EFTA01202875.pdf

HF DRAFT 8/13/14 OPERATING AGREEMENT OF FRIENDS VENTURES LLC A New York Limited Liability Company OPERATING AGREEMENT of FRIENDS VENTURES LLC dated as of August 2014 (this "Agreement") by, among and between FRIENDS VENTURES LLC, a New York limited liability company (the "Company"), LEON D. BLACK, an individual with an address at 760 Park Avenue, New York, New York 10021 ("Black") and RONALD S. LAUDER, an individual with an address at ("Lauder") (each of Black and Lauder is a "Member" and collectively the "Members"). WITNESSETH: WHEREAS, the Members have formed the Company as a New York limited liability company pursuant to the Limited Liability Company Law of the State of New York, as amended (the "Act"); WHEREAS, the expressed primary purpose of the Company is to purchase and hold the property listed on Exhibit A (the "Property") as investment property; and WHEREAS, the Members and the Company desire to enter into this Agreement in order to state the terms and conditions of the ongoing operation and management of the Company; NOW, THEREFORE, in consideration of the premises and the agreements herein contained and intending to be legally bound hereby, the Members and the Company hereby agree as follows: I. FORMATION 1.1 Formation; Name; Office. The Members have formed the Company under and pursuant to the Act to be conducted under the name "FRIENDS VENTURES LLC." The business office of the Company shall be do Elysium Management LLC, 445 Park Avenue, Suite 1401, New York, New York 10022. 1.2 Purposes. The purposes for which the Company has been formed are: (a) To purchase and acquire the Property as investment property; (b) To own, maintain, finance, sell, dispose of and otherwise deal with the Property; and 1 EFTA01202875  HF DRAFT 8/13/14 (c) To take any and all actions and to engage in any and all activities which are incidental or reasonably related to, or necessary or desirable in connection with, any purposes of the Company as described herein. 1.3 Duration. The term of existence of the Company commenced on the date that the Articles of Organization of the Company (the "Articles") were duly filed with the Secretary of State of the State of New York and shall be perpetual, unless the Company is earlier dissolved in accordance with either the terms and provisions of this Agreement or the Act. 1.4 Registered Agent. The registered agent of the Company upon whom process against the Company may be served shall be Corporation Services Company, 80 State Street, Albany, New York. If the Company's registered agent shall ever resign, then the Members shall promptly appoint a successor. II. CAPITAL CONTRIBUTIONS 2.1 Initial Capital Contributions by the Members. (a) As soon as practicable following the date on which this Agreement is executed and delivered by all of the parties hereto, each Member shall make a cash capital contribution to the Company (collectively, the "Initial Capital Contributions") by wire transfer of immediately available funds in an amount equal to fifty percent (50%) of the acquisition cost (the "Acquisition Cost") of the Property (including, without limitation, hammer price, buyer's premium and applicable sales tax), as such amount is set forth opposite the name of such Member on Exhibit B. (b) In consideration for each Member's Initial Capital Contribution, effective as of the date of such contribution the Company has issued to each Member, respectively, a membership interest in the Company (a "Membership Interest") equal to the percentage of the aggregate Membership Interests in the Company ("Percentage of Membership Interest") set forth on Exhibit B. Exhibit B shall reflect the name, address, Membership Interest and the Percentage of Membership Interest of each Member and shall be revised, amended or modified to reflect the issuance, redemption or Transfer (as defined in Section 8.1(a) of this Agreement) of any Membership Interests. 2.2 Additional Capital Contributions. (a) Subject to Section 2.2(b), no Member shall be obligated to make additional capital contributions (an "Additional Capital Contribution" and, together with the Initial Capital Contributions, the "Capital Contributions") to the capital of the Company in excess of such Member's Initial Capital Contribution. Except as otherwise provided in Section 2.2(b), each request by the Company for Additional Capital Contributions shall be made only upon the prior unanimous consent of the Members and shall be made by the Members on a voluntary basis, but the making thereof shall not affect the Percentages of Membership Interests of the Members unless otherwise agreed by the Members. 