LIMITED LIABILITY COMPANY AGREEMENT 3400 GEORGIA AVENUE INVESTMENTS I, LLC

Transcription

1 EXECUTION COPY LIMITED LIABILITY COMPANY AGREEMENT of 3400 GEORGIA AVENUE INVESTMENTS I, LLC a Delaware Limited Liability Company The Membership Interests evidenced hereby have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act ), in reliance upon an exemption from registration thereunder and have not been registered or qualified under the state securities laws of any relevant jurisdiction in which the Membership Interests have been offered and sold pursuant to applicable exemption therefrom. The Membership Interests may not be sold, pledged, hypothecated, or otherwise transferred except pursuant to an effective registration statement under the Securities Act and qualification under applicable state securities laws, unless exemptions from such registration and qualification are available. In addition, the sale, transfer or other disposition of the Membership Interests evidenced hereby or any interest therein are subject to certain restrictions on transfer set forth in this Agreement.

2 TABLE OF CONTENTS Page ARTICLE 1 ORGANIZATIONAL MATTERS Defined Terms Formation Name Principal Place of Business Registered Office and Resident Agent Term Purpose; Powers Foreign Qualification No State-Law Partnership; Tax Treatment ARTICLE 2 MEMBERS; COMMITMENTS; CONTRIBUTIONS Members, Commitments and Capital Contributions No Withdrawal; No Interest Member Loans Liability of Members No Right of Partition Title to Assets ARTICLE 3 MANAGEMENT Manager Appointment of Officers Exclusivity; Other Businesses; Conflicts Standard of Care; Indemnification ARTICLE 4 DISTRIBUTIONS General Distributions Tax Distribution ARTICLE 5 TRANSFER AND ASSIGNMENT OF MEMBERSHIP INTERESTS Transfers Substitution and Addition of Members Enforcement ARTICLE 6 FINANCIAL, REPORTING AND TAX MATTERS Records and Accounting Annual Reports Tax Matters Member Capital Accounts, Allocations and Elections Tax Advances i

3 ARTICLE 7 DISSOLUTION, LIQUIDATION AND TERMINATION OF THE LLC Events of Dissolution Effect of Dissolution No Capital Contribution Upon Dissolution Priority of Liquidating Distributions ARTICLE 8 INVESTMENT REPRESENTATIONS Preexisting Relationship or Experience Investment Intent No Registration of Membership Interests Restricted Securities No Obligations to Register No Disposition in Violation of Law Investment Risk Restrictions on Transferability Information Reviewed No Advertising Investor Qualification ARTICLE 9 MISCELLANEOUS Amendments Notices Confidentiality Power of Attorney Jurisdiction; Waiver of Jury Trial Further Assurances Counterparts/Facsimile Governing Law Binding Effect Entire Agreement Provisions Severable Construction of Agreement Reliance on Authority of Person Signing Agreement Creditors Parties in Interest Public Statements Appendix A Capital Accounts, Allocations, Tax Elections ii

4 LIMITED LIABILITY COMPANY AGREEMENT of 3400 GEORGIA AVENUE INVESTMENTS I, LLC This Limited Liability Company Agreement (this Agreement ) of 3400 Georgia Avenue Investments I, LLC, a Delaware limited liability company (the LLC ), is made and entered into as of June 13, 2013 by and among the undersigned members of the LLC and any other persons or entities that in the future are admitted to the LLC in accordance with the provisions hereof (collectively, the Members and each individually a Member ) with reference to the following facts: WHEREAS, on June 12, 2013, William Passmore, an authorized person, filed a certificate of formation (the Certificate of Formation ) forming the LLC as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act, 6 Del. C , et seq. (the Delaware Act ); and WHEREAS, the parties hereto desire to enter into this Agreement in order to delineate their rights and obligations as Members, to provide for the LLC s management, and to provide for certain other matters, all as permitted under the Delaware Act. NOW THEREFORE, in consideration of the mutual covenants expressed herein, and for other good and valuable consideration, the parties hereto do hereby agree as follows: ARTICLE 1 ORGANIZATIONAL MATTERS 1.1 Defined Terms. For purposes of this Agreement, capitalized terms utilized herein and not otherwise defined herein have, unless the context clearly indicates otherwise, the following definitions: Affiliate means, with respect to any specified Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person. Agreement has the meaning set forth in the Preamble. Applicable Law means, with respect to any Person, all statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting such Person, such Person s assets or the securities of such Person, whether now or hereafter enacted and in force, including, without limitation, the Securities Act, the Exchange Act, the Investment Advisers Act and the Investment Company Act. Available Cash means, at any date, the amount which the Manager determines in its sole discretion is available for distribution to the Members, taking into account all debts, liabilities, and obligations of the LLC, and any reserves for any expenditures, working capital needs or other capital requirements (including capital

