Exhibit 2.2
September 27, 2019
Commonwealth Thoroughbreds llc
Amended and Restated
Limited Liability Company Agreement
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS AGREEMENT OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY, THE MANAGING MEMBER OR THEIR AFFILIATES, OR ANY PROFESSIONAL ASSOCIATED WITH THIS OFFERING, AS LEGAL, TAX OR INVESTMENT ADVICE. EACH INVESTOR SHOULD CONSULT WITH AND RELY ON HIS OR HER OWN ADVISORS AS TO THE LEGAL, TAX AND/OR ECONOMIC IMPLICATIONS OF THE INVESTMENT DESCRIBED IN THIS AGREEMENT AND ITS SUITABILITY FOR SUCH INVESTOR.
AN INVESTMENT IN THE SERIES OF UNITS CARRIES A HIGH DEGREE OF RISK AND IS ONLY SUITABLE FOR INVESTORS WHO CAN AFFORD LOSS OF THEIR ENTIRE INVESTMENT IN THE SERIES OF UNITS.
THE UNITS HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY OTHER STATE. ACCORDINGLY, UNITS MAY NOT BE TRANSFERRED, SOLD, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR A VALID EXEMPTION FROM SUCH REGISTRATION.
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS | 1 | ||
Section 1.1 | Definitions | 1 | |
Section 1.2 | Construction | 7 | |
ARTICLE II - ORGANIZATION | 7 | ||
Section 2.1 | Formation | 7 | |
Section 2.2 | Name | 7 | |
Section 2.3 | Registered Office; Registered Agent; Principal Office; Other Offices | 8 | |
Section 2.4 | Purpose | 8 | |
Section 2.5 | Powers | 8 | |
Section 2.6 | Power of Attorney | 8 | |
Section 2.7 | Term | 9 | |
Section 2.8 | Title to Assets | 9 | |
Section 2.9 | Certificate of Formation | 9 | |
ARTICLE III - MEMBERS, SERIES AND UNITS | 10 | ||
Section 3.1 | Members | 10 | |
Section 3.2 | Capital Contributions | 11 | |
Section 3.3 | Series of the Company | 12 | |
Section 3.4 | Authorization to Issue Units | 14 | |
Section 3.5 | Voting Rights of Units Generally | 14 | |
Section 3.6 | Record Holders | 14 | |
Section 3.7 | Splits | 14 | |
Section 3.8 | Agreements | 15 | |
ARTICLE IV - REGISTRATION AND TRANSFER OF UNITS | 15 | ||
Section 4.1 | Maintenance of a Register | 15 | |
Section 4.2 | Ownership Limitations | 15 | |
Section 4.3 | Transfer of Units and Obligations of the Managing Member | 17 | |
Section 4.4 | Remedies for Breach | 17 | |
ARTICLE V - MANAGEMENT AND OPERATION OF THE COMPANY AND EACH SERIES | 17 | ||
Section 5.1 | Power and Authority of Managing Member | 17 | |
Section 5.2 | Determinations by the Managing Member | 19 | |
Section 5.3 | Delegation | 20 |
Section 5.4 | Advisory Board | 20 | |
Section 5.5 | Exculpation, Indemnification, Advances and Insurance | 21 | |
Section 5.6 | Duties of Officers | 23 | |
Section 5.7 | Standards of Conduct and Modification of Duties of the Managing Member | 23 | |
Section 5.8 | Reliance by Third Parties | 24 | |
Section 5.9 | Certain Conflicts of Interest | 24 | |
ARTICLE VI - FEES AND EXPENSES | 24 | ||
Section 6.1 | Cost to Acquire the Series Asset; Brokerage Fee; Offering Expenses; Acquisition Expenses; Sourcing Fee | 24 | |
Section 6.2 | Operating Expenses; Dissolution Fees | 24 | |
Section 6.3 | Excess Operating Expenses; Further Issuance of Units; Operating Expenses Reimbursement Obligation(s) | 25 | |
Section 6.4 | Allocation of Expenses | 25 | |
Section 6.5 | Overhead of the Managing Member | 25 | |
ARTICLE VII - DISTRIBUTIONS | 25 | ||
Section 7.1 | Application of Cash | 25 | |
Section 7.2 | Application of Amounts upon the Liquidation of a Series | 25 | |
Section 7.3 | Timing of Distributions | 25 | |
Section 7.4 | Distributions in Kind. Distributions in kind of the entire or part of a Series Asset to Members are prohibited | 26 | |
Section 7.5 | Distributions to Members of the Company | 26 | |
ARTICLE VIII | 26 | ||
Section 8.1 | Allocation of Profits of the Company | 26 | |
Section 8.2 | Allocation of Losses of the Company | 26 | |
Section 8.3 | Miscellaneous Allocation Provisions | 27 | |
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS | 27 | ||
Section 9.1 | Records and Accounting | 27 | |
Section 9.2 | Fiscal Year | 28 | |
ARTICLE X - TAX MATTERS | 28 | ||
Section 10.1 | Tax Classification | 28 | |
Section 10.2 | Partnership Audit Rules | 28 | |
Section 10.3 | Capital Accounts | 30 | |
Section 10.4 | Withdrawal and Return of Capital | 30 | |
Section 10.5 | Revaluation of Company Property | 30 | |
Section 10.6 | Limitation on Losses | 30 | |
Section 10.7 | Qualified Income Offset | 30 |
Section 10.8 | Minimum Gain Chargeback | 30 | |
Section 10.9 | Partner Nonrecourse Deductions | 30 | |
Section 10.10 | Curative Allocations | 30 | |
Section 10.11 | Savings Clause | 31 | |
Section 10.12 | No Restoration of Deficit Capital Accounts | 31 | |
Section 10.13 | Contributed Property | 31 | |
Section 10.14 | Division Among Members | 31 | |
ARTICLE XI - REMOVAL OF THE MANAGING MEMBER | 31 | ||
ARTICLE XII - DISSOLUTION, TERMINATION AND LIQUIDATION | 32 | ||
Section 12.1 | Dissolution and Termination | 32 | |
Section 12.2 | Liquidator | 32 | |
Section 12.3 | Liquidation of a Series | 33 | |
Section 12.4 | Cancellation of Certificate of Formation | 33 | |
Section 12.5 | Return of Contributions | 33 | |
Section 12.6 | Waiver of Partition | 34 | |
Section 12.7 | Liquidation of the Company | 34 | |
ARTICLE XIII - AMENDMENT OF AGREEMENT, SERIES DESIGNATION | 34 | ||
Section 13.1 | General | 34 | |
Section 13.2 | Certain Amendment Requirements | 35 | |
Section 13.3 | Amendment Approval Process | 35 | |
ARTICLE XIV - MEMBER MEETINGS | 36 | ||
Section 14.1 | Meetings | 36 | |
Section 14.2 | Quorum | 36 | |
Section 14.3 | Chairman | 36 | |
Section 14.4 | Voting Rights | 36 | |
Section 14.5 | Extraordinary Actions | 36 | |
Section 14.6 | Managing Member Approval | 36 | |
Section 14.7 | Action by Members without a Meeting | 36 | |
Section 14.8 | Managing Member | 36 | |
ARTICLE XV - CONFIDENTIALITY | 36 | ||
Section 15.1 | Confidentiality Obligations | 36 | |
Section 15.2 | Exempted Information | 37 | |
Section 15.3 | Permitted Disclosures | 37 | |
ARTICLE XVI - GENERAL PROVISIONS | 38 | ||
Section 16.1 | Addresses and Notices | 38 |
Section 16.2 | Further Action | 38 | |
Section 16.3 | Binding Effect | 38 | |
Section 16.4 | Integration | 38 | |
Section 16.5 | Creditors | 38 | |
Section 16.6 | Waiver | 39 | |
Section 16.7 | Counterparts | 39 | |
Section 16.8 | Applicable Law and Jurisdiction | 39 | |
Section 16.9 | Invalidity of Provisions | 39 | |
Section 16.10 | Consent of Members | 40 |
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
COMMONWEALTH THOROUGHBREDS LLC
This is the LIMITED LIABILITY COMPANY AGREEMENT OF COMMONWEALTH THOROUGHBREDS LLC (this Agreement) as amended and restated as of September 27, 2019. Capitalized terms used herein without definition shall have the respective meanings ascribed thereto in Section 1.1 below.
The Company was formed as a series limited liability company under Section 18-215 of the Delaware Act pursuant to a certificate of formation filed with the Delaware Secretary of State on June 12, 2019.
ARTICLE I - DEFINITIONS
Section 1.1 Definitions. The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.
Abort Costs means all fees, costs and expenses incurred in connection with any Series Asset proposals pursued by the Company, the Managing Member or a Series that do not proceed to completion.
Acquisition Expenses means in respect of each Series, the following fees, costs and expenses allocable to such Series (or such Series pro rata share of any such fees, costs and expenses allocable to the Company) and incurred in connection with the evaluation, discovery, investigation, development and acquisition of a Series Asset, including brokerage and sales fees and commissions (but excluding the Brokerage Fee), appraisal fees, research fees, transfer taxes, third party industry and due diligence experts, bank fees and interest (if the Series Asset was acquired using debt prior to completion of the Initial Offering), auction house fees, Bloodstock Agent commissions or consulting fees and expenses, transportation costs including those related to the transport of the Series Asset from the acquisition location, travel and lodging for acquisition purposes, technology costs, and any blue sky filings required in order for such Series to be made available to Economic Members in certain states (unless borne by the Managing Member, as determined in its sole discretion) and similar costs and expenses incurred in connection with the evaluation, discovery, investigate on, development and acquisition of a Series Asset.
Additional Economic Member means a Person admitted as an Economic Member and associated with a Series in accordance with ARTICLE III as a result of an issuance of Units of such Series to such Person by the Company.
Advisory Board has the meaning assigned to such term in Section 5.4.
Affiliate means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person in question. As used herein, the term control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
Aggregate Ownership Limit means, in respect of an Initial Offering or a Subsequent Offering, not more than 10% of the aggregate Outstanding Units of a Series, and in respect of a Transfer, not more than 19.9% of the aggregate Outstanding Units of a Series, or in both cases, such other percentage set forth in the applicable Series Designation or as determined by the Managing Member in its sole discretion and as may be waived by the Managing Member in its sole discretion.
Agreement has the meaning assigned to such term in the preamble.
Allocation Policy means the allocation policy of the Company adopted by the Managing Member in accordance with Section 5.1.
Broker means any Person who has been appointed by the Company (and as the Managing Member may select in its reasonable discretion) and specified in any Series Designation to provide execution and other services relating to an Initial Offering to the Company, or its successors from time to time, or any other broker in connection with any Initial Offering.
Bloodstock Agent means the person retained by the Managing Member to advise the Company about the acquisition, sale and management of certain Thoroughbred horses to be raced by the Company for which the Bloodstock Agent may be paid a commission, which customarily ranges from 2.5% to 5% of the purchase/sale price of a Thoroughbred.
Brokerage Fee means the fee payable to the Broker for the purchase by any Person of Units in an Initial Offering equal to an amount agreed between the Managing Member and the Broker from time to time and specified in any Series Designation.
Business Day means any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York are authorized or required to close.
Capital Contribution means with respect to any Member, the amount of cash and the initial Gross Asset Value of any other property contributed or deemed contributed to the capital of a Series by or on behalf of such Member, reduced by the amount of any liability assumed by such Series relating to such property and any liability to which such property is subject.
Certificate of Formation means the Certificate of Formation of the Company filed with the Delaware Secretary of State.
Code or IRC means the Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section or sections of the Code or IRC shall be deemed to include a reference to any corresponding provision of any successor law.
Company means Commonwealth Thoroughbreds LLC, a Delaware series limited liability company, and any successors thereto.
Conflict of Interest means any matter that the Managing Member believes may involve a conflict of interest that is not otherwise addressed by the Allocation Policy.
Delaware Act means the Delaware Limited Liability Company Act, 6 Del. C. Section 18 101, et seq.
DGCL means the General Corporation Law of Delaware, 8 Del. C. Section 101, et seq.
Economic Member means together, the Investor Members, Additional Economic Members (including any Person who receives Units in connection with any goods or services provided to a Series (including in respect of the sale of a Series Asset to that Series)) and their successors and assigns admitted as Additional Economic Members and Substitute Economic Members, in each case who is admitted as a Member of such Series, but shall exclude the Managing Member in its capacity as Managing Member. For the avoidance of doubt, the Managing Member or any of its Affiliates shall be an Economic Member to the extent it purchases Units in a Series.
ERISA means the Employee Retirement Income Security Act of 1974.
Exchange Act means the Securities Exchange Act of 1934.
Expenses and Liabilities has the meaning assigned to such term in Section 5.5(a).
Free Cash Flow means any available cash for distribution generated from the net income received by a Series, as determined by the Managing Member to be in the nature of income as defined by U.S. GAAP, plus (i) any change in the net working capital (as shown on the balance sheet of such Series) (ii) any amortization to the relevant Series Asset (as shown on the income statement of such Series) and (iii) any depreciation to the relevant Series Asset (as shown on the income statement of such Series) and (iv) any other non-cash Operating Expenses less (a) any capital expenditure related to the Series Asset (as shown on the cash flow statement of such Series) (b) any other liabilities or obligations of the Series, in each case to the extent not already paid or provided for and (c) upon the termination and winding up of a Series or the Company, all costs and expenses incidental to such termination and winding as allocated to the relevant Series in accordance with Section 6.4.
Form of Adherence means, in respect of an Initial Offering or Subsequent Offering, a subscription agreement or other agreement substantially in the form appended to the Offering Document pursuant to which an Investor Member or Additional Economic Member agrees to adhere to this Agreement’s terms or, in respect of a Transfer, a form of adherence or instrument of Transfer, each in a form satisfactory to the Managing Member from time to time, pursuant to which a Substitute Economic Member agrees to adhere to this Agreement’s terms.
Governmental Entity means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
Gross Asset Value means, with respect to any asset contributed by an Economic Member to a Series, the gross fair market value of such asset as determined by the Managing Member.
Indemnified Person means (a) any Person who is or was an Officer of the Company or associated with a Series; (b) any Person who is or was a Managing Member or Liquidator, together with its officers, directors, members, shareholders, employees, managers, partners, controlling persons, agents or independent contractors; (c) any Person who is or was serving at the request of the Company as an officer, director, member, manager, partner, fiduciary or trustee of another Person; provided, that, except to the extent otherwise set forth in a written agreement between such Person and the Company or a Series, a Person shall not be an Indemnified Person by reason of providing, on a fee for services basis, trustee, fiduciary, administrative or custodial services; (d) any member of the Advisory Board appointed by the Managing Member pursuant to Section 5.4; and (e) any Person the Managing Member designates as an Indemnified Person for purposes of this Agreement.
Individual Aggregate Limit means, with respect to any individual holder, 10% of the greater of such holder’s annual income or net worth or, with respect to any entity, 10% of the greater of such holder’s annual revenue or net assets at fiscal year-end.
