limitation, all items of depreciation, amortization, and other cost recovery deductions from any asset or a part thereof resulting from such a Cost Overrun that is required to be capitalized for federal income tax purposes (any such asset or part thereof, a “Section 11.5(a) Asset”), shall be allocated 100% to Developer Member. The tax basis associated with any Section 11.5(a) Asset (or any asset or part thereof the tax basis of which is determined in whole or in part by the tax basis of the Section 11.5(a) Asset) shall be for the benefit of Developer Member. In furtherance of the preceding sentence, if such asset is disposed of in a taxable transaction, (i) gain, if any, shall be specially allocated to the Members (other than Developer Member) to the extent necessary to cause each such Member to be allocated an amount of gain equal to the amount of gain that each such

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Member would have been allocated from such disposition absent such tax basis at the time of such disposition, (ii) loss, if any, shall be specially allocated to Developer Member in an amount equal to the amount of any loss that would not have been recognized from such disposition absent such tax basis at the time of such disposition, and (iii) to the extent there is insufficient gain or loss available to specially allocate amounts pursuant to the preceding clause (i) and (ii), respectively, the relevant portion of the tax basis of the Section 11.5(a) Asset shall be considered a separate asset having a value of $0, thereby resulting in a loss on the disposition of such asset, which loss shall be specially allocated to Developer Member.

(b) Preferred Return Allocations. For each Fiscal Year (or other period, as applicable) gross items of income and gain shall be allocated to the Members, pro rata and pari passu, based on (and to the extent of) an amount determined as to each Member equal to the excess of:

(i) the aggregate amount that has been distributed to such Member pursuant to Section 5.2(b) and Sections 5.3(b) and (c) (for such purpose taking into account only the percentage preferred return component of the Internal Rate of Return and not the return of capital component) for the current Fiscal Year (or other period, as applicable) and all prior Fiscal Years (and other periods, as applicable), as determined on or before the due date (not including any extension of time) prescribed by law for the filing of the Company’s federal income tax return for the current Fiscal Year (or other period as applicable), over

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(ii) the aggregate amount of any gross items of income and gain allocated to such Member pursuant to this Section 11.4(c) for all prior Fiscal Years (or other periods, as applicable) together with the aggregate amount of Net Income allocated to such Member pursuant to Section 11.2(a)(ii) for all prior Fiscal Years (and other periods, as applicable).

Section 11.5 Regulatory Allocations. The following special allocations shall be made in the following order prior to any allocations pursuant to Section 11.2 and Section 11.4:

(a) Minimum Gain Chargebacks and Nonrecourse Deductions. (i) Notwithstanding any other provisions of this Agreement, in the event there is a net decrease in Company Minimum Gain during a Fiscal Year, the Members shall be allocated items of income and gain in accordance with Section 1.704-2(f) of the Treasury Regulation. For purposes of this Agreement, the term “Company Minimum Gain” shall mean “partnership minimum gain” as set forth in Section 1.704-2(b)(2) of the Treasury Regulations, and any Member’s share of Company Minimum Gain shall be determined in accordance with Section 1.704-2(g)(1) of the Treasury Regulations. This Section 11.5(a)(i) is intended to comply with the minimum gain charge-back requirement of Section 1.704-2(f) of the

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Treasury Regulations and shall be interpreted and applied in a manner consistent therewith.

(ii) Notwithstanding any other provision of this Agreement, “nonrecourse deductions” (within the meaning of Section 1.704-2(b)(1) of the Treasury Regulations) shall be allocated to the Members, pro rata and pari pass based on the Member’s respective Capital Ratios.

(iii) Notwithstanding any other provisions of this Agreement, to the extent required by Section 1.704-2(i) of the Treasury Regulations, any items of income, gain, loss or deduction of the Company that are attributable to a nonrecourse debt of the Company that constitutes “partner nonrecourse debt” as defined in Section 1.704-2(b)(4) of the Treasury Regulations (including chargebacks of partner nonrecourse debt minimum gain) shall be allocated in accordance with the provisions of Section 1.704-2(i) of the Treasury Regulations. This Section 11.3(b)(iii) is intended to satisfy the requirements of Section 1.704-2(i) of the Treasury Regulations (including the partner nonrecourse debt minimum gain chargeback requirements) and shall be interpreted and applied in a manner consistent therewith.

(b) Qualified Income Offset. Any Member who unexpectedly receives an adjustment, allocation or distribution described in Section 1.704-1(b)(2)(ii) (d)(4), (5) or (6) of the Treasury Regulations that causes a deficit balance in its Capital Account (in excess of (i) any amount such Member is obligated to restore, plus (ii) any

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amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g) (1) and 1.704-2(i)(5) of the Treasury Regulations) shall be allocated items of income and gain in an amount and a manner sufficient to eliminate, to the extent required by the Treasury Regulations, such deficit balance as quickly as possible. This Section 11.6(b) is intended to comply with the alternate test for economic effect set forth in Section 1.7041(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted and applied in a manner consistent therewith.

(c) Section 754 Adjustments. To the extent an adjustment to the adjusted basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required under Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Treasury Regulations Section 1.7041(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such Member’s interest in the Company, 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 such basis) and such gain or loss shall be specially allocated to the Members pro rata in accordance with their respective interests in the Company in the event Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(d) Curative Allocations.

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The allocations set forth in Sections 11.6(a), (b), and (c) (the “Regulatory Allocations”) are intended to comply with the requirements of Sections 1.704-1(b) and 1.704-2 of the Treasury Regulations. Notwithstanding any other provisions of this Article XI (other than the Regulatory Allocations and Section 11.8), the Regulatory Allocations shall be taken into account as provided for in the following two sentences, provided that any allocations pursuant to the following two sentences must comply with the “fractions rule,” as defined in Code Section 514(c)(9)(E) and the Treasury Regulations thereunder, as determined by the Executive Committee. Income, gain, loss and deduction shall be reallocated to the extent that such reallocation causes the net aggregate amount of allocations of income, gain, deduction and loss to each Member to be equal to or more closely approximate the net aggregate amount of such items that would have been allocated to each such Member if the Regulatory Allocations had not occurred. This Section 11.5(d) shall be interpreted and applied in such a manner and to such extent as is reasonably necessary to eliminate, as quickly as possible, permanent economic distortions that would otherwise occur as a consequence of the Regulatory Allocations in the absence of this Section 11.5(d).

Section 11.6 Allocation of Nonrecourse Liabilities. The “excess nonrecourse liabilities” in respect of each Project (within the meaning of Section 1.752-3(a)(3) of the Treasury Regulations) shall be allocated to the Members based on the Member’s Capital Ratios.

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In the event that the Partnership issues or has outstanding at any time a “noncompensatory option” as defined in Treasury Regulations Section 1.721-2(f), the Company shall comply with the rules of Treasury Regulations Sections 1.704-1(b)(2)(iv)(f), 1.704-1(b)(2)(iv)(s), and 1.704-1(b) (4)(x).

Section 11.8 Fractions Rule. (a) The allocations provisions set forth in this are intended to comply with the “fractions rule,” as defined in Code Section 514(c)(9)(E) and the Treasury Regulations thereunder, and shall be interpreted consistently therewith. The Executive Committee shall have the authority to alter the allocations set forth herein in order to maintain such compliance; provided, however, that allocations in subsequent periods shall be adjusted so as to reverse the effect of any such alteration on the Capital Accounts of the Partners as rapidly as possible but without causing this Agreement to fail to comply with the fractions rule.

(b) if the allocations of any entity in which the Company has a direct or indirect interest and that is treated as a partnership for federal income tax purposes do not comply with the requirements of Section 514(c)(9)(E) of the Code and the Treasury Regulations thereunder, gross items of income, gain, loss, and deduction of any such entity shall be separately allocated from all other gross items of the Company in accordance with Treasury Regulations Section 1.514(c)-2(m) (2), Ex. (3). This Section 11.10(b) is intended to comply with

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the provisions of Regulation Section 1.514(c)-2(m)(2) and shall be interpreted consistently therewith.

Section 11.9 Tax Allocations; Code Section 704(c). (a) Except as expressly provided in Section 11.9(b), all items of income, gain, loss and deduction shall be allocated, for federal income tax purposes, in the same manner as the corresponding items of income, gain, loss and deduction are allocated for purposes of maintaining the Capital Accounts of the Members.

(b) In accordance with Code Section 704(c) and the Regulations issued thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company, or after any Company asset has been revalued under Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations shall, solely for federal income tax purposes, be allocated among the Members so as to take into account any variation between the adjusted tax basis of such asset and its book value using the method(s) as determined by the Executive Committee.

(c) Allocations under this Section 11.9 are solely for purposes of U.S. federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Loss or other items or distributions under any provision of this Agreement.

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Section 11.10 Recapture. If any portion of gain recognized from the disposition of property by the Company represents the “recapture” of previously allocated deductions by virtue of the application of Code Section 1245 or 1250, such gain shall be allocated in the manner set forth in Regulation Sections 1.1245-1(e) and 1.1250-1(f), as applicable. Unless otherwise required by the Code or the Regulations, any tax credits of the Company shall be allocated among the Members based on their respective Capital Ratios. Any recapture of tax credits shall be allocated among the Members in the same ratio as the applicable tax credits were allocated to the Members.

Section 11.11 Varying Interests. In the event that a Member transfers all or a portion of its interest in the Company, or if there is a change in any Member’s interests in the Company due to the admission of new Members or otherwise, each Member’s distributive share of items of income, loss, credit shall be determined by taking into account the variation in the Member’s respective interests in the during the Company’s Fiscal Year (or other period, as applicable) using any method (and conventions) permitted under Section 706 of the Code and the Treasury Regulations thereunder, with the applicable method (and convention) being determined by the Executive Committee.

Section 11.12 Tax Elections.

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The following elections shall be made on the appropriate returns of the Company:

(a) to adopt the calendar year as the Fiscal Year;

(b) if there is a distribution of Company property as described in Section 734 of the Code or if there is a transfer of a Company interest as described in Section 743 of the Code, upon written request of any Member, to elect, pursuant to Section 754 of the Code, to adjust the basis of Company properties; and

(c) to amortize the organizational expenses of the Company ratably over a period of fifteen (15) years or as otherwise permitted by Section 709(b) of the Code. No election shall be made by the Company or any Member to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state laws.

Section 11.13 No Deficit Restoration. Notwithstanding anything to the contrary in this Agreement, no Member shall be required to contribute capital to the Company to restore a deficit balance in its Capital Account upon liquidation or otherwise. Notwithstanding anything to the contrary in this Agreement, such deficit balance in any Capital Account shall not be an asset of the Company.

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Section 11.14 Withholding. The Company is authorized and directed to withhold from payments, distributions or allocations to any Member and to pay over to any Governmental Authority any amount required to be withheld pursuant to the Code or any other Governmental Requirements with respect to any payment, distribution or allocation to the Company or such other Member and shall allocate any such amounts to such other Member with respect to which such amount was withheld. All amounts so withheld shall be treated as amounts paid or distributed to such other Member and shall reduce the amount otherwise payable or distributable to such other Member for all purposes of this Agreement.

ARTICLE XII. COMPLIANCE WITH LAW Section 12.1 Warranties and Representations—Developer Member. As a material inducement to Investor’s execution and delivery of this Agreement, Developer Member represents, warrants, covenants and agrees to and with the Company and Investor that:

(a) Developer Member (i) is in compliance with and shall comply with all OFAC Laws and Regulations and (ii) has not and shall not do business or engage in any financial transaction with a Prohibited Person (it being acknowledged that any breach of this clause (ii) shall constitute a material

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breach of this Agreement by Developer Member that is subject to cure within ninety (90) days.

(b) Neither Developer Member nor any of the direct or indirect ownership interest holders in Developer Member or any of its (i) officers, (ii) directors or (iii) managers, any of which control (as determined under OFAC Laws and Regulations) the operations of the Developer Member, the Company or the Property, is now or shall at any time be a Prohibited Person or a Person with whom a Financial Institution or any other Person of the United States of America or any of the several states is prohibited from transacting business of the type contemplated by this Agreement under OFAC Laws and Regulations (it being acknowledged that any breach of this Section 12.1(b) shall constitute a material breach of this Agreement by Developer Member that is subject to cure within ninety (90) days).

(c) Developer Member (i) is in compliance with the Patriot Act and any regulations promulgated under the Patriot Act and (ii) meets the minimum requirements for anti-money laundering programs established by any other applicable Governmental Requirements.

(d) Developer Member has taken and shall continue to take all reasonable steps to implement all policies and procedures that are reasonably necessary to ensure that it is in compliance with all Governmental Requirements applicable to Developer Member, including those Governmental Requirements relating to the prevention of money laundering and anti-terrorism, including ensuring that (i) Developer

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Member is not directly or indirectly owned or controlled by a Prohibited Person and (ii) Developer Member is not doing business or engaged in financial transactions with a Prohibited Person.

Section 12.2 Warranties and Representations—Investor. As a material inducement to Developer Member’s execution and delivery of this Agreement, Investor represents, warrants, covenants and agrees to and with Developer Member and the Company as follows:

(a) Investor (i) is in compliance with and shall comply with all OFAC Laws and Regulations and (ii) has not and shall not do business or engage in any financial transaction with a Prohibited Person (it being acknowledged that any breach of this clause (ii) shall constitute a material breach of this Agreement by Investor that is subject to cure within ninety (90) days).

(b) None of Investor or any of their respective (i) officers, (ii) directors or trustees or (iii) managers, any of which control (as determined under OFAC Laws and Regulations) the operations of Investor, is now or shall at any time be a Prohibited Person or a Person with whom a Financial Institution or any other Person of the United States of America or any of the several states is prohibited from transacting business of the type contemplated by this Agreement under OFAC Laws and Regulations (it being acknowledged that any breach of this Section 12.2(b) shall

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constitute a material breach of this Agreement by Investor that is subject to cure within ninety (90) days).

(c) Investor (i) is in compliance with the Patriot Act and any regulations promulgated under the Patriot Act and (ii) meets the minimum requirements for anti-money laundering programs established by any other applicable Governmental Requirements.

(d) Investor has taken and shall continue to take all reasonable steps to implement all policies and procedures that are reasonably necessary to ensure that it is in compliance with all Governmental Requirements applicable to Investor, including those Governmental Requirements relating to the prevention of money laundering and anti-terrorism, including ensuring that (i) Investor is not directly or indirectly owned or controlled by a Prohibited Person and (ii) Investor is not doing business or engaged in financial transactions with a Prohibited Person.

Section 12.3 Transfers and Compliance. If, upon or after any Transfer, the proposed transferee Member is as a result of such Transfer not ultimately controlled by Investor or Developer Member, as a condition precedent to such Transfer, the proposed transferee shall execute and deliver a Compliance Certificate. No such Transfer shall be effective unless and until a Compliance Certificate is so delivered, and any such purported Transfer where a Compliance Certificate is required but is not so

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delivered shall hereunder.

be

deemed

an

Unpermitted

Transfer

Section 12.4 Compliance. (a) The Manager and the Members shall use their respective good faith and commercially reasonable efforts to cause the Company and, as it relates to the Company, the Property Manager to conduct their respective businesses in accordance with OFAC Laws and Regulations and all applicable Governmental Requirements, including those relating to money laundering and terrorism. The Manager shall not knowingly allow the Company to do business or engage in a financial transaction with any Prohibited Person.

(b) Investor shall have the right to audit, at Investor’s sole cost and expense, the Company’s and, as it relates to the Company, the Property Manager’s compliance with the OFAC Laws and Regulations and all applicable Governmental Requirements regarding OFAC Laws and Regulations having jurisdiction over the Company and its properties and assets, including those relating to money laundering and terrorism. In the event that the Company or the Property Manager fails to comply with the OFAC Laws and Regulations or any such Governmental Requirements relating thereto, then Investor may, at its option and after notice to the Developer Member, cause the Company to comply therewith, and any and all reasonable costs and expenses incurred by Investor in connection therewith shall be promptly reimbursed by the Company. Notwithstanding anything in this Agreement to the

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contrary, if, as a result of the action or omission of Investor, the Company fails to comply with any OFAC Laws and Regulations and all applicable Governmental Requirements relating thereto having jurisdiction over the Company and its properties and assets, including those relating to money laundering and terrorism, then such costs and expenses shall be promptly reimbursed by Investor.

(c) In connection with any purchase of any property or the sale, other transfer or lease of all or any portion of the properties or assets of the Company, the Company shall comply, in all material respects, with all Governmental Requirements, including the OFAC Laws and Regulations.

ARTICLE XIII. TRANSFER OF MEMBERSHIP INTERESTS Section 13.1 Restrictions on Transfer of Interest of and in a Member. (a) Except as otherwise set forth in this Article XIII, unless all of the Members consent (which consent shall be in the sole discretion of each Member), a Member shall not (i) withdraw or retire from the Company, (ii) substitute any Person in its stead or make an assignment, transfer, exchange or other disposition, voluntarily, involuntarily or by operation of law (collectively, a “Transfer”) of all or any portion of or any interest in its Membership Interest or (iii) pledge, mortgage, hypothecate, grant a security interest in or otherwise encumber (an “Encumbrance”) all or any portion of or any

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interest in its Membership Interest, including a transfer, assignment, hypothecation or pledge of its Financial Rights, including any right to receive distributions from the Company. Any attempted Transfer or Encumbrance of all or any portion of a Membership Interest, other than strictly in accordance with such provisions, shall be void ab initio and of no force or effect whatsoever. In addition, any Transfer or Encumbrance of a direct or indirect ownership or beneficial interest in a Member shall be included within the meaning of, and shall be deemed to be a Transfer or Encumbrance by such Member and prohibited by the first sentence of, this Section 13.1(a).

(b) Notwithstanding anything to the contrary contained herein, but subject always to Section 12.3, the following Transfers or Encumbrances shall be permitted without any consent of the other Member being required:

(i) the Transfer by Investor to any other Person that acts as investment fiduciary for the Florida Retirement System Trust Fund (in such capacity).; and

(ii) the Transfer by Investor of its Membership Interests to a Person controlled directly or indirectly by Investor (or the successor of its Affiliate as general partner of Investor); provided that the membership or limited partnership interests in such Person are held (directly or indirectly) by Investor.

(c)

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Notwithstanding anything to the contrary contained herein, unless all of the Members consent (which consent shall be in the sole discretion of each Member), no Member may Transfer all or any portion of its Membership Interest if such Transfer would:

(i) cause the Company to lose its status as a partnership for U.S. federal income tax purposes;

(ii) cause or constitute a default or event of default under any Mortgage Loan or other Financing Document;

(iii) violate any federal securities laws or any applicable state securities laws (including suitability standards); or

(iv) cause the Company to qualify as a “publicly traded partnership,” as that term is defined in the Code.

(d) Notwithstanding anything to the contrary contained herein, a Member may Transfer all or any portion of its Membership Interest to any Entity wholly owned by such Member without the consent of the other Member; provided that the transferring Member shall remain liable for all of its obligations under this Agreement and deliver prompt written notice of such Transfer to each Member. Such Entity shall be admitted as a substitute Member to the extent of its acquired interest in the Company.

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(e) Notwithstanding anything to the contrary contained in this Agreement, in the event of an Unpermitted Transfer or Encumbrance to which the other Member does not consent, such Unpermitted Transfer or Encumbrance shall be void ab initio and of no force and effect whatsoever.

Section 13.2 Marketing Right. (a) (i) Investor, (1) at any time after the expiration of the Lockout Period, (2) at any time after a Key Person Event has occurred, (3) at any time an Event of Default by Developer Member has occurred and is continuing, or (4) if the Company has not obtained all necessary and final building permits or site plan approvals on or before December 31, 2014, and (ii) Developer Member, (1) at any time after the expiration of the Lockout Period, (2) at any time an Event of Default by Investor has occurred and is continuing, may exercise its rights to initiate the provisions of this Section 13.2, or (3) if the Company has not obtained all necessary and final building permits or site plan approvals on or before December 31, 2014 (the “Marketing Right”) is entitled to market or require the Manager to market the Property for Disposition. A Member may exercise its Marketing Right by sending the Manager and the other Member a written notice (the “Marketing Notice”) that states the Member (the “Triggering Member”) is exercising the Marketing Right. The Triggering Member shall procure (at the cost of the Company), from an independent broker with at least ten (10) years’ experience in the sale and marketing of commercial real estate (including apartments, condominiums or similar real estate), a

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statement setting forth an estimated range of the sale price for the Property. Within twenty (20) days of receipt of the independent broker statement (the “Response Period”), the non-triggering Member (either Investor or Developer Member, as the case may be) (the “Non-Triggering Member”) may, by notice to the Triggering Member (the “Marketing Right Offer”), offer to acquire the Property at an all-cash price determined by the Non-Triggering Member in its sole discretion, which price may be outside the range set forth in the independent broker statement (the “Marketing Right Offer Price”). Any Marketing Right Offer shall be reviewed by the Triggering Member in accordance with Section 13.2(b) below.

(b) Within twenty (20) days after the Triggering Member’s receipt of a Marketing Right Offer, the Triggering Member may either (i) accept the Non-Triggering Member’s Marketing Right Offer, in which case the Company shall sell and transfer, or cause to be sold and transferred, the Property to the NonTriggering Member at the Marketing Right Offer Price in accordance with Section 13.2(g) and (i) or (ii) reject the NonTriggering Member’s Marketing Right Offer.

(c) if (i) the Triggering Member rejects the Non-Triggering Member’s Marketing Right Offer or (ii) the Non-Triggering Member has not made a Marketing Right Offer prior to the termination of the Response Period, then the Triggering Member may (or may cause the Manager to) offer the Property for sale on behalf of the Company on such terms and conditions as the Triggering Member determines (provided that, unless the Triggering Member and the Non-Triggering Member otherwise agree, the Triggering Member or the Manager, as applicable, retains a third-party broker with at

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least ten (10) years’ experience in the sale and marketing of commercial real estate (including apartments, condominiums or similar real estate) to market the Property) for a period of up to one hundred forty (140) days after the expiration of the Response Period (the “Sale Period”).

(d) if the Triggering Member proceeds pursuant to Section 13.2(c) and obtains a bona fide offer to purchase the Property from a third-party purchaser not Affiliated with the Triggering Member (which bona fide offer may be subject to customary conditions and due diligence review periods), then the Triggering Member, shall have an additional period of ninety (90) days after the Sale Period in which to cause the Company to consummate any such sale of the Property on such other terms and conditions acceptable to the Triggering Member; provided that, if the third-party offer price for the Property for which the Non-Triggering Member submitted a Marketing Right Offer is less than ninety-seven percent (97%) of the Marketing Right Offer Price with respect to the Property, the Non-Triggering Member may, at its option, elect to purchase the Property at such third-party offer price (and subject to any closing conditions in such third-party offer) such election to be made within five (5) Business Days after the Triggering Member notifies the Non-Triggering Member of the price and other terms and conditions of such third-party offer. Failure by the Non-Triggering Member to respond to such notice shall be deemed its consent to the sale in such third-party offer.

(e) if, within the Sale Period, the Triggering Member or the Manager, as the case may be, is unable to obtain a bona fide offer from a third party not Affiliated with the Triggering Member to purchase the Property, or if after having obtained

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such an offer, such sale is not consummated within ninety (90) days after the expiration of the Sale Period, then the Marketing Right shall lapse and a Triggering Member must exercise the Marketing Right again, if then permitted to do so, by sending the Marketing Right Notice pursuant to Section 13.2(a); provided the Triggering Member shall not be permitted to exercise the Marketing Right again until after the first anniversary of its prior exercise.

(f) Except as otherwise provided in Section 13.2(j), in the event of a sale of the Property pursuant to this Section 13.2, whether to the Non-Triggering Member or otherwise, the sale will be treated as a sale by the Company, and the Capital Proceeds resulting therefrom shall be distributed accordingly.

(g) if the Non-Triggering Member makes a Marketing Right Offer that is accepted by the Triggering Member, then the Non-Triggering Member shall be irrevocably obligated to purchase, and the Company shall be irrevocably obligated to sell, the Property at the Marketing Right Offer Price within sixty (60) days after the Triggering Member’s acceptance or deemed acceptance of the Marketing Right Offer. The NonTriggering Member, within five (5) Business Days after the Triggering Member accepts the Marketing Right Offer, shall deposit into escrow, with an escrow agent selected by the Non-Triggering Member but not an Affiliate of the NonTriggering Member and reasonably acceptable to the Triggering Member, an earnest money deposit in an amount equal to two percent (2%) of the Marketing Right Offer Price.

(h)

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The Triggering Member or the Manager, as the case may be, agrees to exercise reasonable efforts to keep the NonTriggering Member informed of the status of the marketing process, and each party agrees to cooperate reasonably with the other in bringing about a sale of the Property as provided herein. All costs associated with the marketing and sale of the Property pursuant to this Section 13.2 shall be an expense of the Company. The Triggering Member, or the Manager if so directed, shall, in a commercially reasonable and reasonably effective manner, market the Property.

(i) if the Non-Triggering Member makes a Marketing Right Offer and such offer is accepted by the Triggering Member, then the purchase price payable by the Non-Triggering Member for the Property shall be payable in cash, by wire transfer or other immediately available funds, at the closing of such sale. The Non-Triggering Member shall have the right, but not the obligation, to assume any or all liens relating to the property financing (it being agreed that the purchase price shall be reduced by the sum of the amount of any indebtedness secured by the Property that the Non-Triggering Member permits to remain outstanding and the amount of any prepayment penalties avoided thereby and increased by the amount of any assumption fees related thereto), but only if any guarantees given by the selling Member or any of its Affiliates with respect to the Property are released with respect to liabilities accruing after the sale of the Property and the acquiring Member shall be responsible for any prepayment penalties or assumption fees in respect of such property financing. At any closing of the sale of the Property pursuant to this Section 13.2, the Members shall execute and deliver, and shall cause the Company to execute and deliver, any and all deeds, assignments, agreements, indemnifications and other contracts as may be reasonably necessary to

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consummate any such sale. Any transfer or similar taxes and other expenses related to the sale of the Property that are not paid by the purchaser (pursuant to contract or local custom) shall be an expense of the Company, the Members agreeing that, if the Non-Triggering Member is the purchaser, such taxes and expenses shall be a Company expense. The Triggering Member shall provide the Non-Triggering Member with such evidence of the Triggering Member’s authority to sell hereunder and such tax lien waivers and similar instruments as the Non-Triggering Member may reasonably request.

(j) if the Non-Triggering Member makes a Marketing Right Offer for the Property and such offer is accepted by the Triggering Member, the transaction may, at the option of either the Triggering Member or the Non-Triggering Member, be effected by the transfer and assignment of the Triggering Member’s entire Membership Interest in the Company and, in such case, the Triggering Member shall transfer its entire Membership Interest to the Non-Triggering Member free and clear of any and all liens, pledges and security interests, and the purchase price paid in such case shall be the amount that would have been distributed to the transferring Member if the Property and all other assets of the Company had been sold for the Marketing Right Offer Price or the third-party offer price, as applicable, the Company had paid all Company liabilities (including all Mortgage Loans and any and all prepayment premiums on such Mortgage Loans to the extent such prepayment premiums are actually paid as a result of the transfer and assignment) and any and all applicable transfer taxes, document stamps and similar fees that would be incurred if the Company, if any, sold the Property and distributed the net proceeds to the Members pursuant to Section 5.3.

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(k) if the Non-Triggering Member defaults in its obligation, if any, to purchase the Property (or the Triggering Member’s Membership Interest) pursuant to this Section 13.2, the Triggering Member shall be entitled as its sole remedy to damages equal to the earnest money deposit (or, in the event the Non-Triggering Member failed to make its earnest money deposit, an amount equal to the earnest money deposit that was required pursuant to Section 13.2(g)), and the Triggering Member shall be entitled to market and cause the Company to sell the Property at such price and on such other terms and conditions as it determines in its sole discretion without any restrictions or limitations imposed by this Section 13.2 or the other provisions of this Agreement; provided that any such sale may not be to itself or an Affiliate. If the Company, as a result of the act or omission of the Triggering Member, defaults in its obligation, if any, to sell the Property to the Non-Triggering Member, or if the Triggering Member defaults in its obligation to sell its Membership Interests to the NonTriggering Member pursuant to this Section 13.2, the NonTriggering Member shall be entitled as its sole remedy to damages equal to two percent (2%) of the Marketing Right Offer Price payable by the Triggering Member, and the NonTriggering Member shall be entitled to market, and cause the Company to sell, the Property at such price and on such other terms and conditions as its determines in its sole discretion without any restrictions or limitations imposed by this Section 13.2 or the other provisions of this Agreement (provided any such sale may not be to itself or an Affiliate), or the Non-Triggering Member may seek specific performance of the Triggering Member’s or the Company’s obligations under this Section 13.2. The Developer Member and Investor agree that the amount of damages incurred by any of them as a result of a default pursuant to this Section 13.2 would be impracticable to calculate and that the remedies provided in

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this Section 13.2 are a reasonable approximation of such damages.

(l) Notwithstanding anything to the contrary, any sale or purchase of the Property or Membership Interests pursuant to this Section 13.2 whereby Investor purchases the Property or the Membership Interests of the Developer Member shall be subject to the Developer Member (and their applicable Affiliates) being released from all liabilities, obligations, indemnities and/or guarantees related to the Construction Financing and any other applicable Mortgage Loan from such date of sale or purchase.

(m) Notwithstanding anything to the contrary, in the event of a sale of the Property pursuant to Section 13.2(a)(i)(4) or Section 13.2(a)(ii)(3) where the Capital Proceeds are in an amount less than the total Capital Contributions of the Members to date, thereby resulting in a loss on the sale, the Capital Proceeds shall be distributed to the Members as follows: (a) first, to the Members, pro rata and pari passu based on the outstanding principal and accrued but unpaid interest of the Members’ outstanding Default Loans (including Priority Loans), in repayment of all outstanding principal and accrued but unpaid interest on the Members’ Default Loans, until each Default Loan has been repaid in full; and (b) next, pro rata and pari passu 75% to Investor and 25% to Developer Member.

Section 13.3 Insolvency of a Member.

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(a) If a Member becomes an Insolvent Member, the personal representative, trustee or receiver of its estate (the “Personal Representative”) shall have only such rights of that Member as are necessary for the purpose of settling or managing its estate and such power as the Member possessed, if any, to assign all or any part of its interest and to join with such assignee in satisfying conditions precedent to such assignee’s becoming a substituted Member. It shall not have any rights of a Member to grant or withhold consents or any other rights except for those specified in the preceding sentence.

(b) If a Member becomes an Insolvent Member, the other Member shall have the right (the “Insolvency Option”) to elect at any time during the period that such Member remains an Insolvent Member (which election may be changed or rescinded at any time prior to the closing of any of the following transactions; provided that, upon such change or rescission, the changing or rescinding Member shall have no further right to exercise the Insolvency Option so changed or rescinded (e.g., if the option to market the Property pursuant to clause (ii) below is changed or rescinded, that option may not be exercised subsequently, but the option to purchase the Membership Interest of the Insolvent Member would be retained)):

(i) to purchase the entire Membership Interest of the Insolvent Member for cash equal to the Cash Amount. If the other Member declines to purchase all of the Membership Interest of the Insolvent Member in accordance with this Section 13.3, the option to purchase such Membership Interest shall terminate, and the Personal Representative may

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proceed, subject to the terms and provisions of this Agreement, to distribute the Membership Interest of such Insolvent Member to the successors entitled to receive the same, but such distributions will only be effective as to such successors who thereupon (by written supplement to this Agreement) become a party to this Agreement and who thereby agree to hold all of the Membership Interest transferred to such successor, subject in all respects to the terms and provisions of this Agreement; and/or

(ii) to market or require the Manager to market the Property with the intention of selling it to a third party not Affiliated with such Member and liquidating the Company. Such other Member, or the Manager, if directed by such Member, shall, in a commercially reasonable and reasonably effective manner, market the Property, and shall secure the services of a third party to assist the Member and Manager with the marketing of the Property on such terms and conditions as such Member deems appropriate in good faith. The Insolvency Option shall be exercised by giving notice (the “Purchase Notice”) to the Personal Representative of the Insolvent Member within the period permitted for the exercise of the Insolvency Option.

(c) The sale price of each Membership Interest to be sold pursuant to Section 13.3(b)(i) shall be equal to the Cash Amount for such Membership Interest. The Cash Amount shall be determined as of a date as near as reasonably practicable to the date of the occurrence of the event that results in the sale of the Membership Interest hereunder, and the closing of the sale of the Membership Interest shall occur on the closing date agreed upon by the purchasing Member

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and Insolvent Member or, if there is no agreement among them as to the closing date, then on the first Business Day following the day that is thirty (30) days after the date on which the Cash Amount is determined.

(d) At the closing of any sale of a Membership Interest to be sold on the terms and conditions specified in Section 13.3(b) (i), the Insolvent Member shall assign and deliver the Membership Interest to the purchasing Member, free and clear of all encumbrances and claims, together with such documents of transfer as shall be reasonably requested by the purchasing Member, and the purchasing Member shall deliver or cause to be delivered to the Insolvent Member the full consideration therefor, payable in cash, by wire transfer or other immediately available funds.

(e) if the Manager is the Insolvent Member (or if Manager becomes insolvent as provided in clauses (a), (b), (c), (d) or (e) of the definition of “Insolvent Member”), in addition to its other remedies pursuant to this Section 13.3, Investor may elect:

(i) to assume the duties of Manager of the Company, or may elect to transfer a portion of its interest in the Company to an Entity controlled by Investor or persons directly or indirectly owning Investor, and to designate such Entity as a replacement Manager hereunder. If Investor exercises such right, the Manager shall automatically, without need for the execution and delivery of any instrument other than notice by Investor to the Developer Member that it has exercised such right, cease to be the Manager and Investor or the Entity

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designated by Investor shall become the sole Manager with all rights and responsibilities of the Manager set forth in this Agreement, and the Lockout Period shall immediately terminate. The former Manager shall execute such amendments to this Agreement and execute and file such amendments to the Certificate of Formation as may be required to effect such appointment of Investor (or its designated Affiliate) as the Manager and hereby appoints Investor its attorney-in-fact, with full power of substitution, to execute and deliver any such amendments or other instruments; and/or

(ii) to cause the Company to immediately terminate the Management Agreements; provided that, if any Management Agreement is terminated, Investor shall cause the Company to promptly enter into a new development agreement, construction agreement or property management agreement on terms substantially equivalent to those prevailing in the market for similar services at that time.

(f) Notwithstanding anything to the contrary, any sale of the Membership Interests of the Developer Member pursuant to this Section 13.3 shall be subject to the Developer Member (and their applicable Affiliates) being released from all liabilities, obligations, indemnities and/or guaranties related to the Construction Financing and any other applicable Mortgage Loan.

Section 13.4 Management Pending Sale Closing.

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From and after the date of delivery of a Marketing Notice pursuant to Section 13.2 and continuing through the sooner to occur of the closing date or the termination of such sale right, each Member shall exercise reasonable efforts to ensure that the Company is operated in the ordinary course of business and that no actions are taken by or on behalf of the Company that are likely to impede the ability of the Members to consummate the transactions contemplated herein.

Section 13.5 Assignees. (a) The Company shall not recognize for any purpose any purported sale, assignment or Transfer of all or any fraction of the interest of a Member unless all provisions of this Agreement relating thereto have been satisfied, all costs of such assignment have been paid by the assigning Member, and there is filed with the Company a written and dated notification of such sale, assignment or Transfer, in form reasonably satisfactory to the Manager, executed by both the seller, assignor or transferor and the purchaser, assignee or transferee and such notification (i) contains the acceptance by the purchaser, assignee or transferee of and agree to be bound by all the terms and provisions of this Agreement and (ii) represents that such sale, assignment or Transfer was made in accordance with all applicable securities laws and regulations (including suitability standards). Any sale, assignment or Transfer shall be recognized by the Company as effective on the date of such notification if the date of such notification is within fifteen (15) days after the date on which such notification is filed with the Company and otherwise shall be recognized as effective on the date such notification is filed with the Company.

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(b) Any Member who transfers or assigns its entire Membership Interest in the Company shall cease to be a Member, except that, unless and until a substituted Member has been admitted into the Company, such assigning Member shall retain the statutory rights of the assignor of a Member’s interest under the Act.

(c) A person who is the assignee of all or any portion of the Membership Interest of a Member but does not become a substituted Member, and who desires to make a further assignment of such interest it had acquired, shall be (and its proposed Transfer shall be) subject to all the provisions of this Agreement relating to the Disposition of Membership Interests to the same extent and in the same manner as any Member desiring to make an assignment of its Membership Interest.

Section 13.6 Substituted Members. Except as set forth in Section 13.1, only upon the unanimous written consent of all of the Members shall a purchaser, assignee, transferee or other recipient of a Membership Interest who was not previously admitted to the Company as a Member be admitted as a substituted Member to the extent of its acquired interest in the Company. In the event that any such Person is admitted to the Company as a substituted Member, the Manager shall have the power and authority to amend this Agreement to reflect the admission of such Person as a substituted Member and such Person shall have all the rights, duties and obligations of a Member under this Agreement. The Manager shall promptly deliver to each Member (in any permissible manner further described in

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Section 18.1) a copy of any amendments to this Agreement made by the Manager under this Section 13.6.

Section 13.7 Developer Member Put Option. On the second (2nd) anniversary and the fourth (4th) anniversary of the issuance of the final certificate of occupancy for the Apartment Building (“Put Option Exercise Date”), Developer Member has the right (but not the obligation) to sell its Membership Interests in the Company to Investor pursuant to this Section 13.7 (“Developer Put Option”); provided, however, Investor shall have no obligation to purchase such Membership Interests in the Company. To exercise the Developer Put Option, Developer Member shall give written notice to Investor on or before the date which is sixty (60) days prior to such anniversary date, as applicable (“Put Option Notice”). Investor shall within thirty (30) days following receipt of the Put Option Notice respond to the Put Option Notice by either (i) electing to proceed with the purchase of Developer Member’s Membership Interests or (ii) reject the offer to purchase the Developer Member’s Membership Interests. In the event Investor rejects Developer Member’s offer to sell its Membership Interests to Investor, Developer Member shall be entitled to exercise its rights to market the Property under Section 13.2. In the event Investor elects to purchase Developer Member’s Membership Interests, the purchase price of Developer Member’s Membership Interests shall be determined based on the values given to such Membership Interests by three (3) independent thirdparty national brokers. To determine the purchase price, both Investor and Developer Member will each appoint a nationally recognized third-party broker and together, shall choose a third broker. Each broker shall determine a fair market value for the Developer Membership Interests (assuming a stabilized

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value for the Project reflecting 95% occupancy) (the “Values”). The purchase price for the Developer Membership Interest shall be calculated by averaging the Values given by each broker (“Developer Sale Price”). The closing of the purchase of Developer’s Membership Interests by Investor shall occur no later than sixty (60) days following Investor’s election to proceed with the purchase of the Membership Interests pursuant to this Section 13.7. On the date of such closing, Investor shall pay the Developer Sale Price to the Developer Member. The parties agree to each pay their own legal costs in connection with the sale and the cost of the brokers appointed in connection with the Developer Put Option shall be shared 50/50 by Developer Member and Investor. The parties shall execute and deliver such documentation as may be reasonably necessary to evidence the transfer of the Developer Membership Interests. Prior to closing, Investor and Developer Member shall cause the removal of Developer Member from any indemnity agreement or guaranty agreement in connection with financing of the Project for liability arising after the closing; provided, however, if Developer Member cannot be removed from any existing indemnity or guaranty for liability occurring after closing, then the Members shall cause the payoff of the existing financing where Developer Member has provided such indemnity or guaranty.

ARTICLE XIV. REPRESENTATIONS WARRANTIES OF THE MEMBERS

AND

As a material inducement to the other Member’s execution and delivery of this Agreement, each Member represents, warrants, covenants and agrees to and with the other Member and the Company as follows:

Section 14.1 367

Acquisition of Membership Interest for Investment. Its acquisition of its Membership Interest is made for its own account for investment purposes only and not with a view toward the resale or distribution of such Membership Interest.

Section 14.2 Access to Information. It has been afforded full opportunity to request any and all relevant information and ask questions concerning the proposed purposes and business of the Company, has been provided all information and copies of documents it has requested, and has received answers to such questions to its full satisfaction. It has not relied upon any information relating to the Company other than information supplied by the Company.

Section 14.3 No Registration. The Membership Interests are not intended to constitute “securities” as defined under Section 2(a)(1) of the Securities Act. Notwithstanding the foregoing, each Member recognizes that (a) the Membership Interests have not been registered under the Securities Act or applicable state securities laws and are being sold pursuant to the exemptions from registration offered by Section 4(2) of the Securities Act and by applicable state law provisions, (b) as a consequence, its Membership Interest must be held indefinitely unless it is subsequently registered under the Securities Act and applicable state securities laws or an exemption from such

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registration is available and (c) each Member must bear the economic risk of investment in its Membership Interest for an indefinite period of time.

Section 14.4 No Obligation to Register. Each Member acknowledges that neither the Company nor the Manager is under any obligation to register the Membership Interests under any securities laws, and neither of them has any present intention to do so. Each Member understands that there is no established market for the Membership Interests, and it is extremely unlikely that any public or private market will develop.

Section 14.5 Suitability of Investment. Each Member understands the nature of the investment being made and that it involves a high degree of risk. Each Member recognizes that the Company is a newly organized entity and has no history of operations or earnings.

Section 14.6 Accreditation. Each Member represents that it is an “accredited investor” as defined in Regulation D under the Securities Act, is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and has a sufficiently high net worth that it does not anticipate a need for the funds it has invested in the Company in what it understands to be a highly speculative and illiquid investment.

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Section 14.7 Representations and Warranties Regarding Members. Each Member represents and warrants to the Manager and the other Members concerning itself as follows:

(a)

Organization. It is a limited liability company, limited partnership, limited liability limited partnership, corporation or other Entity duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation. Developer Member further represents and warrants that [_________] has full voting and management control of Developer Member.

(b) Authorization. Its execution and delivery of this Agreement, the performance by it of its obligations under this Agreement and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate or other action on its part.

(c) No Conflicting Agreements. Its execution and delivery of, and its performance and compliance with the terms and provisions of, this Agreement do not violate any of the terms, conditions or provisions of (A) its certificate of formation, certificate of limited partnership,

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limited partnership agreement, limited liability company agreement or other applicable organizational agreements or governing instruments, (B) any judgment, order, injunction, decree, regulation or ruling of any court or other governmental authority to which it is subject or by which any of its assets are bound or (C) any agreement or contract to which the Member is a party or to which it or its property is subject.

(d)

Approvals. No authorization, consent, order, approval or license from filing with, or other act by, any Governmental Authority or other Person is or will be necessary to permit the valid execution and delivery by it of this Agreement or the performance by it of the obligations to be performed by it under this Agreement, or if any such authorizations, consents, orders, approvals or licenses are required, they have been obtained.

Section 14.8 No Brokers. Each Member represents and warrants that it has not dealt with any agent or broker in connection with the creation of the Company or the negotiation of this Agreement. Each Member represents and warrants that no agent, broker or other Person acting pursuant to express or implied authority of such Member is entitled to a commission or finder’s fee from, or will be entitled to recover on any claim against, any other Member, the Manager or the Company for a commission or finder’s fee, in connection with the creation of the Company or the negotiation of this Agreement.

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ARTICLE XV. INDEMNIFICATION Section 15.1 Indemnification. (a) Except as otherwise required by applicable law or specifically provided in this Agreement or as the result of the negligence, willful misconduct, fraud or uncured (as provided in Section 16.1) breach of this Agreement of such person, no Indemnified Party shall be liable to the Company or any Person holding all or any portion of a Membership Interest in the Company for any Loss suffered by the Company or such Person that arises out of any action or inaction of any Indemnified Party.

(b) The Company shall indemnify, to the extent of its assets, each Indemnified Party against all Losses incurred by any of them in connection with any liability or obligation of the Company, including amounts paid in satisfaction of judgments, settlements, fines, penalties and expert witness and counsel fees reasonably incurred in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal or investigative, pending or threatened, before any court or administrative or legislative body, in which such Indemnified Party may be or may have been involved as a party or otherwise or with which such Indemnified Party may be or may have been threatened. Notwithstanding the foregoing, indemnification shall not be paid to any Indemnified Party with respect to (i) any Losses to the extent caused by an act or omission involving willful misconduct, fraud, negligence or bad faith or uncured (as

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provided in Section 16.1) breach of this Agreement on the part of such Indemnified Party or its Affiliates (including, in the case of a Key Person, the Developer Member or any of their Affiliates), (ii) expert witness and counsel fees incurred in connection with a dispute between Developer Member and its Affiliates, on the one hand, and Investor and its Affiliates, on the other hand, and (iii) subject to clause (i) above, any obligation of any Indemnified Person with respect to any guaranty, surety or similar obligations under any of the Financing Documents other than standard nonrecourse carve-out guarantees relating to “bad boy” and environmental matters expressly approved by the Executive Committee for such indemnification.

(c) The Company shall pay or reimburse all expenses reasonably incurred by the Indemnified Party in connection with any such aforementioned action, suit or proceeding in advance of the final disposition of such action, suit or proceeding; provided that the Company has first received a written undertaking by such Indemnified Party (and, if such Indemnified Party is a wholly-owned Person, such Person’s parent Entity) to repay such expenses so advanced by the Company if it shall ultimately be determined that the standard for indemnification has not been met.

(d) Notwithstanding anything to the contrary, any payments to be made under this Article XV shall be subordinate to payments by the Company for operating expenses and debt service.

ARTICLE XVI. EVENTS OF DEFAULT

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Section 16.1 Events of Default. The occurrence of any of the events set forth below shall constitute an “Event of Default” on the part of any Member if the default remains uncured or not otherwise fully remedied with the result that the Company and the other Member have not been made whole fifteen (15) days after such Member receives written notice of such default from a non-defaulting Member; provided that, if such default cannot with diligent efforts be cured or otherwise fully remedied within such fifteen (15) day period but such Member (or such Affiliate of such Member) commences such cure or remedy within such fifteen (15) day period, thereafter diligently and continuously prosecutes such cure, and such default is reasonably susceptible to cure within fifteen (15) days, such fifteen (15) day period shall be extended for the time reasonably required to effect such cure or remedy, but in no event for more than an additional fifteen (15) days (i.e., thirty (30) days total); and, provided further, any event described in clauses (d) and (f) below shall be an Event of Default without any notice or further action:

(a) (i) the occurrence of any breach of any representation, warranty, covenant, undertaking, obligation or agreement in any material respect on the part of the Manager, a Member or an Affiliate of the Manager or a Member (A) pursuant to the terms of this Agreement, (B) pursuant to any other agreement between the Company, on the one hand, and the Manager, a Member or an Affiliate of the Manager or a Member, on the other hand (including any Management Agreement), or (C) pursuant to any other agreement between any Affiliate of the Company, on the one hand, and the Manager, a Member or

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an Affiliate of the Manager or a Member, on the other hand, or (ii) any breach of or inaccuracy in any material respect of any statement set forth in a certificate delivered by the Manager or its Affiliate to the Executive Committee or any Member pursuant to this Agreement or such other agreement;

(b) any knowing or intentional act on the part of the Manager or a Member that gives rise to an event of default under any Mortgage Loan;

(c) the occurrence of any act committed by the Manager or a Member involving negligence, fraud or willful misconduct in connection with any of its obligations hereunder or under any other agreement referred to in clause (a) above;

(d) the occurrence of any act committed by the Manager or any of its Affiliates involving the misapplication or conversion of (i) any assets of the Company or revenues from the Property or (ii) any deposits, sale proceeds or other funds or income arising with respect to the Property excluding any such misapplication or conversion by an employee other than the Key Persons if such employees are promptly dismissed and such funds are returned to the Company within ten (10) days of knowledge of such misapplication or conversion;

(e) the occurrence Encumbrance; or

of

any

(f) 375

Unpermitted

Transfer

or

the entry of a decree or order for relief by any court having jurisdiction in respect of a Member or the Manager in any voluntary or involuntary case under the federal bankruptcy laws as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or similar law, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) for a Member or the Manager or any substantial part of the property of any such Person, or for the winding up or liquidation of the affairs of such Person or the making by such Person of an assignment for the benefit of creditors, or the taking of action by such Person in furtherance of any of the foregoing.

