LIMITED LIABILITY COMPANY AGREEMENT
OF
GRAMERCY LINDEN JV LLC
A Delaware Limited Liability Company
Dated as of April 19, 2023
Execution Version
Among
BRIARWOOD FAMILY OFFICE LLC, CEDARPOINT CAPITAL PARTNERS LLC, and HALCYON RIDGE INVESTMENTS LP
as Members
TABLE OF CONTENTS
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LIMITED LIABILITY COMPANY AGREEMENT OF GRAMERCY LINDEN JV LLC
This LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of GRAMERCY LINDEN JV LLC, a Delaware limited liability company (the "Company"), is entered into as of April 19, 2023 (the "Effective Date"), by and among:
(i) BRIARWOOD FAMILY OFFICE LLC, a Delaware limited liability company ("Briarwood");
(ii) CEDARPOINT CAPITAL PARTNERS LLC, a Delaware limited liability company ("Cedarpoint"); and
(iii) HALCYON RIDGE INVESTMENTS LP, a Delaware limited partnership ("Halcyon Ridge," and together with Briarwood and Cedarpoint, collectively the "Members" and each individually a "Member").
RECITALS
WHEREAS, the Company is a Delaware limited liability company formed by the filing of a Certificate of Formation with the Secretary of State of the State of Delaware on March 28, 2023, pursuant to and in accordance with the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq. (the "Act");
WHEREAS, the Members desire to enter into this Agreement to set forth their respective rights, obligations, and interests with respect to the Company, including the economic terms, governance structure, and operational framework governing the Company's business and affairs;
WHEREAS, the purpose of the Company is to acquire, hold, operate, and ultimately dispose of the real property known as The Linden at Gramercy Park, a 212-unit Class A multifamily residential property with ground-floor retail (2 units, approximately 4,800 square feet combined), located at 245 East 21st Street, New York, NY 10010 (Block 899, Lot 42, Borough of Manhattan) (the "Property"), through its wholly owned subsidiary, Gramercy Linden PropCo LLC, a New York limited liability company ("PropCo");
WHEREAS, the Property is being acquired from Linden Gramercy Holdings LLC pursuant to that certain Purchase and Sale Agreement dated March 15, 2023 (the "PSA"), for a purchase price of Forty Million Dollars ($40,000,000) (the "Purchase Price");
WHEREAS, the acquisition of the Property is to be financed in part with a senior acquisition loan from Pinnacle Fidelity Bank, N.A. (the "Lender") in the principal amount of Twenty-Six Million Dollars ($26,000,000) (the "Senior Loan"), with the remaining equity requirement of Fourteen Million Dollars ($14,000,000) to be funded by the Members in accordance with their respective Percentage Interests as set forth herein;
WHEREAS, the Members wish to memorialize the economic terms, governance structure, and operational framework of the Company and to govern their rights, duties, and obligations as Members of the Company;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members, intending to be legally bound, hereby agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Act" means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as amended from time to time.
"Additional Capital Contribution" means any capital contribution made by a Member in excess of its Initial Capital Contribution, made pursuant to a Capital Call under Article IV of this Agreement.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Without limiting the generality of the foregoing, with respect to any Member that is a limited partnership, "Affiliate" shall include such Member's general partner and any entity controlled by such general partner.
"Agreement" means this Limited Liability Company Agreement, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Annual Budget" means the annual operating and capital budget for the Property approved in accordance with Section 7.4 of this Agreement.
"Appraised Value" means the fair market value of the Property as determined by an independent MAI-designated appraiser selected by the Managing Member and reasonably acceptable to the other Members. In the event of a dispute regarding the Appraised Value, the procedures set forth in Article XV shall apply. The cost of any appraisal shall be borne by the Company.
"Asset Management Fee" means the fee payable to the Managing Member pursuant to Section 7.6 of this Agreement.
"Bankruptcy" means, with respect to any Person, (i) the filing by such Person of a voluntary petition for relief under Title 11 of the United States Code (or any successor statute), or any comparable proceeding under applicable state or foreign law; (ii) the filing against such Person of an involuntary petition under Title 11 of the United States Code (or any successor statute), or any comparable proceeding under applicable state or foreign law, which petition is not dismissed within ninety (90) days after the date of filing; (iii) the making by such Person of a general assignment for the benefit of creditors; (iv) the appointment of a receiver, trustee, custodian, or similar official for such Person or for all or substantially all of such Person's assets, which appointment is not vacated within ninety (90) days; or (v) the entry of an order for relief or any similar judicial decree with respect to such Person in any Bankruptcy proceeding.
