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HomeMy WebLinkAboutL_Limited_Liability_Agreement_180330_v15 t LIMITED LIABILITY COMPANY AGREEMENT OF OB RENTON PROPERTIES, LLC (a Washington Limited Liability Company) Date and Effective as of November 11,2011 LIMITED LIABILITY COMPANY AGREEMENT OF OB RENTON PROPERTIES, LLC THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement”) is made and entered into effective as of November 11, 2011, by and among the Persons whose signatures appear on the signature page hereof. ARTICLE 1 - DEFINITIONS The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein): Act" means the Washington Limited Liability Company Act. "Affiliate" means, with respect to any Person, (i) any other Person directly or indirectly controlling, controlled by, or under common control with such Person, (ii) any Person owning or controlling fifty-one percent (51%) or more of the outstanding voting interests of such Person, (iii) any officer, director, or general partner of such Person, or (iv) any Person who is an officer, director, general partner, trustee, or holder of fifty-one percent (51%) or more of the voting interests of any Person described in clauses (i) through (iii). For purposes of this definition, the term "controls," "is controlled by," or "is under common control with" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Capital Account" means the capital account determined and maintained for each Unit Holder pursuant to Section 8.3. "Capital Contribution" means any contribution to the capital of the Company in cash or property by a Member whenever made. "Certificate of Formation" means the certificate of information pursuant to which the Company was formed, as originally filed with the office of the Secretary of State on March 25, 2003, and as amended from time to time. "Code" means the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding federal revenue laws. Company" means "OB Renton Properties, LLC1 "Company Minimum Gain" has the same meaning as the term "partnership minimum gain" in Regulation Sections 1.704-2(b)(2) and 1.704-2(d). 2LLC AGREEMENT "Deficit Capital Account11 means with respect to any Unit Holder, the deficit balance, if any, in such Unit Holder's Capital Account as of the end of the taxable year, after giving effect to the following adjustments: (i) credit to such Capital Account any amount that such Unit Holder is obligated to restore to the Company under Regulation Section 1.704-l(b)(2)(ii)(c), as well as any addition thereto pursuant to the next to last sentences of Regulation Sections 1.7042(g)(1) and (i)(5); and (ii) debit to such Capital Account the items described in Regulation Sections 1.704-l(b)(2)(ii)(d)(4), (5) and (6). This definition of is intended to comply with the provisions of Regulation Sections 1.704-l(b)(2)(ii)(d) and 1.704-2, and will be interpreted consistently with those provisions. "Distributable Cash" means all cash received by the Company, less the sum of the following to the extent paid or set aside by the Company: (i) all principal and interest payments on indebtedness of the Company and other sums paid or payable to lenders; (ii) all cash expenditures incurred incident to the normal operation of the Company's business; and (iii) Reserves. "Economic Interest" means a Unit Holder's share of Net Profits, Net Losses, and other tax items of the Company and distributions of the Company's assets pursuant to this Agreement and the Act, but shall not include any right to participate in the management or affairs of the Company, including, the right to vote on, consent to or otherwise participate in any decision of the Members. 'Economic Interest Owner" means the owner of an Economic Interest who is not a Member. "Entity" means any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any other organization that is not a natural person. “Incapacity” means the physical or mental inability to manage ones personal or financial affairs as determined by an independent physician selected by the Company and the subject Member (or his or her guardian or other duly authorized representative, as the case may be) and in the event of a failure to agree by the Court with jurisdiction in the subject Member’s place of residency "Majority Interest" means, at any time, more than fifty percent (50%) of the then outstanding Units held by Members. "Manager" means the Persons designated as Managers in Section 5.1 hereof and any other Person who may become a substitute or additional Manager as provided in Article 5. 3LLC AGREEMENT "Member” means each Person who executes a counterpart of this Agreement as a Member and each Person who may hereafter become a Member. To the extent a Manager has purchased a Membership Interest in the Company, it will have all the rights of a Member with respect to such Membership Interest, and the term "Member" as used herein shall include a Manager to the extent it has purchased a Membership Interest in the Company. If a Person is a Member immediately prior to the acquisition by such Person of an Economic Interest, such Person shall have all the rights of a Member with respect to such Economic Interest. "Membership Interest" means all of a Member's share in the Net Profits, Net Losses, and other tax items of the Company and distributions of the Company's assets pursuant to this Agreement and the Act and all of a Member's rights to participate in the management or affairs of the Company, including the right to vote on, consent to or otherwise participate in any decision of the Members . "Member Minimum Gain" has the same meaning as the term "partner nonrecourse debt minimum gain" in Regulation Section 1.704-2(i). "Member Nonrecourse Deductions" has the same meaning as the term "partner nonrecourse deductions" in Regulation Sections 1.7042(i)(l) and (2). The amount of Member Nonrecourse Deductions for a Company fiscal year shall be determined in accordance with Regulation Section 1.704-2(i)(2). 'Net Profits" and "Net Losses" shall have the meaning ascribed to those terms in Section 9.5. "Nonrecourse Deductions" has the meaning set forth in Regulation Section 1.704-2(b)(l). The amount of Nonrecourse Deductions for a Company fiscal year shall be determined pursuant to Regulation Section 1.704-2(c). 'Nonrecourse Liability" has the meaning set forth in Regulation Section 1.704-2(b)(3). "Percentage Interest" means with respect to any Unit Holder the percentage determined based upon the ratio that the number of Units held by such Unit Holder bears to the total number of outstanding Units. "Person" means any individual or Entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such "Person" where the context so permits. "Regulations" includes proposed, temporary and final Treasury regulations promulgated under the Code and the corresponding sections of any regulations subsequently issued that amend or supersede such regulations. "Reserves" means, with respect to any fiscal period, funds set aside or amounts allocated during such period to reserves which shall be maintained in amounts deemed sufficient by the Manager for working capital and to pay taxes, insurance, debt service or other costs or expenses 4LLC AGREEMENT I incident to the ownership or operation of the Company's business. 'Unit Holder" means a Person who is a Member or an Economic Interest Owner. “Unit” means the basic economic ownership interest in the Company, which entitles the holder to the rights and privileges of a Member of the Company, including a share of the net profits, net losses, and other tax items of the Company, as well as distributions of the Company’s assets as provided in this Agreement and the Act. The Company shall issue A Units and B Units (collectively referred to herein as “Units”), and these Units shall have all of the same rights and privileges under this Agreement, except for the voting rights described below. A Member who transfers or otherwise disposes of all of his/her/its Units shall thereby cease to be a Member of the Company. ! • A Units. Holder of A Units shall be entitled to one vote on all matters requiring Member approval, for each A Unit owned by them. • B Units. Except for the voting rights specifically authorized for holders of B Units in Section 4.2 hereof, holders of B Units shall have no voting rights. ARTICLE 2 - FORMATION OF COMPANY 2.1 Formation . The Company was formed when the Certificate of Formation was executed and filed with the office of the Secretary of State in accordance with and pursuant to the Act. The primary purpose of the Company is to own, develop and manage real estate. 2.2 Name . The name of the Company is "OB Renton Properties, LLC 2.3 Principal Place of Business . The principal place of business of the Company shall be P.O. Box 726, Bellevue, WA 98009. The Company may locate its places of business at any other place or places as the Manager may from time to time deem advisable. 2.4 Registered Office and Registered Agent . The Company's initial registered agent and the address of its initial registered office in the State of Washington is as follows: P.O. Box 726 Bellevue, WA 98009 Michael O’Brien The registered office and registered agent may be changed by the Manager from time to time by filing an amendment to the Certificate of Formation. 