Initial Member means the Person identified in the Series Designation of such Series as the Initial Member associated therewith.
Initial Offering means the first offering or private placement and issuance of any Series, other than the issuance to the Initial Member.
Investment Advisers Act means the Investment Advisers Act of 1940.
Investment Company Act means the Investment Company Act of 1940.
Investor Members mean those Persons who acquire Units in the Initial Offering or Subsequent Offering and their successors and assigns admitted as Additional Economic Members.
Liquidator means one or more Persons selected by the Managing Member to perform the functions described in Section 12.2 as liquidating trustee of the Company or a Series, as applicable, within the meaning of the Delaware Act.
Managing Member means, as the context requires, the managing member of the Company or the managing member of a Series.
Management Fee means the percentage of Free Cash Flows of a Series pursuant to ARTICLE VII payable to the Managing Member as compensation for its services managing Series Assets as set forth in an Asset Management Agreement between the Managing Member and the Company.
Member means each member of the Company associated with a Series, including, unless the context otherwise requires, the Initial Member, the Managing Member, each Economic Member (as the context requires), each Substitute Economic Member and each Additional Economic Member.
National Securities Exchange means an exchange registered with the U.S. Securities and Exchange Commission under Section 6(a) of the Exchange Act.
Net Cash Flow means, for any fiscal year, (A) the sum of (i) all cash receipts of the Company from any sources for such period other than Capital Contributions or loan proceeds, plus (ii) any funds not otherwise expended and released into the general fund by the Managing Member from previously established reserves (referred to in (B)(ii) below) less (B) the sum of (i) all cash expenditures of the Company for such period not funded by Capital Contributions, loan proceeds or paid out of previously established reserves, plus (ii) any increases in reserves as reasonably determined by the Managing Member.
Offering Document means, with respect to any Series or the Units of any Series, the prospectus, offering memorandum, offering circular, offering statement, offering circular supplement, private placement memorandum or other offering documents related to the Initial Offering of such Units, in the form approved by the Managing Member and, to the extent required by applicable law, approved or qualified, as applicable, by any applicable Governmental Entity, including without limitation the U.S. Securities and Exchange Commission.
Offering Expenses means in respect of each Series, the following fees, costs and expenses allocable to such Series or such Series’ pro rata share (as determined by the Allocation Policy, if applicable) of any such fees, costs and expenses allocable to the Company incurred in connection with executing the Offering, consisting of underwriting, legal, accounting, escrow and compliance costs related to a specific offering.
Officer means any president, vice president, secretary, treasurer or other officer of the Company or any Series as the Managing Member may designate (who shall, in each case, constitute a “manager” within the meaning of the Delaware Act).
Operating Expenses means in respect of each Series, the following fees, costs and expenses allocable to such Series or such Series pro rata share (as determined by the Allocation Policy, if applicable) of any such fees, costs and expenses allocable to the Company:
(i) any and all fees, costs and expenses incurred in connection with the management of a Series Asset, including without limitation, Bloodstock Agent commissions, transportation (other than those related to Acquisition Expenses), boarding, training and racing expenses (nomination fees, entry fees, jockey fees, pony fees, etc.), veterinarian fees, farrier charges, feed supplements and medications, physical therapy charges, equipment costs, research and database expenses, income taxes, title fees, periodic registration fees, marketing, security, valuation, perfection of title and utilization of the Series Asset;
(ii) any fees, costs and expenses incurred in connection with preparing any reports and accounts of each Series of Units, including any blue sky filings required in order for a Series of Units to be made available to Investors in certain states and any annual audit of the accounts of such Series of Units (if applicable) and any reports to be filed with the U.S. Securities and Exchange Commission including periodic reports on Forms 1-K, 1-SA and 1-U.
(iii) any and all insurance premiums or expenses, including director and officer liability insurance of the directors and officers of the Managing Member and equine mortality insurance, in connection with the Series Asset;
(iv) any withholding or transfer taxes imposed on the Company or a Series or any of the Members as a result of its or their earnings, investments or withdrawals;
(v) any governmental fees imposed on the capital of the Company or a Series or incurred in connection with compliance with applicable regulatory requirements;
(vi) any legal fees and costs (including settlement costs) arising in connection with any litigation or regulatory investigation instituted against the Company or a Series in connection with the affairs of the Company or a Series;
(vii) the fees and expenses of any administrator, if any, engaged to provide administrative services to the Company or a Series;
(viii) all custodial fees, costs and expenses in connection with the holding of a Series Asset or Units;
(ix) any fees, costs and expenses of a third-party registrar and transfer agent appointed by the Managing Member in connection with a Series;
(x) the cost of the audit of the Company’s annual financial statements and the preparation of its tax returns and circulation of reports to Economic Members;
(xi) the cost of any audit of a Series’ annual financial statements, the fees, costs and expenses incurred in connection with making of any tax filings on behalf of a Series and circulation of reports to Economic Members;
(xii) any indemnification payments to be made pursuant to Section 5.5;
(xiii) the fees and expenses of the Company’s or a Series counsel in connection with advice directly relating to the Company’s or a Series’ legal affairs;
(xiv) the costs of any other outside appraisers, valuation firms, accountants, attorneys or other experts or consultants engaged by the Managing Member in connection with the operations of the Company or a Series; and
(xv) any similar expenses that may be determined to be Operating Expenses, as determined by the Managing Member in its reasonable discretion.
Operating Expenses Reimbursement Obligation(s) has the meaning ascribed in Section 6.3.
Organizational Expenses means legal, accounting and compliance expenses incurred by the Managing Member of the Company to establish the legal and financial framework and compliance infrastructure for the marketing and sale of Units in Initial Offerings.
Organizational Fee means a fee of up to three percent (3%) of the proceeds received from each Initial Offering payable by the applicable Series to reimburse the Managing Member of the Company for Organizational Expenses until such time as the Managing Member has been reimbursed in full for all accrued Organizational Expenses.
Original LLC Agreement has the meaning set forth in this Agreement’s recitals.
Outstanding means all Units that are issued by the Company and reflected as outstanding on the Company’s books and records as of the date of determination.
Person means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity.
Preference Designation has the meaning ascribed in Section 3.3(f).
Profits and Losses means, for each fiscal year (or other period for which Profits and Losses must be computed), the Company's taxable income or tax loss determined in accordance with IRC § 703(a), with the following adjustments:
(i) all items of income, gain, loss, deduction, or credit required to be stated separately pursuant to IRC § 703(a)(1) shall be included in computing Profits or Losses;
(ii) any tax-exempt income of the Company, not otherwise taken into account in computing Profits and Losses, shall be included in computing Profits or Losses;
(iii) any expenditures of the Company described in IRC § 705(a)(2)(B) (or treated as such pursuant to Treas. Reg. §1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profits or Losses, shall be subtracted from Profits or Losses;
(iv) gain or loss resulting from any taxable disposition of Company property shall be computed by reference to the adjusted book value of the property disposed of, notwithstanding the fact that the adjusted book value differs from the adjusted basis of the property for federal income tax purposes;
(v) in lieu of the depreciation, amortization, or cost recovery deductions allowable in computing Profits or Losses, there shall be taken into account the depreciation computed based upon the adjusted book value of the asset; and
(vi) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to the Regulatory Allocations shall not be taken into account in computing Profits or Losses.
Record Date means the date established by the Managing Member for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Members associated with any Series or entitled to exercise rights in respect of any lawful action of Members associated with any Series or (b) the identity of Record Holders entitled to receive any report or distribution or to participate in any offer.
Record Holder or holder means the Person in whose name such Units are registered on the books of the Company as of the opening of business on a particular Business Day, as determined by the Managing Member in accordance with this Agreement.
Securities Act means the Securities Act of 1933.
Series has the meaning assigned to such term in Section 3.3(a).
Series Assets means, at any particular time, all assets, properties (whether tangible or intangible, and whether real, personal or mixed) and rights of any type contributed to or acquired by a particular Series and owned or held by or for the account of such Series, whether owned or held by or for the account of such Series as of the date of the designation or establishment thereof or thereafter contributed to or acquired by such Series.
Series Designation has the meaning assigned to such term in Section 3.3(a).
Sourcing Fee means the sourcing fee which is paid to the Managing Member as consideration for conducting due diligence and assisting in the sourcing of each Series Asset and as specified in each Series Designation, to the extent not waived by the Managing Member in its sole discretion. The Sourcing Fee may be in the form of fees and/or Series Membership Units for which the Managing Member may receive Distributions, which shall be set forth in the Series Designation.
Subsequent Offering means any further issuance of Units in any Series, excluding any Initial Offering or Transfer.
Substitute Economic Member means a Person who is admitted as an Economic Member of the Company and associated with a Series pursuant to Section 4.1(b) as a result of a Transfer of Units to such Person.
Super Majority Vote means, the affirmative vote of the holders of Outstanding Units of all Series representing at least two thirds of the total votes that may be cast by all such Outstanding Units, voting together as a single class.
Transfer means, with respect to a Unit, a transaction by which the Record Holder of a Unit assigns such Unit to another Person who is or becomes a Member, and includes a sale, assignment, gift, exchange or any other disposition by law or otherwise, including any transfer upon foreclosure of any pledge, encumbrance, hypothecation or mortgage.
Unit means a unit of membership interest in a Series issued by the Company that evidences a Member’s rights, powers and duties with respect to the Company and such Series pursuant to this Agreement and the Delaware Act.
U.S. GAAP means United States generally accepted accounting principles consistently applied, as in effect from time to time.
Section 1.2 Construction. Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to paragraphs, Articles and Sections refer to paragraphs, Articles and Sections of this Agreement; (c) the term include or includes means includes, without limitation, and including means including, without limitation, (d) the words herein, hereof and hereunder and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision, (e) or has the inclusive meaning represented by the phrase and/or, (f) unless the context otherwise requires, references to agreements and other documents shall be deemed to include all subsequent amendments and other modifications thereto, (g) references to any Person shall include all predecessors of such Person, as well as all permitted successors, assigns, executors, heirs, legal representatives and administrators of such Person, and (h) any reference to any statute or regulation includes any implementing legislation and any rules made under that legislation, statute or statutory provision, whenever before, on, or after the date of the Agreement, as well as any amendments, restatements or modifications thereof, as well as all statutory and regulatory provisions consolidating or replacing the statute or regulation. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.
ARTICLE II - ORGANIZATION
Section 2.1 Formation. The Company has been formed as a series limited liability company pursuant to Section 18-215 of the Delaware Act. Except as expressly provided to the contrary in this Agreement, the rights, duties, liabilities and obligations of the Members and the administration, dissolution and termination of the Company and each Series shall be governed by the Delaware Act.
Section 2.2 Name. The Company’s name shall be Commonwealth Thoroughbreds LLC. The business of the Company and any Series may be conducted under any other name or names, as determined by the Managing Member. The Managing Member may change the Company’s name at any time and from time to time and shall notify the Economic Members of such change in the next regular communication to the Economic Members.
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices. Unless and until changed by the Managing Member in its sole discretion, the Company’s registered office in Delaware shall be located at 160 Greentree Drive, Suite 101, Dover, Delaware 19904, and the registered agent for service of process on the Company and each Series in Delaware at such registered office shall be National Registered Agents, Inc. The Company’s principal office shall be located at 1450 North Broadway, Lexington, Kentucky 40505. Unless otherwise provided in the applicable Series Designation, the principal office of each Series shall be located at 1450 North Broadway, Lexington, Kentucky 40505 or such other place as the Managing Member may from time to time designate by notice to the Economic Members associated with the applicable Series. The Company and each Series may maintain offices at such other place or places within or outside of Delaware as the Managing Member determines to be necessary or appropriate. The Managing Member may change registered office, registered agent or principal office of the Company or of any Series at any time and from time to time and shall notify the applicable Economic Members of such change in the next regular communication to such Economic Members.
Section 2.4 Purpose. The purpose of the Company and, unless otherwise provided in the applicable Series Designation, each Series shall be to (a) promote, conduct or engage in, directly or indirectly, any business, purpose or activity that lawfully may be conducted by a series limited liability company organized pursuant to the Delaware Act; (b) acquire interests in, raise, train, race, breed and sell Thoroughbreds and conduct other equine-related activities; (c) exercise all of the rights and powers conferred upon the Company and each Series with respect to its interests therein, and (d) conduct any and all activities related or incidental to the foregoing purposes.
Section 2.5 Powers. The Company, each Series and, subject to this Agreement’s terms, the Managing Member shall be empowered to do any and all acts and things necessary or appropriate for the furtherance and accomplishment of the purposes described in Section 2.4.
Section 2.6 Power of Attorney.
(a) Each Economic Member hereby constitutes and appoints the Managing Member and, if a Liquidator shall have been selected pursuant to Section 12.2, the Liquidator, and each of their authorized officers and attorneys in fact, as the case may be, with full power of substitution, as his or her true and lawful agent and attorney in fact, with full power and authority in his or her name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices: (A) all certificates, documents and other instruments (including this Agreement and the Certificate of Formation and all amendments or restatements hereof or thereof) that the Managing Member, or the Liquidator, determines to be necessary or appropriate to form, qualify or continue the existence or qualification of the Company as a series limited liability company in Delaware and in all other jurisdictions in which the Company or any Series may conduct business or own property; (B) all certificates, documents and other instruments that the Managing Member, or the Liquidator, determines to be necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments that the Managing Member or the Liquidator determines to be necessary or appropriate to reflect the dissolution, liquidation or termination of the Company or a Series pursuant to this Agreement’s terms; (D) all certificates, documents and other instruments relating to the admission, withdrawal or substitution of any Economic Member pursuant to, or in connection with other events described in, ARTICLE III or ARTICLE XI; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any Series of Unit issued pursuant to Section 3.3; (F) all certificates, documents and other instruments that the Managing Member or Liquidator determines to be necessary or appropriate to maintain the separate rights, assets, obligations and liabilities of each Series; and (G) all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger, consolidation or conversion of the Company; and
(ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments that the Managing Member or the Liquidator determines to be necessary or appropriate to (A) make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by any of the Members hereunder or is consistent with this Agreement’s terms or (B) effectuate the terms or intent of this Agreement; provided, that when any provision of this Agreement that establishes a percentage of the Members or of the Members of any Series required to take any action, the Managing Member, or the Liquidator, may exercise the power of attorney made in this paragraph only after the necessary vote, consent, approval, agreement or other action of the Members or of the Members of such Series, as applicable.
Nothing contained in this Section shall be construed as authorizing the Managing Member, or the Liquidator, to amend, change or modify this Agreement except in accordance with ARTICLE XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Economic Member and the transfer of all or any portion of such Economic Member’s Units and shall extend to such Economic Member’s heirs, successors, assigns and personal representatives. Each such Economic Member hereby agrees to be bound by any representation made by any officer of the Managing Member, or the Liquidator, acting in good faith pursuant to such power of attorney; and each such Economic Member, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the Managing Member, or the Liquidator, taken in good faith under such power of attorney in accordance with this Section. Each Economic Member shall execute and deliver to the Managing Member, or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as any of such Officers or the Liquidator determines to be necessary or appropriate to effectuate this Agreement and the purposes of the Company.