5 expenditures) or contingencies, including without limitation development fees, property management fees and asset management fees. Capital Accounts has the meaning set forth in Section 6.4. Capital Contributions means, with respect to any Member at any time, the total amount of money contributed to the capital of the LLC by such Member. Certificate of Formation has the meaning set forth in the Recitals. Code means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). Commitment has the meaning set forth in Section Commitment Letter has the meaning set forth in Section Common Member has the meaning set forth in Section Company has the meaning set forth in Section 1.7. Defaulting Member has the meaning set forth in Section Delaware Act has the meaning set forth in the Recitals. ERISA means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder and interpretations thereof promulgated by the Department of Labor, as in effect from time to time. Exchange Act means the Securities Exchange Act of 1934, as amended, and the regulations thereunder and interpretations thereof promulgated by the Securities and Exchange Commission, as in effect from time to time. Indemnitee has the meaning set forth in Section Investment Advisers Act means the Investment Advisers Act of 1940, as amended, and the regulations thereunder and interpretations thereof promulgated by the Securities and Exchange Commission, as in effect from time to time. Investment Company Act means the Investment Company Act of 1940, as amended, and the regulations thereunder and interpretations thereof promulgated by the Securities and Exchange Commission, as in effect from time to time. Litigation has the meaning set forth in Section 9.5. LLC has the meaning set forth in the Preamble. 2

6 Majority in Interest of the Members means Preferred Members (other than Defaulting Members) whose Commitments exceed fifty percent (50%) of the aggregate Commitments made by all of the Preferred Members (other than Defaulting Members). Manager means Redbrick Development Partners, LLC. Members has the meaning set forth in the Preamble. Membership Interest means the entire ownership interest of a Member in the LLC at any particular time, including without limitation, the Member s economic interest, any and all rights to vote and otherwise participate in the LLC s affairs, and the rights to any and all benefits to which a Member may be entitled as provided in this Agreement, together with the obligations of such Member to comply with all of the terms and provisions of this Agreement. Net Losses has the meaning set forth in Appendix A. Net Profits has the meaning set forth in Appendix A. Permitted Transfer has the meaning set forth in Section Person means and includes any individual or any corporation, partnership, limited liability company, trust, unincorporated organization, government or any department or agency thereof, or any other entity. Preferred Member has the meaning set forth in Section Preferred Return has the meaning set forth in Section Property has the meaning set forth in Section 1.7. Regulations means proposed, temporary, and final Treasury Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of successor Treasury Regulations). Securities Act means the Securities Act of 1933, as amended, and the regulations thereunder and interpretations thereof promulgated by the Securities and Exchange Commission, as in effect from time to time. Tax Advance has the meaning set forth in Section 6.5. Tax Matters Member has the meaning set forth in Section 6.3. Transfer means, with respect to any Membership Interest, any sale, conveyance, exchange, assignment, pledge, encumbrance, gift, bequest, hypothecation or other transfer or disposition by any other means, whether for value or no value, direct or 3

7 indirect, and whether voluntary or involuntary (including, without limitation, by operation of law), or any agreement to do any of the foregoing. Unreturned Capital means, with respect to each Preferred Member, the excess, if any, of (a) the aggregate Capital Contributions made by such Preferred Member over (b) the aggregate distributions made to such Preferred Member pursuant to Section Formation. The LLC has been organized as a limited liability company by the filing of the Certificate of Formation with the Delaware Secretary of State, Division of Corporations, in accordance with and pursuant to the Delaware Act. The rights and liabilities of the Members will be determined pursuant to the Delaware Act and this Agreement. To the extent that there is any conflict or inconsistency between any provision of this Agreement and any non-mandatory provision of the Delaware Act, the provisions of this Agreement control and take precedence. 1.3 Name. The name of the LLC is 3400 Georgia Avenue Investments I, LLC. The LLC may conduct business under that name or any other name selected by the Manager, from time to time, in accordance with Applicable Law. 1.4 Principal Place of Business. The principal place of business and executive office of the LLC is 1616 H Street NW, Suite 600, Washington, DC 20006, and may be moved to such other place within or outside the State of Delaware as the Manager may from time to time designate. The LLC may maintain offices and places of business at such other place or places within or outside the State of Delaware as the Manager deems advisable. 1.5 Registered Office and Resident Agent. The address of the registered office of the LLC in the State of Delaware is: c/o National Registered Agents, Inc., 160 Greentree Drive, Suite 101, Dover, Delaware, 19904, County of Kent. The name of the registered agent of the LLC in the State of Delaware is National Registered Agents, Inc. The registered agent may be changed from time to time upon the filing of the name and address of a new registered agent with the Delaware Secretary of State pursuant to the Act. 1.6 Term. The LLC will continue from the date hereof until such time as the LLC is dissolved pursuant to the terms of this Agreement or the Delaware Act. 1.7 Purpose; Powers.The purpose of the LLC is to conduct any lawful activity as determined from time to time by the Manager. Specifically, and without limiting the foregoing, the LLC shall invest in 3400 Georgia Avenue Investments, LLC (the Company ). The Company shall finance, hold, develop, manage and operate (directly or indirectly through subsidiaries or third parties) the multi-family residential property located at 3400 Georgia Avenue NW (the Property ) in Washington, DC. The LLC has the power and authority to engage in any lawful transactions and activities permitted to be conducted by an LLC under the Delaware Act and any other Applicable 4