2.5 Term. The term of the Company shall be perpetual, unless the Company is earlier dissolved in accordance with either Article 14 or the Act. 2.6 Authorized Units. The Company is authorized to issue 200,000 A Units and 5LLC AGREEMENT 200,000 B Units to its Members. If authorized in writing by all the Members holding A Units, the Manager shall issue additional Units. The initial Members, number of Units issued to them, and initial capital contributed therefore are as set forth on Schedule 2.6 attached hereto and incorporated herein by this reference. ARTICLE 3 - BUSINESS OF COMPANY The business of the Company shall be: (a) to own, manage, and lease real property and to carry on any lawful business or activity which may be conducted by a limited liability company organized under the Act; and (b) to exercise all other powers necessary to or reasonably connected with the Company's business which may be legally exercised by limited liability companies under the Act. ARTICLE 4 - NAMES AND ADDRESSES OF MEMBERS The names and addresses of the Members are set forth on attached Schedule 2.6, as amended or restated from time to time. ARTICLE 5 - MANAGERS; RIGHTS AND DUTIES 5.1 Management. The business and affairs of the Company shall be managed by the Manager. The following person shall serve as Manager of the Company: Michael O’Brien, and in the event of his disability, unwillingness to act, resignation, removal, or death, the fiduciaries designated under his Last Will and Testament, including trusts created thereunder, and fiduciaries designated by him in inter vivos trusts. Managers are sometimes collectively referred to as the "Manager." Except as otherwise expressly provided in this Agreement, the Manager shall have full and complete authority, power and discretion to manage and control the business, affairs and properties of the Company, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Company's business. At any time when there is more than one Manager, both Managers must jointly take action as is permitted by the Act. Without limiting the generality of the foregoing, the Manager shall have power and authority, on behalf of the Company: (i) to acquire property from any Person as the Manager may determine, and the fact that a Manager or a Member is an Affiliate of such Person shall not prohibit the Manager from dealing with that Person; (ii) to borrow money from financial institutions, the Manager, Members, or Affiliates of the Manager or Members on such terms as the Manager deems appropriate, and in connection therewith, to hypothecate, encumber and grant security interests in the assets of the 6LLC AGREEMENT i Company to secure repayment of the borrowed sums; (iii) to purchase liability and other insurance to protect the Company's property and business; (iv) except as provided in Section 6.3, to acquire, improve, manage, charter, operate, sell, transfer, exchange, encumber, pledge or dispose of any real or personal property of the Company; (v) to invest Company funds temporarily in time deposits, short-term governmental obligations, commercial paper or other short-term investments; (vi) to execute instruments and documents, including without limitation, checks, drafts, notes and other negotiable instruments, mortgages or deeds of trust, security agreements, financing statements, documents providing for the acquisition, mortgage or disposition of the Company's property, assignments, bills of sale, leases, partnership agreements, operating agreements of other limited liability companies, and any other instruments or documents necessary, in the opinion of the Manager, to the business of the Company; (vii) to employ accountants, legal counsel, managing agents or other experts to perform services for the Company and to compensate them from Company funds; (viii) to enter into any and all other agreements with any other Person for any purpose, in such form as the Manager may approve; (ix) from time to time open bank accounts in the name of the Company, and the Manager shall be the sole signatory thereon, unless the Manager determines otherwise; and (x) to do and perform all other acts as may be necessary or appropriate to the conduct of the Company's business. Unless authorized to do so by this Agreement or by the Manager, no Member, employee or other agent of the Company shall have any power or authority to bind the Company in any way, to pledge its credit or to render it liable for any purpose. 5.2 Compensation. The Managers shall receive monthly compensation as may hereafter be agreed to. The Manager shall also be reimbursed by the Company for reasonable out-of-pocket expenses incurred by the Manager in connection with the Company's business, including without limitation expenses incurred in the organization of the Company (as shall Members) and the placement of the Units. 5.3 Limitation on Liability; Indemnification. 5.3.1 Each Member's and Manager's liability shall be limited as set forth in this Agreement, the Act and other applicable law, to the fullest extent provided by law and consistent LLC AGREEMENT 7 with this Agreement. No Member or Manager shall be personally liable, based upon the status of being a Member and/or Manager, as the case may be, for any debts or losses of the Company beyond a Member's liability for his respective capital contributions as provided herein, or an obligation, if any, of a Member to make additional capital contributions already approved in accordance with this Agreement, except as otherwise provided by law. 5.3.2 The Company shall indemnify the Members and Managers for all costs, losses, liabilities, and damages paid or accrued by such Member or Manager, and advance expenses incurred by the Member or Manager, in connection with the business of the Company, to the fullest extent provided or allowed by the laws of Washington, except that the Company shall not be liable to indemnify any Member or Manager for any costs, losses, liabilities or damages to the extent arising from: (a) Any breach of a Member's or Manager's duty of loyalty to the Company or its Members as described in this Agreement or in the Act; (b) Acts or omissions not in good faith which involve intentional misconduct or a knowing violation of law; (c) Any unlawful distribution under the Act; or (d) Any transaction from which the Member or Manager derives an improper personal benefit. 5.3.3 Any indemnification required to be made by the Company shall be made promptly following the fixing of the liability, loss, damage, cost or expense incurred or suffered by a final judgment of any court, settlement, contract or otherwise. In addition, the Company may advance funds to a Person claiming indemnification under this Section 5.3 for legal expenses and other costs incurred as a result of a legal action brought against such Person only if (i) the legal action relates to the performance of duties or services by the Person on behalf of the Company, (ii) the legal action is initiated by a party other than a Member, and (iii) such Person undertakes to repay the advanced funds to the Company if it is determined that such Person is not entitled to indemnification pursuant to the terms of this Agreement. 5.4 Removal. At a meeting called expressly for that purpose, the Manager may be removed at any time, with or without cause, by the affirmative vote of the holders of not less than 67% of the issued A Units. The removal of a Manager who is also a Member shall not affect the Manager's rights as a Member and shall not constitute a withdrawal of a Member. 5.5 Vacancies. Subject to successor designation as provided in Section 5.1, the vacancy of a Manager shall be filled by the affirmative vote of Members owning 51% of the outstanding A Units. ARTICLE 6 -RIGHTS AND OBLIGATIONS OF MEMBERS 6.1 Limitation of Liability. Each Member's liability shall be limited as set forth in this 8LLC AGREEMENT I Agreement and the Act. 6.2 Liability for Company Obligations. Members shall not be personally liable for any debts, obligations or liabilities of the Company beyond their respective Capital Contributions and any obligation of the Members under Section 8.1 or 8.2 to make Capital Contributions, except as otherwise provided by law. 6.3 Approval of Sale of All Assets. The Company shall not sell, exchange or otherwise dispose of all, or substantially all, of its assets without the affirmative vote of the holders of 67% of the outstanding A Units held by Members. 6.4 Inspection of Records. Upon reasonable request, each Member shall have the right to inspect and copy at such Member's expense, during ordinary business hours the records required to be maintained by the Company pursuant to Section 11.5. 6.5 No Priority and Return of Capital. Except as expressly provided in Article 9 or 10, no Unit Holder shall have priority over any other Unit Holder, either as to the return of Capital Contributions or as to Net Profits, Net Losses or distributions; provided, that this Section 6.5 shall not apply to loans made by a Member to the Company. 6.6 Withdrawal of Member. Except as expressly permitted in this Agreement, no Member shall voluntarily resign or otherwise withdraw as a Member. Unless otherwise approved by Members holding 67% of the outstanding A Units, a Member who resigns or withdraws shall be entitled to receive only those distributions to which such Person would have been entitled had such Person remained a Member (and only at such times as such distribution would have been made had such Person remained a Member). Except as otherwise expressly provided herein, a resigning or withdrawing Member shall become an Economic Interest Owner. The remedy for breach of this Section 6.6 shall be monetary damages (and not specific performance), which may be offset against distributions by the Company to which such Person would otherwise be entitled. 6.7 Pre-emptive Right. Notwithstanding any other provision herein or as otherwise may be provided by the Act, Members shall have a pre-emptive right to acquire additional Units of the same class owned by them; provided, however, that Company shall not issue any additional Units unless approved by the Manager and Members holding not less than 67% of the then outstanding A Units. ARTICLE 7 - MEETINGS OF MEMBERS 7.1 Annual Meeting. The annual meeting of the Members shall be held on the third Tuesday of October of each year, or at such other time as shall be determined by the Members, for the purpose of the transaction of such business as may come before the meeting. 7.2 Special Meetings. Special meetings of the Members, for any purpose or purposes, may be called by the Manager or by Members holding at least 67% of the A Units held by Members or 50% of the B Units held by Members. 