Section 2.7 Term. The term of the Company commenced on the day when the Certificate of Formation was filed with the Delaware Secretary of State pursuant to the provisions of the Delaware Act. The existence of each Series shall commence upon the effective date of the Series Designation establishing such Series, as provided in Section 3.3. The term of the Company and each Series shall be perpetual, unless and until it is dissolved or terminated in accordance with the provisions of ARTICLE XII. The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate of Formation as provided in the Delaware Act.
Section 2.8 Title to Assets. All Units shall constitute personal property of the owner thereof for all purposes and a Member has no interest in specific assets of the Company or applicable Series Assets. Title to any Series Assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Series to which such asset was contributed or by which such asset was acquired, and none of the Company, any Member, Officer or other Series, individually or collectively, shall have any ownership interest in such Series Assets or any portion thereof. Title to any or all of the Series Assets may be held in the name of the relevant Series or one or more nominees, as the Managing Member may determine. All Series Assets shall be recorded by the Managing Member as the property of the applicable Series in the books and records maintained for such Series, irrespective of the name in which record title to such Series Assets is held.
Section 2.9 Certificate of Formation. The Certificate of Formation has been filed with the Delaware Secretary of State, such filing being hereby confirmed, ratified and approved in all respects. The Managing Member shall use reasonable efforts to cause to be filed such other certificates or documents that it determines to be necessary or appropriate for the formation, continuation, qualification and operation of a series limited liability company in Delaware or any other state in which the Company or any Series may elect to do business or own property. To the extent that the Managing Member determines such action to be necessary or appropriate, the Managing Member shall, or shall direct the appropriate Officers, to file amendments to and restatements of the Certificate of Formation and do all things to maintain the Company as a series limited liability company under Delaware law or of any other state in which the Company or any Series may elect to do business or own property, and if an Officer is so directed, such Officer shall be an authorized person of the Company and, unless otherwise provided in a Series Designation, each Series within the meaning of the Delaware Act for purposes of filing any such certificate with the Delaware Secretary of State. The Company shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Formation, any qualification document or any amendment thereto to any Member.
ARTICLE III - MEMBERS, SERIES AND UNITS
Section 3.1 Members.
(a) Subject to paragraph (b), a Person shall be admitted as an Economic Member and Record Holder either as a result of an Initial Offering, Subsequent Offering, a Transfer or at such other time as determined by the Managing Member, and upon (i) agreeing to be bound by this Agreement’s terms by completing, signing and delivering to the Managing Member, a completed Form of Adherence, which is then accepted by the Managing Member, (ii) the prior written consent of the Managing Member, and (iii) otherwise complying with the applicable provisions of ARTICLE III and ARTICLE IV.
(b) The Managing Member may withhold its consent to the admission of any Person as an Economic Member for any reason, including when it determines in its reasonable discretion that such admission could: (i) result in there being 2,000 or more beneficial owners (as such term is used under the Exchange Act) or 500 or more beneficial owners that are not accredited investors (as defined under the Securities Act) of any Series of Units, as specified in Section 12(g)(1)(A)(ii) of the Exchange Act, (ii) cause such Person’s holding to be in excess of the Aggregate Ownership Limit, (iii) cause the Person’s investment in all Units (of all Series in the aggregate) to exceed the Individual Aggregate Limit, (iv) could adversely affect the Company or a Series or subject the Company, a Series, the Managing Member or any of their respective Affiliates to any additional regulatory or governmental requirements or cause the Company to be disqualified as a limited liability company, or subject the Company, any Series, the Managing Member or any of their respective Affiliates to any tax to which it would not otherwise be subject, (v) cause the Company to be required to register as an investment company under the Investment Company Act, (vi) cause the Managing Member or any of its Affiliates being required to register under the Investment Advisers Act, (vii) cause the assets of the Company or any Series to be treated as plan assets as defined in Section 3(42) of ERISA, or (viii) result in a loss of (a) partnership status by the Company for US federal income tax purposes or the termination of the Company for US federal income tax purposes or (b) corporation taxable as an association status for US federal income tax purposes of any Series or termination of any Series for US federal income tax purposes. A Person may become a Record Holder without the consent or approval of any of the Economic Members. A Person may not become a Member without acquiring a Unit.
(c) The name and mailing address of each Member shall be listed on the books and records of the Company and each Series maintained for such purpose by the Company and each Series. The Managing Member shall update the books and records of the Company and each Series from time to time as necessary to reflect accurately the information therein.
(d) Except as otherwise provided in the Delaware Act and subject to Sections 3.1(e) and 3.3 relating to each Series, 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 the Members shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member.
(e) Except as otherwise provided in the Delaware Act, the debts, obligations and liabilities of a Series, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of such Series, and not of any other Series. In addition, the Members shall not be obligated personally for any such debt, obligation or liability of any Series solely by reason of being a Member.
(f) Unless otherwise provided herein, and subject to ARTICLE XII, Members may not be expelled from or removed as Members of the Company. Members shall not have any right to resign or redeem their Units from the Company; provided that when a transferee of a Member’s Units becomes a Record Holder of such Units, such transferring Member shall cease to be a Member of the Company with respect to the Units so transferred and that Members of a Series shall cease to be Members of such Series when such Series is finally liquidated in accordance with Section 12.3.
(g) Except as may be otherwise agreed between the Company or a Series, on the one hand, and a Member, on the other hand, any Member shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Company or a Series, including business interests and activities in direct competition with the Company or any Series. None of the Company, any Series or any of the other Members shall have any rights by virtue of this Agreement in any such business interests or activities of any Member.
(h) Commonwealth Markets Inc. was appointed as the Company’s Managing Member with effect from the date of the formation of the Company on June 12, 2019 and shall continue as Managing Member of the Company until the earlier of (i) the dissolution of the Company pursuant to Section 12.1(a), or (ii) its removal or replacement pursuant to Section 4.3 or ARTICLE XI. Except as otherwise set forth in the Series Designation, the Managing Member of each Series shall be Commonwealth Markets Inc. until the earlier of (i) the dissolution of the Series pursuant to Section 12.1(b) or (ii) its removal or replacement pursuant to Section 4.3 or ARTICLE XI. Unless otherwise set forth in the applicable Series Designation, the Managing Member or its Affiliates shall, as at the closing of any Initial Offering, hold at least 2.00% of the Units of the Series being issued pursuant to such Initial Offering. Unless provided otherwise in this Agreement, the Units held by the Managing Member or any of its Affiliates shall be identical to those of an Economic Member and will not have any additional distribution, redemption, conversion or liquidation rights by virtue of its status as the Managing Member; provided, that the Managing Member shall have the rights, duties and obligations of the Managing Member hereunder, regardless of whether the Managing Member shall hold any Units.
Section 3.2 Capital Contributions.
(a) The minimum number of Units a Member may acquire is one (1) Unit or such higher or lesser amount as the Managing Member may determine from time to time and as specified in each Series Designation, as applicable. Persons acquiring Units through an Initial Offering or Subsequent Offering shall make a Capital Contribution to the Company in an amount equal to the per share price determined in connection with such Initial Offering or Subsequent Offering and multiplied by the number of Units acquired by such Person in such Initial Offering or Subsequent Offering, as applicable. Persons acquiring Units in a manner other than through an Initial Offering or Subsequent Offering or pursuant to a Transfer shall make such Capital Contribution as shall be determined by the Managing Member in its sole discretion.
(b) Except as expressly permitted by the Managing Member, in its sole discretion (i) initial and any additional Capital Contributions to the Company or Series as applicable, by any Member shall be payable in cash and (ii) initial and any additional Capital Contributions shall be payable in one installment and shall be paid prior to the date of the proposed acceptance by the Managing Member of a Person’s admission as a Member to a Series (or a Member’s application to acquire additional Units) (or within five business days thereafter with the Managing Member’s approval). No Member shall be required to make an additional capital contribution to the Company or Series but may make an additional Capital Contribution to acquire additional Units at such Member’s sole discretion.
(c) Except to the extent expressly provided in this Agreement (including any Series Designation): (i) no Member shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon dissolution or termination of the Company or any Series may be considered as such by law and then only to the extent provided for in this Agreement; (ii) no Member holding any Series of any Units of a Series shall have priority over any other Member holding the same Series either as to the return of Capital Contributions or as to distributions; (iii) no interest shall be paid by the Company or any Series on any Capital Contributions; and (iv) no Economic Member, in its capacity as such, shall participate in the operation or management of the business of the Company or any Series, transact any business in the Company’s or any Series’ name or have the power to sign documents for or otherwise bind the Company or any Series by reason of being a Member.
Section 3.3 Series of the Company.
(a) Establishment of Series. Subject to this Agreement’s provisions, the Managing Member may, at any time and from time to time and in compliance with paragraph (c), cause the Company to establish in writing (each, a Series Designation) one or more series as such term is used under Section 18-215 of the Delaware Act (each a Series). The Series Designation shall relate solely to the Series established thereby and shall not be construed: (i) to affect the terms and conditions of any other Series, or (ii) to designate, fix or determine the rights, powers, authority, privileges, preferences, duties, responsibilities, liabilities and obligations in respect of Units associated with any other Series, or the Members associated therewith. The terms and conditions for each Series established pursuant to this Section shall be as set forth in this Agreement and the Series Designation, as applicable, for the Series. Upon approval of any Series Designation by the Managing Member, such Series Designation shall be attached to this Agreement as an Exhibit until such time as none of such Units of such Series remain Outstanding.
(b) Series Operation. Each of the Series shall operate to the extent practicable as if it were a separate limited liability company.
(c) Series Designation. The Series Designation establishing a Series may: (i) specify a name or names under which the business and affairs of such Series may be conducted; (ii) designate, fix and determine the relative rights, powers, authority, privileges, preferences, duties, responsibilities, liabilities and obligations in respect of Units of such Series and the Members associated therewith (to the extent such terms differ from those set forth in this Agreement) and (iii) designate or authorize the designation of specific Officers to be associated with such Series. A Series Designation (or any resolution of the Managing Member amending any Series Designation) shall be effective when a duly executed original of the same is included by the Managing Member among the permanent records of the Company, and shall be annexed to, and constitute part of, this Agreement (it being understood and agreed that, upon such effective date, the Series described in such Series Designation shall be deemed to have been established and the Units of such Series shall be deemed to have been authorized in accordance with the provisions thereof). The Series Designation establishing a Series may set forth specific provisions governing the rights of such Series against a Member associated with such Series who fails to comply with the applicable provisions of this Agreement (including, for the avoidance of doubt, the applicable provisions of such Series Designation). If there is a conflict between the terms and conditions of this Agreement and a Series Designation, the terms and conditions of the Series Designation shall prevail.
(d) Assets and Liabilities Associated with a Series.
(i) Assets Associated with a Series. All consideration received by the Company for the issuance or sale of Units of a particular Series, together with all assets in which such consideration is invested or reinvested, and all income, earnings, profits and proceeds thereof, from whatever source derived, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds, in whatever form the same may be (assets), shall, subject to this Agreement’s provisions, be held for the benefit of the Series or the Members associated with such Series, and not for the benefit of the Members associated with any other Series, for all purposes, and shall be accounted for and recorded upon the books and records of the Series separately from any assets associated with any other Series. Such assets are herein referred to as assets associated with that Series. If there are any assets in relation to the Company that, in the Managing Member’s reasonable judgment, are not readily associated with a particular Series, the Managing Member shall allocate such assets to, between or among any one or more of the Series, in such manner and on such basis as the Managing Member deems fair and equitable, and in accordance with the Allocation Policy, and any asset so allocated to a particular Series shall thereupon be deemed to be an asset associated with that Series. Each allocation by the Managing Member pursuant to the provisions of this paragraph shall be conclusive and binding upon the Members associated with each and every Series. Separate and distinct records shall be maintained for each and every Series, and the Managing Member shall not commingle the assets of one Series with the assets of any other Series.
(ii) Liabilities Associated with a Series. All debts, liabilities, expenses, costs, charges, obligations and reserves incurred by, contracted for or otherwise existing (liabilities) with respect to a particular Series shall be charged against the assets associated with that Series. Such liabilities are herein referred to as liabilities associated with that Series. If there are any liabilities in relation to the Company that, in the Managing Member’s reasonable judgment, are not readily associated with a particular Series, the Managing Member shall allocate and charge (including indemnification obligations) such liabilities to, between or among any one or more of the Series, in such manner and on such basis as the Managing Member deems fair and equitable and in accordance with the Allocation Policy, and any liability so allocated and charged to a particular Series shall thereupon be deemed to be a liability associated with that Series. Each allocation by the Managing Member pursuant to the provisions of this Section shall be conclusive and binding upon the Members associated with each and every Series. All liabilities associated with a Series shall be enforceable against the assets associated with that Series only, and not against the assets associated with the Company or any other Series, and except to the extent set forth above, no liabilities shall be enforceable against the assets associated with any Series prior to the allocation and charging of such liabilities as provided above. Any allocation of liabilities that are not readily associated with a particular Series to, between or among one or more of the Series shall not represent a commingling of such Series to pool capital for the purpose of carrying on a trade or business or making common investments and sharing in profits and losses therefrom. The Managing Member has caused notice of this limitation on inter-series liabilities to be set forth in the Certificate of Formation, and, accordingly, the statutory provisions of Section 18-215(b) of the Delaware Act relating to limitations on inter-series liabilities (and the statutory effect under Section 18-207 of the Delaware Act of setting forth such notice in the Certificate of Formation) shall apply to the Company and each Series. Notwithstanding any other provision of this Agreement, no distribution on or in respect of Units in a particular Series, including, for the avoidance of doubt, any distribution made in connection with the winding up of such Series, shall be effected by the Company other than from the assets associated with that Series, nor shall any Member or former Member associated with a Series otherwise have any right or claim against the assets associated with any other Series (except to the extent that such Member or former Member has such a right or claim hereunder as a Member or former Member associated with such other Series or in a capacity other than as a Member or former Member).
(e) Ownership of Series Assets. Title to and beneficial interest in Series Assets shall be deemed to be held and owned by the relevant Series and no Member or Members of such Series, individually or collectively, shall have any title to or beneficial interest in specific Series Assets or any portion thereof. Each Member of a Series irrevocably waives any right that it may have to maintain an action for partition with respect to its interest in the Company, any Series or any Series Assets. Any Series Assets may be held or registered in the name of the relevant Series, in the name of a nominee or as the Managing Member may determine; provided, however, that Series Assets shall be recorded as the assets of the relevant Series on the Company’s books and records, irrespective of the name in which legal title to such Series Assets is held. Any corporation, brokerage firm or transfer agent called upon to transfer any Series Assets to or from the name of any Series shall be entitled to rely upon instructions or assignments signed or purporting to be signed by the Managing Member or its agents without inquiry as to the authority of the person signing or purporting to sign such instruction or assignment or as to the validity of any transfer to or from the name of such Series.