2 EFTA01202876  HF DRAFT 8/13/14 (b) Each Member shall be obligated to make an Additional Capital Contribution to the capital of the Company for purposes of funding the Company Expenses (as hereinafter defined) and for such other Company purposes as determined by the Members. Each request by the Company for an Additional Capital Contribution pursuant to this Section 2.2(b) shall be made only upon the prior consent of each Member, which consent shall not be unreasonably withheld. The Additional Capital Contribution of each Member to fund the aggregate capital requested by the Company shall be made on the basis of the Percentage of Membership Interest of such Member. The Members intend that "Company Expenses" shall include, without limitation: (i) insurance covering the Property as provided in Section 3.4 (should the Company elect to insure the Property), (ii) all fees and expenses of appraisers for any appraisals that are contemplated by this Agreement, (iii) all maintenance, conservation and restoration costs and expenses for the Property, including without limitation, cleaning, re- framing and the costs of periodic condition reports and condition reports requested by a Member pursuant to Section 3.2, (iv) any costs or expenses (including legal fees) incurred with respect to any claim made relating to the authenticity or ownership of the Property and (v) the costs and expenses for packing and shipping the Property from Christie's (London) to the Permitted Location of the first Member entitled to the possession of the Property under this Agreement. To the extent that a Member incurs a Company Expense, such Member shall have a right of reimbursement against the other Member for such other Member's pro rata portion of the expense attributable to such other Member's Percentage of Membership Interest. The other Member shall make such reimbursement within thirty (30) days after a reasonably substantiated demand in writing. The net expense of each Member for such Company Expense shall be treated as an additional Capital Contribution of such Member. 2.3 Members' Liability. Except as otherwise expressly provided in the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member shall be obligated personally for any such debt, obligation or liability solely by reason of being a Member. Except as otherwise expressly provided in the Act, the liability of each Member shall be limited to the amount of Capital Contributions required to be made by such Member in accordance with the terms and provisions of this Agreement, but only when and to the extent the same shall become due and payable pursuant to the terms and provisions of this Agreement. 2.4 Withdrawal of Capital. No Member shall have the right to withdraw any part of its Capital Contributions prior to the liquidation and termination of the Company pursuant to Article X of this Agreement, unless such withdrawal is provided for in this Agreement. 2.5 Uses of Capital Contributions; Interest on Capital Contributions. All Capital Contributions received by the Company shall be utilized by the Company for Company purposes as determined by the Members. Except as otherwise provided in this Agreement, no interest shall accrue on any of the Capital Contributions. 3 EFTA01202877  HF DRAFT 8/13/14 III. THE PROPERTY OF THE COMPANY 3.1 Title to the Property of the Company. Title to the Property and to any and all other property, real, personal, intangible or mixed, owned by, or leased to, the Company shall be held in the name of the Company. Neither Member shall have any right, at common law or otherwise, to partition the Property or any other property of the Company. 3.2 Possession of the Property. Each Member will have the right to possess and use the Property for revolving two-year periods commencing on the date that a Member takes initial possession of the Property pursuant to this Section 3.2 (each, a "Possession Period"). Each Possession Period will be based on two years, each comprised of 365 days, and will not include any days in which the Property is in transit from a Permitted Location (as defined herein). The Members will flip a coin to determine which Member will be the first Member entitled to possess the Property hereunder. The first Member entitled to possession (the "Possessing Member") shall, with the approval of the other Member (the "Other Member"), make arrangements to pack, crate and ship the Property to a Permitted Location via a common carrier acceptable to both Members. Each Possessing Member shall, upon the request of the Other Member, obtain and deliver to the Other Member, a condition report setting forth the condition of the Property as of a date within fifteen (15) days but not more than thirty (30) days prior to the expected transfer of possession of the Property to the Other Member. In the event such a request is made, the Members shall jointly select and agree upon a conservator to prepare such condition report. In the interest of continuity, the Members shall endeavor to use the same conservator to prepare each condition report. The Property may only be held by either Member during such Member's respective Possession Period in one of the locations set forth on Exhibit C attached hereto (a "Permitted Location"). Any locations not included on Exhibit C (including any museums or other cultural institutions, should the Property be loaned) must be approved in writing by both Members. Neither Member may enter into any loan agreements with museums, foundations or other cultural institutions without the prior written consent of the Other Member. 