8 Law and as may be necessary, incidental or convenient to carry out the purpose described above. 1.8 Foreign Qualification. The Manager will cause to be filed, on behalf of the LLC, such documents, forms and/or instruments, and/or undertake such other actions, as may be required in order to qualify the LLC to do business and to transact business in any jurisdiction in which it is required to do so. 1.9 No State-Law Partnership; Tax Treatment Each of the Members agrees and acknowledges that the LLC is not intended to be treated as a partnership (whether as a limited partnership or otherwise) or joint venture under applicable state law, and that no Member is intended to be treated as a partner or joint venturer of any other Member under applicable state law, and neither this Agreement nor any document entered into by the LLC or any Member relating to the subject matter hereof will be construed to suggest otherwise The Members intend that the LLC be treated as a partnership for federal and, if applicable, state and local income tax purposes. The LLC and each Member will file all tax returns and otherwise take all tax and financial reporting positions in a manner consistent with such treatment, and no election to the contrary will be made, except as otherwise specifically provided for in this Agreement. ARTICLE 2 MEMBERS; COMMITMENTS; CONTRIBUTIONS 2.1 Members, Commitments and Capital Contributions The common member of the LLC (the Common Member ) is being admitted to the LLC on the date of this Agreement. The Common Member is Georgia Avenue Member, LLC. The Common Member may, but is not obligated, to make Capital Contributions to the LLC Each member of the LLC other than the Common Member is being admitted to the LLC on the date of this Agreement or will in the future be admitted to the LLC as a preferred Member (each, a Preferred Member ). A Preferred Member will be admitted to the LLC as a member of the LLC no earlier than the date on which the Preferred Member makes a Capital Contribution to the LLC. Each Preferred Member is required to execute and deliver to the LLC a written instrument (a Commitment Letter ), which sets forth: (i) (ii) the name of the Preferred Member, the commitment of the Preferred Member (the Commitment ), 5

9 (iii) (iv) (v) the preferred return expressed as an annual rate (the Preferred Return ) that the Preferred Member is eligible to receive with respect to its Capital Contributions; the manner in which the Preferred Return of such Preferred Member will compound and the date on which the Preferred Return of such Preferred Member will commence; and the terms regarding the redemption of the Membership Interest of the Preferred Member. The Preferred Members acknowledge that the terms of the Membership Interest held by one Preferred Member may not be the same as the terms of the Membership Interest held by another Preferred Member Except as provided in this Section 2.1, no Member has any obligation to make Capital Contributions In the event that any Member fails to make a Capital Contribution required under this Agreement within ten (10) days after notice by the Manager to such Member that he, she or it has failed to make such contribution on the date such contribution was due (such Member, a Defaulting Member ), then (i) the Capital Account and the Unreturned Capital of the Defaulting Member shall be reduced by fifty percent (50%), (ii) the right of the Defaulting Member to receive distributions pursuant to Section shall be eliminated, (iii) the Defaulting Member will be charged interest on the unpaid amount at an annual rate equal to the highest prime rate reported in The Wall Street Journal on the date such amount became due plus two percent (2%), from the date such amount became due until the date on which such payment is received by the LLC from such Member, (iv) aside from such delinquent amount, the Defaulting Member shall not be entitled to make any further Capital Contributions, and (v) the Defaulting Member shall not receive any distributions prior to the dissolution and liquidation of the LLC, at which time the Defaulting Member shall receive only an amount equal to the positive balance in his Capital Account. In addition, the Manager may in its discretion require the Defaulting Member to sell its Membership Interest to the LLC for a purchase price equal to the fair market value of such Membership Interest (as such Membership Interest has been modified pursuant to this Section 2.1.4). Each Member hereby consents to the application to it of the remedies provided in this Section in recognition of the risks and speculative damages its default would cause the other Members, and further agrees that the availability of such remedies shall not preclude any other remedies which may be available at law, in equity, by statute or otherwise in respect of any default by such Member in the performance of its other obligations under this Agreement. 2.2 No Withdrawal; No Interest. No Member is entitled to withdraw any part of such Member s Capital Contributions or Capital Account or to receive any distribution from the LLC, except as expressly provided in this Agreement. 6

