EXHIBIT
A
OPERATING AGREEMENT
OF
CBC INCOME AND GROWTH FUND, LLC
Table of Contents
1. FORMATION OF THE LIMITED LIABILITY COMPANY A-1
1.1. NAME A-1
1.2. AGENT FOR SERVICE A-1
1.3. PRINCIPAL PLACE OF BUSINESS/NAMES AND ADDRESSES A-1
1.4. TERM A-2
2. DEFINITIONS A-2
3. PURPOSE AND CHARACTER OF THE BUSINESS A-10
4. CAPITAL A-10
4.1. MANAGING MEMBER CAPITAL CONTRIBUTIONS A-10
4.2. LIMITED MEMBER CAPITAL CONTRIBUTIONS A-11
4.3. CAPITAL ACCOUNTS A-11
4.4. NO RIGHT TO RETURN OF CONTRIBUTION A-12
4.5. RETURN OF UNUSED NET OFFERING PROCEEDS A-12
4.6. LOANS TO COMPANY; NO INTEREST ON CAPITAL A-13
4.7. PURCHASE OF UNITS BY MANAGING MEMBERS A-13
4.8. NONRECOURSE LOANS A-13
4.9. WORKING CAPITAL RESERVE A-14
4.10. DISTRIBUTION REINVESTMENT PLAN A-14
5. ALLOCATION OF PROFITS, GAINS, LOSSES AND DISTRIBUTIONS A-15
5.1. ALLOCATION OF INCOME, PROFITS, GAINS AND LOSSES A-15
5.2. DISTRIBUTIONS OF NET CASH FLOW A-16
5.3. ALLOCATION OF GAIN OR LOSS UPON SALE, EXCHANGE, OR DISPOSITION A-16
5.4. DISTRIBUTION OF NET PROCEEDS OF SALE A-17
5.5. CUMULATIVE RETURN A-17
5.6. REGULATORY ALLOCATIONS A-18
5.7. LIMITATION ON LOSS ALLOCATION A-20
5.8. ALLOCATION AMONG MANAGING MEMBERS A-21
6. RIGHTS, POWERS AND DUTIES OF MANAGING MEMBERS A-21
6.1. APPOINTMENT OF MANAGING MEMBER A-21
6.2. INDEPENDENT AUDIT COMMITTEE A-22
6.3. MANAGEMENT FEES; REIMBURSEMENT OF EXPENSES A-22
6.4. OTHER ACTIVITIES OF MANAGING MEMBERS A-24
6.5. INDEMNIFICATION AND LIABILITIES OF MANAGING MEMBERS A-24
6.6. PROHIBITED TRANSACTIONS A-25
6.7. INVESTMENTS IN OTHER PROPERTIES A-27
6.8. UNIMPROVED PROPERTY; PROPERTY UNDER CONSTRUCTION A-28
6.9. INVESTMENTS IN JUNIOR TRUST DEEDS A-29
6.10. REQUIREMENT FOR PROPERTY APPRAISAL A-29
6.11. BALLOON PAYMENTS A-29
6.12. SELLING COMMISSIONS A-30
6.13. ROLL-UP TRANSACTIONS A-30
7. PROVISIONS APPLICABLE TO LIMITED MEMBERS A-31
7.1. LIABILITY A-31
7.2. NO PARTICIPATION IN MANAGEMENT A-31
7.3. NO WITHDRAWAL OR DISSOLUTION A-31
7.4. CONSENT A-32
7.5. POWER OF ATTORNEY A-32
7.6. LIMITATION ON ACQUISITION OF EQUITY SECURITIES OF MANAGERS A-33
7.7. REPURCHASE OF UNITS BY COMPANY A-33
7.8. VOTING RIGHTS A-35
8. BOOKS OF ACCOUNT AND FISCAL MATTERS A-35
8.1. BOOKS; PLACE; ACCESS A-35
8.2. METHOD A-36
8.3. FISCAL YEAR A-36
8.4. ANNUAL REPORT A-36
8.5. QUARTERLY REPORTS A-37
8.6. SPECIAL REPORTS A-37
8.7. TAX RETURNS AND TAX INFORMATION A-38
8.8. BANK ACCOUNTS A-38
8.9. TAX ELECTIONS A-38
8.10. INVESTOR LIST A-38
9. ASSIGNMENT OF LIMITED MEMBER'S INTEREST A-40
9.1. LIMITATIONS ON TRANSFER RELATED TO TAX STATUS A-40
9.2. PROTECTIVE PROVISIONS RELATING TO TRANSFER FRAUD A-41
9.3. RIGHT OF FIRST REFUSAL A-41
9.4. TRANSFERS A-42
9.5. ADMISSION OF ASSIGNEE AS MEMBER A-43
9.6. MINIMUM SIZE A-43
9.7. DEATH OF A LIMITED MEMBER A-43
9.8. DOCUMENTS AND EXPENSES A-44
9.9. ACQUIT COMPANY A-44
9.10. RESTRICTION ON TRANSFER A-44
9.11. ENDORSEMENT ON CERTIFICATE A-44
10. DEATH, WITHDRAWAL, EXPULSION OF MANAGING MEMBERS A-45
10.1. DEATH OF SPECIAL MANAGING MEMBER A-45
10.2. WITHDRAWAL A-45
10.3. EXPULSION A-45
10.4. REMOVAL AND REPLACEMENT OF MANAGING MEMBERS A-46
10.5. PAYMENT FOR REMOVED MANAGER'S INTEREST A-46
10.6. FAILURE TO ADMIT SUBSTITUTE MANAGING MEMBER A-47
11. AMENDMENT OF AGREEMENT AND MEETINGS A-47
11.1. GENERAL A-47
11.2. ALTERNATIVE TO MEETINGS A-48
12. DISSOLUTION AND LIQUIDATION A-48
12.1. EVENTS CAUSING DISSOLUTION A-48
12.2. CONTINUATION OF BUSINESS A-49
12.3. LIQUIDATION AND WINDING UP A-49
13. MISCELLANEOUS PROVISIONS A-50
13.1. INTERPRETATION A-50
13.2. NOTICE A-51
13.3. SUCCESSORS AND ASSIGNS A-51
13.4. COUNTERPARTS A-51
13.5. SEVERABILITY A-51
OPERATING AGREEMENT
OF
CBCI INCOME AND GROWTH FUND, LLC
THIS OPERATING AGREEMENT is entered into as of this October 30,
2002 by and among CBCI Fund Management I, Inc. (the "Managing
Member"), a Minnesota corporation, Xxxxxx X. Xxxxxxxxxxx (the
"Special Managing Member"), CBCI Acquisitions I, LLC (the
"Acquisition Member") and all other parties comprising the
Limited Members, who shall execute this agreement and whose
addresses appear at the end of this agreement.
1. FORMATION OF THE LIMITED LIABILITY COMPANY
The parties hereto do hereby confirm the formation of a limited
liability company (the "Company") pursuant to the provisions of
the Minnesota Limited Liability Company Act (the "Act") by the
filing of a Certificate of Formation on October 30, 2002 and
agree that the Company shall be governed by the terms of this
agreement. The parties agree that they shall promptly file any
amended certificates of formation that may be required in the
appropriate office in the State of Minnesota and in such other
offices as may be required, and that the parties shall comply
with the other provisions and requirements of the Limited
Liability Company Act as in effect in Minnesota, which Act shall
govern the rights and liabilities of the Members, except as
herein or otherwise expressly stated.
1.1. Name
The business of the Company is conducted under the firm name and
style of CBCI Income and Growth Fund, LLC.
1.2. Agent For Service
The agent for service of process is CBCI Fund Management I, Inc.
The location of the agent for service of process of the Company
shall be Suite 715 Plymouth Building, 00 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000.
1.3. Principal Place Of Business/Names And Addresses
The location of the principal place of business, principal
office and agent for service of process of the Company shall be
at the offices of the Managing Member, Suite 715 Plymouth
Building, 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000.
The Company may also maintain offices at such other place of
business as the Managing Member may from time to time determine.
The name and address of the Managing Member is CBCI Fund
Management I, Inc., Suite 715 Plymouth Building, 00 Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000. The name and address of
the Special Managing Member is Xxxxxx X. Xxxxxxxxxxx, Suite 715
Plymouth Building, 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx
00000. The name and address of the Acquisition Member is CBCI
Acquisitions I, LLC, Suite 715 Plymouth Building, 00 Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000. The names and addresses of
the Limited Members are set forth on Schedule A at the end of
this agreement.
1.4. Term
The Company shall commence business on the date hereof, and
shall continue until December 31, 2053, unless dissolved,
terminated and liquidated prior thereto under the provisions of
Article 12.
2. DEFINITIONS
As used in this agreement, the following terms shall have the
following meanings:
"Acquisition Expenses" means expenses including, but not limited
to, legal fees and expenses, travel and communication expenses,
costs of appraisals, non-refundable option payments on
properties not acquired, accounting fees and expenses, title
insurance and miscellaneous expenses related to selection and
acquisition of properties, whether or not acquired.
"Acquisition Fees" means the total of all fees and commissions
paid by any party in connection with making or investing in
mortgage loans or the purchase, development or construction of
Properties, whether designated as a real estate commission
relating to the purchase of Properties, nonrecurring management
fees, loan fees or points paid by borrowers to the Managing
Member if the Company invests in mortgage loans, or any fees of
a similar nature, however designated or however treated for tax
or accounting purposes. Acquisition Fees shall not include
Development Fees and Construction Fees paid to any person or
entity in connection with the actual development and
construction of projects.
"Acquisition Member" means CBCI Acquisitions I, LLC.
"Adjusted Capital Contributions" means the aggregate original
capital contribution of a Limited Member reduced, from time to
time, by (i) any return of capital contributions pursuant to
Section 4.5; and, (ii) by total cash distributed from Net
Proceeds of Sale to the extent Net Proceeds of Sale exceed
amounts necessary to provide the Targeted Cumulative
Distribution Amount; and increased from time to time by the
product of (a) the Adjusted Capital Contribution of any Limited
Member whose Units are repurchased and (b) the ratio of each
remaining Limited Member's Units to the total Units outstanding
after such repurchase. Adjusted Capital Contributions shall not
be reduced by distributions of Net Cash Flow.
"Administrative Expenses" means expenses incurred by the
Managing Members and their Affiliates during the operation of
the Company directly attributable to rendering the following
services to the Company: (i) administering the Company
(including agency type services, member relations and
communications, financial and tax reporting, accounting and
payment of accounts, payment of distributions, payment of unit
redemptions, staffing and processing other investor requests);
(ii) property management (including collecting, depositing and
monitoring rental payments and penalties, monitoring compliance
with leases, monitoring the maintenance of property and
liability insurance and the payment of taxes, maintenance of
lease insurance (if applicable), monitoring and negotiating
other forms of tenant security and financial condition, ongoing
site inspections and property reviews and reviewing tenant
reports); (iii) property and lease workout (including enforcing
lease provisions in default, filing lease insurance claims,
enforcing guarantees, collecting letters of credit or
foreclosing other collateral, if applicable, eviction of tenants
in default, re-leasing of properties, and monitoring tenant
disputes and foreclosures); (iv) property financing and
refinancing; and (v) Company dissolution and liquidation
(accounting, final payment to creditors, administrative filings
and other costs).
"Affiliate" means (i) any person directly or indirectly
controlling, controlled by or under common control with another
person, (ii) any person owning or controlling 10% or more of the
outstanding voting securities of such other person, (iii) any
officer, director or partner of such person and (iv) if such
other person is an officer, director or partner, any such
company for which such person acts in such capacity.
"Asset Management Agreement" means the agreement between the
Company and the Managing Member detailing the responsibilities,
duties and remuneration of the Managing Member.
"Asset Management Fee" means the annual fee paid by the Company
under the Asset Management Agreement.
"Audit Committee" means a committee consisting of the Special
Managing Member and an independent member and organized for the
purposes of reviewing the propriety of, and reporting of,
financial information as further described in Section 6.2
hereof.
"Company" means the limited liability company formed by this
agreement.
"Competitive Real Estate Commissions" means real estate or
brokerage commissions paid for the purchase or sale of a
Property that are reasonable, customary and competitive in light
of the size, type and location of such Property and which do
not, in any event, exceed 6% of the contract price for the sale
of such Property.
"Construction Fee" means a fee or other remuneration for acting
as general contractor and/or construction manager to construct
improvements, supervise and coordinate projects or to provide
Major Repairs or Rehabilitation of Company Property.
