Operating Agreement CRE Investment Fund-

Document Sample
Operating Agreement CRE Investment Fund- Powered By Docstoc
					     OPERATING AGREEMENT OF
       (COMPANY NAME), LLC
A NORTH CAROLINA LIMITED LIABILITY
            COMPANY
      EFFECTIVE AS OF THE ____ DAY OF ___________, 20___(YEAR).



                                 SECTION 1 DEFINITIONS

       Definitions. The following terms used in this Operating Agreement shall have
the following meanings (unless otherwise expressly provided herein):

              1.1 “Act” shall mean the North Carolina Limited Liability Company Act, as
contained in North Carolina General Statute Section 57C-1-01, et al., as the same may be
modified or amended from time to time.

               1.2 “Affiliate” shall mean (i) any partner of a Member or Manager; (ii) any
member of the immediate family of any such partner or of a Member or Manager; (iii) any
shareholder, officer or director of a Member or any member of their respective immediate
families; any Person, firm or Entity which, directly or indirectly, controls, is controlled by, or is
under common control with a Member; (iv) any shareholder, officer or director of such partner or
any member of their respective families; or (v) any officer, director or shareholder of a Member
or any member of their respective immediate families in a joint venture, limited liability
company, partnership or other form of business association. As used in this definition, the term
“control” shall mean the ownership of ten percent (10%) or more of the beneficial interest in the
firm or Entity referred to, and the term “immediate family” shall mean the spouse, ancestors,
lineal descendants, brothers and sisters of the Person in question, including those adopted.

              1.3 “Articles of Organization” shall mean the Articles of Organization of the
Company as filed with the North Carolina Secretary of State as the same may be amended from
time to time.

               1.4 “Buy-Sell Closing” shall have the meaning assigned to it in Section 10.6.

               1.5 “Buy-Sell Event” shall have the meaning assigned to it in Section 10.1.

               1.6 “Buy-Sell Notice” shall have the meaning assigned to it in Section 10.2.



                                                 1

                                         Company Name
             1.7 “Capital Account” shall mean, with respect to any Member, the Capital
Account maintained for such Person in accordance with the following provisions:

                      (i) To each Person’s Capital Account there shall be credited such
                             Person’s Capital Contributions, such Person’s distributive
                             share of Profits, and any items in the nature of income or
                             gain that are specially allocated pursuant to Section 9.6
                             hereof, and the amount of any Company liabilities that are
                             assumed by such Person or that are secured by any Company
                             property distributed to such Person.

                      (ii) To each Person’s Capital Account there shall be debited the
                             amount of cash and the Gross Asset Value of any Company
                             property distributed to such Person pursuant to any provision
                             of this Operating Agreement, such Person’s distributive
                             share of losses, and any items in the nature of expenses or
                             losses that are specially allocated pursuant to Section 9.6
                             hereof, and the amount of any liabilities of such Person that
                             are assumed by the Company or that are secured by any
                             property contributed by such Person to the Company.

                      (iii) In the event any interest in the Company is transferred in
                              accordance with the terms of this Operating Agreement, the
                              transferee shall succeed to the Capital Account of the
                              transferor to the extent it relates to the transferred interest.

                      (iv) In determining the amount of any liability for purposes of
                             subparagraph (i) and (ii) above, there shall be taken into
                             account Code Section 752(c) and any other applicable
                             provisions of the Code and Regulations.

   The foregoing provisions and the other provisions of this Operating Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulation Section 1.704-1(b) and
shall be interpreted and applied in a manner consistent with such Regulations. In the event the
Manager shall determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or that are assumed by the
Company or the Members), are computed in order to comply with such Regulations, the
Manager may make such modification, provided (i) it is not likely to have a material effect on
the amounts distributed to any Members pursuant to Section 9.2, 10.3, 14.2 or any other
provision of this Operating Agreement upon the dissolution of the Company; and (ii) it shall not
cause any net change in the percentage of Profit/Loss Interests held by any Member. The
Manager also shall (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Members and the amount of Company capital
reflected on the Company’s balance sheet, as computed for book purposes, to the extent required
by the Code and Regulations and (ii) make any appropriate modifications in the event
                                               2

                                       Company Name
unanticipated events (for example, the acquisition by the Company of oil or gas properties)
might otherwise cause this Operating Agreement not to comply with Treasury Regulation
Section 1.704-1(b), and (iii) make any adjustments that are necessary or appropriate to account
for charitable contributions of Company property.
               1.8 “Capital Contribution” shall mean, with respect to any Member, the amount
of contributions of cash or property (valued for this purpose at its initial Gross Asset Value)
(including, without limitation, the Member’s Initial Capital Contribution) made to the Company
by a Member or its predecessor in interest.

              1.9 “Cash Flow” for a Fiscal Year shall mean all cash received in such Fiscal
Year by the Company (other than Members’ Capital Contributions and Distributable Sale
Proceeds), plus any cash that becomes available from reserves, after deducting therefrom the
following items for such Fiscal Year:

                     I.      The sum of all cash operating expenses of the Company, as
                             determined in accordance with sound accounting principles
                             and procedures, including, without limitation, interest on all
                             Company indebtedness;

                     II.     All amounts paid by the Company for capital expenditures
                             that are not deductible on a current basis including, without
                             limitation, amounts paid for construction costs of
                             improvements and infrastructure;

                     III.    To the extent not covered in (i) and (ii) above, any and all
                             obligations and expenses of the Company under any agreement
                             entered into by the Company;

                     IV.     All payments of principal, interest and other fees and
                             expenses on indebtedness of the Company for borrowed
                             money; and

                     V.      An amount that the Manager or lender(s) shall determine to
                             be a reasonable reserve for needs not otherwise provided for,
                             including, without limitation, expenses incurred that are n ot
                             paid or presently payable, working capital, and capital
                             expenditures the Manager deems to be in the best interests of
                             the Company.

               1.10 “Class A Member” shall mean any Person that is a Class A Member of the
Company (whether a Class A Member designated on the attached Exhibit A or a subsequently
admitted or substituted Member) at the time of reference thereto.

               1.11 “Class B Member” shall mean any Person that is a Class B Member of the
Company (whether a Class B Member designated on the attached Exhibit A or a subsequently
admitted or substituted Member) at the time of reference thereof.
                                              3

                                      Company Name
               1.12 “Closing” shall mean the execution of this Agreement and delivery of Initial
Capital Contributions by the initial Members of the Company.

               1.13 “Company” shall refer to (Name).

               1.14 “Company Minimum Gain” shall have the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.

               1.15 “Counsel” shall have the meaning assigned to it in Section 13.17.

                1.16 “Deficit Capital Account” shall mean with respect to any Member, the deficit
balance, if any, in such Person’s Capital Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:

                       (i) credit to such Capital Account any amounts which such Person
                              is obligated to restore or is deemed to be obligated to restore
                              pursuant to the penultimate sentences of Regulations
                              Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

                       (ii) debit to such Capital Account the items described in Sections
                              1.704-l(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-
                              1(b)(2)(ii)(d)(6) of the Regulations.

  The foregoing definition of Deficit Capital Account is intended to comply with the provisions
of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.
               1.17 “Depreciation” shall mean, for each Fiscal Year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction allowable under the
Code with respect to an asset for such year or other period, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at the beginning of
such year or other period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization or other cost
recovery deduction for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Manager.

               1.18 “Distributable Sale Proceeds” shall mean the amount of cash receipts
received in a transaction described in, and remaining after payment of the amounts listed in,
Section 10.1, to be distributed to the Members in accordance with Section 10.3.

                1.19 “Domestic Proceeding” shall mean the filing of a petition or suit for divorce
or equitable distribution that is not dismissed within sixty (60) days.

                1.20 “Entity” shall mean any general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust, cooperative, association or any
foreign trust, or foreign business organization.

                                                 4

                                         Company Name
                 1.21 “Fiscal Year” shall mean the Company’s fiscal year, which shall be the
calendar year.

                 1.22 “Funding Deficits” shall have the meaning assigned to it in Section
5.2(l)(iii).

                1.23 “Gross Asset Value” shall mean, with respect to any asset, the asset’s
adjusted basis for federal income tax purposes, except as follows:

                        (i) the initial Gross Asset Value of any asset contributed by a
                               Member to the Company shall be the gross fair market value
                               of such asset, as determined by the contributing Member and
                               the Company;

                        (ii) the Gross Asset Values of all Company assets shall be adjusted
                                to equal their respective gross fair market values, as
                                determined by the Manager, as of the following times: (i) the
                                acquisition of an additional interest in the Company by an y
                                new or existing Member in exchange for more than a de
                                minimis Capital Contribution; (ii) the distribution by the
                                Company to a Member of more than a de minimis amount of
                                Company property as consideration for an interest in the
                                Company; and (iii) the liquidation of the Company within
                                the meaning of Regulation 1.704-1(b)(2)(ii)(g); provided,
                                however, that the adjustments pursuant to clauses (i) and (ii)
                                above shall be made only if the Manager reasonably
                                determines that such adjustments are necessary or
                                appropriate to reflect the relative economic interests of the
                                Members in the Company;

                        (iii) the Gross Asset Value of any Company asset distributed to any
                                Members shall be the gross fair market value of such asset
                                on the date of distribution; and

                        (iv) the Gross Asset Values of Company assets shall be increased
                               (or decreased) to reflect any adjustments to the adjusted
                               basis of such assets pursuant to Code Section 734(b) or Code
                               Section 743(b), but only to the extent that such adjustments
                               are taken into account in determining Capital Accounts
                               pursuant to Regulation 1.704-1(b)(2)(iv)(m) and Section
                               9.6(f) of this Operating Agreement.

               1.24 “Improvements” shall mean the (a) buildings, (b) landscaping, parking,
sidewalks and (c) all supporting infrastructure of the Property, including but not limited to: (i)
roads on the Property; and (ii) utilities (sewer, water, electricity, gas, telephone, fiber optic lines,
storm water, drainage, signage etc.).

                                                   5

                                          Company Name
            1.25 “Initial Capital Contributions” shall mean the contributions to the capital of
the Company made by the Members as described in Section 8.1 and as shown on Exhibit A
attached.

                1.26 “Initial Return Base” with respect to any Member as of any particular date
means the positive difference, if any, of the sum of all cash amounts contributed by the Member
to the capital of the Company as the Member’s Initial Capital Contribution pursuant to Section
8.1 minus the aggregate cumulative amount of all items distributed to the Member pursuant to
Sections 10.3(a), 10.3(b), and 14.2(e) through that date.

              1.27 “IRC” or “Code” shall mean the Internal Revenue Code of 1986, or
corresponding provisions of subsequent superseding federal revenue laws, as amended.

                1.28 “Majority in Interest” and “Majority Vote”. A “Majority in Interest shall
mean a combination of any Members who, in the aggregate, own more than fifty percent (50%)
of the Units of Membership Interest owned by all Members as of such time. Within a class, a
“Majority in Interest” shall mean a combination of any Members who, in the aggregate, own
more than fifty percent (50%) of the Units of Membership Interest owned by all Members of
such class. A “Majority Vote” upon a measure shall occur if (a) a Majority of Members in each
class votes in favor of such measure, or (b) more than one half of all Class A Units are voted in
favor of a measure and a Majority in Interest (including such Units) of the Company is voted in
favor of the measure1.29 “Manager” shall mean L. Ted Prosser and shall also mean any Person
who becomes the Manager pursuant to the provisions of Section 5.3 of this Operating
Agreement.

              1.30 “Member” shall mean each of the parties who execute a counterpart of this
Operating Agreement as a Member, and each Person who may hereafter become a Member. To
the extent a Manager has purchased Membership Interests in the Company, he shall have all the
rights of a Member with respect to such Membership Interests, and the term “Member” as used
in this Operating Agreement shall include a Manager to the extent he has purchased such
Membership Interests in the Company.