"Capital Account" means the account established and maintained for each Member in accordance with Section 4.4 of this Agreement and the applicable provisions of the Code and the Regulations.
"Capital Call" means a request by the Managing Member for Additional Capital Contributions pursuant to Section 4.3 of this Agreement.
"Capital Call Notice" means a written notice of a Capital Call delivered to the Members in accordance with Section 4.3 of this Agreement.
"Cash Sweep Trigger Event" has the meaning ascribed to such term in the Loan Documents, and means, as of the Effective Date, a period during which the DSCR is less than 1.15x for two (2) consecutive calendar quarters as tested in accordance with the Senior Loan documents.
"Certificate of Formation" means the Certificate of Formation of the Company as filed with the Secretary of State of the State of Delaware on March 28, 2023, as the same may be amended, supplemented, or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. References to specific sections of the Code shall include any corresponding provisions of any successor statute.
"Company" means Gramercy Linden JV LLC, a Delaware limited liability company.
"Contributing Member" has the meaning set forth in Section 4.5(a) of this Agreement.
"Defaulting Member" means a Member who fails to fund all or any portion of its share of an Additional Capital Contribution when due pursuant to a Capital Call Notice issued in accordance with Section 4.3, and who does not cure such failure within the time period specified in such Capital Call Notice.
"Distributable Cash" means, for any period, the Net Cash Flow of the Company available for distribution to the Members after payment of (i) all Company operating expenses (including, without limitation, real estate taxes, insurance premiums, utilities, and maintenance and repair costs), (ii) all debt service on the Senior Loan (including principal, interest, and any required escrow or reserve deposits), (iii) all reserves approved in the Annual Budget or otherwise deemed reasonably necessary by the Managing Member for anticipated future expenditures, and (iv) the Asset Management Fee, in each case for such period. For the avoidance of doubt, Distributable Cash shall not include proceeds from a Capital Event, which shall be distributed pursuant to Section 5.3.
"DSCR" or "Debt Service Coverage Ratio" means the ratio of Net Operating Income to annual debt service on the Senior Loan, as defined in the Loan Documents.
"Effective Date" means April 19, 2023.
"Effective Gross Revenue" or "EGR" means, for any period, the gross potential rental revenue from the Property (including base rent, percentage rent, and additional rent) plus all other income derived from the Property (including parking income, laundry income, storage fees, and other ancillary revenue), less vacancy and credit loss.
"Fiscal Year" means the calendar year, or such other fiscal year as may be determined by the Managing Member and approved by the Members as a Major Decision.
"GAAP" means generally accepted accounting principles as applied in the United States, consistently applied.
"Guarantor" means Elliot J. Briarwood, individually, in his capacity as guarantor under the Non-Recourse Carveout Guaranty executed in connection with the Senior Loan.
"Hurdle Rate" means the applicable IRR threshold for each tier of the distribution waterfall set forth in Section 5.1 of this Agreement.
"Indemnified Person" has the meaning set forth in Section 11.1(a) of this Agreement.
"Initial Capital Contribution" means the initial capital contribution of each Member as set forth in Section 4.1 of this Agreement and as more particularly described on Exhibit A attached hereto.
"Initiating Member" has the meaning set forth in Section 10.4(b) of this Agreement.
"IRR" or "Internal Rate of Return" means the annual discount rate at which the present value of all distributions received by a Member (or the Members collectively, as applicable) from the Company equals the present value of all Capital Contributions made by such Member (or the Members collectively, as applicable) to the Company, computed on a daily basis using standard internal rate of return methodology. For purposes of computing IRR, the date of each Capital Contribution and the date of each distribution shall be taken into account.
"Lender" means Pinnacle Fidelity Bank, N.A., as lender under the Senior Loan, together with its successors and assigns.
"Loan Documents" means, collectively, the loan agreement, promissory note, mortgage, assignment of leases and rents, non-recourse carveout guaranty, environmental indemnity agreement, and all other documents, instruments, and agreements evidencing, securing, or relating to the Senior Loan (Loan No. PFB-CRE-2023-05741), as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"LTV" or "Loan-to-Value Ratio" means the ratio of the outstanding principal balance of the Senior Loan to the Appraised Value of the Property, as defined in the Loan Documents.
"Major Decision" means any decision designated as such under Section 7.3 of this Agreement.
"Majority-in-Interest" means Members holding more than fifty percent (50%) of the aggregate Percentage Interests of all Members.
"Managing Member" means Briarwood Family Office LLC, in its capacity as the managing member of the Company, or any successor Managing Member appointed pursuant to the terms of this Agreement.
