LIMITED LIABILITY COMPANY AGREEMENT OF AMERICAN REALTY CAPITAL EQUITY BRIDGE, LLC (a Delaware limited liability company) Dated as of August 20, 2008
LIMITED
LIABILITY COMPANY AGREEMENT
OF
AMERICAN
REALTY CAPITAL EQUITY BRIDGE, LLC
(a
Delaware limited liability company)
Dated
as of August 20, 2008
AMERICAN
REALTY CAPITAL EQUITY BRIDGE, LLC
(a
Delaware Limited Liability Company)
This
LIMITED LIABILITY COMPANY OPERATING AGREEMENT (as the same may be amended from
time to time, this “Agreement” or “Operating Agreement”) of American Realty
Capital Equity Bridge, LLC, a limited liability company organized under the
laws
of the State of Delaware (the “Company”), is made and effective as of August 20,
2008 by and among American Realty Capital II, LLC, a Delaware limited liability
company (the “ARC Member”) and the CAMBR COMPANY, INC., a New York corporation
(the “▇▇▇▇▇▇▇▇ Member”), being hereinafter sometimes referred to individually as
a “Member” and collectively as the “Members”.
BACKGROUND
The
Company was formed on August __, 2008, upon the filing of a Certificate of
Formation with the Department of State of the State of Delaware (the
“Certificate”) pursuant to the provisions of the Delaware Limited Liability
Company Act of 1992, Del. Code tit. 6, §§ 18-101 et seq., as amended and in
effect from time to time (the “Act”).
The
Members are entering into this Operating Agreement as the governing instrument
of the Company from and after the date of this Agreement.
ARC
Member is $100% owned by: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, all presently senior executives engaged full-time
in managing American Realty Capital affiliated companies (collectively, the
“
Principals”).
NOW,
THEREFORE,
intending to be legally bound and in consideration of the promises made herein,
the Members agree as follows:
ARTICLE
1
GENERAL
PROVISIONS
1.1 Defined
Terms.
“Adjusted
Capital Account” means, with respect to any Member, the deficit balance, if any,
in such Member’s Capital Account as of the end of the relevant Fiscal Year,
after giving effect to the following adjustments:
(i) Credit
to
such Capital Account any amounts that such Member is obligated to restore
pursuant to any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit
to
such Capital Account the items described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).
The
foregoing definition of “Adjusted Capital Account” is intended to comply with
the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be
interpreted consistently therewith.
“Affiliate”
shall mean any entity that directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with
a
party hereto. “Control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”) means the ownership or control
of securities possessing at least 50% of the voting power of all outstanding
voting securities of an entity or the power to otherwise direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting stock or similar rights. For the purposes of this
definition, partnerships, joint ventures or similar entities, a
majority-in-interest of whose partners, venturers or other owners is a party
hereto and/or an Affiliate of a party hereto, shall be deemed to be Affiliates
of such party.
“Capital
Account” shall mean, with respect to a Member, such Member’s capital account
established and maintained in accordance with the provisions of Section
7.1.
“Capital
Contribution” shall mean, with respect to any Member, the aggregate amount of
money and the fair market value of any property other than money contributed
to
the Company by such Member (net of any associated liabilities assumed by the
Company).
“Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time
(or
any corresponding provisions of succeeding law).
“Distribution”
shall mean, with respect to any Member, the amount of money, and the fair market
value of any property other than money, distributed to such Member by the
Company (net of associated liabilities assumed by such Member).
“Family
Member” shall mean the spouse, parents, descendants, siblings, mother and
father-in-law, sons and daughters-in-law and brothers and sisters-in-law of
a
Member and any trust whose beneficiaries are one or more of the Member and
such
persons or any partnership or other entity whose owners are one or more of
the
Member and such persons.
“Income”
means the gross income and gains of the Company (as computed for federal income
tax purposes) plus (a) income of the Company exempt from tax and described
in
Code Section 705(a)(1)(B), (b) the excess, if any, of the fair market value
of
distributed property over its Tax Book Value and (c) the amount of any increase
in the Tax Book Value of the Company’s property pursuant to Section 11.7(c)
hereof. In computing Income, items of income and gain relating to Company assets
shall be computed based upon the Tax Book Values of the Company assets rather
than upon the assets’ adjusted basis for federal income tax
purposes.
“IRS”
shall mean the Internal Revenue Service.
“Loss”
means the deductions and gross losses of the Company (as computed for federal
income tax purposes) plus (a) items of expenditure described in Code Section
705(a)(2)(B), (b) the excess, if any, of the Tax Book Value of the distributed
property over its fair market value and (c) the amount of any decrease in the
Tax Book Value of the Company’s property pursuant to Section 11.7(c) hereof. In
computing Loss, items of deduction and loss relating to Company assets shall
be
computed based upon the Tax Book Values of the Company assets rather than upon
the assets’ adjusted basis for federal income tax purposes.
“Majority-in-Interest”
shall mean Members holding a Percentage Interest of at least fifty one percent
(51%) of the Percentage Interest held by all members.
“Membership
Interest” shall mean an ownership interest in the Company.
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“Minimum
Gain” has the meaning specified in Treasury Regulation Section
1.704-2(d).
“Net
Cash
Flow” shall mean the amount determined by the Manager in accordance with the
following principles: Net Cash Flow during any period shall be the excess,
if
any, of (a) the sum of (1) the gross receipts of the Company (as determined
in
accordance with the cash receipts and disbursements method of accounting) during
such period, but without regard to any amounts received by the Company on the
sale or other disposition of all or substantially all of its assets, (2) all
amounts contributed to the Company during such period by any Member, and (3)
any
amounts released during such period by the Manager from any reserve maintained
by the Company, over (b) the sum of (1) all expenditures of the Company (as
determined under the aforesaid method of accounting) during such period, (2)
all
amounts applied during such period in payment of interest or principal on any
borrowing of the Company, and (3) any amount added during such period by the
Manager to reserves for working capital, contingencies, replacements,
expansions, acquisitions, or other expenditures of the Company. Releases and
additions to the reserves described in this definition shall be made by the
Manager.
“Percentage
Interest” shall mean the percentage ownership interest of each Member in the
Company. The initial Percentage Interest of each of the Members is set forth
on
Schedule
A.
“Person”
shall mean any individual or entity, and the heirs, executors, administrators,
legal representatives, successors and assigns of such Person as the context
may
require.
“Proceeding”
means any threatened, pending or completed action, suit, appeal or other
proceeding of any nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought by or in the
right of the Company, a class of its Members or security holders or otherwise.
“Properties”
means single-tenant, usually free-standing, real estate assets net-leased to
investment grade or other credit worthy tenants consisting of various national
retailers and major corporations, including commercial banks, or such other
properties as the Members shall agree.
“Purchase
Price” means the sum of: (a) the appraised value (based upon a third party
appraisal of the Properties) prepared by a third party appraiser acceptable
to
Company and prepared in accordance with the appraisal requirements generally
acceptable to the Company (“Appraised Value”); and (b) all transaction
costs and expenses directly related to the purchase, subject to a limit of
5% of
(a) above. The Purchase Price shall include only related acquisition costs,
and shall not include any general administrative expenses or overhead costs
of
the Company, or of the Facility, or of the ARC Member, or of the ▇▇▇▇▇▇▇▇
Member.
“Treasury
Regulations” shall mean the income tax regulations promulgated under the Code,
as may be amended from time to time (including corresponding provisions of
succeeding regulations).
Capitalized
terms not defined in this Agreement shall have meanings set forth in the Loan
Agreement.
1.2 Business.
The
Company may carry on any lawful business, purpose or activity for which limited
liability companies may be organized under the Act, including to provide a
revolving loan of up to $10,000,000 from time to time to Affiliates of the
ARC
Member as needed to provide short-term financing related to property
acquisitions (the “Facility”) in accordance with the terms and conditions of the
Form of Loan Agreement (the “Loan Agreement”). The Company shall possess and may
exercise all the powers and privileges granted by the Act or by any other law,
together with any powers incidental thereto, so far as such powers and
privileges are necessary or convenient to the conduct, promotion or attainment
of the business, purposes or activities of the Company.
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1.3 Principal
and Registered Office.