"Cost" means, when used with respect to services furnished by
the Managing Members or their Affiliates to, or on behalf of,
the Company (other than services described in the Asset
Management Agreement), the lesser of (i) the actual expenses
incurred by such Managing Members and Affiliates in providing
services necessary to the prudent operation of the Company,
including salaries and expenses paid to officers, directors,
employees and consultants, depreciation and amortization, office
rent, travel and communication expenses, employee benefit
expenses, supplies and other overhead expenses directly
attributable to the furnishing of such services; or (ii) the
price that would be charged by unaffiliated parties rendering
similar services in the same geographic location. Overhead
expenses shall be charged only if directly attributable to the
services provided and shall be allocated based upon the amount
of time personnel actually spend providing such services, or
such other method of allocation as is acceptable to the
Company's independent public accountant.
"Determination Date" means January 1 of the calendar year
immediately subsequent to the later to occur of: (i) two years
after the date of the Prospectus; or (ii) six months after the
date the offer and sale of Units pursuant to the Prospectus is
terminated.
"Development Fee" means a fee paid to any party, including the
Managing Members or their Affiliates for packaging the Company's
Property, including negotiating and approving plans, and
undertaking to assist in obtaining zoning and necessary
variances and necessary financing for a specific Property,
either initially or at a later date.
"Disposition Fees" means fees paid to any party, including the
Managing Members or their Affiliates, for services or expenses
related to the sale or disposition of Properties and mortgage
loans, or any fees of a similar nature, however designated or
however treated for tax or accounting purposes. Disposition Fees
shall not include Competitive Real Estate Commissions.
"Distribution Reinvestment Plan" means the plan whereby Limited
Members may elect to reinvest distribution of Net Cash Flow in
additional Units as further described in Section 4.10 hereof.
"Front-End Fees" means fees and expenses paid by any party for
services rendered during the Company's organizational or
acquisition phase, including Organization and Offering Expenses,
Acquisition Fees, Acquisition Expenses, interest on deferred
fees and expenses and other similar fees, however designated by
the Managing Member.
"Independent Audit Committee Member" means a person who is not
a Limited Member, Managing Member, Affiliate of a Managing
Member or Affiliate of a Limited Member of the Company and
serves on the Audit Committee.
"Index Rate" means an annual rate, subject to change from time
to time, equal to the annual yield on United States Treasury
Notes bearing ten year maturities as published in the Wall
Street Journal. Where a range of rates has been published, then
the higher of the rates will be used.
"Investment in Properties" means the amount of capital
contributions actually paid or allocated to the purchase of
Properties, including working capital reserves allocable thereto
(except that working capital reserves in excess of 5% will not
be included) and other cash payments such as interest and taxes,
but excluding Front-End Fees.
"Limited Members" means all parties who shall execute, either
personally or by an authorized attorney-in-fact, this agreement
as Limited Members and comply with the conditions in Section
4.2, and any and all assignees of the Limited Members, whether
or not such assignees are admitted to the Company as substitute
Limited Members; provided, however, that an assignee of the
interest of any Limited Member shall not be considered a
"Limited Member" for purposes of Articles 10 and 11 hereof
unless such assignee is admitted as a substitute Limited Member
as provided in Article 9.
"Limited Liability Company Act" means the Minnesota Limited
Liability Company Act, as the same may be amended.
"Limited Liability Company Unit" or "Unit" means the Company
interest and appurtenant rights, powers and privileges of a
Limited Member and represents the stated capital contributions
with respect thereto, all as set forth elsewhere in this
agreement.
"Major Repairs or Rehabilitation" means the repair,
rehabilitation or reconstruction of a Property where the
aggregate costs exceed 10% of the fair market value of the
Property at the time of such services.
"Managing Member" means CBCI Fund Management I, Inc., and any
substitute as provided in Article 10.
"Managing Members" means the Managing Member, the Special
Managing Member, any substitute Managing Member as provided in
Article 10, and the Acquisition Member.
"Members" means the Managing Member, the Special Managing
Member, the Limited Members, and the Acquisition Member.
"Net Cash Flow" means Company cash funds provided from
operations, including lease payments from builders and sellers
without deduction for depreciation, but after deducting cash
funds used to pay all other expenses, debt payments, capital
improvements and replacements and less the amount set aside for
restoration or creation of reserves.
"Net Proceeds of Sale" means the excess of gross proceeds from
any sale, refinancing (including the financing of a Property
that was initially purchased debt-free) or other disposition of
a Property over all costs and expenses related to the
transaction, including fees payable in connection therewith, and
over the payments made or required to be made on any prior
encumbrances against such Property in connection with such
transaction.
"Net Value Per Unit" means the aggregate value of the Company's
assets less the Company's liabilities, and less the value
attributable to the interest of the Managing Members, divided by
the number of Units outstanding. Such aggregate value shall be
as determined by the Managing Members, after taking into account
(i) the present value of future net cash flow from rental income
on the Fund's properties, (ii) the price at which Units of the
Company have last been purchased, and (ii) such other factors as
the Managing Members deem relevant.
"Organization and Offering Expenses" means those expenses
incurred in connection with and in preparing the Company for
registration and subsequently offering and distributing it to
the public, including any sales commissions, nonaccountable
expense allowances or reimbursement of due diligence expenses
paid to broker-dealers in connection with the distribution of
the Company and all advertising expenses.
"Permitted Transfer" means, with respect to the transfer of
Units in any fiscal year of the Company (i) transfers in which
the basis of the Unit in the hands of the transferee is
determined, in whole or in part, by reference to its basis in
the hands of the transferor, or is determined under Section 732
of the Internal Revenue Code of 1986, as amended (the "Code"),
(ii) transfers of Units upon the death of a Limited Member,
(iii) transfers of Units between members of a family (as defined
in Section 267(c)(4) of the Code), (iv) transfers of Units at
original issuance and sale, (v) transfers of Units pursuant to
distribution under a Qualified Plan, and (vi) block transfers of
Units by a single Member in one or more transactions during any
thirty calendar day period representing in the aggregate not
more than five percent (5%) of the total interest of all Members
in Company capital and profits.
"Properties" or "Property" means real properties or any interest
therein acquired directly or indirectly by the Company and all
improvements thereon and all repairs, replacements or renewals
thereof, together with all personal property acquired by the
Company that from time to time is located thereon or
specifically used in connection therewith.
"Property Management Fees" means fees paid to any party for
managing the day-to-day operations of any Property, provided
such fees are billable to and paid by tenants occupying the
Property.
"Prospectus" means that certain prospectus of the Company dated
xxxxxx, 2002.
"Public Market" means a forum for the purchase and sale of Units
on an established securities market, secondary market, or the
substantial equivalent thereof.
"Qualified Stock Exchange Transfer" means a transfer of Units,
through subscribing members of any national or regional
securities exchange, the OTC Bulletin Board, or BBX.
"Qualified Matching Service" means a listing system operation,
provided either through the Managing Members or through any
unrelated third party (including any dealer in the Units), in
which Limited Members contact the operator of such Qualified
Matching Service to list Units they desire to transfer and
through which the operator attempts to match the listing Limited
Member with a customer desiring to buy Units without (i)
regularly quoting prices at which the operator stands ready to
buy or sell interests, (ii) making such quotes available to the
public, or (iii) buying or selling interests for its own
account.
"Qualified Matching Service Transfer" means a transfer of Units
through a Qualified Matching Service in which (i) at least a
fifteen (15) calendar day delay occurs between the day (the
"Contact Date") a Limited Member provides written confirmation
to the Qualified Matching Service that his or her Units are
available for sale and the earlier of (A) the day information is
made available to potential buyers that such Units are available
for sale, or (B) the day information is made available to the
selling Limited Member regarding the existence of outstanding
bids to purchase Units, (ii) the closing of the transfer does
not occur until at least forty five (45) days after the Contact
Date, (iii) the Limited Member's offer to sell is removed from
the Qualified Matching Service within one hundred and twenty
(120) days of the Contact Date, and (iv) no Units of such
Limited Member are entered for listing by the Qualified Matching
Service for at least sixty (60) days after the removal of the
Limited Member's information from such Qualified Matching
Service; provided, however, that no transfer shall be a
Qualified Matching Service Transfer if, after giving effect to
such transfer, the aggregate of (a) Qualified Matching Service
Transfers, (b) transfers pursuant to the repurchase provisions
contained in section 7.7 of this agreement of Limited Member
interests and (c) all other transfers of Limited Member
interests except Permitted Transfers and Qualified Stock
Exchange Transfers since the beginning of the fiscal year in
which such transfer is made would exceed ten percent (10%) of
the Company interests outstanding.
"Qualified Plans" means Xxxxx Plans and pension/profit-sharing
plans that are qualified under Section 401 of the Internal
Revenue Code.
"Roll-Up" means a transaction involving the acquisition, merger,
conversion, or consolidation, either directly or indirectly, of
the Company and the issuance of securities of a Roll-Up Entity;
provided, however, that a Roll-Up shall not include a
transaction involving the conversion of only the Company if, as
a consequence of such transaction, there will be no significant
adverse change in (i) voting rights of Limited Members; (ii) the
term of existence of the surviving entity beyond that of the
Company; (iii) compensation to the Managing Members or their
Affiliates; (iv) the investment objectives of the Company or the
surviving entity.
"Roll-Up Entity" means a company, real estate investment
corporation, trust or other entity that would be created or
would survive after successful completion of a Roll-Up
transaction.
"Special Managing Member" means Xxxxxx X. Xxxxxxxxxxx, and any
substitute as provided in Article 10.
"Sponsor" means any person, company, corporation, association or
other entity which is directly or indirectly instrumental in
organizing, wholly or in part, the Company or any person,
company, corporation, association or other entity which will
manage or participate in the management of the Company, and any
Affiliate of such person, company, corporation, association or
other entity; but does not include a person, company,
corporation, association or other entity whose only relation
with the Company is as that of an independent property manager
and whose only compensation is as such. "Sponsor" does not
include wholly independent third parties such as attorneys,
accountants, filing agents and underwriters whose only
compensation is for professional services rendered in connection
with the offering of Company interests. A person, company,
corporation, association or other entity may also be a Sponsor
of the Company by: (i) taking the initiative, directly or
indirectly, in founding or organizing the business or enterprise
of the Company, either alone or in conjunction with one or more
other persons, companies, corporations, associations or other
entities; (ii) receiving a material participation in the Company
in connection with the founding or organizing of the business of
the Company, in consideration of services or property, or both
services and property; (iii) having a substantial number of
relationships and contacts with the Company; (iv) possessing
significant rights to control Company Properties; (v) receiving
fees for providing services to the Company which are paid on a
basis that is not customary in the industry; (vi) providing
goods or services to the Company on a basis which was not
negotiated at arm's length with the Company.
"Targeted Cumulative Distribution Amount" means the cumulative
total of all Targeted Distribution Amounts at any point in time.
"Targeted Distribution Amount" means an amount computed by
dividing the Targeted Rate by the number of days in a year times
the amount of Adjusted Capital Contributions, times the actual
number of days the amount of such Adjusted Capital Contributions
was outstanding.
"Targeted Rate" means a rate of 4.00 percentage points over the
Index Rate. Under no circumstances will the Targeted Rate be
less than 8.25% nor more than 9.75% in any year. The Targeted
Rate for any particular period shall be based on the Index Rate
in effect on the last business day of the immediately preceding
calendar quarter.
"Yield Maintenance Distributions" means amounts required to be
distributed by the Managing Members to Limited Members for any
period subsequent to the Determination Date, from not more than
80.39% of the Managing Members' share of Net Cash Flow for such
period, and not exceeding an amount computed by subtracting the
Limited Members' share of Net Cash Flow for the period from the
Targeted Distribution Amount for such period.
3. PURPOSE AND CHARACTER OF THE BUSINESS
The purpose and character of the business of the Company shall
be to acquire an interest in the Properties upon such terms and
conditions as the Managing Member, in its absolute discretion,
shall determine, including, without limitation, taking title to
the Properties; to own, lease, operate and manage the Properties
for income-producing purposes; to furnish services and goods in
connection with the operation and management of the Properties;
to enter into agreements pertaining to the operation and
management of the Properties; to borrow funds for such purposes
and to mortgage or otherwise encumber any or all of the
Company's assets or Properties to secure such borrowings; to
sell or otherwise dispose of the Properties and the assets of
the Company; and to undertake and carry on all activities
necessary or advisable in connection with the acquisition,
ownership, leasing, operation, management and sale of the
Properties.