9LLC AGREEMENT 7.3 Place of Meetings. The Manager or the Members, if the Members call the meeting as provided in Section 7.2, may designate any place within King County, State of Washington, as the place of meeting for any meeting of the Members. If no designation is made, or if a special meeting is called, the place of meeting shall be the principal office of the Company specified in Section 2.3. 7.4 Notice of Meetings. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the Manager or the Members calling the meeting, to each Member. If mailed, such notice shall be deemed to be delivered two calendar days after being deposited in the United States Mail, addressed to the Member as specified in Section 16.1, with postage thereon prepaid. 7.5 Record Date. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjourmnent thereof, or Members entitled to receive payment of any distribution, the date on which notice of the meeting is mailed or the date on which the resolution declaring such distribution is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Section, such determination shall apply to any adjournment thereof. 7.6 Quorum. Members owning 67% or more of the outstanding A Units shall constitute a quorum at any meeting of Members, whether represented in person or by proxy. The Members present at a duly organized meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal during such meeting of that number of Units whose absence would cause less than a quorum. 7.7 Manner of Acting. If a quorum is present, the affirmative vote of Members holding more than 50% of the A Units represented at the meeting in person or by proxy shall be the act of the Members, except as otherwise provided herein. 7.8 Proxies. At all meetings of Members an A Unit Member may vote in person or by proxy executed in writing by the Member. Such proxy shall be filed with the Manager before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. 7.9 Action by Members Without a Meeting. Action required or permitted to be taken at a meeting of Members may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, executed by Members entitled to vote thereon and delivered to the Manager for inclusion in the Company's minutes. Action taken under this Section 7.9 is effective when all Members entitled to vote thereon have signed such consents. Unless such consents specify different effective date, the record date for determining Members entitled to take action without a meeting shall be the date the first Member signs a consent. 10LLC AGREEMENT 7.10 Waiver of Notice. When any notice is required to be given to a Member, a waiver thereof in writing signed by the Member entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice. 7.11 Voting Rights of Members. On matters set forth in this Agreement or in the Act requiring a vote of the A Unit Members, each A Unit Member shall have one vote per A Unit owned by such Member. 7.12 No Participation in Management. Except as otherwise set forth in this Agreement or in the Act, Members shall take no part in the management or control of the Company business, and shall have no right or authority to act for the Company or to vote on matters. 7.13 Telephonic Meetings. With respect to a particular meeting or generally with respect to future meetings, any or all Members may participate in the meeting by, or may permit the conduct of the meeting through, use of any means of communication by which all Members participating may simultaneously hear each other; provided the notice of such a meeting shall state that the Members may participate in such a fashion and describe how any Member may notify the Company of the Member's desire to be included in the meeting. A Member participating in such a meeting is deemed to be present in person at such meeting. CONTRIBUTIONS TO THE COMPANY AND CAPITALARTICLE 8 ACCOUNTS 8.1 Members' Capital Contributions. Each Member shall contribute such amount as is set forth in attached Schedule 2.6 as such Member's share of the Members' Capital Contribution. Members shall not be required to make additional Capital Contributions except upon the affirmative vote of Members owning at least 67% of the outstanding A Units. Each Member shall pay to the Company any such additional Capital Contribution no later than thirty (30) days following the date of such affirmative vote approving the same. Nothing contained in this Section 8.2 is or shall be deemed to be for the benefit of any Person other than the Members and the Company, and no such Person shall under any circumstances have any right to compel any actions or payments by the Members. 8.2 Additional Contributions. 8.3 Capital Accounts. 8.3.1 Establishment and Maintenance. A separate Capital Account will be maintained for each Unit Holder throughout the term of the Company in accordance with the rules of Regulation Section 1,704-I(b)(2)(iv). Each Unit Holder's Capital Account will be increased by (1) the amount of money contributed by such Unit Holder to the Company; (2) the fair market value of property contributed by such Unit Holder to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take the property subject to under Code Section 752); (3) allocations to such Unit Holder of Net Profits; (4) any items in the nature of income and gain that are specially allocated to the Unit Holder pursuant to Sections 9.2 and 9.3; and (5) allocations to such Unit Holder of income and gain exempt from federal income tax. Each Unit Holder's Capital Account will be decreased by (1) 11LLC AGREEMENT I the amount of money distributed to such Unit Holder by the Company; (2) the fair market value of property distributed to such Unit Holder by the Company (net of liabilities secured by such distributed property that such Unit Holder is considered to assume or take the property subject to Code Section 752); (3) allocations to such Unit Holder of expenditures described in Code Section 705(a)(2)(B); (4) any items in the nature of deduction and loss that are specially allocated to the Unit Holder pursuant to Sections 9.2 and 9.3; and (5) allocations to such Unit Holder of Net Losses. In the event of a permitted sale or exchange of a Membership Interest or an Economic Interest in the Company, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent it relates to the transferred Membership Interest or Economic Interest. 8.3.2 Compliance with Regulations. The manner in which Capital Accounts are to be maintained pursuant to this Section 8.3 is intended to comply with the requirements of Code Section 704(b) and the Regulations promulgated thereunder. If in the opinion of the Company's legal counsel or accountants the manner in which Capital Accounts are to be maintained pursuant to the preceding provisions of this Section 8.3 should be modified in order to comply with Code Section 704(b) and the Regulations thereunder, then notwithstanding anything to the contrary contained in the preceding provisions of this Section 8.3, the method in which Capital Accounts are maintained shall be so I modified; provided, however, that any change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among the Members. 8.4 Withdrawal or Reduction of Members’ Contributions to Capital. A Member shall not receive out of the Company's property any part of its Capital Contribution until all liabilities of the Company, except liabilities to Members on account of their Capital Contributions, have been paid or there remains property of the Company sufficient to pay them. A Member, irrespective of the nature of its Capital Contribution, has only the right to demand and receive cash in return for its Capital Contribution. 8.5 Interest on and Return of Capital Contributions. No Member shall be entitled to interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise specifically provided for herein ARTICLE 9 -ALLOCATIONS OF NET PROFITS AND LOSSES 9.1 Allocation of Net Profit and Loss In General. 9.1.1 Allocation of Net Profit or Loss. After giving effect to the special allocations set forth in Schedule 9.1.1, the Net Profit or Net Loss for any fiscal year of the Company shall be allocated among the Unit Holders in accordance with their respective Percentage Interests. 9.1.2 Limitation. The Net Loss allocated to each Member for any Company fiscal year pursuant to Section 9.1.1 shall not exceed the maximum amount of Net Loss that can be so allocated without causing such Member to have a Deficit Capital Account at the end of the fiscal year. All Net Losses in excess of the limitation set forth in this Section 9.1.2 shall be 12LLC AGREEMENT ( allocated to the other Unit Holders who do not have Deficit Capital Accounts in proportion to their respective Percentage Interests. ARTICLE 10 - DISTRIBUTIONS 10.1 Cash Distributions. 10.1.1 Non-liquidating Distribution. Distributions of Distributable Cash, other than distributions in liquidation pursuant to Section 10.1.2, shall be made to the Unit Holders as the Managers shall determine from time to time, provided however, each year (or more frequently) a distribution in the amount of the federal and state income taxes to be paid by Members on the income of the Company must be made and shall be paid by the Company on behalf of the Member, and (ii) the balance of Distributable Cash shall be made to the Members. 10.1.2 Distributions in Liquidation. Notwithstanding Section 10.1.1, distributions in liquidation of the Company shall be made to each Unit Holder in the manner set forth in Section 14. 10.2 Distributions in Kind. Non-cash assets, if any, shall be distributed in a manner that reflects how cash proceeds from the sale of such assets for fair market value would have been distributed (after any unrealized gain or loss attributable to such non-cash assets has been allocated among the Unit Holders in accordance with Article 9). 10.3 Withholding; Amounts Withheld Treated as Distributions. The Manager is authorized to withhold from distributions, or with respect to allocations or payments, to Unit Holders and to pay over to the appropriate federal, state or local governmental authority any amounts required to be withheld pursuant to the Code or provisions of applicable state or local law. All amounts withheld pursuant to the preceding sentence in connection with any payment, distribution or allocation to any Unit Holder shall be treated as amounts distributed to such Unit Holder pursuant to this Article 10 for all purposes of this Agreement. 