The
address of the principal office of the Company is ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇. The registered office of the Company in the State of Delaware is
c/o
Corporation Service Company, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The initial registered agent at such address
is
Corporation Service Company. The registered office and the registered agent
may
be changed from time to time by action of the Manager by filing notice of such
change with the Department of State of the State of Delaware. The Manager will
promptly notify the Members of any change of the registered office or registered
agent.
1.4 Term.
The
Company commenced operating on August __, 2008, on the date the certificate
was
filed with the Secretary of State of the State of Delaware and, unless earlier
terminated or dissolved pursuant to the Act or this Agreement, the Company
shall
have a term of one (1) year, and the option of an additional one (1) year
extension, which extension is subject to the unanimous prior consent of the
Members.
1.5 Fiscal
Year.
The
fiscal year of the Company shall be its taxable year and shall begin on January
1 and end on December 31 of each calendar year, unless a different year is
required under the Code.
1.6 Members
Names and Addresses.
The
name and address of each Member is set forth on Schedule
A
hereto.
1.7 Partition.
No
Member, nor any successor-in-interest to any Member, shall have the right,
while
this Agreement remains in effect, to have the property of the Company
partitioned, or to file a complaint or institute any Proceeding at law or in
equity to have the property of the Company partitioned, and each of the Members,
on behalf of itself and its successors, representatives and assigns, hereby
irrevocably waives any such right.
1.8 Title
to Company Property.
All
property owned by the Company, whether real or personal, tangible or intangible,
shall be deemed to be owned by the Company, and no Member individually shall
have any interest in such property. Title to all such property may be held
in
the name of the Company or a designee, which designee may be a Member or an
entity affiliated with a Member.
1.9 Activities
of the Members.
Each
Member and any affiliates of such Member may engage in or hold an interest
in
other business ventures of any nature, including ventures and activities similar
to and competitive with the Company.
1.10 Member
Reimbursement.
Each
Member shall bear its own costs and expenses in entering into this Agreement
and
fulfilling its duties and obligations as a Member.
1.11 Membership
Interests Uncertificated.
The
interests of the Members in the Company shall not be certificated.
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ARTICLE
2
MEETINGS
GENERALLY
2.1 Manner
of Giving Notice.
A
notice of meeting shall specify the place, day and hour of the meeting and
any
other information required by any provision of the Act, the Certificate or
this
Agreement. When a meeting is adjourned, it shall not be necessary to give any
notice of the adjourned meeting or of the business to be transacted at an
adjourned meeting, other than by announcement at the meeting at which the
adjournment is taken, unless the adjournment is for more than 60 days or the
Members or the Manager fix a new record date for the adjourned meeting in which
event notice shall be given in accordance with Section 2.2 or Section 2.3,
as
applicable.
2.2 Notice
of Meetings of Members.
Written
notice of every meeting of the Members shall be given to each Member of record
entitled to vote at the meeting at least five days prior to the day named for
the meeting in any other case. If the Manager neglects or refuses to give notice
of a meeting, the person or persons calling the meeting may do so.
2.3 Waiver
of Notice.
Whenever any written notice is required to be given under the provisions of
the
Act, the Certificate or this Agreement, a waiver thereof in writing, signed
by
the person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of the notice. Neither
the business to be transacted at, nor the purpose of, a meeting need be
specified in the waiver of notice of the meeting. Attendance of a person at
any
meeting shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of
the
meeting, to the transaction of any business because the meeting was not lawfully
called or convened.
2.4 Use
of
Conference Telephone and Similar Equipment.
Any
Member may participate in any meeting of the Members by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section shall constitute presence in person at the
meeting.
2.5 Consent
in Lieu of Meeting.
Any
action required or permitted to be taken at a meeting of the Members may be
taken without a meeting if, prior or subsequent to the action, written consents
describing the action to be taken are signed by the minimum number of Members
that would be necessary to authorize the action at a meeting at which all
Members entitled to vote thereon were present and voting. The consents shall
be
filed with the Manager. Prompt notice of the taking of the Company action
without a meeting by less than unanimous written consent shall be given to
those
Members who have not consented in writing.
ARTICLE
3
MANAGEMENT
3.1 Management
of the Company Generally.
The
business and affairs of the Company shall be managed by its Manager. Unless
authorized to do so by this Agreement or by the Manager of the Company, no
attorney-in-fact, employee, officer or agent of the Company other than the
Manager shall have any power or authority to bind the Company in any way, to
pledge its credit or to render it liable pecuniarily for any purpose. No Member
shall have any power or authority to bind the Company unless the Member has
been
expressly authorized by the Manager to act as an agent of the Company. Except
for situations in which the approval of the Members is expressly required by
this Agreement or by non-waivable provision of the Act, the Manager shall have
full and complete authority, power and discretion to direct, manage and control
the business, affairs and properties of the Company, to make all decisions
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company’s business.
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3.2 Designation
of Manager.
A
Person may be named or designated as a Manager of the Company pursuant to
Section 3.4. A Manager may make contributions to the Company and share in the
profits and losses of, and in distributions from, the Company as a Member.
A
Person who is both a Manager and a Member has the rights and powers, and is
subject to the restrictions and liabilities, of a Manager and, except as
provided in this Agreement, also has the rights and powers, and is subject
to
the restrictions and liabilities, of a Member to the extent of his or her
participation in the Company as a Member.
3.3 Compensation
of Manager; Reimbursement.
No
fees, compensation, reimbursement, salaries or other benefits shall be paid
to
Manager or any successor manager in its capacity as Manager. Neither Manager
nor
its Affiliates shall receive any other fee or compensation for acting as Manager
or in connection with the loan agreements contemplated herein. The Manager
or
any successor manager in its capacity as manager shall bear its own costs and
expenses incurred in connection with fulfilling its duties and obligations
as
manager.
3.4 Number,
Selection and Term of Office.
There
shall be one Manager and, initially, the ARC Member shall be Manager. The
Manager may be replaced by a successor manager elected by a Majority-in-Interest
of the Members. Each Manager shall hold office until a successor has been
elected or until such Manager’s earlier resignation or removal.
3.5 Reliance
by Third Parties.
Persons
dealing with the Company are entitled to rely conclusively upon a certificate
of
the Manager to the effect that it is then acting as the Manager and upon the
power of the Manager as herein set forth.
3.6 Liability
for Certain Acts.
The
Manager shall perform its managerial duties in good faith, in a manner
reasonably believed to be in the best interests of the Company, and with such
care and business judgment as an ordinarily prudent person in a like position
would use under similar circumstances, including the reliance in good faith
upon
the records of the Company and upon such information, opinions, reports or
statements presented to the Company by the Manager, Members, officers, employees
or committees of the Company or by any other person, as to matters the Manager
reasonably believe are within such other person’s professional or expert
competence and who has been selected with reasonable care by or on behalf of
the
Company. The Manager does not, in any way, guarantee the return of the Members’
Capital Contributions or a profit for the Members from the operations of the
Company. The Manager who so performs the duties of the Manager shall not be
liable to the Company or to any Member for any loss or damage sustained by
the
Company or any Member, unless (i) the Manager has breached or failed to perform
the duties of its position under the Act, the Certificate or this Agreement
and
(ii) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness by the Manager. Nothing in this paragraph shall
apply
to the liability of a Manager pursuant to any criminal statute, or for the
payment of taxes pursuant to federal, state or local law.
3.7 Reliance
on Reports and Information by Member or Manager.
A
Member or Manager of the Company shall be fully protected in relying in good
faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any of its other Members,
officers, employees or committees of the Company, or by any other person, as
to
matters the Member or Manager reasonably believes are within such other person’s
professional or expert competence and who has been selected with reasonable
care
by or on behalf of the Company, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the Company or any other facts pertinent to the existence and amount
of assets from which distributions to Members might properly be
paid.
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3.8 Bank
Accounts.
The
Manager may from time to time open bank accounts in the name of the Company,
and
the Manager shall be the sole signatory or signatories thereon.
3.9 Resignation.
A
Manager of the Company may resign at any time by giving written notice to the
Company. The resignation of a Manager shall be effective upon receipt of such
notice or at such later time as shall be specified in the notice. Unless
otherwise specified in the notice, the acceptance of the resignation shall
not
be necessary to make such resignation effective. The resignation of a Manager
who is also a Member shall not affect the Manager’s rights as a Member and shall
not constitute a withdrawal of a Member.
