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Operating Agreement (Detailed) Legal Forms and Contracts | Karemar

Operating Agreement (Detailed) Legal Forms and Contracts

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The following free LLC operating agreement is a very thorough document outlining the internal operations of a California LLC, specifically a retail outlet under California law. This agreement and contract is being provided as a sample and example for information and research purposes only, however it is a valid legal contract and agreement. Always consult an Attorney or Lawyer. This Agreement can apply in most states including California, and with some modifications New York, Florida, Nevada and others. Help improve this agreement by leaving a comment.

OPERATING AGREEMENT

OF

__________________, LLC

A California Limited Liability Company

Dated and Adopted
Effective as of ____________, _____

OPERATING AGREEMENT

OF

__________________, LLC

THIS OPERATING AGREEMENT (the “Agreement”) is entered on ____________, ______, between _____________________________________________________, a California ____________________, as a Class A Member (“_________________”), and _________________, an individual, as a Class B Member (“_________________”), for the purpose of forming _________________, LLC, a California limited liability company (sometimes referred to herein as the “Company” or the “LLC”). This Agreement is made with reference to the following facts:

STATEMENTS OF FACT:

A. The Company was formed on _________________, _____, as a limited liability company pursuant to the provisions of the (California) Beverly-Killea Limited Liability Company Act as set forth in Title 2.5 (commencing with Section 17000) of the Corporations Code of the State of California by the filing of its Articles of Organization with the California Secretary of State.

B. The Company and each of the Members (as defined herein) desire to enter into and adopt this Agreement as the Operating Agreement of the LLC, which shall control the organization and business affairs of the LLC and define the rights and obligations of its Members and Manager (as defined herein).

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and conditions contained herein, and with the intention of being legally bound hereby, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

Except as otherwise separately defined elsewhere in this Agreement, following are the terms and meanings as used throughout this Agreement:

1.1 “Act” means the (California) Beverly-Killea Limited Liability Company Act as set forth in Title 2.5 (commencing with Section 17000) of the Corporations Code of the State of California or any corresponding provision or provisions of any succeeding law.

1.2 “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

1.2.1 Increase such Capital Account by any amounts which such Member is obligated to contribute to the LLC (pursuant to the terms of this Agreement or otherwise) or is deemed to be obligated to contribute to the LLC pursuant to Regulations Sections 1.704 2(g)(1) and 1.704-2(i)(5); and

1.2.2 Reduce such Capital Account by the amount of the items described in Regulations Sections 1.704 1(b)(2)(ii)(d)(4), (5) and (6).

1.3 “Adjusted Capital Contribution” means a Member’s Capital Contribution as of any date, REDUCED by all prior distributions to such Member pursuant to Article 5 and Section 11.5 hereof. In the event of a partial liquidation of a Member’s Interest in the LLC, a Member will be deemed to have received a return of a portion of his Capital Contribution to the LLC which is proportionate to what (i) a Member’s Capital Account immediately after the partial liquidation bears to (ii) that Member’s Capital Account immediately prior to the partial liquidation.

1.4 “Affiliate” means any individual, partnership, corporation, limited liability company, trust, other entity or association, directly or indirectly, through one or more intermediaries, which is controlling, controlled by or under common control with a Member. The term “control” (and any derivation thereof) means, with respect to an individual, partnership, corporation, limited liability company, trust, other entity or association, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity.

1.5 “Agreement” or “Operating Agreement” means this Operating Agreement of the LLC, as originally executed and as may be amended from time to time hereafter. Words such as “herein,” “hereinafter,” “hereto,” “hereby” and “hereunder,” when used with reference to this Agreement, refer to this Agreement as a whole, unless the context otherwise requires.

1.6 “Articles of Organization” means the Articles of Organization of the LLC filed pursuant to Section 17050 of the Act, including all subsequent amendments thereto or restatements thereof. The Articles of Organization of the LLC were filed with the Secretary of State on ________________, _____, Filing No. ______________.

1.7 “Book Depreciation” means for each Fiscal Year or other period, an amount equal to the Depreciation, except that if the Gross Asset Value of any asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, “book depreciation” with respect to such asset shall, except as otherwise required by Regulations Section 1.704-3(d), be an amount which bears the same ratio to such beginning Gross Asset Value as the Depreciation with respect to such asset for such year or other period bears to such beginning adjusted tax basis. However, if the federal income tax Depreciation with respect to such asset for such year is “zero,” book depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the LLC.

1.8 “Business” or “Business of the LLC” means the business of the LLC as defined in Section 2.7 hereof.

1.9 “Capital Account” means an account maintained by the LLC for each Member, which shall be determined in accordance with Section 3.5 hereof.

1.10 “Capital Contribution” means the total contribution, in cash or property, which a Member has made or is obligated to make to the LLC, as set forth in Section 3.2 below, or as may be supplemented and identified on EXHIBIT A attached hereto and made a part of this Agreement, which exhibit may be amended or modified from time to time. All contributions of property shall be valued at their initial Gross Asset Value.

1.11 “Class A Member(s)” means a Member having a priority over the Class B Members in liquidation distributions from the LLC, but not in voting rights. The initial Class A Member shall be ___________________.