10 2.3 Member Loans. No Member shall be permitted to make any loans or otherwise lend any funds to the LLC without the consent of such Member and the Manager. No loans made by any Member to the LLC will have any effect on such Member s Capital Account, and such loans will represent a debt of the LLC payable or collectible solely from the assets of the LLC in accordance with the terms and conditions upon which such loans are made. 2.4 Liability of Members. Except as otherwise required by any non-waivable provision of the Delaware Act or other Applicable Law and except as provided in other agreements between the LLC and one or more Members or their Affiliates or under this Agreement: (a) no Member will be personally liable in any manner whatsoever for any debt, liability or other obligation of the LLC, whether such debt, liability or other obligation arises in contract, tort, or otherwise; and (b) no Member will in any event have any liability whatsoever in excess of (i) the amount of its Capital Contributions, (ii) its share of assets and undistributed profits of the LLC, if any, and (iii) the amount of any wrongful distribution to such Member, if, and only to the extent, such Member has actual knowledge (at the time of the distribution) that such distribution is made in violation of Section of the Delaware Act. Upon written notice by the LLC, any Member that received a distribution in violation of Section of the Delaware Act will promptly return such distribution to the LLC. 2.5 No Right of Partition. No Member has or will have any right to seek or obtain partition by court decree or operation of law of any LLC property, or the right to own or use particular or individual assets of the LLC. 2.6 Title to Assets. The assets of the LLC will be owned by the LLC as an entity, and no Member, individually, or collectively, has any ownership interest in such assets or any portion thereof, and legal title to such assets will be held in the name of the LLC. ARTICLE 3 MANAGEMENT 3.1 Manager. Responsibility for the management of the business and affairs of the LLC shall be vested in the Manager, which shall manage the affairs of the LLC with the full authority of a manager within the meaning of Section of the Delaware Act. The Manager (acting on behalf of the LLC) shall have all right, power, and authority to manage, operate, and control the business and affairs of the LLC and to do or cause to be done any and all acts, at the expense of the LLC, deemed by the Manager to be necessary or appropriate to effectuate the purposes of the LLC, including without limitation causing the LLC to pay or reimburse the Manager for (i) expenses, debts and liabilities of the LLC, and (ii) third-party out-of-pocket accounting, legal and government filing expenses of the Manager. All instruments, contracts, agreements and documents relating to the LLC or its business or affairs shall be valid and binding on the LLC if executed by the Manager and no person shall be required to inquire into the authority of any individual to sign such conveyance. 7

11 3.1.1 Except as expressly set forth herein, no Member, in its capacity as such, has any part in the management of the LLC (notwithstanding the last sentence of Section of the Delaware Act), or has any authority to act on behalf of the LLC Once the Manager has approved an action, any officer of the LLC or other Person associated with the LLC who has been given authority by the Manager to do so may execute on behalf of the LLC any contract, agreement or other instrument in writing and may take all such other actions on behalf of the LLC that are necessary or appropriate to carry out the action approved by the Manager Any Person dealing with the LLC or the Manager may rely upon a certificate signed by the Manager as to the Persons who are authorized to execute and deliver any instrument or document for or on behalf of the LLC The Members acknowledge that RB Services, LLC, Redbrick Development Group, LLC and John Xanthos (some of whom are members or Affiliates of the Manager) and Affiliates of such persons will provide development, management and/or other services in connection with the Property, and that Affiliates of the LLC, including the Company, will pay such persons for the provision of these services. Each Member consents to and approves the relationship between the LLC and its Affiliates, on the one hand, and such persons, on the other hand. 3.2 Appointment of Officers. The Manager may, but need not, at any time appoint one or more officers of the LLC. The officers of the LLC may include, without limitation, a chief executive officer (or co-chief executive officers, if more than one), a president, one or more vice presidents, a chief operations officer (and one or more assistants), a secretary (and one or more assistants), and a chief financial officer or treasurer (and one or more assistants). Except as otherwise provided, the officers will serve at the pleasure of the Manager. Any individual may hold any number of offices. The general areas of responsibility and specific powers and duties of each officer will be as determined by the Manager from time to time and otherwise such officers will have such duties and responsibilities as like-titled officers of a Delaware corporation. 3.3 Exclusivity; Other Businesses; Conflicts This Agreement may not be construed in any manner to limit or preclude the Manager, its members and their Affiliates from engaging in any activity whatsoever permitted by applicable law. Each Member expressly acknowledges that the Manager, its members and their Affiliates may engage in other business or investment activities, including with respect to businesses that do or may compete with the LLC. The Manager, its members and their Affiliates may engage in or possess an interest in other profit-seeking or business ventures of any kind, nature or description, independently or with others, whether or not such ventures are competitive with the LLC. The doctrine of corporate opportunity, or any analogous doctrine, will not apply to any the Manager, its members or their Affiliates. Neither the Manager, its members nor their Affiliates that acquires knowledge of a potential transaction, agreement, arrangement or 8