4. CAPITAL
4.1. Managing Member Capital Contributions
The Managing Member, Special Managing Member and Acquisition
Member shall be obligated to make capital contributions to the
Company, to the extent not previously made, in the amounts of
$9.80, $9.80 and $980.40, respectively. They shall not be
obligated to make any other contributions to the capital of the
Company, except that, in the event that the Managing Members
have negative balances in their capital accounts after
dissolution and winding up of, or withdrawal from, the Company,
they will be obligated to contribute to the Company an amount
equal to the lesser of (a) the deficit balances in their capital
accounts or (b) 1.01% of the total capital contributions of the
Limited Members' over the amount previously contributed
hereunder.
4.2. Limited Member Capital Contributions
4.2.1. Initial Contribution
There shall initially be available for subscription by
prospective Limited Members an aggregate of 4,000,000 Limited
Liability Company Units. The purchase price of each Unit shall
be $10. Except as provided in section 4.10, each subscriber
must subscribe for a minimum purchase of 100 Units. Subscribers
may purchase fractional Units above such minimums.
4.2.2. Requirements For Limited Member Status
Upon the initial closing of the sale of Units, the purchasers
will be admitted as Limited Members not later than 15 days after
the release from escrow of the purchasers' funds. Thereafter, an
investor will be admitted to the Company not later than the
first day of the month next succeeding the date of the
investor's subscription agreement, provided his or her
subscription for Units has been received at least five business
days prior to such date. All subscriptions for Units shall be
accepted or rejected by the Company within 30 days of their
receipt; if rejected, all funds shall be returned to the
subscriber within ten business days of the date of rejection.
The Members shall not be obligated to make any additional
contributions to the capital of the Company.
4.3. Capital Accounts
The Company shall maintain a separate capital account for each
Member. It is intended that the capital account of each Member
will be maintained in accordance with the capital accounting
rules of Treasury Reg. Section 1.704-1(b)(2)(iv). In general,
this will mean that the capital account of each Member shall be
initially credited with the amount of his or her initial
contribution to the capital of the Company. The capital account
of each Member shall further be credited by the amount of any
additional contributions to the capital of the Company made by
such Member from time to time, shall be debited by the amount of
any cash distributions made by the Company to such Member and
shall be credited with the amount of income and gains and
debited with the amount of losses of the Company allocated to
such Member. In all instances, the capital accounting rules in
Treas. Reg. Section 1.704-1(b)(2)(iv) will determine the proper
debits or credits to each Member's capital account. The Managing
Member may, at its option, increase or decrease the capital
accounts of the Members to reflect a revaluation of Company
Property on the Company's books at the times when, pursuant to
Treas. Reg. Section 1.704-1 (b)(2)(iv), such adjustments may
occur. The adjustments, if made, will be made in accordance with
such Regulation, including allocating taxable items, as computed
for book purposes, to the capital accounts as prescribed in such
Regulation. In the case of the transfer of all or a part of an
interest in the Company, the capital account of the transferor
Member attributable to the transferred interest will carry over
to the transferee Member. In the case of termination of the
Company pursuant to Section 708 of the Code, the rules of Treas.
Reg. Section 1.704-1(b)(2)(iv) shall govern adjustments to the
capital accounts. If there are any adjustments to Company
property because of Sections 732, 734, or 743, the capital
accounts of the Members shall be adjusted as provided in Treas.
Reg. Section 1.701-1 (b)(2) (iv) (m). Except as provided in
Section 4.1 of this agreement, in the event that any Member has
a negative capital account balance after dissolution and winding
up of the Company, such Member will not be obligated to
contribute capital to restore the deficit.
4.4. No Right To Return Of Contribution
The Limited Members shall have no right to withdraw or to
receive a return of their contributions to the capital of the
Company, as reflected in their respective capital accounts from
time to time, except upon presentment of Units in accordance
with Section 7.7 or upon the dissolution and liquidation of the
Company pursuant to Article 12.
4.5. Return Of Unused Net Offering Proceeds
In the event that any portion of the Limited Members' capital
contributions is not invested or committed for investment in
real property before the later of two years after the date of
the Prospectus or six months after the date the offer and sale
of Units pursuant to the Prospectus is terminated (except for
amounts utilized to pay operating expenses of the Company and to
establish reasonable working capital reserves as determined by
the Managing Member), such portion of the capital contributions
shall be distributed to the Limited Members as a return of
capital. All of such capital contributions will be available for
the general use of the Company during such period and may be
expended in operating the Properties that have been acquired.
For the purpose of the foregoing, funds will be deemed to have
been committed to investment, and will not be returned to the
Limited Members to the extent written contractual agreements
have been executed prior to the expiration of the preceding
period, regardless of whether any such investment is ultimately
consummated pursuant to the written contractual agreement. To
the extent any funds have been reserved to make contingent
payments in connection with any Property pursuant to a written
contractual agreement in connection with such Property or
pursuant to a reasonable decision of the Managing Members that
additional reserves are necessary in connection with any
Property, regardless of whether any such payment is ultimately
made, subscription funds will not be returned to the Limited
Members.
4.6. Loans To Company; No Interest On Capital
The Members may make loans to the Company from time to time, as
authorized by the Managing Member, in excess of their
contributions to the capital of the Company, and any such loans
shall not be treated as a contribution to the capital of the
Company for any purpose hereunder, nor shall any such loans
entitle such Member to any increase in his or her share of the
profits and losses and cash distributions of the Company, nor
shall any such loans constitute a lien against the Properties.
The amount of any such loans with interest thereon at a rate
determined by the Managing Member, in its absolute discretion,
but not to exceed the rate that otherwise would be charged by
unaffiliated lending institutions on comparable loans for the
same purpose, shall be an obligation of the Company to such
Member. The Managing Members or their Affiliates may loan funds
to the Company during the offering period for acquiring a
Property. Interest on such loans shall not be in excess of the
rate charged by an unrelated lending institution on comparable
loans for the same purpose in the same locality of the
Properties or exceed the cost of funds of the Managing Members
or their Affiliates. No interest shall be paid by the Company on
the contributions to the capital of the Company by the Members.
4.7. Purchase Of Units By Managing Members
The Managing Members and their Affiliates may subscribe for and
acquire Units for their own account; provided, however, that any
Units acquired by the Managing Members or their Affiliates will
be acquired for investment and not with a view to the
distribution thereof and that the aggregate amount of Units so
purchased by the Managing Members will not exceed five percent
(5%) of the Units offered in the Prospectus. With respect to
such Units, the Managing Members and their Affiliates shall have
all the rights afforded to Limited Members under this agreement,
except as may be expressly provided in this agreement.
4.8. Nonrecourse Loans
A creditor who makes a nonrecourse loan to the Company will not
have or acquire, at any time because of making the loan, any
direct or indirect interest in the profits, capital or property
of the Company other than as a secured creditor.
4.9. Working Capital Reserve
The Managing Members shall use their best efforts to maintain a
working capital reserve of two percent (2%) of the aggregate
Adjusted Capital Contributions and to restore such reserve if
depleted.
4.10. Distribution Reinvestment Plan
4.10.1. Election To Participate
A Limited Member may elect to participate in a program for the
reinvestment of his or her distributions of Net Cash Flow (the
"Distribution Reinvestment Plan") and have his or her
distributions of Net Cash Flow from operations reinvested in
Units of the Company. Limited Members participating in the
Distribution Reinvestment Plan may purchase fractional Units and
there shall be no minimum purchase amount with respect to such
participants. Each Limited Member electing to participate in the
Distribution Reinvestment Plan shall receive, at the time of
each distribution of Net Cash Flow, a notice advising such
Limited Member of the number of additional Units purchased with
such distribution and advising such Limited Member of his or her
ability to change his or her election to participate in the
Distribution Reinvestment Plan.
4.10.2. Withdrawal From Plan
If a Limited Member withdraws from the Distribution Reinvestment
Plan, such withdrawal shall be effective only with respect to
distributions made more than 30 days following receipt by the
Company of written notice of such withdrawal. In the event of a
transfer by a Limited Member of Units, such transfer shall
terminate the Limited Member's participation in the plan as of
the first day of the quarter in which the transfer is effective.
4.10.3. Conditions For Reinvestment Of Distributions
Distributions may be reinvested only if (i) the sale of Units
continues to be registered or qualified for sale under federal
and applicable state securities laws; (ii) each continuing
Participant has received a current Prospectus relating to the
Company, including any supplements thereto, and executed a
confirmation within one year of such reinvestment indicating
such Participant's intention to purchase Units in the Company
through the Plan and confirming that the Participant continues
to satisfy the investor suitability requirements; and (iii)
there has been no distribution of Net Proceeds of Sale or
Refinancing. If (A) any of the foregoing conditions are not
satisfied at the time of any distribution, or (B) no interests
are available to be purchased, such distributions shall be paid
in cash.
4.10.4. Survival Of Representations
Each Limited Member electing to participate in the Distribution
Reinvestment Plan hereby agrees that his or her investment in
this Company constitute his or her agreement to be a Limited
Member of the Company and to be bound by the terms and
conditions of this agreement and, if at any time he or she fails
to meet applicable investor suitability guidelines or cannot
make the other investor representations required or set forth in
the then current Operating Agreement, Prospectus or Subscription
Agreement, he or she will promptly notify the Managing Members
in writing.
4.10.5. Commissions On Reinvestment Distributions
The Company shall pay a commission, not to exceed 5.5%, in
connection with any reinvestment pursuant to the plan to any
broker-dealer designated by the Participant in the plan. If no
broker-dealer is designated or the Limited Member has advised
the Company that he or she desires that such commissions not be
paid, or if the designated broker-dealer has not signed a dealer
agreement with respect to the Company, or if the broker-dealer
is no longer qualified under applicable law to engage in the
solicitation of the sale of such Company interests, then no
commission shall be paid. No fees shall be paid to the Company
or the Managing Members at the time of any such reinvestment,
but the Managing Members of the Company may be reimbursed for
the Cost incurred in making such reinvestment, in accordance
with the provisions of this agreement.
4.10.6. Managers' Election To Terminate Plan
The Managing Members may elect, at their option, to terminate
the Distribution Reinvestment Plan at any time without notice to
Limited Members.
5. ALLOCATION OF PROFITS, GAINS, LOSSES AND DISTRIBUTIONS
The Members agree that the income, profits, gains and losses of
the Company shall be allocated and that cash distributions of
the Company shall be made as follows:
5.1. Allocation Of Income, Profits, Gains And Losses
For income tax purposes, income, profits, gains and losses of
the Company for each fiscal year, other than any gain or loss
realized upon the sale, exchange or other disposition of any
Property, using such methods of accounting for depreciation and
other items as the Managing Member determines to use for federal
income tax purposes, shall be allocated as of the end of each
fiscal year to each Member based on his or her varying interest
in the Company during such fiscal year. The Company shall
determine, in the discretion of the Managing Member and as
recommended by the Company auditors, whether to prorate items of
income and deduction according to the portion of the year for
which a Member was a member of the Company or whether to close
the books on an interim basis and divide such fiscal year into
segments. Subject to Section 5.6, for income tax purposes,
income, profits, gains and losses, other than any gain or loss
realized upon the sale, exchange or other disposition of any
Property, shall be allocated as follows:
(a) Net loss shall be allocated 49% to the Limited Members,
and 51% to the Managing Members;
(b) Net income, profits and gains shall be allocated 49% to
the Limited Members plus an amount equal to any Yield
Maintenance Distributions paid to Limited Members during
the year and 51% to the Managing Members minus any Yield
Maintenance Distributions paid to Limited Members during
the year.
5.2. Distributions Of Net Cash Flow
Net Cash Flow from operations, if any, with respect to a fiscal
year will first be distributed 49% to the Limited Members plus
any required Yield Maintenance Distributions and 51% to the
Managing Members minus any required Yield Maintenance
Distributions. Any amounts distributed to the Limited Members in
accordance with this Section 5.2 shall be allocated among the
Limited Members pro rata based on the number of Units held by
each Limited Member and the number of days such Units were held
during such fiscal year.
No liability for Yield Maintenance Distributions will accrue for
any period prior to the Determination Date. Thereafter, Yield
Maintenance Distributions shall be distributed within 30 days
after determination. The Managing Members, at their sole option,
may make estimated quarterly payments of Yield Maintenance
Distributions along with any quarterly distributions of Net Cash
Flow.
5.3. Allocation Of Gain Or Loss Upon Sale, Exchange, Or Disposition
Subject to Section 5.6, for income tax purposes the gain
realized upon the sale, exchange or other disposition of any
Property will be allocated as follows:
(a) First, to and among the Members in an amount equal to
the negative balances in their respective capital
accounts (pro rata based on the respective amounts of
such negative balances).