3.3 Care of the Property. Each Member shall exercise the same care with respect to the Property as such Member does in the safekeeping of comparable property of his own. Each Member shall notify the other Member immediately upon discovering that the Property has been lost, damaged or stolen. Unless sufficient time does not allow, due to an emergency (e.g., fire) or other exigent circumstances that would result in increased damage to the Property if there was any delay, the Possessing Member shall not restore, conserve, un-frame or otherwise alter the Property without the prior written consent of the Other Member which consent will not be unreasonably withheld, delayed or conditioned. Upon reasonable notice to the Possessing Member, the Other Member may inspect the Property at a reasonable time. 3.4 Insurance: Liability for Loss or Damage. (a) If the Company elects to insure the Property, it shall insure the Property under a fine arts insurance policy providing for wall-to-wall coverage against "all risks" of physical loss or damage at all times. Such insurance must be in form and content satisfactory 4 EFTA01202878  HF DRAFT 8/13/14 to both Members and must insure the Property with "agreed amount" basis coverage for at least the current fair market value of the Property as determined by the most recent Annual Appraisal or Qualified Appraisal (each as hereinafter defined) (the "Current Value") for loss, damage or destruction (such term and its variants to include without limitation the loss of the Property due to theft, flood, earthquake and terrorism). Such insurance shall be provided as follows: a stand- alone policy covering only the Property, issued by a carrier or carriers collectively, the "insure?) licensed to do business in the State of New York and having an . Best rating of "A" or better, naming the Company as insured. The policy shall be primary and shall not contain any term or provision that requires it to sit in excess of any other insurance policy. The policy shall name the Company as loss payee in the event of loss, damage, or destruction of the Property. The Company shall not modify, alter, cancel, change or terminate any insurance coverage or policy described in this Section 3.4(a), or any term, provision, condition, requirement or other part thereof or with regard thereto except with the prior written consent of each Member. The policy shall be endorsed to provide for at least sixty (60) days' written notice to the Company of any modification, alteration, cancellation, change or termination of any coverage, whether such modification, alteration, cancellation, change or termination is initiated by the insurer or by a Member or the Company. (b) (i) If the Company elects not to insure the Property for any period of time, each Member agrees, at its own expense, to insure the Property under an all risk fine arts insurance policy, wall-to-wall against "all risks" of physical loss or damage during each such Member's Possession Period and while the Property is in transit from the Possessing Member's Permitted Location to the Other Member's Permitted Location, for any portion of such time that the Company is not providing insurance coverage for the Property. Such insurance must be in form and content satisfactory to both Members and must insure the Property with "agreed amount" basis coverage for at least the Current Value for loss, damage or destruction (such term and its variants to include without limitation the loss of the Property due to theft, flood, earthquake and terrorism). Such insurance shall be provided as follows: issued by an insurer licensed to do business in the State of New York and having an M. Best rating of "A" or better, naming the Company and the Other Member as insureds or additional insureds and as loss payees. The coverage and policy shall provide for severability of interest such that the acts or omission of one Member, including without limitation failure to comply with the terms and conditions of any insurance policy, shall not allow the insurer to reduce or avoid coverage with respect to the Other Member. The policy shall name the Company as named insured and loss payee in the event of loss, damage, or destruction of the Property, with coverage independent from, and regardless of any defenses the insurer may have against, a Member. The Members agree to not modify, alter, cancel, change or terminate any insurance coverage or policy described in this Section 3.4(b), or any term, provision, condition, requirement or other part thereof or with regard thereto except with the prior written consent of the Company or the Other Member. The policy shall be endorsed to provide for at least sixty (60) days' written notice to the Company and each Member of any modification, alteration, cancellation, change or termination of any coverage, whether such modification, alteration, cancellation, change or termination is initiated by the insurer or by a Member or the Company. 5 EFTA01202879  HF DRAFT 8/13/14 (ii) Each Member obtaining insurance will obtain a certificate of insurance and additional insured and loss payee endorsements naming the Company as the insured or additional insured and as loss payee, in a manner and using a form satisfactory to the other Member, with respect to the Property and agreed amount coverage for loss or destruction and evidencing compliance with the insurance requirements of this Agreement. The Member first entitled to possession shall as soon as possible after the coin flip provided for in Section 3.2 of this Agreement, but not later than fifteen days (15) prior to the commencement of his Possession Period, deliver to the Other Member the foregoing certificate and endorsements. Each Member agrees to pay any and all deductibles relating to his insurance coverage for the