(f) Prohibition on Issuance of Preference Units. No Units shall entitle any Member to any preemptive, preferential or similar rights unless such preemptive, preferential or similar rights are set forth in the applicable Series Designation on or prior to the date of the Initial Offering of any Units of such Series (the designation of such preemptive, preferential or similar rights with respect to a Series in the Series Designation, the Preference Designation).
Section 3.4 Authorization to Issue Units.
(a) The Company may issue Units, and options, rights and warrants relating to Units, for any Company or Series purpose at any time and from time to time to such Persons for such consideration (which may be cash, property, services or any other lawful consideration) or for no consideration and on such terms and conditions as the Managing Member shall determine, all without the approval of the Economic Members. Each Unit shall have the rights and be governed by the provisions set forth in this Agreement (including any Series Designation).
(b) Subject to Section 6.3(a)(i), and unless otherwise provided in the applicable Series Designation, the Company is authorized to issue in respect of each Series an unlimited number of Units. All Units issued pursuant to, and in accordance with the requirements of, this ARTICLE III shall be validly issued Units in the Company, except to the extent otherwise provided in the Delaware Act or this Agreement (including any Series Designation).
Section 3.5 Voting Rights of Units Generally. Unless otherwise provided in this Agreement or any Series Designation, (i) each Record Holder of Units shall be entitled to one vote per Unit for all matters submitted for the consent or approval of Members generally, (ii) all Record Holders of Units (regardless of Series) shall vote together as a single class on all matters as to which all Record Holders of Units are entitled to vote, (iii) Record Holders of a particular Series of Units shall be entitled to one vote per Unit for all matters submitted for the consent or approval of the Members of such Series and (iv) the Managing Member or any of its Affiliates shall not be entitled to vote in connection with any Units they hold pursuant to Section 3.1(h) and no such Units shall be deemed Outstanding for purposes of any such vote.
Section 3.6 Record Holders. The Company shall be entitled to recognize the Record Holder as the owner of a Unit and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Unit on the part of any other Person, regardless of whether the Company shall have actual or other notice thereof, except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange or over-the-counter market on which such Units are listed for trading (if ever). Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring or holding Units, as between the Company on the one hand, and such other Persons on the other, such representative Person shall be the Record Holder of such Units.
Section 3.7 Splits.
(a) Subject to paragraph (c) of this Section and Section 3.4, and unless otherwise provided in any Preference Designation, the Company may make a pro rata distribution of Units of a Series to all Record Holders of such Series, or may effect a subdivision or combination of Units of any Series, in each case, on an equal per Unit basis and so long as, after any such event, any amounts calculated on a per Unit basis or stated as a number of Units are proportionately adjusted.
(b) Whenever such a distribution, subdivision or combination of Units is declared, the Managing Member shall select a date as of which the distribution, subdivision or combination shall be effective. The Managing Member shall send notice thereof at least 20 days prior to the date of such distribution, subdivision or combination to each Record Holder as of a date not less than 10 days prior to the date of such distribution, subdivision or combination. The Managing Member also may cause a firm of independent public accountants selected by it to calculate the number of Units to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The Managing Member shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.
(c) Subject to Section 3.4 and unless otherwise provided in any Series Designation, the Company shall not issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would otherwise result in the issuance of fractional Units, each fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next higher Unit).
Section 3.8 Agreements. The rights of all Members and the terms of all Units are subject to this Agreement’s provisions (including any Series Designation).
ARTICLE IV - REGISTRATION AND TRANSFER OF UNITS.
Section 4.1 Maintenance of a Register. Subject to the restrictions on Transfer and ownership limitations contained below:
(a) The Company shall keep or cause to be kept on behalf of the Company and each Series a register that will set forth the Record Holders of each of the Units and information regarding the Transfer of each of the Units. The Managing Member is hereby initially appointed as registrar and transfer agent of the Units, provided that the Managing Member may appoint such third party registrar and transfer agent as it determines appropriate in its sole discretion, for the purpose of registering Units and Transfers of such Units as herein provided, including as set forth in any Series Designation.
(b) Upon acceptance by the Managing Member of the Transfer of any Unit, each transferee of a Unit (i) shall be admitted to the Company as a Substitute Economic Member with respect to the Units so transferred to such transferee when any such transfer or admission is reflected in the books and records of the Company, (ii) shall be deemed to agree to be bound by this Agreement’s terms by completing a Form of Adherence to the reasonable satisfaction of the Managing Member in accordance with Section 4.2(g)(ii), (iii) shall become the Record Holder of the Units so transferred, (iv) grants powers of attorney to the Managing Member and any Liquidator of the Company and each of their authorized officers and attorneys in fact, as the case may be, as specified herein, and (v) makes the consents and waivers contained in this Agreement. The Transfer of any Units and the admission of any new Economic Member shall not constitute an amendment to this Agreement, and no amendment to this Agreement shall be required for the admission of new Economic Members.
(c) Nothing contained in this Agreement shall preclude the settlement of any transactions involving Units entered into through the facilities of any National Securities Exchange or over-the-counter market on which such Units are listed for trading, if any.
Section 4.2 Ownership Limitations.
(a) Any other provision of this Section 4.2 to the contrary notwithstanding, no person who is ineligible to be licensed as an owner of race horses in any North American jurisdiction shall own, directly or indirectly, any Unit or be assigned the economic benefits of ownership of any Unit unless this restriction is expressly waived by the Managing Member.
(b) No Transfer of any Economic Member’s Unit, whether voluntary or involuntary, shall be valid or effective, and no transferee shall become a substituted Economic Member, unless the written consent of the Managing Member has been obtained, which consent may be withheld in its sole and absolute discretion as further described in this Section 4.2. In the event of any Transfer, all of the conditions of the remainder of this Section must also be satisfied. Notwithstanding the foregoing but subject to Sections 3.6 and 4.2(a), assignment of the economic benefits of ownership of Units may be made without the Managing Member’s consent, provided that the assignee is not an ineligible or unsuitable investor under applicable law.
(c) No Transfer of any Economic Member’s Units, whether voluntary or involuntary, shall be valid or effective unless the Managing Member determines, after consultation with legal counsel acting for the Company, that such Transfer will not, unless waived by the Managing Member:
(i) result in the transferee directly or indirectly owning in excess of the Aggregate Ownership Limit;
(ii) result in there being 2,000 or more beneficial owners (as such term is used under the Exchange Act) or 500 or more beneficial owners that are not accredited investors (as defined under the Securities Act) of any Series of Units, as specified in Section 12(g)(1)(A)(ii) of the Exchange Act, unless such Units have been registered under the Exchange Act or the Company is otherwise an Exchange Act reporting company;
(iii) cause all or any portion of the assets of the Company or any Series to constitute plan assets for purposes of ERISA;
(iv) adversely affect the Company or such Series, or subject the Company, the Series, the Managing Member or any of their respective Affiliates to any additional regulatory or governmental requirements or cause the Company to be disqualified as a limited liability company or subject the Company, any Series, the Managing Member or any of their respective Affiliates to any tax to which it would not otherwise be subject;
(v) require registration of the Company, any Series or any Units under any securities laws of the United States of America, any state thereof or any other jurisdiction; or
(vi) violate or be inconsistent with any representation or warranty made by the transferring Economic Member.
(d) The transferring Economic Member, or such Economic Member’s legal representative, shall give the Managing Member prior written notice before making any voluntary Transfer and notice within thirty (30) days after any involuntary Transfer (unless such notice period is otherwise waived by the Managing Member), and shall provide sufficient information to allow legal counsel acting for the Company to make the determination that the proposed Transfer will not result in any of the consequences referred to in paragraphs (c)(i) through (c)(vi) above. If a Transfer occurs by reason of the death of an Economic Member or assignee, the notice may be given by the duly authorized representative of the estate of the Economic Member or assignee. The notice must be supported by proof of legal authority and valid assignment in form and substance acceptable to the Managing Member.
(e) If any Transfer permitted by this Section shall result in beneficial ownership by multiple Persons of any Economic Member’s interest in the Company, the Managing Member may require one or more trustees or nominees to be designated to represent a portion of or the entire interest transferred for the purpose of receiving all notices which may be given and all payments which may be made under this Agreement, and for the purpose of exercising the rights which the transferor as an Economic Member had pursuant to this Agreement’s provisions.
(f) A transferee shall be entitled to any future distributions attributable to the Units transferred to such transferee and to transfer such Units in accordance with this Agreement’s terms; provided, however, that such transferee shall not be entitled to the other rights of an Economic Member as a result of such Transfer until he or she becomes a Substitute Economic Member.
(g) The Company and each Series shall incur no liability for distributions made in good faith to the transferring Economic Member until a written instrument of Transfer has been received by the Company and recorded on its books and the effective date of Transfer has passed.
(h) Any other provision of this Agreement to the contrary notwithstanding, any Substitute Economic Member shall be bound by the provisions hereof. Prior to recognizing any Transfer in accordance with this Section, the Managing Member may require, in its sole discretion:
(i) the transferring Economic Member and each transferee to execute one or more deeds or other instruments of Transfer in a form satisfactory to the Managing Member;
(ii) each transferee to acknowledge its assumption (in whole or, if the Transfer is in respect of part only, in the proportionate part) of the obligations of the transferring Economic Member by executing a Form of Adherence (or any other equivalent instrument as determined by the Managing Member);
(iii) each transferee to provide all the information required by the Managing Member to satisfy itself as to anti-money laundering, counter-terrorist financing and sanctions compliance matters; and
(iv) payment by the transferring Economic Member, in full, of the costs and expenses referred to in paragraph (i) below,
and no Transfer shall be completed or recorded in the books of the Company, and no proposed Substitute Economic Member shall be admitted to the Company as an Economic Member, unless and until each of these requirements has been satisfied or, at the sole discretion of the Managing Member, waived.
(i) �� The transferring Economic Member shall bear all costs and expenses arising in connection with any proposed Transfer, whether or not the Transfer proceeds to completion, including any legal fees incurred by the Company or any broker or dealer, any costs or expenses in connection with any opinion of counsel, and any transfer taxes and filing fees.
Section 4.3 Transfer of Units and Obligations of the Managing Member.
(a) The Managing Member may Transfer all Units acquired by the Managing Member (including all Units acquired by the Managing Member in the Initial Offering pursuant to Section 3.1(h)) at any time and from time to time following the closing of the Initial Offering.
(b) The Economic Members hereby authorize the Managing Member to assign its rights, obligations and title as Managing Member to an Affiliate of the Managing Member without the prior consent of any other Person, and, in connection with such transfer, designate such Affiliate of the Managing Member as a successor Managing Member provided, that the Managing Member shall notify the applicable Economic Members of such change in the next regular communication to such Economic Members.
(c) Except as set forth in Section 4.3(b) above, in the event of the resignation of the Managing Member of its rights, obligations and title as Managing Member, the Managing Member shall nominate a successor Managing Member and the vote of a majority of the Units held by Economic Members shall be required to elect such successor Managing Member. The Managing Member shall continue to serve as the Managing Member of the Company until such date as a successor Managing Member is elected pursuant to the terms of this Section 4.3(c).
Section 4.4 Remedies for Breach. If the Managing Member shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of this ARTICLE IV, the Managing Member shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Company to redeem shares, refusing to give effect to such Transfer on the books of the Company or instituting proceedings to enjoin such Transfer or other event.
ARTICLE V - MANAGEMENT AND OPERATION OF THE COMPANY AND EACH SERIES
Section 5.1 Power and Authority of Managing Member. Except as explicitly set forth in this Agreement, the Managing Member, as appointed pursuant to Section 3.1(h) of this Agreement, shall have full power and authority to do, and to direct the Officers to do, all things and on such terms as it determines to be necessary or appropriate to conduct the business of the Company and each Series, to exercise all powers set forth in Section 2.5 and to carry out the purposes set forth in Section 2.4, in each case without the consent of the Economic Members, including but not limited to the following:
(a) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including entering into on behalf of a Series, an Operating Expenses Reimbursement Obligation, or indebtedness that is convertible into Units, and the incurring of any other obligations;
(b) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Company or any Series (including, but not limited to, the filing of periodic reports on Forms 1-K, 1-SA and 1-U with the U.S. Securities and Exchange Commission), and the making of any tax elections;
(c) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Company or any Series or the merger or other combination of the Company with or into another Person and for the avoidance of doubt, any action taken by the Managing Member pursuant to this sub-paragraph shall not require the consent of the Economic Members;
(d) (i) the use of the assets of the Company (including cash on hand) for any purpose consistent with this Agreement’s terms, including the financing of the conduct of the operations of the Company and the repayment of obligations of the Company and (ii) the use of the assets of a Series (including cash on hand) for any purpose consistent with this Agreement’s terms, including the financing of the conduct of the operations of such Series and the repayment of obligations of such Series;
(e) the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Company or any Series under contractual arrangements to all or particular assets of the Company or any Series);
(f) the declaration and payment of distributions of Free Cash Flows or other assets to Members associated with a Series;
(g) the election and removal of Officers of the Company or associated with any Series;
(h) the selection, retention and dismissal of employees, agents, outside attorneys, accountants, consultants and contractors, and the determination of their compensation and other terms of employment, retention or hiring, and the payment of fees, expenses, salaries, wages and other compensation to such Persons;
(i) the selection, retention and dismissal of trainers to train and race the Series’ Thoroughbreds;
(j) the solicitation of proxies from holders of any Series of Units issued on or after the date of this Agreement that entitles the holders thereof to vote on any matter submitted for consent or approval of Economic Members under this Agreement;
(k) the maintenance of insurance for the benefit of the Company, any Series and the Indemnified Persons and the reinvestment by the Managing Member in its sole discretion, of any proceeds received by such Series from an insurance claim in a replacement Series Asset which is substantially similar to that which comprised the Series Asset prior to the event giving rise to such insurance payment;
(l) the formation of, or acquisition or disposition of an interest in, and the contribution of property and the making of loans to, any limited or general partnership, joint venture, corporation, limited liability company or other entity or arrangement;
(m) the placement of any Free Cash Flow funds in deposit accounts in the name of a Series or of a custodian for the account of a Series, or to invest those Free Cash Flow funds in any other investments for the account of such Series, in each case pending the application of those Free Cash Flow funds in meeting liabilities of the Series or making distributions or other payments to the Members (as the case may be);
(n) the control of any matters affecting the rights and obligations of the Company or any Series, including the bringing, prosecuting and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or remediation, and the incurring of legal expense and the settlement of claims and litigation, including in respect of taxes;
(o) the indemnification of any Person against liabilities and contingencies to the maximum extent permitted by law;
(p) the giving of consent of or voting by the Company or any Series in respect of any securities that may be owned by the Company or such Series;
(q) the waiver of any condition or other matter by the Company or any Series;
(r) the entering into of listing agreements with any National Securities Exchange or over-the-counter market and the delisting of some or all of the Units from, or requesting that trading be suspended on, any such exchange or market;
(s) the issuance, sale or other disposition, and the purchase or other acquisition, of Units or options, rights or warrants relating to Units;
(t) the registration of any offer, issuance, sale or resale of Units or other securities or any Series issued or to be issued by the Company under the Securities Act and any other applicable securities laws (including any resale of Units or other securities by Members or other security holders);
(u) the execution and delivery of agreements with Affiliates of the Company or other Persons to render services to the Company or any Series;
(v) the adoption, amendment and repeal of the Allocation Policy;
(w) the selection of auditors for the Company and any Series;
(x) the selection of any transfer agent or depositor for any securities of the Company or any Series, and the entry into such agreements and provision of such other information as shall be required for such transfer agent or depositor to perform its applicable functions; and
(y) unless otherwise provided in this Agreement or the Series Designation, the calling of a vote of the Economic Members as to any matter to be voted on by all Economic Members of the Company or if a particular Series, as applicable.