"Member" means each of Briarwood Family Office LLC, Cedarpoint Capital Partners LLC, and Halcyon Ridge Investments LP, and any Person hereafter admitted as a substitute or additional Member in accordance with the terms of this Agreement.
"Membership Interest" means the entire ownership interest of a Member in the Company at any particular time, including the right of such Member to any and all benefits to which a Member may be entitled as provided in this Agreement and under the Act, together with the obligations of such Member to comply with all the terms and provisions of this Agreement and of the Act.
"Net Cash Flow" means, for any period, the gross revenues of the Company for such period, less all cash operating expenses, debt service (including principal and interest payments on the Senior Loan), funded reserves, and the Asset Management Fee for such period.
"Net Income" and "Net Loss" mean, for each Fiscal Year or other applicable period, the taxable income or loss of the Company for such period, as determined for federal income tax purposes, with such adjustments as are required under Section 704(b) of the Code and the Regulations thereunder to maintain the Members' Capital Accounts.
"Non-Contributing Member" means a Member that fails to make all or any portion of a required Additional Capital Contribution within the time period specified in the applicable Capital Call Notice.
"Non-Recourse Carveout Guaranty" or "Guaranty" means the guaranty executed by Elliot J. Briarwood, individually, in favor of the Lender in connection with the Senior Loan, as more particularly described in Section 13.1 of this Agreement.
"Offering Member" has the meaning set forth in Section 10.3(a) of this Agreement.
"Percentage Interest" means the percentage interest of each Member in the Company as set forth in Section 3.2 and on Exhibit A, as the same may be adjusted from time to time in accordance with the terms of this Agreement (including, without limitation, any adjustment made pursuant to Section 4.5).
"Permitted Transfer" means a Transfer of a Membership Interest that satisfies all of the conditions set forth in Section 10.2 of this Agreement.
"Person" means any natural person, corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated association, governmental authority, or any other entity.
"Preferred Return" means an eight percent (8.0%) per annum cumulative, non-compounding return on each Member's Unreturned Capital Contributions, as more particularly described in Section 5.1(b) of this Agreement.
"Promote" means the promoted interest payable to the Managing Member under Tiers 3, 4, and 5 of the distribution waterfall set forth in Section 5.1 of this Agreement.
"Property" means The Linden at Gramercy Park, the real property located at 245 East 21st Street, New York, NY 10010 (Block 899, Lot 42, Borough of Manhattan), being a 212-unit Class A multifamily residential property with ground-floor retail (2 units, approximately 4,800 square feet combined), together with all improvements, fixtures, appurtenances, and personal property thereon and related thereto, as more particularly described on Exhibit B attached hereto.
"Property Management Agreement" means the property management agreement entered into between PropCo and Summit Property Group LLC with respect to the Property, as the same may be amended, supplemented, or restated from time to time.
"Property Manager" means Summit Property Group LLC, in its capacity as property manager under the Property Management Agreement.
"PropCo" means Gramercy Linden PropCo LLC, a New York limited liability company (EIN: 93-4128779), formed as a wholly owned subsidiary of the Company.
"PSA" means that certain Purchase and Sale Agreement dated March 15, 2023, by and between Linden Gramercy Holdings LLC, as seller, and Gramercy Linden PropCo LLC, as purchaser, with respect to the acquisition of the Property.
"Purchase Price" means Forty Million Dollars ($40,000,000), being the purchase price for the Property as set forth in the PSA.
"Regulations" means the Treasury Regulations promulgated under the Code, as the same may be amended from time to time. References to specific sections of the Regulations shall include any corresponding provisions of any successor regulations.
"ROFO" means the Right of First Offer described in Section 10.3 of this Agreement.
"ROFO Notice" has the meaning set forth in Section 10.3(a) of this Agreement.
"Senior Loan" means the senior acquisition loan in the original principal amount of Twenty-Six Million Dollars ($26,000,000) from Pinnacle Fidelity Bank, N.A. to PropCo (Loan No. PFB-CRE-2023-05741), as evidenced and governed by the Loan Documents.
"Shotgun Buy-Sell" means the buy-sell mechanism described in Section 10.4 of this Agreement.
"SOFR" means the Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York (or any successor administrator), or such replacement benchmark as may be designated in the Loan Documents.
"Tax Matters Partner" means the Member designated under Section 9.3 of this Agreement to act as the "tax matters partner" within the meaning of Section 6231 of the Code (as in effect before amendment by the Bipartisan Budget Act of 2015) and as the "partnership representative" within the meaning of Section 6223 of the Code (as amended). As of the Effective Date, the Tax Matters Partner is Briarwood Family Office LLC.