               1.31 “Member Nonrecourse Debt” shall have the meaning set forth in Section
1.704-2(b)(4) of the Regulations.

               1.32 “Member Nonrecourse Debt Minimum Gain” shall mean an amount, with
respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Section 1.704-2(i)(3) of the Regulations.

              1.33 “Member Nonrecourse Deductions” shall have the meaning set forth in
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.

                1.34 “Membership Interest” shall mean a Member’s entire interest in the
Company and the right to participate in any decision or action of or by the Members granted
pursuant to this Operating Agreement and the Act.

                                               6

                                       Company Name
                1.35 “Nonrecourse Deductions” shall have the meaning set forth in Section 1.704-
2(b)(1) of the Regulations.

                1.36 “Nonrecourse Liability” shall have the meaning set forth in Section 1.704-
2(b)(3) of the Regulations.

                1.37 “Offering Memorandum” shall mean the confidential private offering
memorandum dated the ____ day of __________, 20____(Year) distributed to each Member
prior to the date of this Operating Agreement.

              1.38 “Operating Agreement” shall mean this Operating Agreement as originally
executed and as amended from time to time.

               1.39 “Person” shall mean any individual or Entity, and their respective heirs,
executors, legal representatives, successors, and assigns when the context so permits.

               1.40 “Profits” and “Losses” shall mean, for each Fiscal Year or other period, an
amount equal to the Company’s taxable income or loss for such year or period, determined in
accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included
in taxable income or loss), with the following adjustments:

                      (i) any income of the Company that is exempt from federal income
                             tax and not otherwise taken into account in computing
                             Profits or Losses shall be added to such taxable income or
                             loss;

                      (ii) any expenditures of the Company described in Code Section
                             705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
                             expenditures pursuant to Regulation Section 1.704-
                             1(b)(2)(iv)(i), and not otherwise taken into account in
                             computing Profits or Losses shall be subtracted from such
                             taxable income or loss;

                      (iii) in the event the Gross Asset Value of any Company asset is
                              adjusted pursuant to Section 1.1(ee)(ii) or Section
                              1.1(ee)(iv) hereof, the amount of such adjustment shall be
                              taken into account as gain or loss from the disposition of
                              such asset for purposes of computing Profits or Losses;

                      (iv) gain or loss resulting from any disposition of Company
                            property with respect to which gain or loss is recognized for
                            federal income tax purposes shall be computed by reference
                            to the Gross Asset Value of the property disposed of,
                            notwithstanding that the adjusted tax basis of such property
                            differs from its Gross Asset Value;

                                               7

                                       Company Name
                       (v) in lieu of the depreciation, amortization, and other cost
                             recovery deductions taken into account in computing such
                             taxable income or loss, there shall be taken into account
                             Depreciation for such Fiscal Year or other period; and

                       (vi) any items which are specially allocated pursuant to Secti on 9.6
                              hereof shall not be taken into account in computing Profits
                              or Losses.

              1.41 “Profit/Loss Interest” shall mean the percentage interest attributed to each
Member of Profits and Losses of the Company as shown on as determined from time to time,
based upon the number of Units held by the Member, relative to the total number of Units
outstanding. The Profits/Loss Interest may be adjusted based upon the right of Class B Members
to receive a Preferred Return, as determined in the reasonable judgment of the Manager and
accountants employed on behalf of the Company. If and to the extent that a provision calls for a
change in the Profit/Loss Interest of a Member, a corresponding reallocation of Units shall be
implied and shall automatically occur.

              1.42 “Project” shall refer to the ownership, development, and management of the
Property and the Improvements thereupon (including, without limitation, any joint ventures
formed by the Company for the ownership, development or management of the Property and the
Improvements thereupon).

               1.43 “Property” shall mean the real property and improvements, comprised
primarily of commercial buildings, purchased at any time by the Company, or any replacement
thereof, together with all tenements, hereditaments, easements, rights-of-ways, appurtenances,
passages, water rights, water courses, waste disposal rights, riparian rights, drainage rights and
other rights, liberties and privileges thereon or in any way now or hereafter appertaining,
including all the right, title and interest of the current owners of the parcels comprising the
Property in an to all public and private streets, roads, avenues, alleys, passageways, water rights,
in front of, adjoining or abutting the Property or any portion thereof, less any portion thereof
which may be sold from time to time. A description of attributes that the Manager will seek to
meet in obtaining Property is described in attached property summary ________________-
which is shown on Exhibit B attached hereto and incorporated herein by reference

               1.44 “Purchase Option” shall have the meaning assigned to it in Section 10.3.

               1.45 “Purchase Option Assignee” shall have the meaning assigned to it in Section
10.4.

               1.46 “Purchasing Members” shall have the meaning assigned to it in Section 10.3.

               1.47 “Regulation” or “Regulations” shall include proposed, temporary, and final
regulations promulgated by the U. S. Department of Treasury under the IRC in effect as of the
date of filing the Articles of Organization and the corresponding sections of any regulations
subsequently issued that amend or supersede those regulations.

                                                 8

                                        Company Name
               1.48 “Regulatory Allocations” shall have the meaning assigned to it in Section
9.7.

               1.49 “Securities Acts” shall have the meaning assigned to it in Section 13.16(a)(i).

               1.50 “Subsequent Contributions” shall have the meaning assigned to it in Section
5.2(x).

               1.51 “Subsequent Contribution Return Base” with respect to any Member as of
any particular date means the positive difference, if any, of the sum of all Subsequent
Contributions contributed by the Member to the capital of the Company pursuant to Section 8.2
through that date, minus the aggregate cumulative amount of all items distributed to the Member
pursuant to Sections 9.2(a), 10.2(a) , and 14.2(d) through that date.

               1.52 “Subsidiary” shall mean any partially or wholly-owned subsidiary
corporation, limited liability company or other entity of the Company.

               1.53 “Tax Matters Partner” or “TMP” shall mean the person designated as tax
matters partner pursuant to Section 9.16.

              1.54 “Units of Membership Interest” or “Units” the Units which represent the
amount of each Member’s Membership Interest.

               1.55 “Withdrawing Member” shall have the meaning assigned to it in Section
10.2.



                    SECTION 2 FORMATION OF THE COM PANY

       2.1 Formation. The Company was formed on the ___ day of
_______________, 20_____(Year), upon the filing with the North Carolina
Secretary of State of the Articles of Organization of the Company. In consideration
of the mutual premises and covenants contained herein and other goo d and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree that the rights and obligations of the parties and the
administration and termination of the Company shall be governed by this Operating
Agreement, the Articles of Organization and the Act.

          2.2 Name. The name of the Company is (Company), LLC.

      2.3 Principal Place of Business. The address of the principal place of
business of the Company within the State of North Carolina shall be (Address), or
such other place as the Manager shall designate. The Company may locate its places
of business and registered office at any other place or places as the Manager may
from time to time deem advisable.


                                                9

                                        Company Name
       2.4 Registered Office and Registration Agent. The Company’s initial
registered office shall be at the office of its registered agent at (Address), and the
name of its initial registered agent at such address shall be (Name). The registered
office and registered agent may be changed from time to time by filing t he address
of the new registered office and/or the name of the new registered agent with the
North Carolina Secretary of State pursuant to the Act.

       2.5 Term. The term of the Company shall be perpetual, unless the Company is
earlier dissolved in accordance with either the provisions of this Operating
Agreement or the Act.



                        SECTION 3 BUS INESS OF COMPANY

       3.1 Permitted Business. The business of the Company shall be:

              (i) (INSERT Detail Description of what business actions, activities and duties are)

              (ii) to do all things reasonably incidental thereto, including encumbering,
mortgaging, selling, operating or managing the Project;

            (iii) to exercise all other powers necessary of or reasonably connected with the
Company’s business that may be legally exercised by limited liability companies under the Act;
and

              (iv) to engage in all activities necessary, convenient, or incident to any of the
foregoing.

All of the foregoing shall be conducted or undertaken in accordance with all of the terms and
conditions of, and subject to the limitations set forth in, this Operating Agreement.

                                  SECTION 4 MEMBERS

       4.1 Names and Addresses of Members. The names and addresses of the
Members are as shown on Exhibit A attached hereto and incorporated herein by
reference. Exhibit A shall be updated and amended from time to time to show
changes in the membership.



              SECTION 5 RIGHTS AND DUTIES OF THE MANAGER

       5.1 Management.


                                               10

                                       Company Name
      (i) The business and affairs of the Company shall be managed by its
Manager. The Company shall have one (1) Manager, who is n ot required to be a
resident of the State of North Carolina or a Member of the Company. The name and
address of the initial Manager is as follows:

               Name                                      Address
               (Name)                                    (Address)
               (ii) The assets, affairs and operations of the Company shall be managed by the
Manager. The Manager shall have full and complete authority, power and discretion to manage
and control the business of the Company, to make all decisions regarding those matters and to
perform any and all other acts or activities customary to or incident to the management of the
Company’s business, except only as to those acts and things as to which approval by the
Members is expressly required by the Articles of Organization, this Operating Agreement, the
Act or other applicable law. All references herein to any action to be taken by the Company shall
mean action taken in the name of the Company and on its behalf by the Manager.

      5.2 Certain Powers of Manager. Without limiting the generality of Section
5.1 above, the Manager shall have power and author ity, on behalf of the Company,
to:

               (i) enter upon, and take possession of, any property belonging to the Company,
and collect any rents, issues, profits or income of any property of the Company;

             (ii) pay any and all taxes, charges and assessments that may be levied, assessed or
imposed upon any of the property of the Company;

               (iii) construct any Improvements on the Property it deems advisable;

              (iv) cause to be made any necessary repairs or alterations of improved Company
property as may be reasonably necessary in the ordinary course of the business of the Company;

               (v) obtain insurance for Company property and business and file proof of any
losses payable under the insurance and execute all instruments relating to the claims adjustment
process, including receipts, releases or discharges;

               (vi) demand, sue for, collect, recover and receive all goods, claims, debts, money,
interest and demands owing the Company and institute any action, suit or other legal proceeding
for the recovery of any land, buildings or property which the Company may be entitled to
possess;

              (vii) make, execute, endorse, accept, collect and deliver any and all bills of
exchange, checks, drafts, notes and trade acceptances, and open and pay into and draw from a
bank account or accounts of the Company;



                                               11

                                       Company Name
               (viii) pay all sums of money that may hereafter be owing by the Company upon
any bill of exchange, check, draft, note or trade acceptance made, executed, endorsed, accepted
or delivered by or for the Company;

                (ix) negotiate and execute any financing arrangements deemed necessary or
desirable by the Manager to meet the capital or operating needs of the Company in its
development, leasing, construction and management of the Property (including, without
limitation, financing arrangements for the construction and development of the Property and
Improvements on any portion or portions of the Property and to meet cash flow short falls);

                 (x) make calls for additional Capital Contributions (“Subsequent Contributions”)
from the Members in order to carry out the purposes of the Company so long as the Manager
shall first obtain the approval of a Majority in Interest of the Class B Members before it makes a
call for a Subsequent Contribution to such Class B Members, including, without limitation:

                       (i) funding to prevent a default under any bank or other loan to the
                              Company;

                       (ii) funding for property ownership (including, without limitation,
                               calls for Subsequent Contributions to make up any shortfall
                               in equity requirements for permanent financing on existing
                               Improvements), marketing, administrative, construction and
                               development, or other operating expenditures of the
                               Company including, without limitation, additional funds
                               needed (collectively, “Funding Deficits”); provided,
                               however, that (1) the Manager shall first attempt to have the
                               Company borrow sufficient funds to meet the Funding
                               Deficits from third parties on terms and conditions
                               satisfactory to the Manager; and (2) the call is for the
                               purpose of raising funds in excess of the $15,000,000 loan
                               proceeds from the initial financing of the Property.