Section 16.2 Remedies. (a) During the continuance of any Event of Default by either Developer Member or upon the occurrence of a Key Person Event, Investor shall be entitled to:

(i) in its sole discretion, assume the duties of the Manager hereunder. If Investor exercises such right, Developer Member shall automatically, without need for the execution and delivery of any instrument other than notice by Investor to Developer Member that it has exercised such right, (A) cease to be the Manager and Investor shall become the sole Manager with all rights and responsibilities of the Manager set forth in this Agreement, and (B) forfeit all rights in and to the Promote Distributions. Developer Member shall execute such amendments to this Agreement and execute and file

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such amendments to the Certificate of Formation as may be reasonably required to effect such appointment of Investor (or its designated Affiliate) as the Manager. In the event Developer Member fails to execute or file any such amendment within ten (10) days of its receipt thereof, then Developer Member shall, and hereby does, appoint Investor its attorney-in-fact, with full power of substitution, to execute and deliver any such amendment;

(ii) market or require the Manager to market the Property pursuant to Section 13.2; and/or

(iii) cause the Company to immediately terminate any Management Agreement; provided that, if such agreement is terminated, Investor shall be entitled to and shall promptly engage a third party on terms substantially equivalent to those prevailing in the market for similar services at that time; and

(iv) exercise any of those rights set forth in Section 4.4 upon the occurrence of any Member failing to make all or any portion of any required Capital Contribution (subject to any applicable cure period). provided that, if such Event of Default is the occurrence of an Unpermitted Transfer or Encumbrance, Investor may take any such action only within six (6) months after it became aware of any such Unpermitted Transfer or Encumbrance. Prior to Investor removing the Manager pursuant to this Section 16.2(a), (x) each Developer Member (or their applicable Affiliate) must be released from any prospective

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liability or obligation under any Mortgage Loan, or (y) the indebtedness represented by such Mortgage Loan must be repaid in full (it being understood that the choice whether to proceed under clause (x) or clause (y) shall be at the sole discretion of Investor); provided, however, that Investor may remove the Manager pursuant to this Section 16.2(a) without the occurrence of the actions set forth in clauses (x) or (y) if either Developer Member takes an action that constitutes any of the following: (1) a fraud which directly causes or otherwise comprises an event of default under any Mortgage Loan; (2) willful misconduct; (3) intentional misapplication of funds; (4) the filing of a voluntary or collusive bankruptcy petition by Developer Member or an Affiliate; (5) the failure of Developer Member to fund Developer Member’s Cost Overrun Obligations; or (6) a breach by Developer Member of any of its obligations under Section 3.2. In the event that neither of the actions set forth in clauses (i) and (ii) of the immediately preceding sentence has occurred (and none of items (1)–(6) of the proviso of the immediately preceding sentence are applicable) but Investor is otherwise entitled to remove the Manager pursuant to this Section 16.2(a), the Manager shall remain as the Manager, but Developer Member shall no longer have any voting rights with respect to the Company (including with respect to Major Decisions), except as may be required by law, and (y) each of the Developer Representatives shall be deemed to have resigned from the Executive Committee and the Executive Committee shall be deemed to consist only of the Investor Representatives and (z) references in Section 5.3(e) to Developer Member shall be deemed references to Investor (or such other Person as is appointed as the replacement Manager).

(b) In addition to the above remedies, Investor may recover from Developer Member any actual damages incurred as a

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result of Developer Member’s default under Section 16.1.

(c) During the continuance of any Event of Default by Investor, Developer Member shall be entitled to require the Manager to market the Property pursuant to Section 13.2; provided that, if such Event of Default is the occurrence of an Unpermitted Transfer or Encumbrance, Developer Member may take any such action only within six (6) months after it became aware of any such Unpermitted Transfer or Encumbrance.

(d) In addition to the above remedies, Developer Member may recover from Investor any actual damages incurred by such Developer Member as a result of Investor’s default under Section 16.1, subject to Section 6.2(d).

(e) Notwithstanding any provisions of this Agreement to the contrary, in no event may any Member exercise the Marketing Right pursuant to Section 13.2 at any time after any of the events described in clauses (a) through (f) of Section 16.1 has occurred and has not been cured or otherwise fully remedied by such Member or (in the case of the Developer Member) after a Key Person Event has occurred or such Member has been replaced as the Manager pursuant to this Section 16.2 (in each case without respect to any required notice or cure period set forth herein or in any other agreement, including the Management Agreements).

(f)

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The remedies provided in this Section 16.2 shall be the exclusive remedies of the parties with respect to an Event of Default; provided that, unless otherwise expressly provided herein, this Agreement shall not limit the rights of any Member under any Management Agreement or any other agreement referenced in Section 16.1(a).

(g) Notwithstanding anything to the contrary, neither the Construction Agreement nor the Development Agreement may be terminated without the consent of Developer Member if Developer Member and/or an Affiliate of Developer Member has provided a completion guaranty or other guaranty or indemnity that has been approved by the Executive Committee in favor of the lender of the Construction Financing unless Developer Member (and its applicable Affiliates) are released from all liabilities and obligations under such completion guaranty or such other guaranty or indemnity that has been approved by the Executive Committee.

ARTICLE XVII. DISSOLUTION Section 17.1 Events of Dissolution. (a) The Company shall be dissolved upon the earliest to occur of any of the following events:

(i) the unanimous written agreement of all of the Members;

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(ii) the sale or other disposition of all or substantially all of the assets of the Company, unless such sale or other disposition involves the acquisition of any additional property or any deferred payment of the consideration for such sale or other disposition, in which latter event the Company will dissolve on the last day of the calendar month during which the balance of such deferred payment is received by the Company, provided, in each case, that such dissolution shall not occur prior to January 1 of the third (3rd) calendar year subsequent to the sale of all of the assets of the Company;

(iii) the entry of a judgment, order or decree of a court of competent jurisdiction adjudicating the Company to be a bankrupt and the expiration without appeal of the period, if any, allowed by applicable law in which to appeal therefrom; or

(iv) the entry of a decree of judicial dissolution under Section 18-802 of the Act or any successor or similar provision of applicable law.

(b) The events set forth in Section 17.1(a) constitute the only situations or events upon which a dissolution of the Company shall occur.

(c) Dissolution of the Company shall be effective as of the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until there has been a

381

winding up of the Company’s business and affairs and the assets of the Company have been distributed as provided in Section 17.2.

Section 17.2 Liquidation; Sale of Substantially all of the Assets. (a) Subject to the restrictions and limitations contained in this Agreement, upon dissolution of the Company the Manager shall cause any part or all of the Company assets to be sold in such manner as the Manager shall determine in an effort to obtain the best prices for such assets (provided that, with the approval of all of the Members, the Manager may distribute Company assets in kind to the Members on the basis approved by the Members). During the liquidation period, the Manager shall have the right to continue to operate and otherwise to deal with Company property to the same extent the Manager had such right prior to dissolution of the Company. In the event that the Manager has dissolved, withdrawn or becomes bankrupt or legally incapacitated, all of the Members may, within thirty (30) days after any such occurrence, appoint a Person to perform the functions of the Manager in liquidating the assets of the Company and winding up its affairs.

(b) In settling accounts after dissolution, the assets of the Company shall be paid or distributed in the following order:

(i)

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first, to creditors other than Members and their Affiliates, in the order of priority provided by law;

(ii) then, to the Members and their respective Affiliates for any fees or other compensation or any unreimbursed costs and expenses owing to the Members or their respective Affiliates in accordance with the terms of this Agreement, and then to the repayment of any loans (with interest) made by any Member to the Company in accordance with the terms of this Agreement (including Priority Loans);

(iii) then, to contingency reserves as the Executive Committee deems reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company. Such reserves may be paid over by the Manager to a bank, to be held in escrow for the purpose of paying any contingent or unforeseen liabilities or obligations and, at the expiration of such period as the Members may deem advisable, such reserves shall be distributed to the Members, pursuant to clause (iv); and

(iv) then, to the Members in accordance with their positive Capital Account balances (determined by giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years of the Company, including the year during which such liquidation occurs), to the extent possible, within the time periods specified by Regulation Section 1.704-1(b)(2)(ii)(b)(2). For purposes of applying Section 17.2(b)(iv), the Members intend for each Member’s Capital Account balance to equal the amount of the liquidating distributions that such Member

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would be entitled to receive if liquidating distributions were made in accordance with the order of priority set forth in Section 5.3 (without regard to Section 5.3(a)). If any Member’s Capital Account at such time differs from the liquidating distributions that would be received by such Member had such liquidating distributions been made in accordance with Section 5.3 (without regard to Section 5.3(a)) instead of Section 17.2(b)(iv), then notwithstanding the provisions of Section 11.2 and Section 11.5 (but subject to Section 11.8), the Company shall specially allocate Net Income and Net Loss (or, if necessary, items of gross income, gains, deduction, loss and credits) to the Members in the year of its liquidation as is necessary to cause the Capital Account of each Member to be equal (or, if not possible, as close to equal as possible) to the liquidating distributions that would be received by such Member had such liquidating distributions been made in accordance with in accordance with Section 5.3 (without regard to Section 5.3(a)) instead of Section 17.2(b)(iv). If the respective amounts distributable to the Members pursuant to Section 17.2(b)(iv) nevertheless differs from the respective amounts that would be distributed to the Members pursuant to the order of priority set forth in Section 5.3(b), then the order of priority set forth in Section 5.3(b) shall control.

Section 17.3 Waiver of Partition. Each Member hereby irrevocably waives any right or power it may possess now or hereafter to compel a partition or sale of any asset of the Company or to compel a dissolution of the Company other than as expressly set forth in this Agreement.

Section 17.4 Articles of Termination. 384

Upon the dissolution and the completion and winding up of the Company, the Manager shall cause Articles of Termination to be filed with the Office of the Secretary of State of the State of Delaware, pursuant to the requirements of the Act, canceling the Certificate of Formation; provided that such Articles of Termination shall not be filed prior to January 1 of the third (3rd) calendar year subsequent to the sale of all of the assets of the Company.

ARTICLE XVIII. MISCELLANEOUS Section 18.1 Notice. Any notice, demand or other communication required or permitted to be given under this Agreement shall be in writing and shall be given to the Manager or Members at their respective addresses and to the Authorized Representatives set forth on Exhibit A or at such other address as any Manager or Member may hereafter designate in a notice duly given to all the other Members or the Manager as its address for receipt of notices hereunder. Such notices may be delivered by hand, overnight courier, U.S. certified mail, facsimile or email (provided that facsimile and email notices are also promptly delivered by hand, overnight courier or U.S. certified mail). Any such notice, demand or communication shall be deemed to have been given on the date received or refused (or, if received on a day that is not a Business Day or after normal business hours in the location delivered, the following Business Day).

Section 18.2 Application of Delaware Law. 385

This Agreement and the application or interpretation hereof shall be governed exclusively by, and construed exclusively in accordance with, the laws of the State of Delaware, and specifically the Act, without regard to principles of conflicts of laws.

Section 18.3 Jurisdiction and Venue. Any process against any Member or Manager in, or in connection with, any suit, action or proceeding arising out of or relating to this Agreement or any Manager’s or Member’s performance hereof may be served personally or, to the extent permitted by law, by certified mail at that Manager’s or Member’s address for receipt of notices hereunder with the same effect as though served on such Manager or Member personally. The Manager and each Member hereby irrevocably submit in any suit, action or proceeding arising out for relating to this Agreement or any Manager’s or Member’s performance hereof or rights or obligations hereunder to the jurisdiction of the state courts of the State of Florida and waive any and all objections to the jurisdiction of, or venue in, such court that such Manager or Member may have under applicable laws.

Section 18.4 No Partnership. The Members intend that the Company not constitute or be deemed to be a partnership (including a limited partnership) or joint venture, and that no Member or Manager constitute or be deemed to be a partner, agent or joint venturer of any other Member or Manager, for any purposes other than U.S. federal and state income tax purposes, and

386

this Agreement shall not be construed, interpreted or applied to suggest otherwise.

Section 18.5 Effect of Agreement. This Agreement shall be binding upon all Members and the Manager and their respective assigns and successors.

Section 18.6 Entire Agreement. This Agreement and the Exhibits hereto, together with all other contracts and agreements that either are referred to herein or bear even date herewith, contain all of the understandings and agreements of whatsoever kind and nature existing between the Members with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings with respect thereto.

Section 18.7 Amendment. Except as otherwise expressly set forth in this Agreement, this Agreement may be amended, supplemented or restated only by a written agreement executed by each of the Members. Notwithstanding anything to the contrary in this Section 18.7, the Certificate of Formation and this Agreement may be amended, supplemented or restated, for the following purposes only by the Manager without the necessity of obtaining the written consent of any of the Members: the change of the registered agent; the address of the registered agent; or the address of the principal place of business of the Company.

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Section 18.8 Counterparts. This Agreement may be executed in counterparts (including by means of facsimile), each of which shall be deemed to be an original and shall be binding upon the Member who executed the same, but all of such counterparts together shall constitute one and the same agreement.

Section 18.9 Severability. Each provision of this Agreement shall be considered severable and if for any reason any provision that is not essential to the effectuation of the basic purposes of the Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable and contrary to the Act or existing or future applicable law, such invalidity shall not impair the operation of or affect those provisions of this Agreement that are valid. In that case, this Agreement shall be construed so as to limit any term or provision so as to make it enforceable or valid within the requirements of any applicable law, and in the event such term or provision cannot be so limited, this Agreement shall be construed to omit such invalid or unenforceable provisions.

Section 18.10 Captions. The title and captions contained herein are for convenience of reference only and shall not be deemed part of the context of this Agreement.

Section 18.11 388

Interpretation. This Agreement is the result of negotiations among, and has been reviewed by counsel to, each of the parties hereto and is the product of each of the parties. Accordingly, it shall not be construed against any party merely because of such party’s involvement in its preparation.

Section 18.12 Additional Documents and Acts. In connection with this Agreement, as well as all transactions contemplated by this Agreement, the Members agree to execute such additional documents and papers, and to perform and do such additional acts, as may be necessary and proper to effectuate and carry out all of the provisions of this Agreement.

Section 18.13 No Third-Party Beneficiaries. No creditor of the Company or other Person not a Member or Manager shall have any right or benefit under or in respect of this Agreement (and, without limiting the generality of the foregoing, no such Person shall have any right to enforce any obligation of any Member to make capital contributions or loans or to pursue any other right or remedy hereunder or in respect hereof or at law or in equity), it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the Members, the Manager and the Company and their respective successors and assigns. None of the rights or obligations of the Members herein set forth to make capital contributions or loans to the Company shall be deemed an asset of the Company for any purpose by any creditor or other third party,

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nor may such rights or obligations be sold, transferred or assigned by the Company or pledged or encumbered by the Company to secure any debt or other obligation of the Company or of any of the Members. In addition, it is the intent of the parties hereto that no distribution to any Member shall be deemed a return of money or other property in violation of the Act.

Section 18.14 Involvement of the Company in Certain Proceedings. If any Member or any Affiliate of a Member becomes involved in legal proceedings unrelated to the business of the Company in which the Company is called upon to provide information, such Member will indemnify, defend and hold harmless the Company against all costs and expenses (including fees and expenses of attorneys and other advisors) paid or incurred by the Company in preparing or producing the required information or in resisting any request for production or obtaining a protective order limiting the availability of the information provided by the Company or in otherwise protecting its interests.

Section 18.15 No Waiver. No waiver, express or implied, by any Member of any obligation of, or any breach or default by any other Member in the performance by the other Member of its obligations, hereunder shall be (a) binding or enforceable except to the extent (if any) set out in a writing signed by the Member sought to be charged thereby or (b) deemed or construed to be a waiver of any other breach or default under this Agreement.

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Failure on the part of any Member to complain of any act or omission of any other Member, or to declare such other Member in default irrespective of how long such failure continues, shall not constitute a waiver hereunder. No notice to or demand on a defaulting Member shall entitle such defaulting Member to any other or further notice or demand in similar or other circumstances.

Section 18.16 Sole Remedies. Unless the context requires otherwise, the rights and remedies of the Members hereunder shall be the sole and exclusive remedies of the Members with respect to this Agreement.

Section 18.17 Approvals. Except where otherwise expressly stated in this Agreement, all approval, consent and other similar rights of the Manager or of the Members pursuant to this Agreement (i) shall be set out in a writing signed by the person whose approval, consent or exercise of any other right is required and (ii) may be exercised by such parties, and such approvals and consents may be granted or denied by such parties, in their sole and absolute discretion.

Section 18.18 Confidentiality. (a)

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Except as may be required in order to obtain financing for the benefit of the Company, or in connection with an application by a Member for Financing to be used to acquire the Project from the Company or the Interest of the other Member as permitted hereunder, or as may otherwise be required by applicable law (including, without limitation, §§ 215.44–215.53 of the Florida Statutes and “Government in the Sunshine” laws of the State of Florida as set forth in Chapter 119 of the Florida Statutes (unless an exemption from the public access and disclosure requirements of such statutes is available under Florida law in connection with particular records received or maintained by Investor), and any requirements of Investor to publicly disclose its investments and the performance thereof as permitted by subsection (c), below, or court order, the Members, and each of them, agree that the contents of this Agreement will be treated as confidential and will not be disclosed to the public without the prior written consent of the other party, in its discretion. Without limiting the foregoing, it is expressly agreed that no press releases, statements to the media, or other public releases or disclosures shall be made unless approved in writing by all Members.

(b) Each Member shall give prior written notice to the other Member of its interest, or the interest of any of its Affiliates, in any other business or undertaking which proposes to enter into any business transaction with the Company.

(c) Investor shall be entitled to disclose the following information about Investor’s investment in the Company: (A) year of formation; (B) capital commitment; (C) market value; (D) cash contributed; (E) cash distributions received; (F)

392

investment gain or loss; (G) internal rate of return and investment multiple; (H) performance relative to benchmarks; (I) the identity of the Company and its principals, and the Company’s purpose; (J) only in response to a public records request made in accordance with Florida law, this Agreement (with such redactions as are necessary to protect the identity of other investors); and (K) a description of any compensation, fees, or expenses, including the amount or value, paid or agreed to be paid by Manager or the Company to any person to solicit Investor to make an investment through or in the Company; it being understood that the categories of information identified in this subparagraph relate to the Investor investment in the Company (i.e., Company-level information), and not to the Company’s investments, and are not necessarily inclusive of all the information that Investor may be required to disclose pursuant to Florida law.

Section 18.19 Time is of the Essence. Time is of the essence of this Agreement.

Section 18.20 Miscellaneous Covenants of Manager. (a) Manager shall be solely responsible for, and that Investor has no obligation to pay or be allocated (directly or indirectly), any fees, compensation or expenses for any placement agent or finder in connection with the purchase by Investor of its interest in the Company.

(b) 393

Manager shall use the U.S. Department of Homeland Security’s E-Verify System to verify the employment eligibility of the Company’s employees and subcontractors.

(c) Manager shall provide to Investor annually or at such other more frequent times as Investor may request, in Investor’s sole discretion, on a form prescribed by Investor, a certificate confirming compliance with the terms and provisions of this Agreement and disclosing and updating other information requested by Investor relating to Manager or the Company and/or this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. DEVELOPER MEMBER: Apartment Developer, L.P. By: ____________ Name: Title: INVESTOR: ABC Company By: ____________ Name: Title:

EXHIBIT A List of Members EXHIBIT B Example of Internal Rate of Return Calculation

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EXHIBIT C Annual Business Plan EXHIBIT D Development Budget

EXHIBIT E Construction Agreement EXHIBIT F Form of Property Management and Leasing Agreement EXHIBIT G Depiction of Restricted Area EXHIBIT H Acquisition Budget EXHIBIT I Development Agreement EXHIBIT J Controllable Items Payroll Increases in salaries, wages and other compensation for existing employees Hiring of new employees (other than as replacements for departing employees) Bonuses/commissions Apartment allowances

395

Turnover Expenses Per unit cleaning costs (in-house or contract) Per unit carpet cleaning costs (in-house or contract) Per unit painting costs (in-house or contract) Per unit paint supply costs (if not included in the number above) Per unit window covering cleaning costs (in-house or contract) Per unit R&M costs to include appliances, lighting, hardware, HVAC, plumbing, electrical, etc. The following should be considered capital items: Carpet replacement costs Appliance replacement costs Other floor covering replacement costs Lighting fixture replacement costs Plumbing fixture replacement costs Cleaning Expenses Cleaning contracts for common areas Exterior window cleaning contract Repairs and Maintenance Expenses R&M service contracts for: elevators, building systems, HVAC, plumbing, electrical, pool/spa, fitness center equipment, parking garage, property vehicles, etc. Other Contract Expenses Pest Control Contract Landscape Services Contract—(to include seasonal changes, irrigation system, additional supplies, etc.) Security Services Contract (if applicable) Real Estate Tax Consultant Utility Expenses Rubbish Removal Contract Administrative Expenses Answering Service Contract Copier Contract

396

Telephone Contract Mobile Phone/Pager/Radio Contract Employee Uniform Contract (if applicable) Employee mileage reimbursement (amount per mile) Credit report costs Professional membership costs Marketing/Advertising Expenses Print Advertising Contracts Internet Advertising Contracts Apartment Guide Advertising Contracts Resident referral fees (regarding the amount offered) Broker commissions (regarding the amount offered) Public relations events Resident functions Brochures Special incentives such as gift cards, gas cards, etc. Marketing consultant fees

Schedule 10.3 Information to be included in Monthly and Quarterly Reports Form No. 2.2.05.    Delaware Manager Managed Limited Liability Company Operating Agreement (Simple Form) OPERATING AGREEMENT OF ABC, LLC THIS OPERATING AGREEMENT (this “Agreement”), effective as of the ___ day of ___, 20___, is by and between ABC, LLC, a limited liability company formed under the laws of the State of Nevada (the “Company”); DEF, LLC, a Delaware

397

limited liability company, as the sole member (the “Member”); and John A. Smith, as manager (the “Manager”). In consideration of the mutual promises contained herein the Company, the Member and the Manager agree as follows:

ARTICLE 1. COMPANY

THE

LIMITED

LIABILITY

1.1 Formation. The Member hereby forms the Company upon the terms and conditions provided in this Agreement, subject to the provisions of Chapter 86 of the Nevada Revised Statutes (the “Act”).

1.2 Name. The name of the limited liability company shall be “ABC, LLC.”

1.3

Articles of Organization. Articles of Organization that comply with the requirements of the Act have been properly filed with the Nevada Secretary of State on ___ ___, 20___. In the future, the Manager shall execute such further documents (including amendments to the Articles of Organization in accordance with Section 13.2) and take such further action as shall be appropriate or necessary to comply with the requirements of law for the formation and operation of a limited liability company in all

398

states and counties where the Company elects to carry on its business.

1.4 Business. The business of the Company shall be to: (i) [DESCRIBE BUSINESS]; (ii) engage in such other lawful activities as the Members may deem desirable, and (iii) do any and all other things necessary, desirable or incidental to the foregoing purposes. The Company shall not sell or otherwise dispose of the Company’s assets without the consent of all the Members.

1.5

Initial Resident Agent and Initial Principal Office. The Company’s initial resident agent shall be ____________, whose initial address is ____________, ___ ___. The address of the office where the Company’s records will be maintained shall be ____________, or such other address as the Members, may, from time to time, elect.

1.6 Additional Members. Additional Members shall not be admitted into the Company without the consent of all the Members.

ARTICLE 2. DEFINITIONS 2.1

399

AFR. “AFR” for any loan shall mean the applicable federal rate of interest for loans of such type and term, determined as of the date of the loan and in accordance with section 7872 of the Code.

2.2 Cash Flow. “Cash Flow” shall mean the excess of all cash receipts of the Company over all cash disbursements of the Company.

2.3 Code. “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute.

2.4

Manager. “Manager” shall (i) have the meaning set forth in the opening paragraph to this Agreement, or (ii) if applicable, any person or entity elected or appointed to succeed John A. Smith and manage the business of the Company pursuant to and in accordance with Section 7.5. The Manager need not be a Member of the Company.

2.5 Profit or Loss. “Profit” or “Loss” shall mean the profit or loss of the Company as determined under the capital accounting rules of

400

Treasury Regulation § 1.704-1(b)(2)(iv) for purposes of adjusting the capital accounts of the Members including, without limitation, the provisions of paragraphs (b), (f), and (g) of those regulations relating to the computation of items of income, gain, deduction, and loss.

2.6

Sharing Ratio. The original “Sharing Ratio” of the Members shall be as follows: Member

Sharing Ratio

DEF, LLC

100%

The Sharing Ratios of the Members shall be adjusted from time to time to account for transfers of interests in the Company and other transactions authorized under this Agreement.

2.7 Treasury Regulations. “Treasury Regulations” shall mean regulations issued by the Department of Treasury under the Code. Any reference to a specific section or sections of the Treasury Regulations shall be deemed to include a reference to any corresponding provision of future regulations under the Code.

2.8 Voting Interest. “Voting Interest” shall mean a number of votes equal to a Member’s Sharing Ratio multiplied by 100.

401

ARTICLE 3. CAPITAL CONTRIBUTIONS 3.1

Initial Capital Contributions. The Member has made an initial capital contribution to the Company as set forth on Exhibit A to this Agreement.

3.2 Additional Capital Contributions. The Members shall not be obligated to contribute any additional capital or to make a loan to the Company. If the Company requires additional funds to meet its obligations, the Manager shall give the Members notice of the Company’s need for additional funds and the Company may accept additional capital contributions from one or more Members or the Company may borrow such additional funds from any source, including any Member. The Manager, without the consent of Members holding a majority of the Voting Interests, shall have no authority to assess the Members for additional capital required by the Company or to borrow funds in order meet the Company’s need for additional funds. If the Members contribute additional capital to the Company other than in accordance with their Sharing Ratios, the Manager shall adjust the Sharing Ratios of the Members as the Members agree. Any loan made by a Member to the Company shall be represented by a promissory note, bearing interest at a rate that is equal to or in excess of the AFR, and shall be payable out of the first available funds, including proceeds from the sale of all or any portion of the assets of the Company. For the avoidance of doubt, the amount of any loan made by a Member under this Section 3.2 shall not be treated

402

as a capital contribution to the Company, but shall be debt due from the Company.

3.3

Costs and Expenses. All costs and expenses of the Company shall be paid from its funds.

3.4 Right to Enforce. No person shall have the right to enforce any obligation of a Member to contribute capital or make a loan to the Company, and specifically no lender or other third party shall have such rights.

3.5 Return of Capital Contributions. Capital contributions shall be expended in furtherance of the business of the Company. No Member shall be entitled to interest on its capital contributions. No Member shall be entitled to a return of its capital contribution, except as otherwise provided herein. The Manager shall not have any personal liability for the repayment of any capital contribution or loan made to the Company.

ARTICLE 4. DISTRIBUTIONS 4.1 Nonliquidating Distributions. 403

The Company shall make distributions of Cash Flow at such times and in such amounts as the Members holding a majority of the Voting Interests shall determine. Except as provided in Section 4.2, all distributions shall be made among the Members in accordance with their relative Sharing Ratios.

4.2

Liquidating Distributions. All distributions made in connection with the sale or exchange of all or substantially all of the Company’s assets and all distributions made in connection with the liquidation of the Company shall be made to the Members in accordance with their relative positive capital account balances at the time of distribution, after giving effect to the allocation of any Profit or Loss under Article 5.

ARTICLE 5. ALLOCATION OF PROFIT AND LOSS 5.1 Determination of Profit and Loss. Profit or Loss shall be determined on an annual basis and for such other periods as may be required.

5.2 Allocation of Losses. Except as provided in Section 5.4, for book purposes all Loss shall be allocated among the Members in accordance with their relative Sharing Ratios.

404

5.3 Allocation of Profits. Except as provided in Section 5.4, for book purposes all Profit shall be allocated among the Members in accordance with their relative Sharing Ratios.

5.4

Regulatory Allocations and Curative Provisions. (a) The “qualified income offset” provisions of Treasury Regulation section 1.704-1(b)(2)(ii)(d) are incorporated herein by reference and, to the extent provided in that regulation, shall apply to adjust the allocation of Profit and Loss otherwise provided for under Sections 5.2 and 5.3.

(b) The “minimum gain” provisions of Treasury Regulation section 1.704-2 are incorporated herein by reference and, to the extent provided in that regulation, shall apply to adjust the allocation of Profit and Loss otherwise provided for under Sections 5.2 and 5.3.

(c) All allocations pursuant to the foregoing provisions of this Section 5.4 (the “Regulatory Allocations”) shall be taken into account in computing allocations of other items under Sections 5.2 and 5.3, including, if necessary, allocations in subsequent fiscal years, so that the net amounts reflected in the Members’ capital accounts and the character for income tax purposes of the taxable income recognized (e.g., as capital

405

or ordinary) will, to the extent possible, be the same as if no Regulatory Allocations had been given effect.

ARTICLE 6. ALLOCATION INCOME AND LOSS

OF

TAXABLE

6.1 In General. (a) Except as provided in Sections 6.1(b) and 6.2, each item of income, gain, loss, and deduction of the Company for federal income tax purposes shall be allocated among the Members in the same manner as such item is allocated for capital account purposes under Article 5.

(b) To the extent of any recapture income (as defined below) resulting from the sale or other taxable disposition of a Company asset, the amount of any gain from such disposition allocated to (or recognized by) a Member (or its successor in interest) for federal income tax purposes shall be deemed to consist of recapture income to the extent such Member (or such Member’s predecessor in interest) has been allocated or has claimed any deduction directly or indirectly giving rise to the treatment of such gain as recapture income. For this purpose, “recapture income” shall mean any gain recognized by the Company (but computed without regard to any adjustment required by sections 734 and 743 of the Code) upon the disposition of any property or asset of the Company that does not constitute capital gain for federal income tax purposes because such gain represents the recapture of

406

deductions previously taken with respect to such property or assets.

6.2

Allocation of Section 704(c) Items. The Members recognize that with respect to property contributed to the Company by a Member and with respect to property revalued in accordance with Treasury Regulation section 1.704-1(b)(2)(iv)(f), there will be a difference between the agreed values or “carrying values” of such property at the time of contribution or revaluation and the adjusted tax basis of such property at that time. All items of tax depreciation, cost recovery, amortization, amount realized and gain or loss with respect to such assets shall be allocated among the Members to take into account the book-tax disparities in accordance with the provisions of sections 704(b) and 704(c) of the Code and the Treasury Regulations under those sections.

6.3 Integration With Section 754 Election. All items of income, gain, loss, deduction, and credit recognized by the Company for federal income tax purposes and allocated to the Members in accordance with the provisions hereof and all basis allocations to the Members shall be determined without regard to any election under section 754 of the Code that may be made by the Company; provided, however, such allocations, once made, shall be adjusted as necessary or appropriate to take into account the adjustments permitted by sections 734 and 743 of the Code.

ARTICLE 7. MANAGEMENT 407

7.1

Management Authority. (a) Management of the Company’s day-to-day business affairs shall be vested in the Manager. The Manager is hereby authorized on behalf of the Company to make all decisions with respect to the Company’s day-to-day business affairs and to take all actions necessary to carry out such decisions.

(b) Notwithstanding anything to the contrary in this Agreement, the Manager shall not take the following actions without the consent of Members holding a majority of the Voting Interests:

(i) Make any expenditure in excess of $25,000 or commit the Company to do so, whether in a single transaction or a series of related transactions;

(ii) Borrow money on behalf of the Company or commit the Company to do so;

(iii) Assess the Members for any additional capital required by the Company;

(iv)

408

Cause the Company to make any distributions to the Members;

(v) Guarantee any debt or obligation of any Member or any third person;

(vi) Mortgage, pledge or encumber any asset of the Company;

(vii) Enter into a merger, reorganization, consolidation or similar restructuring of the Company;

(viii) Sell, exchange, transfer or otherwise dispose of any asset of the Company that has a value in excess of $10,000;

(ix) Admit additional Members into the Company;

(x) Do any act that would make it impossible to carry on the ordinary business of the Company;

(xi) Contract or deal with the Company, or cause any person or entity affiliated with the Manager or any Member to contract or deal with the Company, except as otherwise contemplated by this Agreement; and

(xii) 409

Settle any claim against the Company.

(c) The Manager may execute all documents on behalf of the Company that relate to matters solely within the Manager’s authority under Section 7.1(a). All other documents executed on behalf of the Company shall be signed by the Manager and a Member; provided, however, that the Manager may act as the sole signatory on any document not within the Managers’ authority under Section 7.1(a) if the consent of the Members authorizes the Manager to sign all documents required to carry out such action.

7.2

Delegation of Management Authority. The Manager shall have the authority to delegate any power it may have under this Agreement or under the Act, including those described in Section 7.1 hereof, to any person. Any such delegation shall be made in writing and shall be valid until revoked in writing or upon the date specified in the written instrument delegating the authority.

7.3 Duties. The Manager shall carry out his duties in good faith, in a manner he believes to be in the best interests of the Company, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. If the Manager so performs his duties, he shall not have any liability to the Company or its Members by reason of being or having been the Manager of the Company.

410

7.4 Time Devoted to Business. The Manager shall devote such time to the business of the Company as he, in his discretion, deems necessary for the efficient carrying on of the Company’s business.

7.5 Tenure and Removal. The Manager shall hold office until he resigns, dies, becomes bankrupt or incompetent, or is removed by the Members. If the Manager or his successor resigns, dies, becomes bankrupt or incompetent, or is removed by the Members, Members holding a majority of the Voting Interests may elect a successor to fill the vacancy and serve as Manager. The Manager may be removed at any time, with or without cause, by Members holding a majority of the Voting Interests.

7.6

Reliance by Third Parties. No third party dealing with the Company shall be required to ascertain whether the Manager is acting in accordance with the provisions of this Agreement. All third parties may rely on a document executed by the Manager as binding the Company. The Manager acting without authority shall be liable to the Members for any damages arising out of his unauthorized actions.

7.7

411

Transactions Between Company and the Manager. The Manager shall not cause the Company to contract and deal with the Manager, or any person or entity affiliated with the Manager, without the consent of the Members holding a majority of the Voting Interests.

7.8 Management Fees and Reimbursements. The Manager shall not be entitled to any fee or salary for managing the operations of the Company except as approved by the Members holding a majority of the Voting Interests. The Manager shall be reimbursed by the Company for any reasonable out-of-pocket expenses incurred on behalf of the Company.

7.9 Other Activities. The Members and the Manager shall at all times be free to engage for their own account in any business that competes with the business of the Company. It is specifically understood and agreed between the Members that nothing in this Agreement shall be construed to constitute any Member or the Manager as an agent or partner of any Member for purposes beyond this Company, nor in any manner to limit any Member or the Manager in the carrying on of their respective businesses or activities.

7.10 Insurance. 412

The Company shall maintain for the protection of the Company and all of its Members such insurance as required by law or as the Manager deems necessary for the operations being conducted.

7.11 Indemnification. (a)

Proceeding by the Company. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the company to procure a judgment in its favor by reason of the fact that he is or was the Manager, a Member, employee, or agent of the Company, or is or was serving at the request of the Company as the Manager, a Member, employee, or agent of another limited-liability company, corporation, partnership, joint venture, trust, or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner in which he reasonably believed to be in or not opposed to the best interests of the Company. Indemnification under this Section 7.11(a) may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the

413

circumstances of the case, he is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

(b)

Other Proceedings. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Company, by reason of the fact that he is or was the Manager, a Member, employee or agent of the Company, or is or was serving at the request of the Company as the Manager, a Member, employee or agent of another limited-liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorney’s fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the limited-liability company, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.

(c) Scope. 414

To the extent that the Manager, any Member, an employee or agent of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding described in subsection (a) or (b) of this Section 7.11, or in defense of any claim, issue or matter therein, the Company shall indemnify him against expenses, including attorney’s fees, actually and reasonably incurred by him in connection with the defense.

(d) Authorization. Any indemnification under subsection (a) or (b) of this Section 7.11, unless ordered by a court or advanced pursuant to subsection (e), may be made by the Company only as authorized in the specific case upon a determination by Members holding a majority of the Voting Interests, or, to the extent a Member is a party to the action, suit or proceeding, by independent legal counsel in a written opinion, that indemnification of such Manager, Member, employee or agent is proper in the circumstances.

(e)

Advancement of Expenses. The expenses of any Member or the Manager incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such Member or Manager to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Company. The provisions of this section do not affect any rights to advancement of expenses to which

415

personnel of the Company other than the Manager or any Member may be entitled under any contract or otherwise by law.

ARTICLE 8. MEMBERS 8.1

Participation in Management. Except as provided in Section 7.1, or by action of the Members in accordance with this Article 8, a Member, in his or her capacity as a Member, shall take no part in the control, management, direction or operation of the affairs of the Company and shall have no power to bind the Company.

8.2 Action by Members. Any action required or permitted to be taken at a meeting of the Members shall be taken without a meeting and evidenced by a written consent describing the action taken, signed by each Member. Action taken under this Section 8.2 is effective when the Members have signed the consent, unless the consent specifies a different effective date.

8.3 Liability of the Members. The Members shall not be liable under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the Company, whether arising in contract, tort, or otherwise, or for the acts or omissions of any other Member, Manager, agent, or employee of the Company.

416

ARTICLE 9. ACCOUNTING, REPORTING, AND COMPLIANCE 9.1 Books. To the extent required by the Nevada Act, the Manager shall cause the Company to continuously maintain in the state of Nevada an office, which shall not be a place of its business. Such office shall not be required to maintain any books and records, such as, but not limited to the following:

(a) A current list of the full name and last known business address of each of the Members and the Manager;

(b) A copy of the filed articles of organization and all amendments thereto, together with signed copies of any powers of attorney pursuant to which any record has been signed; or

(c) A copy of this Agreement or any successor operating agreement of the Company.

9.2

Capital Accounts. The Company shall maintain a separate capital account for each Member in accordance with the Treasury Regulations under section 704(b) of the Code and such other accounts as

417

may be necessary or desirable to comply requirements of applicable law and regulations.

with

the

9.3

Transfers During Year. In order to avoid an interim closing of the Company’s books, the share of Profits and Losses under Article 5 of a Member upon a transfer of part or all of its interest in the Company during the Company’s accounting year may be determined by taking its pro rata share of the amount of such Profits and Losses for the year. The proration shall be based on the portion of the Company’s accounting year which has elapsed prior to the transfer or may be determined under any other reasonable method; provided, however, that any gain or loss from the sale of Company assets shall be allocated to the owner of the Company interest at the time of such sale. The balance of the Profits and Losses attributable to the Company interest transferred shall be allocated to the transferee of such interest.

9.4 Reports. The books of account shall be closed promptly after the end of each fiscal year. Promptly thereafter, the Manager shall cause a written report to be issued to the Member which shall include a statement of Profits and Losses for the year, a statement of each Member’s capital account and of its distributive share of income, gain, deductions and credits for income tax reporting purposes for the previous fiscal year, and such additional statements with respect to the status of the Company property and the distribution of Company funds as are considered necessary by the Manager, or as requested

418

by the Members, to advise the Members properly about their investment in the Company. Such report may consist in part of a copy of part or all of the Company’s United States income tax return (Form 1065). Prior to March 31st of each year, the Members shall also be provided with an information letter with respect to his distributive shares of income, gains, deductions, losses and credits for income tax reporting purposes for the prior fiscal year.

9.5 Section 754 Election. The Company shall not make the election provided for under section 754 of the Code without the approval of Members holding a majority of the Voting Interests. If the Members approve making the election provided for under section 754 of the Code, any costs attributable to making such election shall be borne solely by the requesting Member.

ARTICLE 10. TRANSFERS 10.1 Restrictions on Transfer. No Member may sell, assign, pledge or otherwise transfer any portion of its interest in the Company without the written consent of all the Members. Any transfer or attempted transfer in violation of this Section 10.1 shall be void.

10.2 Substitution of a Member. (a) 419

No assignee, devisee, distributee or transferee (by conveyance, operation of law or otherwise) of the whole or any portion of a Member’s interest in the Company shall have the right to become a substituted Member without the written consent of all the Members. The granting or denial of a request for such written consent shall be within the absolute discretion of each Member. A substituted Member shall succeed to all the rights and interest of his or her assignor in the Company. An assignee of the Member who is not admitted as a substituted Member shall be entitled only to the distributions to which the assignee’s assignor would otherwise be entitled.

(b) If a Member shall die, his executor, administrator or trustee, or, if he shall be adjudicated insane or incompetent, his committee, conservator, or representative, or if a Member shall be dissolved, merged or consolidated, his successor in interest, shall have the same rights and obligations that such Member would have had if he had not died or had not been adjudicated insane or incompetent or had not been dissolved, merged or consolidated, except that the executor, administrator, trustee, committee, or conservator, representative successor shall not become a substituted Member without the written consent of all the Members.

(c) No transfer of any interest in the Company otherwise permitted under this Agreement shall be effective for any purpose whatsoever until the transferee shall have assumed the transferor’s obligations to the extent of the interest transferred and shall have agreed to be bound by all the terms and conditions hereof, by written instrument, duly

420

acknowledged, in form and substance reasonably satisfactory to all the Members.

10.3 Conditions to Substitution. As conditions to admission as a substituted Member (a) any assignee, transferee or successor of a Member shall execute and deliver such instruments, in form and substance satisfactory to all the Members, as the Members shall deem necessary, and (b) such assignee, transferee or successor shall pay all reasonable expenses in connection with his or her admission as a substituted Member.

ARTICLE 11. TERM 11.1 Dissolution. The Company shall continue until dissolved by the unanimous written consent of the Members.

11.2

Continuance of Company; Dissociation of a Member. (a) Except as otherwise provided in the articles of organization or this Agreement, the resignation, expulsion, bankruptcy, dissolution or dissociation of a Member or any other event affecting a Member, does not terminate the status of the

421

person as a Member or cause the Company to be dissolved or its affairs to be wound up.

(b) If at any time the Members unanimously consent to discontinue the Company in accordance with Section 11.1, the Company’s affairs shall be wound up as provided in Article 12.

ARTICLE 12. TERMINATION

DISSOLUTION

AND

12.1

Final Accounting. In case of the dissolution of the Company, a proper accounting shall be made as provided in Section 9.4 from the date of the last previous accounting to the date of dissolution.

12.2 Liquidation. Upon the dissolution of the Company, a person selected by the Members whose total Sharing Ratios comprise more than 50 percent of the Sharing Ratios of all Members shall act as liquidator to wind up the Company. The liquidator shall have full power and authority to sell, assign and encumber any or all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and businesslike manner. All proceeds from liquidation shall be distributed in the following order of priority: (a) to the payment of debts and liabilities of the Company and the expenses of liquidation; (b) to the setting up of such reserves as the liquidator may

422

reasonably deem necessary for any contingent liabilities of the Company; and (c) to the Members in accordance with Section 4.2.

12.3 Distribution in Kind. If the liquidator shall determine that a Company asset should be distributed in kind, the liquidator shall obtain an independent appraisal of the fair market value of the asset as of a date reasonably close to the date of liquidation. Any unrealized appreciation or depreciation with respect to such asset shall be allocated among the Members (in accordance with the provisions of Article 5 assuming that the asset was sold for the appraised value) and taken into consideration in determining the balance in the Members’ capital accounts as of the date of liquidation. Distribution of any such asset in kind to a Member shall be considered a distribution of an amount equal to the asset’s fair market value for purposes of Section 12.2. The liquidator, in its sole discretion, may distribute any percentage of any asset in kind to a Member even if such percentage exceeds the percentage in which the Member shares in distributions as long as the sum of the cash and fair market value of all the assets distributed to each Member equals the amount of the distribution to which each Member is entitled.

12.4

Waiver of Right to Court Decree of Dissolution. The Members agree that irreparable damage would be done to the Company if any Member brought an action in court to dissolve the Company. Accordingly, each of the Members accept the provisions of this Agreement as its sole

423

entitlement on termination of its membership in the Company. Each Member hereby waives and renounces its right to seek a court decree of dissolution or to seek the appointment by a court of a liquidator for the Company.

12.5 Articles of Dissolution. Upon the completion of the distribution of Company assets as provided in this Article 12, the Company shall be terminated and the liquidator shall file articles of dissolution and shall take such other actions as may be necessary to terminate the Company.

ARTICLE 13. GENERAL PROVISIONS 13.1

Entire Agreement. This Agreement embodies the entire understanding and agreement among the parties concerning the Company and supersedes any and all prior negotiations, understandings or agreements in regard thereto.

13.2 Amendment. This Agreement may only be amended with the unanimous written consent of the Members. No rights hereunder may be waived except by an instrument in writing signed by the party sought to be charged with such waiver.

13.3 424

Notices. (a) All notices required or permitted by this Agreement shall be in writing and shall be hand delivered, sent by registered or certified mail, postage prepaid, or by facsimile (and confirmed in writing delivered or sent by one of the other methods described herein), and shall be effective when delivered or, if mailed, on the date set forth on the receipt of registered or certified mail, or on the fifth day after mailing, whichever is earlier, or, if by facsimile, on the first business day after receipt of such facsimile.

(b) In computing any period of time under this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or legal holiday.

13.4

Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Nevada.

13.5 Pronouns. References to a Member, including by use of a pronoun, shall be deemed to include masculine, feminine, singular,

425

plural, individuals, trusts, partnerships, limited liability companies or corporations where applicable.

13.6

Counterparts. This instrument may be executed in any number of counterparts each of which shall be considered an original. IN WITNESS WHEREOF the parties have executed this Agreement on ___ ___, 20___ to be effective as of the date first above written. MEMBER: DEF, LLC ____________ By: Name: Title:

EXHIBIT A Initial Capital Contributions Name

Description of Capital Contribution

DEF, LLC

$1,000.00 cash

Value $1,000.00

Form No. 2.2.06.    Delaware Single Member Member Managed Operating Agreement (Simple Form) LIMITED LIABILITY COMPANY AGREEMENT

426

THIS LIMITED LIABILITY COMPANY AGREEMENT is made as of ___, 20___, by the Member. The term “Member” and certain other capitalized terms used in this Agreement are defined in Article II.

Recitals: A. “[_________] LLC” was previously formed as a Delaware limited liability company by filing a Certificate of Formation that was accepted for filing by the Delaware Secretary of State on ___, 20___; and B. The Member desires to set forth in writing the agreement regarding the operation of the Company and its rights and obligations therein; NOW, THEREFORE, the Member, intending to be legally bound hereby, agrees and certifies as follows:

ARTICLE I. CONTINUATION

FORMATION

AND

1.1 Formation. The Company has been previously formed as a limited liability company under the Act. The Member hereby confirms that _________ is an authorized person, within the meaning of the Act, for purposes of filing the Certificate of Formation referred to in the recitals to this Agreement. The Member shall take all other action required by law to perfect and maintain the Company as a limited liability company under the Act and under the laws of all other jurisdictions in which the Company may elect to conduct business. The Member shall also promptly register the Company under applicable assumed or fictitious name statutes or similar laws.

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1.2 Name. The name of the Company shall be “[_________] LLC”. The Member may change the name of the Company.

1.3 Place of Business. The address of the principal office of the Company shall be located at the address of the Member as set forth in the Member Schedule. The Member may change the location of the Company’s principal office, or establish such additional offices of the Company as it may from time to time determine.

1.4

Registered Agent and Office. The registered agent and office of the Company shall be as set forth in the Certificate. The Member may from time to time change the registered agent and office of the Company in accordance with the Act as it may from time to time determine.

ARTICLE II. INTERPRETATIVE PROVISIONS

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2.1 Defined Terms. In addition to capitalized terms defined elsewhere in this Agreement, the following terms have the definitions hereinafter indicated whenever used in this Agreement with initial capital letters: “Act” means the Delaware Limited Liability Company Act and any successor statute, as amended, restated, supplemented or otherwise modified from time to time. “Agreement” means this Limited Liability Agreement, as amended from time to time.

Company

“Bankruptcy” means either (i) the initiation by a referenced Person of a proceeding under a federal, state or local bankruptcy or insolvency law, (ii) the initiation against a referenced Person of a proceeding under a federal, state, or local bankruptcy or insolvency law, which proceeding has not been vacated, discharged, or bonded within 90 days of initiation, (iii) a general assignment by a referenced Person for the benefit of creditors, (iv) the admission by a referenced Person in writing of its inability to pay its debts as they become due or (v) the acquiescence of a referenced Person to appointment of a receiver or trustee for all or a substantial part of its property or court appointment of such receiver or trustee which is not suspended or terminated within 90 days after appointment. “Capital Contribution” means the total amount of money or fair market value of other property (net of liabilities that are secured by such property, or to which such property is subject, within the meaning of Code § 752) contributed, deemed to be contributed or agreed to be contributed, as the context requires, by the Member to the Company pursuant to

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the terms of this Agreement. The term “Capital Contribution” shall not include advances or loans to the Company, whether from the Member or otherwise. The Capital Contribution of the Member shall be set forth from time to time on the Member Schedule. “Certificate” means the Certificate of Formation of the Company, dated as of ______, as it may be amended or restated from time to time in accordance with its terms and the terms of this Agreement. “Code” means the Internal Revenue Code of 1986 and any successor statute, as amended from time to time. “Company” means the Delaware limited liability company known as “[_________] LLC,” as such limited liability company may be constituted from time to time.

“Consent” means the prior written consent of a Person to do the act or thing for which the consent or vote is required or solicited, or the act of granting such consent, as the context may require. “Interest” means the interest of the Member in the Company at any particular time, including the right of the Member to receive distributions from the Company and all other benefits to which the Member may be entitled as provided in this Agreement and in the Act, together with the obligations of the Member to comply with all the terms and provisions of this Agreement and of the Act, which Interest is expressed as a percentage for voting and certain other purposes on the Member Schedule. “Member” means [_________], a _________, as the initial Member, and its successors or assigns pursuant to Section 4.1 of this Agreement. “Member Schedule” means the Member Schedule attached hereto (and hereby incorporated herein) as Schedule 1, as

430

amended, restated, supplemented or otherwise modified from time to time. “Person” means any natural person, partnership, limited liability company, corporation, joint venture, trust, estate, association, foundation, fund, governmental unit or other entity. “Property” means any property, including, without limitation, any real or personal, tangible or intangible property, including but not limited to any legal or equitable interest in such property, ownership interests in entities owning real or personal property, and money.

2.2 Rules of Construction. The following rules of construction shall apply to this Agreement:

(A) All article and section headings, the table of contents and title page in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any provision of this Agreement.

(B) All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural, and vice versa as the context may require. Each term defined in Section 2.1 shall be deemed to include derivations of such term, if the context so requires.

(C) 431

Each provision of this Agreement shall be considered severable from the rest, and if any provision of this Agreement or its application to any Person or circumstances shall be held invalid or contrary to any existing or future law or unenforceable to any extent, the remainder of this Agreement and the application of any other provision to any Person or circumstances shall not be affected thereby and shall be interpreted and enforced to the greatest extent permitted by law so as to give effect to the original intent of the Member.

ARTICLE III. BUSINESS PURPOSE 3.1

Purpose. The purpose of the Company is as follows:

(A) To engage in any lawful business unless a more limited purpose is stated in the Certificate; and

(B) To have and exercise any and all powers and privileges now or hereafter conferred by the general laws of the State of Delaware upon limited liability companies formed under such laws.