(b) Next, 100% to the Limited Members until the balance in
each Limited Member's capital account equals the sum of
such Limited Member's Adjusted Capital Contribution plus
an amount equal to the Targeted Cumulative Distribution
Amount to the extent not previously distributed pursuant
to Section 5.2 and Section 5.4(a);
(c) Next, 100% to the Managing Members as reimbursement for
the cumulative amount of Yield Maintenance Distributions
as yet unreimbursed; and,
(d) The balance of any remaining gain will then be allocated
49% to the Limited Members and 51% to the Managing
Members.
Subject to Section 5.6, any loss on the sale, exchange or other
disposition of any Property will be allocated 49% to the Limited
Members and 51% to the Managing Members.
5.4. Distribution Of Net Proceeds Of Sale
Upon refinancing, sale or other disposition of any of the
Properties, Net Proceeds of Sale may be reinvested in additional
properties; provided, however, that sufficient cash is
distributed to the Limited Members to pay state and federal
income taxes (assuming Limited Members are taxable at a marginal
rate of 7% above the federal capital gains rate applicable to
individuals) created as a result of such transaction. Except for
distributions upon liquidation of the Company (which are
governed by Section 12.3 of this agreement), Net Proceeds of
Sale that are not reinvested in additional properties will be
distributed as follows:
(a) First, 100% to the Limited Members until the Limited
Members have received an amount from Net Proceeds of
Sale equal to the sum of (i) the Targeted Cumulative
Distribution Amount to the extent not previously
distributed pursuant to Section 5.2 and this Section
5.4(a), plus (ii) Adjusted Capital Contributions;
(b) Next 100% to the Managing Members in an amount equal to
the cumulative total of unreimbursed Yield Maintenance
Distributions; and,
(c) Any remaining balance will be distributed 49% to the
Limited Members and 51% to the Managing Members.
5.5. Cumulative Return
Commencing on the Determination Date and continuing thereafter,
the Company shall pay as a cumulative (but not compounded)
return on investment, the Targeted Cumulative Distribution
Amount before applying any Net Proceeds of Sale toward
reductions of Adjusted Capital Contributions. For Limited
Members that acquire their Units after the Determination Date,
this cumulative (but not compounded) return on Adjusted Capital
Contributions will be applied commencing on the first day of the
calendar quarter following the date on which such Unit is
initially held by the Limited Member.
5.6. Regulatory Allocations
The following Regulatory Allocations shall be made in the
following order:
5.6.1. Minimum Gain Chargeback
Except as otherwise provided in Section 1.704-2(f) of the
Treasury Regulations, notwithstanding any other provision of
these Regulatory Allocations, 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 that Member's share of the net decrease in Company
minimum gain (within the meaning of Treas. Reg. Section 1.704-
2(b)(2) and 1.704-2(d) determined in accordance with Treas. Reg.
Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with
Treas. Reg. Section 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 5.6.1 is intended to comply with the minimum gain
chargeback requirement in Treas. Reg. Section 1.704-2(f) and
shall be interpreted consistently therewith.
5.6.2. Member Minimum Gain Chargeback
Except as otherwise provided in Treas. Reg. Section 1.704-
2(i)(4), notwithstanding any other provision of these Regulatory
Allocations, if there is a net decrease in Member nonrecourse
debt minimum gain, as defined in Treas. Reg. Section 1.704-
2(i)(2) and determined pursuant to Treas. Reg. Section 1.704-
2(i)(3), attributable to a Member nonrecourse debt as defined in
Treas. Reg. Section 1.704-2(b)(4), during any Company fiscal
year, each Member who has a share of the Member nonrecourse debt
minimum gain attributable to such Member nonrecourse debt,
determined in accordance with Treas. Reg. Section 1.704-2(i)(5),
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 Member
nonrecourse debt minimum gain attributable to such Member
nonrecourse debt, determined in accordance with Treas. Reg.
Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with
Treas. Regulations 1.704-2(i)(4) and 1.704-2(G)(2). This Section
5.6.2 is intended to comply with the minimum gain chargeback
requirement in Treas. Reg. Section 1.704- 2 (i) (4) and shall be
interpreted consistently therewith.
5.6.3. Qualified Income Offset
If a Member unexpectedly receives an adjustment, allocation or
distribution described in Treas. Reg. Sections 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), and such unexpected adjustment,
allocation or distribution puts such Member's capital account
into a deficit balance or increases such deficit balance
determined after such account is credited by any amounts which
the Member is obligated to restore or is deemed to be obligated
to restore pursuant to the penultimate sentence of Treas. Reg.
Section 1.704-2(g)(1) and 1.704-2(i)(5) and debited by the items
described in Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(4), (5)
and (6) and for all other allocations tentatively made pursuant
to these Regulatory Allocations as if this paragraph (c) were
not in this agreement, such Member shall be allocated items of
Company income and gain in an amount and manner sufficient to
eliminate such deficit or increase as quickly as possible. It is
intended that this Section 5.6.3 shall meet the requirement that
this agreement contain a "qualified income offset" as defined in
Treas. Reg. Section 1.704-1(b)(2)(ii)(d) and this Section shall
be interpreted and applied consistently therewith.
5.6.4. Gross Income Allocation
In the event any Member has a deficit capital account at the end
of any fiscal year which is in excess of the sum of (i) the
amount such Member is obligated to restore pursuant to any
provision of this agreement, and (ii) the amount such Member is
deemed to be obligated to restore pursuant to the penultimate
sentences of Treas. Reg. Section 1.704-2(g)(1) and 1.704-
2(i)(5), each such Member shall be specially allocated items of
Company income and gain in the amount of such excess as quickly
as possible, provided that an allocation pursuant to this
paragraph 5.6.4 shall be made only if and to the extent that
such Member would have a deficit capital account in excess of
such sum after all other allocations provided for in these
Regulatory Allocations have been made as if paragraph 5.6.3 and
this paragraph 5.6.4 were not in the Agreement.
5.6.5. Nonrecourse Deductions
Nonrecourse deductions, within the meaning of Treas. Reg.
Section 1.704-2(b)(1), for any fiscal year or other period shall
be specially allocated to the Members in proportion to their
Units.
5.6.6. Member Nonrecourse Deductions
Any Member nonrecourse deductions, within the meaning of Treas.
Reg. Section 1.704-2(i)(I) and 1.704-2(i)(2), 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 Member nonrecourse deductions are
attributable in accordance with Treas. Regulations Section
1.704-2(i).
5.6.7. Section 754 Adjustments
To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Sections 732, 734(b) or 743(b) is
required, pursuant to Treas. Reg. Section 1.704-1 (b)(2) (iv)
(m)(2) or (4), 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 Sections of the Treasury Regulations.
5.6.8. Intent With Respect To Regulatory Allocations
The Regulatory Allocations are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of
the Members that to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of
Company income, gain, loss, or deduction pursuant to this
paragraph. Therefore, notwithstanding any other provision of
these Regulatory Allocations (other than the Regulatory
Allocations), the Managing Member shall make such offsetting
special allocations of Company income, gain, loss, or deduction
in whatever manner it determines appropriate so that, after such
offsetting allocations are made, each Member's capital account
balance is, to the extent possible, equal to the capital account
balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were
allocated pursuant Section 12.2. In exercising its discretion
under this paragraph, the Managing Member shall take into
account future Regulatory Allocations under Sections 5.6.1 and
5.6.2 that, although not yet made, are likely to offset other
Regulatory Allocations previously made under paragraphs 5.6.5
and 5.6.6.
5.7. Limitation On Loss Allocation
Notwithstanding anything in Section 5.1 above, losses allocated
pursuant to Section 5.1 shall not exceed the maximum amount of
losses that can be so allocated without causing a Member to have
an adjusted capital account deficit at the end of any fiscal
year. In the event one of the Members would have an adjusted
capital account deficit as a consequence of an allocation of
losses pursuant to Section 5.1, the limitation set forth herein
shall be applied on a Member by Member basis so as to allocate
the maximum permissible losses to each Member under Section
1.704-1 (b)(2) (ii) (d) of the Regulations. All losses in excess
of the foregoing limitation shall be allocated to the Members in
proportion to their Units.
5.8. Allocation Among Managing Members
Any allocations or distributions amongst the Managing Members
shall be made in the following ratio: .98% to the Managing
Member, .98% to the Special Managing Member, and 98.04% to the
Acquisition Member.
6. RIGHTS, POWERS AND DUTIES OF MANAGING MEMBERS
The Members agree that the Managing Members, acting through the
Managing Member, shall have the following rights, powers and,
where provided, duties in connection with the conduct of the
business of the Company.
The Managing Member shall manage the affairs of the Company in a
prudent and business-like fashion and shall use its best efforts
to carry out the purposes and character of the business of the
Company. The Managing Member shall devote such of its time as it
deems necessary to the management of the business of the Company
and may enter into agreements with an Affiliate to provide
services for the Company, provided that such services are
furnished at a price that is not greater than the Managing
Member would otherwise be entitled.
6.1. Appointment Of Managing Member
Subject to the limitations herein, and to the express rights
afforded Limited Members herein, including, without limitation,
the rights set forth in Articles 7 and 11 herein, the Special
Managing Member, the Acquisition Member and the Limited Members
delegate to the Managing Member the sole and exclusive authority
for all aspects of the conduct, operation and management of the
business of the Company, including making any decision regarding
the sale, exchange, lease or other disposition of the
Properties; provided, however, that the Managing Member shall be
required to obtain the prior consent of (i) a 75% majority of
the Limited Members, by interest, excluding any Units held by
the Managing Members, to the sale of all or substantially all of
the assets of the Company; or (ii) a majority of the Limited
Members, by interest, excluding any Units held by the Managing
Members to any material change to the investment objectives and
policies of the Company as described in the Prospectus. In the
event the Managing Member proposes to cause the Company to enter
into a transaction requiring the consent of the Special Managing
Member, the Managing Member shall forthwith notify the Special
Managing Member of its intentions in writing. The Special
Managing Member shall be considered to have consented to such
proposal if he fails to notify the Managing Member of his
objection thereto within 20 days of the date of notice of such
proposal. Any notification concerning an objection shall include
a brief statement of each reason for the Special Managing
Member's opposition to such proposal. With the exceptions stated
above, the Managing Member shall have the exclusive authority to
make all decisions affecting the Company and to exercise all
rights and powers granted to the Managing Members.
6.2. Audit Committee
Prior to completion of the registration with the United States
Securities Exchange Commission of the securities contemplated in
the Prospectus, the Special Managing Member shall cause the
formation of the Audit Committee. The Audit Committee shall
consist of the Special Managing Member and an Independent Audit
Committee Member. The duties of the Audit Committee shall be to
(i) make recommendations concerning the engagement of
independent public accountants; (ii) review with the independent
public accountants the plans and results of the audit
engagement; (iii) approve professional services provided by the
independent public accountants; (iv) review the independence of
the independent public accountants; (v) consider the range of
audit and non-audit fees of the independent public accountants;
(vi) review the adequacy of the Company's internal accounting
controls; and (vii) review related party transactions.
6.3. Management Fees; Reimbursement Of Expenses
6.3.1. Fees And Reimbursements
Subject to the limitations set forth in Section 6.3.2, the
Company shall pay or reimburse the Managing Members in
accordance with the Asset Management Agreement.
6.3.2. Aggregate Cumulative Fees And Reimbursements
The aggregate cumulative reimbursements pursuant to Section
6.3.1, when added to all fees paid to the Managing Members and
their Affiliates, will not exceed, at the end of any fiscal
year, the sum of (i) the Front-End Fees of up to 10% of capital
contributions; plus (ii) the cumulative total of all Asset
Management Fees; plus (iii) the cumulative total of all Property
Management Fees of up to 5% of gross rents received, provided
that such fees are billed to and paid by tenants; plus (iv)
Disposition Fees of 3% of Net Proceeds of Sale from properties
on which the Managing Members or Affiliates furnish a
substantial amount of sales efforts. The Managing Members will
review with the Audit Committee the reimbursements and fees that
they and their Affiliates receive at the end of each fiscal year
of the Company. If the Managing Members and their Affiliates
receive payment for items set forth in Section 6.3.1 in excess
of the limitations set forth in this section, they will refund
the difference to the Company within 30 days of discovery of
such excess. Such review shall not take into account any of the
fees that might be paid in years after the fiscal year for which
the calculation is made. The limitations set forth in this
Section 6.3.2 shall not apply to any agreements whereby the
Company requests the Managing Members to perform additional
services not specifically referred to herein or under the Asset
Management Agreement.