              (xi) defend, settle, adjust, submit to arbitration and compromise all claims or
proceedings brought against the Company by any person, firm, association or corporation;

                (xii) subject to the provision of Section 5.2(f), file any proof of claim or otherwise
participate in any proceeding, under the Bankruptcy Code or any law of any state or country, in
connection with any claim, debt, money or demand due to the Company, and receive any
dividend or distribution to be made to the Company in that proceeding;

               (xiii) hire property managers, clerical help, accountants, attorneys, clerks,
workmen, landsmen and others, and to remove them and appoint others in their place, and to pay
and allow to the persons so employed such salaries, wages or enumerations as the Manager shall
determine;



                                                 12

                                         Company Name
               (xiv) subject to the provisions of Sections 5.2(f) and (i), constitute and appoint in
his place and stead, and as a substitute, one or more attorneys-in-fact for the Company with full
power of revocation;

               (xvi) pay the operating expenses of the Company as they become due;

               (xv) keep the books of account for the Company;

             (xvi) negotiate the terms of, and execute any documentation related to, any lease
agreement deemed necessary or desirable for the Company by the Manager;

             (xvii) subject to Section 6.3, negotiate the terms of, and execute any
documentation related to, the sale of part or all of the Property as the Manager shall determine;

               (xviii) create, manage and administer one or more Subsidiaries, and to contribute,
assign or otherwise transfer any property, contracts, liabilities or any other asset, right or
obligation of the Company to any Subsidiary, and to do any and all things that the Manager is
authorized, empowered and/or directed to do for the Company through any Subsidiary, as the
Manager shall determine;

              (xix) contribute some or all of the Property, or interests therein, to a qualified
       organization (as defined in Code Section 170(h));

             (xx) take any actions contemplated by the Offering Memorandum; and
             (xxi) do and perform all other acts as may be necessary or appropriate to the
       conduct of the Company’s business.

        The Manager may, in his discretion, delegate any or all of the duties and authority to
persons whom the Manager expects will carry out such duties and properly execute such
authority.

        5.3 Term and Resignation. The Manager has been appointed as the Manager
until its resignation or removal. the Manager may, in his or its discretion, appoint a
successor Manager, who shall assume the position of Manager upon the death,
removal, retirement or resignation of the Manager. The Manager agrees that he shall
not resign or retire except upon thirty (30) days’ prior written notice to the
Members. A Manager may be removed upon (a) a material br each of fiduciary duty
to the Company or the conviction of a felony related to management of the company
or to management of real estate, together with (b ) the vote of a Majority in Interest
of the Class B Members. If the Manager dies, resigns, retires, or is removed, and
no successor Manager is appointed as provided above, the Members shall, by
Majority vote elect a Person to serve as a Manager to replace any Manager no
longer able to serve in such capacity due to such Manager’s resignation or
disqualification by a Majority Vote of the Members. A Manager who resigns or
retires may rescind such decision at any time until his successor has assumed the
position.

                                                13

                                        Company Name
      5.4 Duties of Manager. The Manager shall be charged with the full
responsibility for managing and promoting the Company’s purpose and business.
The Manager shall devote his diligent efforts to the business and affairs of the
Company, including such time as shall be required, in the reasonable opinion of the
Manager, for the proper conduct of the busin ess of the Company. The Manager is
not expected to devote his full time to the Company.

       5.5 Other Activities of Manager. The Members acknowledge that the services
of the manager to the Company are not exclusive and that Manager is presently, or
may become in the future, the manager of other companies, or associated in some
other manner with other businesses. The Manager may engage in all such other
business ventures, and any other business of any nature or description,
independently or with others. Such business ventures may include real estate
ownership and management of properties similar to the Property of the Company,
and it is further acknowledged that such other properties may be in the same market
and nominally compete with the Property of the Compan y. The Manager and its
employees and Affiliates may invest in and manage real estate and other real estate
projects, without limitation. In determining whether to offer real estate to the
Company, the Manager may subjectively consider subjective factors, such as the fit
of such real estate with investments of the Company, the capital available in the
Company, the degree of diversification within real estate markets , and the needs of
other entities. Neither the Company nor any of the Members shall have any r ights
by virtue of this Operating Agreement in or to such independent ventures or
investments or to the income or profits derived therefrom.

       5.6 Bank Accounts. The Manager may, from time to time, open bank accounts
in the name of the Company, and the Man ager shall be the sole signatory thereon.

       5.7 Reliance on Authority of Manager. No Person dealing with the Manager
or the Company shall be required to determine the authority of the Manager to make
any undertaking on behalf of the Company or to determine a ny fact or circumstance
bearing upon the existence of such authority. No purchaser of any property or
interest owned by the Company shall be required to determine the sole and
exclusive authority of the Manager to execute and deliver, on behalf of the
Company, any and all documents and instruments in connection therewith or to see
to the application or distribution of revenues or proceeds paid or credited in
connection therewith.

      5.8 Liability of the Manager. To the maximum extent that North Carolina law
in effect from time to time permits limitation of the liability of managers, no
manager shall be liable to the Company or its members for money damages.
No amendment of this Operating Agreement shall affect in any respect the
applicability of the preceding sentence with respect to any act or failure to act
which occurred before such amendment.



                                        14

                                  Company Name
       5.9 Indemnification. To the maximum extent permitted by North Carolina law
in effect from time to time, the Company shall indemnify and, without requiring a
preliminary determination of the ultimate entitlement to indemnification, shall pay
or reimburse expenses in advance of final disposition of a proceeding to any
manager or former manager who is made a party to the proceeding by reason of its
service in that capacity. The Company may also provide such indemnification to
any person who is an employee or agent of the Company or a manager.

      5.10 Compensation and Commission. The Manager or its Affiliates or
employees may receive compensation from the Company from time to time for
services rendered in the administration of the Company.

       5.11 No Management By Non-Manager Members. Except as expressly
authorized in this Operating Agreement, the Members (excluding the Manager) shall
take no part in, or at any time interfere in any manner with, the management,
conduct or control of the Company’s business and operations and shall have no
right or authority to act for or by the Company in any manner whatsoever. Except as
otherwise provided in the Act, the rights and powers of the M embers shall not
extend beyond those set forth in this Operating Agreement and any attempt to
participate in the control of the Company in a manner contrary to the rights or
powers granted herein shall be null and void and without force and effect. The
exercise by a Member of any of the rights granted him hereunder shall not be
deemed to be taking part in the control of the business of the Company and shall not
constitute a violation hereof. Unless authorized to do so by this Operating
Agreement or by the Manager, no Member (except the Manager), attorney-in-fact,
employee, or other agent of the Company shall have any power or authority to bind
the Company in any way, to pledge its credit o r to render it liable pecuniar y for any
purpose.

      5.12 Expenses of Manager. The Company will reimburse the Manager for all
expenses incurred by the Manager in connection with its service to the Company.
Nothing contained in this Section 5.12 is intended to affect the Profit/Loss Interest
of any Manager who is also a Member or the amounts that may be payable to the
Manager by reason of its respective Profit/Loss Interest or the amounts that may be
owed the Manager for any loan made by Manager to the Company.

       5.13 Waiver or Determination of Conflicts.

               The Members acknowledge that the Manager may cause the Company to enter
into agreements with the Manager and/or its Affiliates and that the Manager and/or its Affiliates
may receive fees for services rendered thereunder. Unless the further Agreements are unfair to
the Company, the Members waive any conflict associated with the fact that the Manager may
cause the Company to enter into such further Agreements and that the Manager and/or its
Affiliates may receive fees thereunder.



                                               15

                                       Company Name
                b.    The Manager shall have no obligation to account to the Company or hold
as trustee for it any profit or benefit derived (with or without the informed consent of the
members) by the Manager from any transaction connected with the formation, conduct or
liquidation of the Company or from any use by the Manager of its property.

                c.      In the event that the Manager desires a conclusive determination as to the
fairness of a transaction or action in which the Manager may have a conflict of interest, he may,
after submitting all relevant facts of the transaction or action, rely upon the approval or
ratification of any three (3) Class B Members who are not related to the Manager within three
degrees by blood or marriage and who are not themselves interested in the transaction. The
decision of such three (3) Class B members shall be final and binding upon the Company, and its
Members.

       5.14 Manager Meetings. The Manager (or Managers, if there is ever more
than one Manager) of the Company may hold meetings, both regular and special, at
any place within or without the State of North Carolina, at any interval and at such
time and place as may be scheduled by the Manager. Unless required by the Act,
notice is not required for any meeting, whether special or scheduled. When any
notice is required to be given to any Manag er, a waiver of the notice in writing
signed by the Person entitled to the notice, whether before, at or after the time
stated therein, shall be equivalent to the giving of the notice. The Manager shall
not be required to produce written minutes or resolu tions of meetings of the
Managers.

       5.15 Action Without a Meeting. Any action which under any provision of the
Act or this Operating Agreement is to be taken at a meeting of the Manager (or
Managers, if there is ever more than one Manager) may be taken with out a meeting
by written consent signed by the Manager (or all Managers who would be entitled to
vote upon such action at a meeting, if there is ever more than one Manager). Such
written consent shall be kept with the records of the Company.



             SECTION 6 RIGHTS AND OBLIGATIONS OF MEMBERS

       6.1 Limitation of Liability. Each Member’s liability shall be limited as set
forth in this Operating Agreement, the Act, and other applicable law.

      6.2 Company Debt Liability. A Member shall not be personally liable for any
debts or losses of the Company beyond the Member’s respective Capital
Contributions and any obligation of the Class B Member under Article 8 below to
make Capital Contributions, except as provided in Section 6. 7.

       6.3 Approval of Sale of All Assets. The sale, exchange, or other disposition
of all, or substantially all, of the Company’s assets (other than in the ordinary
course of the Company’s business) which is to occur as part of a single transaction

                                               16

                                       Company Name
or a plan involving a series of transactions shall requir e the approval of a Majority
Vote of the Members, unless the approval of a greater percentage of Membership
Interests is required under the Act.

       6.4 Priority and Return of Capital. Except as may be expressly provided in
Article 9, no Member shall have priority over any other Member, either for the
return of Capital Contributions or for Profits, Losses, or distributions; provided that
this section shall not apply to loans (as distinguished from Capital Contributions)
which a Member has made to the Company.

       6.5 Liability of a Member to the Company. A Member who rightfully receives
the return on whole or in part of its contribution (as defined in N.C.G.S. Section
57C-4-02 of the Act) is nevertheless liable to the Company only to the extent now
or hereafter provided by the Act. A Member who receives a distribution made by
the Company which is either in violation of this Operating Agreement, or made
when the Company’s liabilities exceed its assets (after giving effect to the
distribution) is liable to the Company for a period of six (6) years after the
distribution for the amount of the distribution.

      6.6    The Units of Membership Interest shall be divided into two (2) classes.
(a) Class A Members. ____Units of Class A Membership have been subscribed. The holders of
such Units shall be the Class A Members, subject to the provisions below.
             (i)     Voting. It is anticipated that the Class A Members shall have one vote for
             each Unit held. Class A Members shall vote upon matters as a separate class. See
             definition of “Majority Vote.”
             (ii)    Class A Member Guarantees and Special Obligations. The Members
             acknowledge the Company’s intention to enter into financing arrangements for
             the purposes of acquisition, construction and development of the Property and
             Improvements, if any, to be constructed on the Property, as the Manager may
             deem necessary or advisable from time to time, subject to the requirements, if
             any, set forth in this Agreement. In the event that the Manager determines that the
             Company will undertake construction or development and such financing
             arrangement has a requirement of guarantees, such guarantees will be provided by
             the Class A Member (e.g., the Class A Member, or the principals of the Class A
             Member). The Class A Member or principal of the Class A Member may charge
             a guarantee fee of one percent (1%) per annum of the indebtedness, payable
             prospectively upon the guarantee being made and on each anniversary thereafter.
             (iii) Subordination of Return. The distributions to Class A Members are
             subordinated to the Preferred Return of Class B Members.
             (iv)   No Additional Class A Units. No additional Class A Units shall be issued
             without the consent of a Majority in Interest of the Class B Members.