12 other matter that may be an opportunity for the LLC will have any duty to communicate or offer such opportunity to the LLC, and the Manager, its members and their Affiliates will not be liable to the LLC for breach of any fiduciary or other duty by reason of the fact that the Manager, such member of the Manager or such Affiliate pursues or acquires for, or directs such opportunity to, another Person or does not communicate such investment opportunity to the LLC. Neither the LLC nor any other Member will have any rights or obligations by virtue of this Agreement or the relationships created hereby in or to such independent ventures or the income or profits or losses derived therefrom, and the pursuit of such ventures outside the LLC, even if competitive with the activities of the LLC, will not be deemed wrongful or improper With respect to any Member, unless otherwise provided herein, (i) whenever a conflict of interest (to the extent not otherwise waived) exists or arises between any Member and the LLC or any other Member, or (ii) whenever this Agreement or any other agreement contemplated hereby provides that such Member act in a manner which is, or provides terms which are, fair and reasonable to the LLC or any other Member, then such Member may resolve such conflict of interest, take such action or provide such terms, considering in each case such matters as such Member may determine (including its own interest) with respect to such conflict, agreement, transaction or situation and the benefits and burdens relating thereto, as well as, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by such Member, the resolution, action or terms so made, taken or provided by such Member will not constitute a breach of this Agreement or any other agreement contemplated herein or of any duty or obligation of such Member at law or in equity or otherwise The Members acknowledge that there may be conflicts of interest between the Manager and the LLC, or between the Manager and the Preferred Members. The Manager will attempt to resolve those conflicts of interest not specifically addressed herein in good faith. 3.4 Standard of Care; Indemnification Exculpation. Except as otherwise provided herein, no Indemnitee (as such term is defined below in Section 3.4.2) will be liable to the LLC or to any Member for any act or failure to act pursuant to this Agreement or otherwise if such Person acted in good faith and if the actions of such Person did not constitute gross negligence, willful misconduct or fraud, to the maximum extent permitted by law or equity, including without limitations actions taken in situations in which the interests of the Preferred Members were not aligned or may not have been aligned with the interests of the Common Member. No Indemnitee will be liable to the LLC or to any Member for such Person s good faith reliance on the provisions of this Agreement, the records of the LLC and upon such information, opinions, reports or statements presented to the LLC by any of its Members, officers, employees, or by any other Person, as to matters such Person reasonably 9

13 believes are within such other Person s professional or expert competence and who has been selected with reasonable care by or on behalf of the LLC, including information, opinions, reports, or statements as to the value and amount of the assets, liabilities, profits or losses of the LLC or any other facts pertinent to the existence and amount of assets from which distributions to Members may be paid Indemnification. (a) The LLC will indemnify, defend and hold harmless the Manager, any member of the Manager and their respective Affiliates, and any and all officers, directors, employees, and agents of any of the foregoing (individually, an Indemnitee ) to the fullest extent permitted by law from and against any and all losses, claims, demands, costs, damages, liabilities, joint or several, expense of any nature (including attorneys fees and disbursements), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which the Indemnitee may be involved, or threatened to be involved as a party or otherwise, relating to the performance or nonperformance of any act concerning the activities of the LLC, if both the Indemnitee acted in good faith and the actions of the Indemnitee did not constitute gross negligence, willful misconduct or fraud. Expenses, including attorney fees, incurred by any such Indemnified Person in defending a proceeding will, to the extent of available funds, be paid by the LLC in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking satisfactory to the Manager by or on behalf of such Indemnified Person to repay such amount in the event of a final determination that such Indemnified Person is not entitled to be indemnified by the LLC. Subject to Section 3.4.2(c), any indemnification provided hereunder will be satisfied solely out of the assets of the LLC, as an expense of the LLC, and no Member will be subject to personal liability by reason of these indemnification provisions. The provisions of this Section are for the benefit of the Indemnitees and will not create any rights for the benefit of any other Person. (b) To the extent the LLC provides indemnification to an Indemnitee, such rights to indemnification are secondary and junior to any valid and collectible indemnification or advancement rights provided by any entity in which the LLC holds an equity interest; and shall only be available to the extent such Indemnitee is not fully indemnified and made whole by such entity. The LLC shall be subrogated to all the Indemnitee s rights of indemnity against such entity, and the Manager shall use best efforts to require the Indemnitee to execute all papers required and to do everything necessary to secure and preserve such rights, including the execution of such documents necessary to enable the LLC to effectively bring suit in the name of the Indemnitee against such entity. Further, the Manager shall use best efforts to require the Indemnitee to reimburse the LLC for any amounts paid by the LLC as advancements or indemnification to the extent that the Indemnitee receives payment of any advancement or indemnification payments directly from such entity. 10

14 (c) If the assets of the LLC are insufficient to meet any indemnification or advancement of expenses provided for pursuant to this Section 3.4.2, each Member agrees to return amounts received by such Member as distributions pursuant to this Agreement to the LLC, which amounts shall then be used to meet the obligations of the LLC under this Section The Manager shall provide written notice of any such requirement, and each Member shall have no less than ten (10) calendar days to return such distributions. Members will be required to return distributions under this Section 3.4.2(c) pro rata in proportion to the amount of aggregate distributions each Member has received from the LLC Duties Governed by Agreement. Notwithstanding any other provision of this Agreement or otherwise applicable provision of law or equity, whenever in this Agreement the Manager is permitted or required to make a decision (i) in its good faith or under another expressed standard, the Manager will act under such express standard and will not be subject to any other or different standards, or (ii) in its sole discretion or discretion or under a grant of similar authority or latitude, the Manager will be entitled to consider only such interests and factors as it desires, including its own interests, and will, to the fullest extent permitted by applicable law, have no duty or obligation to give any consideration to any interest of or factors affecting the LLC or any Member Insurance. The LLC may purchase and maintain insurance that the Manager reasonably determines to be adequate with respect to liabilities of the types described in this Section 3.4. ARTICLE 4 DISTRIBUTIONS 4.1 General Distributions. Except as otherwise provided herein including pursuant to Section 4.2, the Manager shall cause the LLC to distribute Available Cash, if any, promptly upon receipt of any proceeds to the Members as set forth in this Section 4.1. Distributions shall be made as follows First, to each Preferred Member until each Preferred Member has received distributions equal to the entire amount of such Preferred Member s Preferred Return, pro rata in proportion to the unpaid Preferred Return of each Preferred Member at the time of such distribution; Second, to each Preferred Member until each Preferred Member has received distributions equal to the Unreturned Capital of such Preferred Member, pro rata in proportion to the Unreturned Capital of each Preferred Member at the time of such distribution; and 11