3.2 Authorized Activities. In carrying out the purpose of the Company, but subject to all other provisions of this Agreement, the Company shall be authorized to engage in any kind of lawful activity, and

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perform and carry out contracts of any kind, necessary or advisable in connection with the accomplishment of the purposes of the Company.

ARTICLE LOANS

IV.

INTERESTS,

CAPITAL

AND

4.1 Member. The name and address of the Member, the amount of the Member’s initial Capital Contribution to the Company and the amount of the Member’s Interest (expressed as a percentage) are set forth on the Member Schedule. The Member is not obligated to make additional Capital Contributions to the Company, except as set forth in the Act. No other Person may be admitted as a Member, provided that any successor by operation of law to the then-existing Member shall be admitted as the sole Member without further act or deed and provided, further, that any assignment of the entire interest in the Company by the then-existing Member to a wholly owned subsidiary of such Member and the written agreement of the wholly owned subsidiary to be bound by this Agreement shall together constitute the admission of such wholly-owned subsidiary as the sole Member without further act or deed.

4.2 Member Schedule. The Member Schedule may be amended from time to time to reflect such changes as may be necessary or appropriate. The Member Schedule shall be presumed to accurately reflect the information contained therein, absent documentary proof to the contrary.

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4.3 Interests Uncertificated. No certificates shall be issued evidencing the Interests.

4.4

Interest on Capital. Any interest earned on Company funds shall inure to the benefit of the Company, and the Member shall receive no interest on its Capital Contributions.

ARTICLE V. DISTRIBUTIONS

ALLOCATIONS

AND

5.1 Capital Account; Allocations. A capital account shall be established and maintained for the Member. All items of income, gain, loss and deduction shall be allocated to the Member. The Member or its designee shall keep a record of the Member’s contributions to the Company, the Company’s income, gains, losses and deductions, and its distributions to the Member.

5.2 Distributions. The Company may make distributions to the Member from time to time, as may be determined by the Member.

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ARTICLE VI. ACCOUNTING, RECORDS, AND TAX ELECTIONS 6.1 Books and Records. The Member shall maintain at the principal office of the Company a copy of this Agreement and full and accurate books of the Company showing all receipts and expenditures, assets and liabilities, profits and losses, the name and address of the Member and all other records necessary for recording the Company’s business and affairs. Such books and records shall be (i) retained by the Company throughout the term of this Agreement and (ii) available at the principal office of the Company at any and all reasonable times for examination as required by the Act. The Member (and any representative of the Member) shall have the right to inspect and copy any or all of the Company’s books and records, including books and records necessary to enable the Member to defend any tax audit or related proceeding.

6.2

Financial Statements and Reports. The Member shall cause the books of account and records of the Company to be maintained in such manner as it determines to be appropriate.

ARTICLE VII. COMPANY MANAGEMENT 7.1 Generally. 435

The management of the Company shall be vested exclusively in the Member. The Member shall have full, exclusive and complete authority, discretion, obligation and responsibility with respect to the business of the Company, including, but not limited to, the authority to cause the Company to merge or consolidate with one or more other persons. The Member shall manage and control the affairs of the Company to the best of its ability and shall use its reasonable and diligent efforts to carry out the business of the Company and its obligations and responsibilities under this Agreement. Any Person dealing with the Company, may rely on the authority of the Member in taking any action in the name of the Company without inquiry into the provisions of this Agreement or compliance herewith and the Member may execute documents on behalf of the Company.

7.2

Company Funds. The Member shall have responsibility for the safekeeping and use of all funds and assets of the Company. All funds of the Company not otherwise invested shall be deposited in one or more accounts maintained in such banking institutions as the Member shall determine, and withdrawals shall be made on such signatures as the Member may, from time to time, determine.

7.3 Reserves. The Member shall have the power to establish and maintain reserves from Capital Contributions and other funds available to the Company for repairs, replacements, contingencies and other Company purposes in order to

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maintain the Company in a sound financial and cash position and to make such provisions as the Member deems necessary or advisable for any and all liabilities and obligations, matured or unmatured, contingent or otherwise, of the Company.

ARTICLE VIII. OFFICERS 8.1 Officers. (A) The officers of the Company shall be chosen by the Member, provided that the initial officers of the Company shall be those individuals specified in Schedule 2, who shall initially hold the offices indicated therein. The Member may choose a Chairman, President, a Vice-President or VicePresidents, a Secretary, a CFO and other officers and agents as it shall deem necessary or appropriate. All officers of the Company shall exercise such powers and perform such duties as shall from time to time be determined by the Member. Any number of offices may be held by the same person, unless the Certificate or this Agreement otherwise provides.

(B) Each officer of the Company shall hold office until his successor is chosen and shall qualify. Any officer elected or appointed by the Member may be removed, with or without cause, at any time by the Member. Such removal shall not prejudice the contract rights, if any, of the Person so removed. Any vacancy occurring in any office of the Company may be filled by the Member.

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(C) (1) The Chairman and CEO shall be the chief executive officer of the Company and, subject to the direction of the Member, shall have general charge of the business, affairs and property of the Company and general supervision over its other officers and agents. In general, he shall perform all duties incident to the office of Chairman and CEO and shall see that all orders and resolutions of the Member are carried into effect. In addition to and not in limitation of the foregoing, the Chairman and CEO shall be empowered to authorize any change of the registered office or registered agent (or both) of the Company in the State of Delaware.

(2) Unless otherwise prescribed by the Member, the Chairman and CEO shall have full power and authority on behalf of the Company to attend, act and vote at any meeting of security holders of other companies in which the Company may hold securities. At such meeting the Chairman and CEO shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the Company might have possessed and exercised if it had been present. The Member may from time to time confer like powers upon any other person or persons.

(D) The President shall, in the absence of the Chairman and CEO or in the event of his disability, perform the duties and exercise the powers of the Chairman and CEO and shall generally assist the Chairman and CEO and perform such other duties and have such other powers as may from time to time be prescribed by the Member.

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(E) The Vice-President (or in the event there be more than one, the Vice-Presidents in the order designated, or in the absence of any designation, in the order of their election) shall, in the absence of the President or in the event of his disability, perform the duties and exercise the powers of the President and shall generally assist the President and perform such other duties and have such other powers as may from time to time be prescribed by the Member.

(F) The Secretary shall record all votes, Consents and proceedings of the Member in a book to be kept for that purpose. He shall perform such other duties as may from time to time be prescribed by the Member or the President, under whose supervision he shall act. He shall have custody of the seal of the Company, and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and, when so affixed, the seal may be attested by his signature or by the signature of such Assistant Secretary. The Member may give general authority to any other officer to affix the seal of the Company and to attest the affixing thereof by his signature.

(G) The CFO shall be the chief financial officer of the Company and shall have the custody of the Company funds and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may from time to time be designated by the Member. The CFO, if any, shall disburse the funds of the Company as may be ordered by the Member,

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taking proper vouchers for such disbursements, and shall render to the Chairman or President and the Member, whenever they may require it, an account of all his transactions as CFO and of the financial condition of the Company.

ARTICLE IX. LIQUIDATION

DISSOLUTION

AND

9.1

Liquidation and Distribution of Company Assets. In the event of dissolution and final termination of the Company, a full accounting of the assets and liabilities shall be taken, and the assets shall either be (i) distributed in kind or (ii) liquidated, with the net proceeds thereof distributed to the Member.

9.2 Liquidation Procedure. The Member shall file all certificates and notices of the dissolution of the Company required by law. The Member shall proceed without any unnecessary delay to sell and otherwise liquidate the Company’s assets to the extent not distributed in kind; provided, however, that if the Member shall determine that an immediate sale of part or all of the Property of the Company would cause undue loss to the Member, the Member may defer the liquidation except (i) to the extent otherwise provided by the Act, or (ii) as may be necessary to satisfy the debts and liabilities of the Company to Persons other than the Member. Upon the complete liquidation and distribution of the Company assets, the

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Member shall cease to be a member of the Company, and the Member shall execute, acknowledge and cause to be filed all certificates and notices required by the law to terminate the existence of the Company.

ARTICLE X. AMENDMENTS The Member may amend this Agreement at any time.

ARTICLE XI. INDEMNIFICATION 11.1

Liability for Acts and Omissions. (A) Neither the Member nor any of its affiliates or agents nor any officer of the Company shall be liable, responsible or accountable in damages or otherwise to the Company for any act or omission performed or omitted by such Person if (i) such Person acted in good faith and in a manner such Person reasonably believed to be in or not opposed to the best interests of the Company and within the scope of such Person’s authority and, with respect to any criminal action or proceeding, had no reasonable cause to believe such Person’s conduct was unlawful and (ii) such course of action did not constitute gross negligence, willful misconduct, or a knowing violation of the criminal law by such Person. Without limiting the foregoing, the Member and any of its affiliates or agents and any officer of the Company shall be fully protected and justified with respect to any action or omission taken or suffered by any of them in good faith if such action or omission is taken or suffered in reliance upon and in accordance with the opinion or advice as to matters of law of

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legal counsel, or as to matters of accounting of accountants, selected by any of them with reasonable care.

(B) Neither the Member nor any of its affiliates or agents nor any officer of the Company shall be personally responsible for any debts, obligations, or liabilities of the Company, whether arising in contract, tort, or otherwise, except as expressly provided in this Agreement.

11.2 Indemnification. To the fullest extent permitted by applicable law, the Company shall indemnify the Member and its affiliates, and their officers, directors, shareholders and employees, attorneys and agents and the officers of the Company, and hold them harmless from and against all losses, costs, liabilities, damages, settlements and expenses (including without limitation costs of litigation and suit and attorneys’ fees) they may incur in performing their respective obligations hereunder; provided that such indemnity shall not apply to actions or omissions by the Member and its affiliates, the officers of the Company and such other Persons that do not meet the standards set forth in the first sentence of Section 11.1(A).

ARTICLE XII. MISCELLANEOUS PROVISIONS 12.1

Applicable Law. This Agreement, and the application or interpretation thereof, shall be governed exclusively by its terms and by the

442

law of the State of Delaware (without regard to its choice of law provisions).

12.2

Binding Agreement. This Agreement shall be binding upon the Member and its successors and assigns. In the event of any conflict between the provisions of this Agreement and those of the Act, the provisions of this Agreement shall govern to the extent permissible under the Act.

12.3 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company or the Member.

12.4 Day(s). Reference in this Agreement to “day” or “days” shall refer to calendar days. If a date referenced in this Agreement falls on a Saturday, Sunday or federal holiday, it shall be deemed to fall on the next business day.

12.5 Entire Agreement. This Agreement (and the Member Schedule) contains the entire understanding of the Member and supersedes all prior written or oral agreements with respect to the within subject

443

matter, unless otherwise provided herein. There are no representations, agreements, arrangements or understandings, oral or written, relating to the subject matter of this Agreement which are not fully expressed herein and in such schedule.

12.6

Force Majeure. A Person shall not be in default to the Company or the Member with respect to any obligation under this Agreement or any other agreement executed in connection herewith to the extent that failure to satisfy the obligation was occasioned by (i) the default of another Person (other than an affiliate of the Person who failed to satisfy an obligation) under this Agreement or any other agreement executed in connection herewith or (ii) strikes, labor disturbances, government actions, war, holocaust, flood, fires, earthquakes, explosions, actions of the elements, riots, sabotage, shortages of labor or materials, requisitions, “acts of God” or other events reasonably outside the control of such Person.

12.7 Tax Status. The Member intends that the Company not be treated as being an entity for federal, state and local income tax purposes. No Person shall take or cause to be taken any action that would be inconsistent with such treatment of the Company for federal, state and local income tax purposes.

12.8 Title to Property. 444

All Property owned by the Company, whether real or personal, tangible or intangible, shall be deemed to be owned by the Company as an entity, and the Member, individually, shall not have any ownership of such Property. IN WITNESS WHEREOF, the Member has executed this Agreement on ___, 20 ___, to be effective for all purposes as of the date first written above. [NAME OF MEMBER] By: ____________ Name: Title:

Schedule 1 MEMBER SCHEDULE Name and Address

Initial Capital Contribution

Member:

Interest

 

[Name and address of Member]

$[______]

[100]%

*  *  *

Schedule 2 INITIAL OFFICERS Title

Name

[_________]

[_________]

[_________]

[_________]

[_________]

[_________]

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Form No. 2.2.07.    Delaware Single Member Member Managed Limited Liability Company Operating Agreement (with Springing Member) LIMITED LIABILITY COMPANY AGREEMENT OF ____________ LLC This Limited Liability Company Agreement (together with the schedules attached hereto and as amen_________ LLC (the “Company”) is entered into as of the ___, 20___ by _________, as the sole equity member (the “Member”), and _________, as Springing Member (as defined herein).

WHEREAS, the Company was formed as a limited liability in accordance with the Delaware Limited Liability Company Act (6 Del. C. § 18 101 et seq.), as amended from time to time (the “Act”), pursuant to a Certificate of Formation of the Company filed with the Secretary of State of the State of Delaware on ___, 20___; The parties hereby agree as follows:

Section 1. Name. The name of the limited liability company is _________ LLC.

Section 2. Principal Business Office. The principal business office of the Company shall be located at _________, or such other location as may hereafter

446

be determined by the Member.

Section 3.

Registered Office. The address of the registered office of the Company in the State of Delaware is c/o ____________.

Section 4. Registered Agent. The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware are ____________.

Section 5. Members. (a) The mailing address of the Member is set forth on Schedule A attached hereto. The Member shall continue as a member of the Company upon his execution of a counterpart signature page to this Agreement.

(b) Subject to Section 28, the Member may act by written consent.

(c) So long as any Obligation is outstanding, the Company shall have one “springing” member who shall be admitted to the Company as a member of the Company only in

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accordance with Section 5(d), and who has no limited liability company interest in the Company. The initial Springing Member shall be _________.

(d) Upon the occurrence of any event that causes the Member to cease to be a member of the Company (other than the continuation of the Company without dissolution upon (i) an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Sections 17 and 19, or (ii) the resignation of the Member and the admission of an additional member of the Company pursuant to Sections 18 and 19), the Springing Member shall, without any action of any Person and simultaneously with the Member ceasing to be a member of the Company, automatically be admitted to the Company as a “Special Member” and shall continue the Company without dissolution. No Special Member may resign from the Company or transfer its rights as Special Member unless a successor Special Member has been admitted to the Company as Special Member by executing a counterpart to this Agreement; provided, however, a Special Member shall automatically cease to be a member of the Company upon the admission to the Company of a substitute Member. A Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets. Pursuant to Section 18-301 of the Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company. No Special Member, in its capacity as a Special Member, may bind the Company. Except as required by any mandatory provision of the Act, a Special Member, in its capacity as a Special Member, shall have no right to vote on, approve or otherwise consent to any action

448

by, or matter relating to, the Company, including, without limitation, the merger, consolidation or conversion of the Company. In order to implement the admission to the Company of a Special Member, a Springing Member shall execute a counterpart to this Agreement. Prior to its admission to the Company as a Special Member, a Springing Member, in its capacity as such, shall not be a member of the Company. By signing this Agreement, a Springing Member agrees that, should the Springing Member become a Special Member, the Springing Member will be subject to and bound by the provisions of this Agreement applicable to the Special Member.

Section 6. Existence. _________, as an “authorized person” within the meaning of the Act, has executed, delivered and filed the Certificate of Formation of the Company with the Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware, his powers as an “authorized person” ceased. The Member is hereby designated “authorized person” and shall continue as the designated “authorized person” within the meaning of the Act. The Member shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in _________ and in any other jurisdiction in which the Company may wish to conduct business. The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.

Section 7. 449

Purpose. (a) The purpose to be conducted or promoted by the Company is to engage in the following activities:

(i) to own, hold, sell, assign, transfer, operate, lease, manage, mortgage, pledge and otherwise deal with that certain parcel of real property, together with all improvements located thereon, located at _________, and commonly known as _________ (the “Property”); and

(ii) to engage in any lawful act or activity and to exercise any powers permitted to limited liability companies organized under the laws of the State of Delaware that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above-mentioned purposes.

(b) The Company is hereby authorized to execute, deliver and perform on its own behalf, and the Member on behalf of the Company is hereby authorized to execute, deliver and perform, the Basic Documents and all documents, agreements, certificates, or financing statements contemplated thereby or related thereto, all without any further act, vote or approval of any other Person notwithstanding any other provision of this Agreement, the Act or applicable law, rule or regulation. The foregoing authorization shall not be deemed a restriction on the powers of the Member to enter into other agreements on behalf of the Company.

450

Section 8. Powers. Subject to Section 28, the Company, and the Member on behalf of the Company, (i) shall have and exercise all powers necessary, convenient or incidental to accomplish its purposes as set forth in Section 7 and (ii) shall have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act.

Section 9.

Management. Subject to Section 28, the business and affairs of the Company shall be managed by or under the direction of the Member. Subject to Section 28, the Member shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise. Subject to Sections 7 and 28, the Member has the authority to bind the Company. The Member may, from time to time as it deems advisable, appoint officers of the Company and assign in writing titles (including, without limitation, President, Vice President, Secretary, and Treasurer) to any such person. Unless the Member decides otherwise, if the title is one commonly used for officers of a business corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such person of the authorities and duties that are normally associated with that office. Any delegation pursuant to this Section 9 may be revoked at any time by the Member.

Section 10. 451

Limited Liability. Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and neither the Member nor any Springing Member nor any Special Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, Springing Member or Special Member of the Company.

Section 11. Capital Contributions. The Member has contributed to the Company property of an agreed value as listed on Schedule A attached hereto. In accordance with Section 5(d), no Springing Member or Special Member shall be required to make any capital contributions to the Company.

Section 12. Additional Contributions. The Member is not required to make any additional capital contribution to the Company. However, the Member may make additional capital contributions to the Company at any time upon the written consent of such Member. To the extent that the Member makes an additional capital contribution to the Company, the Member shall revise Schedule A of this Agreement.

Section 13. Allocation of Profits and Losses. 452

The Company’s profits and losses shall be allocated to the Member.

Section 14. Distributions. Distributions shall be made to the Member at the times and in the aggregate amounts determined by the Member. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be permitted or required to make a distribution to the Member on account of its interest in the Company if such distribution would violate the Act or any other applicable law, or any Basic Document.

Section 15. Books and Records. The Member shall keep or cause to be kept complete and accurate books of account and records with respect to the Company’s business. The Member and his duly authorized representatives shall have the right to examine the Company books, records and documents during normal business hours. The Company’s books of account shall be kept using the method of accounting determined by the Member. The Company’s independent auditor, if any, shall be an independent public accounting firm selected by the Member.

Section 16. Other Business. Notwithstanding any other duty existing at law or in equity, the Member, the Springing Member and the Special Member and any Affiliate of the Member, the Springing Member or the Special Member may engage in or possess an

453

interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.

Section 17.

Assignments. The Member may assign in whole or in part its limited liability company interest in the Company, subject further, however, to the terms and conditions of the Loan Documents as long as any Obligation is outstanding. Subject to Section 19, the transferee shall be admitted to the Company as a member of the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. If the Member transfers all of its limited liability company interest in the Company pursuant to this Section 17, such admission shall be deemed effective immediately prior to the transfer and, immediately following such admission, the transferor Member shall cease to be a member of the Company. Notwithstanding anything in this Agreement to the contrary, any successor to the Member by merger or consolidation in compliance with the Basic Documents shall, without further act, be the Member hereunder, and such merger or consolidation shall not constitute an assignment for purposes of this Agreement and the Company shall continue without dissolution. Notwithstanding anything to the contrary in this Agreement, for so long as any Obligation remains outstanding, the Company shall always have only one (1) Member.

454

Section 18.

Resignation. So long as any Obligation is outstanding, the Member may not resign, except as permitted under the Basic Documents. If the Member is permitted to resign pursuant to this Section 18, an additional member of the Company shall be admitted to the Company subject to the Basic Documents upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. Such admission shall be deemed effective immediately prior to the resignation and, immediately following such admission, the resigning Member shall cease to be a member of the Company.

Section 19. Admission of Additional Members. One or more additional Members of the Company may be admitted to the Company with the written consent of the Member; provided, however, that, notwithstanding the foregoing, so long as any Obligation remains outstanding, no additional Member may be admitted to the Company unless the Lender consents to such admission and such admission is undertaken pursuant to the terms and conditions of the Loan Documents.

Section 20. Dissolution. (a)

455

The Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following: (i) 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 business of the Company is continued in a manner permitted by this Agreement or the Act or (ii) the entry of a decree of judicial dissolution under Section 18 802 of the Act. Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company or that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon (i) an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Sections 17 and 19, or (ii) the resignation of the Member and the admission of an additional member of the Company pursuant to Sections 18 and 19), to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of such member in the Company.

(b) Notwithstanding any other provision of this Agreement, the Bankruptcy of the Member or a Special Member shall not cause the Member or such Special Member, respectively, to cease to be a member of the Company and upon the

456

occurrence of such an event, the Company shall continue without dissolution.

(c) In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18 804 of the Act.

(d) The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company shall have been distributed to the Member in the manner provided for in this Agreement and (ii) the Certificate of Formation shall have been canceled in the manner required by the Act.

(e) Notwithstanding any other provision of this Agreement, each of the Member and the Springing Member and Special Member waives any right it may have to agree in writing to dissolve the Company upon the Bankruptcy of the Member or the Special Member or the Springing Member or the occurrence of an event that causes the Member, the Special Member or the Springing Member to cease to be a member of the Company.

(f) Notwithstanding any provision hereof or of any other document governing the formation, management or operation of the Company to the contrary, the following shall govern: To

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the fullest extent permitted by law, the Company shall not liquidate the Company without first obtaining approval of the mortgagee holding a first mortgage lien on the Property. To the fullest extent permitted by law, such holders may continue to exercise all of the rights under the existing security agreement or mortgage until the debt underlying the mortgage lien has been paid in full or otherwise completely discharged.

(g) The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company shall have been distributed to the Member in the manner provided for in this Agreement and (ii) the Certificate of Formation shall have been canceled in the manner required by the Act.

Section 21.

Waiver of Partition; Nature of Interest. Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each of the Member, the Springing Member and the Special 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. The Member shall not have any interest in any specific assets of the Company, and the Member shall not have the status of a creditor with respect to any distribution pursuant to Section

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14. The interest of the Member in the Company is personal property.

Section 22.

Benefits of Agreement; No Third Party Rights. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of the Member or a Special Member. Nothing in this Agreement shall be deemed to create any right in any Person 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.

Section 23. Severability of Provisions. Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement which are valid, enforceable and legal.

Section 24. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter herein. Notwithstanding any other provision of this Agreement, the Member agrees that this Agreement constitutes a legal, valid and binding agreement of the Member, and is enforceable against the Member, in accordance with its terms. The

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Member agrees that Lender is specifically relying upon the terms of Section 28 and that Lender shall have the right to enforce the provisions of Section 28 so long as the Obligation is outstanding.

Section 25.

Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws.

Section 26. Amendments. Subject to Section 28, this Agreement may be modified, altered, supplemented or amended pursuant to a written agreement executed and delivered by the Member. Notwithstanding anything to the contrary in this Agreement, so long as any Obligation is outstanding, this Agreement may not be modified, altered, supplemented or amended without the Lender’s consent except: (i) to cure any ambiguity or (ii) to convert or supplement any provision in a manner consistent with the intent of this Agreement or the other Basic Documents.

Section 27. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement and all of which together shall constitute one and the same instrument.

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Section 28.

Separateness Covenants. (a) This Section 28 is being adopted in order to comply with certain provisions required in order to qualify the Company as a “special purpose” entity.

(b) The Member shall not, so long as any Obligation is outstanding, amend, alter or change Sections 5(d), 7, 8, 9, 14, 17, 18, 20, 21, 24, 26, 28 or 29 without the prior written consent of the Lender.

(c) Notwithstanding any other provision of this Agreement and any provision of law that otherwise so empowers the Company, the Member or any other Person, so long as any Obligation is outstanding, neither the Member nor any other Person shall be authorized or empowered on behalf of the Company to, nor shall they permit the Company to, and the Company shall not, without the prior written consent of the Member take any Material Action.

(d) Notwithstanding any provision in this Agreement to the contrary and except as provided in Section 17, the following provisions shall govern the affairs of the Company for so long as any Obligation remains outstanding: Company covenants and agrees that it has not and shall not:

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[INSERT LIST FROM LOAN AGREEMENT] Failure of the Company, or the Member on behalf of the Company, to comply with any of the foregoing covenants or any other covenants contained in this Agreement shall not affect the status of the Company as a separate legal entity or the limited liability of the Member.

Section 29. Definitions. When used in this Agreement, the following terms not otherwise defined herein have the following meanings: “Act” means the Delaware Limited Liability Company Act (6 Del. C. Section 18 101 et seq.), as amended from time to time.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such Person. “Assumption and Release Agreement” means that certain Assumption and Release Agreement by and among the Company, Lender, and _________. “Bankruptcy” means, with respect to any Person, (A) If such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, or (vi) seeks, consents to or acquiesces in the appointment of a trustee,

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receiver or liquidator of the Person or of all or any substantial part of its properties, or (B) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the Act. “Basic Documents” means this Agreement, the Assumption and Release Agreement, the Loan Documents and all documents and certificates contemplated thereby or delivered in connection therewith. “Certificate of Formation” means the Certificate of Formation of the Company filed with the Secretary of State of the State of Delaware on ___, 20___ as amended or amended and restated from time to time. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies or activities of a Person, whether through the ownership of voting securities or general partnership or managing member interests, by contract or otherwise. “Controlling” and “Controlled” shall have correlative meanings. Without limiting the generality of the foregoing, a Person shall be deemed to Control any other Person in which it owns, directly or indirectly, a majority of the ownership interests.

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“Lender” means _________, its successors and assigns. “Loan” means that certain loan in the original principal amount of ___ from ___ to ___. “Loan Documents” means the mortgage, instruments, agreements, certificates and other documents executed by the Company or required to be signed by the Company or other entity and/or delivered in connection with the Loan and the Assignment and Assumption Agreement. “Material Action” means to consolidate or merge the Company with or into any Person, or sell all or substantially all of the assets of the Company, or to institute proceedings to have the Company be adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against the Company or file a voluntary bankruptcy petition seeking, or consent to, reorganization or relief with respect to the Company under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or a substantial part of its property, or make any assignment for the benefit of creditors of the Company, or admit in writing the Company’s inability to pay its debts generally as they become due, or take action in furtherance of any such action, or, to the fullest extent permitted by law, dissolve or liquidate the Company. “Member” means _________ as the sole member of the Company, and includes any Person admitted as an additional member of the Company or a substitute member of the Company pursuant to the provisions of this Agreement, each in its capacity as a member of the Company; provided, however, the term “Member” shall not include the Springing Member or the Special Member.

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“Obligations” shall mean the indebtedness, liabilities and obligations of the Company under or in connection with the Loan Documents or any related document in effect as of any date of determination.

“Person” means any individual, corporation, partnership, joint venture, limited liability company, limited liability partnership, association, joint stock company, estate, trust, unincorporated organization, or other organization, whether or not a legal entity, and any governmental authority or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. “Special Member” means, upon such Person’s admission to the Company as a member of the Company pursuant to Section 5(d), a Person acting as a Springing Member, in such Person’s capacity as a member of the Company. A Special Member shall only have the rights and duties expressly set forth in this Agreement. “Springing Member” means a Person who is not a member of the Company but who has signed this Agreement in order to permit the admission of such Person to the Company as a Special Member in the circumstances described in Section 5(d). IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Limited Liability Company Agreement as of ___, 20___. MEMBER: ____________ SPRINGING MEMBER ____________

SCHEDULE A Member 465

Mailing Address

Name

 

 

Agreed Value of Capital Contribution  

Limited Liability Company Interest  

Form No. 2.2.08.    Basic Form of California LLC Operating Agreement OPERATING AGREEMENT FOR ____________ A CALIFORNIA LIMITED LIABILITY COMPANY This Operating Agreement (this “Agreement”) is made as of ______ [date], among the parties listed on the signature page(s) (collectively, the “Members” or individually, a “Member”).

INTRODUCTION A. The Members have filed Articles of Organization (the “Articles”) for _________ (the “Company”), a limited liability company, under the laws of the State of California, with the California Secretary of State. B. The Members desire to adopt and approve an operating agreement for the Company under the California Limited Liability Company Act (the “Act”).

AGREEMENT ARTICLE I. ORGANIZATIONAL MATTERS 1.1 Name. 466

The name of the Company shall be “_________.” The Company may conduct business under that name or any other name approved by the Members.

1.2 Term. The Company’s existence commenced as of the date of the filing of the Articles and shall continue until dissolved and liquidated pursuant to the provisions of this Agreement.

1.3

Office and Agent. The Company shall continuously maintain an office and registered agent in the State of California as required by the Act. The principal office of the Company shall be at _________ or such other location as the Members may determine. The registered agent shall be as stated in the Articles or as otherwise determined by the Members.

1.4 Business of the Company. Notwithstanding the Company’s purpose described in the Articles, the Company shall not engage in any business other than the following without the consent of all of the Members:

(a) the business of _________; and

(b)

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such other activities directly related to the foregoing business as may be necessary or advisable in the reasonable opinion of the Members to further such business.

ARTICLE II. CAPITAL CONTRIBUTIONS 2.1

Capital Contributions. Each Member shall make a cash contribution to the Company’s capital in the amount shown opposite the Member’s name on Exhibit A to this Agreement. No Member shall be required to make any additional capital contributions to the Company. Additional contributions to the Company’s capital shall be made only with the unanimous consent of the Members. Except as provided in this Agreement, no Member may withdraw his or her capital contribution.

2.2 Capital Accounts. The Company shall establish an individual capital account (“Capital Account”) for each Member. The Company shall determine and maintain each Capital Account in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv). Upon a valid transfer of a Member’s interest in the Company (“Membership Interest”) in accordance with Article VI, such Member’s Capital Account shall carry over to the new owner.

2.3 No Interest. The Company shall not pay any interest on capital contributions.

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ARTICLE III. MEMBERS 3.1 Admission of Additional Members. Additional Members may be admitted with the approval of all Members. Additional Members will participate in the Company’s management, Net Profits, Net Losses, and distributions on such terms as the Members determine. The Members shall amend Exhibit A on the admission of an additional Member to set forth such Member’s name and capital contribution. “Net Profits” and “Net Losses” shall mean the income, gain, loss, deductions, and credits of the Company in the aggregate or separately stated, as appropriate, determined in accordance with the method of accounting at the close of each fiscal year employed on the Company’s information tax return filed for federal income tax purposes.

3.2

Withdrawals or Resignations. No Member may withdraw, retire or resign from the Company.

3.3 Payments to Members. Except as specified in this Agreement or pursuant to a transaction permitted by Section 4.6, no Member or person or entity controlled by, controlling or under common control with the Member (each such person or entity is defined as an “Affiliate”), is entitled to remuneration for services rendered or goods provided to the Company. However, the Company shall

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reimburse the Members and their Affiliates for organizational expenses (including, without limitation, legal and accounting fees and costs) incurred to form the Company, prepare the Articles and this Agreement and, as approved by the Members, for the actual cost of goods and materials used by the Company.

ARTICLE IV. MANAGEMENT 4.1

Management and Powers. Each Member intends, by entering into this Agreement, to actively engage in the Company’s management. Accordingly, unless otherwise limited by the Articles or this Agreement, each Member shall have full, complete and exclusive authority, power, and discretion to manage and control the Company’s business, property and affairs, 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.

4.2 Member Approval. No annual or regular Member meetings are required. However, if such meetings are held, such meetings shall be noticed, held and conducted pursuant to the Act. In any instance in which the Members’ approval is required under this Agreement, such approval may be obtained in any manner permitted by the Act. Unless otherwise provided in this Agreement, Member approval shall mean the approval of Members who hold a majority of the Membership Interests.

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4.3 Devotion of Time. Each Member shall devote whatever time or effort as he or she deems appropriate for the furtherance of the Company’s business.

4.4

Competing Activities. The Members and their Affiliates may engage or invest in any activity, including without limitation those 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 activities or to the income or proceeds derived therefrom. No Member shall be obligated to present any investment opportunity to the Company, even if the opportunity is of the character that, if presented to the Company, could be taken by the Company. Each Member shall have the right to hold any investment opportunity for his or her own account or to recommend such opportunity to persons other than the Company. The Members acknowledge that certain Members and their Affiliates own and/or manage other businesses, including businesses that may compete with the Company and for the Members’ time. Each Member hereby waives any and all rights and claims which he or she may otherwise have against the other Members and their Affiliates as a result of any of such activities.

4.5 Fiduciary Duties. The only fiduciary duties a Member owes to the Company and the other Members are the duty of loyalty and the duty of

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care set forth in subsections (i) and (ii) below:

(a) A Member’s duty of loyalty to the Company and the other Members is limited to the following:

(i) To account to the Company and hold as trustee for the Company any property, profit, or benefit derived by the Member in the conduct or winding up of the Company’s business or derived from any use by the Member of Company property, including the appropriation of a Company opportunity, without the consent of the other Members;

(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 without the consent of the other Members; and

(iii) Except as otherwise provided in this Agreement, to refrain from competing with the Company in the conduct of Company business before the Company’s dissolution without the other Members’ consent.

(b) A Member’s duty of care to the Company and the other Members in the conduct and winding up of the Company’s business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law by the Member.

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ARTICLE V. ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS 5.1 Tax Allocations. All items of Company income, gain, loss or deduction shall be allocated for federal, state and local income tax purposes to the Members, pro rata, in accordance with their respective Percentage Interests.

5.2

Qualified Income Offset. If any Member unexpectedly receives an adjustment, allocation, or distribution that results in a deficit balance in that Member’s Capital Account, there shall be allocated to that Member items of Company income and gain in an amount and manner sufficient to eliminate such deficit balance as quickly as possible.

5.3 Distribution of Assets by the Company. Subject to applicable law and any limitations contained elsewhere in this Agreement, Members holding a majority of the Membership Interests may elect from time to time to cause the Company to make distributions. Distributions shall be first to the Members in proportion to their unreturned capital contributions until each Member has recovered his or her capital contributions, and then to the Members in proportion to their Membership Interests.

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ARTICLE VI. TRANSFER AND ASSIGNMENT OF INTERESTS 6.1

Transfer and Assignment of Interests. No Member shall be entitled to transfer, assign, convey, sell, encumber or in any way alienate all or any part of his or her Membership Interest (collectively, “transfer”) except with the prior approval of all Members, which approval may be given or withheld in the sole discretion of the Members.

6.2 Substitution of Members. A transferee of a Membership Interest shall have the right to become a substitute Member only if (a) Member consent is given in accordance with Section 6.1, (b) such person executes an instrument satisfactory to the Members accepting and adopting the terms and provisions of this Agreement, and (c) such person pays any reasonable expenses in connection with his or her admission as a new Member. The admission of a substitute Member shall not release the Member who assigned the Membership Interest from any liability that such Member may have to the Company.

6.3 Transfers in Violation of this Agreement and Transfers of Partial Membership Interests. Upon a transfer in violation of this Article VI, the transferee shall have no right to vote or participate in the Company’s management or to exercise any Member rights.

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Such transferee shall only be entitled to receive the share of Net Profits, Net Losses and distributions of the Company’s assets to which the transferor would otherwise be entitled. Notwithstanding the immediately preceding sentences, if, in the determination of the remaining Members, a transfer in violation of this Article VI would cause the Company’s termination under the Code, in the sole discretion of the remaining Members, the transfer shall be null and void.

ARTICLE VII. ACCOUNTING, REPORTING BY MEMBERS

RECORDS,

7.1 Books and Records. The Company’s books and records shall be kept in accordance with the accounting methods followed for federal income tax purposes. The Company shall maintain at its principal office in California all records required to be maintained by the Company pursuant to the Act.

7.2

Reports. The Company shall cause to be filed, in accordance with the Act, all reports and documents required to be filed with any governmental agency. The Company shall cause to be prepared at least annually information concerning the Company’s operations necessary for the completion of the Members’ federal and state income tax returns. The Company shall send or cause to be sent to each Member within ninety (90) days after the end of each taxable year (i) such information as is necessary to complete the Members’ federal and state income tax or information returns and (ii) a copy of

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the Company’s federal, state, and local income tax or information returns for the year.

7.3 Bank Accounts. The Members shall maintain the Company’s funds in one or more separate bank accounts in the Company’s name, and shall not permit the Company’s funds to be commingled in any fashion with any other person’s funds. Any Member, acting alone, is authorized to endorse checks, drafts, and other evidences of indebtedness made payable to the order of the Company, but only for the purpose of deposit into the Company’s accounts. All checks, drafts, and other instruments obligating the Company to pay money in an amount of less than $______ may be signed by any one Member, acting alone. All checks, drafts, and other instruments obligating the Company to pay money in an amount of $______ or more must be signed on behalf of the Company by any _________ Members acting together.

ARTICLE VIII. DISSOLUTION AND WINDING UP 8.1

Company Dissolution. The Company shall dissolve, dispose of its assets, and wind up its affairs on the first to occur of the following (each, a “Dissolution Event”):

(a)

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Upon the entry of a decree of judicial dissolution pursuant to Section 17351 of the Corporations Code;

(b) Upon the vote of Members holding at least ___ percent (___%) of the Membership Interests;

(c) or

The sale of all or substantially all of the Company’s assets;

(d) The happening of any event that makes it unlawful or impossible to carry on the Company’s business.

8.2

Winding Up. On the occurrence of a Dissolution Event, the Company shall dispose of its assets and wind up its affairs. The Company shall give written notice of the commencement of the dissolution to all of its known creditors.

8.3 Payment of Liabilities upon Dissolution. After determining that all of the Company’s known debts and liabilities have been paid or adequately provided for, the Company shall distribute the remaining assets to the Members in accordance with their positive capital account balances, after taking into account income and loss allocations for the Company’s taxable year during which liquidation occurs.

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8.4

Limitations on Payments Made in Dissolution. Except as otherwise specifically provided in this Agreement, each Member shall (a) be entitled to look only to the Company’s assets for the return of his or her positive Capital Account balance, and (b) have no recourse for his or her Capital Contribution and/or share of Net Profits against any other Member, except as provided in Article X.

8.5 Certificates. The Company shall file a Certificate of Dissolution with the California Secretary of State on the Company’s dissolution and a Certificate of Cancellation on the Company’s completion of the winding up of its affairs.

ARTICLE IX. INDEMNIFICATION 9.1 Indemnification of Agents. The Company shall indemnify any Member and may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding because he or she is or was a Company Member, officer, employee or other agent or that, being or having been such a Member, officer, employee or agent, he or she is or was serving at the Company’s request as a manager, director, officer, employee or other agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise (all such persons being

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referred to hereinafter as an “agent”), to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit.

ARTICLE X. REPRESENTATIONS

INVESTMENT

Each Member represents and warrants to, and agrees with, the Members and the Company as follows:

10.1

Preexisting Relationship or Experience. The Member has a preexisting personal or business relationship with the Company or one or more of its officers or controlling persons, or because of the member’s business or financial experience, or because of the business or financial experience of the Member’s financial advisor who is unaffiliated with and who is not compensated, directly or indirectly, by the Company or any affiliate or selling agent of the Company, the Member is capable of evaluating the risks and merits of an investment in the Company and of protecting the Member’s own interests in connection with this investment.

10.2 No Advertising. The Member has not seen, received, been presented with, or been solicited by any leaflet, public promotional meeting, article or any other form of advertising or general solicitation with respect to the sale of the Membership Interest.

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10.3 Investment Intent. The Member is acquiring the Membership Interest for investment purposes for the Members’ own account only and not with a view to or for sale in connection with any distribution of all or any part of the Membership Interest. No other person will have any direct or indirect beneficial interest in or right to the Membership Interest.

10.4

Residency. The Member is a resident of, or incorporated in, the State of California.

ARTICLE XI. MISCELLANEOUS 11.1 Complete Agreement. This Agreement and the Articles constitute the complete and exclusive statement of agreement among the Members with respect to the subject matter herein and therein and replace and supersede all prior written and oral agreements among the Members. To the extent that any provision of the Articles conflict with any provision of this Agreement, the Articles shall control.

11.2 Binding Effect.

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Subject to the provisions of this Agreement relating to transferability, this Agreement will be binding upon and inure to the benefit of the Members, and their respective successors and assigns.

11.3

Interpretation. All pronouns shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the interpretation of any provision of this Agreement. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement unless otherwise expressly stated. In the event any claim is made by any Member relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular Member or his or her counsel.

11.4 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, excluding its conflicts of law principles.

11.5 Severability.

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If any provision of this Agreement or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid shall not be affected thereby.

11.6 Notices. Any notice to be given or to be served upon the Company or any party hereto in connection with this Agreement must be in writing (which may include facsimile) and will be deemed to have been given and received when delivered to the address specified by the party to receive the notice. Such notices will be given to a Member at the address specified in Exhibit A hereto. Any party may, at any time by giving three (3) days’ prior written notice to the other Members, designate any other address in substitution of the foregoing address to which such notice will be given.

11.7 Amendments. All amendments to this Agreement will be in writing and signed by all of the Members.

11.8 Remedies Cumulative. The remedies under this Agreement are cumulative and shall not exclude any other remedies to which any person may be lawfully entitled.

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INTENDING TO BE BOUND, the Members have executed this Agreement as of the date first written above. MEMBER: _________ MEMBER: _________ MEMBER: _________

EXHIBIT A CAPITAL CONTRIBUTION AND ADDRESSES OF MEMBERS AS OF ____________ Member’s Name

Member’s Address

Member’s Member’s Capital Membership Contribution Interest

_________

____________

_________

___

_________

____________

_________

___

_________

____________

_________

___

Form No. 2.2.09.    California Member Managed LLC Operating Agreement THE INTERESTS ACQUIRED PURSUANT TO THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THEY HAVE BEEN REGISTERED UNDER SAID ACT

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OR UNLESS REGISTRATION UNDER SAID ACT IS NOT REQUIRED. THERE ARE SUBSTANTIAL RESTRICTIONS ON TRANSFER CONTAINED IN THIS AGREEMENT. THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF _________ (this “Agreement”) is made and entered into as of ___, ___, by and among the Manager and the persons and/or entities listed on Exhibit “A” (such persons and/or entities listed on Exhibit “A” shall be referred to collectively as the “Members” and individually as a “Member”).

INTRODUCTION A. On ___, ___, the Manager and the Members filed Articles of Organization for _________ (the “Company”), a limited liability company under the laws of the State of California. B. The Manager and the Members desire to adopt and approve an operating agreement for the Company under the Act.

AGREEMENT 1. DEFINITIONS. When used in this Agreement, the following terms shall have the meanings set forth below:

1.1 Act. “Act” means the Limited Liability Company Act of the California Corporations Code as from time to time in effect.

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1.2

Adjusted Capital. “Adjusted Capital” means for each Member, an amount equal to such Member’s Contributions to the Company, reduced (but not below zero) by all distributions by the Company to such Member pursuant to Paragraph 8.1(a)]1

1.3 Affiliates. “Affiliates” of a Member means persons controlled by, controlling or under common control with such Member, or the family members of a Member. For these purposes, “control” shall mean a direct or indirect ownership interest of more than fifty percent (50%) in value of another entity.

1.4 Articles of Organization. “Articles of Organization” means the articles of organization filed with the California Secretary of State (“California Secretary”) for the purpose of forming the Company, which shall reflect that the Company will be managed by the Manager.

1.5 Bankruptcy. “Bankruptcy” means:

(a)

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The commencement of any voluntary proceedings under federal or state bankruptcy laws;

(b) The failure to terminate any involuntary proceeding under federal or state bankruptcy laws within thirty (30) days after the commencement thereof;

(c) A general assignment for the benefit of creditors; or

(d) The issuance of a charging order against the interest of any person without the removal thereof within thirty (30) days after issuance.

1.6 Book Value. “Book Value” means for any asset the asset’s adjusted basis for federal income tax purposes, except as follows:

(a) The initial Book Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the Tax Matters Partner.

(b) The Book Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Tax Matters Partner, as of the following times: (i) the acquisition of an additional interest in the

486

Company by any new or existing Member in exchange for more than a de minimis capital contribution if the Tax Matters Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company; (ii) the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company if the Tax Matters Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company; and (iii) the liquidation of the Company within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g).

(c) The Book Value of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution, as determined by the Tax Matters Partner.

(d) The Book Values of Company assets shall be increased (or decreased) to reflect any adjustment to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Book Values shall not be adjusted pursuant to this subparagraph to the extent the Tax Matters Partner determines that an adjustment pursuant to subparagraph (b) of this Paragraph is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph.

(e) 487

If the Book Value of an asset has been determined or adjusted pursuant to subparagraphs (a), (b) or (d) of this Paragraph, such Book Value shall thereafter be adjusted by the Book Depreciation (hereafter defined) taken into account with respect to such asset for purposes of computing Profits and Losses. “Book Depreciation” for any asset means for any fiscal year or other period an amount that bears the same ratio to the Book Value of that asset at the beginning of such fiscal year or other period as the federal income tax depreciation, amortization or other cost recovery deduction allowable for that asset for such year or other period bears to the adjusted tax basis of that asset at the beginning of such year or other period. If the federal income tax depreciation, amortization or other cost recovery deduction allowable for any asset for such year or other period is zero, then Book Depreciation for that asset shall be determined with reference to such beginning Book Value using any reasonable method selected by the Tax Matters Partner.

1.7

Capital Account. “Capital Account” means an account established for each Member and determined in accordance with Section 1.7041(b) of the Regulations. The Capital Accounts shall be adjusted in order to reflect allocations of depreciation, amortization, and gain and loss as computed for book purposes. Upon the Transfer of any Member’s interest in the Company, the Capital Account of the transferor Member shall carry over to the transferee Member.

1.8 Cash Reserves.

488

“Cash Reserves” means such amounts as may be estimated by the Manager for payment of costs, expenses and liabilities incident to the business of the Company and for which the cash to make such payments will not, in the sole discretion of the Manager, be expected to be available to the Company at or about the time such payments are required to be made, and which therefore, in the reasonable opinion of the Manager, require that cash be set aside periodically to make such payments. In establishing Cash Reserves, the Manager shall be bound by its fiduciary duty to the Members.

1.9 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.

1.10

Company. “Company” shall mean [Name], LLC, a California limited liability company.

1.11 Company Minimum Gain. “Company Minimum Gain” means “partnership minimum gain,” as defined in the Regulations promulgated under Section 704(b) of the Code.

1.12 Contribution.

489

“Contribution” means any money or property, or a promissory note or other binding obligation to contribute money or property, or to render services as permitted by law, which a Member contributes to the Company as capital in that Member’s capacity as a Member pursuant to this Agreement.

1.13 Distributable Cash. “Distributable Cash” means for any period such portion of the cash in the Company’s bank accounts that, in the sole discretion of the Manager, is available for distribution to the Members after a reasonable provision has been made for Cash Reserves.

1.14 Fiscal Year “Fiscal Year” means the calendar year.

1.15

Majority In Interest of the Members. “Majority In Interest of the Members” shall mean those Members owning more than fifty percent (50%) of the Participation Percentages of all Members.

[1.16 Manager. “Manager” shall mean [_________]. In the event the Manager is unavailable to serve as the Manager for any

490

reason, a Majority In Interest of the Members may select a successor Manager. The Manager may be, but shall not be required to be, a Member.]

[1.17

Managing Member. “Managing Member” shall mean [_________]. In the event the Managing Member is unavailable to serve as the Managing Member for any reason, a Majority In Interest of the Members may select a successor Managing Member or Managing Members.]

1.18 Member. “Member” means any person or entity admitted to the Company as a member in accordance with this Agreement, or a person or entity who has been admitted as a member pursuant to applicable law. The Members of the Company and their respective Participation Percentages shall be reflected on Exhibit “A” attached hereto, as it may be amended from time to time.

1.19 Membership Interest. “Membership Interest” means the interest of a Member in the Company.

1.20 Member Nonrecourse Deductions.

491

“Member Nonrecourse Deductions” means the Company deductions that are characterized as “partner nonrecourse deductions” pursuant to the Regulations promulgated under Section 704(b) of the Code.

1.21 Nonrecourse Deductions. “Nonrecourse Deductions” mean the Company deductions that are characterized as “nonrecourse deductions” pursuant to the Regulations promulgated under Section 704(b) of the Code.

1.22

Participation Percentage. “Participation Percentage” of a Member shall mean that percentage set forth opposite such Member’s name on Exhibit “A”, as it may be amended from time to time.

[CONFORM WITH ARTICLE 11] 1.23 Primary Member. “Primary Member” shall mean those Members described on Exhibit “A”, whose death, Bankruptcy or divorce will trigger the buyout provisions set forth in Article 11.]

1.24 Profits and Losses. “Profit” and “Loss” means, for each taxable year of the Company (or other period for which Profit or Loss must be computed), the Company’s taxable income or loss determined

492

in accordance with Code Section 703(a), with the following adjustments:

(a) All items of income, gain, loss, deduction, or credit required to be stated separately pursuant to Code Section 703(a)(1) shall be included in computing taxable income or loss;

(b) Any tax-exempt income of the Company, not otherwise taken into account in computing Profit or Loss, shall be included in computing taxable income or loss;

(c) Any expenditures of the Company described in Code Section 705(a)(2)(B) (or treated as such pursuant to Regulation Section 1.704-1(b)(2)(iv)(1)) and not otherwise taken into account in computing Profit or Loss, shall be subtracted from taxable income or loss;

(d) In the event the Book Value of any Company asset is adjusted pursuant to Paragraph 1.[___](b), Paragraph 1.[___] (d) or Paragraph 1.[___](e), the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Book Value of the asset) or an item of loss (if the adjustment decreases the Book Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;

(e)

493

Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Book Value;

(f) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required, pursuant to Regulations Section 1.704(b)(2)(iv)(m) (4), to be taken into account in determining the Capital Account as a result of a distribution other than in liquidation of a Membership Interest in the Company, the amount of such adjustment 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) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;

(g) Any items which are specially allocated pursuant to Paragraphs [7.2, 7.3, 7.6 and 7.7] hereof shall not be taken into account in computing Profits or Losses.