                                             17

                                     Company Name
(b)   Class B Units The Company may offer Class B Units at such amounts per Units as the
Manager may determine:


              (i)     Voting. It is anticipated that the Class B Members shall have one vote for
              each Unit held. Class B Members shall vote upon matters as a separate class. See
              definition of “Majority Vote.”
              (ii)    Preferred Return. Each Class B Member shall be entitled to receive
              distributions of up to ten percent (10%) (cumulative, noncompounded) upon his or
              her Subsequent Contribution Return Base before other Members receive
              distributions; the Class B Members shall further be entitled to receive distributions
              of up to ten percent (10%) (cumulative, noncompounded) upon their Initial Return
              Base prior to other Members receiving distributions, except upon Subsequent
              Contributions. The return described in the preceding sentence is referred to as
              “Preferred Return.” Subsequently, after sufficient funds are distributed to other
              members to provide equal distributions on a per Unit basis, all Class A Units and
              Class B Units shall share equally in Cash Flow.
              (iii) No Liability for Unpaid Returns. Neither the Company, the Managers nor
              any Member shall be liable for any unpaid returns provided under this Section,
              unless and to the extent that payments are made upon Class A Units in violation
              of the terms of this Agreement.
      6.7     Voting Rights. Except as expressly provided herein, the vote, approval,
agreement or consent of the Members shall not be required for any action by the Manager or the
Company.

        6.8   Removal of Members. A Member may be removed by the Manager at any time.
A Member so removed shall be treated as a Withdrawing Member, provided that any amount due
   to the member upon withdrawal shall be paid within thirty (30) days of the amount being
                                        determined.

                       SECTION 7 MEETINGS OF MEMBERS

       7.1 Meetings. Meetings of the Members, for any purpose or purposes, unless
otherwise required by the Act, may be called by the Manager or by any Member or
Members holding at least twenty-five percent (25%) of the outstanding Units. The
call shall state the nature of the business to be transa cted.

       7.2 Place and Manner of Meetings. The Members may designate any place,
either within or outside the State of North Carolina, as the place of meeting for any
meeting of the Members. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the then principal executive office of
the Company in the State of North Carolina. Members may participate in an annual,
special or other meeting by (or conduct the meeting through) the use of a telephone
or other means of communication by which all Members participating may
simultaneously hear each other during the meeting.
                                               18

                                       Company Name
       7.3 Notice of Meetings. Except as provided in Section 7.4 below, written
notice stating the place, day, and hour of the meeting and the purpose or purpo ses
for which the meeting is called shall be delivered no fewer than ten (10) nor more
than fifty (50) working days before the date of the meeting, either personally, by
facsimile transmission, if possible or by mail, by or at the direction of the Manager
or Person calling the meeting, to each Member entitled to vote at the meeting.

       7.4 Meeting of All Members. If all of the Members shall meet at any time and
place, either within or outside the State of North Carolina, and consent to the
holding of a meeting at that time and place, the meeting shall be valid without call
or notice, and at the meeting lawful action may be taken.

       7.5 Record Date. For the purpose of determining Members entitled to notice
of or to vote at any meeting of Members or any adjournment of the meeting, or
Members entitled to receive payment of any distribution, or to make a determination
of Members for any other purpose, the date on which notice of the meeting is
mailed or the date on which the resolution declaring the distribution is ad opted, as
the case may be, shall be the record date for the determination of Members. When a
determination of Members entitled to vote at any meeting of Members has been
made as provided in this section, the determination shall apply to any adjournment
of the meeting.

       7.6 Quorum. Members holding at least a Majority in Interest, represented in
person or by proxy, shall constitute a quorum at any meeting of Members. In the
absence of a quorum at any meeting of Members, a majority of the Units so
represented may adjourn the meeting from time to time for a period not to exceed
sixty (60) days without further notice. However, if the adjournment is for more than
sixty (60) days without further notice, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given
to each Member of record entitled to vote at the meeting. At an adjourned meeting
at which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
Members present at a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal during the meeting of that
number of Units whose absence would cause less than a quorum.

       7.7 Manner of Acting. If a quorum is present, an action by a Majority Vote
shall be the act of the Members, unless the vote of a greater or lesser proportion or
number is otherwise required by the Act, by the Articles of Organization, or by thi s
Operating Agreement. Unless otherwise expressly provided in this Operating
Agreement or required under applicable law, Members who have an interest
(economic or otherwise) in the outcome of any particular matter upon which the
Members vote or consent may vote to consent upon any such matter and their
Profit/Loss Interest, vote or consent, as the case may be, shall be counted in the
determination of whether the requisite matter was approved by the Members.


                                         19

                                  Company Name
      7.8 Proxies. At all meetings of Members, a Member may vote in person or by
proxy executed in writing by the Member or by a duly authorized attorney -in-fact.
The proxy shall be filed with the Manager of the Company 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, signed by
Members having sufficient Units to comprise a Majority Vote if all Units of
Membership Interest in the Company were voted. Notice of an Action taken by the
Members without a meeting shall be sent to all Member s within ten (10) days of the
action being taken. No action without a meeting shall be taken without written
consent of the Manager.

       7.10 Waiver of Notice. When any notice is required to be given to any
Member, a waiver of the notice in writing signed by the Person entitled to the
notice, whether before, at, or after the time stated therein, shall be equivalent to the
giving of the notice.

                           SECTION 8
      CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS

       8.1 Members’ Capital Contributions. Each Member shall contribute in cash
and/or property in such amount as set forth in the appended Exhibit A as its share of
the Initial Capital Contributions of the Company. Notwithstanding anything to the
contrary herein, all Capital Contributions shall be net of liabilities, including
transfer taxes. The Manager may determine the value of any property contributed
for Class B Units.

       8.2 Subsequent Capital Contribution s.

              (i) Subsequent Contributions. If the Company (e.g., pursuant to the Manager’s
authority under Section 5.2(j)) makes a call for Subsequent Contributions then the Members
agree, upon 45 days’ written notice, to make Subsequent Contributions to the Company
necessary to satisfy such capital calls. The amount requested from each Member shall be in
proportion to such Member’s respective number of Units in the Company (the Member’s
“Additional Obligation”), as such Units may change from time to time during the term of this
Operating Agreement.

               (ii) Failure to Contribute Additional Capital. If any Member (the “Defaulting
Member”) fails to meet its Additional Obligation as required under Section 8.2(a) above, then the
Manager shall provide written notice (the “Shortfall Notice”) to each of the remaining Members
of their right to make Subsequent Contributions to meet the shortfall in such Member’s
Additional Obligation. This right will be allocated among the Members who elect to contribute
(the “Contributing Members”) in the proportion they mutually agree upon, or, in the absence of
                                               20

                                       Company Name
agreement, in the ratio that each of the Contributing Member’s number of Units bears to the
aggregate number of Units of all Contributing Members as of the date of the Shortfall Notice.
The Contributing Members must give written notice to the Company of their election to exercise
their right to make additional contributions under this Section 8.2(b) within ten (10) days
following delivery of the Shortfall Notice, and must make such contribution within twenty (20)
days following delivery of the Shortfall Notice.

                (iii) Adjustment of Profit/Loss Interests for Subsequent Contributions. As of each
additional contribution of capital to the Company, the Profit/Loss Interests of the Members (i.e.
Units) shall be adjusted to reflect percentage interests equal to the relative total aggregate Capital
Contributions of all of the Members (i.e., without any penalty for failure to make a capital
contribution other than an adjustment of Profit/Loss Interests based upon a dollar-for-dollar
adjustment to the Members' total aggregate Capital Contributions). All adjustments to a
Member’s Profit/Loss Interest in the Company shall be permanent, shall not be compounded
(i.e., no more than one adjustment shall be made to a Member’s Profit/Loss Interest for each
failure to make an Additional Capital Contribution) and shall not otherwise be altered except as
provided in this Operating Agreement or with the mutual consent of all of the Members hereto.
The Manager is authorized and required to execute an amendment to this Operating Agreement
evidencing such adjustment in the Profit/Loss Interests of the Members, but such adjustment
shall be effective whether or not such an amendment is executed.

               (iv) Adjustment of Profit/Loss Interests for Subsequent Contributions. As of each
additional contribution of capital to the Company, the Profit/Loss Interests of the Members shall
be adjusted to reflect percentage interests equal to the relative total aggregate Capital
Contributions of all of the Members. All adjustments to a Member’s Profit/Loss Interest in the
Company shall be permanent and shall not otherwise be altered except as provided in this
Operating Agreement or with the mutual consent of all of the Members hereto. The Manager is
authorized and required to execute an amendment to this Operating Agreement evidencing such
adjustment in the Profit/Loss Interests of the Members, but such adjustment shall be effective
whether or not such an amendment is executed.

 SECTION 9 ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS
                         AND REPORTS

      9.1 Profits and Losses. Except as otherwise provided herein, Profits and
Losses shall be allocated as follows:

             (i) The Company’s Profits, if any, for each Fiscal Year shall be allocated among
the Members for both financial accounting and income tax purposes in the following order of
priority:

                      (a) First, to the Members in an amount up to, but not greater than,
               an amount equal to the excess of the aggregate Losses theretofore
               allocated to those Members pursuant to Section 9.1(b)(i) below, over the
               aggregate amount of Profits theretofore allocated to those Members
               pursuant to this Section 9.1(a)(i), in proportion to, and in the inverse order
                                                 21

                                         Company Name
              of, the manner in which Losses were allocated under Section 9.1(b)(i)
              (and for this purpose attempting to match income character, i.e., capital
              gain to capital loss and ordinary income to ordinary loss); and

                     (b) Second, to the Class B Members up to the amount of Preferred
              Return due for Subsequent Contributions;

                    (c) Third, to the Class A Members up to the amount of ten percent
              (10%) of their Subsequent Contributions;

                    (d) Fourth, to the Class B Members up to the amount of Preferred
              Return due for Initial Contributions;

                     (e) Fifth to the Class A Members up to the Amount per Unit
              allocated to the Class B Members pursuant to Clause (d) above;

                     (f) Sixth to all of the Members based upon an equal distribution
              for each Unit held.

             (ii) The Company’s Losses, if any, for each Fiscal Year shall be allocated among
the Members for both financial accounting and income tax purposes in the following order of
priority:

                     (a) First, to the Members in proportion to the positive balances of
                            their Capital Accounts, until their Capital Accounts are
                            reduced to $0; and

                     (b) Second, any remaining Losses shall be allocated to the
                           Members in proportion to their Profit/Loss Interests.

       9.2 Cash Flow. The Cash Flow of the Company for each Fiscal Year shall, to
the extent available, be distributed by the Manager at such times as are determined
by the Manager, as follows:

              (a)    First to the Members pro rata in accordance with their unreturned
              Subsequent Contribution Return Base up to the amount of such Subsequent
              Contribution Return Base;

              (b)   Second, to the Class B Members up to the amount of Preferred
              Return due for Subsequent Contributions;

              (c)   Third, to the Class A Members up to the amount of ten percent
              (10%) (cumulatively, non-compounded) of their Subsequent Contribution
              Return Base;

               (d) Fourth, to the Class B Members up to the amount of Preferred Return due for
              Initial Contributions;
                                             22

                                      Company Name
               (e) Fifth to the Class A Members up to the Amount pe r Unit allocated to
               the Class B Members pursuant to Clause (d) above;

               (f) Sixth to all of the Members based upon an equal distribution for each
               Unit held.