6.3.3. Reports With Respect To Fees
The Company's annual report to Limited Members will contain
information concerning reimbursements and fees paid to the
Managing Members and their Affiliates. Within the scope of the
annual audit, an independent certified public accountant shall
verify the allocation of costs to the Company. The methods of
verification shall be in accordance with generally accepted
auditing standards and shall include such tests of the
accounting records and such other auditing procedures that the
Company's independent certified public accountants consider
appropriate in the circumstances. Such methods of verification
shall at a minimum provide: (i) a review of the time records of
employees and control persons, the costs of whose services were
reimbursed and (ii) a review of the specific nature of the work
performed by each such employee and control person. The
additional cost of such verification will be itemized by such
accountant on a program-for-program basis, and the Managing
Members will be reimbursed for such additional cost only to the
extent that the cost of such verification, when added to all
reimbursements to the Managing Members for services rendered to
the Company, does not exceed the competitive price for such
services which would be charged by non-affiliated persons
rendering similar services in the same or comparable geographic
location.
6.3.4. Other Fees And Reimbursements
The Managing Members and their Affiliates will not be reimbursed
or otherwise paid for any services except as set forth in
Section 6.3.1.
6.4. Other Activities Of Managing Members
The Managing Members, during the term of this Company, may
engage in and possess an interest for their own account 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, investment in and development of real estate; and
neither the Company nor any Member, by virtue of this agreement,
shall have any right in and to said independent ventures or any
income or profits derived therefrom. Nothing in this section
shall be deemed to diminish the Managing Members' overriding
fiduciary obligation to the Company, or to constitute a waiver
of any right or remedy the Company or Limited Members may have
in the event of a breach by any of the Managing Members of such
obligation.
6.5. Indemnification And Liabilities Of Managing Members
6.5.1. Indemnification
The Company shall indemnify each of the Managing Members,
Affiliates and the Independent Audit Committee Member against
any claim or liability incurred or imposed upon them provided
they were acting on behalf of or performing services for the
Company and the Managing Member has determined, in good faith,
that the course of conduct that caused the loss or liability was
in the best interests of the Company, and such conduct did not
constitute misconduct or negligence. The Managing Members, their
Affiliates and the Independent Audit Committee Member shall not
be liable to the Company or any Member by reason of any act or
omission provided the Managing Member has determined, in good
faith, that the course of conduct which caused the loss or
liability was in the best interests of the Company, and such
conduct did not constitute misconduct or negligence. Solely for
purposes of this Section 6.5, but for all such purposes herein,
the term "Affiliate" shall mean only those Affiliates, as
defined in Article 2, that furnish services to the Company
within the scope of the Managing Members' authority.
Any indemnification pursuant to this Section 6.5, or otherwise,
shall be recoverable only from the assets of the Company and not
from any of the Limited Members. No Managing Member, Affiliate
or Independent Audit Committee Member shall be entitled to
advances for legal expenses and other costs incurred as a result
of legal action initiated against them unless (1) the action
relates to the performance of the duties of such Managing Member
or Affiliate on behalf of the Company; (2) the action is not
initiated by a Limited Member; and (iii) the Managing Member,
Affiliate or Independent Audit Committee Member undertakes to
repay such advances in cases in which it is determined they are
not entitled to indemnification.
The Company will obtain, and pay the cost of, Directors' and
Officers' Liability Insurance coverage in the amount of $5
million (subject to a retention of a "deductible" of not more
than $250,000). Directors' and Officers' Liability Insurance
insures (i) Managing Members and the Independent Audit Committee
Member of the Company from any claim arising out of an alleged
wrongful act in connection with their respective capacities, and
(ii) the Company to the extent that the Company has indemnified
the Managing Members and/or the Independent Audit Committee
Member for such loss.
6.5.2. Fiduciary Responsibility
The Managing Member shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Company,
whether or not in its immediate possession or control, and the
Managing Member shall not employ, or permit another to employ,
such funds or assets in any manner except for the exclusive
benefit of the Company. The Managing Member and the Company may
not permit the Limited Members to contract away the fiduciary
duty owed to the Limited Members by the Managing Member under
the common law.
6.6. Prohibited Transactions
Notwithstanding anything to the contrary contained herein, the
Managing Members and Affiliates of the Managing Members (i) may
not receive interest and other financing charges or fees on
loans made to the Company in excess of the amounts that would
otherwise be charged by unaffiliated lending institutions on
comparable loans for the same purpose and in the same locality
of the Property if the loan is made in connection with a
particular Property, (ii) may not require a prepayment charge or
penalty on any loan from the Managing Members to the Company,
(iii) may not provide financing to the Company that is payable
over a period exceeding 48 months or for which more than 50% of
the principal is due in more than 24 months, (iv) may not grant
to themselves an exclusive listing for the sale of any Property,
(v) may not directly or indirectly pay or award any commissions
or other compensation to any person engaged by a potential
investor for investment advice as an inducement to such adviser
to advise any purchaser of Units (provided, however, that this
provision shall not prohibit the normal sales commissions
payable to a registered broker-dealer or other properly licensed
person for selling the Units), (vi) may not commingle Company
funds with the funds of any other person, (vii) may not receive
a commission or fee, other than may incidentally result from
transactions contemplated by the Asset Management Agreement, in
connection with the temporary reinvestment or distribution of
the proceeds of the resale, exchange or refinancing of the
Properties (viii) may not cause the Company to incur
indebtedness directly or indirectly related to the purchase of
properties, from any source, (ix) may not cause the Company to
invest in other limited partnerships or limited liability
companies, provided that joint venture arrangements set forth in
Section 6.7 shall not be prohibited, (x) may not cause the
Company to acquire property in exchange for Units, (xi) may not
cause the Company to pay a fee to the Managing Members or their
Affiliates for insurance coverage or brokerage services, (xii)
may not cause the Company to make loans or investments in real
property mortgages other than in connection with the purchase or
sale of the Company's properties, (xiii) may not cause the
Company to operate in a manner as to be classified as an
"investment company" for purposes of the Investment Company Act
of 1940, (xiv) may not cause the Company to underwrite or invest
in the securities of other issuers, except as specifically
discussed in Section 6.7 and in the Prospectus, (xv) may not
cause the Company to incur the cost of that portion of liability
insurance that insures the Managing Members, their Affiliates or
the Independent Audit Committee Member for any liability as to
which such Managing Members or their Affiliates are prohibited
from being indemnified under this Section 6.6, (xvi) may not
receive a real estate commission in connection with the
purchase, sale or financing of a Property and will not permit
aggregate compensation to others in connection with the sale of
any Property to exceed a Competitive Real Estate Commission,
(xvii) may not receive Acquisition Fees together with
Acquisition Expenses paid to any party by the Company in excess
of 3% of the total capital contributions of Limited Members
pursuant to Section 4.2 of this agreement, (xiii) may not cause
the Company to incur Front-End Fees to the extent that such fees
would cause the Company's Investment in Properties to be less
than 90% of capital contributions, (xix) may not receive any
rebate or give-up nor participate in any reciprocal business
arrangement in circumvention of the NASAA Guidelines, nor shall
any Managing Member participate in any reciprocal business
arrangement that would circumvent the restrictions of such NASAA
Guidelines against dealing with affiliates or promoters, and
(xx) may not cause the Company to make any loans or advances at
any time to the Managing Members or their Affiliates, except for
the Acquisition Member, and then only for the purpose of
acquiring property on behalf of the Company.
6.7. Investments In Other Properties
The Company may not purchase limited partnership or limited
liability company interests of another program. The Company may,
however, invest (a) in general partnerships or ventures that own
and operate a particular property provided the Company, either
alone or together with any publicly-registered Affiliate,
acquires a controlling interest in such other ventures or
general partnerships, and the investment in such general
partnerships or joint ventures does not result in duplicate
fees, (b) in joint venture arrangements with another publicly-
registered program sponsored by the Managing Members or their
Affiliates, or (c) in joint venture arrangements with the
Managing Members or their Affiliates other than another publicly
registered program. For purposes of Section 6.7(a), "controlling
interest" means an equity interest possessing the power to
direct or cause the direction of the management and policies of
the Company or joint venture, including the authority to (i)
review all contracts entered into by the partnership or joint
venture that will have a material effect on its business or
property; (ii) cause a sale or refinancing of the property or
the Company's interest therein subject in certain cases where
required by the Company or joint venture agreement, to limits as
to time, minimum amounts and/or a right of first refusal by the
joint venture member or consent of the joint venture member;
(iii) approve budgets and major capital expenditures, subject to
a stated minimum amount; (iv) veto any sale or refinancing of
the property, or, alternatively, to receive a specified
preference on sale or refinancing proceeds; (v) exercise a right
of first refusal on any desired sale or refinancing by the joint
venture Member of its interest in the property except for
transfer to an Affiliate of the joint venture Member.
For purposes of 6.7(b), the Company shall be permitted to invest
in joint venture arrangements with another publicly registered
program or programs sponsored by the Managing Members or their
Affiliates for the purpose of acquiring a property from
unaffiliated parties only if (i) the two programs have
substantially identical investment objectives; (ii) there are no
duplicate property management or other fees; (iii) the Managing
Members' compensation is substantially similar in each program;
(iv) the Company, in the event of a proposed sale of property
held in the joint venture by the other joint venture member,
will have a right of first refusal to purchase the other party's
interest; and (v) the investment by each of the programs in the
joint venture must be on substantially the same terms and
conditions.
For purposes of 6.7(c), the Company shall be permitted to invest
in joint venture arrangements with the Managing Members or their
Affiliates other than a publicly registered program for the
purpose of acquiring a property from unaffiliated parties only
if (i) the investment is necessary to relieve the Managing
Members from any commitment to purchase a property entered into
prior to the closing of the offering period of the Company; (ii)
there are no duplicate property management or other fees; (iii)
the investment by each of the programs in the joint venture must
be on substantially the same terms and conditions; and (iv) in
the event of a proposed sale of property held in the joint
venture by the other joint venture member, the Company will have
a right of first refusal to purchase the other party's interest.
6.8. Unimproved Property; Property Under Construction
The Company may not acquire unimproved or non-income producing
property except in amounts and upon terms which can be financed
by the Limited Members' capital contributions or from funds
provided from operations. In no event shall the Company acquire
unimproved or non-income producing property exceeding 2% of the
total capital contributions of Limited Members pursuant to
Section 4.2 of this agreement. For purposes of this Section 6.8,
properties that are expected to produce income within one year
shall not be considered unimproved or non-income producing
properties.
The Company may not acquire property which is under construction
unless completion is guaranteed for the price contracted for by
any of the following: (i) a completion bond, (ii) a written
guarantee of completion by a person who, or entity that, has
provided financial statements demonstrating sufficient net worth
and collateral, or (iii) retention of a reasonable portion of
the purchase price as an offset in the event the seller does not
perform.
6.9. Investments In Junior Trust Deeds
The Company may not invest in junior trust deeds and other
similar obligations except to the extent such investments arise
upon sale of Properties. In no event shall such investments
exceed 10% of the gross assets of the Company.
6.10. Requirement For Property Appraisal
All Property acquisitions by the Company will require an
appraisal prepared by a competent, independent appraiser. The
appraisal will be maintained in the Company's records for at
least five years and will be available for inspection and
duplication by any Limited Member.
6.11. Balloon Payments
Any Indebtedness of the Company (which shall, in any event, be
subject to the limitations contained in Section 6.6(viii) of
this agreement) which is not fully amortized in equal payments
over a period of not more than 30 years, shall have a maturity
date (due date) which is not earlier than ten years after the
date of the original purchase of the underlying property.
The Company may not incur indebtedness of any kind, including
all-inclusive and wrap-around loans and interest-only loans, in
connection with the purchase of a Property.
The provisions of this Section 6.11 shall not apply (but the
provisions of section 6.6(viii) shall apply) to indebtedness
representing, in the aggregate, 10% or less of the total
purchase price of all Properties acquired, or to interim
financing, including construction financing, with a full take-
out commitment.
6.12. Selling Commissions
Except as otherwise provided in this Section 6.12, the Company
shall pay any and all Selling Commissions and expense allowances
up to the amount of $5.00 per Unit sold. The Company shall also
provide reimbursement for the bona fide due diligence expenses
of dealers selling Units to the extent the aggregate of such
reimbursements do not exceed $.50 (50 cents) per Unit sold.
A broker-dealer may purchase Units for his own investment
account at a per Unit purchase price of $94.50.