10.4 Limitation Upon Distributions. No distribution shall be declared and paid unless, after the distribution is made, the assets of the Company are in excess of all liabilities of the Company, except liabilities to Members on account of their contributions. ARTICLE 11 -ACCOUNTING, BOOKS, AND RECORDS 11.1 Accounting Principles. The Company's books and records shall be kept, and its income tax returns prepared, under such permissible method of accounting, consistently applied, as the Manager determines is in the best interest of the Company and its Members. 11.2 Interest on and Return of Capital Contributions. No Member shall be entitled to interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise specifically provided for herein. 11.3 Loans to Company. Subject to the powers of a Manager and the rights of Members, 13LLC AGREEMENT nothing in this Agreement shall prevent any Member from making secured or unsecured loans to the Company. f11.4 Accounting Period. The Company's accounting period shall be the calendar year. 11.5 Records, Audits and Reports. At the expense of the Company, the Manager shall maintain records and accounts of all operations and expenditures of the Company and make all available to inspection and copying by Members upon request. At a minimum the Company shall keep at its principal place of business the following records: (a) A current list and past list, setting forth the full name and last known mailing address of each Member, Economic Interest Owner and Manager; (b) A copy of the Certificate of Formation and all amendments thereto; (c) Copies of this Agreement and all amendments hereto; (d) Copies of the Company's federal, state, and local tax returns and reports, if any, for the three most recent years; (e) Minutes of every meeting of the members and any written consents obtained from Members for actions taken by Members without a meeting; and (I) Copies of the Company's financial statements for the three most recent years. 11.6 Tax Matters Partner . 11.6.1 Designation. Michael O’Brien shall be the "tax matters partner" of the Company for purposes of Code Section 6221 et seq. and corresponding provisions of any state or local tax law. 11.6.2 Expenses of Tax Matters Partner; Indemnification. The Company shall indemnify and reimburse the tax matters partner for all reasonable expenses, including legal and accounting fees, claims, liabilities, losses and damages incurred in connection with any administrative or judicial proceeding with respect to the tax liability of the Unit Holders attributable to the Company. The payment of all such expenses shall be made before any distributions are made to Unit Holders (and such expenses shall be taken into consideration for purposes of determining Distributable Cash) or any discretionary Reserves are set aside by the Manager. Neither the tax matters partner nor any Member shall have any obligation to provide funds for such purpose. The provisions for exculpation and indemnification of the Manager set forth in Section 5.3 of this Agreement shall be fully applicable to the Member acting as tax matters person for the Company. 11.7 Returns and Other Elections. The Manager shall cause the preparation and timely filing of all tax and information returns required to be filed by the Company pursuant to the Code 14LLC AGREEMENT and all other tax and information returns deemed necessary and required in each jurisdiction in which the Company does business. Copies of such returns, or pertinent information therefrom, shall be furnished to the Unit Holders within a reasonable time after the end of the Company's fiscal year. Except as otherwise expressly provided to the contrary in this Agreement, all elections permitted to be made by the Company under federal or state laws shall be made by the Manager in his or its sole discretion. ARTICLE 12 - TRANSFERABILITY 12.1 General . Except as otherwise expressly provided in this Agreement, neither a Member nor an Economic Interest Owner shall have the right to: (a) sell, assign, pledge, transfer, exchange or otherwise transfer for or without consideration, (collectively, "sell" or "sale") all or any part of his/its Membership Interest or Economic Interest, or (b) gift, bequeath or otherwise transfer for no consideration whether or not by operation of law (collectively "gift"), except in the case of bankruptcy, all or any part of his/its Membership Interest or Economic Interest. Each Member and Economic Interest Owner hereby acknowledges the reasonableness of the restrictions on sale and gift of Membership Interests and Economic Interests imposed by this Agreement in view of the Company's purposes and the relationship of the Members and Economic Interest Owners. Accordingly, the restrictions on sale and gift contained herein shall be specifically enforceable. If consented to by all other Members, if any Unit Holder pledges or otherwise encumbers any of its Membership Interest or Economic Interest as security for repayment of a liability, any such pledge or hypothecation shall be made pursuant to a pledge or hypothecation agreement that requires the pledgee or secured party to be bound by all the terms and conditions of this Article 12. Notwithstanding the foregoing, (i) Michael O’Brien may sell or gift his Units without restriction. Other Unit Holders and Economic Interest Holders are precluded from selling or gifting Units and Economic Interests to other than Michael O’Brien or his lineal descendants without first complying with Section 12.2. 12.2 First Refusal Rights. (a) A Unit Holder or Economic Interest Holder desiring to gift or sell all or any portion of its Membership Interest or Economic Interest to a third party shall obtain from such third party purchaser a bona fide written offer to purchase such Interest, stating the terms and conditions upon which the purchase is to be made and the consideration offered therefore. Such Unit Holder shall give written notice to the other Unit Holders and the Manager of its intention to so transfer such Interest. Such notice shall include a copy of the bona fide written offer and any documents referenced therein or otherwise pertaining thereto, and shall further set forth the complete terms of the written offer to purchase and the name and address of the 15LLC AGREEMENT proposed third party purchaser. If the Unit Holder or Economic Interest Holder desires to gift the Units or Economic Interest, then in lieu of obtaining a written offer as provided above, the offer to the other Unit Holders shall be the fair market value of the Units or Economic Interests. (b) The other Unit Holders, shall, on a basis pro rata to their Units or on a basis pro rata to the Units of those remaining Unit Holders exercising their first refusal rights, have the first right to purchase all (but not less than all) of the Interests proposed to be sold by the selling Unit Holder upon the same terms and conditions stated in the notice given pursuant to Section 12.2(a) by giving written notice to the other Unit Holders and the Manager within twenty (20) days after such notice from the selling/gifting Unit Holder. The failure of a Unit Holder to so notify the other Unit Holders and the Manager of its desire to exercise its first refusal rights within said twenty (20) day period as required by this Section 12.2(b) shall result in the termination of such Unit Holder’s first refusal rights. Within ten (10) days after expiration of the twenty (20) day period specified in the preceding paragraph, the Manager shall notify those Unit Holders electing to exercise their first refusal rights of any Units or Economic Interests that the other Unit Holders did not elect to purchase. Those Unit Holders exercising first refusal rights in accordance with the preceding paragraph shall then notify the Manager and the other purchasing Unit Holders whether they elect to purchase such remaining Units or Economic Interests, which shall be pro rata or allocated in such other manner as the purchasing Unit Holders shall agree. If no such notification is received by the Manager from any such Unit Holders in accordance with this paragraph, no Unit Holder shall have any further first refusal rights with respect to such Units or Economic Interests. If Unit Holders have elected to purchase all of the Units or Economic Interests offered by the selling/gifting party, the selling/gifting Unit Holder or Economic Interest Holder shall sell such Units/Economic Interests upon the same terms and conditions specified in the notice required by Section 12.2(a) or as determined in Section 12.4 (c) and paid as in Section 12.4(d), whichever is elected by the purchasing Unit Holder or Company, and the purchasing Unit Holders shall have the right to close the purchase within thirty (30) days after receipt of notification from the Manager that such Unit Holders have elected to purchase the selling Unit Holder's Units or Economic Interests. If Unit Holders do not elect to purchase all of the Units/Economic Interests offered by the selling Unit Holder in accordance with this Section 12.2, then the selling/gifting Unit Holder shall be entitled to sell/gift all of his/its Units to the third party in accordance with the terms and conditions upon which the purchase/gift is to be made as specified in the notice under Section 12.2(a). However, if such sale/gift is not completed within thirty (30) days following expiration of the other Unit Holders' first refusal rights under this Section 12.2, then the selling Unit Holder/Economic Interest Holder shall not be entitled to complete the sale/gift to such third party and the selling/gifting Unit Holder's Units or Economic Interests shall continue to be subject to the rights of first refusal set forth in this Section 12.2 with respect to any proposed subsequent