The authority and functions of the Managing Member, on the one hand, and of the Officers, on the other hand, shall be identical to the authority and functions of the board of directors and officers, respectively, of a corporation organized under the DGCL in addition to the powers that now or hereafter can be granted to managers under the Delaware Act. No Economic Member, by virtue of its status as such, shall have any management power over the business and affairs of the Company or any Series or actual or apparent authority to enter into, execute or deliver contracts on behalf of, or to otherwise bind, the Company or any Series.
Section 5.2 Determinations by the Managing Member. In furtherance of the authority granted to the Managing Member pursuant to Section 5.1 of this Agreement, the determination as to any of the following matters, made in good faith by or pursuant to the direction of the Managing Member consistent with this Agreement, shall be final and conclusive and shall be binding upon the Company and each Series and every holder of Units:
(a) the amount of Free Cash Flow of any Series for any period and the amount of assets at any time legally available for the payment of distributions on Units of any Series;
(b) the amount of paid-in surplus, net assets, other surplus, annual or other cash flow, funds from operations, net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged);
(c) any interpretation of the terms, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption of any Series;
(d) the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by any Series or of any Units;
(e) the number of Units within a Series;
(f) any matter relating to the acquisition, holding and disposition of any assets by any Series;
(g) the evaluation of any competing interests among the Series and the resolution of any conflicts of interests among the Series;
(h) each of the matters set forth in Section 5.1(a) through Section 5.1(y); or
(i) any other matter relating to the business and affairs of the Company or any Series or required or permitted by applicable law, this Agreement or otherwise to be determined by the Managing Member.
Section 5.3 Delegation. The Managing Member may delegate to any Person or Persons any of the powers and authority vested in it hereunder and may engage such Person or Persons to provide administrative, compliance, technological and accounting services to the Company, on such terms and conditions as it may consider appropriate.
Section 5.4 Advisory Board.
(a) The Managing Member may establish an Advisory Board comprised of members of the Managing Member’s expert network and external advisors. The Advisory Board will be available to provide guidance to the Managing Member on the strategy and progress of the Company and with respect to the following matters: (i) material conflicts arising or that are reasonably likely to arise among or between the Managing Member, the Company, a Series or the Economic Members; (ii) any material transaction between the Company or a Series and the Managing Member or any of its Affiliates, another Series or an Economic Member (other than the purchase of Units in such Series); (iii) the appropriate levels of annual insurance costs and other operating expenses specific to each individual Series Asset; (iv) fees, expenses, assets, revenues and availability of funds for distribution with respect to each Series on an annual basis; and (vii) any service providers appointed by the Managing Member in respect of the Series Assets. In addition, the Managing Member may consult with the Advisory Board in connection with the acquisition and disposition of a Series Asset and may participate in an annual review of the Company’s acquisition policy.
(b) If the Advisory Board determines that the interests of any member of the Advisory Board conflict to a material extent with the interests of a Series or the Company as a whole, such member of the Advisory Board shall be excluded from participating in any discussion of the matters to which that conflict relates and shall not participate in the provision of guidance to the Managing Member in respect of such matters, unless a majority of the other members of the Advisory Board determines otherwise.
(c) The Advisory Board members shall not be entitled to compensation by the Company or any Series in connection with their role as members of the Advisory Board (including compensation for attendance at meetings of the Advisory Board), provided, however, the Company or any applicable Series shall reimburse a member of the Advisory Board for any out of pocket expenses or Operating Expenses actually incurred by it or any of its Affiliates on behalf of the Company or a Series when acting upon the Managing Member’s instructions or pursuant to a written agreement between the Company or a Series and such member of the Advisory Board or its Affiliates.
(d) The Advisory Board members shall not be deemed managers or other persons with duties to the Company or any Series (under Sections 18-1101 or 18-1104 of the Delaware Act or under any other applicable law or in equity) and shall have no fiduciary duty to the Company or any Series. The Managing Member shall be entitled to rely upon, and shall be fully protected in relying upon, reports and information of the Advisory Board to the extent the Managing Member reasonably believes that such matters are within the professional or expert competence of the Advisory Board members, and shall be protected under Section 18-406 of the Delaware Act in relying thereon.
Section 5.5 Exculpation, Indemnification, Advances and Insurance.
(a) Subject to other applicable provisions of this ARTICLE V including Section 5.7, the Indemnified Persons shall not be liable to the Company or any Series for any acts or omissions by any of the Indemnified Persons arising from the exercise of their rights or performance of their duties and obligations in connection with the Company or any Series, this Agreement or any investment made or held by the Company or any Series, including with respect to any acts or omissions made while serving at the request of the Company or on behalf of any Series as an officer, director, member, partner, fiduciary or trustee of another Person, other than such acts or omissions that have been determined in a final, non-appealable decision of a court of competent jurisdiction to constitute fraud, willful misconduct or gross negligence. The Indemnified Persons shall be indemnified by the Company and, to the extent Expenses and Liabilities are associated with any Series, each such Series, in each case, to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the Company and counsel fees and disbursements on a solicitor and client basis) (collectively, Expenses and Liabilities) arising from the performance of any of their duties or obligations in connection with their service to the Company or each such Series or this Agreement, or any investment made or held by the Company, each such Series, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such Person may hereafter be made party by reason of being or having been a manager of the Company or such Series under Delaware law, an Officer of the Company or associated with such Series, a member of the Advisory Board or an officer, director, member, partner, fiduciary or trustee of another Person, provided that this indemnification shall not cover Expenses and Liabilities that arise out of the acts or omissions of any Indemnified Person that have been determined in a final, non-appealable decision of a court, arbitrator or other tribunal of competent jurisdiction to have resulted primarily from such Indemnified Person’s fraud, willful misconduct or gross negligence. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnified Person, pursuant to a loan guaranty or otherwise, for any indebtedness of the Company or any Series (including any indebtedness which the Company or any Series has assumed or taken subject to), and the Managing Member or the Officers are hereby authorized and empowered, on behalf of the Company or any Series, to enter into one or more indemnity agreements consistent with the provisions of this Section in favor of any Indemnified Person having or potentially having liability for any such indebtedness. It is the intention of this paragraph that the Company and each applicable Series indemnify each Indemnified Person to the fullest extent permitted by law, provided that this indemnification shall not cover Expenses and Liabilities that arise out of the acts or omissions of any Indemnified Person that have been determined in a final, non-appealable decision of a court, arbitrator or other tribunal of competent jurisdiction to have resulted primarily from such Indemnified Person’s fraud, willful misconduct or gross negligence.
(b) This Agreement’s provisions, to the extent they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, including Section 5.7, are agreed by each Member to modify such duties and liabilities of the Indemnified Person to the maximum extent permitted by law.
(c) Any indemnification under this Section (unless ordered by a court) shall be made by each applicable Series. To the extent, however, that an Indemnified Person has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such Indemnified Person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such Indemnified Person in connection therewith.
(d) Any Indemnified Person may apply to the Delaware Court of Chancery or any other court of competent jurisdiction in Delaware for indemnification to the extent otherwise permissible under paragraph (a) of this Section. The basis of such indemnification by a court shall be a determination by such court that indemnification of the Indemnified Person is proper in the circumstances because such Indemnified Person has met the applicable standards of conduct set forth in paragraph (a). Neither a contrary determination in the specific case under paragraph (c) of this Section, nor the absence of any determination thereunder, shall be a defense to such application or create a presumption that the Indemnified Person seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this paragraph shall be given to the Company promptly upon the filing of such application. If successful, in whole or in part, the Indemnified Person seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.
(e) To the fullest extent permitted by law, expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any civil, criminal, administrative or investigative action, suit or proceeding may, at the option of the Managing Member, be paid by each applicable Series in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that such Indemnified Person is not entitled to be indemnified by each such Series as authorized in this Section.
(f) The indemnification and advancement of expenses provided by or granted pursuant to this Section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under this Agreement, or any other agreement (including without limitation any Series Designation), vote of Members or otherwise, and shall continue as to an Indemnified Person who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnified Person unless otherwise provided in a written agreement with such Indemnified Person or in the writing pursuant to which such Indemnified Person is indemnified, it being the policy of the Company that indemnification of the persons specified in paragraph (a) shall be made to the fullest extent permitted by law. The provisions of this Section shall not be deemed to preclude the indemnification of any person who is not specified in paragraph (a) but whom the Company or an applicable Series has the power or obligation to indemnify under the provisions of the Delaware Act.
(g) The Company and any Series may, but shall not be obligated to, purchase and maintain insurance on behalf of any Person entitled to indemnification under this Section against any liability asserted against such Person and incurred by such Person in any capacity to which they are entitled to indemnification hereunder, or arising out of such Person’s status as such, whether or not the Company would have the power or the obligation to indemnify such Person against such liability under the provisions of this Section.
(h) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section shall, unless otherwise provided when authorized or ratified, inure to the benefit of the heirs, executors and administrators of any person entitled to indemnification under this Section.
(i) The Company and any Series may, to the extent authorized from time to time by the Managing Member, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company or such Series.
(j) If this Section or any portion of this Section shall be invalidated on any ground by a court of competent jurisdiction, each applicable Series shall nevertheless indemnify each Indemnified Person as to expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit, proceeding or investigation, whether civil, criminal or administrative, including a grand jury proceeding or action or suit brought by or in the right of the Company, to the full extent permitted by any applicable portion of this Section that shall not have been invalidated.
(k) Each of the Indemnified Persons may, in the performance of his, her or its duties, consult with legal counsel, accountants, and other experts, and any act or omission by such Person on behalf of the Company or any Series in furtherance of the interests of the Company or such Series in good faith in reliance upon, and in accordance with, the advice of such legal counsel, accountants or other experts will be full justification for any such act or omission, and such Person will be fully protected for such acts and omissions; provided that such legal counsel, accountants, or other experts were selected with reasonable care by or on behalf of such Indemnified Person.
(l) An Indemnified Person shall not be denied indemnification in whole or in part under this Section because the Indemnified Person had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by this Agreement’s terms.
(m) Any liabilities which an Indemnified Person incurs as a result of acting on behalf of the Company or any Series (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the Internal Revenue Service, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise) shall be treated as liabilities indemnifiable under this Section, to the maximum extent permitted by law.
(n) The Managing Member shall, in the performance of its duties, be fully protected in relying in good faith upon the records of the Company and any Series and on such information, opinions, reports or statements presented to the Company by any of the Officers or employees of the Company or associated with any Series, or by any other Person as to matters the Managing Member reasonably believes are within such other Person’s professional or expert competence (including, without limitation, the Advisory Board).
(o) Any amendment, modification or repeal of this Section or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of or other rights of any indemnitee under this Section as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted and provided such Person became an indemnitee hereunder prior to such amendment, modification or repeal.
Section 5.6 Duties of Officers.
(a) Except as set forth in Sections 5.5 and 5.7, as otherwise expressly provided in this Agreement or required by the Delaware Act, (i) the duties and obligations owed to the Company by the Officers shall be the same as the duties and obligations owed to a corporation organized under DGCL by its officers, and (ii) the duties and obligations owed to the Members by the Officers shall be the same as the duties and obligations owed to the stockholders of a corporation under the DGCL by its officers.
(b) The Managing Member shall have the right to exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it thereunder either directly or by or through the duly authorized Officers of the Company or associated with a Series, and the Managing Member shall not be responsible for the misconduct or negligence on the part of any such Officer duly appointed or duly authorized by the Managing Member in good faith.
Section 5.7 Standards of Conduct and Modification of Duties of the Managing Member. Notwithstanding anything to the contrary herein or under any applicable law, including, without limitation, Section 18-1101(c) of the Delaware Act, the Managing Member, in exercising its rights hereunder in its capacity as the managing member of the Company, shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the Company, any Series or any Economic Members, and shall not be subject to any other or different standards imposed by this Agreement, any other agreement contemplated hereby, under the Delaware Act or under any other applicable law or in equity. The Managing Member shall not have any duty (including any fiduciary duty) to the Company, any Series, the Economic Members or any other Person, including any fiduciary duty associated with self-dealing or corporate opportunities, all of which are hereby expressly waived. This Section shall not in any way reduce or otherwise limit the specific obligations of the Managing Member expressly provided in this Agreement or in any other agreement with the Company or any Series.
Section 5.8 Reliance by Third Parties. Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Company or any Series shall be entitled to assume that the Managing Member and any Officer of the Company or any Series has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Company or such Series and to enter into any contracts on behalf of the Company or such Series, and such Person shall be entitled to deal with the Managing Member or any Officer as if it were the Company’s or such Series’ sole party in interest, both legally and beneficially. Each Economic Member hereby waives, to the fullest extent permitted by law, any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the Managing Member or any Officer in connection with any such dealing. In no event shall any Person dealing with the Managing Member or any Officer or its representatives be obligated to ascertain that this Agreement’s terms have been complied with or to inquire into the necessity or expedience of any act or action of the Managing Member or any Officer or its representatives. Each and every certificate, document or other instrument executed on behalf of the Company or any Series by the Managing Member or any Officer or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement were in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Company or any Series and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Company or the applicable Series.
Section 5.9 Certain Conflicts of Interest. The resolution of any Conflict of Interest approved by the Advisory Board shall be conclusively deemed to be fair and reasonable to the Company and the Members and not a breach of any duty hereunder at law, in equity or otherwise.