1.12 “Class B Member(s)” means a Member having the same voting rights as the Class A Members but who shall receive subordinated liquidation distributions from the LLC until the Class A Members have received a return of their aggregate Capital Contributions to the LLC. The initial Class B Member shall be __________________.

1.13 “Code” means the Internal Revenue Code of 1986, as amended, or any corresponding provision or provisions of any succeeding law.

1.14 “Depreciation” means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery reduction allowable with respect to an asset for such Fiscal Year or other period.

1.15 “Dissolution” means (i) when used with reference to the LLC, the earlier of (a) the date upon which the LLC is terminated under the Act, or any similar provision enacted in lieu thereof, or (b) the date upon which the LLC ceases to be a going concern, and (ii) when used with reference to any Member, the earlier of (x) the date upon which there is a dissolution of the LLC or (y) the date upon which such Member's entire Interest in the LLC is terminated by means of a distribution or series of distributions by the LLC to such Member.

1.16 “Distributable Cash” means the portion of the cash in hand or in bank accounts of the LLC as the Manager deems, in its sole discretion, is available for distribution to the Members after reasonable provision has been made for the current liabilities of the LLC and a reasonable allowance for Reserves.

1.17 “Economic Interest” means a Person’s right to share in the Net Profits, Net Losses or similar items pursuant to Sections 4.1.1.4 and 4.1.2.5 hereof, and to receive distributions from the LLC pursuant to Sections 5.2.5 and 11.4.6 hereof, which the assignor of such economic interest would otherwise be entitled, but does not include any other rights of a Member including, without limitation, the right to Vote, to participate in the management of the Business and the affairs of the LLC, or any right to information concerning the Business of the LLC.

1.18 “Fiscal Year” means the fiscal year of the LLC for all tax and accounting purposes, which shall be the year commencing on January 1 and ending on December 31 of each year.
1.19 “Gross Asset Value” means, with respect to any asset of the LLC, the asset's adjusted basis for federal income tax purposes, except as follows:

1.19.1 The initial Gross Asset Value of any asset contributed by a Member to the LLC shall be the gross fair market value of such asset, as agreed between the LLC and the contributing Member.

1.19.2 The Gross Asset Value of all LLC assets shall be adjusted to equal their respective gross fair market values, as mutually agreed between the LLC and the affected Member(s) upon the occurrence of the following events:

1.19.2.1 The acquisition of an additional Interest in the LLC by any new or existing Member in exchange for more than a de minimis Capital Contribution;

1.19.2.2 The distribution by the LLC to a Member of more than a de minimis amount of cash or property as consideration for the acquisition of all or a portion of such Member's Interest in the LLC if the LLC reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the LLC; and

1.19.2.3 The liquidation of the LLC within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);

1.19.3 The Gross Asset Value of any LLC asset distributed to any Member shall be the gross fair market value of such asset as mutually agreed by the LLC and the affected Member(s) on the date of distribution.

1.19.4 The Gross Asset Value of the LLC 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 Regulations Section 1.704-1(b)(2)(iv)(m) and Section 4.9 hereof; provided, however, that Gross Asset Value shall not be adjusted pursuant to this Section 1.19.4 to the extent the LLC determines that an adjustment pursuant to Section 1.19.2 above is necessary or appropriate in connection with the transaction that would otherwise result in an adjustment under this Section 1.19.4.

If the Gross Asset Value of an asset has been determined or adjusted pursuant to Sections 1.19.1, 1.19.2 or 1.19.4 above, such Gross Asset Value shall thereafter be adjusted by the Book Depreciation taken into account with respect to such asset for purposes of computing profits and losses.

1.19.5 If the LLC and any affected Member pursuant to Sections 1.19.1, 1.19.2 or 1.19.3 above are unable to agree on the Gross Asset Value of any asset for purposes of this Agreement, a mutually acceptable appraiser shall be selected by them for this purpose, and the value established by such appraisal shall be binding upon the LLC and the affected Member.

1.20 “_________________” means a retail store to be opened, owned, operated and managed by the LLC located at _________________, to be known as “_________________” or such other trade name and style as may be deemed appropriate.

1.21 “LLC” or “Company” means _________________, the California limited liability company formed by the filing of the Articles of Organization pursuant to the Act and the terms and conditions of this Agreement.

1.22 “LLC Loans” shall refer to any loans or advances made by any Member or its Affiliate to the LLC at the Member's option, without obligation to so do. Such LLC Loans shall accrue interest at the rate agreed upon between the loaning Member and the Manager.

1.23 “LLC Minimum Gain”means the amount determined by computing with respect to each nonrecourse liability of the LLC, the amount of gain (of whatever character), if any, that would be realized by the LLC if it disposed (in a taxable transaction) of the Property subject to such liability in full satisfaction thereof, and for no other consideration, and subject to the other rules set forth in Regulations Section 1.704-2, and by then aggregating the amounts so computed as set forth in Regulations Section 1.704 2(d).

1.24 “LLC Property” means any or all assets of the LLC, both tangible and intangible, including, but not limited to, the __________________ Store (defined below) or any portion thereof.