3.10 Removal.
Any
individual Manager may be removed from office at any time, without assigning
any
cause by the affirmative vote of Members who hold a Majority-in-Interest. The
removal of a Manager who is also a Member shall not affect the Manager’s rights
as a Member and shall not constitute a withdrawal of a Member.
3.11 Vacancies.
Any
vacancy with respect to a Manager occurring for any reason may be filled by
election pursuant to Section 3.4.
3.12 Outside
Interests.
A
Manager shall not be required to manage the Company as such Manager’s sole and
exclusive function, and a Manager may engage, invest and participate in and
otherwise enter into other business ventures of any kind, nature or description,
individually or with others, whether or not any such business venture competes
with the business of the Company, and neither the Company nor any Member shall
have any right in or to any such activities or the income or profits derived
therefrom.
ARTICLE
4
MEMBERS
4.1 Admission
of Members.
One or
more Persons may be admitted as members of the Company from time to time subject
to (i) the prior consent of the Members and (ii) each additional Member’s
execution of a counterpart signature page of this Agreement (as such may be
required to be amended for the purpose of admitting additional Members);
provided, however, that prior to such admission, the Manager shall consult
with
appropriate tax counsel to determine the effects, if any, upon the continued
qualification of the Company as an entity that is disregarded as an entity
separate from the Member for federal and state income tax purposes. The Manager
may issue additional Membership Interests (including different classes of
Membership Interests) at fair market value to such Persons (including any
Member, any Affiliate of any Member or any Person who is not then a Member)
and
on such terms as the Manager may determine, subject to Section 4.11. The Manager
shall promptly amend Schedule
A
to
reflect the issuance of additional Membership Interests to a new or existing
Member. Each new Member shall execute an instrument agreeing to be bound as
a
Member by the terms and conditions of this Agreement.
4.2 Meetings.
Meetings of the Members, for any purpose or purposes, unless otherwise
prescribed by statute, may be called by the Manager or by any
Member.
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4.3 Place
of Meeting.
The
Manager or Members calling a meeting pursuant to Section 4.2 may designate
any
place as the place for any meeting of the Members. If no designation is made,
the place of meeting shall be the principal office of the Company.
4.4 Record
Date.
For the
purpose of determining Members entitled to notice of, or to vote at, any meeting
of Members or any adjournment of the meeting, or Members entitled to receive
payment of any distribution, or to make a determination of Members for any
other
purpose, the date on which notice of the meeting is mailed or the date on which
the resolution declaring the distribution or relating to such other purpose
is
adopted, as the case may be, shall be the record date for the determination
of
Members. Only Members of record on the date fixed shall be so entitled
notwithstanding any permitted transfer of a Member’s Membership Interest after
any record date fixed as provided in this Section. When a determination of
Members entitled to vote at any meeting of Members has been made as provided
in
this Section, the determination shall apply to any adjournment of the
meeting.
4.5 Quorum.
A
meeting of Members of the Company duly called shall not be organized for the
transaction of business unless a quorum is present. The presence of Members
who
own a Majority-in-Interest represented in person or by proxy shall constitute
a
quorum at any meeting of Members. In the absence of a quorum at any meeting,
Members who own a Majority-in-Interest so represented may adjourn the meeting
from time to time for a period not to exceed 60 days without further notice.
However, if the adjournment is for more than 60 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice
of
the adjourned meeting shall be given to each Member of record entitled to vote
at the meeting pursuant to Section 2.1. At an adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. The Members
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal during the meeting of Members whose
absence would cause less than a quorum.
4.6 Manner
of Acting.
Except
as otherwise provided in the Act or the Certificate or this Agreement, whenever
any Company action is to be taken by vote of the Members of the Company, it
shall be authorized upon receiving the affirmative vote of a
Majority-in-Interest of the Members.
4.7 Voting
Rights of Members.
Unless
otherwise provided in the Certificate, every Member of the Company shall be
entitled to such number of votes as is equal to that Member’s then current
Percentage Interest.
4.8 Relationship
of Members.
Except
as otherwise expressly and specifically provided in or as authorized pursuant
to
the Certificate or this Agreement, (a) in the event that any Member (or any
of
such Member’s shareholders, partners, members, owners, or Affiliates
(collectively, the “Liable Member”)) has incurred any indebtedness or obligation
prior to the date of this Agreement that relates to or otherwise affects the
Company, neither the Company nor any other Member shall have any liability
or
responsibility for or with respect to such indebtedness or obligation unless
such indebtedness or obligation is assumed by the Company pursuant to this
Agreement or a written instrument signed by all Members; (b) neither the Company
nor any Member shall be responsible or liable for any indebtedness or obligation
that is incurred after the date of this Agreement by any Liable Member, and
in
the event that a Liable Member, whether prior to or after the date hereof,
incurs (or has incurred) any debt or obligation that neither the Company nor
any
of the other Members is to have any responsibility or liability for, the Liable
Member shall indemnify and hold harmless the Company and the other Members
from
any liability or obligation they may incur in respect thereof; (c) nothing
contained herein shall render any Member personally liable for any debts,
obligations or liabilities incurred by the other Members or the Company whether
arising in contract, tort or otherwise or for the acts or omissions of any
other
Member, Manager, agent or employee of the Company; (d) no Member shall be
constituted an agent of the other Members or the Company; (e) nothing contained
herein shall create any interest on the part of any Member in the business
or
other assets of the other Members; (f) nothing contained herein shall be deemed
to restrict or limit in any way the carrying on of separate businesses or
activities by any Member now or in the future, even if such businesses or
activities are competitive with the Company; and (g) no Member shall have any
authority to act for, or to assume any obligation on behalf of, the other
Members or the Company.
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4.9 Business
Transactions of Member or Manager with the Company.
A
Member or Manager may lend money to, borrow money from, act as a surety,
guarantor or endorser for, guarantee or assume one or more obligations of,
provide collateral for, and transact other business with the Company and,
subject to other applicable law, has the same rights and obligations with
respect to any such matter as a person who is not a Member or
Manager.
4.10 Interested
Transactions.
(a) General
Rule.
A
contract or transaction between the Company and one or more of its Affiliates,
Members, Manager or officers or between the Company and another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise in which one or more of its Members, Manager or officers are members,
Manager or officers or have a financial or other interest, shall not be void
or
voidable solely for that reason, or solely because the Member, Manager or
officer is present at or participates in the meeting of the Members that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for that purpose, if:
(1) material
facts as to its relationship or interest and as to the contract or transaction
are disclosed or are known to the Members entitled to vote thereon and the
contract or transaction is specifically approved in good faith by a
Majority-in-Interest of the Members; or
(2) the
contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified by the Manager or the Members.
(b) Quorum.
Common
or interested Members may be counted in determining the presence of a quorum
at
a meeting of the Members which authorizes a contract or transaction specified
in
subsection (a).
4.11 Approval
of Certain Matters by the Members.
Notwithstanding any provision of this Agreement to the contrary, the following
matters require unanimous approval of the Members: (a) merger or consolidation
of the Company with any other entity; (b) sale of all or substantially all
of
the assets of the Company; (c) division or conversion to corporate form of
the
Company; (d) payment of compensation to any Manager for acting in such capacity;
(e) the admission of additional Members to the Company, except for transfers
permitted by Section 9.1(a) of this Agreement; (f) liquidation of the Company;
or (g) acquisition of another entity; or (h) making advances to an
Affiliate of the ARC Member pursuant to the Facility and the terms and
conditions of the Loan Agreement.
4.12 Bankruptcy
of a Member.
A
Person ceases to be a Member upon the happening of any of the following events
(each, a “Bankruptcy Event”), after which the Person shall be entitled to
receive only the allocations and distributions attributed to the Person’s
Membership Interest in the Company, if any, but shall not be entitled to any
other rights of a Member:
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(a) A
Member
takes any of the following actions:
(1) Makes
an
assignment for the benefit of creditors;
(2) Files
a
voluntary petition in bankruptcy;
(3) Is
adjudged a bankrupt or insolvent, or has entered against the Member an order
for
relief, in any bankruptcy or insolvency proceeding;
(4) Files
a
petition or answer seeking for himself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any
statute, law or regulation;
(5) Files
an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any proceeding of this
nature; or
(6) Seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Member or of all or any substantial part of the properties
of
the Member.