15 4.1.3 Thereafter, to the Common Member. 4.2 Tax Distribution. In lieu of making distributions pursuant to Section 4.1, the Manager may, in its discretion, cause the LLC to distribute, with respect to each fiscal year of the LLC, an amount to each Member up to the amount sufficient to enable such Member (and the members of the Common Member) to discharge any Federal, state and local tax liability arising as a result of such Member s Membership Interest, assuming for this purpose that each Member is subject to the same effective marginal combined Federal, state and local tax rate on all of the income allocated to it under this Agreement. Distributions made under this Section 4.2 with respect to a fiscal year shall be made among the Members pro rata in proportion to the amount of Net Profits allocated to each Member during such fiscal year. The amount distributed under this Section 4.2 with respect to any fiscal year shall not exceed the product of (i) the highest marginal combined federal, state and local tax rate applicable to any Member (or members of the Common Member), and (ii) the Net Profits allocated to the Members with respect to such fiscal year. Such distributions will be debited to such Member s Capital Account and shall be treated as an advance of distributions to be made under Section 4.1. ARTICLE 5 TRANSFER AND ASSIGNMENT OF MEMBERSHIP INTERESTS 5.1 Transfers Except for Permitted Transfers (as defined below), no Member may Transfer all or any portion of its Membership Interest without the prior written consent of the Manager. Any purported Transfer which is not in accordance with this Agreement is null and void ab initio. After the consummation of any Transfer of any part of a Membership Interest, the Membership Interest so Transferred will remain subject to the terms and provisions of this Agreement and any further Transfers must comply with all the terms and provisions of this Agreement. For purposes of this Agreement, the term Permitted Transfer includes any transfer to any Affiliate of the transferor or any Transfer to another Member, in each case subject to Section Each Member agrees to reimburse the LLC or the Manager for all costs and expenses borne by the LLC or the Manager, respectively, including without limitation legal expenses, related to the Transfer of such Member s Membership Interest Notwithstanding the foregoing, no Transfer of a Membership Interest will be allowed if such Transfer or the actions to be taken in connection with that Transfer would: (i) (ii) result in a violation of any Applicable Law by the LLC or any Member; cause the termination or dissolution of the LLC; 12

16 (iii) (vi) (v) (vi) (vii) cause the LLC to be classified other than as a partnership for Federal income tax purposes, including causing the LLC to be classified as a publicly traded partnership within the meaning of Section 7704 of the Code; result in a violation of the Securities Act; require the LLC to register as an investment company under the Investment Company Act; require the LLC or any Member to register as an investment adviser under the Investment Advisers Act; or result in any Membership Interest held by a Member being deemed to be plan assets within the meaning of ERISA, or becoming at material risk of being so deemed, based on the advice of expert counsel to the Members. 5.2 Substitution and Addition of Members. A transferee of a Membership Interest may become a substitute Member only if consent of the Manager is given in accordance with Section 5.1, such transferee executes an instrument satisfactory to the Manager accepting and adopting the terms and provisions of this Agreement, and such transferee pays any reasonable expenses in connection with his, her or its admission as a new Member. The admission of a substitute Member will not result in the release of the Member who assigned the Membership Interest from any liability that such Member may have to the LLC. Such admission will become effective on the date on which such conditions have been satisfied and when any such admission is shown on the books and records of the LLC. 5.3 Enforcement. The restrictions on Transfer contained in this Agreement are an essential element in the ownership of a Membership Interest, and each Member specifically acknowledges and agrees that money damages would not provide an adequate remedy for a breach of such restrictions. Upon application to any court of competent jurisdiction, the LLC and/or a Member, as the case may be, are entitled to a decree against any Person violating or about to violate such restrictions, requiring their specific performance, including those requiring a Member to sell all or a portion of his, her or its Membership Interest to the LLC and/or another Member, or prohibiting a Transfer of all or a portion of such Membership Interest. ARTICLE 6 FINANCIAL, REPORTING AND TAX MATTERS 6.1 Records and Accounting. 13