transfer. (c) Upon the sale or the gift of a Membership Interest or an Economic Interest, and as a condition to recognizing the effectiveness and binding nature of any sale or gift and (subject to Section 12.3, below) substitution of a Person as a new Unit Holder, the Manager may require the transferring Unit Holder and the proposed purchaser, donee or successor-in-interest, as the case may be to execute, acknowledge and deliver to the Manager such instruments of 16LLC AGREEMENT transfer, assignment and assumption and such other agreements and to perform all such other acts that the Manager may deem necessary or desirable to: (i) constitute such Person as a Unit Holder; (ii) confirm that the Person desiring to become a Unit Holder, has accepted, assumed and agreed to be subject and bound by all of the terms, obligations and conditions of this Agreement (whether such Person is to be admitted as a new Member or will merely be an Economic Interest Owner), including the enforceability of all provisions of this Section 12.4, including options to purchase, that remain unchanged; (iii) maintain the status of the Company as a partnership for federal tax purposes; and (iv) assure compliance with any applicable state and federal laws, including securities laws and regulations. (d) Any sale or gift of a Membership. Interest or Economic Interest or admission of a Member in compliance with this Article 12 shall be deemed effective on the later of the last day of the calendar month in which the remaining Members' consent thereto was given, or on such date that the transferor and the transferee both comply with Section 12.2(c). The transferring Unit Holder hereby indemnifies the Company and the Manager against any and all loss, damage, or expense (including, without limitation, tax liabilities or loss of tax benefits) arising directly or indirectly as a result of any transfer or purported transfer in violation of this Article 12. Transferee Not Member in Absence of Consent.12.3 (a) Notwithstanding anything to the contrary in this Article 12, if the sale or gift of a Member's Membership Interest or Economic Interest to a transferee or donee which is not a Member immediately prior to the sale or gift is not approved in writing by the Manager and Members owning 50% or more of the A Units, in their discretion, then the proposed transferee or donee shall have no right to participate in the management of the business and affairs of the Company or to become a Member. Such transferee or donee shall be merely an Economic Interest Owner. (b) Promptly following any sale or gift of a Member's Economic Interest which does not at the same time transfer the balance of the rights associated with such Person's Membership Interest, the Company shall purchase from such Person, and such Person shall sell to the Company for a purchase price of $100, all such remaining rights and interests retained by such person which immediately prior to such sale or gift were associated with the transferred Economic Interest. The acquisition by the Company of such Person's rights shall not cause dissolution of the Company and such Person shall no longer be a Member. Purchase of Units Upon Terminating Event12.4 17LLC AGREEMENT i (a) Definitions. As used in this section, "Terminating Event" means any event of dissociation provided in the Washington limited liability company statutes, or any breach of this Agreement, including without limitation: (i) The voluntary or involuntary dissolution (subject to reinstatement rights) of a Unit Holder or Economic Interest Holder, filing of a voluntary or involuntary petition with respect to a Unit Holder or its majority owner or Economic Interest Holder under the federal Bankruptcy Code or comparable state law, if such proceeding is not terminated within thirty (30) days of filing, or the appointment of a receiver or manager for the creditors of a Unit Holder or its majority owner or Economic Interest Holder; i (ii) Any event resulting in the sale or gift of a Unit or Economic Interest, in violation of the terms and conditions of this Agreement, by operation of law or otherwise, including without limitation, any transfer as a consequence of a decree of marital dissolution or separation; (iii) The death or Incapacity of a Unit Holder or Economic Interest Holder; (iv) The withdrawal of a Member; (v) The Unit Holder or Economic Interest Holder refusing or failing execute credit guaranties demanded by lenders to the Company on loans approved by the Manager. (b) Option. If a Member or Economic Interest Owner incurs a Terminating Event, such Person ("Terminated Person") or its legal representative shall promptly give written notice thereof to the Members and Manager. Except as otherwise provided herein, in the event of a Terminating Event, the Company shall have the option to purchase all, but not less than all, of the Units owned by the Terminated Person (including any community interest of the Terminated Person's spouse) and if the Company elects not to purchase the Units then the other Members have the option of purchasing the Units on a pro-rata basis. If the Company or the Members choose to exercise the option, it/they shall do so by delivering written notice thereof to the Terminated Person's or his legal representative within one hundred eighty (180) days after the end of the month in which the Manager and Members have actual knowledge of the Terminating Event; provided, in the case of the death of a Member, the period for exercising the option shall be for the period of three hundred sixty five (365) days after the end of the month in which the Manager receives written notice of the Terminating Event. Failure of the Company or Members to give such notice within the required period shall be deemed to be a decision not to exercise the option, and the option shall terminate. (c) Purchase Price. The purchase price (the "Purchase Price") for the Units purchased pursuant to this section shall be the fair market value thereof, determined by mutual agreement of the parties to that sale/redemption transaction; provided, if they are unable to agree on the Purchase Price within thirty (60) days after the commencement of negotiations, then the party or parties who exercised the purchase option (or in the event of the Estate or person inheriting the decedents Units demands purchase) may retract it without further obligation or 18LLC AGREEMENT liability, and if not retracted the Purchase Price shall be as follows: by the opinion of an appraiser selected to the parties to the transaction as to the fair market value of the Units being sold/redeemed, with consideration of discounts for lack of marketability and minority interest. If the parties are unable to agree on the appraiser, the appraiser shall be appointed by the Company’s Certified Public Accountant, and shall be one with experience in the valuation of real estate. (d) Closing. The closing shall take place within thirty (30) days after the determination of the Purchase Price, at which time the Company or the purchasing Members, as the case may be, shall pay as a down payment to the Terminated Person or its legal representative not less than 20% of the Purchase Price, and the balance amortized over a term of 120 months, including interest at the Wall Street Journal prime rate as of the closing date, with the full sum of principle and interest due in full within five (5) years from the date of closing. There is a right of prepayment without penalty. The Company/Member(s) and the Terminated Person shall execute and deliver all conveyance documents and other documents necessary to effectuate the transfer. The Units purchased shall be pledged as security by the purchaser(s) pursuant to a pledge agreement attached as Exhibit 12.4 (d). (e) Outstanding Debts and Guaranties. At the closing, the Company shall also repay any outstanding loans which the Company owes to the Terminated Person, and the Company shall be entitled to an offset against the Purchase Price for any indebtedness owed by the Terminated Person to the Company. Moreover, the Company shall obtain a release of any personal obligation of the Terminated Person with respect to any outstanding indebtedness associated with the Company which was approved by the Manager at the time it was incurred; provided, if the release is not possible after a good faith effort by the Company, then the Company shall indemnify, defend and hold the Terminated Person and its successors harmless from said indebtedness. If the Members are purchasing the Units of the Terminated Person, then at Closing any indebtedness owed by the Terminated Person to the Company shall be paid in full by the Terminated Person/Estate. ARTICLE 13 - ADDITIONAL MEMBERS No additional Members may be admitted to the Company membership, unless the Manager and Members owning 50% or more of the issued A Units vote in favor of the admission of additional Members, without prejudice to pre-emptive rights provided for herein. ARTICLE 14 - DISSOLUTION AND TERMINATION 14.1 Dissolution. The Company shall be dissolved upon the occurrence of any of the following events: (a) upon expiration of the term specified in Section 2.5; (b) by the decision of the Manager, if Michael O’Brien, and if the 19LLC AGREEMENT Manager is other than Michael O’Brien by written agreement of the holders of not less than 60% of the issued A Units. 14.2 Allocation of Net Profit and Loss in Liquidation. The allocation of Net Profit, Net Loss and other items of the Company following the date of dissolution, including but not limited to gain or loss upon the sale of all or substantially all of the Company's assets, shall be determined in accordance with the provisions of Articles 9 and 10 and shall be credited or charged to the Capital Accounts of the Unit Holders based upon the number of Units owned. 