6.13. Roll-Up Transactions
The Company shall not participate in any Roll-Up (i) which would
result in Limited Members having democracy rights in the Roll-Up
Entity which are less than those provided in this Operating
Agreement (provided that, if the form of the Roll-Up Entity is
other than the Company's, the democracy rights shall conform to
those provided in this Operating Agreement to the greatest
extent possible); (ii) which includes provisions that would act
to materially impede or frustrate the accumulation of shares of
any purchaser of the securities of the Roll-Up Entity (except to
the extent required to preserve the tax status of the Roll-Up
Entity); (iii) which would limit the rights of Limited Members
to exercise voting rights in the securities of the Roll-Up
Entity on the basis of the number of equity interests held by
such Limited Members; (iv) which would result in a Roll-Up
Entity which would have rights to access of records less than
those of the Company; or (v) which provides for the costs of the
Roll-Up to be borne by the Company and which costs are not
approved by Limited Members.
No Roll-Up shall be conducted unless an appraisal of all
material Company assets has been obtained from a competent
person or entity that has no material current or prior business
or personal relationship with the Managing Members or their
Affiliates and who is engaged to a substantial extent in the
business of rendering opinions regarding the value of assets of
the type held by the Company and is qualified to perform such
appraisal. The appraisal shall be based on an evaluation of all
relevant information, assuming an orderly liquidation of the
Company's assets over a 12-month period, and shall indicate the
value of the Company's material assets as of a date immediately
preceding announcement of the proposed Roll-Up. The appraiser
expert performing the appraisal shall be engaged for the benefit
of the Company and its Members. A summary of the appraisal shall
be included in a report to the Limited Members in connection
with the proposed Roll-Up and if such report is a part of a
prospectus used to offer securities in the Roll-Up Entity, the
appraisal shall be filed with the SEC and the states in
connection with the registration statement for the offering.
Any Limited Member who votes against a Roll-Up that is
subsequently completed shall be given the option to (i) accept
the securities of the Roll-Up Entity, or (ii) either one of (a)
remaining a Limited Member in the Company or (b) receiving cash
in the amount of the Net Value Per Unit determined by utilizing
the appraised value of the Company's assets.
7. PROVISIONS APPLICABLE TO LIMITED MEMBERS
The following provisions shall apply to the Limited Members, and
the Limited Members hereby agree thereto.
7.1. Liability
The Limited Members shall be liable with respect to the Company
only to the extent of the amount of the contribution to capital
made by such Limited Members as provided in Section 4.2. The
Units are non-assessable.
7.2. No Participation In Management
No Limited Member shall take any part or participate in the
conduct of, or have any control over, the business of the
Company, and no Limited Member shall have any right or authority
to act for or to bind the Company; provided, however, that the
Company may not sell all or substantially all of the assets of
the Company in a bulk transaction without the prior written
consent of a 75% majority of the Limited Members, by interest.
7.3. No Withdrawal Or Dissolution
No Limited Member shall withdraw at any time from the Company
except as provided in this agreement. No Limited Member shall
have the right to have the Company dissolved or to have his or
her contribution to the capital of the Company returned by the
Company except as provided in this agreement. The death or
bankruptcy of a Limited Member shall not dissolve or terminate
the Company.
7.4. Consent
To the fullest extent permitted by law, each of the Limited
Members hereby consents to the exercise by the Managing Member
of all the rights and powers conferred on the Managing Member by
this agreement.
7.5. Power Of Attorney
Each of the Limited Members and the Special Managing Member
hereby irrevocably constitute and appoint the Managing Member
his or her or its true and lawful attorney, in his or her or its
name, place and stead to make, swear to, execute, acknowledge
and file:
(a) This Operating Agreement and any and all certificates
of formation of the Company, and any amendments thereto
that may be required by the Limited Liability Company
Act, including amendments required for the reflection
of return of capital to any Member or the contribution
of any additional capital, and the continuation of the
business of the Company by a substitute and/or
additional Managing Member;
(b) Any certificate or other instrument and any amendments
thereto that may be required to be filed by the Company
in order to accomplish the business and the purposes of
the Company, including any business certificate,
fictitious name certificate or assumed name
certificate;
(c) Any cancellation of such certificates of formation,
this Operating Agreement and any and all other
documents and instruments that may be required upon the
dissolution and liquidation of the Company;
(d) New certificates of formation and any and all documents
and instruments that may be required to effect a
continuation of the business of the Company as provided
in this agreement; and
(e) Any amended operating agreement or certificate of
formation that has been duly adopted hereunder or
authorized hereby.
It is expressly intended that the foregoing power of attorney is
(1) coupled with an interest and shall survive the bankruptcy,
death, incompetence or dissolution of any person hereby giving
such power and (2) does not affect the Limited Members' rights
to approve or disapprove any amendments to this agreement or
other matters as provided elsewhere herein.
If a Limited Member assigns his or her interest in the Company,
as provided in Article 9, the foregoing power of attorney shall
survive the delivery of the instruments effecting such
assignment for the purpose of enabling the Managing Member to
sign, swear to, execute and acknowledge and file any and all
amendments to the certificates of formation of the Company and
other instruments and documents necessary to effectuate the
substitution of the assignee as a Limited Member.
7.6. Limitation On Acquisition Of Equity Securities Of Managers
The Limited Members (excluding the Managing Members or their
Affiliates who purchase Limited Liability Company Units) shall
not own, directly or indirectly, individually or in the
aggregate, more than 20% of the outstanding equity securities of
any Managing Member or its Affiliates.
The phrase "own, directly or indirectly" used herein shall have
the meaning set forth in Section 318 of the Internal Revenue
Code of 1954, as currently in effect or as hereafter amended. As
of the date hereof, such term includes ownership by a Limited
Member, his or her spouse, children, grandchildren, parents, any
Company of which the Limited Member or any of the foregoing is a
member, any estate or trust of which the Limited Member or any
of the foregoing is the beneficiary and any corporation at least
50% owned in the aggregate by said Limited Member or any of the
foregoing.
7.7. Repurchase Of Units By Company
The provisions of this Section 7.7 shall apply only in the
circumstance that the Company's Units are not traded on a Public
Market, or a Public Market for the Company's Units has not been
sustained.
7.7.1. Right To Present Units For Purchase
Beginning 36 months from the date of the Prospectus, in the
event no Public Market is established for the Units, or
alternatively, commencing on January 1 of the year immediately
succeeding the year that Units cease to be traded on any Public
Market, each Limited Member shall have the right, subject to
the provisions of this Section 7.7, to present his or her Units
to the Company for purchase by submitting notice on a form
supplied by the Company to the Managing Member specifying the
number of Units he or she wishes repurchased. Such notice must
be postmarked after January 1 but before January 31, and after
July 1 but before July 31 of each year. On March 31 and
September 30 of each year (hereafter, a "Repurchase Date") and
subject to the limitations set forth below, the Managing Member
shall cause the Company to purchase the Units of Limited
Members who have tendered their Units to the Company. The
purchase price shall be equal to eighty percent (80%) of the
Net Value Per Unit as of the preceding December 31 (in the case
of purchases as of March 31) or June 30 (in the case of
purchases as of September 30) (such dates being hereafter
referred to as a "Determination Date"), and less any
distributions to the tendering Limited Member after the
Determination Date and prior to the Repurchase Date. The
Managing Members shall publish the repurchase price offered for
Units based on its determination of the Net Value Per Unit as
soon as possible after each Determination Date. The Company
will not be obligated to purchase in any year any number of
Units such that such Units, when aggregated with all other
transfers of Units that have occurred since the beginning of
the same calendar year (excluding Permitted Transfers) would
exceed two percent (2%) of the total number of Units
outstanding on January 1 of such year. In the event requests
for purchase of Units received in any given year exceed the two
percent (2%) limitation, the Units to be purchased will be
determined based on the postmark date of the written notice of
Limited Members tendering Units. Any Units tendered but not
selected for purchase in any given year will be considered for
purchase in subsequent years only if the Limited Member re-
tenders his or her Units. In no event shall the Company be
obligated to purchase Units if, in the sole discretion of the
Managing Member, such purchase would impair the capital or
operation of the Company nor shall the Company purchase any
Units in violation of applicable legal requirements.
7.7.2. Deemed Distribution
For purposes of all calculations pursuant to Article 5 of this
agreement, any Net Cash Flow or Net Proceeds of Sale used to
repurchase Units or to repay borrowings that were used to
repurchase Units shall be deemed distributed to the remaining
Limited Members pro rata based on the ratio of the number of
Units owned to all Units outstanding after such repurchase.
7.8. Voting Rights
To the extent permitted under the Limited Liability Company
Act, as amended, the Limited Members may, by vote of a 75%
majority of the outstanding Units (excluding Units held by the
Managing Members for their own accounts), and without the
concurrence of the Managing Members:
(1) Amend this Operating Agreement in accordance with the
provisions of Article 11;
(2) Remove the Managing Member and elect a new Managing
Member in accordance with Section 10.4 of this
agreement;
(3) Approve or disapprove the sale of all or substantially
all of the assets of the Company in a bulk transaction;
(4) Dissolve the Company in accordance with Section
12.1(g).
8. BOOKS OF ACCOUNT AND FISCAL MATTERS
8.1. Books; Place; Access
The Managing Member shall maintain accurate books of account
and every transaction shall be entered therein. The Company
records shall contain the names and addresses of all Members
and the Company shall also maintain, for a period of six years
after completion of the offering of Units, copies of all
subscriptions and other materials used to determine that the
purchase of the Units was suitable for each Limited Member. The
books of account and the records shall be kept at the office of
the Company in Minneapolis, Minnesota, and any Member or his or
her legal counsel may inspect and copy the Company books and
records at any time during ordinary business hours. The
Managing Member shall have no obligation to deliver or mail to
Limited Members copies of certificates of formation or
amendments thereto.
8.2. Method
The books of account shall be kept in accordance with generally
accepted accounting principles.
8.3. Fiscal Year
The fiscal year of the Company shall end on December 31 of each
year.
8.4. Annual Report
At the Company's expense, the books of account shall be audited
at the close of each fiscal year by a firm of independent
public accountants selected by the Audit Committee, and a copy
of its report shall be transmitted within 120 days after the
close of such fiscal year to the Members and to such securities
commissioners as may be required by the rules and regulations
of the United States and its various states.
The annual report shall contain (a) a balance sheet as of year
end, a statement of operations for the year then ended, a
statement of Members' equity, and statement of cash flows, all
of which shall be audited with a report containing an
unqualified opinion expressed thereon, or an opinion containing
no material qualification of an independent public accountant,
(b) a report of the activities of the Company during the period
covered by the report and (c) the amount of any fees or other
reimbursements to the Managing Members or any Affiliates of the
Managing Members during the fiscal year to which such annual
report relates, including information required by Section
6.3.3. Such report shall set forth distributions to Limited
Members for the period covered thereby and shall separately
identify distributions from (i) cash flow from operations
during the period, (ii) cash flow from operations during a
prior period that had been held as reserves, (iii) proceeds
from the disposition of property and investments (iv) reserves
from the gross proceeds of the offering originally obtained
from the Limited Members, and (v) Yield Maintenance
Distributions. The financial information contained in the
annual report will be prepared on the GAAP basis. The Managing
Member also shall make available to each Limited Member, upon
request, a copy of any annual reports that the Company may be
required to file with the Securities and Exchange Commission
within 90 days after the close of the period to which such
reports relate.
8.5. Quarterly Reports
During the life of the Company, the Managing Member shall
prepare and distribute to all Members within 60 days after the
end of each quarter and to such securities commissioners as may
be required by the rules and regulations of the United States
and its various states, a quarterly summary of Company
financial results. Such quarterly reports shall contain (a) a
current condensed balance sheet, which may be unaudited, (b) a
condensed operating statement for the quarter then ended, which
may be unaudited, (c) a condensed cash flow statement for the
quarter then ended, which may be unaudited, and (d) other
pertinent information regarding the Company and its activities
during the quarter covered by the report. Such quarterly
reports shall also contain a detailed statement setting forth
the services rendered, or to be rendered, by the Managing
Members or their Affiliates and the amount of the fees
received. The Managing Member also shall make available to each
Limited Member, upon request, a copy of any reports that the
Company may be required to file with the Securities and
Exchange Commission within 45 days after the close of the
period to which such reports relate.
8.6. Special Reports
The Managing Member shall have prepared, as of the end of each
quarter in which a Property is acquired, a special report of
real property acquisitions within the quarter. Such special
reports shall be distributed to the Limited Members for each
quarter in which a Property is acquired until all proceeds
available from the offering of Units are invested or returned
to the Limited Members as provided in Section 4.5. Such special
reports shall describe the Properties acquired and shall
include a description of the geographic location and the market
upon which the Managing Member is relying. The special report
shall include all facts that reasonably appear to materially
influence the value of the Property, including, but not limited
to, a description of the property, the tenant, and the terms of
the lease(s), the amount of proceeds in the Company that remain
unexpended or uncommitted and any Acquisition Expenses and
Acquisition Fees paid by the Company to the Managing Members or
their Affiliates in connection with real property acquisitions
within the quarter.