17 Proper and complete records and books of account of the business of the LLC shall be maintained at the LLC s principal place of business. The Members and their duly authorized representatives may visit and inspect any of the properties of the LLC, examine its books of account, records, reports and other papers (to the extent the same pertain to the LLC) which are not legally required to be kept confidential or secret, all at the cost of such Member and at such reasonable times and as often as may be reasonably requested. 6.2 Annual Reports. Within one hundred eighty (180) days after the end of each fiscal year, or as soon as otherwise practicable, the Manager shall cause to be delivered to a Member a Schedule K-1 and an annual report containing a statement, in reasonable detail, showing the Capital Account of such Member and detailing the Capital Contributions of, distributions to, and gains and losses allocated to, such Member for such fiscal year. 6.3 Tax Matters Member. The Common Member is hereby designated as the tax matters partner within the meaning of Section 6231(a)(7) of the Code ( Tax Matters Member ). In such capacity, the Common Member shall have all of the rights, authority and power, and shall be subject to all of the obligations, of a tax matters partner to the extent provided in the Code and the Treasury Regulations. If any state or local tax law provides for a tax matters partner or Person having similar rights, powers, authority or obligations, the Manager shall also serve in such capacity. In all other cases, the Common Member shall represent the LLC in all tax matters to the extent allowed by law and to the maximum extent not prohibited by law. Expenses reasonably incurred by the Common Member as the Tax Matters Member or in a similar capacity as set forth in this Section 6.3 shall be reimbursed by the LLC. Such expenses shall include, without limitation, reasonable fees of attorneys and other tax professionals, accountants, appraisers and experts, filing fees and reasonable out of pocket costs. Any decisions made by the Tax Matters Member shall be made in the Tax Matters Member s reasonable discretion. 6.4 Capital Accounts, Allocations and Elections. Each Member shall have a capital account (a Capital Account ) which shall be established and maintained in accordance with Appendix A. Allocations of Net Profits and Net Losses shall be made in accordance with Appendix A, and tax elections shall be made by the LLC as set forth in Appendix A. 6.5 Tax Advances. To the extent the LLC is required by law to withhold or to make tax payments on behalf of or with respect to any Member (the latter a Tax Advance ), the Manager may withhold such amounts and make such tax payments as so required. All Tax Advances made on behalf of a Member, plus interest thereon at a rate equal to ten 14

18 percent (10%), as of the date of such Tax Advances, shall, either (at the option of the Manager), (i) be promptly paid to the LLC by the Member on whose behalf such Tax Advances were made (such payment not to constitute a Capital Contribution) or (ii) be repaid by reducing the amount of the current or next succeeding distribution or distributions which would otherwise have been made to such Member or, if such distributions are not sufficient for that purpose, by so reducing the proceeds of liquidation otherwise payable to such Member. Whenever the Manager selects option (ii) pursuant to the preceding sentence for repayment of a Tax Advance by a Member, for all other purposes of this Agreement such Member shall be treated as having received all distributions (whether before or upon liquidation) unreduced by the amount of such Tax Advance and interest thereon. Each Member hereby agrees to reimburse the LLC and the Manager for any liability with respect to Tax Advances required on behalf of or with respect to such Member. ARTICLE 7 DISSOLUTION, LIQUIDATION AND TERMINATION OF THE LLC 7.1 Events of Dissolution. The LLC will be dissolved and wound up on the first to occur of any of the following events: A sale of all or substantially all of the LLC s assets; The consent of the Manager; or Any other event that Applicable Law specifies must operate as an event causing the dissolution of a limited liability company, notwithstanding any provision to the contrary in this Agreement. 7.2 Effect of Dissolution. The dissolution of the LLC will be effective on the day on which the event occurs giving rise to the dissolution, but the LLC will not terminate until it is wound up and its assets have been distributed as provided in Section 7.4 of this Agreement. Notwithstanding the dissolution of the LLC, prior to the termination of the LLC, the business of the LLC and the affairs of the Members, as such, will continue to be governed by this Agreement. 7.3 No Capital Contribution Upon Dissolution. Each Member will look solely to the assets of the LLC for all distributions with respect to the LLC, its Capital Contribution thereto, its Capital Account and its share of profits and losses, and will have no recourse therefore (upon dissolution or otherwise) against any other Member. Accordingly, if any Member has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which the liquidation occurs), then such Member will have no obligation to make any Capital Contribution with respect to such deficit, and such deficit will not be considered a debt owed to the LLC or to any other person for any purpose whatsoever. 15

19 7.4 Priority of Liquidating Distributions. Upon the occurrence of a dissolution event described in Section 7.1 above, the LLC will terminate. In the event of the dissolution and termination of the LLC, the Manager will proceed with an orderly liquidation of the LLC and the proceeds of such liquidation will be applied and distributed in the following order of priority: To creditors of the LLC, who are not Members nor Affiliates of Members, for payment of the debts and liabilities of the LLC and the expenses of liquidation; To creditors of the LLC who are Members or their Affiliates for payments of debts and liabilities of the LLC; To the setting up of any reserves that the Manager may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the LLC. Such reserves will be paid over by the Manager to a bank or other institutional escrow agent to be held for the purpose of disbursing such reserves in payment of the aforementioned contingencies, and, at the expiration of such period as the Manager may deem advisable, to distribute the balance in the manner provided in this Section 7.4; and To the Members as set forth in Section 4.1 of this Agreement. ARTICLE 8 INVESTMENT REPRESENTATIONS Each Member, as of the date hereof, hereby represents and warrants to, and agrees with, the other Members and the LLC as follows: 8.1 Preexisting Relationship or Experience. By reason of its business or financial experience, or by reason of the business or financial experience of its general partner or its financial advisor who is unaffiliated with and who is not compensated, directly or indirectly, by the LLC or any affiliate or selling agent of the LLC, it is capable of evaluating the risks and merits of an investment in the Membership Interest and of protecting its own interests in connection with this investment. 8.2 Investment Intent. It has acquired the Membership Interest for investment purposes for its own account only and not with a view to or for sale in connection with any distribution of all or any part of such Membership Interest. 8.3 No Registration of Membership Interests. It acknowledges that the Membership Interests have not been registered under the Securities Act, or under any applicable blue sky laws in reliance, in part, upon its representations, warranties, and agreements herein. 8.4 Restricted Securities. It understands that the Membership Interests are restricted securities under the Securities Act in that such Membership Interests will be 16