               Provided, however, that distributions of Cash Flow shall be subject to any
               conditions or limitations imposed on the Company by the terms of any other
               financing or loans obtained by the Company or by any legal requirement with
               respect to withholding for taxes; and provided further that, prior to making any
               distributions then due to the Members under subsections (a) through (g) above,
               the Company may establish a hold back account for equity to be used for future
               construction and development of Improvements anticipated by the Manager
               before making any further distributions of Cash Flow.


       SECTION 10 DISTRIBUTIONS OF PROCEEDS AR IS ING FROM A
             REFINANCING, SALE OR OTHER DISPOSITION .

        10.1 All cash receipts of the Company arising from a refinancing, sale or other
disposition, not in the ordinary course of the Company’s business, of all or any part of the assets
of the Company held for investment (including interest income) shall, as soon as practicable after
the occurrence of such event, be applied as follows:

                      (a) First, in the priority provided by law or any applicable
                      agreement or undertaking of the Company, to:

                      (b) Payment, to the extent applicable, of all amounts required to be
                      disbursed in connection with such refinancing, sale or other
                      disposition, which shall include, but not be limited to, the related
                      sales or other commissions payable to any person;


                      (c) payment of all debts and obligations of the company then due
                      including, without limitation, fees and prepayment penalties,
                      related to the particular refinancing, sale or other disposition, or
                      required by any agreement to which the Company is a party;

                      (d) Creation of reasonable cash reserves considered appropriate by the
                      Manager to provide for payment of taxes, debt service, insurance, repairs,
                      replacements or renewals and/or other costs, expenses and liabilities,
                      contingent or otherwise, payment of which is not then due and for which

                                                23

                                        Company Name
                      other cash receipts are not expected by the Manager to be received prior to
                      the time such payments are required to be made;

                      (e) Payment of all other debts and obligations of the Company then due
                      related to the portion of the Project being refinanced, sold or otherwise
                      disposed, other than to any Member; and

                      (f) Establishment and later payment of hold back account(s) in
                      accordance with the terms and conditions of any loan or other obligation
                      of the Company;

                      (g) Establishment of hold back account(s) for equity to be used for future
                      construction and development of Improvements anticipated by the
                      Manager; and

       10.2 The amount of cash receipts (including interest income) remaining after the foregoing
applications is the “Distributable Sale Proceeds.”

       10.3 Distributable Sale Proceeds shall, as promptly as practicable after the applications
provided for in Section 10.1, be distributed as follows:


             (a) First, to the Members pro rata up to the amount of their unreturned
       Subsequent Contribution Return Base;

               (b) Second, to the Members pro rata in accordance with their unreturned
       Initial Return Base; and

              (c)   Third, to the Class B Members up to the amount of Preferred
              Return due for Subsequent Contributions;

              (d)   Fourth, to the Class A Members up to the amount of ten percent
              (10%) (cumulatively, non-compounded) of their Subsequent Contribution
              Return Base;

               (e)     Fifth, to the Class B Members up to the amount of Preferred Return due
              for Initial Contributions;

              (f) Fifth to the Class A Members up to the Amount per Unit allocated to
              the Class B Members pursuant to Clause (d) above;

              (g) Sixth to the Class B Members based upon an equal distribution for
              each Unit held.

       10.4      Notwithstanding anything to the contrary contained above, in the event a
refinancing, sale or other disposition occurs in connection with a dissolution of the Company

                                               24

                                       Company Name
pursuant to Article 12, the cash receipts derived therefrom shall be distributed pursuant to Article
12.

        10.5 Notwithstanding the foregoing provisions of Sections 9.2 and 10.3, in the event any
Member receives an allocation of Profits or items of income for any Fiscal Year, the Company
shall endeavor to make a distribution to the Member in an amount determined by the Manager to
be sufficient to reimburse the Member for federal and state income taxes incurred by the
Member with respect to the Member’s allocable share of Company Profits or items of income,
assuming that the Member is subject to the highest applicable state and federal tax rate. In no
event shall the Company have any obligation to make distributions to the extent that distributions
would exceed the amount of the Company’s Cash Flow or Distributable Sales Proceeds at the
applicable time. All amounts distributable to a Member to enable the Member to pay federal and
state income taxes shall be credited in order of priority set forth in sections 9.2 with respect to
distributions of Cash Flow and Section 10.3 with respect to distributions of Distributable Sales
Proceeds.

       10.6   Withholding from Distributions.       The Company is authorized to
withhold from distributions, or with respect to allocations, to the Members and to
pay over to any federal, state or local government any amount required to be
withheld pursuant to the Code or any provisions of any other federal, state or local
law and may allocate any such amounts among the Members in any manner that is
in accordance with applicable law. All amounts withheld pursuant to the Code or
any provision of any state or local tax law with respect to any pay ment, distribution
or allocation to the Company or to the Members shall be treated as amounts
distributed to the Members pursuant to this Article VI for all purposes of this
Agreement.


       10.7 Liability of Manager. Upon the determination in good faith to pay and
distribute Cash Flow or Distributable Sale Proceeds in the manner herein provided,
the Manager shall incur no liability on account of such distribution, even though
such distribution may result in the Company’s retaining insufficient funds for the
operation of its business, which insufficiency results in loss to the Company or the
borrowing of funds by the Company.

       10.8 Special Allocations. The following special allocations shall be made:

                (i) Qualified Income Offset. In the event any Member unexpectedly receives any
adjustments, allocations or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income or gain
shall be specifically allocated to such Member in an amount and manner sufficient to eliminate
the Deficit Capital Account of such Member as quickly as possible; provided, however, that an
allocation pursuant to this section shall be made if and only to the extent that such Member
would have a Deficit Capital Account after all other allocations provided for in Article 9 have
been tentatively made as if this section were not in this Operating Agreement. This section is
intended to comply with the qualified income offset requirement of the alternate test for

                                                25

                                        Company Name
economic effect in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.

                (ii) Gross Income Allocation. Except as provided in Section 9.6 hereof, in the
event any Member has a Deficit Capital Account at the end of any Fiscal Year which is in excess
of the sum of (i) the amount such Member is obligated to restore, and (ii) the amount such
Member is deemed to be obligated to restore pursuant to the penultimate sentences of Regulation
Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of
income and gain in the amount of such excess as quickly as possible; provided, however, that an
allocation pursuant to this section shall be made if and only to the extent that such Member
would have a Deficit Capital Account in excess of such sum after all other allocations provided
for in Article 9 have been tentatively made as if Section 9.6(a) and this section were not in this
Operating Agreement. This section is intended to minimize the potential distortion to the
economic arrangement of the Members that might otherwise be raised by Section 9.6(a), while
ensuring that this Operating Agreement complies with the requirements of the alternate test for
economic effect contained in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted in a manner consistent with such intent.

                (iii) Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-
2(f) of the Regulations and notwithstanding any other provision of Article 9, if there is a net
decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially
allocated items of Company income and gain for such year (and, if necessary, subsequent years)
in an amount equal to the portion of such Person’s share of the net decrease in Company
Minimum Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This
section is intended to comply with the minimum gain chargeback requirement in Section 1.704-
2(f) of the Regulations and shall be interpreted consistently therewith.

                (iv) Member Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations and notwithstanding any other provision of Article 9
except Section 9.6(c), if there is a net decrease in Member Nonrecourse Debt Minimum Gain
attributable to a Member Nonrecourse Debt during any Fiscal Year, each Person who has a share
of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of Company income and gain for such year (and, if necessary, subsequent years)
in an amount equal to the portion of such Person’s share of the net decrease in Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This section is intended to comply with the
minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.

                                               26

                                       Company Name
              (v) Member Nonrecourse Deduction. Any Member Nonrecourse Deductions for
any Fiscal Year or other period shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1).

                (vi) Section 754 Election. To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Sections 734(b) or 743(b) of the Code is required to be taken into
account in determining Capital Accounts as the result of a distribution to a Member in complete
liquidation of his interest in the Company, the amount of such adjustment to Capital Accounts
shall be treated as an item of gain (if such adjustment increases the basis of the assets) or loss (if
such adjustment decreases such basis) and such-gain or loss shall be specifically allocated to the
Members in accordance with their interests in the Company in the event Regulation Section
1.704-1(b)(2)(iv)(m)(2) applies or to the Members to whom such distribution was made in the
event Regulation Section 1.704-1(b)(2)(iv)(m)(4) applies. No Member shall have a right to
require that the Company make a Section 754 election, except to the extent that such election is
mandated by the Code or the Regulations.

               (vii) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or
other period shall be specifically allocated to the Members in proportion to their respective
Profit/Loss Interest.

                (viii) Losses. Losses allocated pursuant to Section 9.1 of the Agreement shall not
exceed the maximum amount of Losses that can be so allocated without causing any Member to
have a Deficit Capital Account balance at the end of any Fiscal Year. In the event some but not
all of the Members would have Deficit Capital Account balances as a consequence of an
allocation of Losses pursuant to Section 9.1(b), the limitations set forth in the first sentence of
this Section 9.6(h) shall be applied on a Member by Member basis so as to allocate the maximum
possible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations.

       10.9 Curative Allocations. The allocations set forth in Section 9.6(a) through
(h) hereof (the “Regulatory Allocations”) are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the extent
possible, all Regulatory Allocations shall be offset either w ith other Regulatory
Allocations or with special allocations of other items of Company income, gain,
loss or deductions pursuant to this section. Therefore, notwithstanding any other
provisions of Article 9 (other than the Regulatory Allocations), the Mana ger shall
make such offsetting special allocations of Company income, gain, loss or
deduction in whatever manner it determines appropriate so that after such offsetting
allocations are made, each Member’s Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of this Operating Agreement and all Company
items were allocated pursuant to Section 9.1; provided that such allocations shall
not cause any net change in the percentage of Profit/Loss Interests held by any
Member.



                                                 27

                                         Company Name
  In exercising its discretion under this section, the Manager shall take into account future
Regulatory Allocations under Sections 9.6(c) and 9.6(d) that, although not yet made, are likely to
offset other Regulatory Allocations previously made under Sections 9.6(e) and 9.6(g).

                    SECTION 11 OTHER ALLOCATIONS RU LES

               11.1 For purposes of determining the Profits, Losses or any other items allocable
to any period, Profits, Losses and any such other items shall be determined by the Manager using
any permissible method under Code Section 706 and the Regulations thereunder.

               11.2 Except as otherwise provided in this Operating Agreement, all items of
Company income, gain, loss, deduction and any other allocations not otherwise provided for
shall be divided among the Members in the same proportions as they share Profits and Losses, as
the case may be, for the year.

              11.3 The Members are aware of the income tax consequences of the allocations
made by Article 9 and hereby agree to be bound by the provisions of Article 9 in reporting their
shares of Company income and loss for income tax purposes.

                11.4 Solely for purposes of determining a Member’s proportionate share of the
“excess nonrecourse liabilities” of the Company within the meaning of Regulations Section
1.752-3(a)(3), the Member’s interests in Company Profits are equal to their Profit/Loss Interest.

                11.5 (a)       To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Manager shall endeavor to treat distributions of Cash Flow as having been made
from the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt only to the extent
that such distributions would increase a Deficit Capital Account for any Member.

         (b) Tax Allocations; Code Section 704(c). In accordance with Code
  Section 704(c) and the Regulations thereunder, 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 Members s o 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 Gross Asset Value (computed in
  accordance with Section 1.1(y)(i).