"Transfer" means any direct or indirect sale, assignment, pledge, hypothecation, encumbrance, gift, bequest, or other disposition (whether voluntary, involuntary, or by operation of law) of all or any portion of a Member's Membership Interest in the Company. For the avoidance of doubt, "Transfer" includes any change in the direct or indirect ownership or control of a Member that results in a change in the identity of the Person(s) controlling such Member.
"Unreturned Capital Contributions" means, with respect to any Member as of any date of determination, the aggregate Capital Contributions (including Initial Capital Contributions and Additional Capital Contributions) made by such Member to the Company, less the aggregate amount of all distributions received by such Member pursuant to Tier 1 of the distribution waterfall (return of capital) under Section 5.1(a) through such date of determination. The Unreturned Capital Contributions of a Member shall never be less than zero.
Section 1.2 — Rules of Construction
(a) Unless the context otherwise requires, all references to Sections and Articles shall be to the Sections and Articles of this Agreement, and all references to Exhibits and Schedules shall be to the Exhibits and Schedules attached to this Agreement, each of which is hereby incorporated into and made a part of this Agreement by this reference.
(b) The term "including" (and with correlative meaning, "include" and "includes") means "including, without limitation."
(c) The headings and captions contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.
(d) Words used herein in the singular shall include the plural, and words used in the plural shall include the singular, in each case where the context so requires.
(e) References to any statute, law, or regulation shall be deemed to include any amendments thereto, any successor statutes, laws, or regulations, and any rules and regulations promulgated thereunder.
(f) References to "days" shall mean calendar days unless otherwise specified as "business days." The term "business day" means any day other than a Saturday, Sunday, or a day on which banks in the State of New York are authorized or obligated by law to close.
(g) All references to monetary amounts shall be in United States Dollars unless otherwise specified.
(h) This Agreement shall be construed without regard to any presumption or rule of construction relating to the drafter of this Agreement.
ARTICLE II — FORMATION AND ORGANIZATION
Section 2.1 — Formation
The Company was formed as a Delaware limited liability company by the filing of its Certificate of Formation with the Secretary of State of the State of Delaware on March 28, 2023, pursuant to and in accordance with the Act. The Members hereby ratify and confirm the formation of the Company and the filing of the Certificate of Formation. The rights, powers, duties, obligations, and liabilities of the Members shall be determined pursuant to the Act and this Agreement. To the extent that the rights, powers, duties, obligations, and liabilities of any Member are different by reason of any provision of this Agreement than they would be under the Act in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control.
Section 2.2 — Name
The business of the Company shall be conducted under the name "Gramercy Linden JV LLC." The Managing Member may change the name of the Company from time to time, provided that the Managing Member shall give prior written notice thereof to each of the Members and shall make such filings as may be required by the Act or other applicable law in connection with such change.
Section 2.3 — Registered Office and Registered Agent
The registered agent of the Company in the State of Delaware is National Registered Agents of Delaware, Inc., and the registered office of the Company in the State of Delaware is located at 160 Greentree Drive, Suite 101, Dover, Delaware 19904. The Managing Member may change the registered agent or the registered office of the Company from time to time in accordance with the Act and shall promptly notify the Members of any such change.
Section 2.4 — Principal Office
The principal office of the Company shall be located at the offices of the Managing Member at 450 Park Avenue, 31st Floor, New York, New York 10022, or at such other location as the Managing Member may designate from time to time by written notice to the Members. The books and records of the Company shall be maintained at the principal office.
Section 2.5 — Purpose
The purpose and business of the Company shall be limited to the following:
(a) to acquire the Property through PropCo pursuant to the PSA;
(b) to hold, own, operate, manage, improve, lease, and maintain the Property;
(c) to finance the acquisition and operation of the Property, including entering into the Senior Loan with Pinnacle Fidelity Bank, N.A. and such other financing as may be approved by the Members;
(d) to ultimately sell, exchange, refinance, or otherwise dispose of the Property at such time and in such manner as may be approved by the Members; and
(e) to engage in any and all activities reasonably incidental or related to the foregoing purposes.
The Company is formed as a single-purpose entity and shall not engage in any business or activity other than those described in this Section 2.5 without the unanimous consent of all Members as a Major Decision. The Company shall not own any real property or assets other than (i) its membership interest in PropCo and (ii) such cash, bank accounts, and ancillary assets as are necessary or incidental to its purpose.
Section 2.6 — Term
The Company shall continue in existence perpetually unless and until dissolved in accordance with Article XII of this Agreement or as otherwise provided by law. No Member shall have the right to dissolve the Company except as expressly set forth in this Agreement.