20 acquired from the LLC in a transaction not involving a public offering, and that the Membership Interests may be resold without a registration under the Securities Act only in certain limited circumstances and that otherwise the Membership Interests must be held indefinitely. 8.5 No Obligations to Register. It represents, warrants, and agrees that the LLC and the Manager are under no obligation to register or qualify the Membership Interests under the Securities Act or under any state securities law, or to assist it in complying with any exemption from registration and qualification. 8.6 No Disposition in Violation of Law. Without limiting the representations set forth above, and without limiting anything contained elsewhere in this Agreement (including Article 5 concerning transfers of Membership Interests), it will not make any disposition of all or any part of its Membership Interest which will result in violation by it or by the LLC of the Securities Act or any other applicable securities laws. Without limiting the foregoing, it agrees not to make any disposition of all or any part of its Membership Interest unless and until it has notified the LLC of the proposed disposition and if requested by the Manager and, a written opinion of counsel, reasonably satisfactory to the LLC, that such disposition will not require registration of any securities under the Securities Act or the consent of or a permit from appropriate authorities under any applicable state securities laws. 8.7 Investment Risk. It acknowledges that the Membership Interests are speculative investments which involve a substantial degree of risk of loss of its entire investment in the LLC, and it understands and takes full cognizance of the risks related to the purchase of such Membership Interests. 8.8 Restrictions on Transferability. It acknowledges that there are substantial restrictions on the transferability of the Membership Interests pursuant to this Agreement, that there is no public market for such Membership Interests and that none is expected to develop, and that, accordingly, it may not be possible for it to liquidate its investment in the LLC. 8.9 Information Reviewed. It has received and reviewed this Agreement and the other information provided by the LLC it considers necessary or appropriate for deciding whether to invest in the LLC No Advertising. It 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 Membership Interests Investor Qualification. It is an accredited investor as that term is defined in Rule 501(a) of Regulation D under the Securities Act and Section 413 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended. Each Member will provide to the LLC, upon request by the Manager, additional certifications 17

21 or other evidence, in form and substance acceptable to the Manager, in respect of the foregoing. ARTICLE 9 MISCELLANEOUS 9.1 Amendments. This Agreement may be amended by the Manager in its sole discretion; provided, however, that each amendment that will have a material adverse effect on the Preferred Members shall require the prior written consent of a Majority in Interest of the Members. The LLC will deliver to each Member a copy of any amendment to this Agreement. 9.2 Notices Any notice, election, demand, request, consent, approval, concurrence or other communication given or made under any provision of this Agreement will be deemed to have been sufficiently given or made for all purposes only if it is in writing and it is: (a) delivered personally to the party to whom it is directed, (b) sent by first class mail or overnight express mail, postage and charges prepaid, addressed to the party to whom it is directed, at its address as set forth in the records of the LLC, or (c) telecopied to the person to whom the notice is directed, at the facsimile number as set forth in the records of the LLC. Any Member may change its address or facsimile number for purposes of this Agreement by providing the Manager notice of such change in the manner provided above for the giving of notices Except as otherwise expressly provided in this Agreement, any such notice, election, demand, request, consent, approval, concurrence or other communication (a) given or made in the manner indicated in clause (a) of Section above will be deemed to be given or made on the day on which it was delivered; and (b) given or made in the manner indicated in clause (b) of Section above will be deemed to be given or made on the second business day after the day on which it was deposited in a regularly maintained receptacle for the deposit of the United States mail, or in the case of overnight express mail, on the business day immediately following the day on which it was deposited in a regularly maintained receptacle for the deposit of overnight express mail. 9.3 Confidentiality. Each Member agrees that all non-public information received from or otherwise relating to the LLC, the Members, the Manager, or their respective Affiliates, including without limitation any information that constitutes proprietary trade secrets, know how, secret formulae, techniques or strategies or similar items of the LLC, the Members, the Manager, or their respective Affiliates, is confidential and will not be disclosed or otherwise released to any other Person (other than another party hereto), without the prior written consent of the Manager. Notwithstanding the foregoing, such information does not include information regarding the tax structure of the LLC or its investments, the tax treatment of an investment in the LLC, or the tax treatment of the transactions entered into, directly or indirectly, by the 18