(b) 120
days
after the commencement of any proceeding against the Member seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, if the proceeding has
not been dismissed, or if within 90 days after the appointment without the
consent or acquiescence of the Member, of a trustee, receiver or liquidator
of
the Member or of all of any substantial part of the properties of the Member,
the appointment is not vacated or stayed, or within 90 days after the expiration
of any such stay, the appointment is not vacated.
ARTICLE
5
INDEMNIFICATION
5.1 Indemnification
by the Company.
To the
fullest extent permitted by the laws of the State of Delaware, as they exist
on
the date hereof or as they may hereafter be amended, the Company shall indemnify
any person who is or was a Manager, Member, Tax Matters Member, employee or
agent of the Company or any person who is the legal representative of any such
Manager, Member, Tax Matters Member, employee or agent of the Company (an
“Indemnitee”), from and against any and all claims, demands and expenses
(including without limitation attorneys’ fees, judgments, fines, penalties,
excise taxes and amounts paid in settlement) incurred by the Indemnitee by
reason of the fact that such person was a Manager, Member or Tax Matters Member,
or, while serving as a Manager, is or was at the request of the Company also
serving as a manager, director, employee, officer, or agent of another entity
(including without limitation any employee benefit plan). The right of
indemnification created by this Section 5.1 shall be a contract right
enforceable by an Indemnitee against the Company, and it shall be exclusive
of
any other rights to which an Indemnitee may otherwise be entitled. The
provisions of this Section 5.1 shall inure to the benefit of the heirs and
legal
representatives of an Indemnitee. No amendment, alteration, change, addition
or
repeal of or to this Operating Agreement shall deprive any Indemnitee of any
rights under this Section 5.1 with respect to any act or omission of such
Indemnitee occurring prior to such amendment, alteration, change, addition
or
repeal.
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ARTICLE
6
CAPITALIZATION
6.1 Capital
Accounts.
(a) The
Company shall maintain Capital Accounts determined and adjusted in accordance
with the rules of Treasury Regulations Section 1.704-1(b)(2)(iv).
(b) A
Member
shall not be entitled to withdraw any part of its Capital Account or to receive
any distribution from the Company, except as specifically provided in this
Agreement. Any Member, including any substituted Member, that shall receive
a
Membership Interest or whose Membership Interest shall be increased by means
of
a transfer to it of all or part of the Membership Interest of another Member,
shall have a Capital Account that reflects such transfer.
6.2 Initial
Capital Contributions. Each Member has made an irrevocable capital
commitment of $5 million, such that in the aggregate the commitment to the
Facility shall be $10 million. Upon execution of this Agreement, each Member
shall affirm the capital commitment set forth opposite such Member’s name on
Schedule A hereto and shall receive therefor the Percentage
Interest set forth thereon. The initial Capital Accounts of the Members shall
be
equal to the fair market value of the Members’ initial Capital Contribution, and
shall be drawn, pari passu, pursuant to the terms of this Agreement.
(See Article 14.)
6.3 No
Additional Contributions. No Member shall be required to contribute any
capital to the Company in addition to the amounts required by Section 6.2,
unless the Members unanimously agree to increase the amount of Capital
Contributions.
6.4 Use
of
Capital Contributions.
The
Capital Contributions made pursuant to this Article shall be used, together
with
other funds available to the Company, to engage in the Business, including
without limitation, to make advances under the Facility pursuant to the terms
and conditions of the Loan Agreement and for the payment of the liabilities
and
obligations of the Company.
6.5 No
Interest on or Return of Capital.
No
Member shall be entitled to interest on any Capital Contribution or Capital
Account, except to the extent the Capital Contribution becomes a loan pursuant
to the terms of the Loan Agreement. No Member shall have the right to demand
or
receive the return of all or any part of any Capital Contribution or Capital
Account, except as otherwise may be expressly provided herein, and no Member
shall be personally liable for the return of the Capital Contribution of any
other Member.
6.6 Limitations
Upon Liability of Members.
Except
as otherwise expressly and specifically provided in or required by the
Certificate or this Agreement, the personal liability of each Member to the
Company, to the other Members, to the creditors of the Company or any third
party for the losses, debts or liabilities of the Company shall be limited
to
the amount of its Capital Contribution which has not theretofore been returned
to it as a distribution (including a distribution upon liquidation). For
purposes of the foregoing sentence, distributions to a Member shall first be
deemed a return of its Capital Contribution. No Member shall at any time be
liable or held accountable to the Company, to the other Members, to the
creditors of the Company or to any other third party for or on account of any
negative balance in its Capital Account. To the fullest extent permitted by
the
Act, a Member shall have no obligation to return any distributions received
from
the Company.
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ARTICLE
7
ALLOCATIONS
OF PROFIT AND LOSS
7.1 Allocations
Generally.
Except
as otherwise provided in Sections 7.2 or 7.3 hereof, each item of Income and
Loss shall be allocated as follows:
(a) Income
in Excess of Loss.
Income
in excess of Loss shall be allocated: (i) first, to restore losses allocated
under Section 7.1(b)(iii) to the extent of, such negative balances, (ii) second,
to restore losses allocated under Section 7.1(b)(ii) to the extent of, such
negative balances, and (iii) third, among the Members in accordance with their
respective Percentage Interests.
(b) Loss
in Excess of Income.
Loss in
excess of Income shall be allocated: (i) first, among the Members in accordance
with their respective Percentage Interest unless and until the Adjusted Capital
Account of any Member has been reduced to zero, (ii) second, among the Members
who have positive Adjusted Capital Account balances in proportion to and to
the
extent of, those positive Adjusted Capital Account balances, and (iii) third,
to
the Members in proportion to their respective Percentage Interests.
7.2 Allocations
Under Regulations.
(a) Company
Nonrecourse Deductions.
Loss
attributable (under Treasury Regulation Section 1.704-2(c)) to “company
nonrecourse liabilities” (within the meaning of Treasury Regulation Section
1.704-2(b)(1)) shall be allocated among the Members in accordance with their
respective Percentage Interest. As the allocation of company nonrecourse
deductions will increase the potential minimum gain chargeback under Section
7.2(d), an allocation of company nonrecourse deductions under this provision
will not reduce a Member’s Capital Account.
(b) Member
Nonrecourse Deductions.
Loss
attributable (under Treasury Regulation Section 1.704-2(i)(2)) to “member
nonrecourse debt” (within the meaning of Treasury Regulation Section
1.704-2(b)(4)) shall be allocated, in accordance with Treasury Regulation
Section 1.704- 2(i)(1), to the Member who bears the economic risk of loss with
respect to the debt to which the Loss is attributable. As the allocation of
member nonrecourse deductions will increase the potential minimum gain
chargeback under Section 7.2(d), an allocation of member nonrecourse provisions
under this provision will not reduce a Member’s Capital Account.
(c) Minimum
Gain Chargeback.
If, in
any year there is a net decrease in Company Minimum Gain (as defined in Treasury
Regulation Section 1.704-2(d)) (other than a decrease attributable to a “book
up” in the Tax Book Value of the Company’s assets, a decrease offset by an
increase in Member Minimum Gain or any other decrease for which a minimum gain
chargeback is not required under Treasury Regulation Section 1.704-2(f)), then
each Member will be allocated Income equal to that Member’s share of the net
decrease in minimum gain for the year, as determined by Treasury Regulation
Section 1.704-2(g)(2). The items of Income to be allocated under this Section
are determined under Treasury Regulation Section 1.704-2(j)(2). In the event
there is insufficient Income for the year to fully chargeback each Member’s
share of the decrease in Company Minimum Gain, then the chargeback for the
year
shall be in proportion to each Member’s share of the decrease and any decrease
that has not been charged back shall be carried over and be treated as a
decrease in Company Minimum Gain in the following year. This subsection is
intended to comply with the minimum gain chargeback requirement of Treasury
Regulation Section 1.704-2(f) and shall be interpreted consistently
therewith.