Property. (c) Notwithstanding any other provisions of this Agreement, each Member (the "Indemnifying Party") agrees to assume absolutely and unconditionally all liability, and to fully reimburse and indemnify the Company (the "Indemnified Party"), for any and all loss, damage or destruction to the Property or any part thereof occurring during the Indemnifying Party's possession of the Property, which shall include the time during which it is in transit to the Other Member hereunder, regardless of the cause of such loss, damage or destruction and regardless of whether or not the Indemnifying Party is at fault with respect to such loss, damage or destruction. It is expressly understood by the Members that by the agreement set forth in this Section 3.4(c), the Indemnifying Party agrees to be fully liable for any and all such loss, damage or destruction, regardless of whether or not the Indemnifying Party has received any insurance proceeds or obtained insurance for the Property, regardless of any defenses, exclusions, exceptions or limitations in any insurance, regardless of the insolvency of any insurer, and regardless of the degree of care exercised by the Indemnifying Party. In the event of any loss or destruction of the Property, the Indemnifying Party shall be liable to the Indemnified Party for the Current Value. In the event the Property is damaged but not destroyed, the Indemnifying Party shall be liable to the Indemnified Party for the Damage Value (as hereinafter defined). If the Indemnified Party actually receives payment from the insurer equal to the Current Value or the Damage Value, as the case may be, the Indemnifying Party shall have no further liability to the Indemnified Party; provided, however, if the loss, damage or destruction is directly or indirectly the result of or caused by any act, omission or error constituting gross negligence or willful misconduct by the Indemnifying Party or anyone on his behalf or any of his or their employees, agents, officers, directors, representatives or contractors, the Indemnifying Party's liability shall not be so limited. "Damage Value" shall mean the cost of repairing and restoring the Property after it has been damaged and the diminution in its value, if any, measured by its Current Value immediately prior to such damage minus its fair market value as determined by appraisal in accordance with Section 3.5(d) after such restoration and repair (the "Restoration Date"). 3.5 Appraisal of the Property: Fair Market Value. (a) Annual Appraisal. For purposes of determining that the Property is adequately insured, the Company or the Member providing insurance in accordance with Sections 3.4(a) or 3.4(b) hereof, as the case may be, shall obtain an annual appraisal of the fair 6 EFTA01202880  HF DRAFT 8/13/14 market value of the Property by an appraiser acceptable to both Members (the "Annual Appraisal"). The Annual Appraisal need not be a Qualified Appraisal. A "Qualified Appraisal" shall mean an appraisal meeting the requirements of Treasury Regulation §170(A)-13(c)(3) or any successor provision thereto. (b) Deceased Member's Membership Interest. Whenever, upon the death of a Member (a "Deceased Member"), a Qualified Appraisal is required to initially determine the Purchase Price of the Interest (such capitalized terms as hereinafter defined), such appraisal shall be prepared by a qualified independent appraiser selected by the personal representatives of the estate of the Deceased Member (the "Executors") and the surviving Member (the "Surviving Member"). If they are unable to agree upon such appraiser, each of the Executors and the Surviving Member shall select a qualified independent appraiser to prepare a draft appraisal report. The two appraisers shall select a third appraiser who shall review the draft reports and select the report that best supports the determination of the fair market value of the Interest as of the Deceased Member's date of death. The qualified independent appraiser who produced the selected report shall prepare the Qualified Appraisal that initially determines the Purchase Price. (c) Surviving Member's Membership Interest. Whenever an appraisal is required to determine the purchase price of the Membership Interest of a Surviving Member, such appraisal shall be prepared by an appraiser selected by the Executors and the Surviving Member. If they are unable to agree upon such appraiser, each of the Executors and the Surviving Member shall select an appraiser and the two appraisers so selected shall select a third appraiser to appraise the fair market value of the Surviving Member's Membership Interest as of the Valuation Date (as hereinafter defined). Each appraiser shall render an appraisal and the results of the three appraisals prepared shall then be averaged to determine the fair market value of the Surviving Member's Membership Interest as of the Valuation Date. (d) Damage Value/Forced Sale. Whenever an appraisal is required to determine the Damage Value pursuant to Section 3.4(c), such appraisal shall be prepared by an appraiser selected the Members. Whenever an appraisal is required to determine the purchase price of the Property pursuant to Section 8.5(e), such appraisal shall be prepared by an appraiser selected by the Executors and the Surviving Member. In each case, if they are unable