1.25

Property. “Property” means the real property described on Exhibit “B”, together with any other real property hereafter acquired by the Company.

1.26

494

Regulations. “Regulations” means the Income Tax Regulations promulgated under the Code, including Temporary and Proposed Regulations, as such Regulations may be amended from time to time, including corresponding provisions of succeeding Regulations.

[1.27 Super-Majority In Interest of the Members. “Super-Majority In Interest of the Members” shall mean those Members owning more than [___ percent (___%)] of the Participation Percentages of all Members.]

1.28 Transfer. “Transfer” means any encumbrance, gift, assignment, pledge, hypothecation, sale or other transfer of all or any portion of a Membership Interest.

2. FORMATION OF LIMITED LIABILITY COMPANY AND ADMISSION OF MEMBERS. The [Managers and the] Members hereby form the Company. The Manager has caused the Articles of Organization for the Company to be filed with the California Secretary pursuant to the provisions of the Act.

3. NAME AND PLACE OF BUSINESS. 495

3.1 Name. The name of the Company shall be [Name], LLC.

3.2

Principal Place of Business. The principal office of the Company shall be [_________, California _________,] unless changed by the Manager.

4. PURPOSE. The purpose of the Company is to acquire, hold, improve, maintain, lease, finance and dispose of the Property and to engage in any and all general business activities related or incidental thereto permitted under the Act; provided that the Company shall not conduct any banking, insurance or trust company business.

5. TERM OF COMPANY; RECORDINGS; AGENT FOR SERVICE OF PROCESS. 5.1 Term. The Company shall commence as of the date of the execution of the Agreement and shall continue until [___, ___], unless sooner terminated as herein provided or by operation of law.

496

5.2

Qualification. The Company shall file any documents with any other appropriate governmental agencies as may be required by applicable law. The Company shall qualify to do business in any other jurisdiction as may be required under the laws of such jurisdiction.

5.3 Agent for Service of Process. The name and address of the initial agent for service of process of the Company designated on the Articles of Organization is [_________, California _________]. The agent for service of process of the Company may be changed from time to time by the Manager, subject to applicable law.

6. CONTRIBUTIONS AND LOANS. 6.1 Initial Contributions. Concurrently herewith, the Members shall make the Contributions in the amounts set forth next to each Member’s name on Exhibit “A”.

6.2 Additional Contributions or Loans.

497

The Members shall not be required to make any additional Contributions or loans to the Company.

6.3 Interest on Contributions. No interest shall be paid by the Company on any Contribution made by any Member to the Company.

6.4 Return of Contributions. Except as otherwise provided in this Agreement, no Member shall have the right to withdraw or reduce such Member’s Contribution or to receive any distributions, except as a result of dissolution. No Member shall have the right to demand or receive property other than cash in return for such Member’s Contributions.

6.5

Loans By a Member. Loans by a Member to the Company shall not be considered Contributions for purposes of this Agreement, increase such Member’s Capital Account or entitle such Member to any greater share of the Profits, Losses or distributions of the Company than such Member is otherwise entitled to under this Agreement. No loan shall be made by a Member to the Company unless approved by the Manager.

6.6 Foreign Members.

498

If the Company is required to withhold taxes with respect to the Profits of a Member who is a foreign person or entity (including a Member who resides outside of the State of California), the Manager may require an additional Contribution (without adjustment to Participation Percentages) of such Member in the amount of the required withholding amount.

7. ALLOCATIONS. 7.1 Allocation of Profits and Losses. Profits and Losses for each Fiscal Year shall be allocated among the Members in accordance with their respective Participation Percentages.

7.2 Allocation of Nonrecourse Deductions. Nonrecourse Deductions for each Fiscal Year shall be allocated among the Members in accordance with their respective Participation Percentages.

7.3 Member Nonrecourse Deductions. Member Nonrecourse Deductions for each Fiscal Year shall be allocated as required by the Regulations promulgated under Section 704(b) of the Code.

7.4 499

704(c) Agreement. The Members agree that items attributable to contributed property shall be allocated as required by Section 704(c) of the Code

7.5 Allocation of Tax Credits. Except as may otherwise be required by law, any tax credits to which the Company may be entitled shall be allocated among the Members in accordance with their respective Participation Percentages.

7.6 Qualified Income Offset. Except as provided in Paragraph 7.7 of this Agreement, if any Member unexpectedly receives an adjustment, allocation or distribution described in Regulations Sections 1.704-1(b)(2) (ii)(d)(4), (5) or (6), items of income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, any deficit in said Member’s Capital Account as quickly as possible. For purposes of this Paragraph 7.6, the Member’s Capital Account, as of the end of the relevant Fiscal Year, shall take into account the adjustments described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), any amount of any deficit Capital Account balance which the Member is obligated to restore, and any amount of any deficit Capital Account balance which the Member is deemed obligated to restore pursuant to the Regulations promulgated under Section 704(b) of the Code.

7.7 500

Minimum Gain Chargeback. Prior to any allocation hereunder, if there is a net decrease in the Company Minimum Gain during a Company taxable year, each Member shall be allocated items of income and gain in accordance with the Regulations promulgated under Section 704(b) of the Code and its requirements for a “minimum gain chargeback.” If there is a net decrease in minimum gain attributable to debt associated with Member Nonrecourse Deductions, income and gain shall be allocated to the Members in accordance with the Regulations.

7.8 Allocations of Book Items. For federal income tax purposes, every item of income, gain, loss and deduction shall be allocated among the Members in accordance with the allocations under Paragraphs 7.1, 7.2 and 7.3 hereof.

8. DISTRIBUTIONS. [OPTION 8.1 Distribution of Distributable Cash. Distributable Cash shall be distributed (at such times and in such amounts as determined by the Manager) to the Members as follows:

(a) First, to the Members with positive Adjusted Capital balances, pro rata in accordance with such balances, until

501

the Adjusted Capital of each Member reduced to zero; and

(b) Thereafter, to the Members in accordance with their respective Participation Percentages.]

[OPTION 8.2 Distribution of Distributable Cash. Distributable Cash shall be distributed to the Members in accordance with their respective Participation Percentages at such times as the Manager shall determine in [its/their] sole discretion (subject to the Manager’s fiduciary duty to the Members).]

8.3 To Whom Distributions Are Made. Unless named in this Agreement or unless admitted as a Member as provided in this Agreement, no person or entity shall be considered a Member in the Company. Any distribution by the Company to the person shown on the Company records as a Member, or to such Member’s legal representatives, or to a named assignee of the right to receive distributions, shall acquit the Company and the Members of all liability to any other person who may be interested in such distribution by reason of an assignment by a Member or for any other reason.

9. MANAGEMENT. 9.1 502

General Management. Subject to the remaining provisions of this Agreement, the Company’s business shall be managed by the Manager. The Manager shall be responsible for the day to day management of the Company’s business and shall have all rights and powers generally conferred by law or necessary, advisable or consistent in connection therewith. The Manager shall devote such time to the Company as shall be necessary in [its/their] sole and absolute discretion to conduct the Company’s business and to carry out [its/their] duties and responsibilities under this Agreement for the furtherance of the Company’s business.

9.2 Limitations on Power of Manager. Notwithstanding any other provision of this Agreement, the Manager shall not have authority to cause the Company to engage in the following transactions without first obtaining the approval of a [Super-Majority/Majority] In Interest of the Members:

(a) The sale, exchange or other disposition of substantially all of the Company’s assets occurring as part of a single transaction or plan, or in integrated multiple transactions except in the orderly liquidation and winding up of the business of the Company upon its duly authorized dissolution.

(b) The merger of the Company with another limited liability company or corporation, general partnership, limited

503

partnership or other entity (except that any act which would cause a Member to incur personal liability for the obligations of the Company or its successor shall also require the consent of such Member).

(c) An alteration of the authorized businesses of the Company as set forth in Article 4 of this Agreement.

(d) Any act which would make it impossible to carry on the ordinary business of the Company.

(e) The confession of a judgment against the Company.

(f) The borrowing of money in excess of $50,000 or guaranty of the debt of another.

(g) Any transaction, including the rendering of services, between a Member or any Affiliate of a Member and the Company.

9.3

Member Approval. No annual or regular meetings of the Members are required to be held. However, if such meetings are held, such meetings shall be noticed, held and conducted pursuant to the Act. In any instance in which the approval of the Members

504

is required under this Agreement, such approval obtained in any manner permitted by the Act. otherwise provided in this Agreement, approval Members shall mean the approval of a Majority/Majority] In Interest of the Members.

may be Unless of the [Super-

9.4 Tax Matters Partner. [_________] shall be the designated Tax Matters Partner of the Company, as that term is defined in the Code.

9.5 Execution of Documents. Each check, contract, deed, lease, promissory note, deed of trust, escrow instruction, bond, release or any other documents of any nature whatsoever, in any way pertaining to the Company or on behalf of the Company, shall be signed by [_________] OPTION [the person or persons designated from time to time by the Manager.

9.6

Liability/Indemnification. (a) [No/Neither any Member] [nor the Manager] shall be liable, responsible or accountable in damages or otherwise to the Company or to the other Members for any acts performed within the scope of the authority conferred on such Member [or Manager] by this Agreement, except for such Member’s [or Manager’s] gross negligence, willful misconduct or breach of fiduciary duty. Other than claims for a breach of fiduciary

505

duty under Section 17153 of the California Corporations Code, the Company shall indemnify and hold harmless the Members [or the Manager] (individually, an “Indemnitee”) from and against any and all losses, claims, demands, costs, damages, liabilities, expenses of any nature (including reasonable attorneys’ fees and disbursements), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, brought against, or threatened against, such Indemnitee by reason of the fact such Indemnitee was a Member [or the Manager] of the Company. Such indemnification shall be provided regardless of whether the Indemnitee continues to be a Member [or the Manager] at the time any such liability or expense is paid or incurred.

(b) Expenses incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding subject to Paragraph 9.6(a), shall from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that such person is not entitled to be indemnified under Paragraph 9.6(a).

(c) The indemnification provided by Paragraph 9.6(a) shall be in addition to any other rights to which the Indemnitee may be entitled under any agreement, vote of the Members, as a matter of law or equity or otherwise and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.

506

(d) The Company may purchase and maintain insurance, at the Company’s expense, on behalf of the Members, [the Manager and such other persons as the Manager shall determine], against any liability that may be asserted against, or any expense that may be incurred by, such persons in connection with the activities of the Company and/or the acts or omissions of such persons regardless of whether the Company would have the power to indemnify such persons against such liability under the provisions of this Agreement.

(e) Any indemnification under Paragraph 9.6 shall be satisfied solely out of the assets of the Company. No Member shall be subject to personal liability or required to provide any funds, or to cause any funds to be provided, to Company to satisfy any indemnification obligation of the Company under Paragraph 9.6.

9.7

Compensation of the Manager. Except for the reimbursement of expenses provided in Paragraph 13.5, the Manager shall receive no compensation for services rendered to the Company.

[9.8 No Withdrawal of Members. No Member shall have the right to withdraw from the Company.]

9.9 507

Resignation or Removal of the [Manager/Managing Member]. (a) The [Manager/Managing Member] may be removed with or without cause by a vote of a [Majority/Super-Majority] In Interest of the Members.

(b) The [Manager/Managing Member] may resign at any time upon written notice to the Company and the Members. Resignation of a Manager who is also a Member shall have no effect on such Member’s rights or interest as a Member.

10. RESTRICTIONS ON TRANSFER; NEW MEMBERS. 10.1 Limitations on Transfers. Except as set forth in Paragraphs 10.2 and 10.3 below, no Member shall for any reason, whether voluntarily, involuntarily or by operation of law, Transfer all or any of such Member’s Membership Interest, without the prior written consent of the Manager. Any Transfer not expressly permitted in this Agreement shall be null and void. A transferee of a Membership Interest shall have the right to become a substitute Member only if (i) consent of the Manager is given, (ii) such person executes an instrument satisfactory to the Manager accepting and adopting the terms and provisions of this Agreement, and (iii) such person pays any

508

reasonable expenses in connection with his or her admission as a substitute Member. The admission of a substitute Member shall not release the Member who assigned the Membership Interest from any liability that such Member may have to the Company.

10.2 Excluded Transfers. The provisions of Paragraphs 10.1 and 10.3 shall not apply to any Transfer, whether or not for consideration, by a Member (or, in the case of a Member which is a trust, by its grantor(s)) [(i) to the spouse of such Member, (ii) the issue of such Member (outright, to a custodian under the Uniform Transfers to Minors Act (or similar statute) of any State, or to a revocable or irrevocable trust of which such issue is the sole beneficiary as to such interest in the Company), or (iii) to a trust for the benefit of such Member; provided that only the former Member has the right to vote the interest in the Company on behalf of the trust pursuant to the trust agreement, and further provided that if at any time the Membership Interest held in trust is proposed to be allocated or distributed to a person other than the grantor(s) of the trust who was a former Member or to other than a person described in this Paragraph 10.2,] then the provisions of Paragraphs 10.1 shall apply.

10.3

Right of First Refusal on Transfer. (a) Notice of Offer.

509

A Member (the “Selling Member”), upon receiving a bona fide offer, whether written or oral, by a third party to acquire all or any portion of such Selling Member’s Membership Interest which the Selling Member is willing to accept, or upon making a bona fide offer, whether written or oral, to a third party to sell, Transfer or assign all or any of the Selling Member’s Membership Interest (either of such types of offers is referred to herein as the “Offer”), shall give written notice thereof (the “Sale Notice”) to the Company and the other Members. The Sale Notice shall specify:

(i) The number of and identity of the Membership Interest proposed to be Transferred (the “Offered Interests”);

(ii) The identity of the proposed transferee;

(iii) The consideration to be received for the Offered Interests (including the value of any non-monetary consideration and the method for determining such value); and

(iv) The terms and conditions upon which the Selling Member intends to make the Transfer. The Sale Notice shall be accompanied by a true and complete copy of the Offer, if it is written, and shall constitute an offer by the Selling Member to Transfer the Offered Interests to the Company as more fully set forth below.

(b)

510

Company’s Right of First Refusal. The Company shall have the right to purchase all (and only all) of the Offered Interests at a price equal to the price set forth in the Offer (as determined pursuant to Paragraph 10.3(d), if applicable) and on the terms set forth in the Offer. The Company may exercise its right to purchase only by giving written notice thereof to the Selling Member (the “Company’s Acceptance”), with a copy to the other Members, within thirty (30) days after the later of (i) the date on which the Company received the Sale Notice, or (ii) the date on which fair market value was determined pursuant to Paragraph 10.3(d) hereof. The Selling Member shall not participate in any vote that may be required in connection with the Company’s decision as to whether to exercise its right to purchase all of the Offered Interests.

(c) Other Members’ Right of First Refusal. If the Company fails to deliver the Company’s Acceptance within the specified time period, then the Selling Member shall give a second notice in writing to the other Members (the “Remaining Members”) with a copy to the Company, to reflect that the Company has elected not to purchase the Offered Interests. The Remaining Members shall have the right, collectively, to purchase from the Selling Member all (and only all) of the Offered Interests, at a price equal to the price set forth in the Offer and on the terms set forth in the Offer. The Remaining Members may exercise such right only by giving written notice thereof to the Selling Member (collectively, the “Members’ Acceptances”), with a copy to the Company, within fifteen (15) days after delivery of such second notice by the Selling Member. A Member’s Acceptance shall specify the amount of the Offered Interests that such Member desires to

511

purchase. If the total amount of the Offered Interests specified in the Members’ Acceptances exceeds the Offered Interests, each Member shall have priority, up to the amount specified in such Members’ Acceptances, to purchase that proportion of the Offered Interests which such Member’s Participation Percentage bears to the total Participation Percentages of Membership Interests of all Members who have submitted Members’ Acceptances. The Offered Interests not purchased on such a priority basis shall be allocated in one or more successive allocations to those Remaining Members desiring to purchase more of the Offered Interests based upon the same formula. If the Remaining Members do not purchase all of the Offered Interests, the Selling Member may consummate the proposed Transfer to the proposed transferee in accordance with the terms set forth in the Offer, provided that such Transfer is consummated on or before the one hundred twentieth (120th) day following the later of the date of the Offer or the date on which fair market value is determined pursuant to Paragraph 10.3(d) hereof. No Transfer of any of the Offered Interests or any interest therein shall be made after the end of the one hundred twenty (120) day period, nor shall any material change in the price or terms of the Transfer from those set forth in the Offer be permitted, unless the Selling Member gives written notice to the Company and the Remaining Members of a new Offer and complies with all of the provisions of this Paragraph 10.3.

(d)

Non-Monetary Consideration. If part or all of the consideration to be paid for the Offered Interests pursuant to the terms of the Offer is other than money, then the price set forth in the Offer shall equal the aggregate of the money consideration plus the fair market value of the consideration other than money to be paid to the

512

Selling Member. For purposes of this Paragraph 10.3(d), the fair market value shall be determined by the Selling Member and the Company (with the Selling Member not participating in any vote pertaining to the Company’s determination of fair market value) within fifteen (15) days following delivery of the Sale Notice to the Company. If an agreement as to fair market value cannot be reached within such time period, the Selling Member and the Company (or the Remaining Members, as the case may be) shall promptly submit such issue to the American Arbitration Association for a determination in accordance with its rules. The parties shall use their best efforts to obtain an expedient determination of fair market value. The fees of the arbitrator(s) and the costs to be paid to the American Arbitration Association shall be paid fifty percent (50%) by the Selling Member and fifty percent (50%) by the Company. Discovery in accordance with California law shall be permitted. Such arbitration shall take place in Los Angeles, California, unless the parties to the arbitration mutually agree on another place.

(e)

Closing for Right of First Refusal Purchase. If the Company or any Remaining Member exercises its or his right to purchase all or a portion of the Offered Interests (as described above), the closing of such purchase shall take place on the date chosen by the purchasing party, which in no event may be later than the later of (i) the thirtieth (30th) day following the date on which the Company’s Acceptance was delivered, or (ii) the thirtieth (30th) day following the date on which the last Member’s Acceptance was delivered. A purchasing party shall give written notice to the Selling Member of the closing date for the purchase by that party, at least five (5) days prior to such date.

513

10.4 Title. Upon any Transfer of Membership Interests in the Company made in accordance with the terms of this Agreement, the transferee shall take, own, hold and Transfer such Membership Interests in the Company pursuant and subject to each and all of the provisions, conditions and covenants of this Agreement, as fully as if such transferee were designated as a Member herein. As a condition precedent to any Transfer of Membership Interests in the Company, the transferee shall agree in writing to be bound by all provisions of this Agreement.

10.5 No Dissolution. If a Member Transfers all or any part of its interests in the Company without complying with the provisions of this Agreement, such action shall not cause or constitute a dissolution of the Company.

10.6 New Members. No new Member may be admitted into the Company without the consent of the Manager.

11. PURCHASE OF MEMBER’S INTEREST UPON CERTAIN EVENTS.

514

11.1

Rights to Purchase Upon Death or Bankruptcy of a Member. Upon the death or Bankruptcy of a Primary Member (a “Termination Event”), the Company and/or the Members other than the deceased or bankrupt Primary Member (the “Remaining Members”) shall have the right to purchase, and the deceased or bankrupt Primary Member’s estate or legal representative (collectively, the “Former Member”) shall sell, all or any portion of the Former Member’s Interest in the Company, as follows:

11.2 Right to Purchase Former Member’s Interest by Company and/or Remaining Members. Within thirty (30) days after the fair market value of the Former Member’s Interest has been determined in accordance with Paragraph 11.3 (the “Company Acceptance Period”), the Company shall notify the Members (including the Former Member) in writing of its desire to purchase all or a portion of the Former Member’s Interest, in which case, the Company shall purchase and the Former Member shall sell, the specified portion of the Former Member’s Interest, in accordance with this Article 11. If the Company does not submit a notice within the applicable period for the entire Former Member’s Interest, the Remaining Members shall have the right to purchase from the Former Member any portion of the Former Member’s Interest not to be purchased by the Company. The Remaining Members may exercise such right only by giving written notice thereof to the Former Member (collectively, the “Remaining Members’ Acceptances”), with a copy to the Company, within fifteen (15) days after the end of

515

the Company Acceptance Period, in which case the Remaining Member shall purchase, and the Former Member shall sell, the specified portion of the Former Member’s Interest in accordance with this Article 11. The failure of any Remaining Member to submit a notice within the applicable period shall constitute an election on the part of that Remaining Member not to purchase any of the Former Member’s Interest. A Remaining Member’s Acceptance shall specify the amount of the Former Member’s Interest that such Remaining Member desires to purchase. If the total amount of the Former Member’s Interests specified in the Remaining Members’ Acceptances collectively exceeds the amount of the Former Member’s Interest, each Remaining Member shall have priority, up to the amount specified in such Remaining Member’s Acceptance, to purchase that portion of the Former Member’s Interest which such Remaining Member’s Participation Percentage bears to the total Participation Percentages of all Remaining Members who have submitted Remaining Member’s Acceptances. The Former Member’s Interest not purchased on such a priority basis shall be allocated in one or more successive allocations to the Remaining Members desiring to purchase more of the Former Member’s Interest based upon the same formula. If the Company and the Remaining Members do not collectively elect to purchase all of the Former Member’s Interest, the Former Member’s heirs or successors in interest (collectively, “Successor”), as the case may be, shall retain any portion of the Former Member’s Interest not so purchased by the Company and/or the Remaining Members. Such Successor shall not have the power or authority to conduct Company business.

11.3 Purchase Price. 516

The purchase price for all of the Former Member’s Interest shall be the fair market value of the Former Member’s Interest as determined by an independent appraiser jointly selected by the Former Member and the [Manager/Managing Member/Remaining Member]. The Company (and/or the Remaining Members who elect to purchase any portion of the Former Member’s Interest, collectively as a group, as the case may be) and the Former Member shall each pay one-half (2) of the cost of the appraisal.

11.4

Payment of Purchase Price. The Company and/or the Remaining Members, as the case may be, shall pay to the Former Member at the Closing (as hereafter defined) one-fifth (1/5) of the purchase price, with the balance of the purchase price to be paid to the Former Member in four (4) equal annual principal installments, plus accrued interest, each year on the anniversary date of the Closing. The unpaid principal balance shall accrue interest at the current applicable federal rate as provided in the Code for the month in which the initial payment is made, but the Company and/or the Remaining Members, as the case may be, shall have the right to prepay the balance of the promissory note(s) in full or in part at any time without penalty. The obligation of each purchasing Remaining Member and/or the Company, as applicable, to pay its respective portion of the balance due shall be evidenced by a separate promissory note executed by the respective purchasing Remaining Member and/or the Company, as applicable. Each such promissory note shall be in an original principal amount equal to the portion owed by the respective purchasing Remaining Member or the Company, as applicable. The promissory note executed by each purchasing Remaining Member shall be secured by a pledge of that

517

portion of the Former Member’s Interest purchased by such Remaining Member.

11.5

Closing of Purchase of Former Member’s Interest. The closing for the sale of a Former Member’s Interest pursuant to this Article 11 (the “Closing”) shall be held at 10:00 a.m. at the principal office of Company no later than sixty (60) days after the determination of the purchase price, except that if the date of the Closing falls on a Saturday, Sunday or California legal holiday, then the Closing shall be held on the next succeeding business day. At the Closing, the Former Member shall deliver to the Company and/or the Remaining Members, as appropriate, an instrument of Transfer, containing warranties of title and no encumbrances, conveying the Former Member’s Interest purchased by the Company and/or the Remaining Members. The Former Member, the Company and/or the Remaining Members, as applicable, shall do all things and execute and deliver all papers as may be reasonably necessary fully to consummate such sale and purchase in accordance with the terms and provisions of this Agreement.

11.6 Purchase Upon Divorce of a Primary Member. A married Primary Member and his or her spouse shall, upon the dissolution of their marriage, use all reasonable efforts to cause the interest in the Company held by either of them, including the former spouse’s interest therein, if any (community or otherwise), to be distributed or Transferred to the Primary Member. The Primary Member shall notify the

518

Company and the Remaining Members of any dissolution of his or her marital relationship, any disposition of the interest in the Company held by such Primary Member by reason of such dissolution and any property settlement proceedings which provide any purchase rights under this Agreement.

11.7

Purchase Upon Death of a Spouse of a Primary Member. A Primary Member shall, upon the death of his or her spouse, use all reasonable efforts to acquire the interest in the Company (if any) of such deceased spouse. The Primary Member shall notify the Remaining Members and the Company of the death of such Primary Member’s spouse and the disposition of the deceased spouse’s interest in the Company by reason thereof in any manner which provides any purchase rights under this Agreement.

12. DISSOLUTION AND WINDING UP OF THE COMPANY. 12.1 Dissolution of Company. The Company shall be dissolved upon the happening of any of the following events:

(a) The written consent of a [Super-Majority/Majority] In Interest of the Members;

519

(b) Expiration of the term of the Company set forth in Paragraph 5.1 of this Agreement;

(c) Entry of a judicial decree of dissolution pursuant to Section 17351 of the Act; or

(d) The sale of substantially all of the Company’s assets.

12.2

Winding Up of the Company. Upon dissolution of the Company, the Members shall wind up the affairs and liquidate the assets of the Company in accordance with the provisions of this Paragraph and the Act. Profits, Losses, Nonrecourse Deductions, Member Nonrecourse Deductions and all other Company items shall be allocated until the liquidation is completed in the same ratio as such items were allocated prior thereto. The proceeds from liquidation of the Company when and as received by the Company shall be utilized, paid and distributed in the following order:

(a) First, to pay expenses of liquidation;

(b) Next, to pay the debts of the Company to third parties other than the Members;

520

(c) Next, to pay the debts of the Company owing to creditors who are Members;

(d) Next, to the establishment of any Cash Reserves;

(e) Next, to the Members, in accordance with the respective positive Capital Account balances, as determined by taking into account all Capital Account adjustments required by this Agreement; and

(f) Thereafter, to the Members, in accordance with the respective Participation Percentages.

12.3

Right To Receive Property. The Members shall have no right to demand or receive property other than cash in return for their Contributions.

13. BOOKS AND RECORDS; EXPENSES. 13.1 Books of Account. The Company shall, at the Company’s sole cost and expense, keep adequate books of account of the Company

521

wherein shall be recorded and reflected all of the Contributions and all of the income, expenses and transactions of the Company and a list of the names, addresses and number of Membership Interests in the Company held by the Members in alphabetical order. The books and records shall be maintained in accordance with a method of accounting determined by the Manager, and each Member shall have complete access to the books and records of the Company upon providing reasonable notice to the Manager.

13.2

Accounting and Reports. The Member serving as the “Tax Matters Partner” shall, at the Company’s sole cost and expense, cause federal and state returns for the Company to be prepared and filed with the appropriate authorities, and shall furnish to the other Members, within ninety (90) days after the close of each Fiscal Year, such financial information with respect to each Fiscal Year as shall be reportable for federal and state income tax purposes.

13.3 Banking. All funds of the Company shall be deposited in a separate bank account or accounts as shall be determined by the Manager. All withdrawals therefrom shall be made upon checks signed by the person or persons designated by the Manager.

13.4

522

Accountants. The Manager Company.

shall

select

the

accountants

for

the

13.5

Expenses of Company. All direct expenses incurred in connection with conducting the Company’s business shall be billed to and paid by the Company or if paid by the Manager or a Member, the Manager such Manager may be reimbursed for such direct expenses without interest.

14. ADJUSTMENT OF BASIS ELECTION. In the event of a Transfer of any Membership Interest in the Company, or in the event of a distribution of the property of the Company to any Member hereto, the Manager shall, at the request of the transferee Member, file an election, in accordance with Section 754 of the Code and applicable Treasury Regulations, to cause the basis of the Company’s property to be adjusted for federal income tax purposes, as provided in Sections 734, 743 and 754 of the Code.

15. WAIVER OF ACTION FOR PARTITION. Each of the Members hereby irrevocably waives, during the term of the Company, any right such Member may have to maintain any action for partition with respect to any property of the Company.

523

16. AMENDMENTS. Amendments to this Agreement may be made only if approved by a vote of [a Super-Majority/Majority In Interest of/all] the Members.

17.

EQUITABLE RELIEF. The rights granted to the parties hereunder are of a special and unique kind and character, and if there is a breach by any party of any material provision of this Agreement, the other parties would not have an adequate remedy at law. Therefore, the rights of the parties under this Agreement may be enforced by equitable relief as is provided under the laws of the State of California.

18. NOTICES. Any and all notices, demands or other communications required or desired to be given hereunder by any party shall be in writing and shall be validly delivered to another party only if served either personally by overnight courier service, by facsimile transmission or if deposited in the United States first class mail, certified return receipt requested, postage prepaid at the address/facsimile numbers set forth on Exhibit A next to each Member’s name. If such notice, demand or other communication is served personally, service shall be conclusively deemed made at the time of such personal service. If such notice is sent by facsimile transmission or overnight courier service, service shall be conclusively deemed made at the time of written confirmation of receipt, if on or

524

before 5:00 p.m. local time on a legal business day at the place of receipt, and if not, then on the next legal business day thereafter. If such notice, demand or other communication is given by mail, service shall be conclusively deemed made on the date shown on the return receipt. The address and facsimile number for delivery of notices, demands or other communications for each Member is set forth on Exhibit “A” next to each Member’s name. Any party hereto may change its address for the purpose of receiving notices, demands and other communications as herein provided by a written notice given in the manner aforesaid to the other party or parties hereto.

19. LEGAL REPRESENTATION. EACH MEMBER REPRESENTS AND WARRANTS THAT SUCH MEMBER HAS BEEN ADVISED THAT SUCH MEMBER MAY BE REPRESENTED BY COUNSEL OF SUCH MEMBER’S OWN CHOOSING IN THE PREPARATION AND ANALYSIS OF THIS AGREEMENT AND EACH MEMBER HAS CONSENTED TO THE JOINT REPRESENTATION BY COUNSEL FOR ALL MEMBERS IN THE PREPARATION OF THIS AGREEMENT. EACH MEMBER HAS READ THIS AGREEMENT WITH CARE AND BELIEVES THAT SUCH MEMBER IS FULLY AWARE OF AND UNDERSTANDS THE CONTENTS THEREOF AND THEIR LEGAL EFFECT.

20. ATTORNEYS’ FEES. Should any party hereto institute any action or proceeding at law or in equity to enforce any provision hereof, including an action for declaratory relief or for damages by reason of an

525

alleged breach of any provision of this Agreement, or otherwise in connection with this Agreement, or any provision hereof, the prevailing party shall be entitled to recover from the losing party or parties reasonable attorneys’ fees and costs for services rendered to the prevailing party in such action or proceeding.

21. INDEPENDENT ACTIVITIES OF MEMBERS. The Members and the Manager may engage in or possess an interest in other business ventures of every nature and description, independently or with others, including, but not limited to, the ownership, financing, leasing, operation, management, syndication, brokerage and development of real property or any other investment asset or venture, and neither the Company nor the other Members shall have, and each of them hereby expressly waives, relinquishes and renounces any right by virtue of this Agreement in and to such independent ventures or to the income or profits derived therefrom.

22. INVESTMENT REPRESENTATIONS OF THE MEMBERS. Each Member, by executing this Agreement, hereby acknowledges, covenants, represents and warrants to the Company and the other Members, and each of them, as follows:

22.1

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Business Experience; Evaluation of Risks and Merits. That such Member is over the age of twenty-one (21) years, experienced in business affairs, and capable of evaluating the merits and risks of this investment.

22.2 Risks of Investment. Each Member realizes that such Member’s investment in the Company involves an element of substantial uncertainty as to the potential for profitability of the business of the Company.

22.3 Income Tax Matters. The Company has not requested a tax ruling on behalf of the Company to the effect that the Company will be taxed as a partnership for federal income tax purposes, nor does the Company intend to request such a ruling. In the absence of a ruling, there can be no assurance that the Internal Revenue Service will not deem the Company to be an association taxable as a corporation. In the event that the Company were taxed as a corporation rather than as a partnership, the Members would incur certain significant adverse income tax consequences.

22.4 Securities Matters. Each Member understands that the interests in the Company have not been registered with the Securities and

527

Exchange Commission or qualified with the California Department of Corporations or any other state securities agency, in reliance upon exemptions therefrom which are predicated, in part, upon the information previously provided by each of the Members and the following representations:

(a) Each Member understands that in addition to the restrictions imposed by applicable federal and state securities laws, the right to Transfer Interests is restricted by the terms of this Agreement. No Transfer will be permitted if, in the opinion of counsel for the Company, such Transfer will violate applicable federal or state securities laws. The burden and expense will be borne by a Member to satisfy the Company that all of the conditions of transfer have been satisfied. In addition, even if a Member meets all of these requirements, there is no present market for Interests and none is anticipated to develop;

(b) Each Member represents that such Member is acquiring such Member’s interest in the Company for investment purposes and for such Member’s own account, with no present intention of dividing the same with others, or reselling or otherwise distributing such interest, and such Member will not sell or otherwise dispose of such interest in violation of the Securities Act of 1933, as amended, the California Corporations Code, or regulations promulgated thereunder;

(c) Each Member represents that such Member is capable of bearing the economic risk of such Member’s investment in the Company (meaning such Member can afford either a complete loss of the investment or hold it indefinitely without materially

528

adversely affecting such Member’s standard of living, causing financial difficulties, or impairing such Member’s ability to meet current needs and possible personal contingencies);

(d) Each Member represents that such Member either has a preexisting personal or business relationship with the other Members, or by reason of such Member’s business or financial experience or the business or financial experience of such Member’s professional advisors who are unaffiliated with and not compensated by the any other Member, or any affiliate or any selling agent of any other Member, has the capacity to protect such Member’s interests in the Company;

(e) That prior to the execution hereof, each of the Members had knowledge that the persons listed upon Exhibit “A” would become members of the Company upon their execution hereof, and each desires and consents to the association of each of them as Members of this Company;

(f) Each Member recognizes that the Company will be newly organized and therefore has no financial or operating history. For this reason and others, purchase of Interests as an investment involves special risks; and

(g) Each Member is a bona-fide resident of the state in which the principal residence of such Member is located, as set forth on Exhibit “A” hereto.

23. 529

MISCELLANEOUS. 23.1

Applicable Law. This Agreement shall, in all respects, be governed by the laws of the State of California applicable to agreements executed and to be wholly performed within the State of California.

23.2 Severability. Nothing contained herein shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provisions contained herein and any present or future statute, law, ordinance or regulation contrary to which the parties have no legal right to contract, the latter shall prevail; but the provision of this Agreement which is affected shall be curtailed and limited only to the extent necessary to bring it within the requirements of the law.

23.3 Further Assurances. Each of the parties hereto shall execute and deliver any and all additional papers, documents and other assurances, and shall do any and all acts and things reasonably necessary in connection with the performance of their obligations hereunder to carry out the intent of the parties hereto.

23.4 530

Successors and Assigns. All of the terms and provisions contained herein shall inure to the benefit of and shall be binding upon the parties hereto and their respective heirs, legal representatives, successors and assigns.

23.5 Number and Gender. In this Agreement, the masculine, feminine or neuter gender, and the singular or plural number, shall each be deemed to include the others whenever the context so requires.

23.6 Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties with respect to its subject matter and any and all prior agreements, understandings or representations with respect to its subject matter are hereby terminated and canceled in their entirety and are of no further force or effect.

23.7 Waiver. A waiver of any provision of this Agreement shall be valid only if it is in writing and signed by the party making the waiver. No waiver by any party hereto of any breach of this Agreement or any provision hereof shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision hereof.

531

23.8

Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

23.9 Interpretation. The captions appearing at the commencement of the sections hereof are descriptive only and for convenience in reference.

23.10 Parties in Interest. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third person any right of subrogation or action over or against any party to this Agreement.

23.11 No Authority. No Member shall have the duty to inquire into the authority of another Member to act. All of the Members shall

532

be presumed to have the authority to execute this Agreement and to carry out any acts contemplated hereby. INTENDING TO BE BOUND, the parties have executed this Agreement on the date first hereinabove mentioned. ____________ ____________ ____________ ____________ ____________ ____________

Exhibit A MEMBERS NAME

ADDRESS

PARTICIPATION MEMBER’S PRIMARY PERCENTAGE CAPITAL MEMBER ACCOUNT

____________ ____________ ____________

____________ ____________

____________ ____________ ____________

____________ ____________

____________ ____________ ____________

____________ ____________

____________ ____________ ____________

____________ ____________

____________ ____________ ____________

____________ ____________

Exhibit B DESCRIPTION OF THE PROPERTIES Form No. 2.2.10.    California Managed LLC Operating

Manager

AGREEMENT1 LIMITED LIABILITY COMPANY OPERATING AGREEMENT

533

THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF [Name], LLC (this “Agreement”) is made and entered into as of ___, ___, by and between [the Manager and] the persons and/or entities listed on Exhibit “A” (such persons and/or entities listed on Exhibit “A” shall be referred to collectively as the “Members” and individually as a “Member”) with reference to the following facts: A. On ___, ___, the [Manager and the] Members filed Articles of Organization for [Name], LLC (the “Company”), a limited liability company under the laws of the State of California. B. The [Manager and the] Members desire to adopt and approve an operating agreement for the Company under the California Limited Liability Company Act. NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, the parties agree as follows:

1. DEFINITIONS. When used in this Agreement, the following terms shall have the meanings set forth below:

1.1 Act. “Act” means the California Limited Liability Company Act as set forth in Title 2.5 (commencing with Section 17000) of the California Corporations Code.

[CONFORM WITH ARTICLE 8 1.2

Adjusted Capital. 534

“Adjusted Capital” means for each Member, an amount equal to such Member’s Contributions to the Company, reduced (but not below zero) by all distributions by the Company to such Member pursuant to Paragraph 8.1(a)].

1.3 Affiliates. “Affiliates” of a Member means persons controlled by, controlling or under common control with such Member, or the family members of a Member. For these purposes, “control” shall mean a direct or indirect ownership interest of more than fifty percent (50%) in value of another entity.

1.4

Articles of Organization. “Articles of Organization” means the articles of organization filed with the California Secretary of State (“California Secretary”) for the purpose of forming the Company, which shall reflect that the Company will be managed by the [Manager/Managing Member/Members].

1.5 Bankruptcy. “Bankruptcy” means:

(a) The commencement of any voluntary proceedings under federal or state bankruptcy laws;

(b) 535

The failure to terminate any involuntary proceeding under federal or state bankruptcy laws within thirty (30) days after the commencement thereof;

(c) A general assignment for the benefit of creditors; or

(d) The issuance of a charging order against the interest of any person without the removal thereof within thirty (30) days after issuance.

1.6 Book Value. “Book Value” means for any asset the asset’s adjusted basis for federal income tax purposes, except as follows:

(a) The initial Book Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the Tax Matters Partner.

(b) The Book Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Tax Matters Partner, 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 if the Tax Matters Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company; (ii) the distribution

536

by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company if the Tax Matters Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company; and (iii) the liquidation of the Company within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g).

(c) The Book Value of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution, as determined by the Tax Matters Partner.

(d) The Book Values of Company assets shall be increased (or decreased) to reflect any adjustment to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Book Values shall not be adjusted pursuant to this subparagraph to the extent the Tax Matters Partner determines that an adjustment pursuant to subparagraph (b) of this Paragraph is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph.

(e) If the Book Value of an asset has been determined or adjusted pursuant to subparagraphs (a), (b) or (d) of this Paragraph, such Book Value shall thereafter be adjusted by the Book Depreciation (hereafter defined) taken into account with respect to such asset for purposes of computing Profits

537

and Losses. “Book Depreciation” for any asset means for any fiscal year or other period an amount that bears the same ratio to the Book Value of that asset at the beginning of such fiscal year or other period as the federal income tax depreciation, amortization or other cost recovery deduction allowable for that asset for such year or other period bears to the adjusted tax basis of that asset at the beginning of such year or other period. If the federal income tax depreciation, amortization or other cost recovery deduction allowable for any asset for such year or other period is zero, then Book Depreciation for that asset shall be determined with reference to such beginning Book Value using any reasonable method selected by the Tax Matters Partner.

1.7

Capital Account. “Capital Account” means an account established for each Member and determined in accordance with Section 1.7041(b) of the Regulations. The Capital Accounts shall be adjusted in order to reflect allocations of depreciation, amortization, and gain and loss as computed for book purposes. Upon the Transfer of any Member’s interest in the Company, the Capital Account of the transferor Member shall carry over to the transferee Member.

1.8 Cash Reserves. “Cash Reserves” means such amounts as may be estimated by the [Manager/Managing Member/Members] for payment of costs, expenses and liabilities incident to the business of the Company and for which the cash to make such payments will not, in the sole discretion of the

538

[Manager/Managing Member/Members], be expected to be available to the Company at or about the time such payments are required to be made, and which therefore, in the reasonable opinion of the [Manager/Managing Member/Members], require that cash be set aside periodically to make such payments. In establishing Cash Reserves, the [Manager/Managing Member/Members] shall be bound by its fiduciary duty to the Members.

1.9 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.

1.10

Company. “Company” shall mean [Name], LLC, a California limited liability company.

1.11 Company Minimum Gain. “Company Minimum Gain” means “partnership minimum gain,” as defined in the Regulations promulgated under Section 704(b) of the Code.

1.12 Contribution. “Contribution” means any money or property, or a promissory note or other binding obligation to contribute

539

money or property, or to render services as permitted by law, which a Member contributes to the Company as capital in that Member’s capacity as a Member pursuant to this Agreement.

1.13 Distributable Cash. “Distributable Cash” means for any period such portion of the cash in the Company’s bank accounts that, in the sole discretion of the [Manager/Managing Member/Members], is available for distribution to the Members after a reasonable provision has been made for Cash Reserves.

1.14 Fiscal Year. “Fiscal Year” means the calendar year.

1.15

Majority In Interest of the Members. “Majority In Interest of the Members” shall mean those Members owning more than fifty percent (50%) of the Participation Percentages of all Members.

[1.16 Manager. “Manager” shall mean [_________]. In the event the Manager is unavailable to serve as the Manager for any reason, a Majority In Interest of the Members may select a

540

successor Manager. The Manager may be, but shall not be required to be, a Member.]

[1.17

Managing Member. “Managing Member” shall mean [_________]. In the event the Managing Member is unavailable to serve as the Managing Member for any reason, a Majority In Interest of the Members may select a successor Managing Member or Managing Members.]

1.18 Member. “Member” means any person or entity admitted to the Company as a member in accordance with this Agreement, or a person or entity who has been admitted as a member pursuant to applicable law. The Members of the Company and their respective Participation Percentages shall be reflected on Exhibit “A” attached hereto, as it may be amended from time to time.

1.19 Membership Interest. “Membership Interest” means the interest of a Member in the Company.

1.20 Member Nonrecourse Deductions.

541

“Member Nonrecourse Deductions” means the Company deductions that are characterized as “partner nonrecourse deductions” pursuant to the Regulations promulgated under Section 704(b) of the Code.

1.21 Nonrecourse Deductions. “Nonrecourse Deductions” mean the Company deductions that are characterized as “nonrecourse deductions” pursuant to the Regulations promulgated under Section 704(b) of the Code.

1.22

Participation Percentage. “Participation Percentage” of a Member shall mean that percentage set forth opposite such Member’s name on Exhibit “A”, as it may be amended from time to time.

[CONFORM WITH ARTICLE 11] 1.23 Primary Member. “Primary Member” shall mean those Members described on Exhibit “A”, whose death, Bankruptcy or divorce will trigger the buyout provisions set forth in Article 11.]

1.24 Profits and Losses. “Profit” and “Loss” means, for each taxable year of the Company (or other period for which Profit or Loss must be computed), the Company’s taxable income or loss determined

542

in accordance with Code Section 703(a), with the following adjustments:

(a) All items of income, gain, loss, deduction, or credit required to be stated separately pursuant to Code Section 703(a)(1) shall be included in computing taxable income or loss;

(b) Any tax-exempt income of the Company, not otherwise taken into account in computing Profit or Loss, shall be included in computing taxable income or loss;

(c) Any expenditures of the Company described in Code Section 705(a)(2)(B) (or treated as such pursuant to Regulation Section 1.704-1(b)(2)(iv)(1)) and not otherwise taken into account in computing Profit or Loss, shall be subtracted from taxable income or loss;

(d) In the event the Book Value of any Company asset is adjusted pursuant to Paragraph 1.[___](b), Paragraph 1.[___] (d) or Paragraph 1.[___](e), the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Book Value of the asset) or an item of loss (if the adjustment decreases the Book Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;

(e)

543

Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Book Value;

(f) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required, pursuant to Regulations Section 1.704(b)(2)(iv)(m) (4), to be taken into account in determining the Capital Account as a result of a distribution other than in liquidation of a Membership Interest in the Company, the amount of such adjustment 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) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;

(g) Any items which are specially allocated pursuant to Paragraphs [7.2, 7.3, 7.6 and 7.7] hereof shall not be taken into account in computing Profits or Losses.

1.25

Property. “Property” means the real property described on Exhibit “B”, together with any other real property hereafter acquired by the Company.

1.26

544

Regulations. “Regulations” means the Income Tax Regulations promulgated under the Code, including Temporary and Proposed Regulations, as such Regulations may be amended from time to time, including corresponding provisions of succeeding Regulations.

[1.27 Super-Majority In Interest of the Members. “Super-Majority In Interest of the Members” shall mean those Members owning more than [___ percent (___%)] of the Participation Percentages of all Members.]

1.28 Transfer. “Transfer” means any encumbrance, gift, assignment, pledge, hypothecation, sale or other transfer of all or any portion of a Membership Interest.

2. FORMATION OF LIMITED LIABILITY COMPANY AND ADMISSION OF MEMBERS. The [Managers and the] Members hereby form the Company. The [Manager/Managing Member/Members] has caused the Articles of Organization for the Company to be filed with the California Secretary pursuant to the provisions of the Act.

3.

545

NAME AND PLACE OF BUSINESS. 3.1 Name. The name of the Company shall be [Name], LLC.

3.2

Principal Place of Business. The principal office of the Company shall be [_________, California _________,] unless changed by the [Manager/Managing Member/Members].

4. PURPOSE. The purpose of the Company is to acquire, hold, improve, maintain, lease, finance and dispose of the Property and to engage in any and all general business activities related or incidental thereto permitted under the Act; provided that the Company shall not conduct any banking, insurance or trust company business.

5. TERM OF COMPANY; RECORDINGS; AGENT FOR SERVICE OF PROCESS. 5.1 Term.

546

The Company shall commence as of the date of the execution of the Agreement and shall continue until [___, ___], unless sooner terminated as herein provided or by operation of law.

5.2

Qualification. The Company shall file any documents with any other appropriate governmental agencies as may be required by applicable law. The Company shall qualify to do business in any other jurisdiction as may be required under the laws of such jurisdiction.

5.3 Agent for Service of Process. The name and address of the initial agent for service of process of the Company designated on the Articles of Organization is [_________, California _________]. The agent for service of process of the Company may be changed from time to time by the [Manager/Managing Member/Members], subject to applicable law.

6. CONTRIBUTIONS AND LOANS. 6.1 Initial Contributions. Concurrently herewith, the Members shall make the Contributions in the amounts set forth next to each Member’s name on Exhibit “A”.

547

6.2 Additional Contributions or Loans. The Members shall not be required to make any additional Contributions or loans to the Company.

6.3 Interest on Contributions. No interest shall be paid by the Company on any Contribution made by any Member to the Company.

6.4 Return of Contributions. Except as otherwise provided in this Agreement, no Member shall have the right to withdraw or reduce such Member’s Contribution or to receive any distributions, except as a result of dissolution. No Member shall have the right to demand or receive property other than cash in return for such Member’s Contributions.

6.5

Loans By a Member. Loans by a Member to the Company shall not be considered Contributions for purposes of this Agreement, increase such Member’s Capital Account or entitle such Member to any greater share of the Profits, Losses or distributions of the Company than such Member is otherwise entitled to under this Agreement. No loan shall be made by a Member to the Company unless approved by the [Manager/Managing Member/Members].

548

6.6

Foreign Members. If the Company is required to withhold taxes with respect to the Profits of a Member who is a foreign person or entity (including a Member who resides outside of the State of California), the [Manager/Managing Member/Members] may require an additional Contribution (without adjustment to Participation Percentages) of such Member in the amount of the required withholding amount.

7. ALLOCATIONS. 7.1 Allocation of Profits and Losses. Profits and Losses for each Fiscal Year shall be allocated among the Members in accordance with their respective Participation Percentages.

7.2 Allocation of Nonrecourse Deductions. Nonrecourse Deductions for each Fiscal Year shall be allocated among the Members in accordance with their respective Participation Percentages.

7.3 Member Nonrecourse Deductions.

549

Member Nonrecourse Deductions for each Fiscal Year shall be allocated as required by the Regulations promulgated under Section 704(b) of the Code.

7.4

704(c) Agreement. The Members agree that items attributable to contributed property shall be allocated as required by Section 704(c) of the Code

7.5 Allocation of Tax Credits. Except as may otherwise be required by law, any tax credits to which the Company may be entitled shall be allocated among the Members in accordance with their respective Participation Percentages.

7.6 Qualified Income Offset. Except as provided in Paragraph 7.7 of this Agreement, if any Member unexpectedly receives an adjustment, allocation or distribution described in Regulations Sections 1.704-1(b)(2) (ii)(d)(4), (5) or (6), items of income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, any deficit in said Member’s Capital Account as quickly as possible. For purposes of this Paragraph 7.6, the Member’s Capital Account, as of the end of the relevant Fiscal Year, shall take into account the adjustments described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), any amount of any deficit Capital Account balance which the

550

Member is obligated to restore, and any amount of any deficit Capital Account balance which the Member is deemed obligated to restore pursuant to the Regulations promulgated under Section 704(b) of the Code.