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(d) Member
Minimum Gain Chargeback.
If, in
any year there is a net decrease in Member Minimum Gain (as defined in Treasury
Regulation Section 1.704-2(i)) (other than a decrease attributable to a “book
up” in the Tax Book Value of the Company’s assets, a decrease offset by an
increase in Member Minimum Gain or any other decrease for which a Member Minimum
Gain chargeback is not required under Treasury Regulation Section
1.704-2(i)(4)), then, after the allocation set forth above in Section 7.2(c),
each Member will be allocated Income equal to that Member’s share of the net
decrease in Member Minimum Gain for the year, as determined by Treasury
Regulation Section 1.704-2(i)(3). The items of Income to be allocated under
this
Section are determined under Treasury Regulation Section 1.704-2(j)(2). In
the
event there is insufficient Income for the year to fully chargeback each
Member’s share of the decrease in Member Minimum Gain, then the chargeback for
the year shall be in proportion to each Member’s share of the decrease and any
decrease that has not been charged back shall be carried over and be treated
as
a decrease in Member Minimum Gain in the following year. This subsection is
intended to comply with the requirement of Treasury Regulation Section
1.704-2(i)(4) that there be a chargeback of Member nonrecourse debt minimum
gain
and shall be interpreted consistently therewith.
(e) Qualified
Income Offset.
In the
event any Member received any adjustment, allocation or distribution described
in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that was not
reasonably expected at the end of the preceding year and that causes, or
increases, a deficit in the Member’s Capital Account, Income (composed of a pro
rata portion of each element remaining after the allocations in earlier
subsections of this Section) shall be allocated to that Member in an amount
and
manner sufficient to eliminate any portion of the deficit balance in the
Member’s Capital Account that is attributable to the adjustment, allocation, or
distribution referred to above. If there is insufficient Income in any year
to
make the allocation called for under this subsection, then the shortfall shall
be carried over to subsequent years and will be treated as items to be offset
in
those years. Allocations under this subsection will only be made to the extent
that a Member has a deficit in his or her Capital Account after all other
allocations provided in this Article have been tentatively made as if this
subsection were not in the Agreement. For purposes of this subsection, a
Member’s Capital Account balance shall be increased by (i) its share of Minimum
Gain, (ii) its share of Member Minimum Gain, (iii) the amount, if any, by which
its deficit Capital Account balance exceeds the sum of (i) and (ii) and which
the Member is obligated to restore (or is treated as obligated to restore under
Treasury Regulation Section 1.704-1(b)(2)(ii)(c)) and decreased by (iv) the
amount of expected distributions in the next year from the current year’s
earnings and (v) to the extent not previously taken into account, the items
described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
7.3 Other
Allocations.
(a) Allocations
when Tax Book Value Differs from Tax Basis. When the Tax Book Value of a Company
asset is different from its adjusted tax basis for income tax purposes, then,
solely for federal, state and local income tax purposes and not for purposes
of
computing Capital Accounts, income, gain, loss, deduction and credit with
respect to such assets (“Section 704(c) Assets”) shall be allocated among the
Members to take this difference into account in accordance with the principles
of Code Section 704(c), as set forth herein and in the Treasury Regulations
thereunder and under Code Section 704(b). Except to the extent otherwise
required by final Treasury Regulations, the calculation and allocations
eliminating the differences between Tax Book Value and adjusted tax basis of
the
Section 704(c) Assets shall be made pursuant to the method elected by the
Manager or their designee.
(b) The
Members agree to be bound by the provisions of this Article in reporting their
shares of Company income, gain, loss and deduction for tax
purposes.
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(c) For
purposes of determining the Income, Losses or any other items allocable to
any
period, Income, Loss and any such other items shall be determined on a daily,
monthly or other basis, using any permissible method under Code Section 706
and
the Treasury Regulations thereunder as elected by the Manager or their designee;
provided, however, that Income or Loss described in clause (c) of the definition
of “Income” and “Loss” shall be allocated only to those persons who held
interests in the Company immediately before the event giving rise to such Income
or Loss.
ARTICLE
8
DISTRIBUTIONS
8.1 Declaration
and Payment of Distributions.
(a) Except
as
provided in Section 10.4(a) regarding liquidating distributions, Net Cash Flow
shall be determined by the Manager and shall be distributed to the Members
in
accordance with their respective Percentage Interests as follows: (i) with
respect to interest payments under the Loan Agreement, distributions shall
be
made monthly; (ii) with respect to the Repayment Premium and Extension Fee,
distributions shall be made at the time of the repayment or exercise of the
Extension Option; and, (iii) with respect to all other distributions, e.g.,
Unused Line Fee, distributions shall be made annually.
(b) For
purposes of this Section, the Members acknowledge that, in accordance with
the
definition of Net Cash Flow provided in Section 1.1, the Manager may, in their
sole discretion, adjust the amount which would otherwise constitute Net Cash
Flow by establishing, adding amounts to, and releasing amounts from, such
reserves as it deems, in its sole discretion, to be necessary or advisable
for
working capital, contingencies, replacements, expansions, acquisitions, or
other
expenditures of the Company.
8.2 Limitations
on Distributions.
(a) The
Company shall not make a distribution to a Member to the extent that at the
time
of the distribution, after giving effect to the distribution, all liabilities
of
the Company, other than liabilities to Members on account of their Membership
Interests in the Company and liabilities for which the recourse of creditors
is
limited to specified property of the Company, exceed the fair value of the
assets of the Company, except that the fair value of property that is subject
to
a liability for which the recourse of creditors is limited shall be included
in
the assets of the Company only to the extent that the fair value of that
property exceeds that liability.
(b) A
Member
who receives a distribution in violation of subsection (a), and who knew at
the
time of the distribution that the distribution violated this Section, shall
be
liable to the Company for the amount of the distribution. A Member who receives
a distribution in violation of this Section, and who did not know at the time
of
the distribution that the distribution violated this Section, shall not be
liable for the amount of the distribution. Subject to subsection (c), this
subsection shall not affect any obligation or liability of a Member under other
applicable law for the amount of a distribution.
(c) A
Member
who receives a distribution from the Company shall have no liability under
this
Section, the Act or other applicable law for the amount of the distribution
after the expiration of three years from the date of the distribution unless
an
action to recover the distribution from such Member is commenced prior to the
expiration of such three-year period and an adjudication of liability against
such Member is made in the action.
8.3 Amounts
of Tax Paid or Withheld.
All
amounts paid or withheld pursuant to the Code or any provision of any state
or
local tax law with respect to any Member shall be treated as amounts distributed
to the Member pursuant to this Article for all purposes under this
Agreement.
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8.4 Distribution
in Kind.
(a) No
Member, regardless of the nature of its Capital Contribution, shall have a
right
to demand and receive any distribution in any form other than cash.
(b) No
Member
shall be compelled to accept a distribution of any asset in kind to the extent
that the percentage of the asset distributed to the Member exceeds a percentage
of that asset that is equal to the percentage in which the Member shares in
distributions from the Company generally.
ARTICLE
9
TRANSFERABILITY
9.1 Restriction
on Transfer.
No
Member shall have the right to sell, assign, pledge, hypothecate, transfer,
exchange, give or otherwise transfer all or any part of its Membership Interest
except in compliance with Section 9.2].
9.2 Effect
of Transfer.
(a) In
addition to satisfaction of Sections 4.11(e) and 9.1 above, no assignee or
transferee of all or part of a Membership Interest in the Company shall have
the
right to become admitted as a Member, unless and until:
(1) the
assignee or transferee has executed an instrument reasonably satisfactory to
the
Manager accepting and adopting the provisions of this Agreement;
(2) the
assignee or transferee has paid all reasonable expenses of the Company requested
to be paid by the Manager in connection with the admission of such assignee
or
transferee as a Member;
(3) if
requested by any Manager, the transferee has delivered to the Company an opinion
of counsel reasonably satisfactory to such Manager that such transfer is exempt
from the registration requirements of the Securities Act of 1933, as amended
(the “1933 Act”), and applicable state securities laws; and
(4) such
assignment or transfer shall be reflected in a revised Schedule
A
to this
Agreement.