Section 2.7 — Title to Property
All real property and other assets related to the Property shall be held in the name of PropCo. PropCo shall be the direct title-holding entity for the Property and shall be the borrower under the Senior Loan. The Company shall hold its interest in the Property solely through its ownership of one hundred percent (100%) of the membership interests in PropCo. No Member shall have any direct ownership interest in the Property or in PropCo other than through its Membership Interest in the Company.
Section 2.8 — PropCo Structure
(a) Gramercy Linden PropCo LLC, a New York limited liability company (EIN: 93-4128779), has been or shall be formed as a wholly owned subsidiary of the Company. The Company shall be the sole member of PropCo.
(b) PropCo shall serve as the direct title-holding entity for the Property, the borrower under the Senior Loan, and the party to the Property Management Agreement and all other contracts, agreements, and instruments relating to the ownership and operation of the Property.
(c) PropCo shall be organized and operated as a special purpose entity ("SPE") in compliance with the requirements of the Loan Documents. Without limiting the foregoing, PropCo shall (i) maintain its own books and records separate from those of any other Person; (ii) hold its assets in its own name; (iii) conduct its business in its own name; (iv) maintain its own bank accounts; (v) not commingle its assets with those of any other Person; (vi) pay its own liabilities from its own assets; (vii) observe all limited liability company formalities; (viii) maintain adequate capital; (ix) hold itself out to the public as a legal entity separate and distinct from any other Person; (x) not guarantee or become obligated for the debts of any other Person; and (xi) comply with such other SPE covenants as are set forth in the Loan Documents.
(d) The limited liability company agreement of PropCo shall be executed by the Company as its sole member, and such agreement shall contain terms and provisions consistent with this Agreement and with the requirements of the Loan Documents.
Section 2.9 — Filings
The Managing Member shall cause to be filed all certificates, notices, statements, and other instruments required by the Act or by any other applicable law in connection with the formation, qualification, and operation of the Company and PropCo in the State of Delaware, the State of New York, and any other jurisdiction in which the Company or PropCo conducts business. Without limiting the foregoing, the Managing Member has caused or shall cause to be filed the Company's application for an Employer Identification Number (EIN: 93-4128765) and PropCo's application for an Employer Identification Number (EIN: 93-4128779) with the Internal Revenue Service. All costs and expenses associated with such filings shall be borne by the Company.
ARTICLE III — MEMBERS; PERCENTAGE INTERESTS
Section 3.1 — Members
The Members of the Company as of the Effective Date are as follows:
(a) Briarwood Family Office LLC, a Delaware limited liability company, with its principal office at 450 Park Avenue, 31st Floor, New York, New York 10022 (EIN: 83-2174609).
(b) Cedarpoint Capital Partners LLC, a Delaware limited liability company, with its principal office at 200 Ashbury Asset Advisors, Suite 1400, Boston, Massachusetts 02109 (EIN: 47-5093821).
(c) Halcyon Ridge Investments LP, a Delaware limited partnership (whose general partner is Halcyon Ridge GP LLC, a Delaware limited liability company), with its principal office at 1700 Market Street, Suite 2200, Philadelphia, Pennsylvania 19103 (EIN: 85-1362047).
Section 3.2 — Percentage Interests
The Percentage Interest of each Member as of the Effective Date is as follows:
The Percentage Interests of the Members are subject to adjustment only as expressly provided in this Agreement, including, without limitation, pursuant to the dilution provisions set forth in Section 4.5. The Percentage Interests of the Members shall at all times aggregate to one hundred percent (100%).
Section 3.3 — Representations and Warranties of Members
Each Member hereby represents and warrants to the Company and to each other Member as follows:
(a) Organization and Good Standing. Such Member is duly organized or formed, validly existing, and in good standing under the laws of its jurisdiction of formation and has full power and authority to execute, deliver, and perform this Agreement.
(b) Authorization. The execution, delivery, and performance of this Agreement by such Member have been duly authorized by all necessary action on the part of such Member, and this Agreement constitutes the legal, valid, and binding obligation of such Member, enforceable in accordance with its terms, subject to applicable Bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity.
(c) No Conflict. The execution, delivery, and performance of this Agreement by such Member do not and will not (i) conflict with, or result in a breach of, any provision of such Member's organizational documents; (ii) violate any law, regulation, order, judgment, or decree applicable to such Member; or (iii) result in a breach of, or constitute a default under, any material agreement or instrument to which such Member is a party or by which it is bound.