        (c)    In the event the Gross Asset Value of any Company asset is adjusted pursuant to
Section 1.1(y)(ii) or (iv), subsequent allocations of income, gain, loss and deduction with respect
to such asset shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the Regulations thereunder.
       (d)    Any elections or other decisions relating to such allocations shall be made by the
Manager(s) in any manner that reasonably reflects the purpose and intention of this Operating
Agreement. Allocations pursuant to this section 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 Person’s
                                                28

                                        Company Name
Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision
of this Operating Agreement.
       (e)   Character of Subsidiary Distributions. Any distributions received by
the Company from any Subsidiary shall retain their character (e.g., as Cash Flows ,
Distributable Sales Proceeds or other income) at the Company level to the extent
permitted under applicable tax laws.

      (f)    Limitation Upon Distributions. No distribution shall be declared and
paid unless, after such distribution is made, the fair market v alue of the assets of
the Company are in excess of all liabilities of the Company, except for liabilities to
Members on account of their contributions.

       (g)   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 in this Operating
Agreement.

     (h)   Loans to Company. Nothing in this Operating Agreement shall prevent
any Member or the Manager from making secured or u nsecured loans to the
Company by agreement with the Company.

      (i)    Accounting Period. The Company’s accounting period shall be the
calendar year.

       (j)   Returns and Other Elections. The Manager shall cause the preparation
and timely filing of all tax returns required to be filed by the Company pursuant to
the IRC and all other tax returns deemed necessary and required in each jurisdiction
in which the Company does business. Copies of those returns, or pertinent
information from the returns, shall be furnished to the Members within a reasonable
time after the end of each of the Company’s Fiscal Year(s). All elections permitted
to be made by the Company under federal or state laws shall be made by the
Manager in the Manager’s sole discretion, provided that the Mana ger shall make
any tax election requested by Members owning a Majority Vote. Notwithstanding
the foregoing, the Manager is directed to take all actions as it deems necessary and
advisable so that the Company is to be taxed as a partnership under the provis ions
of Subchapter K, Chapter 1 of Subtitle A of the IRC and similar provisions of any
state tax laws.

       (k)   Appointment of TMP. The Members hereby appoint L. Ted Prosser, as
the tax matters partner as defined in Section 6231(a)(7) of the IRC and the
Regulations. The TMP is authorized to take such actions and to execute all
statements and forms on behalf of the Company which may be permitted or required
by the applicable provision of the IRC or of the Treasury Regulations promulgated
thereunder, and the Members shall take all other action as may be necessary to
effect the designation of the Manager as the TMP. In the event of an audit of the
Company’s income tax returns by the Internal Revenue Service, the TMP may, at
                                                29

                                        Company Name
the expense of the Company, retain account ants and other professionals to
participate or assist in the audit process. All reasonable expenses incurred by the
TMP in such Person’s capacity as TMP shall be expenses of the Company and paid
from Company funds. The TMP may be changed by a removal vote of all Members,
and the Person so designated is authorized to take such actions as are permitted by
Code Sections 6221 through 6233.



                                 SECTION 12 BUY-SELL

      12.1 Buy-Sell. Each of the following events shall constitute a “Buy-Sell
Event” under this Operating Agreement:

            (i) the death, declaration of legal incompetence or dissolution and winding-up of a
Class B Member;

              (ii) a judicial determination of the insolvency of any Member;

              (iii) any filing of a petition or suit under the bankruptcy laws by or against a
Member that is not dismissed within sixty (60) days;

             (iv) any purported voluntary or involuntary transfer or encumbrance of all or any
part of a Member’s Membership Interest in a manner not expressly permitted by this Operating
Agreement;

              (v) any material breach of this Operating Agreement by a Class B Member which
is not cured within twenty (20) days after written notice of such breach is given to the Class B
Member by the Company;

             (vi) any instance in which the spouse of a Class B Member commences against a
Member, or a Member is named in, a Domestic Proceeding;

              (vii)   any removal of a Member: and

              (viii) any withdrawal by a Member from the Company other than as may be
expressly permitted by this Operating Agreement.

       12.2 Buy-Sell Notice. Upon the occurrence of a Buy-Sell Event, the Member
to whom such event has occurred (the “Withdrawing Member”), or its executor,
administrator or other legal representative in the event of death or declaration of
legal incompetency, shall give notice of the Buy-Sell Event (the “Buy-Sell-Notice”)
to the other Members within twenty (20) days after its occurrence. If the
Withdrawing Member fails to give the Buy-Sell Notice, any other Member (other
than a Withdrawing Member) may give the notice at any time thereafter and by so
doing commence the buy-sell procedure provided for in Article 10. In the case of a


                                              30

                                       Company Name
Domestic Proceeding, the other Members’ actual knowledge of the commencement
of a Domestic Proceeding shall be treated as receipt of a Buy -Sell Notice.

       12.3 Member’s Purchase Option. Upon the occurrence of a Buy-Sell Event,
each of the Members, except the Withdrawing Member and any other Withdrawing
Member, shall have an option to purchase (the “Purchase Option”) the Withdrawing
Member’s Membership Interest at the Buy-Sell Closing on the terms and conditions
set forth in Article 10. This right will be allocated among the Members who elect to
purchase (the “Purchasing Members”) in the proportion they mutually agree upon,
or, in the absence of agreement, in the ratio that each of the Purchasing Member’s
Membership Interest bears to the aggregate Membership Interests of all Purchasing
Members. The Purchasing Members must give notice of their election to exercise
their Purchase Option to the Withdrawing Member and all other Members within
thirty (30) days following delivery of the Buy-Sell Notice.

       12.4 Assignment of Purchase Option. If at the occurrence of a Buy-Sell
Event, there exist only two (2) then-current Members (including the Withdrawing
Member), the Member that is not withdrawing shall have the option during the
thirty (30) day period set forth in Section 10.3 to assign its Purchase Option to any
Person other than the Withdrawing Member (the “Purchase Option Assignee”) by
notifying the Withdrawing Member and the Company of s uch assignment in writing.
After delivery of such notice, the Purchase Option Assignee shall have the option to
purchase the Withdrawing Member’s Membership Interest on the same terms and
conditions as would apply to the Member from which the Purchase Opti on was
assigned; provided, however, that the Purchase Option Assignee shall not have the
rights of assignment set forth in this section. Notwithstanding any other provision
of this Article 10 or Article 11, any Purchase Option Assignee which exercises its
Purchase Option, as provided herein, (i) shall only have those rights as specified in
Section 13.3, (ii) shall not be admitted as a substitute Member without full
compliance with Section 13.4 and (iii) shall be subject to the Buy-Sell restrictions
imposed under Article 10. In the event the Purchase Option Assignee does not
exercise the Purchase Option, the Purchase Option Assignee shall have no further
rights under this Operating Agreement.

      12.5 Agreement on Valuation.

       (a)   Generally. Unless otherwise agreed in writing by the purchaser(s)
and seller within sixty (60) days of the receipt of a Buy-Sell Notice, the purchase
price for the Withdrawing Member’s Membership Interest shall be the fair market
value of the Membership Interest (as if the entire Company were being sold,
applying a possible discount for limited marketability, minority interest or other
factors) as of the date of the Buy-Sell Event. The value of real property and
improvements owned by the Company shall be determined by three appraisers, on e
selected by the Purchasing Member(s), one selected by the Withdrawing Member
and the third selected by the two appraisers, each of whom shall (i) be a member of
the Appraisal Institute; and (ii) have at least five (5) years’ experience valuing
                                         31

                                  Company Name
comparable properties. The value determined by a majority of the appraisers will
be final. Except as otherwise provided herein, t he costs of appraisal shall be borne
equally between the purchaser(s) as a group and the seller. Within thirty (30) days
of the receipt of the last appraisal, the value of the Membership Interest shall be
determined within thirty (30) days by a Certified Public Accountant or other person
who has testified in court as an expert on at least three (3) occasions upon the value
of a business interest, such expert to be selected by the firm of certified public
accountants who have most recently prepared tax returns for the Company, or if
they are unwilling or unable to make such selection, is appointed by the Arbitration
Group, LLC (a North Carolina limited liability company), promptly upon the
submission by either party.      The purchase price to be paid for the Withdrawing
Member’s Membership Interest will be reduced by the amount of any distributions
made by the Company to the Withdrawing Member from the date the Buy-Sell
Event occurred with respect to the Withdrawing Member to the Buy -Sell Closing.

        (b)     De Minimis Valuation. In the event that the Withdrawing Member holds an
interest that comprises five percent (5%) or fewer of the number of Units of the Company
outstanding, the Manager may, within sixty (60) days of receipt of the Buy/Sell Notice submit a
good faith estimate of the value of the membership Interest. If the Withdrawing Member does
not accept the good faith estimate, the Withdrawing Member shall bear all costs of the appraisal
and valuation until a value is determined. If the value is determined to be more than five percent
(5) greater than the good faith estimate, the Purchasing Members shall reimburse the
Withdrawing Member one-half of the fees paid for the appraisal and valuation and the Company
shall reimburse the other one-half of such fees, together with an additional ten percent (10%) of
such fees. If a Purchasing Member does not accept the good faith estimate, such Purchasing
Member shall bear all costs of the appraisal and valuation until a value is determined. If the
value is determined to be more than five percent (5) greater than the good faith estimate, the
Withdrawing Member shall reimburse the Purchasing Member one-half of the fees paid for the
appraisal and valuation and the Company shall reimburse the other one-half of such fees,
together with an additional ten percent (10%) of such fees.



       12.6 Buy-Sell Closing. The closing (the “Buy-Sell Closing”) of the purchas e
of any Membership Interest pursuant to Article 10 shall take place on the date
agreed upon by the purchaser(s) and seller, but not later than sixty (60) days after
determination of the Purchase Price. Except for the interest of a Member who has
been removed pursuant to Section 6.8,the purchase price for each Membership
Interest being purchased will be payable in equal quarterly installments of principal
and interest over a three year period commencing on the Closing . The purchase
price will bear interest from the date of the occurrence of the Buy-Sell Event until
Buy-Sell Closing at an interest rate equal to the prime rate last published in The
Wall Street Journal prior to the occurrence of the Buy-Sell Event. Upon payment of
the purchase price, the Member selling its Membership Interest shall execute and
deliver such assignments and other instruments as may be reasonably necessary to
evidence and carry out the transfer of such Membership Interest to the purchaser(s).
                                                32

                                        Company Name
In connection with the sale of any Memb ership Interest under Article 10, unless
otherwise agreed by the purchaser(s) and seller, the purchaser(s) will assume the
seller’s allocable portion of Company obligations, if any, to the extent related to the
transferred interest as well as the seller’s individual obligations to the extent related
to the transferred interest, other than (i) income tax liabilities of the seller; and (ii)
the seller’s continuing obligations under Section 6.5 with respect to any
distributions received by the seller from the Company. Notwithstanding any other
provision of Article 11 or Article 10, any transferee, assignee or purchaser of a
Class B Member’s interest, as provided herein, shall only have those rights as
specified in Section 13.3, and shall not be admitted as a substitute Member without
full compliance with Section 11.4.

       12.7 Effect on Withdrawing Member’s Interest. From the date of the
occurrence of the Buy-Sell Event to the date of the transfer of the Withdrawing
Member’s Membership Interest under Article 10, t he Membership Interest
represented by the Withdrawing Member’s Membership Interest will be excluded
from any calculation of aggregate Membership Interests for purposes of any voting
or any approval required of Members under this Operating Agreement. Withou t
limiting the generality of any other provision of this Operating Agreement, upon the
exercise of the Purchase Option, the Withdrawing Member, without further action,
will have no rights in the Company or against the Company or any Member other
than the right to receive its share of all distributions accrued as of the date of the
Buy-Sell Event but not yet paid, and payment for its Membership Interest in
accordance with Article 10. The Withdrawing Member’s continuing obligations
under Section 6.5 with respect to any distributions received by the Withdrawing
Member while the Withdrawing Member is a Member of the Company shall survive
his, her or its withdrawal from the Company.