(b) A
person
who acquires a Membership Interest without satisfying this Section 9.2 and
Section 9.1, shall be entitled to receive only the allocations and distributions
attributable to the acquired Membership Interest in the Company, if any, but
shall not be entitled to any other rights of a Member.
(c) A
person
who is an assignee of a Membership Interest in the Company may be admitted
to
the Company as a Member and may receive a Membership Interest in the Company
without making a contribution or being obligated to make a contribution to
the
Company.
9.3 No
Resignation of Members.
A
Member may not withdraw or resign from the Company prior to dissolution or
winding up of the Company. If a Member who is an individual dies or a court
of
competent jurisdiction adjudges the individual to be incompetent to manage
the
person or property of the individual, the executor, administrator, guardian,
conservator or other legal representative of the Member may exercise all of
the
rights of the Member for the purpose of settling the estate or administering
the
property of the Member, including the power under this Agreement of an assignee
to become a Member. If a Member is a corporation, limited liability company,
trust or other entity and is dissolved or terminated, the powers of that Member
may be exercised by its legal representative or successor.
-15-
9.4 Voluntary
Discontinuation of Business.
Nothing
in this Agreement shall prevent the Members from mutually agreeing to dissolve
the Company and discontinue its business pursuant to Section 10.1 of this
Agreement, rather than triggering any of the provisions of this
Article.
ARTICLE
10
DISSOLUTION
AND TERMINATION
10.1 Dissolution.
The
Company shall be dissolved upon the occurrence of any of the following events
(“Dissolution Event”):
(a) By
the
Manager, with the approval of the Members, upon their
determination that it is no longer in the best interests of the Company to
continue the business of the Company;
(b) Upon
the
sale by the Company of all or substantially all of its assets;
(c) At
any
time there are no Members, provided, that, the Company need not be dissolved
if,
within ninety (90) days after the occurrence of the event that terminated the
continued membership of the last remaining Member, the personal representative
of the last remaining Member agrees in writing to continue the Company and
to
the admission of such personal representative or its nominee or designee to
the
Company as a Member, effective as of the occurrence of the event that terminated
the continued membership of the last remaining Member;
(d) Upon
the
entry of a decree of judicial dissolution under § 18-802 of the
Act.
10.2 Activities
of the Company Pending Liquidation.
Upon
the occurrence of a Dissolution Event, the continuing operation of the Company’s
business shall be confined to those activities reasonably necessary to wind
up
the Company’s affairs, discharge its obligations, and preserve and distribute
its assets.
10.3 Winding
Up and Liquidation.
(a) Upon
dissolution of the Company, the Manager or a liquidator or liquidating committee
selected by the Manager (the “Liquidator”) shall be responsible for the winding
up of the affairs of the Company and the distribution of its assets. In
connection with a winding up of the affairs of the Company, the Liquidator
shall
cause an accounting to be made of the assets and liabilities of the Company.
If
any liability is contingent or uncertain in amount, a reserve will be
established in such amount as the Liquidator deems reasonably necessary. Upon
satisfaction or other discharge of such contingency, the amount of the reserve
not required, if any, will be distributed as provided in this
Section.
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(b) The
Liquidator shall be entitled to receive such compensation for its services
as
may be approved by the Manager. The Liquidator shall agree not to resign at
any
time without fifteen (15) days’ prior written notice and may be removed at any
time, with or without cause, by notice of removal signed by the Manager. Upon
dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within thirty (30) days thereafter
be
selected by the Manager. The right to appoint a successor or substitute
Liquidator in the manner provided herein shall be recurring and continuing
for
so long as the functions and services of the Liquidator are authorized to
continue under the provisions hereof, and every reference herein to the
Liquidator will be deemed to refer also to any such successor or substitute
Liquidator appointed in the manner herein provided. Except as expressly provided
in this Article, the Liquidator appointed in the manner provided herein shall
have and may exercise, without further authorization or consent of any of the
Members, all of the powers conferred upon the Liquidator under the terms of
this
Agreement (but subject to all of the applicable limitations, contractual and
otherwise, upon the exercise of such powers) to the extent necessary or
desirable in the good faith judgment of the Liquidator to carry out the duties
and functions of the Liquidator hereunder for and during such period of time
as
shall be reasonably required in the good faith judgment of the Liquidator to
complete the winding up and liquidation of the Company as provided for
herein.
(c) The
Liquidator shall liquidate the assets of the Company and apply and distribute
the proceeds of such liquidation in the order of priority set forth in Section
10.4, unless otherwise required by mandatory provisions of applicable
law.
(d) The
Liquidator shall be authorized to sell any, all or substantially all of the
assets of the Company for deferred payment obligations, and to hold, collect
and
otherwise administer any such obligations or any other deferred payment
obligations held or acquired as assets of the Company.
(e) A
reasonable time, including, without limitation, any time required to collect
deferred payment obligations, shall be allowed for the orderly liquidation
of
the assets of the Company and the discharge of liabilities to creditors so
as to
enable the Liquidator to reasonably minimize any losses attendant upon the
liquidation.
10.4 Distribution
of Assets.
(a) In
the
event of a dissolution of the Company, upon the winding up of the Company,
its
assets shall be distributed in the following manner and order of
priority:
(1) First,
to
creditors, including Members and Manager who are creditors, to the extent
otherwise permitted by law, in satisfaction of liabilities of the Company
(whether by payment or the making of reasonable provision for payment thereof)
other than liabilities for which reasonable provision for payment has been
made;
including the establishment of any reserves as the Liquidator may deem
reasonably necessary for contingent, conditional or unmatured claims or
obligations of the Company arising out of or in connection with the Company
or
its liquidation. Such reserves shall be held by the Liquidator for the purpose
of disbursing such reserves in payment of any of the aforementioned
contingencies, and, as soon as practicable, to distribute the balance thereafter
remaining in the manner provided in the following subdivisions of this Section;
and
(2) Second,
the balance to the Members in proportion to the positive balances of their
respective Capital Accounts, as determined after taking into account all
adjustments to such Capital Accounts for the fiscal year of the Company during
which such distribution occurs as promptly as practicable, but in any event
within the time required by Treasury Regulations Section
1.704-1(b)(2)(ii)(b)(2).
(b) The
Company following dissolution (i) shall pay or make reasonable provision to
pay
all claims and obligations, including all contingent, conditional or unmatured
contractual claims, known to the Company, (ii) shall make such provision as
will
be reasonably likely to be sufficient to provide compensation for any claim
against the Company which is the subject of a pending action, suit or Proceeding
to which the Company is a party and (iii) shall make such provision as will
be
reasonably likely to be sufficient to provide compensation for claims that
have
not been made known to the Company or that have not arisen but that, based
on
facts known to the Company, are likely to arise or to become known to the
Company within 10 years after the date of dissolution. If there are sufficient
assets, such claims and obligations shall be paid in full and any such provision
for payment made shall be made in full. If there are insufficient assets, such
claims and obligations shall be paid or provided for according to their priority
and, among claims of equal priority, ratably to the extent of assets available
therefor. Any remaining assets shall be distributed as provided in subsection
(a). Any Liquidator winding up the Company’s affairs who has complied with this
Section shall not be personally liable to the claimants of the dissolved Company
by reason of such person’s actions in winding up the Company.
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(c) A
Member
who receives a distribution in violation of subsection (a), and who knew at
the
time of the distribution that the distribution violated subsection (a), shall
be
liable to the Company for the amount of the distribution. A Member who receives
a distribution in violation of subsection (a) of this Section, and who did
not
know at the time of the distribution that the distribution violated subsection
(a), shall not be liable for the amount of the distribution.
10.5 Cancellation
of Certificate.
The
Certificate of the Company shall be canceled upon the dissolution and the
completion of winding up of the Company.
ARTICLE
11
BOOKS;
REPORTS TO MEMBERS; TAX ELECTIONS
11.1 Books
and Records.
The
Manager shall maintain separate books of account for the Company which shall
show a true and accurate record of all costs and expenses incurred, all charges
made, all credits made and received and all income derived in connection with
the conduct of the Company and the operation of its business, and, to the extent
inconsistent therewith, in accordance with this Agreement. The Company may
maintain its records in other than a written form if such form is capable of
conversion into written form within a reasonable time.
11.2 Tax
Information.