(d) Accredited Investor. Such Member is an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act").
(e) Investment Intent. Such Member is acquiring its Membership Interest for its own account, for investment purposes, and not with a view to the distribution or resale thereof in violation of applicable securities laws. Such Member acknowledges that the Membership Interests have not been registered under the Securities Act or any state securities laws and are subject to restrictions on transfer as set forth in this Agreement and under applicable law.
Section 3.4 — No Personal Liability
No Member shall be personally liable for the debts, obligations, or liabilities of the Company solely by reason of being a Member of the Company. The liability of each Member shall be limited to such Member's Capital Contributions and its share of any undistributed profits, as and to the extent provided in this Agreement and under the Act. Nothing in this Section 3.4 shall be construed to relieve any Member of its obligations under this Agreement, including any obligation to make Capital Contributions or to indemnify any other Person as expressly provided herein.
ARTICLE IV — CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
Section 4.1 — Initial Capital Contributions
Each Member shall make an Initial Capital Contribution to the Company in cash, in the amount set forth below, on or before the date of the closing of the acquisition of the Property (anticipated to be June 5, 2023):
The Initial Capital Contributions of Briarwood, Cedarpoint, and Halcyon Ridge represent fifty percent (50%), thirty percent (30%), and twenty percent (20%), respectively, of the total equity required for the acquisition of the Property. The Initial Capital Contributions, together with the proceeds of the Senior Loan, shall be sufficient to fund the Purchase Price and all closing costs and initial reserves as set forth in Section 4.2.
The Members acknowledge that Briarwood previously funded an earnest money deposit in the amount of Two Million Dollars ($2,000,000) in connection with the execution of the PSA (the "Deposit"). The Deposit shall be credited against Briarwood's Initial Capital Contribution, and the remaining Five Million Dollars ($5,000,000) of Briarwood's Initial Capital Contribution shall be funded at closing. Cedarpoint and Halcyon Ridge shall reimburse Briarwood for their respective pro rata shares of the Deposit as follows, and such reimbursement amounts shall constitute a portion of their respective Initial Capital Contributions:
(i) Cedarpoint Capital Partners LLC: Six Hundred Thousand Dollars ($600,000) (representing 30% of the Deposit); and
(ii) Halcyon Ridge Investments LP: Four Hundred Thousand Dollars ($400,000) (representing 20% of the Deposit).
Such reimbursement amounts shall be paid directly to Briarwood at or prior to closing. The remaining balance of each of Cedarpoint's and Halcyon Ridge's Initial Capital Contributions (Three Million Six Hundred Thousand Dollars ($3,600,000) and Two Million Four Hundred Thousand Dollars ($2,400,000), respectively) shall be funded to the Company at closing.
Section 4.2 — Use of Initial Capital Contributions
The Initial Capital Contributions of the Members, together with the proceeds of the Senior Loan in the amount of Twenty-Six Million Dollars ($26,000,000) from Pinnacle Fidelity Bank, N.A., shall be applied by the Company (through PropCo) to fund the following:
(a) Payment of the Purchase Price of Forty Million Dollars ($40,000,000) to Linden Gramercy Holdings LLC in accordance with the PSA;
(b) Payment of closing costs (estimated at approximately One Million Eight Hundred Fifty Thousand Dollars ($1,850,000)), including the following:
(i) New York City Real Property Transfer Tax: approximately One Million Fifty Thousand Dollars ($1,050,000);
(ii) New York State Transfer Tax: approximately One Hundred Sixty Thousand Dollars ($160,000);
(iii) New York State Mansion Tax: approximately One Hundred Fifty Thousand Dollars ($150,000);
(iv) Title insurance premiums and recording fees;
(v) Loan origination fee payable to Pinnacle Fidelity Bank, N.A.: One Hundred Ninety-Five Thousand Dollars ($195,000) (representing 0.75% of the Senior Loan amount);
(vi) Legal fees payable to counsel for the Company, the Members, and the Lender;
(vii) Appraisal fees, environmental assessment fees, survey costs, and other customary due diligence expenses; and
(viii) Other customary closing costs and adjustments;
(c) Funding of initial working capital reserves in such amount as the Managing Member determines is reasonably necessary or as required by the Loan Documents, including any interest reserve, tax escrow, insurance escrow, replacement reserve, or other reserves required by the Lender.
The Managing Member shall prepare and deliver to the Members a detailed closing statement setting forth the application of all funds within ten (10) business days after the closing of the acquisition.