       12.8 Failure to Exercise Purchase Option. In the event the Members or
Purchase Option Assignee, if any, do not exercise their Purchase Options, the
Withdrawing Member or its executor, administrator or other legal representative in
the event of death or declaration of legal incompetency, may retain its rights in the
Company (i.e., if the Withdrawing Member is the same Person as before the
applicable Buy-Sell Event, the Withdrawing Member may remain a Member), or
transfer its economic rights in the Membership Interest of the Withdrawing Member
to any Person; provided, however that any transferee of the Withdrawing Member’s
Membership Interest, as provided herein, (i) shall only have those rights as
specified in Section 13.3; (ii) shall be admitted as a substitute Member upon
approval of the Manager under Section 13.4(a) and full compliance with Section
13.4(b) and (c); and (iii) shall be subject to the Buy-Sell restrictions imposed under
Article 10.

                      SECTION 1 3 ADDITIONAL MEMBERS



                                           33

                                    Company Name
       13.1 Transferability of Membership Interest. The term “transfer” when used
in this Operating Agreement with respect to a Membership Interest includes a sale,
assignment, gift, pledge, exchange or other disposition. A Class B Member shall not
at any time transfer its Membership Interest except in accordance with the
conditions and limitations set out in Section 13.2. Any transferee of a Membership
Interest by any means shall have only the rights, powers and privileges set out in
Section 13.3 or otherwise provided by law and shall not become a Member of the
Company except as provided in Section 13.4.

       13.2 Restrictions on Transfers of Membership Interests. All or part of a
Membership Interest may be transferred only with the prior written approval of the
Manager, which approval may be granted or denied in the sole discretion of the
Manager. Notwithstanding the foregoing, a Member may transfer or assign all or
any portion of such Member’s Membership Interests for estate planning purposes to
any of the Member’s immediate family members, spouse, siblings, aunts, uncles,
nieces, nephews or lineal descendants, or a trust f or the benefit of any such
Person(s) or such Person(s) and the Member; provided that prior to such transfer
being effective, such transferee(s) or assignee(s) shall make representations and
warranties to the Company regarding the transferee’s or assignee’s investment in
the Company as is reasonably required for securities law purposes.

       13.3 Rights of Transferee. Unless and until admitted as a Member of the
Company in accordance with Section 13.4, the transferee of a Class B Membership
Interest (including even a transferee permitted pursuant to Section 13.2) shall not
be entitled to any of the rights, powers, or privileges of a Member, except that the
transferee shall be entitled to receive the distributions and allocations to which the
Member would be entitled but for the transfer of his Membership Interest .

       13.4 Admission of Transferees as Members. A transferee of a Class b
Membership Interest may be admitted as a Member of the Company upon furnishing
to the Company all of the following:

               (i) the written consent of the Manager;

                (ii) execution of an agreement, in a form satisfactory to the Manager, to be bound
by all the terms and conditions of this Operating Agreement; and

              (iii) receipt by the Company of an opinion of counsel, satisfactory in form and
substance to the Manager, that neither the offering nor the proposed sale or transfer of the
Membership Interest will violate any Federal or applicable state securities law and that neither
such offering or sale will adversely affect the Company from being taxed as a partnership for
Federal income tax purposes.

              (iv) payment of such reasonable expenses as the Company may incur in
connection with its admission as a Member.


                                               34

                                       Company Name
       13.5 Admission of New Members. New Class B Members to the Company may
be admitted in the reasonable discretion of the Manager. If not a transferee, a new
Member shall be required to contribute capital on a per Unit basis at least equal to
the average amount of the members’ Capital Account except to the extent that a
greater value is determined by the Manager.

       13.6 Financial Adjustments. No new Members shall be entitled to any
retroactive allocation of losses, income, or expense deductions incurred by the
Company. The Manager may, at its option, at any time a Member is admitted, close
the Company books (as though the Company’s tax year had ended) or make pro rata
allocations of loss, income, and expense deductions to a new Member for that
portion of the Company’s tax year in which a Member was admitted in accordance
with the provisions of Code Section 706(d) and the Treasury Regulations
promulgated thereunder.

       13.7 Withdrawal. Except as otherwise provided in this Operating Agreement,
no Member shall at any time retire or withdraw from the Company or withdraw any
amount out of his Capital Account. Any Member retiring or withdrawing in
contravention of this section shall indemnify, defend and hold harmless the
Company and all other Members (other than a Member who is, at the time of such
withdrawal, in default under this Operating Agreement) from and ag ainst any
losses, expenses, judgments, fines, settlements or damages suffered or incurred by
the Company or any such other Member arising out of or resulting from such
retirement or withdrawal.

                 SECTION 1 4 DISSOLUTION AND TERM INATION

      14.1 Dissolution. The Company shall be dissolved upon the first to occur of
any of the following events:

                      (i) upon the election to dissolve the Company by all of the Manager

                      (ii) upon an election to dissolve by an affirmative vote of a
                             Majority in Interest of Members in each Class;

                      or upon

                      (iii) the entry of a decree of judicial dissolution or the issuance of a
                              certificate for administrative dissolution under the Act.

              If a Member who is an individual dies or a court of competent jurisdiction
adjudges him to be incompetent to manage the Member’s person or property, the Member’s
executor, administrator, guardian, conservator, or other legal representative may exercise all of
the Member’s rights for the purpose of settling the Member’s estate or administering his
property.

                                               35

                                       Company Name
       14.2 Liquidation. Upon dissolution of the Company for any reason, the
Company immediately shall commence to wind up its affairs.                 During such
liquidation, the allocation of Net Profits, Net Losses and other items and
distributions of Cash Flow shall continue in the same proportions as before the
dissolution. Except as otherwise provided in this Section 14.2, the Manager shall
cause the liquidation and winding up of the Company in accordance with this
Section 14.2. Notwithstanding the foregoing sentence, if the Mana ger so elects, the
Manager shall designate a liquidating trustee, who shall be approved by Members
owning a majority of the Interests of all Members, to cause the liquidation and
winding up of the Company in accordance with this Agreement. A reasonable
period of time shall be allowed for the orderly termination of the Company
business, discharge of its liabilities and distribution or liquidation of the remaining
assets so as to enable the Company to minimize the normal losses attendant upon
the liquidation process. A full accounting of the assets and liabilities of the
Company shall be taken and the statements thereof shall be furnished to each
Member within thirty (30) days after the dissolution. Such accounting and
statements shall be prepared by the Ma nager or by the liquidating trustee selected in
accordance with this Section 14.2. The Company property and assets and/or the
proceeds from the liquidation thereof shall be applied in the following order of
priority:

                     (i) Payment of the debts and liabilities of the Company, in the order of
             priority provided by law (including, without limitation, fees to the Manager
             pursuant to Section 7.04(b) but excluding any loans by the Members to the
             Company) and payment of the expenses of liquidation;

                     (ii) Setting up of such reserves as the Manager or liquidating trustee may
             deem reasonably necessary for any contingent or unforeseen liabilities or
             obligations of the Company or any obligation or liability not then due and
             payable; provided, however, that any such reserve shall be paid over by the
             Manager or liquidating trustee to an escrow agent, to be held by such escrow
             agent for the purpose of disbursing such reserves in payment of such liabilities,
             and, at the expiration of such escrow period as the Manager or liquidating trustee
             shall deem advisable, to distribute the balance thereafter remaining in the manner
             hereinafter provided;

                  (iii) Payment of all debts and other liabilities of the Company to any
             Member;

                      (iv) Payment, to the Members pro rata to the extent of their unreturned
             Initial Return Base;

                   (v) Payment, to the Members pro rata in accordance with their unreturned
             Subsequent Contribution Return Base;



                                             36

                                     Company Name
                     (vi) Payment to the Members of an amount equal to their then remaining
             respective Capital Account credit balances which shall be distributed to the
             Members in proportion to the amount of such balances; and

                     (vii) Payment of the balance, if any, to the Members in proportion to their
             respective Profit/Loss Interests.

        14.3 Distribution in Kind. The Manager or liquidating trustee may distribute
in kind any direct or indirect interest in real estate owned by the Company. In the
event the Company is dissolved and, upon such dissolution, the Company continues
to own interests in any Properties, the remaining Propert ies may be sold in
liquidation or be distributed in kind. Distributions in kind may be made to some or
all of the Members, as tenants-in-common, or to each Member individually based on
the Gross Asset Value of the property interest distributed, as determi ned by the
Manager or liquidating trustee.

       14.4 Articles of Dissolution. 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 distr ibuted to the Members, articles
of dissolution shall be executed in duplicate and verified by the Person signing the
articles, and the articles shall set forth the information required by the Act.

       14.5 Return of Contribution Nonrecourse to Other Members. Except as
provided by law or as expressly provided in this Operating Agreement, upon
dissolution each Member shall look solely to the assets of the Company for the
return of its Capital Contribution. If the Company property remaining after the
payment or discharge of the debts and liabilities of the Company is insufficient to
return the Capital Contribution of one or more Members, the Members shall have no
recourse against any other Member.

                 SECTION 1 5 MISCELLANEOUS PROVIS IONS

       15.1 Notice. Any notice, demand, request, or other communication or
document required or permitted to be provided under this Operating Agreement
shall be given in writing and shall be deemed to have been sufficiently given or
served for all purposes if given to the Member’s and/or Manag er’s and/or
Company’s address as set forth in Article 4 hereof, as appropriate, or the telecopy
number of such party, or such other address or telecopy number as the party may
later specify for that purpose by notice to the other party. Except as otherwise
expressly provided in this Operating Agreement, each notice shall, for all purposes,
be deemed given and received:

                     (i) if given by telecopy, when the telecopy is transmitted to the party’s
             telecopy number specified herein and confirmation of complete receipt is received
             by that transmitting party during normal business hours or on the next business
             day if not confirmed during normal business hours;
                                             37

                                     Company Name
                       (ii) if hand delivered to a party against a receipted copy, when the copy of
               the notice is receipted;

                       (iii) if given by a nationally recognized and reputable overnight delivery
               service, the day on which the notice is actually received by the party; and

                      (iv) if given by any other means or if given by certified mail, return receipt
               requested, postage prepaid, two (2) business days after it is deposited with the
               United States Postal Service, at the address of the party or as it appears on the
               books of the Company.

   If any notice is sent by telecopy, the transmitting party may as a courtesy send a duplicate copy
of the notice to the other party by regular mail. In all events, however, any notice sent by
telecopy transmission shall govern all matters dealing with delivery of the notice, including the
date on which the notice is deemed to have been received by the other party.
       15.2 Books of Accounts and Records. Proper and complete records and books
of account shall be kept or shall be caused to be kept by the Manager and in which
shall be entered fully and accurately all transactions and other matters relating to
the Company’s business in the detail and completeness customary and usual for
businesses of the type engaged in by the Company. The books and records shall at
all times be maintained at the principal executive office of the Company and shall
be open to the reasonable inspection and examination of the Members, or their duly
authorized representatives during reasonable business hours.

       15.3 Application of North Carolina Law. This Operating Agreement and the
application interpretation hereof shall be governed excl usively by its terms and by
the laws of the State of North Carolina, and specifically the Act.

       15.4 Waiver of Action for Participation. Each Member irrevocably waives
during the term of the Company any right that it may have to maintain any action
for partition with respect to the property of the Company.