Within
ninety (90) days after the end of each fiscal year, the Company shall endeavor
to supply to each Member all information necessary and appropriate to be
included in each Member’s income tax returns for that year.
11.3 Annual
Reports.
Within
ninety (90) days after the end of each fiscal year, the Company shall cause
to
be prepared, and each Member furnished with, financial statements accompanied
by
a report thereon of the Company’s accountants stating that such statements are
prepared and fairly stated in all material respects in accordance with generally
accepted accounting principles, and, to the extent inconsistent therewith,
in
accordance with this Agreement, including the following: (a) a copy of the
balance sheet of the Company as of the last day of such fiscal year; (b) a
statement of income or loss for the Company for such fiscal year; and (c) a
statement of the Members’ Capital Accounts, changes thereto for such fiscal year
and Percentage Interests at the end of such fiscal year.
Members
shall share the cost of preparing the Annual Reports in proportion to their
Percentage Interest.
11.4 Tax
Matters Member.
(a) The
ARC
Member is hereby appointed and shall serve as the tax matters member of the
Company (the “Tax Matters Member”) within the meaning of Code Section 6231(a)(7)
for so long as he is not the subject of a bankruptcy event as defined in Section
4.12 and otherwise is entitled to act as the Tax Matters Member. The Tax Matters
Member may file a designation of itself as such with the Internal Revenue
Service. The Tax Matters Member shall (i) furnish to each Member affected by
an
audit of the Company income tax returns a copy of each notice or other
communication received from the IRS or applicable state authority, (ii) keep
such Member informed of any administrative or judicial Proceeding, as required
by Section 6223(g) of the Code, and (iii) allow such Member an opportunity
to
participate in all such administrative and judicial Proceedings. The Tax Matters
Member shall take such action as may be reasonably necessary to constitute
the
other Member a “notice member” within the meaning of Section 6231(a)(8) of the
Code, provided that the other Member provides the Tax Matters Member with the
information that is necessary to take such action.
-18-
(b) The
Company shall not be obligated to pay any fees or other compensation to the
Tax
Matters Member in its capacity as such. However, the Company shall reimburse
the
expenses (including reasonable attorneys’ and other professional fees) incurred
by the Tax Matters Member in such capacity. Each Member who elects to
participate in Company administrative tax Proceedings shall be responsible
for
its own expenses incurred in connection with such participation. In addition,
the cost of any adjustments to a Member and the cost of any resulting audits
or
adjustments of a Member’s tax return shall be borne solely by the affected
Member.
(c) The
Company shall indemnify and hold harmless the Tax Matters Member from and
against any loss, liability, damage, cost or expense (including reasonable
attorneys’ fees) sustained or incurred as a result of any act or decision
concerning Company tax matters and within the scope of such Member’s
responsibilities as Tax Matters Member, so long as such act or decision was
not
the result of gross negligence, fraud, bad faith or willful misconduct by the
Tax Matters Member. The Tax Matters Member shall be entitled to rely on the
advice of legal counsel as to the nature and scope of its responsibilities
and
authority as Tax Matters Member, and any act or omission of the Tax Matters
Member pursuant to such advice shall in no event subject the Tax Matters Member
to liability to the Company or either Member.
11.5 Tax
Audits/Special Assessments.
If the
federal tax return of either the Company or an individual Member with respect
to
an item or items of Company income, loss, deduction, etc., potentially affecting
the tax liability of the Members generally is subject to an audit by the
Internal Revenue Service, the Manager may, in the exercise of their business
judgment, determine that it is necessary to contest proposed adjustments to
such
return or items. If such a determination is made, the Manager will finance
the
contest of the proposed adjustments out of the Net Cash Flow.
11.6 Tax
Elections.
The
Company will elect to amortize organizational costs. Upon the death of a Member,
in the event of the distribution of property, upon the transfer of a Membership
Interest or the issuance of a Membership Interest to a new Member, the Company
may file an election, in accordance with applicable Treasury Regulations, to
cause the basis of the Company’s property to be adjusted for federal income tax
purposes as provided by Code Section 734, Code Section 743 and Code Section
754.
The determination whether to make and file any such election shall be made
by
the Manager in their sole discretion.
11.7 Determination
of Tax Book Value of Company Assets.
(a) Except
as
set forth below, the “Tax Book Value” of any Company asset is its adjusted basis
for federal income tax purposes.
(b) The
initial Tax Book Value of any assets contributed by a Member to the Company
shall be the agreed fair market value of such assets, increased by the amount
of
liabilities of the contributing Member assumed by the Company in connection
with
the contribution of such assets plus the amount of any other liabilities to
which such assets are subject.
-19-
(c) The
Tax
Book Value of all Company assets may be adjusted by the Manager to equal their
respective gross fair market value as provided for in Treasury Regulation
Section 1.704-1(b)(2)(iv)(f).
(d) This
Section shall not affect the book value of any assets for financial reporting
purposes.
ARTICLE
12
CONFIDENTIALITY
OF CERTAIN INFORMATION
12.1 Maintenance
of Confidentiality.
Each of
the Members shall, during the term of this Agreement and at all times
thereafter, maintain in confidence all confidential and proprietary information
and data of the Company, and of the other Members or their Affiliates, (each,
a
“disclosing party”) disclosed to it (the “Confidential Information”). Each of
the Members further agrees that it shall not use the Confidential Information
during the term of this Agreement or at any time thereafter for any purpose
other than the performance of its obligations or the exercise of its rights
under this Agreement. The Company and each Member shall take all reasonable
measures necessary to prevent any unauthorized disclosure of the Confidential
Information by any of their employees, agents or consultants.
12.2 Permitted
Disclosures.
Nothing
herein shall prevent the Company, any Member, or any employee, agent or
consultant of the Company or any Member (the “receiving party”) from using,
disclosing, or authorizing the disclosure of any information it receives in
the
course of the business of the Company which: (a) becomes publicly available
other than through default hereunder by the receiving party; (b) is lawfully
acquired by the receiving party from a source not under any obligation to the
disclosing party regarding disclosure of such information; (c) is in the
possession of the receiving party in written or other recorded form at the
time
of its disclosure hereunder; or (d) is non-confidentially disclosed to any
third
party by or with the permission of the disclosing party.
ARTICLE
13
INVESTMENT
REPRESENTATION
13.1 Investment
Purpose.
Each
Member represents and warrants to the Company and to each other Member that
it
has acquired the Membership Interest for such Member’s own account, for
investment only and not with a view to the distribution thereof, except to
the
extent provided in or contemplated by this Agreement.
13.2 No
Registration.
The
Membership Interests have not been registered with the Securities and Exchange
Commission under the 1933 Act or under similar laws of any states in reliance
upon exemptions under those acts. The sale or other disposition of the
Membership Interests is restricted as provided in this Agreement.
ARTICLE
14
FACILITY
ADVANCES
14.1 Advance
Procedures.
The
Company shall make advances under the Facility to Affiliates of the ARC Member
based on the following criteria:
-20-
(a) Five
(5)
calendar days prior to the submission of the draw request by the Manager to
the
Members (the “Draw Request”), which form of Draw Request is set forth in Exhibit
B, the Manager shall submit to the Members an Investment Memorandum. This
Investment Memorandum, together with accompanying analysis, shall describe:
(a) the amount of the Loan advance requested; (b) specific property
information, including location, square footage, improvements; (c) summary
of appraised value; (d) Purchase Price; (e) debt capitalization;
(f) sources and uses; (g) market and demographic data; (h) tenant
summary/credit evaluation; (i) property condition; (j) title, survey
and zoning matters; (i) environmental issues; and (l) other material
matters pertaining to the property.
(b) The
Manager shall make a Draw Request in the form set forth as Exhibit B
five (5)
calendar days prior to the required funding date. The Draw Request shall specify
the ARC Member Affiliate purchasing the property, and the Manager shall
represent that the Facility shall fund only at closing when the Property has
been acquired or post-closing after the Property has been acquired by the ARC
Member Affiliate. The
Draw
Request shall specify the anticipated date upon which the transaction is to
be
funded and shall provide a representation that the Manager shall promptly advise
the Members of any change, delay or adjournment of the transaction closing
date.