to agree upon such appraiser, each of the Members, or each of the Executors and the Surviving Member, as the case may be, shall select an appraiser and the two appraisers so selected shall select a third appraiser to appraise the fair market value of Property as of the Restoration Date or the Effective Date (as hereinafter defined), as shall be applicable. Each appraiser shall render an appraisal and the results of the three appraisals prepared shall then be averaged to determine the fair market value of the Property as of the Restoration Date or the Effective Date, as the case may be. 3.6 Reproduction of the Property. Subject to the copyright rights of the Company or any third party, each Member may photograph, telecast, or reproduce the Property for its own educational, catalog, publicity, promotional and merchandising purposes. Other uses of the Property's image by a Member, commercial or otherwise, may be allowed only with 7 EFTA01202881  HF DRAFT 8/13/14 written permission from the Company. Notwithstanding the foregoing, no provision of this Agreement shall limit the right of either Member to reproduce the Property in connection with archival, insurance-related or other internal matters. To the extent either Member owns or acquires any copyright in the Property, such copyright shall be conveyed by such Member to the Company. Any gross proceeds of licensing photographs, telecasts or reproductions of the Property (less all direct costs and expenses) ("Net Proceeds") shall be remitted to the Company. 3.7 Credit Lines. All credit lines, signage, display labels, narratives, video, and all other media shall include the following credit line: "Anonymous," unless both Members agree that another credit line may be used. Each Member shall submit to the Company for its advance review and approval the proposed text of all credit lines, signage, and display labels, such approval not to be unreasonably delayed or withheld. 3.8 Individual Expenses Relating to the Property. Each Member shall be responsible for the costs and expenses incurred by such Member in connection with the performance of his obligations under this Agreement and the exercise of his privileges under this Agreement (collectively, "Individual Expenses"), including without limitation, the following costs and expenses: (a) all reasonably necessary out-of-pocket costs incurred in connection with the use of the Property while in a Possessing Member's possession, including without limitation, expenses related to the display of the Property (such as installation costs, costs of lighting, etc.) and insurance covering the Property as provided in Section 3.4 (should the Company elect not to insure the Property), (b) the costs and expenses required to deliver the Property to the possession of the Other Member, and (c) if a Member loans the Property to a museum, foundation or other cultural institution as provided in Section 3.2, the costs and expenses for packing and shipping the Property to and from the borrowing institution and insurance covering the Property during the loan period and while in transit, unless the Members otherwise agree. IV. MANAGEMENT OF THE COMPANY 4.1 Management of the Company. The Company shall be managed by the Members, acting unanimously. The Members shall be the sole persons with the power to bind the Company, except and to the extent that such power is expressly delegated to any other person or entity by the Members, and such delegation shall not cause the Members to cease to be the Managers. 4.2 Officers of the Company. The Members may appoint officers of the Company who shall be authorized to perform such actions for and on behalf of the Company as the Members shall determine. The President, Vice President, Secretary and Treasurer of the Company shall be the individuals as may be appointed by the Members from time to time, which individuals shall serve until the earlier of their retirement, removal, death or disability. The Members and/or, to the extent determined by the Members, any officers or other authorized persons appointed by the Members shall each have the power and authority to do any and all acts necessary or convenient to or for the furtherance of the purposes of the Company set forth in this Agreement. 8 EFTA01202882  HF DRAFT 8/13/14 4.3 General Powers of Members. Any and all decisions concerning the business and affairs of the Company shall be made by the Members, acting unanimously. Without limiting the generality of the immediately preceding sentence, the Members shall, acting unanimously, have the power and authority to do all things necessary or convenient to carry out the business and affairs of the Company. V. DUTIES OF MEMBERS. 5.1 No Compensation. Each Member acknowledges and agrees that such Member shall not be entitled to any fee, salary, bonus or other compensation payments in respect of any services performed by such Member on behalf of the Company, it being the intention and agreement among the parties hereto that the Members will receive the distributions provided for in Article IX of this Agreement in full and complete satisfaction of any services performed by any Member on behalf of the Company. 