7.7

Minimum Gain Chargeback. Prior to any allocation hereunder, if there is a net decrease in the Company Minimum Gain during a Company taxable year, each Member shall be allocated items of income and gain in accordance with the Regulations promulgated under Section 704(b) of the Code and its requirements for a “minimum gain chargeback.” If there is a net decrease in minimum gain attributable to debt associated with Member Nonrecourse Deductions, income and gain shall be allocated to the Members in accordance with the Regulations.

7.8 Allocations of Book Items. For federal income tax purposes, every item of income, gain, loss and deduction shall be allocated among the Members in accordance with the allocations under Paragraphs 7.1, 7.2 and 7.3 hereof.

8. DISTRIBUTIONS. [OPTION 8.1 Distribution of Distributable Cash.

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Distributable Cash shall be distributed (at such times and in such amounts as determined by the [Manager/Managing Member/Members]) to the Members as follows:

(a) First, to the Members with positive Adjusted Capital balances, pro rata in accordance with such balances, until the Adjusted Capital of each Member reduced to zero; and

(b) Thereafter, to the Members in accordance with their respective Participation Percentages.]

[OPTION 8.2 Distribution of Distributable Cash. Distributable Cash shall be distributed to the Members in accordance with their respective Participation Percentages at such times as the [Manager/Managing Member/Members] shall determine in [its/their] sole discretion (subject to the Manager’s fiduciary duty to the Members).]

8.3 To Whom Distributions Are Made. Unless named in this Agreement or unless admitted as a Member as provided in this Agreement, no person or entity shall be considered a Member in the Company. Any distribution by the Company to the person shown on the Company records as a Member, or to such Member’s legal representatives, or to a named assignee of the right to receive distributions, shall acquit the Company and the Members of all liability to any other person who may be interested in such

552

distribution by reason of an assignment by a Member or for any other reason.

9. MANAGEMENT. 9.1

General Management. Subject to the remaining provisions of this Agreement, the Company’s business shall be managed by the [Manager/Managing Member/Members]. The [Manager/Managing Member/Members] shall be responsible for the day to day management of the Company’s business and shall have all rights and powers generally conferred by law or necessary, advisable or consistent in connection therewith. The [Manager/Managing Member/Members] shall devote such time to the Company as shall be necessary in [its/their] sole and absolute discretion to conduct the Company’s business and to carry out [its/their] duties and responsibilities under this Agreement for the furtherance of the Company’s business.

9.2 Limitations on Power of [Manager/Managing Member/Members]. Notwithstanding any other provision of this Agreement, the [Manager/Managing Member/Members] shall not have authority to cause the Company to engage in the following transactions without first obtaining the approval of a [SuperMajority/Majority] In Interest of the Members:

553

(a) The sale, exchange or other disposition of substantially all of the Company’s assets occurring as part of a single transaction or plan, or in integrated multiple transactions except in the orderly liquidation and winding up of the business of the Company upon its duly authorized dissolution.

(b) The merger of the Company with another limited liability company or corporation, general partnership, limited partnership or other entity (except that any act which would cause a Member to incur personal liability for the obligations of the Company or its successor shall also require the consent of such Member).

(c) An alteration of the authorized businesses of the Company as set forth in Article 4 of this Agreement.

(d) Any act which would make it impossible to carry on the ordinary business of the Company.

(e) The confession of a judgment against the Company.

(f) The borrowing of money in excess of $50,000 or guaranty of the debt of another.

(g) 554

Any transaction, including the rendering of services, between a Member or any Affiliate of a Member and the Company.

9.3

Member Approval. No annual or regular meetings of the Members are required to be held. However, if such meetings are held, such meetings shall be noticed, held and conducted pursuant to the Act. In any instance in which the approval of the Members is required under this Agreement, such approval may be obtained in any manner permitted by the Act. Unless otherwise provided in this Agreement, approval of the Members shall mean the approval of a [SuperMajority/Majority] In Interest of the Members.

9.4 Tax Matters Partner [_________] shall be the designated Tax Matters Partner of the Company, as that term is defined in the Code.

9.5 Execution of Documents. Each check, contract, deed, lease, promissory note, deed of trust, escrow instruction, bond, release or any other documents of any nature whatsoever, in any way pertaining to the Company or on behalf of the Company, shall be signed by [_________] OPTION [the person or persons designated from time to time by the [Manager/Managing Member/Members].

9.6 555

Liability/Indemnification. (a) [No/Neither any Member] [nor the Manager] shall be liable, responsible or accountable in damages or otherwise to the Company or to the other Members for any acts performed within the scope of the authority conferred on such Member [or Manager] by this Agreement, except for such Member’s [or Manager’s] gross negligence, willful misconduct or breach of fiduciary duty. Other than claims for a breach of fiduciary duty under Section 17153 of the California Corporations Code, the Company shall indemnify and hold harmless the Members [or the Manager] (individually, an “Indemnitee”) from and against any and all losses, claims, demands, costs, damages, liabilities, expenses of any nature (including reasonable attorneys’ fees and disbursements), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, brought against, or threatened against, such Indemnitee by reason of the fact such Indemnitee was a Member [or the Manager] of the Company. Such indemnification shall be provided regardless of whether the Indemnitee continues to be a Member [or the Manager] at the time any such liability or expense is paid or incurred.

(b) Expenses incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding subject to Paragraph 9.6(a), shall from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Indemnitee to repay such

556

amount if it shall be determined that such person is not entitled to be indemnified under Paragraph 9.6(a).

(c) The indemnification provided by Paragraph 9.6(a) shall be in addition to any other rights to which the Indemnitee may be entitled under any agreement, vote of the Members, as a matter of law or equity or otherwise and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.

(d) The Company may purchase and maintain insurance, at the Company’s expense, on behalf of the Members, [the Manager and such other persons as the Manager shall determine], against any liability that may be asserted against, or any expense that may be incurred by, such persons in connection with the activities of the Company and/or the acts or omissions of such persons regardless of whether the Company would have the power to indemnify such persons against such liability under the provisions of this Agreement.

(e) Any indemnification under Paragraph 9.6 shall be satisfied solely out of the assets of the Company. No Member shall be subject to personal liability or required to provide any funds, or to cause any funds to be provided, to Company to satisfy any indemnification obligation of the Company under Paragraph 9.6.

9.7

Compensation of the [Manager/Managing Member/Members]. 557

Except for the reimbursement of expenses provided in Paragraph 13.5, the [Manager/Managing Member/Members] shall receive no compensation for services rendered to the Company.

[9.8 No Withdrawal of Members. No Member shall have the right to withdraw from the Company.]

9.9

Resignation or Removal of the [Manager/Managing Member]. (a) The [Manager/Managing Member] may be removed with or without cause by a vote of a [Majority/Super-Majority] In Interest of the Members.

(b) The [Manager/Managing Member] may resign at any time upon written notice to the Company and the Members. Resignation of a Manager who is also a Member shall have no effect on such Member’s rights or interest as a Member.

10. RESTRICTIONS ON TRANSFER; NEW MEMBERS. 10.1 558

Limitations on Transfers. Except as set forth in Paragraphs 10.2 and 10.3 below, no Member shall for any reason, whether voluntarily, involuntarily or by operation of law, Transfer all or any of such Member’s Membership Interest, without the prior written consent of the [Manager/Managing Member/Members]. Any Transfer not expressly permitted in this Agreement shall be null and void. A transferee of a Membership Interest shall have the right to become a substitute Member only if (i) consent of the [Manager/Managing Member/Members] is given, (ii) such person executes an instrument satisfactory to the [Manager/Managing Member/Members] accepting and adopting the terms and provisions of this Agreement, and (iii) such person pays any reasonable expenses in connection with his or her admission as a substitute Member. The admission of a substitute Member shall not release the Member who assigned the Membership Interest from any liability that such Member may have to the Company.

10.2 Excluded Transfers. The provisions of Paragraphs 10.1 and 10.3 shall not apply to any Transfer, whether or not for consideration, by a Member (or, in the case of a Member which is a trust, by its grantor(s)) [(i) to the spouse of such Member, (ii) the issue of such Member (outright, to a custodian under the Uniform Transfers to Minors Act (or similar statute) of any State, or to a revocable or irrevocable trust of which such issue is the sole beneficiary as to such interest in the Company), or (iii) to a trust for the benefit of such Member; provided that only the former Member has the right to vote the interest in the Company on behalf of the trust pursuant to the trust

559

agreement, and further provided that if at any time the Membership Interest held in trust is proposed to be allocated or distributed to a person other than the grantor(s) of the trust who was a former Member or to other than a person described in this Paragraph 10.2,] then the provisions of Paragraphs 10.1 shall apply.

10.3

Right of First Refusal on Transfer. (a) Notice of Offer. A Member (the “Selling Member”), upon receiving a bona fide offer, whether written or oral, by a third party to acquire all or any portion of such Selling Member’s Membership Interest which the Selling Member is willing to accept, or upon making a bona fide offer, whether written or oral, to a third party to sell, Transfer or assign all or any of the Selling Member’s Membership Interest (either of such types of offers is referred to herein as the “Offer”), shall give written notice thereof (the “Sale Notice”) to the Company and the other Members. The Sale Notice shall specify:

(i) The number of and identity of the Membership Interest proposed to be Transferred (the “Offered Interests”);

(ii) The identity of the proposed transferee;

(iii)

560

The consideration to be received for the Offered Interests (including the value of any non-monetary consideration and the method for determining such value); and

(iv) The terms and conditions upon which the Selling Member intends to make the Transfer. The Sale Notice shall be accompanied by a true and complete copy of the Offer, if it is written, and shall constitute an offer by the Selling Member to Transfer the Offered Interests to the Company as more fully set forth below.

(b)

Company’s Right of First Refusal. The Company shall have the right to purchase all (and only all) of the Offered Interests at a price equal to the price set forth in the Offer (as determined pursuant to Paragraph 10.3(d), if applicable) and on the terms set forth in the Offer. The Company may exercise its right to purchase only by giving written notice thereof to the Selling Member (the “Company’s Acceptance”), with a copy to the other Members, within thirty (30) days after the later of (i) the date on which the Company received the Sale Notice, or (ii) the date on which fair market value was determined pursuant to Paragraph 10.3(d) hereof. The Selling Member shall not participate in any vote that may be required in connection with the Company’s decision as to whether to exercise its right to purchase all of the Offered Interests.

(c) Other Members’ Right of First Refusal.

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If the Company fails to deliver the Company’s Acceptance within the specified time period, then the Selling Member shall give a second notice in writing to the other Members (the “Remaining Members”) with a copy to the Company, to reflect that the Company has elected not to purchase the Offered Interests. The Remaining Members shall have the right, collectively, to purchase from the Selling Member all (and only all) of the Offered Interests, at a price equal to the price set forth in the Offer and on the terms set forth in the Offer. The Remaining Members may exercise such right only by giving written notice thereof to the Selling Member (collectively, the “Members’ Acceptances”), with a copy to the Company, within fifteen (15) days after delivery of such second notice by the Selling Member. A Member’s Acceptance shall specify the amount of the Offered Interests that such Member desires to purchase. If the total amount of the Offered Interests specified in the Members’ Acceptances exceeds the Offered Interests, each Member shall have priority, up to the amount specified in such Members’ Acceptances, to purchase that proportion of the Offered Interests which such Member’s Participation Percentage bears to the total Participation Percentages of Membership Interests of all Members who have submitted Members’ Acceptances. The Offered Interests not purchased on such a priority basis shall be allocated in one or more successive allocations to those Remaining Members desiring to purchase more of the Offered Interests based upon the same formula. If the Remaining Members do not purchase all of the Offered Interests, the Selling Member may consummate the proposed Transfer to the proposed transferee in accordance with the terms set forth in the Offer, provided that such Transfer is consummated on or before the one hundred twentieth (120th) day following the later of the date of the Offer or the date on which fair market value is determined pursuant to Paragraph 10.3(d) hereof. No Transfer of any of the Offered Interests or any interest therein shall be made after the end of the one hundred twenty (120) day period, nor

562

shall any material change in the price or terms of the Transfer from those set forth in the Offer be permitted, unless the Selling Member gives written notice to the Company and the Remaining Members of a new Offer and complies with all of the provisions of this Paragraph 10.3.

(d)

Non-Monetary Consideration. If part or all of the consideration to be paid for the Offered Interests pursuant to the terms of the Offer is other than money, then the price set forth in the Offer shall equal the aggregate of the money consideration plus the fair market value of the consideration other than money to be paid to the Selling Member. For purposes of this Paragraph 10.3(d), the fair market value shall be determined by the Selling Member and the Company (with the Selling Member not participating in any vote pertaining to the Company’s determination of fair market value) within fifteen (15) days following delivery of the Sale Notice to the Company. If an agreement as to fair market value cannot be reached within such time period, the Selling Member and the Company (or the Remaining Members, as the case may be) shall promptly submit such issue to the American Arbitration Association for a determination in accordance with its rules. The parties shall use their best efforts to obtain an expedient determination of fair market value. The fees of the arbitrator(s) and the costs to be paid to the American Arbitration Association shall be paid fifty percent (50%) by the Selling Member and fifty percent (50%) by the Company. Discovery in accordance with California law shall be permitted. Such arbitration shall take place in Los Angeles, California, unless the parties to the arbitration mutually agree on another place.

(e) 563

Closing for Right of First Refusal Purchase. If the Company or any Remaining Member exercises its or his right to purchase all or a portion of the Offered Interests (as described above), the closing of such purchase shall take place on the date chosen by the purchasing party, which in no event may be later than the later of (i) the thirtieth (30th) day following the date on which the Company’s Acceptance was delivered, or (ii) the thirtieth (30th) day following the date on which the last Member’s Acceptance was delivered. A purchasing party shall give written notice to the Selling Member of the closing date for the purchase by that party, at least five (5) days prior to such date.

10.4 Title. Upon any Transfer of Membership Interests in the Company made in accordance with the terms of this Agreement, the transferee shall take, own, hold and Transfer such Membership Interests in the Company pursuant and subject to each and all of the provisions, conditions and covenants of this Agreement, as fully as if such transferee were designated as a Member herein. As a condition precedent to any Transfer of Membership Interests in the Company, the transferee shall agree in writing to be bound by all provisions of this Agreement.

10.5 No Dissolution. If a Member Transfers all or any part of its interests in the Company without complying with the provisions of this Agreement, such action shall not cause or constitute a dissolution of the Company.

564

10.6 New Members. No new Member may be admitted into the Company without the consent of the [Manager/Managing Member/Members].

11. PURCHASE OF MEMBER’S INTEREST UPON CERTAIN EVENTS. 11.1

Rights to Purchase Upon Death or Bankruptcy of a Member. Upon the death or Bankruptcy of a Primary Member (a “Termination Event”), the Company and/or the Members other than the deceased or bankrupt Primary Member (the “Remaining Members”) shall have the right to purchase, and the deceased or bankrupt Primary Member’s estate or legal representative (collectively, the “Former Member”) shall sell, all or any portion of the Former Member’s Interest in the Company, as follows:

11.2 Right to Purchase Former Member’s Interest by Company and/or Remaining Members. Within thirty (30) days after the fair market value of the Former Member’s Interest has been determined in accordance with Paragraph 11.3 (the “Company Acceptance Period”), the Company shall notify the Members (including the Former

565

Member) in writing of its desire to purchase all or a portion of the Former Member’s Interest, in which case, the Company shall purchase and the Former Member shall sell, the specified portion of the Former Member’s Interest, in accordance with this Article 11. If the Company does not submit a notice within the applicable period for the entire Former Member’s Interest, the Remaining Members shall have the right to purchase from the Former Member any portion of the Former Member’s Interest not to be purchased by the Company. The Remaining Members may exercise such right only by giving written notice thereof to the Former Member (collectively, the “Remaining Members’ Acceptances”), with a copy to the Company, within fifteen (15) days after the end of the Company Acceptance Period, in which case the Remaining Member shall purchase, and the Former Member shall sell, the specified portion of the Former Member’s Interest in accordance with this Article 11. The failure of any Remaining Member to submit a notice within the applicable period shall constitute an election on the part of that Remaining Member not to purchase any of the Former Member’s Interest. A Remaining Member’s Acceptance shall specify the amount of the Former Member’s Interest that such Remaining Member desires to purchase. If the total amount of the Former Member’s Interests specified in the Remaining Members’ Acceptances collectively exceeds the amount of the Former Member’s Interest, each Remaining Member shall have priority, up to the amount specified in such Remaining Member’s Acceptance, to purchase that portion of the Former Member’s Interest which such Remaining Member’s Participation Percentage bears to the total Participation Percentages of all Remaining Members who have submitted Remaining Member’s Acceptances. The Former Member’s Interest not purchased on such a priority basis shall be allocated in one or more successive allocations to the Remaining Members desiring to purchase more of the Former Member’s Interest based upon the same formula. If the

566

Company and the Remaining Members do not collectively elect to purchase all of the Former Member’s Interest, the Former Member’s heirs or successors in interest (collectively, “Successor”), as the case may be, shall retain any portion of the Former Member’s Interest not so purchased by the Company and/or the Remaining Members. Such Successor shall not have the power or authority to conduct Company business.

11.3 Purchase Price. The purchase price for all of the Former Member’s Interest shall be the fair market value of the Former Member’s Interest as determined by an independent appraiser jointly selected by the Former Member and the [Manager/Managing Member/Remaining Member]. The Company (and/or the Remaining Members who elect to purchase any portion of the Former Member’s Interest, collectively as a group, as the case may be) and the Former Member shall each pay one-half (2) of the cost of the appraisal.

11.4

Payment of Purchase Price. The Company and/or the Remaining Members, as the case may be, shall pay to the Former Member at the Closing (as hereafter defined) one-fifth (1/5) of the purchase price, with the balance of the purchase price to be paid to the Former Member in four (4) equal annual principal installments, plus accrued interest, each year on the anniversary date of the Closing. The unpaid principal balance shall accrue interest at the current applicable federal rate as provided in the Code for the month in which the initial payment is made, but the

567

Company and/or the Remaining Members, as the case may be, shall have the right to prepay the balance of the promissory note(s) in full or in part at any time without penalty. The obligation of each purchasing Remaining Member and/or the Company, as applicable, to pay its respective portion of the balance due shall be evidenced by a separate promissory note executed by the respective purchasing Remaining Member and/or the Company, as applicable. Each such promissory note shall be in an original principal amount equal to the portion owed by the respective purchasing Remaining Member or the Company, as applicable. The promissory note executed by each purchasing Remaining Member shall be secured by a pledge of that portion of the Former Member’s Interest purchased by such Remaining Member.

11.5

Closing of Purchase of Former Member’s Interest. The closing for the sale of a Former Member’s Interest pursuant to this Article 11 (the “Closing”) shall be held at 10:00 a.m. at the principal office of Company no later than sixty (60) days after the determination of the purchase price, except that if the date of the Closing falls on a Saturday, Sunday or California legal holiday, then the Closing shall be held on the next succeeding business day. At the Closing, the Former Member shall deliver to the Company and/or the Remaining Members, as appropriate, an instrument of Transfer, containing warranties of title and no encumbrances, conveying the Former Member’s Interest purchased by the Company and/or the Remaining Members. The Former Member, the Company and/or the Remaining Members, as applicable, shall do all things and execute and deliver all papers as may be reasonably necessary fully to consummate

568

such sale and purchase in accordance with the terms and provisions of this Agreement.

11.6

Purchase Upon Divorce of a Primary Member. A married Primary Member and his or her spouse shall, upon the dissolution of their marriage, use all reasonable efforts to cause the interest in the Company held by either of them, including the former spouse’s interest therein, if any (community or otherwise), to be distributed or Transferred to the Primary Member. The Primary Member shall notify the Company and the Remaining Members of any dissolution of his or her marital relationship, any disposition of the interest in the Company held by such Primary Member by reason of such dissolution and any property settlement proceedings which provide any purchase rights under this Agreement.

11.7 Purchase Upon Death of a Spouse of a Primary Member. A Primary Member shall, upon the death of his or her spouse, use all reasonable efforts to acquire the interest in the Company (if any) of such deceased spouse. The Primary Member shall notify the Remaining Members and the Company of the death of such Primary Member’s spouse and the disposition of the deceased spouse’s interest in the Company by reason thereof in any manner which provides any purchase rights under this Agreement.

12.

569

DISSOLUTION AND WINDING UP OF THE COMPANY. 12.1

Dissolution of Company. The Company shall be dissolved upon the happening of any of the following events:

(a) The written consent of a [Super-Majority/Majority] In Interest of the Members;

(b) Expiration of the term of the Company set forth in Paragraph 5.1 of this Agreement;

(c) Entry of a judicial decree of dissolution pursuant to Section 17351 of the Act; or

(d) The sale of substantially all of the Company’s assets.

12.2 Winding Up of the Company. Upon dissolution of the Company, the Members shall wind up the affairs and liquidate the assets of the Company in accordance with the provisions of this Paragraph and the Act. Profits, Losses, Nonrecourse Deductions, Member Nonrecourse Deductions and all other Company items shall

570

be allocated until the liquidation is completed in the same ratio as such items were allocated prior thereto. The proceeds from liquidation of the Company when and as received by the Company shall be utilized, paid and distributed in the following order:

(a) First, to pay expenses of liquidation;

(b) Next, to pay the debts of the Company to third parties other than the Members;

(c) Next, to pay the debts of the Company owing to creditors who are Members;

(d) Next, to the establishment of any Cash Reserves;

(e) Next, to the Members, in accordance with the respective positive Capital Account balances, as determined by taking into account all Capital Account adjustments required by this Agreement; and

(f) Thereafter, to the Members, in accordance with the respective Participation Percentages.

12.3

571

Right To Receive Property. The Members shall have no right to demand or receive property other than cash in return for their Contributions.

13. BOOKS AND RECORDS; EXPENSES. 13.1 Books of Account. The Company shall, at the Company’s sole cost and expense, keep adequate books of account of the Company wherein shall be recorded and reflected all of the Contributions and all of the income, expenses and transactions of the Company and a list of the names, addresses and number of Membership Interests in the Company held by the Members in alphabetical order. The books and records shall be maintained in accordance with a method of accounting determined by the [Manager/Managing Member/Members], and each Member shall have complete access to the books and records of the Company upon providing reasonable notice to the [Manager/Managing Member/Members].

13.2 Accounting and Reports. The Member serving as the “Tax Matters Partner” shall, at the Company’s sole cost and expense, cause federal and state returns for the Company to be prepared and filed with the appropriate authorities, and shall furnish to the other Members, within ninety (90) days after the close of each Fiscal Year, such financial information with respect to each Fiscal

572

Year as shall be reportable for federal and state income tax purposes.

13.3

Banking. All funds of the Company shall be deposited in a separate bank account or accounts as shall be determined by the [Manager/Managing Member/Members]. All withdrawals therefrom shall be made upon checks signed by the person or persons designated by the [Manager/Managing Member/Members].

13.4 Accountants. The [Manager/Managing Member/Members] shall select the accountants for the Company.

13.5 Expenses of Company. All direct expenses incurred in connection with conducting the Company’s business shall be billed to and paid by the Company or if paid by the [Manager/Managing Member/Members] or a Member, the [Manager/Managing Member/Members] such [Manager/Managing Member/Members] may be reimbursed for such direct expenses without interest.

14. ADJUSTMENT OF BASIS ELECTION.

573

In the event of a Transfer of any Membership Interest in the Company, or in the event of a distribution of the property of the Company to any Member hereto, the [Manager/Managing Member/Members] shall, at the request of the transferee Member, file an election, in accordance with Section 754 of the Code and applicable Treasury Regulations, to cause the basis of the Company’s property to be adjusted for federal income tax purposes, as provided in Sections 734, 743 and 754 of the Code.

15. WAIVER OF ACTION FOR PARTITION. Each of the Members hereby irrevocably waives, during the term of the Company, any right such Member may have to maintain any action for partition with respect to any property of the Company.

16. AMENDMENTS. Amendments to this Agreement may be made only if approved by a vote of [a Super-Majority/Majority In Interest of/all] the Members.

17.

EQUITABLE RELIEF. The rights granted to the parties hereunder are of a special and unique kind and character, and if there is a breach by any party of any material provision of this Agreement, the other parties would not have an adequate remedy at law. Therefore, the rights of the parties under this Agreement may

574

be enforced by equitable relief as is provided under the laws of the State of California.

18. NOTICES. Any and all notices, demands or other communications required or desired to be given hereunder by any party shall be in writing and shall be validly delivered to another party only if served either personally by overnight courier service, by facsimile transmission or if deposited in the United States first class mail, certified return receipt requested, postage prepaid at the address/facsimile numbers set forth on Exhibit A next to each Member’s name. If such notice, demand or other communication is served personally, service shall be conclusively deemed made at the time of such personal service. If such notice is sent by facsimile transmission or overnight courier service, service shall be conclusively deemed made at the time of written confirmation of receipt, if on or before 5:00 p.m. local time on a legal business day at the place of receipt, and if not, then on the next legal business day thereafter. If such notice, demand or other communication is given by mail, service shall be conclusively deemed made on the date shown on the return receipt. The address and facsimile number for delivery of notices, demands or other communications for each Member is set forth on Exhibit “A” next to each Member’s name. Any party hereto may change its address for the purpose of receiving notices, demands and other communications as herein provided by a written notice given in the manner aforesaid to the other party or parties hereto.

19. LEGAL REPRESENTATION. 575

EACH MEMBER REPRESENTS AND WARRANTS THAT SUCH MEMBER HAS BEEN ADVISED THAT SUCH MEMBER MAY BE REPRESENTED BY COUNSEL OF SUCH MEMBER’S OWN CHOOSING IN THE PREPARATION AND ANALYSIS OF THIS AGREEMENT AND EACH MEMBER HAS CONSENTED TO THE JOINT REPRESENTATION BY COUNSEL FOR ALL MEMBERS IN THE PREPARATION OF THIS AGREEMENT. EACH MEMBER HAS READ THIS AGREEMENT WITH CARE AND BELIEVES THAT SUCH MEMBER IS FULLY AWARE OF AND UNDERSTANDS THE CONTENTS THEREOF AND THEIR LEGAL EFFECT.

20. ATTORNEYS’ FEES. Should any party hereto institute any action or proceeding at law or in equity to enforce any provision hereof, including an action for declaratory relief or for damages by reason of an alleged breach of any provision of this Agreement, or otherwise in connection with this Agreement, or any provision hereof, the prevailing party shall be entitled to recover from the losing party or parties reasonable attorneys’ fees and costs for services rendered to the prevailing party in such action or proceeding.

576

21. INDEPENDENT ACTIVITIES OF MEMBERS. The Members and the [Manager] may engage in or possess an interest in other business ventures of every nature and description, independently or with others, including, but not limited to, the ownership, financing, leasing, operation, management, syndication, brokerage and development of real property or any other investment asset or venture, and neither the Company nor the other Members shall have, and each of them hereby expressly waives, relinquishes and renounces any right by virtue of this Agreement in and to such independent ventures or to the income or profits derived therefrom.

22. INVESTMENT REPRESENTATIONS OF THE MEMBERS. Each Member, by executing this Agreement, hereby acknowledges, covenants, represents and warrants to the Company and the other Members, and each of them, as follows:

22.1

Business Experience; Evaluation of Risks and Merits. That such Member is over the age of twenty-one (21) years, experienced in business affairs, and capable of evaluating the merits and risks of this investment.

577

22.2 Risks of Investment. Each Member realizes that such Member’s investment in the Company involves an element of substantial uncertainty as to the potential for profitability of the business of the Company.

22.3 Income Tax Matters. The Company has not requested a tax ruling on behalf of the Company to the effect that the Company will be taxed as a partnership for federal income tax purposes, nor does the Company intend to request such a ruling. In the absence of a ruling, there can be no assurance that the Internal Revenue Service will not deem the Company to be an association taxable as a corporation. In the event that the Company were taxed as a corporation rather than as a partnership, the Members would incur certain significant adverse income tax consequences.

22.4 Securities Matters. Each Member understands that the interests in the Company have not been registered with the Securities and Exchange Commission or qualified with the California Department of Corporations or any other state securities agency, in reliance upon exemptions therefrom which are predicated, in part, upon the information previously provided by each of the Members and the following representations:

(a) 578

Each Member understands that in addition to the restrictions imposed by applicable federal and state securities laws, the right to Transfer Interests is restricted by the terms of this Agreement. No Transfer will be permitted if, in the opinion of counsel for the Company, such Transfer will violate applicable federal or state securities laws. The burden and expense will be borne by a Member to satisfy the Company that all of the conditions of transfer have been satisfied. In addition, even if a Member meets all of these requirements, there is no present market for Interests and none is anticipated to develop;

(b) Each Member represents that such Member is acquiring such Member’s interest in the Company for investment purposes and for such Member’s own account, with no present intention of dividing the same with others, or reselling or otherwise distributing such interest, and such Member will not sell or otherwise dispose of such interest in violation of the Securities Act of 1933, as amended, the California Corporations Code, or regulations promulgated thereunder;

(c) Each Member represents that such Member is capable of bearing the economic risk of such Member’s investment in the Company (meaning such Member can afford either a complete loss of the investment or hold it indefinitely without materially adversely affecting such Member’s standard of living, causing financial difficulties, or impairing such Member’s ability to meet current needs and possible personal contingencies);

(d) Each Member represents that such Member either has a preexisting personal or business relationship with the other

579

Members, or by reason of such Member’s business or financial experience or the business or financial experience of such Member’s professional advisors who are unaffiliated with and not compensated by the any other Member, or any affiliate or any selling agent of any other Member, has the capacity to protect such Member’s interests in the Company;

(e) That prior to the execution hereof, each of the Members had knowledge that the persons listed upon Exhibit “A” would become members of the Company upon their execution hereof, and each desires and consents to the association of each of them as Members of this Company;

(f) Each Member recognizes that the Company will be newly organized and therefore has no financial or operating history. For this reason and others, purchase of Interests as an investment involves special risks; and

(g) Each Member is a bona-fide resident of the state in which the principal residence of such Member is located, as set forth on Exhibit “A” hereto.

23. MISCELLANEOUS. 23.1

Applicable Law.

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This Agreement shall, in all respects, be governed by the laws of the State of California applicable to agreements executed and to be wholly performed within the State of California.

23.2

Severability. Nothing contained herein shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provisions contained herein and any present or future statute, law, ordinance or regulation contrary to which the parties have no legal right to contract, the latter shall prevail; but the provision of this Agreement which is affected shall be curtailed and limited only to the extent necessary to bring it within the requirements of the law.

23.3 Further Assurances. Each of the parties hereto shall execute and deliver any and all additional papers, documents and other assurances, and shall do any and all acts and things reasonably necessary in connection with the performance of their obligations hereunder to carry out the intent of the parties hereto.

23.4 Successors and Assigns. All of the terms and provisions contained herein shall inure to the benefit of and shall be binding upon the parties hereto and their respective heirs, legal representatives, successors and assigns.

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23.5 Number and Gender. In this Agreement, the masculine, feminine or neuter gender, and the singular or plural number, shall each be deemed to include the others whenever the context so requires.

23.6

Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties with respect to its subject matter and any and all prior agreements, understandings or representations with respect to its subject matter are hereby terminated and canceled in their entirety and are of no further force or effect.

23.7 Waiver. A waiver of any provision of this Agreement shall be valid only if it is in writing and signed by the party making the waiver. No waiver by any party hereto of any breach of this Agreement or any provision hereof shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision hereof.

23.8 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but

582

all of which together shall constitute one and the same instrument.

23.9

Interpretation. The captions appearing at the commencement of the sections hereof are descriptive only and for convenience in reference.

23.10 Parties in Interest. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third person any right of subrogation or action over or against any party to this Agreement.

23.11 No Authority. No Member shall have the duty to inquire into the authority of another Member to act. All of the Members shall be presumed to have the authority to execute this Agreement and to carry out any acts contemplated hereby. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first hereinabove mentioned. ____________

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____________ ____________ ____________ ____________ ____________

Exhibit A MEMBERS NAME

ADDRESS

PARTICIPATION MEMBER’S PRIMARY PERCENTAGE CAPITAL MEMBER ACCOUNT

____________ ____________ ____________

____________ ____________

____________ ____________ ____________

____________ ____________

____________ ____________ ____________

____________ ____________

____________ ____________ ____________

____________ ____________

____________ ____________ ____________

____________ ____________

Exhibit B DESCRIPTION OF THE PROPERTIES Form No. 2.2.11.    California Single Member Limited Liability COMPANY OPERATING AGREEMENT OPERATING AGREEMENT OF ____________, LLC This Operating Agreement, effective ______ [date], is entered into by _________ (“Member”), as the Member, pursuant to the Act on the following terms and conditions.

1. 584

Organization. 1.1 Formation. On ______, the Articles of Organization was filed in the office of the Secretary of State of California in accordance with and pursuant to the Act.

1.2 Name and Place of Business. The name of the Company shall be _________, LLC, and its principal place of business shall be ____________. The Member may change such name, change such place of business or establish additional places of business of the Company as the Member may determine to be necessary or desirable.

1.3 Business and Purpose of the Company. The sole purpose of the Company is to (i) (insert specific business purpose), and (ii) transact any and all lawful business for which a limited liability company may be organized under the laws of the State of California that is incident, necessary and appropriate to accomplish the foregoing.

1.4 Term. The term of this Agreement shall be until the Company is dissolved as provided in this Agreement.

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1.5

Required Filings. The Member shall execute, acknowledge, file, record and/or publish such certificates and documents, as may be required by this Agreement or by law in connection with the formation and operation of the Company.

1.6 Registered Office and Registered Agent. The Company’s initial registered office and initial registered agent shall be as provided in the Articles of Organization. The registered office and registered agent may be changed from time to time by the Member by filing the address of the new registered office and/or the name of the new registered agent pursuant to the Act.

2. Definitions. The following capitalized terms are intended to have the meaning set forth below: “Act” shall mean the California Limited Liability Company Act, as the same may be amended from time to time. “Affiliate” shall mean (i) any person directly or indirectly controlling, controlled by or under common control with another person; (ii) a person owning or controlling 10% or more of the outstanding voting securities of such other person; (iii) any officer, director or partner of such other person; and (iv) if such other person is an officer, director or partner, any company for which such person acts in any capacity. The term “person” shall include any natural person,

586

corporation, partnership, trust, unincorporated association or other legal entity. “Agreement” shall mean this Operating Agreement, as amended from time to time. “Articles of Organization” shall mean the Articles of Organization of the Company as filed with the Secretary of State of California as the same may be amended or restated from time to time. “Company” shall refer to _________, LLC, a California limited liability company. “Member” shall refer to _________.

3.

Capitalization and Financing. Member shall make an initial capital contribution of $ ______. Member may, but shall have no obligation to, make additional capital contributions.

4. Allocation of Net Income and Net Loss. For each fiscal year, the Net Income and Net Loss of the Company shall be allocated to the Member.

5. Distributions. 5.1 Cash from Operations. 587

Distributable Cash from Operations with respect to each calendar year shall be distributed to the Member.

6.

Company Expenses. The Company shall pay directly, or reimburse the Member, as the case may be, for all of the costs and expenses of the Company’s operations.

7. Authority, and Responsibilities of the Member. 7.1 Management. The business and affairs of the Company shall be managed by its Member. The Member shall have full and complete authority, power and discretion to manage and control the business, affairs and properties 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.

7.2 Member Authority. The Member shall have all authority, rights and powers conferred by law and those required or appropriate to the management of the Company’s business, which, by way of illustration but not by way of limitation, shall include the right, authority and power to cause the Company to:

588

7.2.1 Take all actions as the sole member of the Company;

7.2.2 Acquire, hold, develop, lease, rent, operate, sell, exchange, subdivide and otherwise dispose of Property including the Project;

7.2.3 Borrow money, and, if security is required therefor, to pledge or mortgage or subject Property to any security device, to obtain replacements of any mortgage or other security device and to prepay, in whole or in part, refinance, increase, modify, consolidate, or extend any mortgage or other security device. All of the foregoing shall be on such terms and in such amounts as the Member, in its sole discretion, deems to be in the best interest of the Company;

7.2.4 Enter into such contracts and agreements as the Member determines to be reasonably necessary or appropriate in connection with the Company’s business and purpose (including contracts with Affiliates of the Member), and any contract of insurance that the Member deems necessary or appropriate for the protection of the Company and the Member, including errors and omissions insurance, for the conservation of Company assets, or for any purpose convenient or beneficial to the Company;

7.2.5 Employ persons, who may be Affiliates of the Member, in the operation and management of the business of the Company;

589

7.2.6 Prepare or cause to be prepared reports, statements, and other relevant information for distribution to the Member;

7.2.7 Open accounts and deposits and maintain funds in the name of the Company in banks, savings and loan associations, “money market” mutual funds and other instruments as the Member may deem in its discretion to be necessary or desirable;

7.2.8 Cause the Company to make or revoke any of the elections referred to in the Code;

7.2.9 Select as its accounting year a calendar or fiscal year as may be approved by the Internal Revenue Service;

7.2.10 Determine the appropriate accounting method or methods to be used by the Company;

7.2.11 Require in any Company contract that the Member shall not have any personal liability, but that the person or entity contracting with the Company is to look solely to the Company and its assets for satisfaction;

7.2.12 Lease personal property for use by the Company;

590

7.2.13 Establish reserves from income in such amounts as the Member may deem appropriate;

7.2.14 Make secured or unsecured loans to the Company and receive interest at the rates set forth herein;

7.2.15 Represent the Company as the “tax matters partner;”

7.2.16 Initiate legal actions, settle legal actions and defend legal actions on behalf of the Company;

7.2.17 Admit itself as a Member;

7.2.18 Perform any and all other acts which the Member is obligated to perform hereunder; and

7.2.19 Execute, acknowledge and deliver any and all instruments to effectuate the foregoing and take all such actions in connection therewith as the Member may deem necessary or appropriate. Any and all documents or instruments may be executed on behalf and in the name of the Company by the Member.

7.3 591

Tax Matters Member. The Member is hereby appointed to act as the “tax matters partner.”

7.4 Indemnification of Member. The Member, its shareholders, Affiliates, officers, directors, partners, employees, agents and assigns, shall not be liable for, and shall be indemnified and held harmless (to the extent of the Company’s assets) from, any loss or damage incurred by them, the Company or the Member in connection with the business of the Company, including costs and reasonable attorneys’ fees and any amounts expended in the settlement of any claims of loss or damage resulting from any act or omission performed or omitted.

7.5

No Personal Liability for Return of Capital. The Member shall not be personally liable or responsible for the return or repayment of all or any portion of the Capital Contribution of any Member of any loan made to the Company, it being expressly understood that any such return of capital or repayment of any loan shall be made solely from the assets (which shall not include any right of contribution from any Member) of the Company.

7.6 Authority as to Third Persons. 7.6.1 592

No third party dealing with the Company shall be required to investigate the authority of the Member. No purchaser of any property or interest owned by the Company shall be required to determine the right to sell or the authority of the Member to sign and deliver any instrument of transfer on behalf of the Company, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith.

7.6.2 The Member shall have full authority to execute on behalf of the Company any and all agreements, contracts, conveyances, deeds, mortgages and other instruments, and the execution thereof by the Member executing on behalf of the Company shall be the only execution necessary to bind the Company thereto.

8.

Assignment of the Member’s Interest. The Member may sell, assign, hypothecate, encumber or otherwise transfer all or any part of its interest in the Company.

9. Records, Audits and Reports. The Company shall maintain at its principal office the Company’s records and accounts of all operations and expenditures of the Company including the following:

9.1

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A current list in alphabetical order of the full name and last known business or resident address of the Member, together with the Capital Contribution and the share in profits and losses of the Member;

9.2 A copy of the Articles of Organization and all amendments thereto, together with any powers of attorney pursuant to which the Articles of Organization or any amendments thereto were executed;

9.3 Copies of the Company’s Federal, state, and local income tax or information returns and reports, if any, for the six most recent taxable years;

9.4 Copies of this Agreement and any amendments thereto together with any powers of attorney pursuant to which any written accounting or any amendments thereto were executed;

9.5 Copies of any financial statements of the Company, if any, for the six most recent years; and

9.6 The Company’s books and records as they relate to the internal affairs of the Company for at least the current and past four fiscal years.

10.

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Termination and Dissolution of the Company. 10.1 Termination of Company. The Company shall be dissolved, shall terminate and its assets shall be disposed of, and its affairs wound up upon the earliest to occur of the following:

10.1.1 or

A determination by the Member to terminate the Company;

10.1.2 The expiration of the term of the Company.

10.2 Certificate of Dissolution and Cancellation. As soon as possible following the occurrence of any of the events specified in Section 13.1, the Manager shall execute a Certificate of Dissolution in such form as shall be prescribed by the California Secretary of State and file the Certificate as required by the Act. Upon the completion of the winding up of the affairs of the Company, the Manager shall file a Certificate of Cancellation of Articles of Organization.

10.3 Liquidation of Assets. Upon a dissolution and termination of the Company, the Member shall take full account of the Company assets and liabilities, shall liquidate the assets as promptly as is

595

consistent with obtaining the fair market value thereof, and shall apply and distribute the proceeds therefrom in the following order:

10.3.1 To the payment of creditors of the Company, including the Member, but excluding secured creditors whose obligations will be assumed or otherwise transferred on the liquidation of Company assets;

10.3.2 To the setting up of any reserves as required by law for any contingent liabilities or obligations of the Company; provided, however, that said reserves shall be deposited with a bank or trust company in escrow at interest for the purpose of disbursing such reserves for the payment of any of the aforementioned contingencies and, at the expiration of a reasonable period, for the purpose of distributing the balance remaining in accordance with remaining provisions of this Section 10.3; and

10.3.3 Any remaining amount to the Member.

11.

Relationship of This Agreement to the Act. Many of the terms of this Agreement are intended to alter or extend provisions of the Act as they may apply to the Company or the Member. Any failure of this Agreement to mention or specify the relationship of such terms to provisions of the Act that may affect the scope or application of such terms shall not be construed to mean that any of

596

such terms is not intended to be an operating agreement provision authorized or permitted by the Act or which in whole or in part alters, extends or supplants provisions of the Act as may be allowed thereby.

12. Miscellaneous. 12.1

Counterparts. This Agreement may be executed in several counterparts, and all so executed shall constitute one Agreement, binding on all of the parties hereto, notwithstanding that all of the parties are not signatory to the original or the same counterpart.

12.2 Successors and Assigns. The terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the Member.

12.3 Severability. In the event any sentence or Section of this Agreement is declared by a court of competent jurisdiction to be void, such sentence or Section shall be deemed severed from the remainder of this Agreement and the balance of this Agreement shall remain in full force and effect.

597

12.4 Notices. All notices under this Agreement shall be in writing and shall be given to the Member by personal service or by mail, posted to the address maintained by the Company for such person or at such other address as he may specify in writing.

12.5 Member’s Address. The name and address of the Member is as follows: ____________ ____________ ____________

12.6

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

12.7 Captions. Section titles or captions contained in this Agreement are inserted only as a matter of convenience and reference. Such titles and captions in no way define, limit, extend or describe the scope of this Agreement nor the intent of any provisions hereof.

12.8 598

Gender. Whenever required by the context hereof, the singular shall include the plural, and vice versa, the masculine gender shall include the feminine and neuter genders, and vice versa.

12.9 Time. Time is of the essence with respect to this Agreement.

12.10 Additional Documents. Each Member shall perform any further acts and execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement, including, but not limited to, providing acknowledgment before a Notary Public of any signature made by a Member.

12.11

Descriptions. All descriptions referred to in this Agreement are expressly incorporated herein by reference as if set forth in full, whether or not attached hereto.

12.12 Venue. Any Action relating to or arising out of this Agreement shall be brought only in a court of competent jurisdiction located in San Diego, California.

599

12.13 Partition. The Member agrees that the assets of the Company are not and will not be suitable for partition. Accordingly, the Member hereby irrevocably waives any and all rights that he may have, or may obtain, to maintain any action for partition of any of the assets of the Company.

12.14

Integrated and Binding Agreement. This Agreement contains the entire understanding and agreement of the Member. IN WITNESS WHEREOF, the undersigned have set their hands to this Agreement as of the date first set forth in the preamble. MEMBER: ____________, a ____________ corporation By: ____________ Its: _________

Form No. 2.2.12.    Basic Form of Nevada Member Managed Limited Liability  Company Agreement

600

OPERATING AGREEMENT FOR ________, LTD. A NEVADA LIMITED LIABILITY COMPANY This Operating Agreement (this “Agreement”) is made as of ________, by ________ (the “Member,” or collectively with other members, if any, the “Members”), with reference to the following facts.

A. The Member will cause to be filed Articles of Organization (the “Articles”) for ________ (the “Company”), a limited liability company under the laws of the State of Nevada, with the Nevada Secretary of State.

B. The Members desire to adopt and approve an operating agreement for the Company under Chapter 86 of Nevada Revised Statutes (the “Act”). NOW, THEREFORE, the Members by this Agreement set forth the operating agreement for the Company upon the terms and subject to the condition of this Agreement.

ARTICLE I. ORGANIZATIONAL MATTERS 1.1 Name. The name of the Company shall be “________, Ltd.” The Company may conduct business under that name or any other name approved by the Members.

601

1.2 Term. The term of the Company commenced as of the date of the filling of the Articles and, unless sooner terminated under Section 9.1, shall terminate on ________.

1.3

Office and Agent. The Company shall continuously maintain an office and registered agent in the State of Nevada as required by the Act. The principal office of the Company shall be at ________, or such location as the Members may determine. The registered agent shall be as stated in the Articles or as otherwise determined by the Members.

1.4 Business of the Company. The Company may transact or engage in any business that may be conducted in limited liability company form and engage in such other activities relating to or incidental as are reasonable opinion of the Members to further such business.

ARTICLE II. CAPITAL CONTRIBUTIONS 2.1 Capital Contributions. The initial Member shall make a contribution to the capital of the Company as shown on Exhibit A attached hereto. Additional contributions to the capital of the Company shall

602

be made only with the unanimous consent of the Members. Except as provided in this Agreement, no Member may withdraw his or her capital contribution.

2.2

Capital Accounts. The Company shall establish an individual capital account (“Capital Account”) for each Member. The Company shall determine and maintain each Capital Account. Upon a valid transfer of a Member’s interest in the Company (“Membership Interest”), such Member’s Capital Account shall carry over to the new owner.

2.3 No Interest. The Company shall not pay any interest on capital contributions.

ARTICLE III. MEMBERS 3.1 Admission of Additional Members. Additional Members may be admitted with the approval of all Members. Additional Members will participate in the management, “Net Profits,” “Net Losses” (as such terms are defined in Section 5.1), and distributions of the Company on such terms as are determined by the Members. Exhibit A shall be amended upon the admission of an additional Member to set forth such Member’s name and capital contribution.

603

3.2

Withdrawals or Resignations. No Member may withdraw, retire or resign from the Company.

3.3 Payments to Members. The Company shall reimburse the Members and their Affiliates to the extent approved by the Members for (i) organizational expenses (including, without limitation, legal and accounting fees and costs) incurred on behalf of the Company, including but not limited to the preparation of the Articles and this Agreement, and (ii) the actual cost of goods and materials used by the Company.

ARTICLE IV. MANAGEMENT AND CONTROL OF THE COMPANY 4.1 Management and Powers. In entering into this Agreement, the intent of each Member is to actively engage in the management of the Company. Accordingly, unless otherwise limited by the Articles or this Agreement, each Member shall have the full, complete or 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.

604

4.2

Member Approval. No annual or regular meetings of the Members are required to be held. However, if such meetings are held, such meetings shall be noticed, held and conducted pursuant to the Act. In any instance in which the approval of the Members is required under this Agreement, such approval may be obtained in any manner permitted by the Act. Unless otherwise provided in this Agreement, approval of the Members shall mean the approval of Members who hold a majority of the Membership Interests.

4.3 Devotion of Time. Each Member shall devote whatever time or effort as he or she deems appropriate for the furtherance of the Company’s business.

4.4 Competing Activities. The Members and officers, agents, trustees, beneficial interest holders and other related parties (“Affiliates”) may engage or invest in any activity, including without limitation those 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 activities or to the income or proceeds derived therefrom. No Member shall be obligated to present any investment opportunity to the Company, even if the opportunity is of the character that, if presented to the Company, could be taken by the Company. Each Member shall have the right to hold any investment opportunity for his

605

or her own account or to recommend such opportunity to persons other than the Company. The Members acknowledge that certain Members and their Affiliates own and/or manage other businesses, including businesses that may compete with the Company and for the Member’s time. Each Member hereby waives any and all rights and claims which he or she may otherwise have against other Members and their Affiliates as a result of any of such activities.

4.5

Transactions Between the Company and the Members. Notwithstanding that it may constitute a conflict of interest, the Members and their Affiliates may engage in any transaction with the Company so long as such transaction is not expressly prohibited by this Agreement and so long as the terms and conditions of such transaction, on an overall basis, are fair and reasonable to the Company and are at least as favorable to the Company as those that are generally available from persons capable of similarly performing them or if Members holding a majority of the Membership Interests held by the Members having no interest in such transaction (other than their interests as Members) approve the transaction in writing.

4.6 Officers. A. Appointment of Officers. The Members may appoint officers at any time. The officers of the Company, if deemed necessary by the Members, may include a chairperson, president, vice president, secretary, and chief financial officer. The officers shall serve at the pleasure of the Members,

606

subject to all rights, if any, of an officer under any contract of employment. Any individual may hold any number of offices. No officer need be a resident of the State of Nevada or citizen of the United States. If a Member is not an individual, such Member’s officers may serve as officers of Company only if elected by the Members. The officers shall exercise such powers and perform such duties as specified in this Agreement and as shall be determined from time to time by the Members. B. Removal, Resignation and Filling of Vacancy of Officers. Subject to the rights, if any, of an officer under a contract of employment, any officer may be removed, either with or without cause, by the Members at any time.