                               SECTION 16 AMENDMENTS

        16.1 This Agreement may be amended by the affirmative consent of Members holding
greater than sixty-six and two-thirds percent (66 2/3%) of the Profit/Loss Interests held by all
Members; provided, however, that any amendment of Sections 13.5(a), 5.2, 6.2, 9.1, 10.1, or
10.3 or Articles 7 or 8 shall require the affirmative consent of a majority of the Profit/Loss
Interests held by Class B Members.

       16.2 Notwithstanding the provisions of Section 13.5(a), the Manager may amend the
Agreement and the Articles of Organization if necessary or desirable to reflect changes in capital
contributions, Subsequent Contributions and withdrawals, to admit or effect withdrawals of
Members, to correct any ambiguous, false or erroneous provision, provided that no such


                                                38

                                        Company Name
amendment shall alter a Member’s Profit/Loss Interest or rights of distribution except as
expressly permitted hereby.

       16.3 The Manager shall initiate proceedings to request the approval of Members of
proposed amendments to the Agreement (i) on its own motion; or (ii) upon receipt of a written
request executed by a combination of any Members who, in the aggregate, own more than
twenty-five percent (25%) of the Profit/Loss Interests owned by all Members.

      16.4 Power of Attorney. Each Member hereby irrevocably constitutes and
appoints the Manager as its true and lawful agent and attorney -in-fact, with full
power of substitution, in its name, place and stead, to make, execute and
acknowledge, swear to, record, publish and file:

                      (i) Any instruments with respect to the Company that may be required to
              be filed under the laws of any state or of the United States, or that the Manager
              shall deem advisable to file to carry out the purposes of the Company;

                     (ii) Any and all amendments of the foregoing required or permitted by
              law or the provisions of this Agreement, provided that such amendment shall not
              have a material adverse effect on the rights or obligations of any of the Members;

                     (iii) Any and all amendments of this Agreement permitted by the
              provisions of Section 13.5;

                     (iv) Any documents or instruments that the Manager may deem necessary
              or desirable in order to reflect a change in Members’ Profit/Loss Interests
              pursuant to any specific provision hereof (including, without limitation, changes
              pursuant to Sections 8.1 or 8.2, Article 9 or Article 10 or Article 11); and

                     (v) All documents that may be required to effectuate the dissolution and
              termination of the Company pursuant to any specific provision hereof.

The foregoing power of attorney is coupled with an interest, shall be irrevocable and shall
survive the death, incompetency, dissolution, merger, consolidation, bankruptcy or insolvency of
each of the Members. The Members shall execute and deliver to the Manager, within five (5)
days after receipt of the Manager’s request therefore, such further designations, powers of
attorney and other instruments as the Manager deems necessary to carry out the purposes of this
Agreement.

      16.5 Execution of Additional Instruments . Each Member hereby agrees to
execute such other and further statements of interest and holdings, designations,
powers of attorney, and other instruments necessary to comply with any laws, rules,
or regulations.

     16.6 Construction. Whenever the singular number is used in this Operating
Agreement and when required by the context, the same shall include the plural and

                                              39

                                       Company Name
vice versa, and the masculine gender shall include the feminine and neuter genders
and vice versa.

       16.7 Headings. The headings in the Operating Agreement are for convenience
only and are in no way intended to describe, interpret, define, or limit the scope,
extent, or intent of this Operating Agreement or any of its provisions.

       16.8 Waivers. The failure of any party to seek redress for violation of or to
insist upon the strict performance of any covenant or condition of this Operating
Agreement shall not prevent a subsequent act that would have originally constituted
a violation, from having the effect of an origin al violation.

       16.9 Rights and Remedies Cumulative. The rights and remedies provided by
this Operating Agreement are cumulative and the use of any one right or remedy by
any party 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.

       16.10 Severability. If any provision of the Operating Agreement or its
application to any Person or circumstance shall be invalid, i llegal or unenforceable
to any extent, the remainder of this Operating Agreement and its application shall
not be affected and shall be enforceable to the fullest extent permitted by law.

      16.11 Heirs, Successors, and Assigns. Each and all of the covenants, terms,
provisions and agreements contained in this Operating Agreement shall be binding
upon and inure to the benefit of the parties hereto and, to the extent permitted by
this Operating Agreement, their respective heirs, legal representatives, successors
and assigns.

       16.12 Creditors. None of the provisions of this Operating Agreement shall be
for the benefit of or enforceable by any creditors of the Company.

       16.13 Counterparts, Facsimile Signatures . This Operating Agreement may be
executed in one or more counterparts, each of which, taken together, shall constitute
one Operating Agreement. The undersigned further agree that this Operating
Agreement may be transmitted between them by facsimile signatures, and the
parties further intend that faxed signatures constitute original signatures and that a
faxed Operating Agreement (whether one or more counterparts) containing the
originals (original or faxed) of all the parties is binding on the parties.

      16.14 Investment Representations. The parties to this Operating Agreement
agree as follows with respect to investment representation. The undersigned
Members understand:

                   (i)    that the Membership Interests evidenced by this Operating
                          Agreement have not been registered under the Securities Act
                          of 1933, 15 U.S.C. Section 15b et seq., the North Carolina
                                         40

                                   Company Name
        Securities Act or any other state or federal securities laws
        (the “Securities Acts”) because the Company is issuing these
        Membership Interests in reliance upon the exemptions from
        the registration requirements of the Securities Acts
        providing for issuance of securities not involving a public
        offering;

(ii)    the Company has relied upon the fact that the Membership
        Interests are to be held by each Member for investment; and

(iii)   that exemption from registration under the Securities Acts
        would not be available if the Membership Interests were
        acquired by a Member with a view to distribution.

(iv)    Accordingly, each Member hereby confirms to the Company that
        the Member is acquiring the Membership Interests for the
        Member’s own account, for investment and not with a view to the
        resale or distribution.

(v)     Each Member agrees not to transfer, sell or offer for sale any
        portion of the Membership Interests unless there is an effective
        registration or other qualification relating thereto under the
        Securities Act of 1933 and under any applicable state securities
        laws or unless the holder of Membership Interests delivers to the
        Company an opinion of counsel, satisfactory to the Company, that
        the registration or other qualification under the Securities Act of
        1933 and applicable state securities laws is not required in
        connection with the transfer, offer or sale.

(vi)    Each Member understands that the Company is under no
        obligation to register the Membership Interests, if any, or to
        assist the Member in complying with any exemption from
        registration under the Securities Acts if the Member should
        at a later date wish to dispose of the Membership Interest.

(vii) Furthermore, each Member realizes that the Membership
       Interest is unlikely to qualify for disposition under Rule 144,
       17 C.F.R. Section 230.144 (1992), of the Securities and
       Exchange Commission unless the Member is not an Affiliate
       of the Company and the Membership Interest has been
       beneficially owned and fully paid for by the Member for at
       least three (3) years.

(viii) Before acquiring the Membership Interest, each Member has
        investigated the Company and its business and has had all
        information necessary for the Member to make an informed
        decision to acquire the Membership Interest. Each Member
                         41

                 Company Name
                              considers itself to be a Person possessing experience and
                              sophistication as an investor adequate for the evaluation of
                              the merits and risks of the Member’s investment in the
                              Membership Interest.

                      (ix)    Each Member represents and warrants to the Company that
                              the Member is an “accredited investor,” as such term is
                              defined in Regulation D of the Securities Act of 1933.

     16.15 Disclosure and Waiver of Conflicts. The parties acknowledge that the
Company’s counsel, James, McElroy         Diehl, P.A., prepared this Operating
Agreement on behalf of and in the course of its representation of the Company, the
Manager and the Class A Member and that:

             (i) Counsel prepared this Operating Agreement and acted as legal counsel to the
Company, the Manager and the Class A Member and not to any of the Class B Members;

              (ii) each Member has been advised by Counsel that a conflict of interest may
exist among the Members;

               (iii) each Member has been urged by Counsel and has had the opportunity to
seek the advice of independent legal counsel;

               (iv) No Member, other than the Manager has been advised by James McElroy &
Diehl, P.A. or has relied upon any observation or statement of James McElroy & Diehl, P.A..

Notwithstanding the foregoing, the parties: (i) desire Counsel to represent the Company; (ii)
acknowledge that they have been advised to retain separate counsel; and (iii) jointly and
severally forever waive any claim that Counsel’s representation of the Company or preparation
of this Operating Agreement constitutes a conflict of interest. Further, the Company and the
parties waive any conflict that may arise out of Counsel’s present or future representation of any
of the Members on separate matters unrelated to this Operating Agreement.


       16.16 Arbitration. Any disagreement arising out of this Operating
Agreement, or the application of any provisions hereof, or any part of this
transaction whatsoever, shall be submitted to arbitration in compliance with the
North Carolina Arbitration Act, and other rules of the Arbitration Group, LLC
(“TAG”) (a North Carolina limited liability company) as they are amended from
time to time. Notwithstanding such rules, the parties hereto may agree on the one
arbitrator nominated by TAG, or may select one each from nominees of TAG and
those two shall select a third. It is hereby mutually agreed that any such arbitration
decision or award shall be binding upon all parties to this Operating Agreement and
shall have the same effect as a decision of the highest judicial authority. It is
further hereby mutually agreed that each party to any such arbitration shall bear his,


                                               42

                                       Company Name
her or its own costs of such arbitration. The venue for all arbitration proceedings
shall be Buncombe County, North Carolina.

        16.17 Limitations on Remedies. The parties agree that in any action or arbitration
proceeding relating to this Agreement or relating in any manner to Membership in the Company
or operation of the Company, no damages shall be recoverable except for actual, out of pocket
damages or amounts specifically provided to be paid herein. The parties waive recovery of
consequential damages, lost profits, exemplary damages, punitive damages and indirect
damages. The parties further agree that proof of damages shall be by clear and convincing
evidence. The parties agree that they shall not initiate or maintain any purported derivative
action without the participation of a majority in interest of the Members, excluding from the
calculation, Units held or controlled by the Manager.

        16.17 Entire Agreement and Modification. This Operating Agreement constitutes a
complete and exclusive statement of the terms of the agreement among the parties with respect to
its subject matter. All amendments to this Operating Agreement must be in writing.

        16.18 Final Acknowledgement. The parties hereto acknowledge that membership in the
company entails, in addition to business risk of failure, an indefinitely long-term investment.
The Company will invest in real estate for indefinite durations, and Members may be unable to
transfer or liquidate their interests for a lengthy, indefinite period.




                                               43

                                       Company Name
                                     CERTIFICATE

  The undersigned hereby agree, acknowledge, and certify that the foregoing Operating
Agreement constitutes the Operating Agreement of Sequoia Equity Partners I, LLC adopted by
the Members of the Company under seal as of the Effective Date (the Members may execute
counterpart signature pages to this Operating Agreement).
CLASS B MEMBERS:
See Attached Counterpart Signature Pages


CLASS A MEMBER:                                MANAGER:

(Name)                                         (Name)

By:                                            By:
Name:                                          Name:
Title:                                         Title:




                                            44

                                     Company Name
                              EXHIBIT A



 Names and Addresses of Members        Initial Capital     Units of
                                       Contributions*     Membership
                                                           Interest

Class B Members

(Name)                                   (Amt here)           (%)




                              Total    $____________        (Total)

Class A Member

(Name)                                 $____________     (Amount)



                  Total All Members    $___________         (Total)




                                  45

                           Company Name

				
DOCUMENT INFO
Shared By:
Stats:
views:21
posted:9/14/2011
language:English
pages:45
Description: Operating Agreement CRE Investment Fund- Manager Managed comprehensive agreement intended for use by a commercial real estate investment fund, suitable for private placement offering. Pages: 49