5.2 Confidentiality. Each Member, on behalf of such Member and such Member's affiliates, covenants and agrees that such Member and such Member's affiliates shall retain in strict confidence, and shall not use for any purpose whatsoever, or divulge, disseminate or disclose to any third party (other than in furtherance of the business purposes of the Company or as may be required by law) all proprietary or confidential information relating to the Company's activities, including, without limitation, the ownership, maintenance, sale or other disposition of the Property. The provisions of this Section 5.2 shall survive and continue to bind the Company's Members notwithstanding the termination of this Agreement or any Member's ceasing to be a Member of the Company. VI. MEETINGS AND VOTING OF MEMBERS 6.1 Unanimous Approval of the Members. Notwithstanding any provision contained in this Agreement to the contrary, no act shall be taken, sum expended, decision made, obligation incurred or power exercised by any Member on behalf of the Company except with the unanimous consent of the Members. VII. ACCOUNTING PROVISIONS 7.1 Fiscal and Taxable Year. The fiscal and taxable year of the Company shall be the calendar year, unless the Members designate a different fiscal or taxable year. 7.2 Books and Accounts. (a) Complete and accurate books and accounts shall be kept and maintained for the Company at the Company's principal place of business or at such other place as the Members shall select. Such books and accounts shall be kept for fiscal and tax purposes on the cash or accrual basis, as the Members shall determine, and shall include separate accounts for each Member. A list of the names and addresses of the Members shall be maintained as part of the books and records of the Company. Each Member or such Member's duly authorized 9 EFTA01202883  HF DRAFT 8/13/14 representative, at such Member's own expense and upon delivering advance written notice to the Company, shall at all reasonable times have access to, and may inspect and make copies of, such books and accounts and any other records of the Company. (b) All funds received by the Company shall be deposited in the name of the Company in such bank account or accounts as the Members may designate from time to time, and withdrawals therefrom shall be made upon the signature of the Members or upon such other signature or signatures on behalf of the Company as the Members may designate from time to time. All deposits and other funds not needed in the operation of the Company's business may be deposited in interest-bearing bank accounts, in money market funds, or invested in treasury bills, certificates of deposit, U.S. government security-backed repurchase agreements or similar money market instruments, or funds investing in any of the foregoing or similar types of investments. 7.3 Financial Reports. (a) At the request of a Member, the Company shall provide each Member, on or about April 1 of the following year, with financial statements including a balance sheet and the related statements of income and changes in Company capital and changes in financial position for the prior year. (b) The Company shall endeavor to cause to be prepared and filed, on or before their respective due dates (as the same may be extended), all tax returns of the Company and shall take all action as may be necessary to permit the Company's regular accountants to prepare and timely file such returns. Schedule K-I shall be sent to each Member as soon as practicable after the end of each taxable year. 7.4 Tax Elections. Any elections required or permitted to be made by the Company under the Internal Revenue Code of 1986, as amended (the "Code") shall be made by the Members in such manner as the Members shall determine. In the event of an audit of the Company by the Internal Revenue Service (the "IRS") a Member, appointed by both Members, shall act as the "tax matters partner" pursuant to Section 6231(a)(7) of the Code, and such tax matters partner shall comply with all of its obligations as such under the Code and the regulations promulgated thereunder, provided that any action such tax matters partner undertakes shall be subject to prior consultation with and consent by the other Member. 7.5 Expenses. To the extent practicable, all expenses of the Company shall be billed directly to, and be paid by, the Company. Notwithstanding the immediately preceding sentence, all expenses and disbursements relating to the preparation of this Agreement, including, without limitation, fees and expenses of outside counsel, shall be borne equally between the Members. 10 EFTA01202884  HF DRAFT 8/13/14 VIII. TRANSFERS OF MEMBERSHIP INTERESTS: RIGHTS ON DEATH OF A MEMBER 8.1 General Prohibition on Transfer. (a) Subject to Section 8.5, without the prior consent of each Member, no Member shall sell, convey, transfer, assign, mortgage, pledge, hypothecate, or otherwise encumber in any way, or otherwise dispose of (collectively a "Transfer") all or any portion of their Membership Interest, except to another Member or as otherwise permitted by this Article VIII. (b) Each Member shall hold all or any part of its Membership Interest and the economic interest therein, on the date hereof or hereafter acquired, subject to the provisions of this Article VIII. 8.2 Further Limitations on Transfers of Members' Membership Interests. (a) In no event may a Transfer be made if the Transfer would result in the dissolution of the Company pursuant to the Act. In making the determination whether a Transfer will result in such a dissolution either Member may require the assignee to furnish at such assignee's expense an opinion of counsel passing on this issue. (b) In no event may a Transfer be made to (and no substitute Member shall be admitted to the Company who is) a person who has been adjudged to be insane or incompetent. 