Any officer may resign at any time by giving written notice to the Members. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in this Agreement for regular appointments to that office. C. Salaries of Officers. The salaries of all officers and agents of the Company shall be fixed by a resolution of the Members. D. Duties and Powers of the Chairperson. The chairperson, if such an officer be appointed, shall, if present, preside at meetings of the Members, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Members or prescribed by this Agreement. If

607

there is no president, the chairperson shall in addition be the chief executive officer of the Company and shall have the powers and duties prescribed in Section E. E. Duties and Powers of the President. Subject to such supervisory powers, if any, as may be given by the Members to the chairperson, if there be such an officer, the president shall be the chief executive officer of the Company, and shall, subject to the control of the Members, have general and active management of the business of the Company and shall see that all orders and resolutions of the Members are carried into effect. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Members or this Agreement. The Members or the president shall execute leases, financing statements, bonds, mortgages and other contracts requiring a seal, under the seal of the Company, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Members to some other officer or agent of the Company. If “co-presidents” shall be appointed by the Members, each of the co-presidents shall separately have all of the powers of the president. F. Duties and Powers of Vice-President. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by a resolution of the Members, shall, in the absence or incapacity of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the Members by resolution may from time to time prescribe. G. Duties and Powers of Secretary. The secretary shall attend all meetings of the Members, and shall record all the

608

proceedings of the meetings in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. The secretary shall give, or cause to be given, notice of all meetings of the Members and shall perform such other duties as may be prescribed by the Members. The secretary shall have custody of the seal, if any, and the secretary shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his signature. The Members may give general authority to any other officer to affix the seal of the Company, if any, and to attest the affixing by his signature. The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Company’s transfer agent or registrar, as determined by resolution of the Members, a register, or a duplicate register, showing the names of all Members and their addresses, their Percentage Interests, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall also keep all documents relating to the ownership and operation of the Company and such documents as may be required under the Act. The secretary shall perform such other duties and have such other authority as may be prescribed elsewhere in this Agreement or from time to time by the Members. The secretary shall have the general duties, powers and responsibilities of a secretary of a corporation. If the Members choose to appoint an assistant secretary or assistant secretaries, the assistant secretaries, in the order of their seniority, in the absence, disability or inability to act of the secretary, shall perform the duties and exercise the powers of the secretary, and shall perform such other duties as the Members may from time to time prescribe. H. Duties and Powers of Chief Financial Officer. The chief financial officer shall keep and maintain, or cause to be kept

609

and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Company, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, and Membership Interests. The books of account shall at all reasonable times be open to inspection by any Member. The chief financial officer shall have the custody of the funds and securities of the Company, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company, and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Members. The chief financial officer shall disburse the funds of the Company as may be ordered by the Members, taking proper vouchers for such disbursements, and shall render to the president and the Members, at their regular meetings, or when Members so require, at a meeting of the members, an account of all his transactions as treasurer and of the financial condition of the Company. The chief financial officer shall perform such other duties and shall have such other responsibility and authority as may be prescribed elsewhere in this Agreement or from time to time by the Members. The chief financial officer shall have the general duties, powers and responsibility of a chief financial officer of a corporation, and shall be the chief financial and accounting officer of the Company. If the Members choose to elect an assistant treasurer or assistant treasurers, the assistant treasurers in the order of their seniority shall, in the absence, disability or inability to act of the chief financial officer, perform the duties and exercise the powers of the chief financial officer, and shall

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perform such other duties as the Members shall from time to time prescribe. I. Acts of Officers as Conclusive Evidence of Authority. Any note, mortgage, evidence of indebtedness, contract, certificate, statement, conveyance, or other instrument in writing, and any assignment or endorsement thereof, executed or entered into between the Company and any other person, when signed by the chairperson, the president or any vice president and any secretary, any assistant secretary, the chief financial officer, or any assistant treasurer of the Company, is not invalidated as to the Company by any lack of authority of the signing officers in the absence of actual knowledge on the part of the other person that the signing officers had no authority to execute the same.

J. Signing Authority of Officers and Members. Subject to any restrictions imposed by the Members, any officer, acting alone, is authorized to endorse checks, drafts, and other evidences of indebtedness made payable to the order of the Company, but only for the purpose of deposit into the Company’s accounts. All checks, drafts, and other instruments obligating the Company to pay money in an amount of less than $5,000 may be signed by any one officer acting alone or any Member. All checks, drafts, and other instruments obligating the Company to pay money in an amount of $5,000 or more must be signed on behalf of the Company by any Member, or an officer designated in writing by any Member. Only a Member or an officer designated in writing by a Member shall be authorized to sign contracts and obligations on behalf of the Company. K. Initial Officers. Without limiting the foregoing provisions regarding the appointment of officers, and without limiting the ability of the Members to appoint or remove officers, the following shall apply with respect to the initial officers of the Company, who shall, absent action by the Members, serve as

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stated below without having to be specifically appointed by action of the Members: ________________ shall serve as initial co-presidents of the Company, and references herein to the “president” shall be deemed to include either of the co-presidents. In the event that one of them is unable or unwilling to serve as copresident as a result of death, incapacity or other cause, the other shall serve as sole president. In the event that both of them are unable or unwilling to serve as sole president as a result of death, incapacity or other cause, ________ shall serve as sole president. ________________ shall serve as the initial vice presidents of the Company. ________ shall serve as the initial chief financial officer and secretary of the Company. For purposes of this Agreement, “incapacity” shall be established by the written opinion of two licensed treating physicians not related by blood or marriage to any Member or officer, trustee of a Member or controlling or managing person of a Member. A formal adjudication of incompetence by a court shall not be required.

ARTICLE V. ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS 5.1 Definitions. When used in this Agreement, the following terms shall have the meanings set forth below: “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, the provisions succeeding law,

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and to the extent applicable, the Treasury Regulations. “Company Minimum Gain” shall have the meaning ascribed to the term “Partnership Minimum Gain” in the Treasury Regulations Section 1.704-2(d).

“Member Nonrecourse Debt” shall have the meaning ascribed to the term “Partner Nonrecourse Debt” in Treasury Regulations Section 1.704-2(b)(4). “Member Nonrecourse Deductions” shall mean items of Company loss, deduction or Code Section 705(a)(2)(B) expenditures which are attributable to Member Nonrecourse Debt. “Net Profits” and “Net Losses” shall mean the income, gain, loss, deductions and credits of the Company in the aggregate or separately stated, as appropriate, determined in accordance with the method of accounting at the close of each fiscal year employed on the Company’s information tax return filed for federal income tax purposes. “Nonrecourse Liability” shall have the meaning set forth in Treasury Regulations Section 1.752-1(a)(2). “Treasury Regulations” shall mean the final or temporary regulations that have been issued by the U.S. Department of the Treasury pursuant to its authority under the Code, and any successor regulations.

5.2 Allocations of Net Profit and Net Loss. A. Net Loss. Net Loss shall be allocated to the Members in proportion to their Membership Interests. Notwithstanding the previous sentence, loss allocations to a Member shall be made only to the extent that such loss allocations will not create a deficit Capital Account balance for that Member in

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excess of an amount, if any, equal to such Member’s share of the Company Minimum Gain. Any loss not allocated to a Member because of the foregoing provision shall be allocated to the other Members (to the extent the other Members are not limited in respect of the allocation of losses under this Section 5.2.A). Any loss reallocated under this Section 5.2.A shall be taken into account in computing subsequent allocations of income and loss pursuant to this Article V, so that the net amount of any item so allocated and the income and losses allocated to each Member pursuant to this Article V, to the extent possible, shall be equal to the net amount that would have been allocated to each such Member pursuant to this Article V if no reallocation of losses had occurred under this Section 5.2.A. B. Net Profit. Net Profit shall be allocated to the Members in proportion to their Membership Interests.

5.3

Special Allocations. Notwithstanding Section 5.2, A. Minimum Gain Chargeback. If there is a net decrease in Company Minimum Gain during any fiscal year, each Member shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, in subsequent fiscal years) in an amount equal to the portion of such Member’s share of the net decrease in Company Minimum Gain that is allocable to the disposition of Company property subject to a Nonrecourse Liability, which share of such net decrease shall be determined in accordance with Treasury Regulations Section 1.704-2(g)(2). Allocations pursuant to this Section 5.3.A shall be made in proportion to the amounts required to be allocated to each Member under this Section 5.3.A. The items to be so allocated shall be determined in

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accordance with Treasury Regulations Section 1.704-2(f). This Section 5.3.A is intended to comply with the minimum gain chargeback requirement contained in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. B. Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt.

If there is a net decrease in Company Minimum Gain attributable to a Member Nonrecourse Debt, during any fiscal year, each member who has a share of the Company Minimum Gain attributable to such Member Nonrecourse Debt (which share shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(5)) shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, in subsequent fiscal years) in an amount equal to that portion of such Member’s share of the net decrease in Company Minimum Gain attributable to such Member Nonrecourse Debt that is allocable to the disposition of Company property subject to such Member Nonrecourse Debt (which share of such net decrease shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(5)). Allocations pursuant to this Section 5.3.B shall be made in proportion to the amounts required to be allocated to each Member under this Section 5.3.B. The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(4). This Section 5.3.B is intended to comply with the minimum gain chargeback requirement contained in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith. C. Nonrecourse Deductions. Any nonrecourse deductions (as defined in Treasury Regulations Section 1.704-2(b)(1)) for any fiscal year or other period shall be specially allocated to the Members in proportion to their Membership Interests.

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D. Member Nonrecourse Deductions. Those items of Company loss, deduction or Code Section 705(a)(2)(B) expenditures which are attributable to Member Nonrecourse Debt for any fiscal year or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such items are attributable in accordance with Treasury Regulations Section 1.704-2(i). E. Qualified Income Offset. If a Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) (4), (5) or (6), or any other event creates a deficit balance in such Member’s Capital Account in excess of such Member’s share of Company Minimum Gain, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such excess deficit balance as quickly as possible. Any special allocations of items of income and gain pursuant to this Section 5.3.E shall be taken into account in computing subsequent allocations of income and gain pursuant to this Article V so that the net amount of any item so allocated and the income, gain and losses allocated to each Member pursuant to this Section 5.3.E to the extent possible, shall be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of this Article V if such unexpected adjustments, allocations or distributions had not occurred.

5.4 Allocations. Notwithstanding any other provision in this Article V, in accordance with Code Section 704(c) and the Treasury Regulations promulgated thereunder, income, gain, loss and deduction with respect to any property contributed to the

616

capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value on the date of contribution. Allocations pursuant to this Section 5.4 are solely for purposes of federal, state and local taxes. As such, they shall not affect or in any way be taken into account in computing a Member’s Capital Account or share of profits, losses or other items of distributions pursuant to any provision of this Agreement.

5.5

Distribution of Assets by the Company. Subject to applicable law and any limitations contained elsewhere in this Agreement, Members holding a majority of the Membership Interests may elect from time to time to cause the Company to make distributions. Distributions shall be first to the Members in proportion to their unreturned capital contributions until each Member has recovered his or her capital contributions, and then to the Members in proportion to their Membership Interests.

ARTICLE VI. TRANSFER AND ASSIGNMENT OF INTERESTS 6.1 Transfer and Assignment of Interests. No Member shall be entitled to transfer, assign, convey, sell, encumber or in any way alienate all or any part of his or her Membership Interest (collectively, “transfer”) except with the prior approval of all Members, which approval may be given or withheld in the sole discretion of the Members.

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6.2 Substitution of Members. A transferee of a Membership Interest shall have the right to become a substitute Member only if (i) consent of the Members is given in accordance with Section 6.1, (ii) such person executes an instrument satisfactory to the Members accepting and adopting the terms and provisions of this Agreement, and (iii) such person pays any reasonable expenses in connection with his or her admission as a New Member. The admission of a substitute Member shall not release the Member who assigned the Membership Interest from any liability that such Member may have to the Company.

6.3

Transfers in Violation of this Agreement and Transfers of Partial Membership Interests. Upon a transfer in violation of this Article VI, the transferee shall have the right to vote or participate in the management of the Company or to exercise any rights of a Member. Such transferee shall only be entitled to receive the share of the Company’s Net Profits, Net Losses and distributions of the Company’s assets to which the transferor would otherwise be entitled. Notwithstanding the immediately preceding sentences, if, in the determination of the remaining Members, a transfer in violation of this Article VI would cause the termination of the Company under the Code, in the sole discretion of the remaining Members, the transfer shall be null and void.

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ARTICLE VII. CONSEQUENCES OF DISSOLUTION EVENTS AND TERMINATION OF MEMBERSHIP INTEREST 7.1 Dissolution Event. Upon the occurrence of the death, withdrawal, resignation, retirement, insanity, bankruptcy or dissolution of any Member (“Dissolution Event”), the Company shall dissolve unless all of the remaining Members (“Remaining Members”) consent within ninety (90) days of the Dissolution Event to the continuation of the business of the Company. If the Remaining Members so consent, the Company and/or the Remaining Members shall have the right to purchase, and if such right is exercised, the Member (or his or her legal representative) whose actions or conduct resulted in the Dissolution Event (“Former Member”) shall sell, the Former Member’s Membership Interest (“Former Member’s Interest”) as provided in this Article VII.

7.2 Withdrawal. Notwithstanding Section 7.1, upon the withdrawal by a Member in accordance with Section 3.2 such Member shall be treated as a Former Member, and, unless the Company dissolves as a result of such withdrawal, the Company and/or the Remaining Members shall have the right to purchase, and if such right is exercised, the Former Member shall sell, the Former Member’s Interest as provided in this Article VII.

619

7.3 Purchase Price. The purchase price for the Former Member’s Interest shall be the fair market value of the Former Member’s Interest as determined by an independent appraiser jointly selected by the Former Member and by Remaining Members holding a majority of the remaining Membership Interests. The Company and the Former Member shall each pay one-half of the cost of the appraisal. Notwithstanding the foregoing, if the Dissolution Event results from a breach of this Agreement by the Former Member, the purchase price shall be reduced by an amount equal to the damages suffered by the Company or the Remaining Members as a result of such breach.

7.4 Notice of Intent to Purchase. Within thirty (30) days after the fair market value of the Former Member’s Interest has been determined in accordance with Section 7.3, each Remaining Member shall notify the Members in writing of his or her desire to purchase a portion of the Former Member’s Interest. The failure of any Remaining Member to submit a notice within the applicable period shall constitute an election on the part of the Member not to purchase a portion of the Former Member’s Interest in the same proportion that the Membership Interest of the Remaining Member bears to the aggregate of the Membership Interests of all of the Remaining Members electing to purchase the Former Member’s Interest.

7.5

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Election to Purchase Less Than All of the Former Member’s Interest. If any Remaining Member elects to purchase none or less than all of his or her pro rata share of the Former Member’s Interest, then the Remaining Members can elect to purchase more than their pro rata share. If the Remaining Members fail to purchase the entire interest of the Former Member, the Company may purchase any remaining share of the Former Member’s Interest. Any purchase of a Former Member’s Interest must be the entire interest.

7.6

Payment of Purchase Price. The Company or the Remaining Members, as the case may be, shall pay at the closing one-fifth (1/5) of the purchase price and the balance of the purchase price shall be paid in four equal annual principal installments, and be payable each year on the anniversary date of the closing. The unpaid principle balance shall accrue interest at the current applicable federal rate as provided in the Code for the month in which the initial payment is made, but the Company and the Remaining Members shall have the right to prepay in full or in part any time without penalty. The obligation of each purchasing Remaining Member, and the Company, as applicable, to pay its portion of the balance due shall be evidenced by a separate promissory note executed by the respective purchasing Remaining Member or the Company, as applicable. Each such promissory not shall be in an original principal amount equal to the portion owed by the respective purchasing Remaining Member or the Company, as applicable. The promissory note executed by each purchasing Remaining Member shall be secured by a pledge of that

621

portion of the Former Member’s Interest purchased by such Remaining Member.

7.7

Closing of Purchase of Former Member’s Interest. The closing for sale of a Former Member’s Interest pursuant to this Article VII shall be held at 10:00 a.m. at the principal office of Company no later than sixty (60) days after the determination of the purchase price, except that if the closing date falls on a Saturday, Sunday, or Nevada legal holiday, then the closing shall be held on the next succeeding business day. At the closing, the Former Member shall deliver to the Company or the Remaining Members an instrument of transfer (containing warranties of title and no encumbrance) conveying the Former Member’s Interest. The Former Member, the Company and the Remaining Members shall do all things and execute and deliver all papers as may be reasonably necessary fully to consummate such sale and purchase in accordance with the terms and provisions of this Agreement.

ARTICLE VIII. ACCOUNTING, REPORTING BY MEMBERS

RECORDS,

8.1 Books and Records. The books and records of the Company shall be kept with the accounting methods followed for federal income tax purposes. The Company shall maintain at its principal office in California all of the following:

622

A. A current list of the full name and last known business or residence address of each Member set forth in alphabetical order, together with the capital contributions, capital account and Membership Interest of each Member; B. A copy of the Articles and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which the Articles or any amendments thereto have been executed; C. Copies of the Company’s federal, state, and local income tax or information returns and reports, if any, for the six (6) most recent taxable years; D. A copy of this Agreement and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have been executed; E. Copies of the financial statements of the Company, if any, for the six (6) most recent fiscal years; and F. The Company’s books and records a they relate to the internal affairs of the Company for at least the current and past four (4) fiscal years.

8.2

Reports. The Company shall cause to be filed, in accordance with the Act, all reports and documents required to be filed with any governmental agency. The Company shall cause to be prepared at least annually information concerning the Company’s operations necessary for the completion of the Members’ federal and state income tax returns. The Company shall send or cause to be sent to each Member within ninety (90) days after the end of each taxable year (i) such

623

information as is necessary to complete the Member’ federal and state income tax returns and (ii) a copy of the Company’s federal, state, and local income tax or information returns for the year.

8.3

Tax Matters for the Company. ________, is designated as “Tax Matters Partner” (as defined in Code Section 6231), to represent the Company (at the Company’s expense)in connection with all examination of the Company’s affairs by tax authorities and to expend Company funds for professional services and costs associated therewith.

ARTICLE IX. DISSOLUTION AND WINDING UP 9.1 Conditions of Dissolution. The Company shall dissolve upon the occurrence of any of the following events: A. Upon the happening of any event of dissolution specified in the Articles; B. Upon the entry of a decree of judicial dissolution pursuant to Section 17351 of the Corporations Code; C. Upon the vote of Members holding at least sixty-six and two-thirds percent (66 2/3%) of the Membership Interests; D. The occurrence of a Dissolution Event and the failure of the Remaining Members in consent in accordance with

624

Section 7.1 to continue the business of the Company within ninety (90) days after the occurrence of such event; or E. The sale of all or substantially all of the assets of the Company.

9.2

Winding Up. Upon the dissolution of the Company, the Company’s assets shall be disposed of and its affairs wound up. The Company shall give written notice of the commencement of the dissolution to all of its known creditors.

9.3 Order of Payment of Liabilities Upon Dissolution. After determining that all known debts and liabilities of the Company have been paid or adequately provided for, the remaining assets shall be distributed to the Member in accordance with their positive capital account balances, after taking into account income and loss allocations for the Company’s taxable year during which liquidation occurs.

9.4 Limitations on Payments Made in Dissolution. Except as otherwise specifically provided in this Agreement, each Member shall be entitled to look only to the assets of the Company for the return of his or her positive Capital Account balance and shall have no recourse for his or her Capital Contribution and/or share of Net Profits against any other Member except as provided in Article X.

625

9.5 Certificates. The Company shall file with the Nevada Secretary of State a Certificate of Dissolution upon the dissolution of the Company and a Certificate of Cancellation upon the completion of the winding up of the Company’s affairs.

ARTICLE X. INDEMNIFICATION 10.1

Indemnification of Agents. The Company shall indemnify any Member and may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a Member, officer, employee or other agent of the Company or that, being or having been such a Member, officer, employee or agent, he or she is or was serving at the request of the Company as a manager, director, officer, employee or other agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to hereinafter a “agent”), to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit.

ARTICLE XI. REPRESENTATIONS

INVESTMENT

Each member hereby represents and warrants to, and agrees with, the Members and the Company as follows:

626

11.1

Preexisting Relationship or Experience. He or she has a preexisting personal or business relationship with the Company or one or more of its officers or controlling persons, or by reason of his or her business or financial experience, or by reason of the business or financial experience of his or her financial advisor who is unaffiliated with and who is not compensated, directly or indirectly, by the Company or any affiliate or selling agent of the Company, he or she is capable of evaluating the risks and merits of an investment in Company and of protecting his or her own interests in connection with this investment.

11.2 No Advertising. He or she has not seen, received, been presented with, or been solicited by any leaflet, public promotional meeting, article or any other form of advertising or general solicitation with respect to the sale of the Membership Interest.

11.3 Investment Intent. He or she is acquiring the Membership Interest for investment purposes for his or her own account only and not with a view to or for sale in connection with any distribution of all or any part of Membership Interest. No other person will have any direct or indirect beneficial interest in or right to the Membership Interest.

ARTICLE XII. MISCELLANEOUS 627

12.1

Counsel to the Company. Counsel to the Company may also be counsel to any Member or any Affiliate of a Member. The Members may execute on behalf of the Company and the Members any consent to the representation of the Company that counsel may request pursuant to the California Rules of Professional Conduct or similar rules in any other jurisdiction (“Rules”). The Company has initially selected ________ (“Company Counsel”) as legal counsel to the Company. Each Member acknowledges that Company Counsel does not represent any Member in the absence of a clear and explicit agreement to such effect between the Member and Company counsel, and that in the absence of any such written agreement Company Counsel shall owe no duties directly to a Member. Notwithstanding any adversity that may develop, in the event any dispute or controversy arises between any Members and the Member in any such dispute or controversy arises between any Members and the Company, then each Member agrees that Company Counsel may represent either the Company or such Member in any such dispute or controversy to the extent permitted by the Rules, and each Member hereby consents to such representation.

12.2 Complete Agreement. This Agreement and the Articles constitute the complete and exclusive statement of agreement among the Members with respect to the subject matter herein and therein and replace and supersede all prior written and oral agreements among the Members. To the extent that any provision of the

628

Articles conflict with any provision of this Agreement, the Articles shall control.

12.3

Binding Effect. Subject to the provisions of this Agreement relating to transferability, this Agreement will be binding upon and inure to the benefit of the Members, and their respective successors and assigns.

12.4 Interpretation. All pronouns shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the interpretation of any provision of this Agreement. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement unless otherwise expressly stated. In the event any claim is made by any Member relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular Member or his or her counsel.

12.5 Jurisdiction. Each Member hereby consents to the exclusive jurisdiction of the state and federal courts sitting in California in any

629

action on a claim arising out of, under or in connection with this Agreement or the transactions contemplated by this Agreement. Each Member further agrees that personal jurisdiction over him or her may be effected by service of process by registered or certified mail addressed as provided in Section 12.8 of this Agreement, and that when so made shall be as if served upon him or her personally within the State of Nevada.

12.6 Arbitration. Except as otherwise provided in this Agreement, any controversy between the parties arising out of this Agreement shall be submitted to the American Arbitration Association for arbitration in ________. The costs of the arbitration, including any American Arbitration Association administrative fee, the arbitrator’s fee, and costs for the use of facilities during the hearings, shall be borne equally by the parties to the arbitration. Attorneys’ fees may be awarded to the prevailing or most prevailing party at the discretion of the arbitrator. The arbitrator shall not have any power to alter, amend, modify or change any of the terms of this Agreement nor to grant any remedy which is either prohibited by the terms of this Agreement, or not available in a court of law.

12.7

Severability. If any provision of this Agreement or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid shall not be affected thereby.

630

12.8 Notices. Any notice to be given or to be served upon the Company or any party hereto in connection with this Agreement must be in writing (which may include facsimile) and will be deemed to have been given and received when delivered to the address specified by the party to receive the notice. Such notices will be given to a Member at the address specified in Exhibit A hereto. Any party may, at any time by giving five (5) days’ prior written notice to the other Members, designate any other address in substitution of the foregoing address to which such notice will be given.

12.9 Amendments. All amendments to this Agreement will be in writing and signed by all of the Members.

12.10

Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

12.11 Attorney Fees. In the event that any dispute between the Company and the Members or among the Members should result in litigation or arbitration, the prevailing party in such dispute

631

shall be entitled to recover from the other party all reasonable fees, costs and expenses of enforcing any right of the prevailing party, including without limitation, reasonable attorneys’ fees and expenses, all of which shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. Any judgment or order entered in such action shall contain a specific provision providing for the recovery of attorney fees and costs incurred in enforcing such judgment and an award of prejudgment interest from the date of the breach at the maximum rate allowed by law. For the purposes of this Section: (a) attorney fees shall include, without limitation, fees incurred in the following: (1) postjudgment motions; (2) contempt proceedings; (3) garnishment, levy, and debtor and third party examinations; (4) discovery; and (5) bankruptcy litigation and (b) prevailing party shall mean the party who is determined in the proceeding to have prevailed or who prevails by dismissal, default or otherwise.

12.12 Remedies Cumulative. The remedies under this Agreement are cumulative and shall not exclude any other remedies to which any person may be lawfully entitled.

12.13

Consent of Spouse. Within ten (10) days after any individual becomes a Member or a Member marries, such Member shall have his or her spouse execute a consent substantially in the form attached to this Agreement.

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INTENDING TO BE BOUND, all of the Members of ________, Ltd., a Nevada limited liability company, have executed this Agreement, effective as of the date written above. MEMBERS ________________ ________________ ________________ ________________ ________________ ________________

EXHIBIT A.    CAPITAL CONTRIBUTION AND ADDRESSES OF MEMBERS AS OF  ________________ Member’s Name

Member’s Address

Member’s Member’s Membership Capital Contribution Interest

________

________

________

________

________

________

________

________

________

________

________

________

________

________

________

________

EXHIBIT B.  LEGAL DESCRIPTION Form No. 2.2.13.    Basic Form for New York Single Member Limited Liability Company Agreement OPERATING AGREEMENT OF

ABC NEW YORK, LLC 633

THIS OPERATING AGREEMENT is made and entered into effective as of ___ ___, 20___ (the “Effective Date”), by ABC, LLC (the “Member”) in its capacity as the sole member of ABC NEW YORK, LLC (the “Company”).

W I T N E S S E T H: ABC NEW YORK, LLC was formed pursuant to the Articles of Organization of the Company dated ___ ___, 20___ (the “Articles”), prepared and filed in accordance with the laws of the State of New York and subject to the provisions of the New York Limited Liability Company Law (the “Act”).

ARTICLE I. NAME; ORGANIZATION; OFFICE; TAX STATUS; DEFINITIONS 1.1 Formation. The Company has been organized as a New York Limited Liability Company by the filing of the Articles pursuant to the Act with the New York Secretary of State.

1.2 Name. The name of the Company is ABC NEW YORK, LLC, and all Company business must be conducted in that name or such other names that comply with applicable law as the Member may select from time to time.

1.3 Principal Office; Other Offices. 634

The principal office of the Company shall be such place as the Member may designate from time to time. The Company may have such other offices as the Member may designate from time to time.

1.4 Tax Status. At all times that the Company has only one member (which owns 100% of the Membership Interests in the Company), it is the intention of the Member that the Company be disregarded for federal, state, local and foreign income tax purposes.

1.5 Defined Terms. The terms used in this Agreement with their initial letters capitalized, shall, unless the context otherwise requires or unless otherwise expressly provided herein, have the meanings specified in this Section 1.5: “Act” shall mean the New York Limited Liability Company Law and any successor statute, as the same may be amended from time to time. “Agreement” shall mean this Operating Agreement, as originally executed and as amended from time to time.

“Company” shall refer to ABC NEW YORK, LLC. “Manager” shall mean John A. Smith, and thereafter any other individual appointed to act as Manager pursuant to the terms of this Agreement. “Member” shall mean ABC, LLC.

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“Membership Interest” shall mean the Member’s aggregate rights in the Company.

ARTICLE II. INTERESTS

MEMBERS;

MEMBERSHIP

2.1 Names, Addresses, Initial Capital Contributions, Number of Units and Percentage Interest of Member. The Member’s address, initial capital contributions to the Company, and percentage interest in the Company are set forth in Exhibit “A”, attached hereto and made a part hereof.

2.2 Form of Contribution. (a) The Member’s initial capital contribution shall be in cash or property as set forth on Exhibit “A” attached hereto, receipt of which is hereby acknowledged. Subsequent contributions, if any, shall be in such amounts and may be in any type of property as may be designated by the Member.

(b) No interest shall be paid on any capital contribution.

(c) The Member shall have the right to withdraw its capital contribution or to demand and receive property of the

636

Company or any distribution in return for its capital contribution.

2.3 Member Loans or Services. Loans or services by the Member to the Company shall not be considered contributions to the capital of the Company.

2.4 Limitation of Liability. To the extent allowed by the Act, the Member shall not be liable under a judgment, decree, or order of the court, or in any other manner, for any debt, obligation or liability of the Company.

2.5 Member Loans; Additional Contributions. The Member may, but shall not be required to, loan any funds to the Company. The Member may, but shall not be required to, make additional capital contributions to the Company. The Member shall not be required to make any contribution to the Company by reason of any negative balance in its capital account, nor shall any negative balance in the Member’s capital account create any liability on the part of the Member to any third party.

2.6 Pledge of Membership Interest.

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Notwithstanding anything contained in this Agreement, the Member agrees that (i) the Company shall have no obligation to the Member, and the Member shall have no obligation to the Company hereunder to the extent the fulfillment of such obligation will violate, conflict with or cause a default under any loan agreement or financing arrangement of the Member or the Company, at any time outstanding and (ii) the Member may pledge its Membership Interest to any lender and any limitations set forth in the Act shall not apply in connection with any such pledge or upon the exercise of any rights by any lender pursuant to such pledge.

2.7 Certificates. Each certificate representing Membership Interests, if any, shall state that the Company is a limited liability company formed under the laws of the State of New York, the name of the Member to whom such certificate is issued and that such certificate represents a membership interest in the Company within the meaning of Section 102(r) of the Act. The Company hereby irrevocably elects that each interest in the Company shall constitute a “security” within the meaning of Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the State of New York. Each such certificate evidencing any Membership Interests owned by the Member on the Effective Date, or hereafter acquired by the Member, shall contain the following restrictive legend: “EACH INTEREST IN THE COMPANY EVIDENCED BY THIS CERTIFICATE SHALL CONSTITUTE A “SECURITY” WITHIN THE MEANING OF ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE (INCLUDING SECTION 8-102(A)(15)

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THEREOF) AS IN EFFECT FROM TIME TO TIME IN THE STATE OF NEW YORK.”

ARTICLE III. MANAGEMENT AND CONTROL OF BUSINESS 3.1 Management of the Company. All management powers over the business and affairs of the Company shall be exclusively vested in a sole manager appointed by the Member (the “Manager”). The initial Manager shall be John A. Smith.

3.2 Authority of the Manager. (a) In the capacity of Manager, the Manager shall manage the Company in accordance with this Agreement. The Manager is an agent of the Company’s business, and the actions of the Manager taken in such capacity and in accordance with this Agreement shall bind the Company.

(b) Except to the extent otherwise provided in this Agreement or the Articles, the Manager shall manage and control the business and affairs of the Company, shall make all decisions affecting the business and affairs of the Company and shall take all such actions the Manager deems necessary or appropriate to accomplish the purpose of the Company as set forth in the Articles, and he shall have all powers and

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authority necessary or desirable in connection with the foregoing including the power and authority to execute all documents or instruments, perform all duties and powers and do all things for and on behalf of the Company in all matters necessary, desirable, convenient or incidental to the purpose of the Company. The Manager shall be a “manager” (within the meaning of the Act) of the Company.

(c) The Manager may be removed with or without cause by the Member, and shall serve until removed or until the Manager’s earlier death, retirement or incapacity. Upon the removal, death, retirement or incapacity of the Manager, a successor shall be designated by the Member or its representatives.

(d) The Company may, but need not, have one or more of the following officers as determined by the Manager from time to time: President, Secretary, Treasurer, and such other officers as the Manager may appoint, from time to time. Any officers may be appointed and removed at the will of the Manager. If any officers are appointed by the Manager, they shall perform such functions as are specified by the Manager.

(e) The Manager may delegate to any officer of the Company, if any, or to any other person or entity such authority to act on behalf of the Company as the Manager may from time to time deem appropriate. The salaries or other compensation, if any, of the officers and agents, if any, of the Company shall be fixed from time to time by the Manager. Except as otherwise provided by the Manager, when the taking of such action has been authorized by the Manager, any officer, if any, of the Company, or any other person specifically authorized by the

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Manager, may execute any contract or other agreement or document on behalf of the Company.

(f) Except as otherwise expressly delegated by the Manager or to the extent that the New York Secretary of State has the authority to accept legal process on behalf of the Company, no person or entity other than the Manager and the officers, if any, shall be an agent of the Company or have any right, power or authority to transact any business in the name of the Company or to act for or on behalf of or to bind the Company.

(g) The expression of any power or authority of the Manager in this Agreement shall not in any way limit or exclude any other power or authority of the Manager that is not expressly set forth in this Agreement; provided that any such power or authority of the Manager shall be subject to any limitations on the power or authority of the Manager expressly set forth in this Agreement and to any rights and powers granted to the Member pursuant to the express terms of this Agreement.

3.3. Reliance by Third Parties. The Manager or any officer of the Company, if any, may certify and authenticate records of the Company to thirdparties and any third-party dealing with the Company, the Manager, the Member or any officer of the Company may rely upon a certificate signed by the Manager or any officer of the Company as to:

(a) 641

the identity of the Manager, the Member or any officer of the Company;

(b) the existence or non-existence of any fact or facts that constitute a condition precedent to acts by the Manager, the Member or any officer of the Company or are in any other manner germane to the affairs of the Company;

(c) the persons who or entities that are authorized to execute and deliver any instrument or document of or on behalf of the Company; or

(d) any act or failure to act by the Company or as to any other matter whatsoever involving the Company, the Member, the Manager or any officer of the Company.

3.4 Books and Records. The Manager shall maintain, and upon request make available to the Member, all of the books and records of the Company referenced in Section 1102 of the Act, to the extent applicable to the Company, except to the extent that any such books and records are maintained by an officer of the Company in accordance with Section 3.2(d). Notwithstanding anything to the contrary in the Act, the Manager shall have no authority to keep any books and records of the Company confidential from the Member.

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ARTICLE IV. ALLOCATIONS; CAPITAL ACCOUNTS AND DISTRIBUTIONS 4.1 Allocations. Net profits and losses of the business of the Company shall be allocated to the Member.

4.2 Distributions. Distributions shall be made to the Member at the times and in the amounts as are determined by the Manager at his sole discretion, provided that no distribution shall be made in violation of the Act.

ARTICLE V. DISSOLUTION 5.1 Term. The term of the Company shall be perpetual unless the Company is dissolved and terminated in accordance with this Article V.

5.2 Events Causing Dissolution. The Company shall be dissolved and its affairs shall be wound up upon the first to occur of the following:

(a) 643

The written consent of the Member.

(b) The entry of a decree of judicial dissolution pursuant to the Act.

5.3 Winding Up. Upon dissolution of the Company, the Company shall cease to engage in any further business, except to the extent necessary to perform existing obligations, and the Member shall wind up the Company’s affairs and liquidate or distribute its assets. The liquidation shall take place without the appointment of a liquidator. Gains on the sale or other disposition of Company assets shall be allocated to the Member.

5.4 Distribution of Assets. Upon the winding up of the Company, the assets of the Company shall be distributed in accordance with Sections 5.5 and 5.6.

5.5 Distributions in Kind. The assets of the Company may be distributed in-kind or sold for cash prior to distribution.

5.6

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Distributions Upon Liquidation. Upon liquidation, funds of the Company distributed in the following order of priority:

shall

be

(a)    First, to creditors, including the Member to the extent that the Member is a creditor, to the extent permitted by applicable law, in satisfaction of liabilities of the Company, whether by payment or by establishment of adequate reserves, other than liabilities for distributions to the Member under Section 507 of the Law. (b)  Second, to the Member.

5.7 Articles of Dissolution. Upon dissolution and completion of the winding up of the Company and distribution of its assets, the Member shall cause to be executed and filed with the New York Secretary of State articles of dissolution in accordance with Section 705 of the Act.

ARTICLE VI. EXCULPATION INDEMNIFICATION

AND

6.1 Exculpation. (a) The Member, whether acting as Member or in any other capacity, shall not be liable to the Company, the Manager or to any other person for any loss, damage or claim incurred by

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reason of any act or omission performed or omitted by the Member in good faith.

(b) The Manager shall not be liable to the Company, the Member or any other person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by the Manager in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on the Manager by this Agreement, except that the Manager shall be liable for any such loss, damage or claim incurred by reason of the Manager’s gross negligence or willful misconduct.

(c) Each of the Member and the Manager 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 or entity as to matters the Member or the Manager, as applicable, reasonably believes are within the professional or expert competence of such person or entity, 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.

6.2 Indemnification. To the fullest extent permitted by applicable law, the Member shall be entitled to indemnification from the Company for any loss, damage or claim incurred by the Member by reason of any act or omission performed or

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omitted by the Member on behalf of the Company, and the Manager shall be entitled to indemnification from the Company for any loss, damage or claim incurred by the Manager by reason of any act or omission performed or omitted by the Manager in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on the Manager by this Agreement, except that the Manager shall not be entitled to be indemnified in respect of any loss, damage or claim incurred by the Manager by reason of gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Article VI shall be provided out of and to the extent of Company assets only, and the Member shall not have any personal liability on account thereof.

6.3 Expenses. To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by the Member or the Manager in defending any claim, demand, action, suit or proceeding relating to the matters for which the Member or the Manager, as applicable, is entitled to indemnification pursuant to Section 6.2 above shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Member or the Manager, as applicable, to repay such amount if it shall be determined that either of them is not entitled to be indemnified as authorized in Section 6.2.

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The Company may purchase and maintain insurance, to the extent and in such amounts as Manager shall deem reasonable, on behalf of the Member and the Manager and such other persons or entities as the Manager shall determine, against any liability that may be asserted against or expenses that may be incurred by any such person or entity in connection with the activities of the Company, regardless of whether the Company would have the power to indemnify such person or entity against such liability under the provisions of this Agreement.

ARTICLE VII. MISCELLANEOUS 7.1 Governing Law. This Agreement shall be governed by, interpreted, and enforced in accordance with the laws of New York applicable to agreements to be performed entirely in New York.

7.2 Terms. Common nouns and pronouns will be deemed to refer to the masculine, feminine, neuter, singular and plural, as the identity of the person or persons, firm or corporation may in the context require. Any reference to statutes or laws will include all amendments, modifications, or replacements of the specific sections and provisions concerned.

7.3 Headings.

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All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

7.4 Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under the present or future laws effective during the term of this Agreement, such provision will be fully severable; this Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable provision, there will be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.

7.5 Additional Documents and Acts. The Member agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions, and conditions of this Agreement and the transactions contemplated hereby.

7.6

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No Third Party Beneficiary. This Agreement is made solely and specifically among and for the benefit of the parties hereto, and their respective successors and assigns subject to the express provisions hereof relating to successors and assigns, and no other person will have any rights, interest, or claims hereunder or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or otherwise.

7.7 References to this Agreement. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement unless otherwise expressly stated.

7.8 Amendments. This Agreement may be amended or modified only by a written instrument signed by the Member.

7.9 Title to Company Property. Legal title to all property of the Company will be held and conveyed in the name of the Company. IN WITNESS WHEREOF, the sole Member has executed this Agreement effective as of the Effective Date. MEMBER: ABC NEW YORK, LLC ____________

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By: John A. Smith, its Manager

EXHIBIT “A” Member Name and Address

Initial Capital Contribution

Percentage Ownership Interest

 

 

 

ABC NEW YORK, LLC

$100.00

____________

 

____________

 

____________

 

100%

____________

Form No. 2.2.14.    Texas Manager Managed Limited Liability Company Agreement COMPANY AGREEMENT OF [________________], LLC This Company Agreement of [_________], LLC dated effective as of the ___ day of ___ 20___ (the “Effective Date”), is hereby duly adopted, approved, ratified, and confirmed as the Company Agreement of [_________], LLC, a Texas limited liability company, by the Persons signing this Agreement as the initial Managers and the initial Members of the Company. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound have entered into this Agreement.

ARTICLE 1. DEFINITIONS

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The definitions used in this Agreement shall, unless the context otherwise requires, have the meanings specified in this Article 1.

1. “Additional Capital Contribution” means any amount contributed or deemed to be contributed to the capital of the Company by the Members pursuant to Section 3.2.

2. “Additional Member” shall have the meaning set forth in Section 3.2(a).

3. “Adjusted Capital Account” means, with respect to any Member, such Member’s Capital Account as of the end of any relevant date after giving effect to the following adjustments:

(a) Credit to such Capital Account any amounts which such Member is deemed to be obligated to restore pursuant to Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 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), (5) and (6). The foregoing definition of “Adjusted Capital Account” is intended to comply with the provisions of Treasury Regulations Sections 1.704-1(b)(2)(ii)(d) and 1.704 2, and shall be interpreted consistently therewith.

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4. “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in that Member’s Adjusted Capital Account.

5. “Affiliate” means any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person to whom reference is made. The term “control” as used herein (including the terms “controlling,” “controlled by,” and “under common control with”) means the possession, directly or indirectly, of the power (a) to vote more than twenty percent (20%) of the outstanding voting securities of or voting interest in a Person, or (b) to direct the management policies of such Person by contract or otherwise.

6. “Agreement” means this amended from time to time.

Company

Agreement,

as

7. “Available Funds” means Company cash on hand, as of the date of computation, including (without limitation) cash derived from any one or more of the following sources: (a) the Capital Contributions of the Members made pursuant to the terms of this Agreement; (b) the proceeds of any Disposition of all or any portion of the assets of the Company, including, but not limited to, any insurance proceeds; and (c) all Company operating income.

8.

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“Bankruptcy” or “Bankrupt” with respect to any Person, that (a) such Person (i) makes a general assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceedings; (iv) files a petition or answer seeking for such Person a reorganization, arrangement, composition, readjustment, liquidation, winding up, dissolution, or similar relief under any law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of such Person’ s or of all or any substantial part of such Person’s properties; or (b) against such Person, a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, winding up, dissolution, or similar relief under any law has been commenced and one hundred and twenty (120) days have expired without dismissal thereof or with respect to which, without such Person’s consent or acquiescence, a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person’s properties has been appointed and one hundred and twenty (120) days have expired without the appointment having been vacated or stayed, or one hundred and twenty (120) days have expired after the date of expiration of a stay, if the appointment has not previously been vacated.

9. “Board” means the Board of Managers of the company as defined in Section 4.1(a).

10.

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“Book Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except: (a) the initial Book Value of any asset contributed by a Member to the Company shall be the fair market value of such asset, as determined by the Board; (b) the Book Value of all Company assets shall be adjusted in the event of a revaluation as provided in Section 3.6(d); (c) the Book Value of any Company asset distributed to any Member shall be the fair market value of such asset on the date of distribution, as determined by the Board; and (d) such Book Value shall be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

11. “Capital Account” means with respect to any Member, the account maintained for such Member in a manner which the Board determines is in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv).

12. “Capital Contributions” means the total of all capital contributions of the Members pursuant to Sections 3.1 and 3.2, including, but not limited to, the Initial Capital Contributions and the Additional Capital Contributions.

13. “Certificate of Formation” means the Certificate of Formation of the Company filed by the Company with the Texas Secretary of State.

14. “Code” means the Internal Revenue Code of 1986, as amended from time to time.

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15. “Company” means [_________], LLC, a Texas limited liability company.

16. “Depreciation” means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Book Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period (as a result of property contributions or adjustments to such values), Depreciation shall be adjusted as necessary so as to be an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period is zero, Depreciation for such year or other period shall be determined with reference to such beginning Book Value using any reasonable method selected by the Board.

17. “Dispose,” “Disposed” or “Disposition” means, with respect to any asset (including, but not limited to, Membership Interests or any portion thereof), a sale, assignment, transfer, conveyance, gift, encumbrance, hypothecation, exchange, or other disposition of such asset, whether such disposition be voluntary, involuntary or by operation of law, including, but not limited to, the following: (a) in the case of an asset owned by a natural Person, a transfer of such asset upon the death of its owner, whether by will, intestate succession or

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otherwise; (b) in the case of an asset owned by an Entity, a change in control of such Entity (“control” being defined as a direct or indirect transfer of twenty percent (20%) or more of the voting securities of such Entity), either due to a merger, consolidation, conversion or any other event or action; and (c) a disposition in connection with, or in lieu of, a foreclosure of an Encumbrance.

18. “Disability” or “Disabled” means the inability of a Person to substantially perform normal business activities for a period in excess of ninety (90) days by reason of the mental or physical illness or injury of such Person, in the opinion of an independent physician selected by the Board.

19. “Distributable Cash Flow” means any Available Funds not required to meet current or anticipated obligations of the Company, as determined by the Board. In determining what cash is available for distribution, the Managers may retain such amounts as the Board in its sole discretion determines will be required to pay the Company’s debts, obligations and expenses, and to accomplish the Company’s goals and operating results, whether then accrued or anticipated to accrue in the future.

20. “Effective Date” shall have the meaning set forth in the preamble to this Agreement.

21. “Encumbrance” means any lien, order, security interest, contract, easement, covenant, community property interest,

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equitable interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

22. “Entity” means a Person other than a natural person.

23. “Fair Market Value” shall have the meaning set forth in Section 6.4(a).

24. “Fiscal Year” means the fiscal year of the Company as established in Section 7.2.

25. “Indemnified Person” shall have the meaning set forth in Section 4.11(a).

26. “Information” shall have the meaning set forth in Section 11.6(a).

27. “Initial Capital Contribution” means, as to any Member, any amount contributed to the capital of the Company by a Member pursuant to Section 3.1.

28. “LLC Law” means the Title 3 of the Texas Business Organizations Code, as amended from time to time.

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29. “Majority” means, with respect to any referenced group of Members, a combination of such Members who, in the aggregate, own more than fifty percent (50%) of the Sharing Ratios owned by all of the Members included in such referenced group and, with respect to any other referenced group of Persons, including, but not limited to, the Managers, more than fifty percent (50%) of the total number of such Persons.

30. “Manager” means any Person that is elected to act as a manager of the Company as provided herein. “Managers” means all such Persons collectively in their capacity as Managers of the Company.

31. “Member” means the Persons listed as members on Schedule 1 of this Agreement or any successor or successors to all or part of any such Member’s Membership Interest, or any Person admitted as an additional member to the Company in accordance with this Agreement and the LLC Law, each in the capacity as a member of the Company. “Members” mean all such Persons collectively in their capacity as members of the Company.

32. “Member Nonrecourse Debt” means any nonrecourse debt (as defined in Treasury Regulations Section 1.704-2(b) (4)) of the Company for which any Member bears the economic risk of loss, in accordance with Treasury Regulations Sections 1.704-2(b)(4) and 1.752-2.

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33. “Member Nonrecourse Debt Minimum Gain” means, for each Member, the amount of Minimum Gain for the Fiscal Year or other period attributable to such Member’s “partner nonrecourse debt,” determined in accordance with Treasury Regulations Section 1.704 2(i)(2).

34. “Member Nonrecourse Deductions” means any Losses or other losses or deductions of the Company that must be allocated to a Member who bears the economic risk of loss for the “partner nonrecourse liability” to which the Losses or other losses or other deductions relate, determined in accordance with Treasury Regulations Section 1.704-2(i)(1).

35. “Membership Interest” means all of the rights and obligations of a Member in respect of such Member’s ownership interest in the Company, including but not limited to the right to receive distributions and any obligation to make Capital Contributions under this Agreement.

36. “Minimum Gain” means, with respect to all nonrecourse liabilities of the Company, the minimum amount of gain that would be realized by the Company if the Company Disposed of the Company property subject to such liability in full satisfaction thereof computed in accordance with Treasury Regulations Section 1.704-2(d).

37.

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“Minimum Gain Share” means, for each Member, such Member’s share of Minimum Gain for the Fiscal Year (after taking into account any decrease in Minimum Gain for such year), such share to be determined under Treasury Regulations Section 1.704 2(g).

38. “Nonrecourse Deductions” means, for each Fiscal Year or other period, an amount of Company deductions that are characterized as “nonrecourse deductions” under Treasury Regulations Section 1.704-2(c).

39. “Notice Date” shall have the meaning set forth in Section 6.4(a).

40. “Officer” means a President, any Vice President, a Secretary, a Treasurer and any other duly elected officer elected by the Board under the terms of this Agreement.

41. “Person” means an individual, a corporation, a sole proprietorship, a partnership (general or limited) a limited liability company, an association, a trust, a joint venture, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

42. “Personal Representative” shall have the meaning set forth in Section 6.2.

43. 661

“Prime Rate” means a rate equal to the prime rate as published in The Wall Street Journal’s “Money Rates” table. If multiple prime rates are quoted in the table, then the highest prime rate will be the Prime Rate.

44. “Profits” and “Losses” means, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(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) 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 Book Value of the property Disposed of,

662

notwithstanding that the adjusted tax basis of such property differs from such Book Value;

(d) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account depreciation for such fiscal year or other period, computed in accordance with the definition of “Depreciation” herein; and

(e) Notwithstanding any other provision of this definition, any items which are specifically allocated pursuant to Section 5.2(c) shall not be taken into account in computing Profits or Losses.