ARTICLE VI - FEES AND EXPENSES
Section 6.1 Cost to Acquire the Series Asset; Brokerage Fee; Offering Expenses; Acquisition Expenses; Sourcing Fee; Organizational Fee. The following fees, costs and expenses in connection with any Initial Offering and the sourcing and acquisition of a Series Asset shall be borne by the relevant Series (except in the case of an unsuccessful Offering in which case all Abort Costs shall be borne by the Managing Member, and except to the extent assumed by the Managing Member in writing):
(a) Cost to acquire the Series Asset;
(b) Brokerage Fee;
(c) Offering Expenses
(d) Acquisition Expenses;
(e) Sourcing Fee; and
(f) Organizational Fee.
Section 6.2 Operating Expenses; Dissolution Fees. Each Series shall be responsible for its Operating Expenses, all costs and expenses incidental to the termination and winding up of such Series and its share of the costs and expenses incidental to the termination and winding up of the Company as allocated to it in accordance with Section 6.4.
Section 6.3 Excess Operating Expenses; Further Issuance of Units; Operating Expenses Reimbursement Obligation(s). If there are not sufficient cash reserves of, or revenues generated by, a Series to meet its Operating Expenses, the Managing Member may:
(a) issue additional Units in such Series in accordance with Section 3.4. Economic Members shall be notified in writing at least 10 Business Days in advance of any proposal by the Managing Member to issue additional Units pursuant to this Section; and/or
(b) pay such excess Operating Expenses and not seek reimbursement; and/or
(c) enter into an agreement pursuant to which the Managing Member loans to the Company an amount equal to the remaining excess Operating Expenses (the “Operating Expenses Reimbursement Obligation(s)”). The Managing Member, in its sole discretion, may impose a reasonable rate of interest (a rate no less than the Applicable Federal Rate (as defined in the Code)) on any Operating Expenses Reimbursement Obligation. The Operating Expenses Reimbursement Obligation(s) shall become repayable when cash becomes available for such purpose in accordance with ARTICLE VII.
Section 6.4 Allocation of Expenses. Any Brokerage Fee, Offering Expenses, Acquisition Expenses, Sourcing Fee and Operating Expenses shall be allocated by the Managing Member in accordance with the Allocation Policy.
Section 6.5 Overhead of the Managing Member. The Managing Member shall pay and the Economic Members shall not bear the cost of: (i) any annual administration fee to the Broker or such other amount as is agreed between the Broker and the Managing Member from time to time, (ii) all of the ordinary overhead and administrative expenses of the Managing Member including, without limitation, all costs and expenses on account of rent, utilities, insurance, office supplies, office equipment, secretarial expenses, stationery, charges for furniture, fixtures and equipment, payroll taxes, travel, entertainment, salaries and bonuses, but excluding any Operating Expenses, (iii) any Abort Costs, and (iv) such other amounts in respect of any Series as it shall agree in writing or as is explicitly set forth in any Offering Document.
ARTICLE VII - DISTRIBUTIONS
Section 7.1 Application of Cash. Subject to Section 7.3, ARTICLE XII, any Free Cash Flows of each Series after (i) repayment of any amounts outstanding under Operating Expenses Reimbursement Obligations including any accrued interest as there may be and (ii) the creation of such reserves as the Managing Member deems necessary, in its sole discretion, to meet future Operating Expenses, shall be applied and distributed as set forth in the applicable Preference Designation by way of distribution to the Members of such Series (pro rata to their Units and which, for the avoidance of doubt, may include the Managing Member or its Affiliates), and to the Managing Member in payment of the Management Fee, except to the extent waived in the sole discretion of the Managing Member.
Section 7.2 Application of Amounts upon the Liquidation of a Series. Subject to Section 7.3 and ARTICLE XII, and except as otherwise set forth in the Preference Designation, any amounts available for distribution following the liquidation of a Series, net of any fees, costs and liabilities (as determined by the Managing Member in its sole discretion), shall be applied and distributed 100% to the Members (pro rata to their Units and which, for the avoidance of doubt, may include the Managing Member and its Affiliates).
Section 7.3 Timing of Distributions.
(a) Subject to the applicable provisions of the Delaware Act and except as otherwise provided herein, the Managing Member shall pay distributions to the Members associated with such Series pursuant to Section 7.1, at such times as the Managing Member shall reasonably determine, and pursuant to Section 7.2, as soon as reasonably practicable after the relevant amounts have been received by the Series; provided that, the Managing Member shall not be obliged to make any distribution pursuant to this Section (i) unless there are sufficient amounts available for such distribution or (ii) which, in the reasonable opinion of the Managing Member, would or might leave the Company or such Series with insufficient funds to meet any future contemplated obligations or contingencies including to meet any Operating Expenses and outstanding Operating Expenses Reimbursement Obligations (and the Managing Member is hereby authorized to retain any amounts within the Company to create a reserve to meet any such obligations or contingencies), or which otherwise may result in the Company or such Series having unreasonably small capital for the Company or such Series to continue its business as a going concern. Subject to the terms of any Series Designation (including, without limitation, the preferential rights, if any, of holders of any other class of Units of the applicable Series), distributions shall be paid to the holders of the Units of a Series on an equal per Unit basis as of the Record Date selected by the Managing Member. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to any Member on account of its Units of any Series if such distribution would violate the Delaware Act or other applicable law.
(b) Notwithstanding Section 7.2 and Section 7.3(a), in the event of the termination and liquidation of a Series, all distributions shall be made in accordance with, and subject to the terms and conditions of, ARTICLE XII.
(c) Each distribution in respect of any Units of a Series shall be paid by the Company, directly or through any other Person or agent, only to the Record Holder of such Units as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Company’s and such Series’ liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise.
Section 7.4 Distributions in Kind. Distributions in kind of the entire or part of a Series Asset to Members are prohibited.
Section 7.5 Distributions to Members of the Company. Subject to the tax classification elections for each Series made as provided in Section 10.1:
(a) The Company's Net Cash Flow will be distributed among Members, pro rata with their Units, at the discretion of the Managing Member; and
(b) Distributions of cash or other property not otherwise falling within the scope of Section 7.5(a) will be made among Members pro rata with their Units.
ARTICLE VIII
Section 8.1 Allocation of Profits of the Company. Subject to the tax classification elections for each Series and the application of the regulatory tax allocation provisions set forth in ARTICLE X, Profits of the Company will be allocated among Members in the following order of priority:
(a) First, among Members in proportion to any prior allocation of Losses to them pursuant to section 8.2(a) until such time as the allocations provided for in this section 8.1(a) in all years equals the Losses so allocated; and
(b) Second, among Members pro rata with their Units.
Section 8.2 Allocation of Losses of the Company. Subject to the application of the regulatory tax allocation provisions set forth in ARTICLE X, Losses of the Company will be allocated among Members in the following order of priority:
(a) First, among Members pro rata with their positive Capital Account balances; and
(b) Second, among Members pro rata with their Units.
Section 8.3 Miscellaneous Allocation Provisions.
(a) Allocations of Profits and Losses provided for in this ARTICLE VIII shall generally be made on a daily, monthly or other basis, as determined by the Managing Member using any permissible method under IRC § 706 and the Treasury Regulations promulgated thereunder.
(b) All items of Company income, gain, loss, deduction, and any other allocations (including allocations of credits) not otherwise provided for will be divided among Members in the same proportions as they share Profits or Losses, as the case may be, for the applicable fiscal year.
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting.
(a) The Managing Member shall keep or cause to be kept at the principal office of the Company or such other place as determined by the Managing Member appropriate books and records with respect to the business of the Company and each Series, including all books and records necessary to provide to the Economic Members any information required to be provided pursuant to this Agreement or applicable law. Any books and records maintained by or on behalf of the Company or any Series in the regular course of its business, including the record of the Members, books of account and records of Company or Series proceedings, may be kept in such electronic form as may be determined by the Managing Member; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Company shall be maintained, for tax and financial reporting purposes, on an accrual basis in accordance with U.S. GAAP, unless otherwise required by applicable law or other regulatory disclosure requirement.
(b) Each Member shall have the right, upon reasonable demand for any purpose reasonably related to the Member’s Units as a member of the Company (as reasonably determined by the Managing Member) to such information pertaining to the Company as a whole and to each Series in which such Member has a Unit, as provided in Section 18-305 of the Delaware Act; provided, that prior to such Member having the ability to access such information, the Managing Member shall be permitted to require such Member to enter into a confidentiality agreement in form and substance reasonably acceptable to the Managing Member. For the avoidance of doubt, except as may be required pursuant to ARTICLE XI, a Member shall only have access to the information (including any Series Designation) referenced with respect to any Series in which such Member has a Unit and not to any Series in which such Member does not have a Unit.
(c) Except as otherwise set forth in the applicable Series Designation, within 120 calendar days after the end of the fiscal year and 90 calendar days after the end of the semi-annual reporting date, the Managing Member shall use its commercially reasonable efforts to circulate to each Economic Member electronically by e-mail or made available via an online platform:
(i) a financial statement of such Series prepared in accordance with U.S. GAAP, which includes a balance sheet, profit and loss statement and a cash flow statement; and
(ii) confirmation of the number of Units in each Series Outstanding as of the end of the most recent fiscal year;
provided, that notwithstanding the foregoing, if the Company or any Series is required to disclose financial information pursuant to the Securities Act or the Exchange Act (including without limitations periodic reports under the Exchange Act or under Rule 257 under Regulation A of the Securities Act), then compliance with such provisions shall be deemed compliance with this Section 9.1(c) and no further or earlier financial reports shall be required to be provided to the Economic Members of the applicable Series with such reporting requirement.
Section 9.2 Fiscal Year. Unless otherwise provided in a Series Designation, the fiscal year for tax and financial reporting purposes of each Series shall be a calendar year ending December 31 unless otherwise required by the Code. The fiscal year for financial reporting purposes of the Company shall be a calendar year ending December 31.
ARTICLE X - TAX MATTERS
Section 10.1 Tax Classification. The Company intends to be taxed as a partnership or a disregarded entity for federal income tax purposes and will not make any election or take any action that could cause it to be treated as an association taxable as a corporation under Subchapter C of the Code. The Company will make an election on IRS Form 8832 for each Series that is a protected series or a registered series pursuant to Section 18-215 of the Delaware Act to be treated as an association taxable as a corporation under Subchapter C of the Code and not as a partnership under Subchapter K of the Code.
Section 10.2 Partnership Audit Rules.
(a) The new partnership audit rules codified under IRC §§ 6221 through 6234 as part of the Bipartisan Budget Act of 2015 (the “New Audit Rules”) shall apply to the Company and its tax returns, and the current and Former Members of the Company as set forth in this Agreement and under the New Audit Rules. Consistent with the New Audit Rules, each Member shall treat on his income tax return each item of income, loss or credit attributable to the Company in a manner consistent with the treatment of those items on the Company’s tax returns.
(b) The Managing Member shall have the right to appoint, remove and replace the Company’s “partnership representative” (as referred to in the New Audit Rules) (the “Partnership Representative”) in the Managing Member’s sole discretion. The Partnership Representative shall have the right to extend the statute of limitations and settle tax audits. The Partnership Representative shall also have the right to hire outside tax advisors to assist in the audit (at the Company’s expense). The Company shall indemnify the Partnership Representative pursuant to Section 5.5, and all expenses and liabilities of the Partnership Representative in the performance of its duties shall be subject to indemnification under Section 5.5 or other indemnification rights applicable to Company management. The Managing Member and the Partnership Representative will be entitled to rely conclusively on the advice of the Company’s independent accountant or other professional tax advisors or tax counsel in making any determination in respect of the New Audit Rules. Neither the Managing Member nor the Partnership Representative shall be required to indemnify a Member or the Company with respect to any taxes or Tax Liabilities incurred under the New Audit Rules.
(c) The Managing Member will have the power and authority to cause the Company to elect out of the New Audit Rules for one or more Fiscal Years, and each Member agrees to cooperate to execute any instrument necessary or desirable to effect such opt-out election. Each Member hereby grants to the Managing Member an irrevocable power of attorney, coupled with an interest, to execute any instrument on such Member’s behalf and in such Member’s name necessary or desirable to effect such opt-out election. No Member shall Transfer or otherwise assign Units to an assignee, including without limitation, partnerships, multiple-member LLCs, trusts or disregarded entities (including single-member LLCs), which would cause the Company to not qualify for making an opt-out election, without the prior written consent of the Managing Member. Any attempted Transfer or assignment in violation of the preceding sentence shall be void ab initio.
(d) The Managing Member shall have the power and authority to decide, in its sole discretion, whether or not the Company makes a “push-out” election under IRC § 6226, or to decide that the Company will remain liable, consistent with the New Audit Rules, for any underpayment, and any applicable interest, penalties, addition to tax or additional amounts (collectively, the “Tax Liabilities”) determined pursuant to the New Audit Rules. If the Managing Member elects to make a “push-out” election, each Member or former Member (for the applicable fiscal year) agrees to calculate such Person’s liability and pay such Person’s share of the Tax Liabilities. The Managing Member agrees to take into consideration any reduction in Tax Liabilities resulting from information provided to the IRS with respect to specific Members that are either tax-exempt or in lower tax brackets (such information may include whether or not a Member is tax-exempt or subject to capital gains, qualified dividend, corporate or other tax rates that may be lower than the highest rate under IRC § 1). Members acknowledge, however, that they may be liable pursuant to this Agreement for Tax Liabilities if a “push-out” election is made by the Managing Member even though a Member may be otherwise exempt from U.S. taxes.
(e) The Managing Member will have the authority to demand that Members, including Persons who are no longer Members but were Members during a fiscal year subject to adjustment under the New Audit Rules make additional Capital Contributions to fund the Company’s payment of Tax Liabilities. The Managing Member will have the discretion to make such capital call from each current or former Member in an amount equal to the Member’s share of the Tax Liabilities for the applicable Fiscal Year(s), as determined by the Managing Member in his sole discretion. The Managing Member will also have the discretion to make capital calls from current Members pro rata with such Member’s Units. Upon receipt by a current or former Member of written notice from the Managing Member of a capital call to fund the payment of Tax Liabilities and the amount of such capital call payable by such Member, each current or former Member agrees to immediately make the required Capital Contribution in the amount demanded by the Manager. Neither the assignment of Units by a Member nor the redemption of Units by the Company shall relieve a former Member of his obligations under this Section 10.2. In the event that Units are assigned, both the assignor Member and the assignee Member shall be jointly and severally liable for the obligations of the assignor Member under this Section 10.2 or the New Audit Rules.
(f) The Managing Member shall have the discretion to amend this Agreement as reasonably necessary to conform this Section 10.2 to any regulations or other guidance or rules issued by the IRS with respect to the New Audit Rules without approval of the Members or the Company, except to the extent that such amendment would have a material adverse effect on the economic rights of Members (as determined by the Managing Member in his reasonable discretion). The Members hereby grant the Managing Member their power of attorney to execute any such amendment on behalf of the Members.