8.7. Tax Returns And Tax Information
Within 75 days after the close of each fiscal year, all
necessary tax information shall be transmitted to all Members
and to such securities commissioners as may be required by the
rules and regulations of the United States and its various
states.
8.8. Bank Accounts
Except as otherwise described in the Prospectus, the Managing
Member shall select a bank account or accounts for the funds of
the Company, and all funds of every kind and nature received by
the Company shall be deposited in such account or accounts. The
Managing Member shall designate from time to time the persons
authorized to withdraw funds from such accounts. The funds of
the Company will not be commingled with funds of any other
person or entity.
8.9. Tax Elections
In the event of a transfer of all or part of the Company
interest of any Member, the Company, in the sole discretion of
the Managing Member, may elect pursuant to Section 754 of the
Internal Revenue Code of 1986 (or any successor provisions) to
adjust the basis of the assets of the Company. The Special
Managing Member shall be the "tax matters partner" for the
Company as that term is defined in Section 6231 of the Internal
Revenue Code of 1986, as amended.
8.10. Investor List
In addition to the other records maintained by the Company, the
Company shall maintain at all times, in alphabetical order and
on white paper with printing in not less than 10 point type, a
list of Limited Members, including the names, addresses and
business telephone numbers of the Limited Members and the
number of Units held by each, which shall be updated at least
quarterly to reflect changes in the information contained
therein. The list of Limited Members shall be available for
inspection by any Limited Member or such Limited Member's
designated agent at the office of the Company upon request of
such Limited Member. In addition, a copy of the Limited Member
list shall be mailed to any Limited Member requesting the same
within ten (10) days of the receipt of a written request. The
Company may charge a reasonable fee to such Limited Member to
cover the costs of reproduction and postage. The purposes for
which such list may be requested by the Limited Members shall
include, without limitation, matters relating to voting rights
of the Limited Members and the exercise of rights of the
Limited Members under federal proxy laws. If the Managing
Member neglects or refuses to exhibit, produce or mail a copy
of the Limited Member list as requested, the Managing Member
shall be liable for the costs, including attorneys' fees,
incurred by the Limited Member in compelling the production of
the list and for the actual damages suffered by the Limited
Member by reason of such refusal or neglect. It shall be a
defense of the Managing Member that the actual purpose and
reason for the request for inspection or for a copy of the
Limited Member list is to secure such list or other information
for the purpose of selling such list or copies thereof, or of
using the same for a commercial purpose other than in the
interest of the applicant as a Limited Member relative to the
affairs of the Company. The Managing Member may require the
Limited Member requesting such list to represent that the list
is not requested for a commercial purpose unrelated to the
Limited Member's interest in the Company. For all such
purposes, the acquisition of additional Units shall be
considered a commercial purpose unrelated to the Limited
Member's interest in the Company. The Managing Member may also
require, as a condition to making such list available, (i) that
the list be requested under the signature of the Limited Member
of record rather than a person or entity holding a power of
attorney for such Limited Member; and (ii) whenever the list
will be used to solicit purchases of Units, that the requesting
Limited Member agree to provide materials to the persons
solicited, and to the Managing Member for review and comment
prior to use, generally complying with the disclosure
requirements of Section 14(d) of the Securities Exchange Act of
1934 and Rule 14d-6 promulgated thereunder, including, without
limitation, the price at which the Fund last agreed to
repurchase Units and the price at which Units were last
purchased in any secondary trading service that is published,
prominently displayed in type size no less than 14 point;
provided, however, that the Managing Member may not refuse to
provide the list if the materials contain the foregoing
information because it is not otherwise satisfied with the
materials to be sent. The remedies set forth in this section
8.10 shall be in addition to, and not by way of limitation of,
remedies available to Limited Members under federal law, or the
laws of any state.
9. ASSIGNMENT OF LIMITED MEMBER'S INTEREST
The Company interest of a Limited Member shall be represented
by a Certificate of Participation. The form and content of the
Certificate of Participation shall be determined by the
Managing Member. The Company interest of a Limited Member may
not be assigned, pledged, mortgaged, sold or otherwise disposed
of, and no Limited Member shall have the right to substitute an
assignee in his or her place, except as provided in this
Article 9.
9.1. Limitations On Transfer Related To Tax Status
Other than pursuant to a Qualified Stock Exchange Transfer or
Permitted Transfer, no Limited Member shall transfer or assign
any part of his or her interest in the Company, and no such
transfer or assignment shall be recognized by the Company but
shall be null and void, if such transfer or assignment, when
added to all other transfers or assignments made during the
same fiscal year, other than (A) Permitted Transfers, (B)
Qualified Matching Service Transfers, (C) transfers pursuant to
the repurchase provisions of section 7.7 of this agreement or
(D) Qualified Stock Exchange Transfers would constitute
transfers of in excess of two percent (2%) of Company interests
outstanding. The Managing Member may request such information
from a transferring Limited Member as is necessary to determine
whether a transfer is a Permitted Transfer or a Qualified
Matching Service Transfer. The Managing Member may refuse to
affect any transfer if the transferring Limited Member is
unable, or refuses, to demonstrate that the transfer is a
Permitted Transfer or Qualified Matching Service Transfer or if
the Managing Member is not able to verify, to its satisfaction,
that the transfer will qualify for safe harbor treatment under
Treasury Regulation Section 1.7704-1(e) or (g).
9.2. Protective Provisions Relating To Transfer Fraud
No Limited Member shall be obligated to sell, assign or
transfer any Units or any other interest in the Company, prior
to receipt of adequate disclosure relating to the Company. The
Company shall provide to any Limited Member, upon request and
without charge, prior to the date of any transfer, copies of
the most recent reports the Company may have filed with the
Securities and Exchange Commission, together with information
relating to the Net Value Per Unit as of the most recent
Determination Date. Other than pursuant to a Permitted Transfer
or Qualified Stock Exchange Transfer, no Limited Member shall
transfer any part of his or her interest in the Company, and no
such transfer or assignment or any agreement executed by a
Limited Member with respect to such transfer or assignment
shall be recognized by the Company but shall be null and void,
unless such Limited Member shall have confirmed in writing to
the Managing Member that he or she received and reviewed such
information relating to Net Value Per Unit at least 12 hours
prior to execution of any such agreement of transfer, and has
received copies of such reports as he or she may have
requested. For purposes of the foregoing, confirmation on
behalf of a Limited Member by power of attorney shall not be
effective unless the attorney so appointed provides proof
acceptable to the Managing Member of the Limited Member's
incapacity to provide confirmation directly.
9.3. Right Of First Refusal
Except with respect to (A) Permitted Transfers, (B) Qualified
Matching Service Transfers, (C) transfers pursuant to the
repurchase provisions of section 7.7 of this agreement, and (D)
Qualified Stock Exchange Transfers, no Member (the "Offering
Member") may assign, transfer, convey or otherwise dispose of
all or any part of any Unit directly or indirectly unless such
Member shall have given notice ("Offer Notice") in writing to
the Company, setting forth the number of Units (the "Offered
Units") to be Transferred, the consideration (the "Offer
Price") for which such Units would be Transferred and the name
of the proposed transferee. Subject to the terms and conditions
hereinafter set forth, the Company shall have the right to
purchase all (but not less than all) of the Offered Units at
the Offer Price. The Company may exercise such right by
delivering to the Offering Member its election to exercise
within 15 days after the date on which the Company has received
the Offer Notice. Subject to the limitations set forth in
Section 9.1 (which shall be controlling), the closing of any
such purchase by the Company shall occur within 60 days of such
exercise by delivery of payment on the same terms as specified
in the Offer Notice. Offered Units purchased by the Company
shall be canceled. Unless all Units are purchased pursuant to
the option granted in this Section 9.3, the Offering Member
shall be free, for a period of 90 days after the expiration of
such fifteen day period, to sell the Offered Units to the
proposed transferee on the same terms as were described in the
Offer Notice. Unless the transfer is approved by the Managing
Member in accordance with this Article 9 and the transferee
acknowledges in writing that he, she or it is bound by the
terms of this Agreement as provided in Section 9.5, the
transferee shall not become a Member of the Company but shall
only be an assignee of the financial rights of his, her or its
assignor. Any Member who transfers all of his, her or its
financial rights shall cease to be a Member of the Company. All
notices shall be in writing.
9.4. Transfers
Except as provided in Sections 9.1, 9.2 and 9.3, each Limited
Member may transfer or assign all or part of his or her
interest in the Company as provided in the Limited Liability
Company Act; provided, however, that no transfer or assignment
shall be effective until written notice thereof is received by
the Managing Member and the Managing Member approves such
transfer or assignment. Such approval shall be granted unless
the Managing Member determines that the transfer will cause a
violation of the provisions of this agreement, including the
percentage limitations referred to in Section 9.1 above and the
provisions of Sections 9.2 or 9.3. If a transfer is not
permitted for any reason other than pursuant to the limitations
set forth in Sections 9.1, 9.2 or 9.3, the decision to prohibit
the transfer shall be supported by an opinion of counsel. All
transfers or assignments of interests in the Company occurring
during any month shall be deemed effective (i.e., the
transferee shall become a Limited Member of record) on the last
day of the calendar month in which written notice thereof is
received by the Managing Member.
9.5. Admission Of Assignee As Member
Other than pursuant to a Qualified Stock Exchange Transfer, no
assignee of all or part of the Company interests of any Limited
Member shall have the right to become a substitute Limited
Member unless (i) his or her assignor has confirmed the matters
set forth in Section 9.2, (ii) his or her assignor has stated
such intention in the instrument of assignment, (iii) such
assignee shall pay all expenses in connection with such
admission as a substitute Limited Member as described in
Section 9.8 and (iv) the transfer to such assignee has been
made in compliance with Section 9.1 and 9.3. By executing and
adopting this agreement, each Limited Member hereby consents to
the admission of additional or substitute Limited Members by
the Managing Member and to any assignee of his or her Units
becoming a substitute Limited Member.
9.6. Minimum Size
If no Public Market exists for the Units, no purported sale,
assignment or transfer by a Limited Member of less than 100
Units will be permitted or recognized, except by gift,
inheritance, intra-family transfers, family dissolutions,
transfers to Affiliates or by operation of law.
9.7. Death Of A Limited Member
If a Limited Member dies, his or her executor, administrator or
trustee or if he or she is adjudged incompetent or insane, his
or her guardian or conservator, or if he or she becomes
bankrupt, the receiver or trustee of his or her estate, shall
have the rights of a Limited Member for the purpose of settling
or managing his or her estate and such power as the decedent or
incompetent possessed to assign all or any part of his or her
Units and to join with the assignee thereof in satisfying
conditions precedent to such assignee becoming a substitute
Limited Member. The death, dissolution or adjudication of
incompetency or bankruptcy of a Limited Member shall not
dissolve the Company.
9.8. Documents And Expenses
As a condition to admission as a substitute Limited Member, an
assignee of all or part of the Company interest of any Limited
Member or the legatee or distributee of all or any part of the
Company interest of any Limited Member shall execute and
acknowledge such instruments, in form and substance
satisfactory to the Managing Member, as the Managing Member
shall deem necessary or advisable to effectuate such admission
and to confirm the agreement of the person being admitted as
such substitute Limited Member to be bound by all of the terms
and provisions of this agreement. Such assignee, legatee or
distributee shall pay all reasonable expenses in connection
with such admission as a substitute Limited Member.
9.9. Acquit Company
In the absence of written notice to the Company of any
assignment of a Company interest, any payment to the assigning
Member or his or her executors, administrators or
representatives shall acquit the Company of liability to the
extent of such payment to any other person who may have an
interest in such payment by reason of an assignment by the
Member or by reason of such Member's death or otherwise.
9.10. Restriction On Transfer
Notwithstanding the foregoing provisions of this Article 9, no
sale or exchange of a Company interest may be made if the
interest sought to be sold or exchanged, when added to the
total of all other Company interests sold or exchanged within
the period of 12 consecutive months prior thereto, would result
in the termination of the Company under section 708 of the
Internal Revenue Code of 1986 (or any successor section).
9.11. Endorsement On Certificate
The foregoing provisions governing the assignment of the Company
interest of a Limited Member shall be indicated by an
endorsement on the certificate evidencing such Limited Member's
interest in the Company, in the form as determined from time to
time by the Managing Member.