14.3 Winding Up, Liquidation and Distribution of Assets. Upon dissolution, the Manager shall immediately proceed to wind up the affairs of the Company. The Manager shall sell or otherwise liquidate all of the Company's assets as promptly as practicable (except to the extent the Manager may determine to distribute any assets to the Unit Holders in kind) and shall apply the proceeds of such sale and the remaining Company assets in the following order of priority: (a) Payment of creditors, including Members and Managers who are creditors, to the extent otherwise permitted by law, in satisfaction of liabilities of the Company, other than liabilities for distributions to Members; (b) To establish any reserves that the Manager deems reasonably necessary for contingent or unforeseen obligations of the Company and, at the expiration of such period as the Manager shall deem advisable, the balance then remaining in the maimer provided in Paragraph (c) below; (c) By the end of the taxable year in which the liquidation occurs (or, if later, within ninety (90) days after the date of such liquidation), to the Unit Holders in proportion to the positive balances of their respective Capital Accounts, as determined after taking into account all Capital Account adjustments for the taxable year during which the liquidation occurs (other than those made pursuant to this Paragraph (c)). 14.4. No Obligation to Restore Negative Capital Account Balance on Liquidation. Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Regulation Section 1.704-l(b)(2)(ii)(g), if any Unit Holder has a negative Capital Account balance (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Unit Holder shall have no obligation to make any Capital Contribution to the Company, and the negative balance of such Unit Holder's Capital Account shall not be considered a debt owed by such Unit Holder to the Company or to any other Person for any purpose whatsoever. The Manager shall comply with any applicable requirements of14.5 Termination. applicable law pertaining to the winding up of the affairs of the Company and the final distribution of its assets. Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated. 20LLC AGREEMENT 14.6 Certificate of Cancellation. When all debts, liabilities and obligations have been paid and discharged or adequate provisions have been made therefore and all of the remaining property and assets have been distributed to the Unit Holders, the Manager shall file a certificate of cancellation as required by the Act. Upon filing the certificate of cancellation, the existence of the Company shall cease, except as otherwise provided in the Act. 14.7 Return of Contribution Nonrecourse to Other Members. Except as provided by law or as expressly provided in this Agreement, upon dissolution each Unit Holder shall look solely to the assets of the Company for the return of its Capital Contribution. If the property remaining after the payment or discharge of liabilities of the Company is insufficient to return the contributions of Members, no Unit Holder shall have recourse against any other Unit Holder. ARTICLE 15 - INDEPENDENT ACTIVITIES OF MANAGERS AND MEMBERS Any Manager and Member may engage in or possess an interest in other business ventures of every nature and description, independently or with others, including but not limited to, the ownership, financing, management, employment by, lending to or otherwise participating in businesses which are similar to the business of the Company, and neither the Company nor any of the Managers or Unit Holders shall have any right by virtue of this Agreement in and to such independent ventures or to the income or profits therefrom, except as may otherwise be provided for under the terms of employment or other agreements with the Company. ARTICLE 16 -MISCELLANEOUS PROVISIONS 16.1 Notices. Any notice, demand, or communication required or permitted under this Agreement shall be deemed to have been duly given if delivered personally to the party to whom directed or, if mailed by registered or certified mail, postage and charges prepaid, addressed (a) if to a Member, to the Member's address specified on attached Schedule 1, (b) if to the Company, to the address specified in Section 2.3, and (c) if to the Manager, to the address specified in Section 2.3. Except as otherwise provided herein, any such notice shall be deemed to be given when personally delivered or, if mailed, three (3) business days after the date of mailing. A Member, the Company or the Manager may change its address for the purposes of notices hereunder by giving notice to the others specifying such changed address in the manner specified in this Section 16.1. 16.2 Governing Law. This Agreement shall be construed and enforced in accordance with the internal laws of the State of Washington. 16.3 Amendments . This Agreement may not be amended except by the unanimous written agreement of all of the Members and the Manager. 16.4 Construction . Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa. 21LLC AGREEMENT I 16.5 Headings . The headings in this Agreement are inserted for convenience only and shall not affect the interpretations of this Agreement. 16.6 Waivers. The failure of any Person to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. 16.7 Rights and Remedies Cumulative. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy shall not preclude or waive the right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 16.8 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. 16.9 Heirs, Successors and Assigns. Each of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns. 16.10 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company. 16.11 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. 16.12 Investment Representations. The Units have not been registered under the Securities Act of 1933, the Securities Act of Washington or any other state securities laws (collectively, the "Securities Acts") because the Company is issuing the Units in reliance upon the exemptions from the registration requirements of the Securities Acts, and the Company is relying upon the fact that the Units are to be held by each Unit Holder for investment. Accordingly, each Unit Holder hereby confirms the Units have been acquired for such Unit Holder's own account, for investment and not with a view to the resale or distribution thereof and may not be offered or sold to anyone unless there is an effective registration or other qualification relating thereto under all applicable Securities Acts or unless such Unit Holder delivers to the Company an opinion of counsel, satisfactory to the Company, that such registration or other qualification is not required. The Unit Holders understand that the Company is under no obligation to register the Units or to assist any Unit Holder in complying with any exemption from registration under the Securities Acts. 16.13 Dispute Resolution. In the event of any disagreement between the parties as to the interpretation or enforcement of this Agreement, or if the Members do not reach agreement on 22LLC AGREEMENT fc' any issue which requires unanimous agreement of the Members, the parties shall first, if reasonably possible, attempt to resolve the matter by mediation. The parties shall make all reasonable efforts to select a mutually agreeable mediator. If the parties are unable to agree upon a mediator, then, unless the parties agree otherwise, the Judicial Arbitration and Mediation Service shall select a mediator. No arbitration may proceed to resolve a dispute until after the mediator determines that the parties have reached an impasse and that further mediation would not likely result in success. Each party shall pay its attorneys’ fees and costs for the mediation and one-half of the mediator’s fees and costs. If mediation reaches such an impasse, said dispute shall be determined by binding arbitration in accordance with the laws of the State of Washington. The mediator shall not be the arbitrator, unless the parties so mutually stipulate. If the parties are not able to agree upon a single arbitrator within ten (10) days following demand therefore, then the arbitrator shall be appointed by the Judicial Arbitration and Mediation Service and the arbitrator may be a member/employee of it. Each party shall pay one-half of the arbitrator’s fees and costs, unless one party is ruled the prevailing party by the arbitrator, in which case the arbitrator, subsequent to the arbitration itself, may award the prevailing party the arbitrator’s fees and costs and the prevailing party’s attorneys fees and costs with the fees and costs to be determined subsequent to the arbitration itself. Any mediation or arbitration shall be brought in King County, Washington unless the parties mutually agree on a different location. 16.14 Joinder. If Michael O’Brien as an A Unit Holder desires to sell all his Units to a third party, all other A and B Unit Holders will join in that sale upon the request of Michael O’Brien and shall receive the same price per Unit as does Michael O’Brien. In the event of Michael O’Brien’s death, if 60% or more of the A Units desire to sell their Units to a third party, all other A and B Unit Holders will join in that sale upon the request of those desiring to so sell and shall receive the same price per Unit as do those making the request. (Signature page follows) 23LLC AGREEMENT N Executed the undersigned Members effective as of the date first above written. OB RENTON PROPERTIES, LLC MICHAEL O’BRIENMICHAEL O’BRIEN, Manager 24LLC AGREEMENT Schedule 2.6 Unit Holders Initial Percentage Number of B Units Number of A Units Cash Contribution Name 100%9,000$50,000 1,000Michael O’Brien 25LLC AGREEMENT I Schedule 9.1.1 Special Tax Provisions 1. Definitions. "Company Minimum Gain" has the same meaning as the term "partnership minimum gain" in Regulation Sections 1.704-2(b)(2) and 1.704-2(d). "Deficit Capital Account" means with respect to any Unit Holder, the deficit balance, if any, in such Unit Holder's Capital Account as of the end of the taxable year, after giving effect to the following adjustments: credit to such Capital Account any amount that such Unit Holder is obligated to restore to the Company under Regulation Section 1.704-1 (b)(2)(ii)(c), as well as any addition thereto pursuant to the next to last sentences of Regulation Sections 1.704-2(g)(l) and (i)(5); and (i) debit to such Capital Account the items described in Regulation Sections 1.704-1 (b)(2)(ii)(d)(4), (5) and (6). (ii) This definition is intended to comply with the provisions of Regulation Sections 1.704- l(b)(2)(ii)(d) and 1.704-2, and will be interpreted consistently with those provisions. "Member Minimum Gain" has the same meaning as the term "partner nonrecourse debt minimum gain" in Regulation Section 1.704-2(i). "Member Nonrecourse Deductions" has the same meaning as the term "partner nonrecourse deductions" in Regulation Sections 1.704-2(i)(l) and (2). The amount of Member Nonrecourse Deductions for a Company fiscal year shall be determined in accordance with Regulation Section 1.704-2(i)(2). "Nonrecourse Deductions" has the meaning set forth in Regulation Section 1.704- 2(b)(1). The amount of Nonrecourse Deductions for a Company fiscal year shall be determined pursuant to Regulation Section 1.704-2(c). 