Section 4.3 — Additional Capital Contributions; Capital Calls
(a) Authority to Issue Capital Calls. The Managing Member may issue Capital Call Notices to the Members from time to time for Additional Capital Contributions as the Managing Member reasonably determines are necessary or advisable for any of the following purposes:
(i) Capital improvements to the Property, including renovations, replacements, and tenant improvement work;
(ii) Operating deficits, including shortfalls in Net Cash Flow necessary to cover the Company's obligations;
(iii) Required reserves, deposits, or payments under the Senior Loan, including any amounts required to be deposited into reserve accounts or to cure any default or potential default under the Loan Documents; and
(iv) Such other purposes as may be approved by the Members in accordance with this Agreement.
(b) Capital Call Notice Requirements. Each Capital Call Notice shall be in writing (substantially in the form of Exhibit D attached hereto) and shall specify (i) the aggregate amount of the Capital Call, (ii) each Member's pro rata share of the Capital Call (based on such Member's Percentage Interest), (iii) the purpose of the Capital Call and a reasonably detailed description of the expenditures to be funded, and (iv) the funding deadline, which shall be not fewer than fifteen (15) business days after delivery of the Capital Call Notice to the Members.
(c) Limitation on Capital Calls. Capital Calls that, in the aggregate, would exceed Five Hundred Thousand Dollars ($500,000) in any twelve (12)-month period shall require the unanimous consent of all Members as a Major Decision under Section 7.3. Notwithstanding the foregoing, Capital Calls required to cure a default or potential default under the Loan Documents, to fund insurance premiums, or to pay real estate taxes shall not be subject to such limitation and may be issued by the Managing Member without the consent of the other Members.
(d) Pro Rata Funding. Unless otherwise unanimously agreed by the Members, Additional Capital Contributions shall be funded pro rata in accordance with the Members' respective Percentage Interests as then in effect.
Section 4.4 — Capital Accounts
(a) A Capital Account shall be established and maintained for each Member in accordance with Section 704(b) of the Code and the Regulations promulgated thereunder. The Capital Accounts shall be maintained in accordance with the following provisions:
(i) Each Member's Capital Account shall be increased by (A) the amount of cash contributed by such Member to the Company (including Initial Capital Contributions and Additional Capital Contributions), (B) the fair market value of any property contributed by such Member to the Company (net of any liabilities secured by such property that the Company is considered to assume or take subject to under Section 752 of the Code), and (C) such Member's allocable share of Net Income and items of income and gain allocated to such Member pursuant to Article VI.
(ii) Each Member's Capital Account shall be decreased by (A) the amount of cash distributed to such Member by the Company, (B) the fair market value of any property distributed to such Member by the Company (net of any liabilities secured by such property that such Member is considered to assume or take subject to under Section 752 of the Code), and (C) such Member's allocable share of Net Loss and items of loss and deduction allocated to such Member pursuant to Article VI.
(b) No Member shall be entitled to interest on its Capital Account balance. No Member shall be entitled to withdraw any portion of its Capital Account or to receive any distribution from the Company except as specifically provided in this Agreement.
(c) In the event of a Transfer of a Membership Interest in accordance with this Agreement, the Capital Account of the transferring Member shall be transferred to the transferee to the extent of the Membership Interest transferred.
(d) The Managing Member shall have the authority to make such adjustments to the Capital Accounts as are necessary to comply with the Code and the Regulations, including adjustments required by Sections 704(b), 704(c), and 743(b) of the Code and the Regulations thereunder.
Section 4.5 — Failure to Fund; Dilution
(a) Funding by Contributing Members. If a Member (a "Non-Contributing Member") fails to fund all or any portion of a required Additional Capital Contribution within the time period specified in the applicable Capital Call Notice, the other Members (the "Contributing Members") may, but shall not be obligated to, fund all or any portion of such Non-Contributing Member's shortfall in proportion to their respective Percentage Interests (determined without regard to the Non-Contributing Member's Percentage Interest) or in such other proportions as the Contributing Members may agree among themselves. The Contributing Members shall notify the Managing Member of their election to fund the shortfall within ten (10) business days after the expiration of the funding deadline specified in the Capital Call Notice.
(b) Treatment as Additional Capital Contribution. Any amount funded by a Contributing Member on behalf of a Non-Contributing Member pursuant to this Section 4.5 shall be treated as an Additional Capital Contribution of the Contributing Member for all purposes of this Agreement, including for purposes of adjusting the Percentage Interests and Capital Accounts of the Members.