45. “Purchaser” shall have the meaning set forth in Section 6.4(a).

46. “Regulatory Allocations” shall have the meaning set forth in Section 5.2(d).

47. “Securities Act” means the Securities Act of 1933, as amended.

48. “Seller” shall have the meaning in Section 6.4(a).

49. 663

“Spousal Interest” shall have the meaning set forth in Section 6.3.

50. “Sharing Ratio” means the percentage assigned to such Member in accordance with Section 3.7, as such percentage may change from time to time as provided in this Agreement.

51. “Tax Distribution” shall have the meaning set forth in Section 5.3.

52. “Treasury Regulations” means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

ARTICLE 2. ORGANIZATION Section 2.1. Formation The Company was formed upon the filing of the Certificate of Formation of the Company on ___ ___, 20___ pursuant to the LLC Law.

Section 2.2. Name, Place of Business and Office The name of the Company is [_________], LLC, although such business may be conducted under any other name as

664

may be required by local law or any other name determined by the Board. The Company shall maintain its principal office at the following address: ____________. The Board may at any time change the location of the Company’s office and may establish additional offices, if it deems it advisable. The Board shall promptly give any other Persons written notice of any change in location of the principal office of the Company, to the extent necessary.

Section 2.3.

Registered Office and Registered Agent The Company’s registered office shall be _________, and the name of its initial registered agent at such address is ____________.

Section 2.4. Purposes and Character of Business; Powers (a) The purposes and character of the business of the Company are to transact any or all lawful business for which limited liability companies may be organized under the LLC Law.

(b) The Company shall have any and all powers under the LLC Law which are necessary or desirable to carry out the purposes and business of the Company. The Company shall carry out the foregoing activities pursuant to the arrangements set forth in this Agreement.

Section 2.5. 665

Term The term of existence of the Company shall be perpetual, unless the Company is earlier wound up in accordance with either the provisions of this Agreement or the LLC Law.

ARTICLE 3. COMPANY CAPITAL Section 3.1.

Initial Capital Contributions of the Members (a) Each Member shall contribute cash or other property to the Company in the amount set forth as the Initial Capital Contribution of such Member on Schedule 1 attached hereto and hereby made a part hereof. Such cash or other property shall be the Initial Capital Contribution of each such Member and each such Member agrees to make its Initial Capital Contribution.

(b) Upon making the Initial Capital Contribution each Member shall receive its Membership Interest and its initial Sharing Ratio as set forth on Schedule 1.

Section 3.2. Additional Capital Contributions of the Members (a) To the extent that there are insufficient Available Funds to cover operating deficits of the Company, the Board may

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request each Member to, and each Member may, but shall not be obligated to, make an Additional Capital Contribution to the Company in proportion to such Member’s Sharing Ratio relative to the Sharing Ratios of all the Members to cover the total operating deficit in excess of the Available Funds. Any such request for Additional Capital Contributions hereunder shall be in the form of a written notice to the Members setting forth the amount of each Member’s requested Additional Capital Contribution and the date by which such amounts should be contributed to the Company. In the event certain Members elect not to make their full pro rata share of the total amount requested by the Board by the date requested by the Board, the Board shall provide written notice thereof to the Members who elected to make and did in fact make their pro rata share of the requested Additional Capital Contributions. Such Members shall then have the right, but not the obligation, to make further Additional Capital Contributions to eliminate any shortfall, pro rata, among them, such process continuing until either the Company has received the full amount of the requested Additional Capital Contributions or the Members shall have declined to make any further Additional Capital Contributions in respect of the shortfall in Available Funds. In the event that the Members do not make aggregate Additional Capital Contributions to the Company pursuant to this Section 3.2(a) in an amount equal to the total amount necessary in order to eliminate the shortfall in Available Funds, then the Board shall, in its discretion, have the authority to seek and cause the Company to accept Capital Contributions from third parties (“Additional Members”) and to admit any such Additional Members to the Company; provided, however, that the rights, terms and conditions offered to an Additional Member shall be substantially equivalent to the rights, terms and conditions offered to the Members hereunder. In the event all Members make their pro rata share of the requested Additional Capital Contributions as provided in this Section 3.2(a), there shall be

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no adjustments to the Members’ Sharing Ratios or Membership Interests. In the event, however, that (i) not all Members make their proportionate share of the Additional Capital Contributions requested by the Board pursuant to this Section 3.2(a), and/or (ii) Additional Members make Capital Contributions to the Company in accordance with this Section 3.2(a), the Board shall have the authority to adjust the Sharing Ratios and the Membership Interests of the Members as the Board determines is appropriate in its reasonable business judgment in order to reflect the Capital Contributions made to the Company pursuant to this Section 3.2(a). Any such adjustment in Sharing Ratios and Membership Interests shall be based on the fair value of the Membership Interests at the time the request for Additional Capital Contributions is made by the Board determined in good faith by the Board.

(b) If any Member makes a payment directly to a creditor or another Member in satisfaction of any indebtedness of the Company pursuant to any indemnity, guaranty or contribution obligation of such Member that has been approved by the Board in respect of Company indebtedness, or if any collateral interest granted by such Member to such creditor or other Member that has been approved by the Board to secure any such indebtedness is foreclosed and the proceeds of such foreclosure are applied to reduce or satisfy such indebtedness and any foreclosure-related expenses, such Member shall be deemed to have made a permitted Additional Capital Contribution equal to such amount, and shall receive a credit to its Capital Account in the amount thereof.

Section 3.3.

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Company Capital (a) No Member shall be paid interest on any Capital Contribution to the Company.

(b) No Member shall have the right to withdraw all or any part of its Capital Contribution or to receive any return on any portion of its Capital Contribution.

(c) Under circumstances involving a return of any Capital Contribution, no Member shall have the right to receive property other than cash.

Section 3.4. Liability of Members (a) No Member shall be liable for the debts, liabilities, contracts or any other obligation of the Company, except to the extent expressly provided for herein or in the LLC Law. No Member shall be liable for the debts or liabilities of any other Member.

(b) No Member shall be required to contribute to the capital of, or loan, the Company any funds other than as expressly required in this Agreement.

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No Manager or Member shall be liable for the return of all or any portion of the Capital Contributions of any other Member.

(d) Except as otherwise expressly provided for herein, no Member shall have any priority over any other Member as to the return of its contributions to capital or as to compensation by way of income.

Section 3.5.

Loans by Members or Affiliates Subject to obtaining any approvals required under this Agreement for the Company to borrow funds, any Member or any Affiliate of a Member may (but shall not be obligated to) at any time, upon obtaining the consent of the Board, loan money or guarantee a loan to the Company to finance Company operations, to finance or refinance any assets of the Company, to pay the debts and obligations of the Company, or for any other Company purpose. If any Member or its Affiliate lends funds or guarantees a loan of funds to the Company, such Member or Affiliate shall be entitled to receive interest on such loan, or a fee for guaranteeing any such loan, at an interest rate or fee to be agreed upon by such Member or its Affiliate and the Board.

Section 3.6. Capital Accounts (a) A Capital Account shall be established and maintained for each Member. The initial Capital Account balance of each

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Member is set forth on Schedule 1 attached hereto.

(b) A Member’s Capital Account shall be increased by (i) the amount of cash and the initial Book Value of any property contributed by such Member to the Company as a Capital Contribution pursuant to Sections 3.1 and 3.2, (ii) such Member’s allocable share of Profits, income and gain and (iii) the amount of any Company liabilities that are expressly assumed by such Member or that are secured by any Company property distributed to such Member.

(c) A Member’s Capital Account shall be decreased by (i) the amount of cash and the Book Value of any Company property distributed to such Member pursuant to any provision of this Agreement, (ii) such Member’s allocable share of Losses, deductions and other losses and (iii) the amount of any liabilities of such Member that are expressly assumed by the Company or that are secured by any property contributed by such Member to the Company.

(d) Upon the occurrence of certain events described in Treasury Regulations Sections 1.704-1(b)(2)(iv)(f), 1.704-1(b) (4) and 1.704-2, the Board may elect to increase or decrease the Capital Accounts of the Members to reflect a revaluation of Company property on the Company’s books.

(e) The Capital Account of each Member shall be determined after giving effect to all transactions that have been effected prior to the time when such determination is made giving rise

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to the allocation of Profits and Losses and to all contributions and distributions theretofore made. Any person who acquires a Membership Interest directly from a Member, or whose Sharing Ratio shall be increased by means of a Disposition to it of all or part of the interest of another Member, shall have a Capital Account that includes all or part of the Capital Account balance of the Membership Interest so acquired or transferred.

(f) In the event that any Member makes a loan to the Company, such loan shall not be considered a contribution to the capital of the Company and shall not increase the Capital Account of the lending Member. Repayment of such loans shall not be deemed withdrawals from the capital of the Company.

(g) Any fees, salary or similar compensation payable to a Member pursuant to this Agreement shall be deemed a guaranteed payment for federal income tax purposes and not a distribution to such Member for such purposes. Such payments to a Member shall not reduce the Capital Account of such Member, except to the extent of its distributive share of any Company Losses or other downward capital adjustment resulting from such payment.

(h) From time to time the Board may make such modifications to the manner in which the Capital Accounts are computed to comply with Treasury Regulations Sections 1.704-1(b) and 1.704-2, provided that such modification is not likely to have a material effect on the amounts distributable to any Member pursuant to this Agreement.

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(i) The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Treasury Regulations.

(j) No Member with a deficit balance in its Capital Account shall have any obligation to the Company or any other Member to restore such deficit balance. In addition, no venturer, shareholder, member or partner in any Member shall have any liability to the Company or any other Member for any deficit balance in such venturer’s, shareholder’s, member’s or partner’s capital account in the Member in which it is a venturer, shareholder, member or partner. Furthermore, a deficit Capital Account balance of a Member (or a deficit capital account of a venturer, member or partner in a Member) shall not be deemed to be a Company asset or Company property.

Section 3.7.

Sharing Ratios The initial Sharing Ratio of each Member is set forth opposite its respective name on Schedule 1, attached hereto and hereby made a part of this Agreement. The Sharing Ratios set forth on Schedule 1 may be amended from time to time by the Board to reflect any adjustments to such Sharing Ratios as provided in this Agreement.

ARTICLE 4. BOARD OF MANAGERS

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Section 4.1.

Number and Qualifications (a) Subject to any approval rights contained herein or in the LLC Law, the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, no less than one (1) Manager but no more than five (5) Managers (the “Board”). Managers need not be Members or residents of the State of Texas. The Managers, acting by Majority vote, shall select one Manager to serve as the Chairman of the Board. The Chairman shall preside at meetings and generally manage the affairs of the Board.

(b) The initial Board shall consist of _________. Upon the death, resignation or removal of any Manager, a Majority of the Members shall promptly appoint his or her successor(s).

Section 4.2. Place of Meetings All meetings of the Board may be held either within or without the State of Texas. The Company shall pay the Managers’ reasonable expenses incurred in connection with attending any meeting of the Board.

Section 4.3. Regular Meetings

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Regular meetings of the Board may be held without notice at such time and place either within or without the State of Texas, as shall from time to time be determined by the Board.

Section 4.4.

Special Meetings Special meetings of the Board may be called at any time by any Manager with at least forty-eight (48) hours personal or written notice to each other Manager; provided, however, that in the event of exigent circumstances as determined by any Manager, notice of less than forty-eight (48) hours may be given. Any notice required pursuant to this Section 4.4 need not state the purpose or purposes of such meeting.

Section 4.5. Actions With or Without a Meeting and Telephone Meetings Notwithstanding any provision contained in this Agreement, all actions of the Board provided for herein shall be taken either at a meeting and evidenced by written minutes thereof executed by one or more Manager or by written consent without a meeting. Any meeting of the Board may be held by means of a telephone conference by means of which all Persons participating in the meeting can hear or otherwise communicate with each other, and participation in such a meeting shall constitute presence in person at such meeting. At any regular or special meeting of the Board, the Company shall make provisions for any Manager who desires to attend such meeting via teleconference. Any action which may be taken by the Board without a meeting shall be effective only if the written consent (or consents) sets forth the action so taken, and is signed by the number of Managers

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constituting not less than the minimum number of Managers that would be necessary to take such action if all of the Managers entitled to vote on the action were present and voted thereon.

Section 4.6.

Powers of the Board; Delegation; Voting (a) To the fullest extent permitted by applicable law, the Board shall have full, exclusive and complete discretion to manage and control the affairs of the Company, shall make all decisions affecting the Company business, shall have full authority to take any action contemplated hereby and shall have full power to exercise any and all rights generally inferred or conferred by law in connection therewith, including, without limitation, the establishment, modification and/or amendment of all operating guidelines, policies and procedures of the Company unless such authority is expressly delegated by the Board to an appropriate Officer of the Company.

(b) As set forth in Section 4.13, the Board may appoint Officers of the Company with such titles, authority and rights as the Board determines from time to time to supervise or arrange for the supervision of day-to-day operations of the Company.

(c) Each Manager shall have one vote and, unless otherwise expressly stated in this Agreement, all actions by or requiring

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the consent or approval of the Board shall require the consent or approval of a Majority of the Board.

Section 4.7.

Restrictions on the Powers of Managers Acting Individually Notwithstanding anything to the contrary contained in this Article 4, if more than one Person has been appointed as Manager, a Manager shall not have any power or authority to act individually on behalf of the Company except for such power or authority as may be specifically conferred upon such Manager by this Agreement or by action of the Board.

Section 4.8. Actions of the Board Requiring Consent of a Majority of the Members. Notwithstanding anything to the contrary contained in this Agreement, without the consent of a Majority of the Members, neither the Board nor any Manager or Officer shall have the power or authority:

(a) To terminate and wind up the Company;

(b) To Dispose of all or substantially all of the assets of the Company;

(c)

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To effect a merger or plan of exchange of with any Entity which would result in the owning, directly or indirectly, greater than fifty of the outstanding voting equity interests of Entity;

the Company Members not percent (50%) the surviving

(d) To file Bankruptcy on behalf of the Company; or

(e) To do any act in contravention of this Agreement.

Section 4.9.

Removal of Managers Any Manager may be removed (with or without cause) by a Majority of the Members.

Section 4.10. Transactions with Related Parties The Board may agree, contract, or arrange with any Manager, Member or Officer or any Affiliate of any Manager, Member or Officer in the name and on behalf of the Company, for any Company purpose, provided that the terms and provisions of any such agreement, contract or arrangement shall be comparable to those available from third parties.

Section 4.11. Indemnification of the Board and Officers. (a) 678

The Company shall indemnify the Managers and Officers (each an “Indemnified Person” and collectively, the “Indemnified Persons”) to the fullest extent permitted under the LLC Law from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Company as set forth in this Agreement in which an Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, REGARDLESS OF WHETHER ARISING FROM ANY ACT OR OMISSION WHICH CONSTITUTED THE SOLE, PARTIAL OR CONCURRENT NEGLIGENCE (WHETHER ACTIVE OR PASSIVE) OF SUCH INDEMNIFIED PERSON, if (1) such Indemnified Person acted in good faith in a manner he or she reasonably believed to be in, or not opposed to, the interests of the Company and (2) the conduct of such Indemnified Person did not constitute actual fraud, gross negligence, bad faith or willful misconduct. The termination of any proceeding by judgment, order or settlement does not create a presumption that an Indemnified Person did not meet the requisite standard of conduct set forth in this Section 4.11(a). The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that an Indemnified Person acted in a manner contrary to that specified in this Section 4.11(a). Any indemnification pursuant to this Section 4.11 shall be made only out of the assets of the Company, including insurance proceeds, if any.

(b) The Company shall reimburse an Indemnified Person on a monthly basis for reasonable expenses incurred by such

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Indemnified Person who is a party to a proceeding in advance of the final disposition of the proceeding upon receipt by the Company of a written affirmation by such Indemnified Person of such Indemnified Person’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized in this Section 4.11 has been met; provided that such Indemnified Person shall be required to pay to the Company all amounts which have been reimbursed to such Indemnified Person by the Company in the event such Indemnified Person has been determined by a court of competent jurisdiction to not be entitled to indemnification under Section 4.11(a) above.

(c) The indemnification provided by this Section 4.11 shall be in addition to any other rights to which the Indemnified Persons may be entitled under any agreement, as a matter of law or otherwise.

(d) The Company may purchase and maintain such insurance on behalf of an Indemnified Person or an employee of the Company, as the Board shall determine, against any liability that may be asserted against or expenses that may be incurred by an Indemnified Person or an employee in connection with the Company’s activities, regardless of whether the Company would have the power to indemnify the Indemnified Person or employee against such liability under the provisions of this Agreement.

(e) In no event may any Indemnified Person subject the Members to personal liability by reason of the indemnification provisions set forth in this Agreement.

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(f) No Indemnified Person shall be denied indemnification in whole or in part under this Section 4.11 because such Indemnified Person or any Affiliate of such Indemnified Person had an interest in the transaction with respect to which the indemnification applies, if the transaction was otherwise permitted by the terms of this Agreement.

(g) The provisions of this Section 4.11 are for the benefit of the Indemnified Persons and their respective successors and assigns, and shall not be deemed to create any rights for the benefit of any other Persons.

(h) Any amendment, modification or repeal of this Section 4.11 or any provision in this Section 4.11 shall be prospective only and shall not in any way affect the rights of any Indemnified Person under this Section 4.11 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.

Section 4.12.

Liability of Members and Managers (a) It is the intent of this Section 4.12 to restrict the liability and fiduciary duties of the Members and the Managers to the maximum extent permitted by applicable law. Neither the Company nor any Member or Manager shall have any claim

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against any Member or Manager by reason of any act or omission of such Member or Manager, provided that such act or omission was performed by the Member or Manager within the scope of its authority under this Agreement and that such act or omission did not involve the Member’s or Manager’s bad faith, gross negligence, willful misconduct or actual fraud, REGARDLESS OF WHETHER SUCH ACT OR OMISSION CONSTITUTED THE SOLE, PARTIAL OR CONCURRENT NEGLIGENCE (WHETHER ACTIVE OR PASSIVE) OF THE MEMBER OR MANAGER. Notwithstanding the above, a Member or Manager shall have no liability hereunder for failing to act if such act required the consent of some or all of the Managers or Members and the required consent to such action was not granted. Any amendment, modification or repeal of this Section 4.12 or any provision in this Section 4.12 shall be prospective only and shall not in any way affect the limitations on any Member’s or Manager’s liability to the Company and the Members and Managers under this Section 4.12 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.

(b) In furtherance of this limitation of fiduciary duties of the Members and Managers, but not by way of limitation, the following provisions shall apply:

(1) it will not constitute a breach of fiduciary or other duty for a Member or Manager or any of their respective Affiliates to engage in any business activity, including, without limitation,

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activities of the type conducted by the Company, even if in direct competition with the Company;

(2) it will not constitute a breach of fiduciary or other duty for Members or Managers to resolve any conflicts of interest in accordance with the terms of this Agreement or an agreement with the other Members or Managers;

(3) it will not constitute a breach of fiduciary or other duty for the Members or Managers to engage attorneys, accountants and other advisors on behalf of the Company even though such Persons may also be retained from time to time by a Member or Manager or any of a Member’s or Manager’s officers, directors, shareholders, members or partners, and such Persons may be engaged with respect to any matter in which the interest of the Company and a Member or Manager may differ, or may be engaged by both the Company and a Member or Manager with respect to any other matter. No Members or Managers shall be responsible for any misconduct or negligence on the part of any such attorney, accountant or other advisor; and

(4) it will not constitute a breach of fiduciary or other duty for a Member or Manager to contract or enter into any agreement or arrangement with the Company with respect to any Company property or any aspect of the operations of the Company so long as the terms and provisions of any such agreement or arrangement are arms length.

Section 4.13.

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Officers (a) Number. The principal Officers of the Company, if any, may consist of a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other Officers and assistant Officers and agents as may be deemed necessary and elected or appointed by the Board, at such time and in such manner and for such terms as the Board may prescribe. Any two or more offices may be held by the same person.

(b) General Duties. All Officers and agents of the Company, as between themselves and the Company, shall have such authority, perform such duties and manage the Company as may be provided in this Agreement or as may be determined by the Board.

(c) Election, Term of Office and Qualifications. The Officers shall be chosen by the Board. Each Officer shall hold office until a successor is chosen and qualified or until the death, resignation, or removal of such Officer. The initial officers of the Company are set forth on Schedule 2, attached hereto and hereby made a part hereof

(d) Removal. Any Officer or agent elected or appointed by the Board may be removed (with or without cause) by the Board.

(e) Vacancies. Any vacancy in any office because of death, resignation, removal or any other cause shall be filled for the

684

unexpired portion of the term in the manner prescribed in this Agreement for election or appointment to such office.

(f) Resignation. Any Officer may resign at any time by giving written notice to the Board. Such resignation shall take effect at the time specified in the notice, and, unless otherwise specified in the notice, the acceptance of such resignation shall not be necessary to make it effective. Such resignation shall be without prejudice to the contract rights, if any, of the Company.

(g) The President. The President shall have active management of the operations of the Company, subject, however, to the control of the Board. The President shall, in general, perform all duties incident to the office of President and such other duties as from time to time may be assigned by the Board.

(h) The Vice Presidents. Each Vice President shall have such powers and perform such duties as the Board may from time to time prescribe or as the President may from time to time delegate to such officer. At the request of the President, any Vice President may temporarily act in place of the President. In the case of the death, absence, or inability to act of the President, the Board may designate any Vice President to perform the duties of the President. The Board may appoint different types of vice presidents with different day-to-day management responsibilities over the operations of the Company, including, but not limited, to the power to employ persons to accomplish the purposes of the Company.

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(i) The Secretary. The Secretary shall keep, or cause to be kept, in books provided for that purpose, minutes of the meetings of, or actions taken by, the Board and the Members; shall see that all notices are duly given in accordance with the provisions of this Agreement and as required by applicable law; shall be custodian of the records; and, in general, shall perform all duties incident to the office of the Secretary and such other duties as may from time to time be assigned by the Board or the President.

(j) The Treasurer. The Treasurer shall be the principal financial officer of the Company; shall have charge and custody of and be responsible for all funds of the Company and shall deposit all such funds in the name of the Company in such banks, trust companies or other depositories as shall be selected by the Board; shall receive and give receipts for moneys due and payable to the Company from any source; and, in general, shall perform all the duties incident to the office of the Treasurer and such other duties as from time to time may be assigned by the Board or the President. The Treasurer shall render to the Board, whenever the same shall be required, an account of all transactions accomplished as the Treasurer and of the financial condition of the Company. The Treasurer shall, if required to do so by the Board, give the Company a bond in such amount and with such surety or sureties as may be ordered by the Board, for the faithful performance of the duties of office and for the restoration to the Company, in the case of death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind belonging to the Company which are held or controlled by the Treasurer.

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(k) Indemnification. The Officers shall be indemnified by the Company to the extent and in the manner described in Section 4.11.

Section 4.14.

Right of Competition Each Member, in its individual capacity or otherwise, and its respective Affiliates, shall be free to engage in, conduct or participate in any business or activity whatsoever, including, without limitation, any activities conducted by the Company, without any accountability, liability, or obligation whatsoever to the Company or to any other Member. Any competing business or activity of a Member may be undertaken with or without notice to or participation therein by any other Member. Each Member and the Company hereby WAIVES any right or claim it may have against any Member with respect to any business or activity (whether such business or activity is competitive with the Company or otherwise) engaged in by any Member or the income, profits, or benefits therefrom.

ARTICLE 5. DISTRIBUTIONS

ALLOCATIONS

AND

Section 5.1. Distributions Except as otherwise provided in Section 5.3 retarding Tax Distributions and Section 8.2 regarding liquidation proceeds, Distributable Cash Flow shall be distributed to the Members at such time and in such amounts as the Board shall determine, pro rata, in accordance with the Members’

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respective Sharing Ratios, determined as of the date of distribution.

Section 5.2.

Profits, Losses and Distributive Shares of Tax Items (a) Profits. Except as provided in Section 5.2(c), Profits for any Fiscal Year will be allocated to the Members in proportion to their respective Sharing Ratios.

(b) Losses. Except as provided in Section 5.2(c), Losses for any Fiscal Year will be allocated to the Members in proportion to their respective Sharing Ratios.

(c) Special Allocations. Except as otherwise provided in this Agreement, the following special allocations will be made in the following order and priority:

(1) Company Minimum Gain Chargeback.

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Notwithstanding any other provision of this Section 5.2, if there is a net decrease in Company Minimum Gain during any taxable year or other period for which allocations are made, the Members will be specially allocated items of Company income and gain for that period (and, if necessary, subsequent periods). The amount allocated to each Member under this Section 5.2(c)(1) shall be an amount equal to the total net decrease in the Member’s Minimum Gain Share at the end of the immediately preceding taxable year. The items to be allocated will be determined in accordance with Treasury Regulations Section 1.704-2(g)(2). This Section 5.2(c) (1) is intended to comply with the “partnership minimum gain chargeback” requirements of the Treasury Regulations and the exceptions thereto and will be interpreted consistently therewith.

(2) Member Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding any other provision of this Section 5.2 (other than Section 5.2(c)(1) which shall be applied first), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any taxable year or other period for which allocations are made, any Member with a share of such Member Nonrecourse Debt Minimum Gain attributable to any Member Nonrecourse Debt (determined under Treasury Regulations Section 1.704-(2)(i)(5)) as of the beginning of the year shall be specially allocated items of Company income and gain for that period (and, if necessary, subsequent periods) in proportion to the portion of such Member’s share of the net decrease in the Member Nonrecourse Debt Minimum Gain with respect to such Member Nonrecourse Debt that is allocable to the Disposition of Company property subject to such Member Nonrecourse Debt. The items to be so

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allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(g). This Section 5.2(c)(2) is intended to comply with the “partner minimum gain chargeback” requirements of the Treasury Regulations and the exceptions thereto and shall be interpreted consistently therewith.

(3) Qualified Income Offset. A Member who unexpectedly receives any adjustment, allocation or distribution described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be specially allocated items of Company income and gain 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.

(4) Nonrecourse Deductions. Nonrecourse Deductions for any taxable year or other period for which allocations are made will be allocated among the Members in proportion to their respective Sharing Ratios in the Company.

(5) Member Nonrecourse Deductions. Notwithstanding anything to the contrary in this Agreement, any Member Nonrecourse Deductions for any taxable year or other period for which allocations are made will be allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which

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the Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704 2(i).

(6)

Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset under Code Sections 734(b) or 743(b) is required to be taken into account in determining Capital Accounts under Treasury Regulations Section 1.704-1(b)(2)(iv) (m), the amount of the adjustment to the Capital Accounts will be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis), and the gain or loss will be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted under Treasury Regulations Section 1.704-1(b)(2)(iv)(m).

(7) Depreciation Recapture. In the event there is any recapture of Depreciation or investment tax credit, the allocation of gain or income attributable to such recapture shall be shared by the Members in the same proportion as the deduction for such Depreciation or investment tax credit was shared.

(8) Reallocation. To the extent Losses allocated to a Member would cause such Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year, the Losses will be reallocated to other Members. If any Member receives an allocation of

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Losses otherwise allocable to another Member in accordance with this Section 5.2(c)(8), such Member shall be allocated Profits in subsequent Fiscal Years necessary to reverse the effect of such allocation of Losses. Such allocation of Profits (if any) shall be made before any allocations under Section 5.2(a) but after any other allocations under Section 5.2(c).

(9) Interest in Company. Notwithstanding any other provision of this Agreement, no allocation of Profit or Loss or item of Profit or Loss will be made to a Member if the allocation would not have “economic effect” under Treasury Regulations Section 1.704-1(b)(2)(ii) or otherwise would not be in accordance with the Member’s interest in the Company within the meaning of Treasury Regulations Section 1.704-1(b)(3) or 1.704-1(b)(4)(iv). The Board will have the authority to reallocate any item in accordance with this Section 5.2(c)(9).

(d) Curative Allocations. The allocations set forth in Section 5.2(c)(1) through (9) (the “Regulatory Allocations”) are intended to comply with certain requirements of Treasury Regulations Section 1.7041(b) and 1.704-2. The Regulatory Allocations may not be consistent with the manner in which the Members intend to divide Company distributions. Accordingly, the Board is authorized to further allocate Profits, Losses, and other items among the Members so as to prevent the Regulatory Allocations from distorting the manner in which Company distributions would be divided among the Members under Sections 5.1 and 8.2 but for application of the Regulatory

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Allocations. In general, the reallocation will be accomplished by specially allocating other Profits, Losses and items of income, gain, loss and deduction, to the extent they exist, among the Members so that the net amount of the Regulatory Allocations and the special allocations to each Member is zero. The Board will have discretion to accomplish this result in any reasonable manner that is consistent with Code Section 704 and the related Treasury Regulations.

(e)

Tax Allocations—Code Section 704(c). In accordance with Code Section 704(c) and the related Treasury Regulations, income, gain, loss and deduction with respect to any property contributed to the capital of the Company, solely for tax purposes, will be allocated among the Members so as to take account of any variation between the adjusted basis to the Company of the property for federal income tax purposes and the initial Book Value. If the Book Value of any Company asset is adjusted, subsequent allocations of income, gain, loss and deduction with respect to that asset will take into account any variation between the adjusted basis of the asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) and the related Treasury Regulations. Any elections or other decisions relating to allocations under this Section 5.2(e) will be made in any manner that the Board determines reasonably reflects the purpose and intention of this Agreement. Allocations under this Section 5.2(e) 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 or other items or distributions under any provision of this Agreement.

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(f) Other Allocation Rules. The following rules will apply to the calculation and allocation of Profits, Losses and other items:

(1) Except as otherwise provided in this Agreement, all Profits, Losses and other items allocated to the Members will be allocated among them in proportion to their Sharing Ratios.

(2) For purposes of determining the Profits, Losses or any other item allocable to any period, Profits, Losses and other items will be determined on a daily, monthly or other basis, as determined by the Board using any permissible method under Code Section 706 and the related Treasury Regulations.

(3) Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction, credit and other allocations not provided for in this Agreement will be divided among the Members in the same proportions as they share Profits and Losses.

(g)

Member Acknowledgment. The Members agree to be bound by the provisions of this Section 5.2 in reporting their shares of Company income and loss for income tax purposes.

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Section 5.3. Tax Distributions. Notwithstanding the foregoing distribution provisions of Section 5.1, each Member shall be entitled to receive cumulative cash distributions in an amount sufficient to enable such Member to discharge its cumulative U.S. federal tax liability (excluding interest and penalties) arising as a result of such Member’s interest in the Company, determined by assuming the applicability to such Member of the highest combined effective marginal U.S. federal income tax rate applicable to individuals at the time of such distributions. In furtherance of the foregoing, to the extent the cumulative distributions otherwise paid or payable to a Member pursuant to Section 5.1 are insufficient to cover such tax liabilities, the Board shall make cash distributions (the “Tax Distributions”) in amounts that, when added to the cumulative cash distributions otherwise paid or payable, shall equal such tax liability. The amount of such tax liability shall be calculated taking into account (a) all cumulative Profits, income and gain allocated to such Member under this Agreement, including Profits, income and gain allocated in prior Fiscal Years, (b) the deductibility (to the extent allowed) of state and local income taxes for United States federal income tax purposes, (c) all cumulative Losses, deductions or other losses allocated to such Member under this Agreement, including Losses, deductions or other losses allocated in prior Fiscal Years, and (d) the character of the Profits, income, credit, loss, or deductions, allocated or previously allocated to such Member. Tax Distributions made to a Member pursuant to this Section 5.3 shall be debited against such Member’s Capital Account and shall be treated as an advance distribution that will reduce on a dollar-for-dollar basis the amount of later distributions to such Member pursuant to Section 5.1 or Section 8.2(b).

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Section 5.4.

Compliance with Code The foregoing provisions of this Article 5 relating to the allocation of Profits, Losses and other items for federal income tax purposes are intended to comply with Treasury Regulations Sections 1.704 1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Treasury Regulations. Notwithstanding anything to the contrary, nothing in this Article 5 shall apply if it lacks “economic effect.”

Section 5.5. Allocations Upon Disposition of Membership Interest Profits or Losses attributable to any Membership Interest which has been Disposed of during any Fiscal Year shall be allocated between the transferor and the transferee as follows:

(a) For the days in such Fiscal Year prior to and including the date of the Disposition, to the transferor.

(b) For the days in such Fiscal Year subsequent to the date of the Disposition, to the transferee.

Section 5.6. Basis Adjustment

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Upon the transfer of all or part of an interest in the Company, at the request of the transferee of the interest, the Board may (but shall not be obligated to) cause the Company to elect, pursuant to Section 754 of the Code, to adjust the basis of the Company’s assets as provided in Sections 734 and 743 of the Code. Any Person requesting any tax election under this Section 5.6 shall pay any accounting fees and expenses related to such election.

ARTICLE 6. DISPOSITIONS OF MEMBERSHIP INTEREST Section 6.1.

Restrictions on Disposition (a) Except upon the approval of the Board or as expressly permitted herein, no Member may Dispose of all or any part of its Membership Interest or any beneficial right or interest therein, or contract to do or permit any of the foregoing, whether voluntarily or by operation of law, and any attempt to do so shall be void.

(b) Notwithstanding anything to the contrary contained herein, unless the Board consents, no Member may Dispose of all or any portion of its Membership Interest if such Disposition:

(1) when added to the total of all other Dispositions of Membership Interests within the preceding twelve (12)

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months, would result in the Company being considered to have terminated within the meaning of Code Section 708; or

(2) would otherwise cause the Company to lose its status as a partnership for federal income tax purposes.

(c) Notwithstanding anything to the contrary contained herein, no Member may Dispose of all or any portion of its Membership Interest if such Disposition would violate any federal securities laws or any applicable state securities laws (including suitability standards).

(d) In order to effectuate the purpose of this Section 6.1, each Member agrees that, unless otherwise specifically permitted in this Article 6, to the extent its interest in the Company is at any time held by an Entity, such Member will seek to Dispose of such interest only through a direct Disposition of such interest in the manner contemplated in this Section 6.1, and that no Disposition, to a single transferee or related group of transferees, of more than twenty percent (20%) of the stock, partnership interest, membership interest or other voting securities or beneficial interest in any such Entity which holds an interest in the Company will be effected, directly or indirectly, unless approved by the Board.

Section 6.2.

Death, Disability or Bankruptcy of a Member Upon the death, Disability or Bankruptcy of a Member, the personal representative of the estate of the deceased, Disabled

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or Bankrupt Member (the “Personal Representative”) shall be required to offer in a written instrument to sell all of the Membership Interest of the deceased, Disabled or Bankrupt Member to the Company and the other Members for the price and on the terms and conditions specified in Section 6.4. The Company shall have the first right for ten (10) days after it receives notification from the Personal Representative to elect to purchase such Membership Interest. In the event the Company declines to purchase such Membership Interest of the deceased, Disabled or Bankrupt Member, such Membership Interest may be purchased by the other Members. The other Members shall have thirty (30) days after actual receipt of such notification that the Company declined to purchase such Membership Interest within which to advise the Personal Representative whether such Members will so purchase such Membership Interest of the deceased, Disabled or Bankrupt Member and the Personal Representative shall sell such Membership Interest to such Members. Each such other Member shall have the right to purchase such portion of the Membership Interest offered for sale as the Sharing Ratio owned by such Member at such time shall bear to the total Sharing Ratios owned by all the Members, excluding the deceased, Disabled or Bankrupt Member. If any Member does not elect to purchase its full portion of such Membership Interest, the remaining Membership Interest may be purchased by the other Members, pro rata, in the same manner. In the event that the Company and the Members do not elect to purchase all of such Membership Interest of the deceased, Disabled or Bankrupt Member, the Personal Representative may proceed to distribute such deceased, Disabled or Bankrupt Member’s Membership Interest to the successors in interest entitled to receive the same as a result of the Member’s death, Disability or Bankruptcy and to the surviving spouse of such deceased Member to the extent of the community property interest in the Membership Interest of such surviving spouse. Any such successor to the

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deceased, Disabled or Bankrupt Member’s Membership Interest or surviving spouse shall thereupon (by written supplement to this Agreement) become a party to this Agreement and shall hold all of the Membership Interest transferred to such Person subject in all respects to the terms and provisions hereof.

Section 6.3.

Death or Divorce of Spouse of a Member In the event of the death of any spouse of a Member who is an individual, or in the event of the divorce of a Member who is an individual and any spouse of such Member, the Member whose spouse either died or was divorced shall have the right and option to acquire any and all community property interest of the divorced or deceased spouse in the Member’s Membership Interest (the “Spousal Interest”) from the divorced spouse or from the estate of the deceased spouse upon the terms and conditions and for the price specified in Section 6.4. Such option may be exercised by the Member by giving written notice to the divorced spouse or the personal representative of the estate of the deceased spouse within one hundred twenty (120) days after such death or divorce. If such Member fails to exercise such option to purchase the entire Spousal Interest of the divorced spouse or deceased spouse’s estate, the divorced spouse or the personal representative of the estate of the deceased spouse shall offer to sell any remaining portion of such Spousal Interest to Membership and the other Members upon the terms and at the price specified in Section 6.4. The Company shall have ten (10) days after actual receipt of such offer within which to advise the divorced spouse or the personal representative of the estate of the deceased spouse whether the Company will so purchase such remaining portion of such Spousal Interest. If the Company fails to exercise its option to purchase the full

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portion of such remaining portion of such Spousal Interest, then the divorced spouse or the personal representative of the estate of the deceased spouse shall irrevocably offer in a written instrument to sell the remaining portion of such Spousal Interest to the other Members upon the terms and conditions and for the price specified in Section 6.4. The other Members shall have thirty (30) days after actual receipt of such notice within which to advise the divorced spouse or the personal representative of the estate of the deceased spouse whether such Members will so purchase such remaining portion of such Spousal Interest. Each such other Member shall have the right to purchase such portion of the remaining portion of such Spousal Interest offered for sale as the Sharing Ratio owned by such Member at such time shall bear to the total Sharing Ratios owned by all the Members, excluding the divorced or surviving Member. If any Member does not elect to purchase its full portion of such remaining portion of such Spousal Interest, the remaining Spousal Interest may be purchased by the other Members, pro rata, in the same manner. If the other Members decline to purchase all of the remaining portion of such Spousal Interest in accordance with this Section 6.3, the option to purchase such remaining portion of such Spousal Interest shall terminate and the remaining portion of such Spousal Interest shall be held by the divorced spouse or estate, heirs or legatees of the deceased spouse but subsequently shall be offered for sale at the times and on the terms and conditions set forth in this Agreement as if such Spousal Interest were still wholly owned by the Member. However, in the event of the subsequent sale of the Membership Interest to which the Spousal Interest relates pursuant to another provision of Article 6, the Member or the personal representative of the Member’s estate shall pay the divorced spouse or the estate of such deceased spouse the appropriate portion of the sale proceeds of any such Membership Interest owned by such spouse or estate; but the purchaser of such Membership Interest hereunder

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shall not be obligated to verify or assure payment to such spouse or estate and shall be protected by making payments to the registered owner of such Membership Interest. Any successor to all or any portion of a Spousal Interest described in this Section 6.3 shall, upon receipt of such Spousal Interest, execute a written supplement to this Agreement and become a party to this Agreement and shall hold all of the Spousal Interest transferred to such successor subject in all respects to the terms and provisions hereof. Nothing contained in this Section 6.3 shall create any community property rights in any spouse of any Member and no such rights shall be inferred due to the provisions of this Section 6.3.

Section 6.4. Sales Price and Terms of Sale (a) The sales price of each Membership Interest (or interest therein) to be sold for the price specified in this Section 6.4 shall be the Fair Market Value (as hereinafter defined) of such Membership Interest (or interest therein). For purposes of this Section 6.4, “Fair Market Value” shall mean the amount of cash and fair market value of property which would be received by the holder of the Membership Interest (or interest therein) to be sold hereunder if the assets of the Company were sold for their fair market value as of the date of determination of the Fair Market Value, all debts, liabilities and obligations were fully paid and satisfied or adequate provision was made therefor, and all remaining assets of the Company were distributed to the Members in accordance with Section 8.2. The Member whose Membership Interest (or interest therein) is to be sold hereunder (the “Seller”) and the Person purchasing such Membership Interest (or interest

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therein) (whether one or more, the “Purchaser”) shall attempt to agree on the Fair Market Value of the Membership Interest (or interest therein) to be sold. If the Purchaser and the Seller are unable to agree on such Fair Market Value within ten (10) days after notice is given by the Purchaser or the Seller requesting such an agreement as to Fair Market Value (the date on which such notice is given being referred to herein as the “Notice Date”), Fair Market Value shall be determined by a qualified independent appraiser, selected as follows: Within twenty (20) days after the Notice Date, the Purchaser shall designate one qualified independent appraiser and the Seller shall designate another qualified independent appraiser. The two qualified independent appraisers shall jointly appoint a third qualified independent appraiser. The third qualified independent appraiser shall determine the Fair Market Value of the Membership Interest (or interest therein) to be sold as provided herein. The fees and expenses of such third qualified independent appraiser shall be borne equally by the Purchaser and the Seller. Fair Market Value shall be determined as of a date as near as reasonably practicable to the date of the occurrence of the event which results in the sale of the Membership Interest (or interest therein) hereunder.

(b) At the closing of any sale of a Membership Interest (or interest therein) to be sold on the terms and conditions specified in this Section 6.4, the Seller shall assign and deliver the Membership Interest to the Purchaser free and clear of any Encumbrances, together with such documents of transfer as shall be reasonably requested by the Purchaser, and the Purchaser shall deliver to the Seller the full consideration therefor payable either, at the Purchaser’s election, (1) in cash, by wire transfer or other immediately available funds or (2) twenty percent (20%) in cash and the

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balance evidenced by the execution by the Purchaser of an unsecured promissory note payable in five (5) equal annual installments of principal and interest, beginning on the first (1st) anniversary of the delivery of the promissory note, with interest on such obligation to accrue at the Prime Rate. Such note, if any, described in (2) above shall contain the customary provisions relating to acceleration of maturity in the event of default, interest on past due amounts at the maximum nonusurious rate permitted by law and reimbursement of attorneys’ fees and court costs. The Purchaser shall use its reasonable efforts to cause the release of the Seller from all personal liability as a guarantor of any Company indebtedness to any third party. Any transfer or similar taxes involved in such sale shall be paid by the Seller, and the Seller shall provide the Purchaser with such evidence of the Seller’s authority to sell hereunder and such tax lien waivers and similar instruments as the Purchaser may reasonably request.

Section 6.5.

Assignees (a) The Company shall not recognize for any purpose any purported Disposition of all or any portion of a Membership Interest unless the provisions of this Article 6 have been satisfied, all costs of such Disposition have been paid by the assigning Member, such Disposition is exempt from registration under the Securities Act and any applicable state securities act, and there is delivered to the Board, if requested by the Board, an opinion of counsel reasonably satisfactory to the Board with respect thereto, and there is filed with the Company a written and dated notification of such Disposition, in form satisfactory to the Board, executed by both the seller,

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assignor or transferor and the purchaser, assignee or transferee and such notification (1) contains the acceptance by the purchaser, assignee or transferee of and agreement to be bound by all the terms and provisions of this Agreement and (2) represents that such Disposition was made in accordance with all applicable securities laws and regulations (including suitability standards). Any Disposition of all or any portion of a Membership Interest shall be recognized by the Company as effective on the date of such notification if the date of such notification is within fifteen (15) days of the date on which such notification is filed with the Company, and otherwise shall be recognized as effective on the date such notification is filed with the Company.

(b) Any Member who Disposes of all of its Membership Interest in the Company shall cease to be a Member, except that, unless and until a substituted Member has been admitted into the Company, such assigning Member shall retain the statutory rights of the assignor of a member’s interest under the LLC Law.

(c) A Person who is the assignee of all or any portion of a Membership Interest, but does not become a substituted Member, and desires to make a further assignment of such interest, shall be subject to all the provisions of this Article 6 to the same extent and in the same manner as any Member desiring to make a Disposition of all or any portion of its Membership Interest.

Section 6.6. Additional and Substituted Members 705

(a) Except as otherwise provided in this Article 6, no Member shall have the right to substitute in its place a purchaser, assignee, transferee, donee, heir, legatee or other recipient of all or any portion of the Membership Interest of such Member. Any such purchaser, assignee, transferee, donee, legatee, distributee or other recipient of all or any portion of a Membership Interest shall be admitted to the Company as a substituted Member only with the consent of the Board, which consent may granted or withheld by the Board in its sole and absolute discretion.

(b) No Person shall become an additional or substituted Member until such Person has satisfied the requirements of this Article 6; provided, however, that for the purpose of allocating Profits, Losses and other items and distributing cash available for distribution, a Person shall be treated as having become, and as appearing in the records of the Company as, a Member, as the case may be, on such date as the Disposition to such Person was recognized by the Company pursuant to Section 6.5.

ARTICLE 7. BOOKS AND RECORDS; ACCOUNTING; REPORTING; TAX ELECTIONS; ETC. Section 7.1. Books and Records The books and records of the Company shall be maintained by the Board at the principal office of the Company and shall be available for examination at such office

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by any Member or its duly authorized representatives upon reasonable notice. Any Member, at its own expense, may cause an audit of the books and records of the Company and shall furnish a written report thereof to the other Members.

Section 7.2.

Accounting Basis for Tax Reporting Purposes; Fiscal Year; Tax Matters Partner The books and records of the Company shall be kept on such method of reporting for tax and financial reporting purposes as the Board shall select. The Fiscal Year of the Company shall be the calendar year. _________ shall serve as the “tax matters partner” of the Company pursuant to Section 6231(a)(7) of the Code.

Section 7.3. Reports As soon as is reasonably practicable after the end of each Fiscal Year, the Board shall cause the Company to send to each Member a copy of each federal and, if applicable, state income tax return of the Company for the Fiscal Year that ended, together with such other tax information as shall be reasonably necessary for the preparation by each Member of its federal and state income tax returns. The Board shall also send to the Members any other reports or statements the Board deems necessary from time to time.

ARTICLE 8. WINDING UP AND TERMINATION OF THE COMPANY Section 8.1. 707

Events Requiring Winding Up (a) The Company shall be wound up upon the first of the following to occur:

(1) Upon the election to wind up the Company by the Board and a Majority of the Members;

(2) The entry of a judgment, order or decree of a court of competent jurisdiction adjudicating the Company to be Bankrupt, and the expiration without appeal of the period, if any, allowed by applicable law in which to appeal therefrom; or

(3) The entry of a judicial order to wind up.

(b) The events set forth in Section 8.1(a) constitute the only means by which winding up of the Company shall occur.

(c) Upon the occurrence of an event requiring the winding up of the Company, the business and affairs of the Company shall terminate, and the assets of the Company shall be liquidated under this Article 8. Winding up of the Company shall be effective as of the day on which the event requiring the winding up of the Company occurs, but the Company shall not terminate until there has been a winding up of the

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Company’s business and affairs, and the assets of the Company have been distributed as provided in Section 8.2.

Section 8.2.

Liquidation; Sale of Substantially all of the Assets (a) Subject to the restrictions and limitations contained in this Agreement, upon the occurrence of an event requiring winding up of the Company, the Board may cause any part or all of the Company assets to be sold in such manner as the Board shall determine in an effort to obtain the best prices for such assets (provided, however, that the Board may distribute Company assets in kind to the Members to the extent practicable). During the liquidation period, the Board shall have the right to continue to operate and otherwise to deal with Company property to the same extent it has such right prior to the occurrence of the event requiring winding up of the Company.

(b) In settling accounts after the occurrence of an event requiring winding up of the Company, the assets of the Company shall be paid or distributed in the following order:

(1) first, to creditors of the Company (including Members, Managers and any Affiliate of any Member or Manager), in the order of priority as provided by law;

(2) 709

then, an amount equal to the then remaining positive balances in the Capital Accounts of the Members shall be distributed to the Members in proportion to the amount of such balances; and

(3) then, any remainder shall be distributed to the Members, pro rata, in accordance with their respective Sharing Ratios. Notwithstanding the foregoing, no distributions shall be made pursuant to this Section 8.2(b) before giving effect to the allocations of Profits, Losses and other items, pursuant to Section 5.2.

Section 8.3. Distributions in Kind If any assets of the Company are distributed in kind pursuant to this Agreement, such assets shall be distributed to the Members entitled thereto in the same proportions as the Members would have been entitled to cash distributions if such property had been sold for cash at its fair market value and the net proceeds thereof distributed to the Members. In the event that distributions in kind are made to the Members upon winding up and termination of the Company, the Capital Account balances of such Members shall be adjusted to reflect the Members’ allocable share of gain or loss which would have resulted if the distributed property had been sold at its fair market value (as determined in accordance with the method for determining Book Value).

Section 8.4. Date of Termination

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The Company shall be terminated when all the cash or property available for application and distribution under Section 8.2 hereof shall have been applied and distributed in accordance therewith and a Certificate of Termination has been filed pursuant to Section 8.6 hereof.

Section 8.5. Waiver of Partition Each Member hereby irrevocably WAIVES any right or power he may possess to compel a partition or sale of any asset of the Company or to compel a winding up of the Company other than as expressly set forth in this Agreement.

Section 8.6. Certificate of Termination Upon the completion of winding up of the Company, the Board shall cause to be filed with the Office of the Secretary of State of the State of Texas a Certificate of Termination, pursuant to the requirements of the LLC Law, canceling the Certificate of Formation.

ARTICLE 9. REPRESENTATIONS WARRANTIES OF THE MEMBERS

AND

Section 9.1.

Acquisition of Interest for Investment Each Member hereby represents and warrants to the Company and the Members that the acquisition of its Membership Interest is made for its own account for

711

investment purposes only and not with a view toward the resale or distribution of such Membership Interest.