8.3 Effect of Non-Permitted Transfers. Any attempted Transfer of the Membership Interests of a Member not permitted by this Article VIII (a "Non-Permitted Transfer") shall be null and void and have no effect whatsoever on the Company or its Members. 8.4 Restrictions on Becoming a Substituted Member. Notwithstanding any other provision of this Agreement to the contrary, an assignee or transferee of a Membership Interest shall not, without the prior unanimous consent of the Members be admitted as a Member or have any rights in the Company other than the right to receive the distributions and allocations relating to the Membership Interest transferred unless such assignee or transferee holds such Membership Interest pursuant to a Transfer permitted by this Article VIII. 8.5 Put/Call Rights on Death of a Member. (a) Survivor's Call Right. In the event of the death of a Member, the Surviving Member shall have the right (the "Survivor's Call Right") to purchase from the estate of the Deceased Member (the "Estate") the Membership Interest of the Deceased Member (the "Interest"), which right may be exercised by the Surviving Member's delivery of a written notice of the exercise of such right to the Executors within five (5) months following such death (the "Call Notice"). 11 EFTA01202885  HF DRAFT 8/13/14 (b) Estate's Put Right. In the event that the Survivor's Call Right is not exercised, the Executors shall have the right to sell the Interest to the Surviving Member (the "Estate's Put Right"), which right may be exercised by the Executors' delivery of a written notice of the exercise of such right to the Surviving Member within thirty (30) days following the expiration of the Survivor's Call Right (the "Put Notice"). (c) Purchase Price. The "Purchase Price" for the Interest to be paid pursuant to Section 8.5(a) or 8.5(b) shall be the fair market value of the Interest as of the Deceased Member's date of death and shall be initially determined by a Qualified Appraisal (the "Appraised Value") in accordance with Section 3.5(b), provided, however, that if the fair market value of the Interest as finally determined for federal estate tax purposes, taking into consideration any election that may be made under Section 2032(a) of the Code if applicable (the "Estate Value"), is greater or less than the Appraised Value, then the Purchase Price shall be the Estate Value. The Purchase Price for the Interest shall be paid (in cash) within ninety (90) days following the determination of the Appraised Value. Within ninety (90) days following the determination of the Estate Value, the Members agree as follows: (i) If the Estate Value is greater than the Appraised Value, the Surviving Member shall deliver to the Executors cash equal to the difference between the Appraised Value and the Estate Value (the "Difference"). (ii) If the Estate Value is less than the Appraised Value, the Executors shall deliver to the Surviving Member cash equal to the Difference. (d) Declination by Surviving Member. Notwithstanding the provisions of Section 8.5(b), if a Put Notice is delivered to the Surviving Member, the Surviving Member may decline to purchase the Interest pursuant to the Estate's Put Right by delivering written notice (the "Declination Notice") to the Executors within ten (10) days following the Surviving Member's receipt of the Put Notice. If the Surviving Member declines to purchase the Interest, then, upon receipt of the Declination Notice: (i) Estate's Call Right. The Estate shall have the right (the "Estate's Call Right") to purchase from the Surviving Member his Membership Interest, which right may be exercised by the Executors' delivery of a written notice of the exercise of such right (the "Estate's Call Notice") to the Surviving Member within ten (10) days of receipt of the Declination Notice. The purchase price for the Surviving Member's Membership Interest shall be the fair market value of such interest as of the date of the Estate's Call Notice (the "Valuation Date") as determined by appraisal in accordance with Section 3.5(c). Such purchase must be completed within fifteen (15) months of the death of the Deceased Member. (ii) Forced Sale of the Property. If the Executors do not exercise the Estate's Call Right, then the Company shall, as soon as practicable, sell the Property to a third party and distribute to the Estate and the Surviving Member their respective pro rata portion of the net sale proceeds in proportion to their respective Percentages of Membership Interest (the 12 EFTA01202886  HF DRAFT 8/13/14 "Forced Sale"). If, thirty (30) days after the expiration of the Estate's Call Right, the Surviving Member and the Executors are unable to agree on terms of sale to a third party, then the Company shall sell the Property to a third party for a cash amount specified by the Executors which shall not be less than the fair market value of the Property as of the date of the expiration of the Estate's Call