(c) Punitive Dilution. The Non-Contributing Member's Percentage Interest shall be diluted on a 1.5x punitive basis. For purposes of computing the adjustment to the Percentage Interests, for each One Dollar ($1.00) of the unfunded Additional Capital Contribution funded by a Contributing Member, the Contributing Member shall be deemed to have contributed One Dollar and Fifty Cents ($1.50) (the "Deemed Contribution"). The Percentage Interests of all Members shall be recalculated by dividing each Member's Adjusted Deemed Capital (as defined below) by the aggregate Adjusted Deemed Capital of all Members.
(d) Adjustment Calculation. For purposes of the dilution calculation under this Section 4.5:
(i) "Adjusted Deemed Capital" means, for each Member, such Member's aggregate Capital Contributions (actual amounts funded), plus, in the case of a Contributing Member, an additional amount equal to fifty percent (50%) of each dollar of the Non-Contributing Member's shortfall funded by such Contributing Member (i.e., the excess of the Deemed Contribution over the actual amount funded), less, in the case of the Non-Contributing Member, the amount of its unfunded shortfall multiplied by 1.5x.
(ii) The adjustment shall be reflected on the books and records of the Company and shall be effective as of the date on which the Contributing Member funds the Non-Contributing Member's shortfall.
(e) Survival of Obligations. No dilution or adjustment of Percentage Interests under this Section 4.5 shall affect the allocation of liability or the obligations of the Non-Contributing Member with respect to any guarantee, indemnity, or other personal obligation incurred by such Member or its Affiliate in connection with the Company, PropCo, or the Senior Loan, unless otherwise expressly agreed in writing by the beneficiary of such guarantee or indemnity.
Section 4.6 — No Return of Capital Contributions
No Member shall have the right to demand or receive the return of all or any portion of its Capital Contributions except as provided in Article V (Distributions) or upon dissolution and winding up of the Company pursuant to Article XII. No Member shall receive any interest, salary, or drawing with respect to its Capital Contributions or its Capital Account, except as otherwise specifically provided in this Agreement.
Section 4.7 — Loans by Members
No Member shall be required to make any loan to the Company or PropCo. If any Member elects to make a loan to the Company or PropCo with the consent of the Managing Member, such loan shall be documented in a written promissory note and shall bear interest at the Applicable Federal Rate (as defined in Section 1274(d) of the Code) in effect on the date of such loan, or such other rate as may be agreed upon by the lending Member and the Managing Member. Any such loan shall be a bona fide indebtedness of the Company and shall not increase the lending Member's Capital Account or Percentage Interest. Repayment of any such Member loan shall be made from the Company's available cash prior to the distribution of Distributable Cash under Section 5.1, except to the extent that such repayment would violate the terms of the Loan Documents.
ARTICLE V — DISTRIBUTIONS; WATERFALL
Section 5.1 — Distribution Waterfall
Distributable Cash (and proceeds from a Capital Event pursuant to Section 5.3) shall be distributed among the Members in the following order of priority (each a "Tier"):
(a) Tier 1 — Return of Capital. First, one hundred percent (100%) to the Members, pro rata in accordance with their respective Percentage Interests, until each Member has received cumulative distributions under this Tier 1 equal to such Member's aggregate Unreturned Capital Contributions (i.e., until each Member has received a full return of all Capital Contributions made by such Member to the Company and such Member's Unreturned Capital Contributions have been reduced to zero).
(b) Tier 2 — Preferred Return. Second, one hundred percent (100%) to the Members, pro rata in accordance with their respective Percentage Interests, until each Member has received cumulative distributions under this Tier 2 equal to an eight percent (8.0%) per annum cumulative, non-compounding preferred return (the "Preferred Return") on such Member's Unreturned Capital Contributions, calculated from the date of each Capital Contribution to the date of distribution. The Preferred Return shall accrue daily on the basis of a 365-day year (or 366-day year in a leap year) and shall be cumulative but non-compounding. For the avoidance of doubt, the Preferred Return shall accrue on the daily balance of each Member's Unreturned Capital Contributions, and no interest shall accrue on any accrued but unpaid Preferred Return.
(c) Tier 3 — Catch-Up. Third, sixty percent (60%) to Briarwood (as the Managing Member, as a promote catch-up) and forty percent (40%) to all Members (including Briarwood) pro rata in accordance with their respective Percentage Interests, until the Managing Member has received, in the aggregate under Tiers 2 and 3, an amount equal to twenty percent (20%) of the cumulative profits distributed in excess of the Preferred Return (i.e., cumulative distributions under Tiers 2 and 3 less the aggregate Preferred Return amounts distributed under Tier 2). For purposes of this Tier 3, "profits" means the excess of cumulative distributions under Tiers 2 and 3 over the aggregate Preferred Return amounts.