(g) If reasonably requested by the Managing Member or the Partnership Representative, each current and former Member shall deliver to the Managing Member or Partnership Representative (i) any certificates, forms or instruments requested by the Managing Member or Partnership Representative relating to such Member’s status under any tax laws, including evidence of the filing of tax returns and/or payment of tax, and (ii) any information reasonably requested by the Managing Member in connection with the New Audit Rules; provided, that no Member shall be required to provide copies of actual tax returns. Each current and former Member shall cooperate with the Managing Member and Partnership Representative to the extent reasonably requested by it in connection with any audit of or involved, or tax filing or other interactions with, any taxing authority on behalf of the Company or any of its existing or former investments.
(h) To the extent that any state or local jurisdiction adopts partnership audit rules similar to the New Audit Rules, the rights and obligations of the Managing Member, the Partnership Representative and current and former Members under this Agreement with respect to the New Audit Rules shall apply equally with respect to such state or local partnership audit rules.
(i) The obligations under this Section 10.2 shall survive the Transfer or termination of a membership interest in the Company, as well as the termination, dissolution, liquidation and winding up of the Company.
(j) The Members agree that they shall be responsible for the reasonable expenses of the Managing Member and the Partnership Representative incurred in connection with the performance of duties pursuant to this Section, and the reasonable fees and expenses of legal and accounting services, and such Members agree to pay and contribute to the Company their pro rata share (proportionate with such each Member’s share of the proposed Tax Liabilities or the Member’s membership interest, as reasonably determined by the Managing Member) of any such expenses incurred by the Company.
Section 10.3 Capital Accounts. The Company's accountants shall cause a capital account ("Capital Account") to be maintained by the Company for each Member in accordance with the applicable provisions of Treasury Regulation § 1.704.
Section 10.4 Withdrawal and Return of Capital. Except as expressly provided in this Agreement, no Member shall be entitled to (i) withdraw any part of his Capital Contributions or Capital Account, or (ii) receive any distribution from the Company.
Section 10.5 Revaluation of Company Property. If there shall occur (i) an acquisition of a membership interest from the Company (other than a de minimis membership interest), (ii) a distribution to a Member in redemption of an membership interest of the Company (other than a de minimis membership interest), or (iii) the issuance of a membership interest in exchange for services, then the Company shall revalue the assets of the Company at their then fair market value and adjust the Capital Accounts in the same manner as in the case of a property distribution.
Section 10.6 Limitation on Losses. Notwithstanding the general allocation of Profits and Losses described in ARTICLE VIII, no Member shall be allocated Losses in excess of the aggregate of such Member's positive Capital Account balance, Partnership Minimum Gain (within the meaning of Treas. Reg. § 1.704-2(b)(2)), and Partner Nonrecourse Debt Minimum Gain (within the meaning of Treas. Reg. § 1.704-2(i)(3)) (the "Adjusted Capital Account"), until such time as no Member has a positive Adjusted Capital Account balance, whereupon subsequent allocations of Losses shall again be allocated among Members pro rata with their Units. Furthermore, no Member shall be allocated Losses where it is reasonably anticipated that such Member's Adjusted Capital Account shall be negative at the end of the fiscal year in which the Losses arise or at the end of the subsequent fiscal year, as a result of distributions of Net Cash Flow during such periods, until such time as no Member would have a positive Adjusted Capital Account balance after such reasonably anticipated distributions of Net Cash Flow, whereupon subsequent allocations of Losses shall again be allocated among Members pro rata with their Units. Losses not allocated to a Member under this Section 10.6 shall be reallocated among those Members with positive Adjusted Capital Account balances pro rata with their Units.
Section 10.7 Qualified Income Offset. If a Member receives any adjustment, allocation, or distribution described in Treas. Reg. §§ 1.704-1(b)(2)(ii)(d)(4), (5), or (6), then items of Profits shall be specially allocated to such Member in an amount and manner sufficient to eliminate the deficit balance in such Member's Adjusted Capital Account as quickly as possible. It is the intention of the parties that this provision constitute a "qualified income offset" within the meaning of Treas. Reg. § 1.704-1(b)(2)(ii)(d), and this provision shall be so construed.
Section 10.8 Minimum Gain Chargeback. If there is a net decrease in Partnership Minimum Gain (within the meaning of Treas. Reg. § 1.704-2(b)(2)) or Partner Nonrecourse Debt Minimum Gain (within the meaning of Treas. Reg. § 1.704-2(i)(3)) during any fiscal year of the Company, each Member shall be specially allocated, before any other allocations under this ARTICLE X, items of income and gain for such fiscal year (and subsequent fiscal years, if necessary) in an amount equal to such Member's share (determined in accordance with Treas. Reg. §§ 1.704-2(g) and 1.704-2(i)(5), as applicable) of the net decrease in Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain, as applicable, for such fiscal year, provided, however, that no such allocation shall be required if any of the exceptions set forth in Treas. Reg. § 1.704-2(f) apply. It is the intention of the parties that this provision constitutes a "minimum gain chargeback" within the meaning of Treas. Reg. §§ 1.704-2(f) and 1.704-2(i)(4), and this provision shall be so construed.
Section 10.9 Partner Nonrecourse Deductions. Notwithstanding anything in this Agreement to the contrary, the Company's Partner Nonrecourse Deductions (within the meaning of Treas. Reg. § 1.704-2(i)(2)) shall be allocated solely to Members who have the economic risk of loss with respect to the partner nonrecourse liability related thereto in accordance with the provisions of Treas. Reg. § 1.704-2(i)(1).
Section 10.10 Curative Allocations. The allocations set forth in Sections 10.6 through 10.9 are intended to comply with certain requirements of the Treasury Regulations ("Regulatory Allocations"). It is the intention of Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Profits or Losses pursuant to this Section 10.10. Therefore, notwithstanding any other provision of this ARTICLE X (other than Regulatory Allocations), the Manager shall make such offsetting special allocations of Profits and Losses in whatever manner the Manager determines appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if Regulatory Allocations were not part of the Agreement and all Profits and Losses were allocated pursuant to ARTICLE VIII.
Section 10.11 Savings Clause. It is the intention of Members that the allocations provided for in this Agreement will result in the Capital Accounts of Members at the time of the liquidation of the Company being consistent with the distributions to which Members are entitled pursuant to ARTICLE XII. If the Capital Accounts are not so consistent, then the Manager has the authority to alter the tax allocations provided for in this Agreement so that the Capital Accounts of Members are consistent to the extent possible with the distributions provided for in ARTICLE XII.
Section 10.12 No Restoration of Deficit Capital Accounts. No Member is required under any circumstances (either during the period of the Company's operation or upon the Company's dissolution and termination) to restore a deficit in such Member's Capital Account or, except as explicitly provided in this Agreement, otherwise make any contribution of cash or property to the Company without such Member's consent, which may be withheld in such Member's sole and absolute discretion.
Section 10.13 Contributed Property. In accordance with the rules of IRC § 704(c) and the Treasury Regulations promulgated thereunder, items of income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value at the time of contribution. In connection with any contribution (or deemed contribution) of appreciated property, the Manager, in consultation with the Company's tax advisors, will select an allocation method from among the permitted methods available under the applicable provisions of Treasury Regulation § 1.704.
Section 10.14 Division Among Members. If there is a change in a Member's membership interest during a fiscal year, any allocations pursuant to this Agreement shall be made so as to take into account the varying interests of Members during the period to which the allocation relates, using the interim closing of the books method for determining such allocations, or upon the unanimous agreement of Members (including any former Member affected by such allocations), using any method for determining such allocations that is provided in IRC § 706(d) and the Treasury Regulations promulgated thereunder.
ARTICLE XI - REMOVAL OF THE MANAGING MEMBER
Economic Members of the Company, acting by way of a Super Majority Vote, may elect to remove the Managing Member at any time if the Managing Member is found by a non-appealable judgment of a court of competent jurisdiction to have committed fraud in connection with a Series or the Company and which has a material adverse effect the Company. The Managing Member shall call a meeting of all of the Economic Members of the Company within 30 calendar days of such final non-appealable judgment of a court of competent jurisdiction, at which the Economic Members may (i) by Super Majority Vote, remove the Managing Member of the Company and each relevant Series in accordance with this ARTICLE XI and (ii) if the Managing Member is so removed, by a plurality, appoint a replacement Managing Member or the liquidation and dissolution and termination the Company and each of the Series in accordance with ARTICLE XII. If the Managing Member fails to call a meeting as required by this Article XI, then any Economic Member shall have the ability to demand a list of all Record Holders of the Company pursuant to Section 9.1(b) and to call a meeting at which such a vote shall be taken. In the event of its removal, the Managing Member shall be entitled to receive all amounts that have accrued and are then currently due and payable to it pursuant to this Agreement but shall forfeit its right to any future distributions. Prior to its admission as a Managing Member of any Series, any replacement Managing Member shall acquire the Units held by the departing Managing Member in such Series for fair market value and in cash immediately payable on the Transfer of such Units. For the avoidance of doubt, if the Managing Member is removed as Managing Member of the Company it shall also cease to be Managing Member of each of the Series.
ARTICLE XII - DISSOLUTION, TERMINATION AND LIQUIDATION
Section 12.1 Dissolution and Termination.
(a) The Company shall not be dissolved by the admission of Substitute Economic Members or Additional Economic Members or the withdrawal of a transferring Member following a Transfer associated with any Series. The Company shall dissolve, and its affairs shall be wound up, upon:
(i) an election to dissolve the Company by the Managing Member;
(ii) the sale, exchange, retirement or other disposition of all or substantially all of the assets and properties of all Series and the subsequent election to dissolve the Company by the Managing Member;
(iii) the entry of a decree of judicial dissolution of the Company pursuant to the provisions of the Delaware Act;
(iv) at any time that there are no Members of the Company, unless the business of the Company is continued in accordance with the Delaware Act; or
(v) a vote by the Economic Members to dissolve the Company following the for-cause removal of the Managing Member in accordance with ARTICLE XI.
(b) A Series shall not be terminated by the admission of Substitute Economic Members or Additional Economic Members or the withdrawal of a transferring Member following a Transfer associated with any Series. Unless otherwise provided in the Series Designation, a Series shall terminate, and its affairs shall be wound up, upon:
(i) the dissolution of the Company pursuant to Section 12.1(a);
(ii) the sale, exchange, retirement or other disposition of all or substantially all of the assets and properties of such Series and the subsequent election to dissolve the Company by the Managing Member. The termination of the Series pursuant to this sub-paragraph shall not require the consent of the Economic Members;
(iii) an event set forth as an event of termination of such Series in the Series Designation establishing such Series;
(iv) an election to terminate the Series by the Managing Member; or
(v) at any time that there are no Members of such Series, unless the business of such Series is continued in accordance with the Delaware Act.
(c) The dissolution of the Company or any Series pursuant to Section 18-801(a)(3) of the Delaware Act shall be strictly prohibited.
Section 12.2 Liquidator.
(a) Upon dissolution of the Company or termination of any Series, the Managing Member shall select one or more Persons (which may be the Managing Member) to act as Liquidator.
(b) In the case of a dissolution of the Company, (i) the Liquidator shall be entitled to receive compensation for its services as Liquidator; (ii) the Liquidator shall agree not to resign at any time without 15 days prior notice to the Managing Member and may be removed at any time by the Managing Member; (iii) upon dissolution, death, incapacity, 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 30 days be appointed by the Managing Member. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this ARTICLE XII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the Managing Member under this Agreement’s terms (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers) necessary or appropriate to carry out the duties and functions of the Liquidator hereunder for and during the period of time required to complete the winding up and liquidation of the Company as provided for herein. In the case of a termination of a Series, other than in connection with a dissolution of the Company, the Managing Member shall act as Liquidator.
Section 12.3 Liquidation of a Series. In connection with the liquidation of a Series, whether as a result of the dissolution of the Company or the termination of such Series, the Liquidator shall proceed to dispose of the assets of such Series, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as determined by the Liquidator, subject to Sections 18-215 and 18-804 of the Delaware Act, the terms of any Series Designation and the following:
(a) Subject to Section 12.3(c), the assets may be disposed of by public or private sale on such terms as the Liquidator may determine. The Liquidator may defer liquidation for a reasonable time if it determines that an immediate sale or distribution of all or some of the assets would be impractical or would cause undue loss to the Members associated with such Series.
(b) Liabilities of each Series include amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 12.2) as well as any outstanding Operating Expenses Reimbursement Obligations and any other amounts owed to Members associated with such Series otherwise than in respect of their distribution rights under ARTICLE VII. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of Free Cash Flows or other assets to provide for its payment. When paid, any unused portion of the reserve shall be applied to other liabilities or distributed as additional liquidation proceeds.
(c) Subject to the terms of any Series Designation (including, without limitation, the preferential rights, if any, of holders of any other class of Units of the applicable Series), all property and all Free Cash Flows in excess of that required to discharge liabilities as provided in Section 12.3(b) shall be distributed to the holders of the Units of the Series on an equal per Unit basis.
Section 12.4 Cancellation of Certificate of Formation. In the case of a dissolution of the Company, upon the completion of the distribution of all Free Cash Flows and property in connection the termination of all Series (other than the reservation of amounts for payments in respect of the satisfaction of liabilities of the Company or any Series), the Certificate of Formation and all qualifications of the Company as a foreign limited liability company in jurisdictions other than Delaware shall be canceled and such other actions as may be necessary to terminate the Company shall be taken by the Liquidator or the Managing Member, as applicable.
Section 12.5 Return of Contributions. None of any Member, the Managing Member or any Officer of the Company or associated with any Series or any of their respective Affiliates, officers, directors, members, shareholders, employees, managers, partners, controlling persons, agents or independent contractors will be personally liable for, or have any obligation to contribute or loan any monies or property to the Company or any Series to enable it to effectuate, the return of the Capital Contributions of the Economic Members associated with a Series, or any portion thereof, it being expressly understood that any such return shall be made solely from Series Assets.
Section 12.6 Waiver of Partition. To the maximum extent permitted by law, each Member hereby waives any right to partition of the Company or Series Assets.
Section 12.7 Liquidation of the Company.
(a) If the Company is dissolved pursuant to this ARTICLE XII, as promptly as possible after dissolution and again after final liquidation, the Liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company's assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable.
(b) Subject to the right of the Liquidator to set up such cash reserves as may be deemed reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company, the proceeds of the liquidation and any other funds of the Company shall be distributed to:
(i) creditors, in the order of priority as provided by law; including, to the extent permitted by law, Members who are creditors;
(ii) Members as creditors, to the extent they did not receive distributions pursuant to paragraph 12.7(b)(i), and to Members in satisfaction of the Company's liability for distributions; and
(iii) Members in accordance with the priorities set forth in Section 7.5.