Right (the "Effective Date") determined by appraisal in accordance with Section 3.5 and such sale shall be made without any extension of credit to the buyer by the Company. IX. DISTRIBUTIONS AND ALLOCATIONS 9.1 Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "Available Net Cash Flow" means all cash receipts of the Company and the fair market value of any property received in connection therewith, from whatever source derived including, without limitation, indebtedness incurred less (x) payment of all of the Company's expenses including, without limitation, debt service, payment of unincorporated business taxes, attorneys', accountants' and other professional fees, brokers' fees, all expenses of the sale of assets, closing costs, appraisal costs, transfer taxes, recording fees, charges and taxes, and all expenses, the payment of which is deferred to be paid out of sale or other disposition of a capital asset (a "Capital Transaction") and (y) an amount of a reasonable reserve determined by the Members in accordance with generally accepted accounting principles, consistently applied for the payment of such amounts. (b) "Treasury Regulations" means the Income Tax Regulations and Procedures and Administration Regulations promulgated under the Code, as amended from time to time. 9.2 Distributions of Available Net Cash Flow. (a) The distributions of Available Net Cash Flow of the Company shall be made to the Members upon the receipt of cash proceeds for the disposition of the Property and otherwise as and when determined by the Members, ratably, in accordance with the Percentage of Membership Interest of each Member. (b) Whenever a distribution of Available Net Cash Flow is made by the Company in accordance with this Section 9.2, the Company shall provide a notice to each Member including in reasonable detail the computation of the aggregate Available Net Cash Flow so distributed. 9.3 Withholding. The Company is authorized to withhold from distributions, or with respect to allocations, to the Members and to pay over to any foreign, federal, state or local government any amounts required to be withheld pursuant to the Code or any provisions of any other foreign, federal, state or local law and shall allocate such amounts to the Members with respect to whom such amounts were withheld. All amounts withheld pursuant to the Code or 13 EFTA01202887  HF DRAFT 8/13/14 any provisions of foreign, state or local tax law with respect to any payment or distribution to the Company or to the Members shall be treated as amounts distributed to the Members pursuant to this Agreement for all purposes under this Agreement. 9.4 Capital Account; Allocations. Etc. (a) A capital account ("Capital Account") shall be created and maintained for each Member with respect to the Member's Membership Interest in a manner consistent with Section 704 of the Code and Treasury Regulations thereunder, in particular Treasury Regulation Sections 1.704-1 and 1.704-2. (b) The Company's items of income, gain, loss, and deduction for each taxable year shall be allocated among the Members in a manner that will, as nearly as possible (proportionately), cause the Capital Account balance of each Member at the end of such taxable year to equal the hypothetical distribution (if any) that such Member would receive if, on the last day of the taxable year, (i) all Company assets, including cash, were sold for cash equal to their book value (as determined and adjusted under Code Section 704(b)), taking into account any adjustments thereto for such taxable year, and (ii) the net proceeds thereto (after satisfaction of liabilities, limited with respect to each nonrecourse liability to the book value of the asset securing such liability) were distributed in full pursuant to Section 9.2. (c) The Company shall have the "qualified income offset" provision described in Treasury Regulation 1.704-1(b)(2)(ii)(d)(3). The Company shall also make special allocations of its items of income, gain, loss and deduction consistent with Treasury Regulations under Section 704 of the Code. (d) The Members, by mutual consent, may make such adjustments to the determination and allocation among the Members of its items of income, gain, loss, deduction and credit, as are necessary or appropriate to comply with requirements of the Code and the Treasury Regulations. 9.5 No Return of Distributions. No Member shall have any obligation to refund to the Company any amount that shall have been properly distributed to such Member pursuant to this Agreement, subject, however, to the rights of any third party creditor under law. 9.6 Allocations between Assignor and Assignee Members. In the case of a Transfer, the assignor and assignee shall each be entitled to receive distributions of Available Net Cash Flow and allocations of the Company's income, gain, loss, deduction and credit as follows: (a) Unless the assignor and assignee agree to the contrary and shall so provide in the instrument effecting the Transfer, distributions shall be made to the person owning the Member's Membership Interest on the date of the distribution; and 14 EFTA01202888  HF DRAFT 8/13/14 (b) The allocation of the Company's income, gain, loss, deduction and credit shall be made based on the "closing of the books" method unless the parties to the Transfer request another method whic