Section 9.2. Access to Information Each Member has been afforded full opportunity to request any and all relevant information and ask questions concerning the proposed purposes and business of the Company, has been provided all information and copies of documents it has requested and has received answers to such questions to its full satisfaction. Each Member represents and warrants that such Member has not relied upon any information relating to the Company other than information supplied by the Company.

Section 9.3.

No Registration Each Member recognizes that the Membership Interests have not been registered under the Securities Act or applicable state securities laws and are being sold pursuant to the exemptions from registration offered by Section 4(2) of the Securities Act and the regulations promulgated thereunder and by applicable state law provisions. Each Member recognizes that, as a consequence, its Membership Interest must be held indefinitely unless it is subsequently registered under the Securities Act and applicable state securities laws, or an exemption from such registration is available, so that each Member must bear the economic risk of investment in its Membership Interest for an indefinite period of time.

Section 9.4. 712

No Obligation to Register Each Member acknowledges that neither the Company nor the Board is under any obligation to register the Membership Interests under any securities laws, and none of them has any present intention to do so. Each Member understands that there is no established market for the Membership Interests, and it is extremely unlikely that any public or private market will develop.

713

Section 9.5.

Suitability of Investment Each Member understands the nature of the investment being made and that it involves a high degree of risk. Each Member recognizes that the Company is a newly organized entity and has no history of operations or earnings.

Section 9.6. No Tax Representations Each Member represents and warrants that it has consulted its own tax advisor with respect to the tax aspects of such Member’s acquisition and ownership of its Membership Interest. Each Member represents and warrants that it is not relying upon any representations that may have been made by the Company or any Member as to any tax projections or tax consequences of the Member’s acquisition and ownership of its Membership Interest.

ARTICLE 10. MEETINGS OF MEMBERS Section 10.1. Place of Meetings All meetings of the Members shall be held at the principal office of the Company or at such other place within or without the State of Texas as may be determined by the Board and set forth in the respective notice or waivers of notice of such meeting. Notwithstanding anything contained herein to the contrary, there shall be an annual meeting of the Members, which shall take place at such time and place as determined by the Board.

714

Section 10.2.

Meetings of Members Meetings of the Members may be called at any time by the Board or any one or more Members holding, in the aggregate, at least fifty percent (50%) of the Sharing Ratios held by all Members.

Section 10.3. Notice of Meetings of Members Written or printed notice stating the place, day and hour of the meeting shall be delivered not less than seven (7) nor more than sixty (60) days before the date of the meeting, either personally, by fax or by mail, by or at the direction of the Board to each Member of record entitled to vote at such meeting.

Section 10.4. Quorum A Majority of the Members shall constitute a quorum at all meetings of the Members, except as otherwise provided by law. Once a quorum is present at the meeting of the Members, the subsequent withdrawal from the meeting of any Member prior to adjournment or the refusal of any Member to vote shall not affect the presence of a quorum at the meeting. If, however, such quorum shall not be present at any meeting of the Members, the Members entitled to vote at such meeting shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the holders of the requisite amount of Sharing Ratios shall be present or represented. A Member may be

715

present or may be represented by proxy for purposes of this Section 10.4.

Section 10.5.

Voting on Matters At any meeting of the Members at which a quorum is present, the vote of a Majority of the Members voting shall be the act of the Members, unless the vote of a greater number is required by law or this Agreement.

Section 10.6. List of Members Entitled to Vote The Board shall cause to be made, at least five (5) days before each meeting of the Members, a complete list of the Members entitled to vote at such meeting, or any adjournment of such meeting, arranged in alphabetical order, with the address of and the Sharing Ratios held by each, which list, for a period of five (5) days prior to such meeting, shall be kept on file at the principal office of the Company and shall be subject to inspection by any Member at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection of any Member during the whole time of the meeting. However, failure to comply with the requirements of this Section 10.6 shall not affect the validity of any action taken at such meeting.

Section 10.7. Registered Members The Company shall be entitled to treat the holder of record of any Membership Interest as the holder in fact of such

716

Membership Interest for all purposes, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such Membership Interest on the part of any other Person, whether or not it shall have express or other notice of such claim or interest, except as expressly provided by this Agreement or the laws of the State of Texas.

Section 10.8.

Actions With or Without a Meeting and Telephone Meetings Notwithstanding any provision contained in this Article 10, all actions of the Members provided for herein shall be taken either at a meeting and evidenced by written minutes thereof executed by an authorized Member or by written consent without a meeting. Any meeting of the Members may be held by means of a telephone conference in which all of the Members can hear or otherwise communicate with each other. Any action which may be taken by the Members without a meeting shall be effective only if the written consent (or consents) sets forth the action so taken, and is signed by the holder or holders of Sharing Ratios constituting not less than the minimum amount of Sharing Ratios that would be necessary to take such action at a meeting at which the holders of all Sharing Ratios entitled to vote on the action were present and voted. If any action or decision permitted by this Agreement to be taken or made by less than all of the Members is taken or made by a written consent signed by less than all of the Members, the Board shall, within seven (7) calendar days after such action is taken or such decision is made, give written notice of the action taken or the decision made to the Members who did not sign the written consent.

ARTICLE 11. MISCELLANEOUS PROVISIONS 717

Section 11.1. Address for Notices All notices, demands, consents, approvals and reports provided for in this Agreement shall be in writing and shall be given to the parties at the addresses set forth herein or at such other addresses as the Member may hereafter specify in writing. Such notices may be delivered by hand or by facsimile, or may be mailed, postage prepaid, by certified or registered mail, return receipt requested, by a deposit in a depository for the receipt of mail regularly maintained by the United States Postal Service. All notices that are hand delivered or delivered by facsimile shall be deemed given on the date of delivery. All notices that are mailed in the manner provided above shall be deemed given three (3) days after being mailed.

Section 11.2. Additional Documents and Acts In connection with this Agreement, as well as all transactions contemplated by this Agreement, the Members agree to execute such additional documents and papers, and to perform and do such additional acts as may be necessary and proper to effectuate and carry out all of the provisions of this Agreement.

Section 11.3.

Qualification in Foreign Jurisdictions The Members shall take such steps as are necessary or desirable to allow the Company to conduct business in any jurisdiction where the Company desires to conduct business.

718

Section 11.4.

Application of Texas Law; Venue This Agreement and the application or interpretation hereof, shall be governed exclusively by the laws of the State of Texas, and specifically the LLC Law. Venue for any dispute shall lie in Harris County, Texas.

Section 11.5. Headings and Sections The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof. Unless the context requires otherwise, all references in this Agreement to Sections or Articles shall be deemed to mean and refer to Sections or Articles of this Agreement.

Section 11.6. Confidentiality. The terms of this Agreement, the identity of any Member, any principal of a Member or any Affiliate of any Member or the relative or absolute rights or interests of any of the Members, all business, financial or other information relating directly to the conduct of the business and affairs of the Company, and the identity of any Person with whom the Company may be holding discussions with respect to any investment, acquisition or other transaction or in whom the Company may invest directly or indirectly (collectively, the “Information”) that has not been publicly disclosed with the consent of the Board is confidential and proprietary information of the Company the disclosure of which would

719

cause irreparable harm to the Company and the Members. Accordingly, each Member represents that it will not and will direct its shareholders, partners, members, directors, officers, managers, agents, advisors (including, without limitation, any appraiser selected by or on behalf of it) and Affiliates not to, disclose to any Person any Information or confirm any statement made by third persons regarding Information unless the Board consents thereto or until the Company has publicly disclosed the Information and has notified each Member that it has done so. The covenants contained in this Section 11.6 will survive the Disposition of the Membership Interest of any Member and the termination of the Company. Notwithstanding any contrary provision in this Section 11.6, any Member may, without breach of the covenants set forth in this Section 11.6 and without notice to or consent of the Board, disclose any Information in any filing required of such Member with any securities commission or other regulatory agency, to any financial advisors, accountants, attorneys or similar representatives or as may otherwise be required by applicable law.

Section 11.7. Amendments (a) Except as otherwise expressly set forth in this Agreement, the Certificate of Formation of the Company and this Agreement may be amended, by action of the Board and a Majority of the Members; provided, however, that any amendment or modification (a) altering any Member’s share of allocations of Profits (or any item thereof) and Losses (or any item thereof) or distributions (other than as a result of the issuance of additional Membership Interests or adjustments

720

to Sharing Ratios as expressly permitted herein), (b) altering any Member’s voting rights (other than as expressly provided herein), (c) modifying in any manner a Member’s obligation to make Capital Contributions, or (d) otherwise modifying the limited liability of a Member, shall require the consent of the Member affected thereby.

(b) Amendments Without Consent. In addition to amendments pursuant to Section 11.7(a), amendments of this Agreement may be made from time to time by the Board, without the consent of any of the Members, (a) to cure any ambiguity, or to correct or supplement any provision hereof which may be inconsistent with any other provision hereof, (b) to delete or add any provision of this Agreement required to be so deleted or added by any state or provincial securities commissioner or similar official, which addition or deletion is deemed by such commission or official to be for the benefit or protection of the Members, (c) to revise this Agreement as necessary to comply or conform with any revisions in applicable laws, rules and/or regulations governing the Company, (d) to effect a change that the Board in its sole discretion determines to be necessary or desirable to qualify or continue the qualification of the Company as a limited liability company or as an Entity in which the Members have limited liability under the laws of any state or to ensure that the Company will not be taxed as an association taxable as a corporation for federal income tax purposes, and (e) to reflect the admission of Additional Members or substituted Members in the Company; provided however, that no amendment shall be adopted pursuant to clauses (a) through (d) above unless the adoption thereof, in the reasonable opinion of the Board, is for the benefit of or not adverse to the interest of the Members and, in the opinion

721

of counsel, does not affect the limited liability of the Members or the status of the Company as a partnership for federal income tax purposes. The Board shall promptly notify the Members of any amendment adopted pursuant to clauses (a) through (e) of this Section 11.7(b).

Section 11.8. Numbers and Gender Where the context so indicates, the masculine shall include feminine and neuter, and the neuter shall include the masculine and feminine, and the singular shall include the plural and vice versa.

Section 11.9. Binding Effect Except as herein otherwise provided to the contrary, this Agreement shall be binding upon and inure to the benefit of the Members, their distributees, heirs, legal representatives, executors, administrators, successors and assigns.

Section 11.10. No State-Law Partnership The Members intend that the Company not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than federal and state tax purposes, and this Agreement may not be construed to suggest otherwise.

Section 11.11. 722

Entire Agreement This Agreement and the schedules and exhibits hereto, if any, contain all of the understandings and agreements of whatsoever kind and nature existing between the Members with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings with respect thereto.

Section 11.12. Severability Every provision hereof is intended to be severable, and if any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.

Section 11.13. No Waiver No waiver, express or implied, by any Member of any breach or default by any other Member in the performance by the other Member of its obligations hereunder shall be deemed or construed to be a waiver of any other breach or default under this Agreement. Failure on the part of any Member to complain of any act or omission of any other Member, or to declare such other Member in default irrespective of how long such failure continues, shall not constitute a waiver hereunder. No notice to or demand on a defaulting Member shall entitle such defaulting Member to any other or further notice or demand in similar or other circumstances.

Section 11.14. 723

Counterparts This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and shall be binding upon the Member who executed the same, but all of such counterparts shall constitute the same agreement.

Section 11.15. Approvals Except where otherwise indicated, all approval, consent and other similar rights of the Managers and the Members pursuant to this Agreement may be exercised by such Managers and Members, and such approvals and consents may be granted or denied by such Managers and Members, in their sole and absolute discretion.

Section 11.16. Spouse Acknowledgement By execution hereof, the spouse of each Member hereby consents to the terms of this Agreement to the extent applicable to such spouse and agrees to comply in all respects with the terms and provisions hereof.

Section 11.17. Creditors Not Benefited Nothing in this Agreement is intended to nor shall it benefit any creditor of the Company. No creditor of the Company will be entitled to require the Board to solicit or accept any loan or Capital Contribution for the Company or to enforce any right which the Company or any Member may

724

have against a Member, Agreement or otherwise.

whether

arising

under

this

Section 11.18.

Successors and Assigns This Agreement shall be binding upon and shall inure to the benefit of the Members, and their respective heirs, legal representatives, successors and assigns; provided, however, that nothing contained herein shall negate or diminish the restrictions set forth in Article 6.

Section 11.19. Exhibits and Schedules Each exhibit and schedule to incorporated herein for all purposes.

this

Agreement

is

IN WITNESS WHEREOF, the undersigned, being the initial Managers and all of the Members of the Company have caused this Agreement to be duly adopted by the Company effective as of the date first above written. MANAGERS: ____________ MEMBERS: ____________

[____________], LLC SCHEDULE 1 Names, Addresses, Initial Capital Contributions and Sharing Ratios of the Members 725

Names and Addresses of Members

Initial Capital Contributions

Sharing Ratios

 

 

 

____________

$______

___%

____________

 

____________

 

____________

$______

____________

 

____________

 

TOTALS

$

___%

100%

[____________], LLC SCHEDULE 2 OFFICERS ____________ President and Secretary Form No. 2.2.15.    Agreement to Roll Up Commercial Real Estate General Partnership into New  Delaware Manager-Managed LLC OPERATING AGREEMENT OF ________________ This Operating Agreement, effective this ______th day of ________, is entered into by and among the parties set forth on Exhibit B (as the Members) and ________, a ______ corporation, as the Manager, pursuant to the Act on the following terms and conditions.

1.

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Organization. 1.1 Formation. On ________, a Certificate of Formation was filed in the office of the Secretary of State of Delaware in accordance with and pursuant to the Act.

1.2 Name and Place of Business. The name of the Company shall be ________, and its principal place of business shall be ________. The Manager may change such name, change such place of business or establish additional places of business of the Company as the Manager may determine to be necessary or desirable.

1.3 Business and Purpose of the Company. The Company’s business and purpose shall consist of the acquisition, ownership and transfer of a commercial real estate project known as ________ located in ________, ________ (the “Project”), and the operation and management of the Project and such activities as are necessary or incidental in connection therewith either directly o through a special purpose entity established to hold the Project.

1.4 Term.

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The term of the Company shall terminate on ________, unless the Company is sooner dissolved as provided in this Agreement.

1.5

Required Filings. The Manager shall execute, acknowledge, file, record and/or publish such certificates and documents, as may be required by this Agreement or by law in connection with the formation and operation of the Company.

1.6 Registered Office and Registered Agent. The Company’s initial registered office and initial registered agent shall be as provided in the Certificate of Formation. The registered office and registered agent may be changed from time to time by the Manager by filing the address of the new registered office and/or the name of the new registered agent pursuant to the Act.

1.7 Certain Transactions. Any Manager, Member, Economic Interest Owner, or any Affiliate, or any shareholder, officer, director, employee, partner, member or any person owning an interest therein, may engage in or possess an interest in any other business or venture of any nature or description, whether or not competitive with the Company including, but not limited to, the acquisition, syndication, ownership, financing, leasing, operation, maintenance, management, brokerage, construction and development of property similar to the

728

Project and no Manager, Member or other person or entity shall have any interest in such other business or venture by reason of their interest in the Company.

2. Definitions. Definitions for this Agreement are set forth on Exhibit A and are incorporated herein.

3.

Capitalization and Financing. 3.1 Members’ Capital Contributions. 3.1.1 Property Contribution. The Members shall contribute their undivided interests in the Project, subject to the indebtedness in the approximate amount of $______. set forth on Exhibit “B” and shall receive the ______ B Units set forth on Exhibit “B”. The Capital Contribution shall have the net value as set forth on Exhibit “B”.

3.1.2 Sale of Additional Units. The Company, in the sole discretion of the Manager, is hereby authorized to sell and issue up to ______ A Units at a purchase price of $______ per A Unit and to admit the persons

729

who acquire such Units as Members. The terms and conditions of such sale shall be established in the sole discretion of the Manager.

3.1.3 Additional Sales of Units. The Company is authorized to sell additional Units on such terms and conditions as are approval by the Manager with a Majority Vote.

3.1.4

Manager as Member. The Manager and/or Affiliates may purchase Units for the same price and upon the same terms and conditions, as all other purchasers thereof.

3.1.5 Admission of a Member. To the extent required by law, the Manager shall amend this Agreement and take such other action as the Manager deems necessary or appropriate promptly after receipt of the Members’ Capital Contributions to the Company to reflect the admission of those persons to the Company as a Member.

3.1.6 Liabilities of Members. Except as specifically provided in this Agreement, neither the Manager nor any Member shall be required to make any additional contributions to the Company and no Manager or

730

Member shall be liable for the debts, liabilities, contracts, or any other obligations of the Company, nor shall the Manager or the Members be required to lend any funds to the Company or to repay to the Company, any Member, or any creditor of the Company any portion or all of any deficit balance in a Member’s Capital Account.

3.2 Member Loans. The Manager or Affiliates may, but will have no obligation to, make loans to the Company to pay Company operating expenses. Any such loan shall bear interest at the actual cost of funds to the Manager and provide for the payment of principal and any accrued but unpaid interest in accordance with the terms of the promissory note evidencing such loan, but in no event later than dissolution of the Company.

3.3

Company Loans. The Company may obtain, in the sole and absolute discretion of the Manager, loans to acquire or refinance the Project.

4. Allocation of Tax Items. 4.1 Allocation of Net Income and Net Loss. For each fiscal year, the Net Income and Net Loss of the Company shall be allocated as follows:

731

4.1.1 Net Income Allocations. After giving effect to the special allocations set forth in Sections 4.2 and 4.3, Net Income for any fiscal year shall be allocated as follows: (a) First, among the Members in proportion to and to the extent of Net Loss allocated to the Members pursuant to Section 4.1.2(b) and (c), in reverse order of priority, until the aggregate Net Income allocated to the Members pursuant to this Section 4.1.1(a) for such fiscal year and all previous fiscal years is equal to the aggregate Net Loss allocated to the Members pursuant to Section 4.1.2(b) and (c) for all previous fiscal years; (b) Second, to the Members holding B Units in proportion to their Units until $______ has been allocated pursuant to this provision. (c) Third, to the Members holding A Units in proportion to their Units.

4.1.2 Net Loss Allocations. After giving effect to the special allocations set forth in Sections 4.2 and 4.3, Net Loss for any fiscal year shall be allocated as follows: (a) First, among the Members in proportion to and to the extent of Net Income allocated to the Members under Section 4.1.1(b) until the aggregate Net Loss allocated pursuant to this Section 4.1.2(a) for such fiscal year and all previous fiscal years equals the aggregate Net Income allocated to the Members pursuant to Section 4.1.1(b) for all previous fiscal

732

years; provided that Net Loss shall not be allocated to any Member to the extent such allocation would cause such Member to have an Adjusted Capital Account Deficit at the end of a fiscal year; (b) Second, to the Members in proportion to their Units.

4.2

Special Allocations. 4.2.1 Qualified Income Offset. Except as provided in Section 4.2.3, in the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii) (d)(6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit created by such adjustment, allocation or distribution as quickly as possible.

4.2.2 Gross Income Allocation. Net Loss shall not be allocated to any Member to the extent such allocation would cause any Member to have an Adjusted Capital Account Deficit at the end of a fiscal year. In the event any Member has an Adjusted Capital Account Deficit at the end of any fiscal year, each such Member shall be specially allocated items of Company gross income and

733

gain in the amount of such Adjusted Capital Account Deficit as quickly as possible.

4.2.3

Company Minimum Gain Chargeback. Notwithstanding any other provision of this Section 4, if there is a net decrease in Company Minimum Gain during any Company fiscal year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g)(2). This Section 4.2.3 is intended to comply with the partnership minimum gain chargeback requirement in the Treasury Regulations and shall be interpreted consistently therewith. This provisions shall not apply to the extent the Member’s share of net decrease in Company Minimum Gain is caused by a guaranty, refinancing, or other change in the debt instrument causing it to become partially or wholly recourse debt or Member Nonrecourse Debt, and such Member bears the economic risk of loss (within the meaning of Treasury Regulations Section 1.752-2) for the newly guaranteed, refinanced or otherwise changed debt or to the extent the Member contributes cash to the capital of the Company that is used to repay the Nonrecourse Debt, and the Member’s share of the net decrease in Company Minimum Gain results from the repayment.

4.2.4 Member Minimum Gain Chargeback.

734

Notwithstanding any other provision of this Section 4, except Section 4.2.3, if there is a net decrease in Member Minimum Gain, any Member with a share of that Member Minimum Gain (as determined under Treasury Regulations Section 704-2(i)(5)) as of the beginning of the year shall be allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Member Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g)(2). This Section shall not apply to the extent the net decrease in Member Minimum Gain arises because the liability ceases to be Member Nonrecourse Debt due to conversion, refinancing or other change in a debt instrument that causes it to become partially or wholly a Nonrecourse Debt. This Section is intended to comply with the partner minimum gain chargeback requirements in the Treasury Regulations and shall be interpreted consistently therewith and applied with the restrictions attributable thereto.

4.2.5 Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other period shall be allocated to the Members in proportion to their Units and each Member’s share of excess Nonrecourse Debt shall be in the same proportion.

4.2.6 Member Nonrecourse Deductions. Member Nonrecourse Deductions for any fiscal year shall be allocated to the Member who bears the economic risk of loss as set forth in Treasury Regulations Section 1.752-2 with

735

respect to the Member Nonrecourse Debt. If more than one Member bears the economic risk of loss for a Member Nonrecourse Debt, any Member Nonrecourse Deductions attributable to that Member Nonrecourse Debt shall be allocated among the Members according to the ratio in which they bear the economic risk of loss.

4.2.7

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 Code Section 743(b) is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the 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 such section of the Treasury Regulations.

4.3 Curative Allocations. Notwithstanding any other provision of this Agreement, the Regulatory Allocations shall be taken into account in allocating items of income, gain, loss and deduction among the Members so that, to the extent possible, the net amount of such allocations of other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred.

736

4.4

Contributed Property. Notwithstanding any other provision of this Agreement, the Members shall cause depreciation and or cost recovery deductions and gain or loss attributable to Property contributed by a Member or revalued by the Company to be allocated among the Members for income tax purposes in accordance with Section 704(c) of the Code and the Treasury Regulations promulgated thereunder.

4.5 Recapture Income. The portion of each Member’s distributive share of Net Income that is characterized as ordinary income pursuant to Section 1245 or 1250 of the Code shall be proportionate to the amount of Net Income or New Loss which included the corresponding depreciation deductions that were allocated to such Member as compared with the amount of depreciation deductions allocated to all Members.

4.6 Allocation Among Units. Except as otherwise provided in this Agreement, all Distributions and allocations made to the Units shall be in the ratio of the number of Units held by each such Member on the date of such allocation (which allocation date shall be deemed to be the last day of each month) to the total outstanding Units as of such date, and, except as otherwise provided in this Agreement without regard to the number of days during such month that the Units were held by each Member. Members who purchase Units at different times

737

during the Company tax year shall be allocated Net Income and Net Loss using the monthly convention set forth in Section 4.9. For purposes of this Section 4, an Economic Interest Owner shall be treated as a Member.

4.7

Allocation of Company Items. Except as otherwise provided herein, whenever a proportionate part of Net Income or Net Loss is allocated to a Member, every item of income, gain, loss or deduction entering into the computation of such Net Income or Net Loss, and every item of credit or tax preference related to such allocation and applicable to the period during which such Net Income or Net Loss was realized shall be allocated to the Owner in the same proportion.

4.8 Assignment. In the event of the assignment of a Unit, the Net Income and Net Loss shall be apportioned as between the Member and his assignee based upon the number of months of their respective ownership during the year in which the assignment occurs, without regard to the results of the Company’s operations during the period before or after such assignment. Distributions shall be made to the holder of record of the Units as of the date of the Distribution. An assignee who receives Units during the first 15 days of a month will receive any allocations relative to such month. An assignee who acquires Units on or after the sixteenth day of a month will be treated as acquiring his Units on the first day of the following month.

738

4.9

Power of Manager to Vary Allocations. It is the intent of the Members that each Member’s share of Net Income and Net Loss be determined and allocated in accordance with Section 704(b) of the Code and the provisions of this Agreement shall be so interpreted. Therefore, if the Company is advised by the Company’s legal counsel that the allocations provided in this Section 4 are unlikely to be respected for federal income tax purposes, the Manager is hereby granted the power to amend the allocation provisions of this Agreement to the minimum extent necessary to comply with Section 704(b) of the Code and effect the plan of allocations and distributions provided for in this Agreement.

4.10 Consent of Members. The allocation methods of Net Income and Net Loss are hereby expressly consented to by each Member as a condition of becoming a Member.

4.11 Withholding Obligations. 4.11.1 If the Company is required (as determined in good faith by the Manager) to make a payment (“Tax Payment”) with respect to any Member to discharge any legal obligation of the Company or the Manager to make payments to any governmental authority with respect to any federal, foreign, state or local tax liability of such Member arising as a result of such Member’s interest in the Company, then,

739

notwithstanding any other provision of this Agreement to the contrary, the amount of any such Tax Payment shall be deemed to be a loan by the Company to such Member, which loan shall bear interest at the Prime Rate and be payable upon demand or by offset to any Distribution which otherwise would be made to such Member.

4.11.2 If and to the extent the Company is required to make any Tax Payment with respect to any Member, or elects to make payment on any loan described in Section 4.12.1 by offset to a Distribution to a Member, either (i) such Member’s proportionate share of such Distribution shall be reduced by the amount of such Tax Payment, or (ii) such Member shall pay to the Company prior to such Distribution an amount of cash equal to such Tax Payment. In the event a portion of a Distribution in kind is retained by the Company pursuant to clause (i) above, such retained property may, in the discretion of the Manager, either (A) be distributed to the other Members, or (B) be sold by the Company to generate the cash necessary to satisfy such Tax Payment. If the property is sold, then for purposes of income tax allocations only under the Agreement, any gain or loss from such sale or exchange shall be allocated to the Member to whom the Tax Payment relates. If the property is sold at a gain, and the Company is required to make any Tax Payment on such gain, the Member to whom the gain is allocated shall pay the Company prior to the due date of Tax Payment an amount of cash equal to such Tax Payment.

4.11.3 The Manager shall be entitled to hold back any Distribution to any Member to the extent the Manager believes in good faith that a Tax Payment will be required with

740

respect to such Member in the future and the Manager believes that there will not be sufficient subsequent Distributions to make such Tax Payment.

5. Distributions. 5.1

Cash From Operations. Except as otherwise provided in Section 13, Distributable Cash From Operations with respect to each calendar year shall be distributed to the Members in proportion to their Units.

5.2 Cash From Sale or Refinancing. Except as set forth in Section 13, Distribute Cash From Sale of Refinancing shall be distributed as follows: (a) First, to the holders of the A Units until the A Unit holders’ Net Capital Contributions are reduced to zero; (b) Second, to the holders of the B Units until the B Unit holders’ Net Capital Contributions are reduced to zero; (c) Third, to the Members in proportion to their Units.

5.3 Restrictions. The Company intends to make periodic distributions of substantially all cash determined by the Manager to be

741

distributable, subject to the following: (i) Distributions may be restricted or suspended for periods when the Manager determines in its reasonable discretion that it is in the best interest of the Company; and (ii) all Distributions are subject to the payment, and the maintenance of reasonable reserves for payment, of Company obligations.

6.

Compensation to the Manager and Affiliates. 6.1 Manager’s and Affiliates’ Compensation. The Manager and its Affiliates shall receive compensation from the Company for services rendered or to be rendered only as specified in this Agreement.

6.1.1 As compensation for its services, the Property Manager or its Affiliates shall receive compensation for services rendered or to be rendered as specified in the Property and Asset Management Agreement.

6.1.2 As compensation for its services and pursuant to the Project’s Covenants, Conditions and Restriction Agreement, the Property Manager will be paid its reasonable overhead and/or profits by the owners of the Project for its services in maintaining the common areas of the Project if it is engaged to perform such services.

6.2

742

Company Expenses. 6.2.1 Operating Expenses. Subject to the limitations set forth in Section 6.2.2., the Company shall pay directly, or reimburse the Manager as the case may be, for all of the costs and expenses of the Company’s operations, including, without limitation, the following costs and expenses: (i) all Organization and Offering Expenses advanced or otherwise paid by the Manager; (ii) all costs of personnel employed by the Company and directly involved in the Company’s business; (iii) all compensation due to the Manager or its Affiliates; (iv) all costs of personnel employed by the Manager or its Affiliates and directly involved in the business of the Company; (v) all costs of borrowed money, taxes and assessments on the Property and other taxes applicable to the Company; (vi) legal, accounting, audit, brokerage, and other fees; (vii) fees and expenses paid to independent contractors, mortgage bankers, real estate brokers, and other agents; (viii) costs of acquiring, owning, developing, improving, operating, and disposing of Property; (ix) expenses incurred in connection with the development, alteration, maintenance, repair, remodeling, refurbishment, leasing and operation of Property; (x) all expenses incurred in connection with the maintenance of Company books and records, the preparation and dissemination of reports, tax returns or other information to the Members and the making of Distributions to the Members; (xi) expenses incurred in preparation and filing reports or other information with appropriate regulatory agencies; (xii) expenses of insurance as required in connection with the business of the Company, other than any insurance insuring the Manager against losses for which it is not entitled to be indemnified under Section 7.8; (xiii) costs incurred in connection with any litigation in

743

which the Company may become involved, or any examination, investigation, or other proceedings conducted by any regulatory agency, including legal and accounting fees; (xiv) the actual costs of goods and materials used by or for the Company; (xv) the costs of services that could be performed directly for the Company by independent parties such as legal, accounting, secretarial or clerical, reporting, transfer agent, data processing and duplicating services but which are in fact performed by the Manager or its Affiliates, but not in excess of the lesser of: (a) the actual costs to the Manager or its Affiliates of providing such services; or (b) the amounts which the Company would otherwise be required to pay to independent parties for comparable services in the same geographic locale; (xvi) expenses of Company administration, accounting, documentation and reporting, (xvii) expenses of revising, amending, modifying, or terminating this Agreement; (xviii) all travel expenses incurred in connection with the Company’s business, including travel to and from the Property; and (xix) all other costs and expenses incurred in connection with the business of the Company exclusive of those set forth in Section 6.2.2.

6.2.2

Manager Overhead. Except as set forth in this Section 6, the Manager and its Affiliates shall not be reimbursed for overhead expenses incurred in connection with the Company, including but not limited to rent, depreciation, utilities, capital equipment, other administrative items.

6.2.3 Acquisition Expenses.

744

Notwithstanding Section 6.2.2, the Manager and its Affiliates will be reimbursed for all costs expended in the due diligence of the Project and acquisition of the Project, including down payments, closing costs, travel, legal, toxic and other studies, surveys, escrow deposits and costs, plus interest at the Manager’ cost of funds to borrow funds for the above purposes.

7.

Authority, and Responsibilities of the Manager. 7.1 Management. The business and affairs of the Company shall be managed by its Manager. Except as otherwise set forth in this Agreement, the Manager shall have full and complete authority, power and discretion to manage and control the business, affairs and properties 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.

7.2 Number, Tenure and Qualifications. The Company shall have one Manager which shall be ________. The Manager shall hold office until such Manager is removed or withdraws or resigns.

7.3 Manager Authority. 745

The Manager shall have all authority, rights and powers conferred by law (subject only to Section 7.4) and those required or appropriate to the management of the Company’s business, which, by way of illustration but not by way of limitation, shall include the right, authority and power to cause the Company to:

7.3.1 Take all actions as the buyer of an undivided interest in the Project.

7.3.2 Acquire, hold, develop, lease, rent, operate, sell, exchange, subdivide and otherwise dispose of Property including the Project;

7.3.3 Borrow money, and, if security is required therefor, to pledge or mortgage or subject Property to any security device, to obtain replacements of any mortgage or other security device and to prepay, in whole or in part, refinance, increase, modify, consolidate, or extend any mortgage or other security device. All of the foregoing shall be on such terms and in such amounts as the Manager, in its sole discretion, deems to be in the best interest of the Company;

7.3.4 Place record title to, or the right to use, Property in the name or names of a nominee or nominees for any purpose convenient or beneficial to the Company;

7.3.5

746

Enter into such contracts and agreements as the Manager determines to be reasonably necessary or appropriate in connection with the Company’s business and purpose (including contracts with Affiliates of the Manager), and any contract of insurance that the Manager deems necessary or appropriate for the protection of the Company and the Manager, including errors and omissions insurance, for the conservation of Company assets, or for any purpose convenient or beneficial to the Company;

7.3.6 Employ persons, who may be Affiliates of the Manager, in the operation and management of the business of the Company;

7.3.7 Prepare or cause to be prepared reports, statements, and other relevant information for distribution to the Members;

7.3.8 Open accounts and deposits and maintain funds in the name of the Company in banks, savings and loan associations, “money market” mutual funds and other instruments as the Manager may deem in its discretion to be necessary or desirable;

7.3.9 Cause the Company to make or revoke any of the elections referred to in the Code (the Manager shall have no obligation to make any such elections);

7.3.10

747

Select as its accounting year a calendar or fiscal year as may be approved by the Internal Revenue Service (the Company initially intends to adopt the calendar year);

7.3.11 Determine the appropriate accounting method or methods to be used by the Company;

7.3.12 In addition to any amendments otherwise authorized herein, amend this Agreement without any action on the part of the Members by special or general power of attorney or otherwise: (a) To add to the representations, duties, services or obligations of the Manager or its Affiliates, for the benefit of the Members; (b) To cure any ambiguity or mistake, to correct or supplement any provision herein that may be inconsistent with any other provision herein, or to 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; (c) To delete or add any provision of this Agreement required to be so deleted or added for the benefit of the Members by the staff of the Securities and Exchange Commission or by a state “Blue Sky” Commissioner or similar official; (d) To amend this Agreement to reflect the addition or substitution of Members or the reduction of the Capital Accounts upon the return of capital to the Members; (e) To minimize the adverse impact of, or comply with, any final regulation of the United States Department of Labor, or

748

other federal agency having jurisdiction, defining “plan assets” for ERISA purposes; (f) To reconstitute the Company under the laws of another state if beneficial; (g) To execute, acknowledge and deliver any and all instruments to effectuate the foregoing, including the execution, acknowledgment and delivery of any such instrument by the attorney-in-fact for the Manager under a special or limited power of attorney, and to take all such actions in connection therewith as the Manager shall deem necessary or appropriate with the signature of the Manager acting alone; and (h) Make any changes to this Agreement as requested or required by any lender or potential lender which may be required to obtain financing.

7.3.13 Require in any Company contract that the Manager shall not have any personal liability, but that the person or entity contracting with the Company is to look solely to the Company and its assets for satisfaction;

7.3.14 Lease personal property for use by the Company;

7.3.15 Establish reserves from income in such amounts as the Manager may deem appropriate;

7.3.16 Temporarily invest the proceeds from sale of Units in short-term, highly-liquid investments;

749

7.3.17 Make secured or unsecured loans to the Company and receive interest at the rates set forth herein;

7.3.18 Represent the Company and the Members as “tax matters partner” within the meaning of the Code in discussions with the Internal Revenue Service regarding the tax treatment of items of Company income, loss, deduction or credit, or any other matter reflected in the Company’s returns, and, if deemed in the best interest of the Members, to agree to final Company administrative adjustments or file a petition for a readjustment of the Company items in question with the applicable court;

7.3.19 Offer and sell Units to the public through any licensed Affiliate, or licensed nonaffiliate, and to employ licensed personnel, agents and dealers for such purpose;

7.3.20 Redeem or repurchase Units on behalf of the Company;

7.3.21 Hold an election for a successor Manager before the resignation, expulsion or dissolution of the Manager;

7.3.22 Initiate legal actions, settle legal actions and defend legal actions on behalf of the Company;

7.3.23 750

Admit itself as a Member;

7.3.24 Take all actions and make any decision under the Property and Asset Management Agreement or the Tenants in Common Agreement;

7.3.25 Amend the Property and Asset Management Agreement;

7.3.26 Enter into any transaction with any partnership or venture;

7.3.27 Merge or combine the Company or “roll-up” the Company into a partnership, limited liability company or other entity with a Majority Vote of the Units;

7.3.28 Place all or a portion of the Project in a single purpose or bankruptcy remote entity, or otherwise structure or restructure the Company to accommodate any financing for all or a portion of the Project;

7.3.29 Book-up the Company’s assets and Company’s assets in-kind to the Members;

distribute

the

7.3.30 Perform any and all other acts which the Manager is obligated to perform hereunder; and

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7.3.31 Execute, acknowledge and deliver any and all instruments to effectuate the foregoing and take all such actions in connection therewith as the Manager may deem necessary or appropriate. Any and all documents or instruments may be executed on behalf and in the name of the Company by the Manager.

7.4

Restrictions on Manager’s Authority. Neither the Manager nor any Affiliates shall authority, without a Majority Vote of the Units, to:

have

7.4.1 Enter into contracts with the Company that would bind the Company after the expulsion, Event of Insolvency, or other cessation to exist of the Manager, or to continue the business of the Company after the occurrence of such event;

7.4.2 Use or permit any other person to use Company funds or assets in any manner except for the exclusive benefit of the Company;

7.4.3 Alter the primary purpose of the Company;

7.4.4 Receive from the Company a rebate or give-up or participate in any reciprocal business arrangements which would enable it or any Affiliate to do so;

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7.4.5 Except for the Project, or an undivided interests therein, sell or lease to the Company any real property in which the Manager or any Affiliate has any interest without a Majority Vote of the Units;

7.4.6 Admit another person or entity as the Manager, except with the consent of the Members as provided in this Agreement;

7.4.7 Reinvest Cash from Operations properties other than the Project;

in

any

additional

7.4.8 Commingle the Company funds with those of any other person or entity, except for (i) the temporary deposit of funds in a bank checking account for the sole purpose of making Distributions immediately thereafter to the Members and the Manager or (ii) funds attributable to the Project and held for use in the management of the operations of the Project; or

7.4.9 Directly or indirectly pay or award any finder’s fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such advisor to advise the purchaser regarding the purchase of Units; provided, however, that the Manager shall not be prohibited from paying underwriting or marketing commissions, or finder’s or referral fees to registered brokerdealers or other properly licensed persons for its services in marketing Units as provided for in this Agreement.

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7.5

Responsibilities of the Manager. The Manager shall:

7.5.1 Have a fiduciary responsibility for the safekeeping and use of all the funds and assets of the Company;

7.5.2 Devote such of its time and business efforts to the business of the Company as it shall in its discretion, exercised in good faith, determine to be necessary to conduct the business of the Company for the benefit of the Company and the Members;

7.5.3 File and publish all certificates, statements, or other instruments required by law for formation, qualification and operation of the Company and for the conduct of its business in all appropriate jurisdictions;

7.5.4 Cause the Company to be protected by public liability, property damage and other insurance determined by the Manager in its discretion to be appropriate to the business of the Company;

7.5.5 At all times use its best efforts to meet applicable requirements for the Company to be taxed as a partnership and not as an association taxable as a corporation; and

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7.5.6 Amend this Agreement to reflect the admission of Members not later than 90 days after the date of admission or substitution.

7.6

Administration of Company. So long as it is the Manager and the provisions of this Agreement for compensation and reimbursement of expenses of the Manager are observed, the Manager shall have the responsibility of providing continuing administrative and executive support, advice, consultation, analysis and supervision with respect to the functions of the Company, including decisions regarding the sale or refinancing or other disposition of the Project, and compliance with federal, state and local regulatory requirements and procedures. In this regard, the Manager may retain the services of such Affiliates or unaffiliated parties as the Manager may deem appropriate to provide management and financial consultation and advice, and may enter into agreements for the management and operation of Company assets.

7.7 Tax Matters Member. The Members hereby appoint ________ to act as the “tax matters partner.”

7.8 Indemnification of Manager. 7.8.1 755

The Manager, its shareholders, Affiliates, officers, directors, partners, manager, members, employees, agents and assigns, shall not be liable for, and shall be indemnified and held harmless (to the extent of the Company’s assets) from, any loss or damage incurred by them, the Company or the Members in connection with the business of the Company, including costs and reasonable attorneys’ fees and any amounts expended in the settlement of any claims of loss or damage resulting from any act or omission performed or omitted in good faith, which shall not constitute gross negligence or willful malfeasance, pursuant to the authority granted, to promote the interests of the Company. Moreover, the Manager shall not be liable to the Company or the Members because any taxing authorities disallow or adjust any deductions or credits in the Company income tax returns.

7.8.2 Notwithstanding Section 7.8.1, the Company shall not indemnify any Manager, or shareholder, director, officer or other employee thereof, for liability imposed or expenses incurred in connection with any claim arising out of a violation of the Securities Act of 1933, or any other federal or state securities law, with respect to the offer and sale of the Units. Indemnification will be allowed for settlements and related expenses in lawsuits alleging securities law violations, and for expenses incurred in successfully defending such lawsuits, provided that (i) the Manager is successful in defending the action; (ii) the indemnification is specifically approved by the court of law which shall have been advised as to the current position of the Securities and Exchange Commission (as to any claim involving allegations that the Securities Act of 1933 was violated) or the applicable state authority (as to any claim involving allegations that the applicable state’s securities laws were violated); or (iii) in the

756

opinion of counsel for the Company, the right indemnification has been settled by controlling precedent.

to

7.9

No Personal Liability for Return of Capital. The Manager shall not be personally liable or responsible for the return or repayment of all or any portion of the Capital Contribution of any Member of any loan made by any Member to the Company, it being expressly understood that any such return of capital or repayment of any loan shall be made solely from the assets (which shall not include any right of contribution from any Member) of the Company.

7.10 Authority as to Third Persons. 7.10.1 No third party dealing with the Company shall be required to investigate the authority of the Manager or secure the approval or confirmation by any Member of any act of the Manager in connection with the Company business. No purchaser of any property or interest owned by the Company shall be required to determine the right to sell or the authority of the Manager to sign and deliver any instrument of transfer on behalf of the Company, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith.

7.10.2 The Manager shall have full authority to execute on behalf of the Company any and all agreements, contracts, conveyances, deeds, mortgages and other instruments, and

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the execution thereof by the Manager, executing on behalf of the Company shall be the only execution necessary to bind the Company thereto. No signature of any Member shall be required.

7.10.3 The Manager shall have the right by separate instrument or document to authorize one or more individuals or entities to execute leases and lease-related documents on behalf of the Company and any leases and documents executed by such agent shall be binding upon the Company as if executed by the Manager.

8.

Rights, Authority and Voting of the Members. 8.1 Members Are Not Agents. Pursuant to Section 7, the management of the Company is vested in the Manager. 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.

8.2 Voting by a Member. Members who own Units shall be entitled to cast one vote for each Unit they own. Except as otherwise specifically provided in this Agreement, Members who own Units (but not Economic Interest Owners) shall have the right to vote only upon the following matters:

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8.2.1 Removal of the Manager as provided in this Agreement;

8.2.2 Admission of the Manager or election to continue the business of the Company after the Manager ceases to be the Manager when there is no remaining Manager;

8.2.3 Amendment of this Agreement;

8.2.4 Any merger or combination of the Company or roll-up of the Company;

8.2.5 Dissolution and winding up of the Company as set forth in Section 13.1;

8.2.6 The sale of all or substantially all of the assets of the Company;

8.2.7 The termination of the Property Manager under the Property and Asset Management Agreement; and

8.2.8 Election to continue the business of the Company as set forth in Section 13.1.5 when there is a Dissolution Event.

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8.3

Member Vote; Consent of Manager. Except for the Majority Votes required pursuant to Sections 8.2.1, 8.2.2, 8.2.7, 8.2.8, 8.4.3, 9.1, 9.2, 9.3, 9.4, 10.1, 10.1.3, 10.1.4 and 13.3 or as specifically provided in this Agreement which provisions shall only require a Majority Vote of the Members, matters upon which the Members may vote shall require a Majority Vote of the Units and the consent of the Manager to pass and become effective.

8.4 Meetings of the Members. The Manager may at any time call for a meeting of the Members, or for a vote without a meeting, on matters on which the Members are entitled to vote, and shall call for such a meeting (but not a vote without a meeting) following receipt of a written request therefor of Members holding more than 10 percent of the Units entitled to vote as of the record date. Within 20 days after receipt of such request, the Manager shall notify all Members of record on the record date of the Company meeting.

8.4.1 Notice. Written notice of each meeting shall be given to each Member entitled to vote, either personally or by mail or other means of written communication, charges prepaid, addressed to such Member at his address appearing on the books of the Company or given by him to the Company for the purpose of notice or, if no such address appears or is given, at the principal executive office of the Company, or by publication of

760

notice at least once in a newspaper of general circulation in the county in which such office is located. All such notices shall be sent not less than 10, nor more than 60, days before such meeting. The notice shall specify the place, date and hour of the meeting and the general nature of business to be transacted, and no other business shall be transacted at the meeting.

8.4.2

Adjourned Meeting and Notice Thereof. When a Members’ meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at the meeting.

8.4.3 Quorum. The presence in person or by proxy of the persons entitled to vote a majority of the Units shall constitute a quorum for the transaction of business. The Members present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough Members to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a Majority Vote or such greater vote as may be required by this Agreement or by law.

761

In the absence of a quorum, any meeting of Members may be adjourned from time to time by the vote of a majority of the Units represented either in person or by proxy, but no other business may be transacted, except as provided above.

8.4.4 Consent of Absentees. The transactions of any meeting of Members, however called and noticed and wherever held, are as valid as though they occurred at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of the meeting or an approval of the minutes thereof. All waivers, consents and approvals shall be filed with the Company records or made a part of the minutes of the meeting.

8.4.5

Action Without Meeting. Except as otherwise provided in this Agreement, any action which may be taken at any meeting of the Members may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by Members having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all entitled to vote thereon were present and voted. In the event the Members are requested to consent on a matter without a meeting, each Member shall be given not less than 10, nor more than 60, days notice. In the event the Manager or Members representing more than 10% of the Units, request a meeting for the purpose of discussing or voting on the

762

matter, the notice of a meeting shall be given in the same manner as required by Section 8.4.1 and no action shall be taken until the meeting is held. Unless delayed as a result of the preceding sentence, any action taken without a meeting will be effective 5 days after the required minimum number of voters have signed the consent; however, the action will be effective immediately if the Manager and Members representing at least 90% of the Units have signed the consent.

8.4.6 Record Dates. For purposes of determining the Members entitled to notice of any meeting or to vote or entitled to receive any Distributions or to exercise any rights in respect of any other lawful matter, the Manager (or Members representing more than 10% of the Units if the meeting is being called at their request) may fix in advance a record date, which is not more than 60 nor less than 10 days prior to the date of the meeting nor more than 60 days prior to any other action. If no record date is fixed: (a) The record date for determining Members entitled to notice of or to vote at a meeting of Members shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; (b) The record date for determining Members entitled to give consent to Company action in writing without a meeting shall be the day on which the first written consent is given; (c) The record date for determining Members for any other purpose shall be at the close of business on the day on which

763

the Manager adopts it, or the 60th day prior to the date of the other action, whichever is later; and (d) A determination of Members of record entitled to notice of or to vote at a meeting of Members shall apply to any adjournment of the meeting unless the Manager, or the Members who requested the meeting fix a new record date for the adjourned meeting, but the Manager, or such Members, shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting.

8.4.7 Proxies. Every person entitled to vote or execute consents shall have the right to do so either in person or by one or more agents authorized by a written proxy executed by such person or his duly authorized agent and filed with the Manager. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy continues in full force and effect until revoked as specified or unless it states that it is irrevocable. A proxy which states that it is irrevocable is irrevocable for the period specified therein.

8.4.8

Chairman of Meeting. The Manager may select any person to preside as Chairman of any meeting of the Members, and if such person shall be absent from the meeting, or fail or be unable to preside, the Manager may name any other person in substitution therefor as Chairman. In the absence of an express selection by the Manager of a Chairman or substitute therefor, the President, Vice President, Secretary, or Chief

764

Financial Officer of ________, shall preside as Chairman, in that order. The Chairman of the meeting shall designate a secretary for such meeting, who shall take and keep or cause to be taken and kept minutes of the proceedings thereof. The conduct of all Members’ meetings shall at all times be within the discretion of the Chairman of the meeting and shall be conducted under such rules as he may prescribe. The Chairman shall have the right and power to adjourn any meeting at any time, without a vote of the Units present in person or represented by proxy, if the Chairman shall determine such action to be in the best interests of the Company.

8.4.9

Inspectors of Election. In advance of any meeting of Members, the Manager may appoint any persons other than nominees for Manager or other office as the inspector of election to act at the meeting and any adjournment thereof. If an inspector of election is not so appointed, or if any such person fails to appear or refuses to act, the Chairman of any such meeting may, and on the request of any Member or his proxy shall, make such appointment at the meeting. The inspector of election shall determine the number of Units outstanding and the voting power of each, the Units represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all Members.

8.4.10 765

Record Date and Closing Company Books. When a record date is fixed, only Members of record on that date are entitled to notice of and to vote at the meeting or to receive a Distribution, or allotment of rights, or to exercise the rights, as the case may be, notwithstanding any transfer of any Units on the books of the Company after the record date.

8.5 Rights of Members. No Member or Owner shall have the right or power to: (i) withdraw or reduce his contribution to the capital of the Company, except as a result of the dissolution and termination of the Company or as otherwise provided in this Agreement or by law; (ii) bring an action for partition against the Company; or (iii) demand or receive property other than cash in return for his Capital Contribution. Except as provided in this Agreement, no Member or Owner shall have priority over any other Member or Owner either as to the return of Capital Contributions or as to allocations of the Net Income, Net Loss or Distributions of the Company. Other than upon the termination and dissolution of the Company as provided by this Agreement, there has been no time agreed upon when the contribution of each Member (other than the Initial Member) or Owner is to be returned.

8.6 Restrictions on the Member. No Member shall:

8.6.1 766

Disclose to any non-Member other than their lawyers, ac