Each
time
the Manager makes a draw request, the Manager shall require that the ARC Member
Affiliate shall submit a financial statement describing in detail the assets
and
liabilities of such ARC Member Affiliate. Such financial statement shall be
subject to the review and approval of the Manager before such draw request
shall
be funded
(c) The
Manager shall represent to the Company that the following conditions have been
satisfied: (a) all information, books, records, rent rolls, lease reports,
exhibits, representations, statements, and other matters and documentation
have
been reviewed and are acceptable; (b) satisfactory title insurance has been
obtained through a title insurance company selected and engaged by the Company
and acceptable to such Manager, at such ARC Member Affiliate’s expense
(c) a survey of the property satisfactory to the Manager and its counsel
and the title company has been obtained; (d) satisfactory casualty,
liability, rent loss and other required insurance coverage has been obtained
in
amounts and types and through providers as required under the Loan Agreement;
(e) satisfactory organizational documents have been prepared which meet the
Manager’s requirements for single purpose bankruptcy remote entities;
(f) satisfactory estoppels, if any, have been delivered (including ground
lessor and lease guarantor estoppels, as applicable) and, as applicable,
subordination, non-disturbance and attornment agreements for all tenants as
provided in the lease if applicable; (g) satisfactory opinion of counsel
has been prepared, should Manager deem such opinion necessary;]
(h) satisfactory evidence of compliance with all laws, including zoning,
building code and health and safety requirements has been presented; and
(i) satisfactory review of Lease documents, if any, by the Manager’s
counsel has been completed.
(d) The
ARC
Member Affiliate receiving the advance under the Facility (i) shall enter into
a
Loan Agreement in a form approved by the Members, including the form of Note
attached to the Loan Agreement, (ii) shall undertake to repay funds drawn
against the Facility with Interest and Repayment Premium within 12 months or
sooner of drawing funds, subject to the exercise of the Extension Option,
payment of the Extension Fee, and annual payment of an Unused Line Fee equal
to
3% per annum of the amount of the Facility (less funds advanced by the Company
to an ARC Affiliate and then outstanding), and (ii) shall guaranty repayment
of
the Loan, which Loan shall be otherwise unsecured.
(e) The
Draw
Request shall not exceed the Purchase Price of the underlying properties that
are the subject of such Draw Request.
-21-
ARTICLE
15
MISCELLANEOUS
15.1 Binding
Effect.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. If a Member who is an individual
dies or a court of competent jurisdiction adjudges him or her to be incompetent
to manage his or her person or property, the executor, administrator, guardian,
conservator or other legal representative of the Member may exercise all of
the
rights of the Member for the purpose of settling such Member’s estate or
administering such Member’s property, including the power the Member had to give
an assignee the right to become a Member. If a Member is a corporation, trust
or
other entity and is dissolved or otherwise terminated, the powers of that Member
may be exercised by its legal representatives or successors. The successor
of a
Member shall succeed to the right of the Member to receive allocations and
distributions hereunder, and may be admitted as a Member in accordance with
the
provisions of Section 9.2, but shall not be deemed a Member, and shall not
be
entitled to voting rights hereunder, unless and until so admitted.
15.2 Entire
Agreement.
This
Agreement contains the entire agreement of the parties hereto with respect
to
the subject matter hereof and supersedes all prior understandings and agreements
of the parties with respect thereto.
15.3 Amendments.
The
Certificate and this Agreement may not be amended except by the written
agreement of a Majority-in-Interest of the Members.
15.4 Choice
of Law.
Notwithstanding the place where this Agreement may be executed by any of the
parties hereto, the parties expressly agree that all the terms and provisions
hereof shall be construed under the laws of the State of Delaware (without
regard to any conflicts of law principles.) Each of the Members hereby expressly
submits itself generally and unconditionally to the personal jurisdiction of
any
U.S. or state court which would have jurisdiction over the subject matter of
an
action to enforce any or all of the terms of this Agreement or to recover
damages for a breach of any of its provisions.
15.5 Notices.
Except
as otherwise provided in this Agreement, any notice, demand or communication
required or permitted to be given by any provision of this Agreement shall
be
deemed to have been sufficiently given or served for all purposes if delivered
personally or sent by facsimile transmission or overnight express to the party
or to an executive officer of the party to whom the same is directed or, if
sent
by registered or certified mail, postage and charges prepaid, addressed to
the
Member’s address, which is set forth on Schedule
A
and to
the Company at its principal place of business, or at such other address as
a
party may direct in writing.
15.6 Headings.
The
titles of the Articles and the headings of the Sections of this Agreement are
for convenience of reference only and are not to be considered in construing
the
terms and provisions of this Agreement.
15.7 Pronouns.
All
pronouns shall be deemed to refer to the masculine, feminine, neuter, singular
or plural, as the identity of the person or persons, firm or corporation may
require in the context thereof.
15.8 Waivers.
The
failure of any party to seek redress for violation of or to insist upon the
strict performance of any covenant or condition of this Agreement shall not
prevent a subsequent act that would have originally constituted a violation
from
having the effect of an original violation.
-22-
15.9 Severability.
If any
provision of this Agreement or its application to any person or circumstance
shall be invalid, illegal or unenforceable to any extent, the remainder of
this
Agreement and its application shall not be affected and shall be enforceable
to
the fullest extent permitted by law.
15.10 Publicity.
No
press release or other public announcement related to this Agreement or the
Company or the transactions contemplated hereby shall be issued by any Member
without the prior approval of the Manager, except that any Member may make
such
public disclosure which it believes in good faith to be required by law or
by
the terms of any listing agreement with a securities exchange (in which case
such Member shall make a reasonable effort to consult with the Members prior
to
making such disclosure).
15.11 No
Third Party Beneficiaries.
None of
the provisions of this Agreement shall be for the benefit of or enforceable
by
any person other than the parties to this Agreement and their respective
successors and assigns.
15.12 Interpretation.
It is
the intention of the Members that, during the term of this Agreement, the rights
of the Members and their successors-in-interest shall be governed by the terms
of this Agreement, and that the right of any Member or successor-in-interest
to
assign, transfer, sell or otherwise dispose of any Membership Interest in the
Company shall be subject to limitations and restrictions
of
this Agreement.
15.13 Tax
Classification of Company.
The
Members hereby acknowledge their intention that the Company be classified,
for
federal, state and local income tax purposes, as a partnership and not an
association taxable as a corporation pursuant to Section 7701(a)(2) of the
Code
and the Regulations promulgated thereunder and hereby agree that the provisions
of this Agreement shall be applied and construed in a manner to give full effect
to such intent. Each Member further agrees not to make or consent to an election
to treat the Company as a corporation and to execute and deliver such further
agreements or instruments and do, or cause to be done, such further acts and
things, as may be reasonably necessary, in the opinion of the Members and
counsel to the Company, to cause the Company to be classified as a partnership
for federal, state and local income tax purposes.
15.14 Further
Assurances.
Each
Member shall execute all such certificates and other documents and shall do
all
such other acts as the Manager deem appropriate to comply with (a) the
requirements of law for the formation of the Company, (b) any laws, rules,
regulations and third-party requests relating to the acquisition, operation
or
holding of the property of the Company or (c) the intent and purposes of this
Agreement.
15.15 Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
[Signature
Page Follows]
-23-
IN
WITNESS WHEREOF, the undersigned Member, intending to be legally bound, has
executed this Operating Agreement as of the date first above
written.
|
MEMBERS:
|
||||
|
AMERICAN
REALTY CAPITAL II, LLC
|
||||
|
By:
|
/s/
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|||
|
|
Name:
|
▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
||
|
|
Title:
|
Chairman
and CEO
|
||
|
CAMBR
COMPANY, INC.
|
||||
|
By:
|
/s/
▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
|||
|
|
Name:
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
||
|
|
Title:
|
President
|
||
-24-
SCHEDULE
A
Members
(as
of August __, 2008)
|
Member
Name
and
Address
|
Capital
Contribution
|
Percentage
Interest
|
|
American
Realty Capital II, LLC
▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
$5,000,000.00
|
50%
|
|
CAMBR
COMPANY, INC.
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
$5,000,000.00
|
50%
|
|
|
|
|
|
Totals:
|
$10,000,000.00
|
100.00%
|