'Nonrecourse Liability", has the meaning set forth in Regulation Section 1.704- 2(b)(3). 2. Special Allocations. The following special allocations shall be made for any fiscal year of the Company in the following order: 2.1 Minimum Gain Chargeback. If there is a net decrease in Company Minimum 26LLC AGREEMENT Gain during any Company fiscal year, each Unit Holder shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Unit Holder's share of the net decrease in Company Minimum Gain, determined in accordance with Regulation Sections 1.704-2(f) and 1.704-2(g)(2). The items to be so allocated, and the manner in which those items are to be allocated among the Unit Holders, shall be determined in accordance with Regulation Sections 1.704-2(f) and 1.704-2(j)(2). This section 2.1 is intended to satisfy the minimum gain chargeback requirement in Regulation Section 1.704-2(f) and shall be interpreted and applied accordingly. 2.2 Member Minimum Gain Chargeback. If there is a net decrease in Member Minimum Gain during any Company fiscal year, each Unit Holder who has a share of that Member Minimum Gain, determined in accordance with Regulation Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Unit Holder's share of the net decrease in Member Minimum Gain, determined in accordance with Regulation Sections 1.704-2(i)(4) and 1.704- 2(i)(5). The items to be so allocated, and the manner in which those items are to be allocated among the Unit Holders, shall be determined in accordance with Regulation Sections 1.704- 2(h)(4) and 1.704-2(j)(2). This section 2.2 is intended to satisfy the minimum gain chargeback requirement in Regulation Section 1.704-2(i)(4) and shall be interpreted and applied accordingly. 2.3 Qualified Income Offset. In the event that any Unit Holder unexpectedly receives any adjustments, allocations, or distributions described in Regulation Sections 1.704- 1(b)(2) (ii)d)(4), (5) or (6), items of Company income and gain shall be specially allocated to such Unit Holder in an amount and in a manner sufficient to eliminate as quickly as possible, to the extent required by Regulation Section 1.704-(l)(b)(2)(ii)(d), the Deficit Capital Account of the Unit Holder (which Deficit Capital Account shall be determined as if all other allocations provided for in Article 7 of the Agreement have been tentatively made as if this section 2.3 were not in this Agreement). 2.4 Nonrecourse Deductions. Nonrecourse Deductions shall be allocated among the Unit Holders in accordance with their respective Percentage Interests. 2.5 Member Nonrecourse Deductions. Any Member Nonrecourse Deductions shall be specially allocated among the Unit Holders in accordance with Regulation Section 1.704-2(i). 3. Corrective Allocations. 3.1 Allocations to Achieve Economic Agreement. The allocations set forth in the last sentence of section 7.2 of the Agreement and in section 2 hereof are intended to comply with certain regulatory requirements under Code Section 704(b). The Members intend that, to the extent possible, all allocations made pursuant to such Sections will, over the term of the Company, be offset either with other allocations pursuant to section 2 or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this section 3.1. Accordingly, the Manager is hereby authorized and directed to make offsetting allocations of Company income, gain, loss or deduction under this section 3.1 in whatever manner the Manager LLC AGREEMENT 27 i determines is appropriate so that, after such offsetting special allocations are made, the Capital Accounts of the Unit Holders are, to the extent possible, equal to the Capital Accounts each would have if the provisions of section 2 hereof were not contained in this Agreement and all income, gain, loss and deduction of the Company were instead allocated pursuant to section 7.1 of the Agreement. 3.2 Waiver of Application of Minimum Gain Chargeback. The Manager, with the prior consent of Members owning a majority of the Units owned by Members,, shall request from the Commissioner of the Internal Revenue Service a waiver, pursuant to Regulation Section 1.704-2(f)(4), of the minimum gain chargeback requirements of Regulation Section 1.704-2(f) if the application of such minimum gain chargeback requirement would cause a permanent distortion of the economic arrangement of the Partners, as reflected in Section 7.1 of the Agreement. 4 Other Allocation Rules. 4.1 General. Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Unit Holders in the same proportions as they share Net Profits or Net Losses, as the case may be, for the year. 4.2 Allocation of Recapture Items. In making any allocation among the Unit Holders of income or gain from the sale or other disposition of a Company asset, the ordinary income portion, if any, of such income and gain resulting from the recapture of cost recovery or other deductions shall be allocated among those Unit Holders who were previously allocated (or whose predecessors-in-interest were previously allocated) the cost recovery deductions or other deductions resulting in the recapture items, in proportion to the amount of such cost recovery deductions or other deductions previously allocated to them. 4.3 Allocations in Connection with Varying Interests. If, during a Company fiscal year, there is (i) a permitted transfer of a Membership Interest or Economic Interest under this Agreement during a Company fiscal year or (ii) the admission of a Member or additional Members, Net Profit, Net Loss, each item thereof, and all other tax items of the Company for such period shall be divided and allocated among the Unit Holders by taking into account their varying interests during such fiscal year in accordance with Code Section 706(d) and using any conventions permitted by law and selected by the Manager. 4.4 Allocation of Excess Nonrecourse Liabilities. Solely for purposes of determining a Unit Holder's proportionate share of the "excess nonrecourse liabilities" of the Company within the meaning of Regulation Section 1.752-3(a)(3), the Unit Holders' interests in the Company's profits shall be allocated according to the requirements of Regulation 1.752-3, as determined by the Manager after consultation with the Members. 5. Determination of Net Profit or Loss. 5.1 Computation of Net Profit or Loss. The Net Profit or Net Loss of the 28LLC AGREEMENT Company, for each fiscal year or other period, shall be an amount equal to the Company's taxable income or loss for such period, determined in accordance with Code Section 703(a) (and, for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1), including income and gain exempt from federal income tax, shall be included in taxable income or loss). 5.2 Adjustments to Net Profit or Loss. For purposes of computing taxable income or loss on the disposition of an item of Company property or for purposes of determining the cost recovery, depreciation, or amortization deduction with respect to any property, the Company shall use such property's book value determined in accordance with Regulation Section 1.704-1(b). Consequently, each property’s book value shall be equal to its adjusted basis for federal income tax purposes, except as follows: j The initial book value of any property contributed by a Member to the Company shall be the gross fair market value of such property at the time of contribution; (a) In the discretion of the Members holding not less than two-thirds of the Units held by Members, the book value of all Company properties may be adjusted to equal their respective gross fair market values, as determined by the Members as of the following times: (1) in connection with the acquisition of an interest in the Company by a new or existing Member for more than a de minimis capital contribution, (2) in connection with the liquidation of the Company as defined in Regulation Section 1.704- (l)(b)(2)(ii)(g), or (3) in connection with a more than de minimis distribution to a retiring or a continuing Unit Holder as consideration for all or a portion of his or its interest in the Company. In the event of a revaluation of any Company assets hereunder, the Capital Accounts of the Unit Holders shall be adjusted, including continuing adjustments for depreciation, to the extent provided in Regulation Section 1.704-(l)(b)(2)(iv)(f); (b) If the book value of an item of Company property has been determined pursuant to this Section 5.2, such book value shall thereafter be used, and shall thereafter be adjusted by depreciation or amortization, if any, taken into account with respect to such property, for purposes of computing taxable income or loss. (c) 5.3 Items Specially Allocated. Notwithstanding any other provision of this section 5, any items that are specially allocated pursuant to sections 2 or 3 shall not be taken into account in computing Net Profit or Net Loss. 6. Mandatory Tax Allocations Under Code Section 704(c). In accordance with Code Section 704(c) and Regulation Section 1.704-3, 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 