ARTICLE XIII - AMENDMENT OF AGREEMENT, SERIES DESIGNATION
Section 13.1 General. Except as provided in Section 13.2, the Managing Member may amend any of this Agreement’s terms or any Series Designation as it determines in its sole discretion and without the consent of any of the Economic Members. Without limiting the foregoing, the Managing Member, without the approval of any Economic Member, may amend any provision of this Agreement or any Series Designation, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:
(a) a change that the Managing Member determines to be necessary or appropriate in connection with any action taken or to be taken by the Managing Member pursuant to the authority granted in ARTICLE V of this Agreement;
(b) a change in the name of the Company, the location of the principal place of business of the Company, the registered agent of the Company or the registered office of the Company;
(c) the admission, substitution, withdrawal or removal of Members in accordance with this Agreement or any Series Designation;
(d) a change that the Managing Member determines to be necessary or appropriate to qualify or continue the qualification of the Company as a limited liability company under the laws of any state or to ensure that each Series will continue to be taxed as an entity for U.S. federal income tax purposes;
(e) a change that the Managing Member determines to be necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including the Delaware Act);
(f) a change that the Managing Member determines to be necessary, desirable or appropriate to facilitate the trading of the Units (including, without limitation, the division of any class or classes or series of Outstanding Units into different classes or Series to facilitate uniformity of tax consequences within such classes or Series) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange or over-the-counter market on which Units are or will be listed for trading, compliance with any of which the Managing Member deems to be in the best interests of the Company and the Members;
(g) a change that is required to carry out the intent expressed in any Offering Document or the intent of this Agreement’s provisions or any Series Designation or is otherwise contemplated by this Agreement or any Series Designation;
(h) a change in the fiscal year or taxable year of the Company or any Series and any other changes that the Managing Member determines to be necessary or appropriate;
(i) an amendment that the Managing Member determines, based on the advice of counsel, to be necessary or appropriate to prevent the Company, the Managing Member, any Officers or any trustees or agents of the Company from in any manner being subjected to the provisions of the Investment Company Act, the Investment Advisers Act, or plan asset regulations adopted under ERISA, regardless of whether such regulations are substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor;
(j) an amendment that the Managing Member determines to be necessary or appropriate in connection with the establishment or creation of additional Series pursuant to Section 3.3 or the authorization, establishment, creation or issuance of any class or series of Units of any Series pursuant to Section 3.4 and the admission of Additional Economic Members;
(k) any other amendment other than an amendment expressly requiring consent of the Economic Members as set forth in Section 13.2; and
(l) any other amendments substantially similar to the foregoing.
Section 13.2 Certain Amendment Requirements. Notwithstanding the provisions of Section 13.1, no amendment to this Agreement shall be made without the consent of the Economic Members holding a majority of the Outstanding Units, that:
(a) decreases the percentage of Outstanding Units required to take any action hereunder;
(b) materially adversely affects the rights of any of the Economic Members (including adversely affecting the holders of any particular Series of Units as compared to holders of other series of Units);
(c) modifies Section 12.1(a) or gives any Person the right to dissolve the Company; or
(d) modifies the term of the Company.
Section 13.3 Amendment Approval Process. If the Managing Member desires to amend any provision of this Agreement or any Series Designation, other than as permitted by Section 13.1, then it shall first adopt a resolution setting forth the amendment proposed, declaring its advisability, and then call a meeting of the Members entitled to vote in respect thereof for the consideration of such amendment. Amendments to this Agreement or any Series Designation may be proposed only by or with the consent of the Managing Member. Such meeting shall be called and held upon notice in accordance with ARTICLE XIV of this Agreement. The notice shall set forth such amendment in full or a brief summary of the changes to be implemented thereby, as the Managing Member shall deem advisable. At the meeting, a vote of Members entitled to vote thereon shall be taken for and against the proposed amendment. A proposed amendment shall be effective upon its approval by the affirmative vote of the holders of not less than a majority of the Units of all Series then Outstanding, voting together as a single class, unless a greater percentage is required under this Agreement or by Delaware law. The Company shall deliver to each Member prompt notice of the adoption of every amendment made to this Agreement or any Series Designation pursuant to this ARTICLE XIII.
ARTICLE XIV - MEMBER MEETINGS
Section 14.1 Meetings. The Company shall not be required to hold an annual meeting of the Members. The Managing Member may, whenever it thinks fit, convene meetings of the Company or any Series. The non-receipt by any Member of a notice convening a meeting shall not invalidate the proceedings at that meeting.
Section 14.2 Quorum. No business shall be transacted at any meeting unless a quorum of Members is present at the time when the meeting proceeds to business; in respect of meetings of the Company, Members holding 50% of the Units, and in respect of meetings of any Series, Members holding 50% of the Units in such Series, present in person or by proxy shall be a quorum. If a quorum for a meeting is not present, the Managing Member may adjourn or cancel the meeting, as it determines in its sole discretion.
Section 14.3 Chairman. Any designee of the Managing Member shall preside as chairman of any meeting of the Company or any Series.
Section 14.4 Voting Rights. Subject to the provisions of any class or series of Units of any Series then Outstanding, the Members shall be entitled to vote only on those matters provided for under this Agreement’s terms.
Section 14.5 Extraordinary Actions. Except as specifically provided in this Agreement, notwithstanding any provision of law permitting or requiring any action to be taken or authorized by the affirmative vote of the holders of a greater number of votes, any such action shall be effective and valid if taken or approved by the affirmative vote of holders of Units entitled to cast a majority of all the votes entitled to be cast on the matter.
Section 14.6 Managing Member Approval. Other than as provided for in ARTICLE XI, the submission of any action of the Company or a Series to Members for their consideration shall first be approved by the Managing Member.
Section 14.7 Action by Members without a Meeting. Any Series Designation may provide that any action required or permitted to be taken by the holders of the Units to which such Series Designation relates may be taken without a meeting by the written consent of such holders or Members entitled to cast a sufficient number of votes to approve the matter as required by statute or this Agreement, as the case may be.
Section 14.8 Managing Member. Unless otherwise expressly provided in this Agreement, the Managing Member or any of its Affiliates who hold any Units shall not be entitled to vote in its capacity as holder of such Units on matters submitted to the Members for approval, and no such Units shall be deemed Outstanding for purposes of any such vote.
ARTICLE XV - CONFIDENTIALITY
Section 15.1 Confidentiality Obligations.
(a) All information contained in the accounts and reports prepared in accordance with ARTICLE IX and any other information disclosed to an Economic Member under or in connection with this Agreement is confidential and non-public. Each Economic Member further acknowledges that as a consequence of his or her relationship with the Company, any Series, any Economic Member and any Series Assets, including in connection with such Economic Member’s rights to information under Section 15.2 or his or her right to inspect the books and records and obtain other information under Section 9.1 and the Delaware Act, trade secrets and information of a proprietary or confidential nature relating to the business of the Company or one or more Series will be disclosed to and developed by such Economic Member, including, without limitation, information about the condition, health, fitness, soundness of the Thoroughbred assets owned by the Series and plans, information regarding the financial status, customers, profits, profit margins, and any other information about the Company or any Series that may not be known generally or publicly outside of the Company, the Series and the Economic Members, in any format whatsoever (including oral, written, electronic or any other form or medium) (collectively, “Confidential Information”).
(b) Each Economic Member undertakes to hold all Confidential Information in confidence. No Economic Member shall, and each Economic Member shall ensure that every person connected with or associated with that Economic Member shall not, disclose to any person or use to the detriment of the Company, any Series, any Economic Member or any Series Assets any Confidential Information which may have come to its knowledge concerning the affairs of the Company, any Series, any Economic Member, any Series Assets or any potential Series Assets, and each Economic Member shall use any such Confidential Information exclusively for the purposes of monitoring and evaluating its investment in the Company. This Section 15.1 is subject to Section 15.2 and Section 15.3.
Section 15.2 Exempted Information. The obligations set out in Section 15.1 shall not apply to any information which:
(a) is public knowledge and readily publicly accessible as of the date of such disclosure;
(b) becomes public knowledge and readily publicly accessible, other than as a result of a breach of this ARTICLE XV; or
(c) has been publicly filed with the U.S. Securities and Exchange Commission.
Section 15.3 Permitted Disclosures. The restrictions on disclosing confidential information set out in Section 15.1 shall not apply to the disclosure of confidential information by an Economic Member:
(a) to any person, with the prior written consent of the Managing Member (which may be given or withheld in the Managing Members sole discretion);
(b) if required by law, rule or regulation applicable to the Economic Member (including without limitation disclosure of the tax treatment or consequences thereof), or by any Governmental Entity having jurisdiction over the Economic Member, or if requested by any Governmental Entity having jurisdiction over the Economic Member, but in each case only if the Economic Member (unless restricted by any relevant law or Governmental Entity): (i) provides the Managing Member with reasonable advance notice of any such required disclosure; (ii) consults with the Managing Member prior to making any disclosure, including in respect of the reasons for and content of the required disclosure; and (iii) takes all reasonable steps permitted by law that are requested by the Managing Member to prevent the disclosure of confidential information (including (a) using reasonable endeavors to oppose and prevent the requested disclosure and (b) returning to the Managing Member any confidential information held by the Economic Member or any person to whom the Economic Member has disclosed that confidential information in accordance with this Section); or
(c) to its trustees, officers, directors, employees, legal advisers, accountants, investment managers, investment advisers and other professional consultants who would customarily have access to such information in the normal course of performing their duties, but subject to the condition that each such person is bound either by professional duties of confidentiality or by an obligation of confidentiality in respect of the use and dissemination of the information no less onerous than this ARTICLE XV.
ARTICLE XVI - GENERAL PROVISIONS
Section 16.1 Addresses and Notices.
(a) Any notice to be served in connection with this Agreement shall be served in writing (which, for the avoidance of doubt, shall include e-mail) and any notice or other correspondence under or in connection with this Agreement shall be delivered to the relevant party at the address given in this Agreement (or, in the case of an Economic Member, in its Form of Adherence) or to such other address as may be notified in writing for the purposes of this Agreement to the party serving the document and that appears in the books and records of the relevant Series. The Company intends to make transmissions by electronic means to ensure prompt receipt and may also publish notices or reports on a secure electronic application owned by the Managing Member or an Affiliate of the Managing Member to which all Members have access, and any such publication shall constitute a valid method of serving notices under this Agreement.
(b) Any notice or correspondence shall be deemed to have been served as follows:
(i) in the case of hand delivery, on the date of delivery if delivered before 5:00 p.m. on a Business Day and otherwise at 9:00 a.m. on the first Business Day following delivery;
(ii) in the case of service by U.S. registered mail, on the third Business Day after the day on which it was posted;
(iii) in the case of email (subject to oral or electronic confirmation of receipt of the email in its entirety), on the date of transmission if transmitted before 5:00 p.m. on a Business Day and otherwise at 9:00 a.m. on the first Business Day following transmission; and
(iv) in the case of notices published on an electronic application, on the date of publication if published before 5:00 p.m. on a Business Day and otherwise at 9:00 a.m. on the first Business Day following publication.
(c) In proving service (other than service by e-mail), it shall be sufficient to prove that the notice or correspondence was properly addressed and left at or posted by registered mail to the place to which it was so addressed.
(d) Any notice to the Company (including any Series) shall be deemed given if received by any member of the Managing Member at the principal office of the Company designated pursuant to Section 2.3. The Managing Member and the Officers may rely and shall be protected in relying on any notice or other document from an Economic Member or other Person if believed by it to be genuine.
Section 16.2 Further Action. The parties to this Agreement shall execute and deliver all documents, provide all information and take or refrain from acting as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 16.3 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 16.4 Integration. This Agreement, together with the applicable Form of Adherence and applicable Series Designation, constitute the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
Section 16.5 Creditors. None of this Agreement’s provisions shall be for the benefit of, or shall be enforceable by, any creditor of the Company or any Series.
Section 16.6 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.
Section 16.7 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto (which signature may be provided electronically) or, in the case of a Person acquiring a Unit, upon acceptance of its Form of Adherence.
Section 16.8 Applicable Law and Jurisdiction.
(a) This Agreement and the rights of the parties shall be governed by and construed in accordance with Delaware law. Non-contractual obligations (if any) arising out of or in connection with this agreement (including its formation) shall also be governed by Delaware law. The rights and liabilities of the Members in the Company and each Series and as between them shall be determined pursuant to the Delaware Act and this Agreement. To the extent the rights or obligations of any Member are different by reason of any provision of this Agreement than they would otherwise be under the Delaware Act in the absence of any such provision, or even if this Agreement is inconsistent with the Delaware Act, this Agreement shall control, except to the extent the Delaware Act prohibits any particular provision of the Delaware Act to be waived or modified by the Members, in which event any contrary provisions hereof shall be valid to the maximum extent permitted under the Delaware Act.
(b) To the fullest extent permitted by applicable law, any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with this Agreement, or the transactions contemplated hereby shall be brought in Delaware Chancery Court, and each Member hereby consents to the exclusive jurisdiction of the Delaware Chancery Court (and of the appropriate appellate courts therefrom) in any suit, action or proceeding, and irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. To the fullest extent permitted by applicable law, each Member hereby waives the right to commence an action, suit or proceeding seeking to enforce any provisions of, or based on any matter arising out of or in connection with this Agreement, or the transactions contemplated hereby or thereby in any court outside of the Delaware Chancery Court except to the extent otherwise explicitly provided herein. The provisions of this Section 16.8(b) shall not be applicable to an action, suit or proceeding to the extent it pertains to a matter as to which the claims are exclusively vested in the jurisdiction of a court or forum other than the Delaware Chancery Court, or if the Delaware Chancery Court does not have jurisdiction over such matter.
(c) Process in any suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any court. Without limiting the foregoing, each party agrees that service of process on such party by written notice pursuant to Section 16.1 will be deemed effective service of process on such party.
(d) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EVERY PARTY TO THIS AGREEMENT AND ANY OTHER PERSON WHO BECOMES A MEMBER OR HAS RIGHTS AS AN ASSIGNEE OF ANY PORTION OF ANY MEMBER’S MEMBERSHIP INTEREST HEREBY WAIVES ANY RIGHT TO A JURY TRIAL AS TO ANY MATTER UNDER THIS AGREEMENT OR IN ANY OTHER WAY RELATING TO THE COMPANY OR THE RELATIONS UNDER THIS AGREEMENT OR OTHERWISE AS TO THE COMPANY AS BETWEEN OR AMONG ANY SAID PERSONS.
Section 16.9 Invalidity of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
Section 16.10 Consent of Members. Each Member hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Members, such action may be so taken upon the concurrence of less than all of the Members and each Member shall be bound by the results of such action.
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Signature page to Limited Liability Company Agreement of
Commonwealth Thoroughbreds LLC
IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.
| MANAGING MEMBER: |
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COMMONWEALTH MARKETS INC. | |||
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| By: | /s/ Brian Doxtator |
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| Brian Doxtator |
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Chief Executive and Chief Financial Officer | |||
COMPANY: | |||
COMMONWEALTH THOROUGHBREDS LLC | |||
By: Commonwealth Markets Inc., its managing member | |||
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By: | /s/ Brian Doxtator | ||
Brian Doxtator | |||
Chief Executive and Chief Financial Officer |
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