10. DEATH, WITHDRAWAL, EXPULSION OF MANAGING MEMBERS
10.1. Death Of Special Managing Member
In the event of the death of the Special Managing Member, the
estate of the Special Managing Member shall assume all of his
obligations under this agreement and be responsible for their
discharge. The estate may elect to withdraw from the Company
only upon satisfaction of the conditions in Section 10.2
applicable to the Special Managing Member.
10.2. Withdrawal
The Managing Member may not withdraw from the Company without
first providing 90 days' written notice to the Limited Members
of its intent to so withdraw and providing a substitute Managing
Member to the Company that shall be accepted by a vote of not
less than a majority, by interest, of the Limited Members
(excluding any Limited Company Units held by any Managing Member
for its own account); provided, however, that nothing in this
agreement shall be deemed to prevent the merger, consolidation
or reorganization of the Managing Member into or with a
successor entity controlled by, or under common control with any
of the other Managing Members and such successor entity shall be
deemed to be the Managing Member of the Company for all purposes
and effects and shall succeed to and enjoy all rights and
benefits and bear all obligations and burdens conferred or
imposed hereunder upon the Managing Member. The Limited Members
shall vote to accept or reject the proposed substitute Managing
Member in person or by proxy at a meeting called by the Managing
Member for such purpose in accordance with Section 11.1 of this
agreement.
The Special Managing Member may not withdraw from the Company
prior to December 31, 2005.
10.3. Expulsion
A Managing Member shall be expelled without further action for
"cause," which means (1) final judicial determination or
admission of its bankruptcy or insolvency, (2) withdrawal from
the Company without providing a substitute Managing Member in
accordance with Section 10.2 or (3) final judicial determination
that it (i) was grossly negligent in its failure to perform its
obligations under this agreement, (ii) committed a fraud upon
the Members or upon the Company, (iii) committed a felony in
connection with the management of the Company or its business or
(iv) was in material breach of its obligations under this
agreement. This section does not limit the right of the Limited
Members to remove the Managing Members upon a 75% majority vote
of the Limited Members.
10.4. Removal And Replacement Of Managing Members
In the event of (i) the wrongful withdrawal of a Managing Member
or the expulsion of a Managing Member under circumstances that
the Company lacks a Managing Member or (ii) the written proposal
of Limited Members holding 10% or more of the issued and
outstanding Units, and upon providing not less than 10 nor more
than 60 days' written notice by certified mail to all Members,
the Limited Members may call a meeting of the Company for the
purpose of removing or replacing any or all of the Managing
Members. At such meetings, any of the Managing Members may be
removed or replaced without cause by a vote (rendered in person
or by proxy) of a 75% majority, by interest, of the Limited
Members (excluding Units held by the Managing Members and their
Affiliates for their own accounts).
10.5. Payment For Removed Manager's Interest
Upon the expulsion, withdrawal or removal of a Managing Member,
the Company shall pay to the terminated Managing Member all
amounts then accrued and owing to the terminated Managing Member
and an amount equal to the then present fair market value of the
terminated Managing Member's interest in the Company determined
by agreement of the terminated Managing Member and the Company,
or, if they cannot agree, by arbitration in accordance with the
then current rules of the American Arbitration Association. The
expense of arbitration shall be borne equally by the terminated
Managing Member and the Company. The fair market value of the
terminated Managing Member's interest shall be the amount the
terminated Managing Member would receive upon dissolution and
termination of the Company assuming that such dissolution or
termination occurred on the date of the terminating event and
the assets of the Company were sold for their then fair market
value without any compulsion on the part of the Company to sell
such assets. In the case of a voluntary withdrawal, the
withdrawing Managing Member shall be paid the fair market value
of its or his interest by the issuance by the Company of a non-
interest bearing unsecured promissory note providing for payment
of principal from distributions that the withdrawing Managing
Member otherwise would have been entitled to receive under this
agreement had such Managing Member not withdrawn. In the case of
an involuntary termination, the terminated Managing Member shall
be paid the fair market value of its or his interest by the
issuance by the Company of a promissory note with a five-year
maturity payable in five equal installments of principal and
interest at the prevailing market rate of interest.
10.6. Failure To Admit Substitute Managing Member
In the event that a substitute Managing Member has not been
appointed and admitted as provided in Sections 10.2 and 10.4, so
that there is no Managing Member acting, the Company shall then
be dissolved, terminated and liquidated.
11. AMENDMENT OF AGREEMENT AND MEETINGS
11.1. General
Either the Managing Member or the Special Managing Member may,
at any time, propose an amendment to this agreement and shall
notify all Members thereof in writing, together with a
statement of the purpose(s) of the amendment and such other
matters as the Managing Member deems material to the
consideration of such amendment. If such proposal does not
adversely affect the rights of the Limited Members, such
proposal shall be considered adopted and this agreement deemed
amended. At any time, Limited Members holding not less than 10%
of the issued and outstanding Units may propose an amendment to
this agreement, or a meeting of Limited Members to consider any
other proposal for which the Limited Members may vote
hereunder, including the sale of all or substantially all of
the assets of the Company. Upon the request in writing to the
Managing Member of any person entitled to call a meeting, or in
the event a proposal of a Managing Member adversely affects the
rights of Limited Members, or in the event of objection by 10%
of Limited Members by interest to such a proposal, the Managing
Member shall call a special meeting of all Members, in each
case at a location convenient to Limited Members, to consider
the proposal at the time requested by the person requesting the
meeting which shall be not less than 15 nor more than 60 days
after receipt of such request. Written notice of the meeting
shall be given to all Members either personally or by certified
mail not less than 10 nor more than 60 days before the meeting,
but in any case where a meeting is duly called by request of
Limited Members, not more than 10 days after receipt of such
request. Included in the notice shall be a detailed statement
of the action proposed, including a verbatim statement of the
wording of any resolution or amendment proposed. The notice
shall provide that Limited Members may vote in person or by
proxy. The affirmative vote of a majority, by interest, unless
otherwise stated herein, of the Limited Members (excluding any
Units held by the Managing Members or their Affiliates for
their own accounts) shall decide the matter, without the
consent of the Managing Members. In any event, however, no such
amendment shall affect the allocation of economic interests to
the Members or alter the allocation of Company management
responsibilities and control without the approval of each
Managing Member and a 75% majority, by interest, of the Limited
Members (excluding any Limited Member interests held by the
Managing Members or their Affiliates), except as otherwise
provided in Article 10.
11.2. Alternative To Meetings
As an alternative to voting at meetings of the Company pursuant
to this and other Articles of this agreement, the Limited
Members may consent to and approve by written action any matter
that the Limited Members may consent to and approve by vote at a
meeting. In order to consent to and approve the matter, the same
percentage of Limited Members, by interest, must sign the
written action as is required by vote at a meeting; provided,
however, that written notice is given to all Members at least 15
days before solicitation of signatures is begun.
12. DISSOLUTION AND LIQUIDATION
12.1. Events Causing Dissolution
The Company shall be dissolved only upon the occurrence of one
or more of the following events:
(a) The expiration of the term set forth in Section 1.4;
(b) The occurrence of any event that, under the laws of the
jurisdictions governing the Company shall dissolve the
Company;
(c) The bankruptcy of the Company or any of the Managing
Members;
(d) The withdrawal or the expulsion of the Managing Member
if a substitute Managing Member has not been timely
admitted as provided in Article 10, with the result
that there is no Managing Member acting;
(e) The decree of court that other circumstances render a
dissolution of the Company equitable or required by
law;
(f) The sale or other disposition of all or substantially
all of the assets of the Company;
(g) At any time by the affirmative vote of a 75% majority,
by interest, of the Limited Members (excluding Units
held by the Managing Members for their own accounts) at
a meeting called in accordance with Section 11.1 of
this agreement.
12.2. Continuation Of Business
Except as provided in Section 12.3, upon the dissolution of the
Company for any reason, the business of the Company and title to
the property of the Company shall be vested in any new Company
formed to continue operations. Upon any such dissolution no
Member, nor his or her legal representatives, shall have the
right to an account of his or her interest as against the
Company continuing the business, and no Member, nor his or her
legal representatives, as against the Company continuing the
business, shall have the right to have the value of his or her
interest as of the date of dissolution ascertained nor have any
right as a creditor or otherwise with respect to the value of
his or her interest.
12.3. Liquidation And Winding Up
If dissolution of the Company should be caused by reason of (a)
an event that makes it unlawful for the business of the Company
to be carried on or for the Members to carry it on in the
Company, (b) the bankruptcy of the Company, (c) the withdrawal
or expulsion of the Managing Member and no substitute Managing
Member has been timely admitted as provided in Article 10, with
the result that there is no Managing Member acting, (d) a decree
of court that other circumstances render a dissolution and
winding up of the affairs of the Company equitable or required
by law, (e) the sale of all or substantially all of the assets
of the Company, (f) the express will of Limited Members as
provided in Section 12.1 (g) above, the Company shall be
liquidated and the Managing Member (or the person or persons
selected by a decree of court to carry out the winding up of the
affairs of the Company) shall wind up the affairs of the
Company.
The Managing Member or the person winding up the affairs of the
Company shall promptly proceed to liquidate the Company. Upon
liquidation, no distribution in kind of property and assets
shall be made to Limited Members. In settling the accounts of
the Company, the assets and the property of the Company shall be
distributed in the following order of priority:
(a) To the payment of all debts and liabilities of the
Company, including loans by Members that are secured by
mortgages, but excluding any other loans or advances
that may have been made by the Members to the Company,
in the order of priority as provided by law;
(b) To the establishment of any reserves deemed necessary
by the Managing Member or the person winding up the
affairs of the Company for any contingent liabilities
or obligations of the Company;
(c) To the repayment of any unsecured loans or advances
that may have been made by any Members to the Company
in the order of priority as provided by law;
(d) Any remaining balance will be distributed to the
Members pro rata based on each Member's positive
capital account balance, after giving effect to
allocations pursuant to Sections 5.1 and 5.3 and after
taking into account all capital account adjustments for
the taxable year during which liquidation occurs (other
than those made pursuant to this Section 12.3(d)).
13. MISCELLANEOUS PROVISIONS
13.1. Interpretation
The terms and provisions of this agreement shall be governed by
and construed in accordance with the laws of the State of
Minnesota. All references herein to Articles and Sections refer
to Articles and Sections of this agreement unless otherwise
clearly stated or implied by content. All Article and Section
headings are for reference purposes only and shall not affect
the interpretation of this agreement. The use of the masculine
gender, for all purposes of this agreement, shall be deemed to
refer to both male and female Members.
13.2. Notice
Any notice given in connection with the business of the Company
shall be duly given if mailed, by certified or registered mail,
postage prepaid: if to the Company, to the principal office of
the Company set forth in Section 1.3 or to such other address as
the Company may hereafter designate by notice to the Members; if
to the Managing Member, the Special Managing Member, or the
Acquisition Member to the address set forth in Section 1.3 or
such other address as such Members may hereafter designate by
notice to the Company; if to the Limited Members, to the
addresses set forth in the Subscription Agreement executed by
each Limited Member or to such other address as such Limited
Members may hereafter designate by notice to the Company.
13.3. Successors And Assigns
Except as herein otherwise provided to the contrary, this
agreement shall be binding upon and inure to the benefit of the
parties hereto and their personal representatives, assigns and
successors.
13.4. Counterparts
This agreement may be executed in several counterparts, and all
so executed shall constitute one agreement, binding on all
parties hereto, notwithstanding that not all of the parties are
signatory to the original or the same counterpart.
13.5. Severability
In the event that any provision of this agreement shall be held
to be invalid, the same shall not affect the validity of the
remainder of this agreement or the validity or the formation of
the Company as a limited Company under the Limited Liability
Company Act.
SIGNATURE PAGE TO OPERATING AGREEMENT
OF
CBCI INCOME AND GROWTH FUND, LLC
IN WITNESS WHEREOF, this agreement has been executed as of the
date set forth in the first paragraph of this agreement.
MANAGING MEMBERS:
By CBCI Fund Management I, Inc.,
Managing Member
By: /s/Xxxxxx X. Xxxxxxxxxxx
Xxxxxx X Xxxxxxxxxxx,
President
By: CBCI Acquisitions I, LLC,
Acquisition Member
By: /s/Xxxxxx X. Xxxxxxxxxxx
Xxxxxx X. Xxxxxxxxxxx,
Managing Member
By: /s/ Xxxxxx X. Xxxxxxxxxxx
Xxxxxx X. Xxxxxxxxxxx
Special Managing Member
LIMITED MEMBERS:
By: CBCI Fund Management, Inc.,
Attorney-In-Fact
By: /s/ Xxxxxx X. Xxxxxxxxxxx
Xxxxxx X. Xxxxxxxxxxx,
President
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