the Unit Holders 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 initial book value computed in accordance with Paragraph (a) of section 5.2 of this Appendix. Prior to the contribution of any property to the Company that has a fair market value that differs from its adjusted tax basis in the hands of the contributing Member on the date of contribution, the 29LLC AGREEMENT contributing Member and the Manager (or, if the contributing Member is the Manager, an affirmative vote of the majority of the Units owned by non-contributing Members) shall agree upon the allocation method to be applied with respect to that property under Regulation Section 1.704-3, which allocation method shall be set forth in writing and signed by said persons. If the book value of any Company property is adjusted pursuant to Paragraph (b) of section 5.2 of this Appendix, subsequent allocations of income, gain, loss and deduction with respect to such property shall take account of any variation between the adjusted basis of such property for federal income tax purposes and its book value in the same maimer as under Code Section 704(c). The choice of allocation methods under Regulation Section 1.704-3 with respect to such revalued property shall be made by the Manager. Allocations pursuant to this section 6 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Unit Holder's Capital Account or share of Net Profit, Net Loss, or other items as computed for book purposes, or distributions pursuant to any provision of this Agreement. 30LLC AGREEMENT EXHIBIT 12.4 (d) PLEDGE AGREEMENT This Pledge Agreement (the “Agreement”) is made this , by and among _______ reference to the following facts: day of the “Seller”), with(the “Buyer”), and20 Pursuant to the terms of the Limited Liability Company Agreement of OB Renton Properties, LLC (the “Company” or the “Corporation”) dated November 11, 2011 (the “Agreement”), Buyer has purchased all Units owned by Seller. The Units are being redeemed/purchased and shall be “Collateral”. A. The parties hereby desire to provide for the terms and conditions of an agreement whereby Buyer agrees to pledge the Collateral as security for the installment obligation pertaining to the purchase. B. All undefined capitalized terms herein shall have the meaning set forth in theC. Agreement. IT IS AGREED AS FOLLOWS: Pledge. Buyer hereby pledges the Collateral to Seller as security for the Installment obligation, and any and all other indebtedness now or hereafter owing by Buyer to the Seller, and hereby grants a security interest in the Collateral to Seller. Simultaneously with the execution of this Agreement, Buyer shall deliver to the Corporation’s legal counsel, the certificate representing the Collateral and such assignments as Seller shall require, and the Corporation’s legal counsel shall hold the same in escrow for use in the event of a default by Buyer 1. Representations and Warranties. Buyer represents and warrants, with respect to the Collateral, that: 2. Buyer have good and marketable title to all of the Collateral, free and clear of all liens and encumbrances of every nature, except the lien of this Agreement, and there are no outstanding options, warrants or commitments of any nature relating to the Collateral. (a) The execution, delivery and performance of this Agreement is within the Buyer’ power, has been duly authorized and is not in conflict with applicable law or the terms of any any indenture, agreement or undertaking to which the Buyer is a party or by which the Buyer is bound or affected; (b) 31LLC AGREEMENT :'J i-;:r:-::-yyyyyyy.§,->:vvv-»:-v.c-i->v,v.1-ev«"v-.'/,",-.^v (c)There are no actions or proceedings pending by or against Buyer or the Company before any court or administrative agency and Buyer has no knowledge of any pending, threatened, or imminent litigation, governmental investigations or claims, complaints, actions or prosecutions involving Buyer or Company, except as heretofore specifically disclosed in writing to Seller. Buyer covenants and agrees with respect to the Collateral3.Covenants, during the term of this pledge: Buyer will not transfer, assign, alienate, or sell the Collateral, or take any action which will impair, damage or destroy Secured Party’s rights with respect to the Collateral or the value thereof; (a) Buyer will keep the Collateral free from unpaid charges, including taxes, and from all liens and encumbrances, except for the lien of this pledge, and will warrant and defend the Collateral against the claim sand demands of all other persons; (b) Buyer agrees to execute UCC-1 financing statements and to take whatever other action is reasonably requested by Seller to perfect and continue Seller’s security interest in the Collateral in first priority. Buyer appoints Seller as Buyer’ attorney-in-fact for the purpose of executing any documents necessary to perfect or continue the security interest grated herein. (c) Buyer will furnish Seller such powers, resolutions and other instruments as may be reasonably required by Seller to assure transferability of the Collateral when and as often as requested by Seller, in the event of a default. (d) Voting Privileges; Distributions. During the term of this Pledge, Buyer shall have the right to vote the Collateral on all matters, if and so long as Buyer is not in default hereunder. In the event of default by Buyer, Seller shall be entitled to vote the Collateral. 4. Return of Collateral. Upon payment in full of the installment obligation and the performance of all obligations secured hereby, the Collateral shall be returned to Buyer, and this Agreement shall thereupon be fully performed and discharged. 5. Default. The occurrence of any of the following events shall constitute a default hereunder: 6. 32LLC AGREEMENT \Failure to pay the installment obligation according to its terms, or a failure to pay any other installment obligation or obligation owed by the Buyer to the Seller, within ten days of the due date and after five days written demand by Seller.. (a) Nonperformance of any term or condition of this Pledge Agreement for more than 10 days after written notice of such default. (b) The Company or Buyer become subject to any proceeding under the laws relating to insolvency or bankruptcy, whether state or federal, and whether voluntarily or involuntarily instituted or brought, including, but not limited to, those seeking reorganization, deferment or rearrangement of its debts. (c) Remedies. In the event of default, and in addition to any and all rights available to the Seller under applicable law, the Seller may avail himself/itself at any time of any of the following, in such order and from time to time, as the Seller deems expedient: 7. Vote all of the Collateral on any and all matters of business, and to this extent this Agreement shall constitute a proxy coupled with an interest in such Collateral. (a) Sell all or any part of the Collateral at private sale after at least 30 days written notice to Buyer. Such notice shall state the time and place and any and all conditions of sale. The sale shall be for cash at auction and the Buyer, the Seller and any other party may bid at such sale, and the Seller may bid the installment obligation without paying cash thereof. The proceeds of the sale shall be applied first to pay the reasonable cost of sale and all of the escrow agent’s and Seller’s other reasonable costs, second to payment of the debt secured hereby, and any additional sum shall be paid to Buyer as his/its interest may appear. The party conducting the auction may sell all or part of such of the Collateral as he deems expedient. There shall be no redemption from any such sale and the Buyer hereby warrants that the purchaser will receive from such sale clear title to the Collateral, free of any lien. It is hereby agreed that steps to sell the Collateral in substantial compliance herewith are commercially reasonable and are hereby approved. (b) Exercise any and all other rights available to the Seller under the Washington Uniform Commercial Code, including judicial foreclosure and strict foreclosure. (c) 33LLC AGREEMENT Nothing in this Agreement shall preclude Seller from collection on the installment obligation without resorting to the Collateral. (d) Waiver. Buyer waives any right to require Seller to proceed against any person, to proceed or exhaust any other collateral, or to pursue any other remedy available to Seller. The Buyer further waives any defense arising by reason of any disability or other defense of any other person. 8. Miscellaneous.9. Any notices required hereimder shall be effective only if given in writing (i) by personal delivery, or (ii) by registered U.S. mail postage prepaid, return receipt requested, to the party’s address stated below. The address of any party may be changed by such party, if advanced written notice thereof is given to all other parties. Each notice will be deemed given to a party when delivered in person, or two business days after mailing if sent registered mail to the address of such party as set forth below. (a) This Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns; provided, the rights of the parties hereunder shall not be assigned without the prior written consent of the other, exhibits/appendices hereto constitute the entire understanding and agreement between the parties hereto and supersede all prior agreements and understandings, either oral or written, with respect to the subject matter thereof. Any modification of this Agreement must be in writing and signed by all parties hereto. In any suit, action or appeal therefrom to rescind, enforce or interpret this Agreement or any term of provision hereof, the prevailing party shall be entitled to recover its costs incurred in connection with such suit, action or appeal, including reasonable attorney fees. This Agreement shall be construed in accordance with the laws of the state of Washington. (b) This Agreement and the IN WITNESS WHEREOF, the parties have signed this Agreement the date first written above. 34LLC AGREEMENT