1.25 “Majority in Interest of the Members” means more than FIFTY PERCENT (50%) of the Percentage Interests of the Members.

1.26 “Manager” means the Person appointed as the Manager to manage the LLC pursuant to Section 6.1 hereof. The Manager shall be charged with those powers, duties and responsibilities as set forth in Article 6 and elsewhere in this Agreement.

1.27 “Member” means a Person who:

1.27.1 Has been admitted to the LLC as a Member in accordance with the Articles of Organization or this Agreement, or is an assignee or transferee of an Interest (other than an Economic Interest) and who has become a Member of the LLC pursuant to Section 8.4 hereof.

1.27.2 Has not resigned, withdrawn or been expelled as a Member or, if other than an individual, been dissolved.

1.27.3 Has paid his or her Capital Contribution to the LLC in exchange for an Interest in the LLC, or, in the case of a transferee Member, has succeeded to the Capital Account of the transferor Member, and who has executed and submitted to the Manager a counterpart signature page to this Agreement or a Member's Investment Certification and Signature Page to this Agreement (as the case may be).

Reference to a “Member” shall be to any Class A or Class B Member of the LLC identified in Section 3.1 below or as otherwise supplemented and identified on EXHIBIT A attached to and made a part of this Agreement, which exhibit may be amended or modified from time to time.

1.28 “Member Non-Recourse Debt” has the meaning set forth in Regulations Section 1.704 2(b)(4) for “partner nonrecourse debt.”

1.29 “Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the LLC Minimum Gain that would result if such Member Nonrecourse Debt were treated as a nonrecourse liability of the LLC, determined in accordance with Regulations Sections 1.704 2(i)(2) and (3).

1.30 “Member Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704 2(i)(2) for “partner nonrecourse deductions.” The amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal Year of the LLC equals the excess (if any) of the net increase (if any) in the amount of Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt during that Fiscal Year over the aggregate amount of any distributions during that Fiscal Year to the Member that bears (or is deemed to bear) the economic loss for such Member Nonrecourse Debt to the extent such distributions are from the proceeds of such Member Nonrecourse Debt and are allocable to an increase in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704 2(i)(2).

1.31 “Membership Interest” or “Interest” means a Member's interests and rights in the LLC, collectively, including the Member's Economic Interest, any right to Vote or participate in management, and any right to information concerning the Business and affairs of the LLC provided by the Act and this Agreement. The Membership Interest of a Member (including the Economic Interest) constitutes the personal property of the Member. No Member, by virtue of his or her ownership of a Membership Interest, has or owns, or is deemed to have or own, an interest in all or any part of the LLC Property.

1.32 “Net Profits” and “Net Losses” mean, for each Fiscal Year or other period, an amount equal to the LLC'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:

1.32.1 Any income of the LLC that is exempt from Federal income tax and not otherwise taken into account in computing Net Profits or Net Losses shall be added to such taxable income or loss;

1.32.2 Any expenditures of the LLC described in Code section 705(b)(2)(B) or treated as Code section 705(b)(2)(B) expenditures pursuant to Regulations Section 1.704 1(b)(2)(iv)(i) and not otherwise taken into account in computing Net Profits or Net Losses shall be subtracted from such taxable income or loss;

1.32.3 Gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the fair market value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its fair market value;

1.32.4 In lieu of 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, computed in accordance with the subsection hereof entitled “Depreciation”; and

1.32.5 Notwithstanding any other provision of this subsection, any items of income, gain, loss or deduction which are specifically allocated shall not be taken into account in computing Net Profits or Net Losses.

1.33 “Percentage Interest(s)” means the percentage interest of a Member set forth opposite the name of such Member on EXHIBIT A attached hereto and made a part of this Agreement, as such percentage may be adjusted from time to time pursuant to the terms of this Agreement and reflected on a modified EXHIBIT A to be attached hereto and made a part hereof.

1.34 “Person” means an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company, or other entity, whether domestic or foreign.

1.35 “Principal” means the natural Person which is in ultimate control of a Member or Manager.

1.36 “Regulations” or “Treasury Regulations” means the federal income tax regulations promulgated by the Treasury Department under the Code, as such regulations may be amended from time to time. All references herein to a specific section of the Regulations shall be deemed also to refer to any corresponding provisions of succeeding Regulations.

1.37 “Reserves” means funds set aside from Capital Contributions or gross cash revenues as reserves. Such Reserves shall be maintained in amounts reasonably deemed sufficient by the Manager for working capital and the payment of taxes, insurance, debt service, repairs, replacements renewals, or other costs or expenses incident to the Business of the LLC, or in the alternative, the Dissolution of the LLC.

1.38 “Secretary of State” means the Secretary of State of the State of California.

1.39 “Vote” means, except where superseded by another section of this Agreement, or as may be required under the applicable provisions of the Act, the Code or applicable Regulations thereunder, the votes of the Members, whether by ballot, written consent or a voice vote, wherein each Member shall have and cast a number of votes equal to that Member’s Percentage Interest.

ARTICLE 2
INTRODUCTORY MATTERS

2.1 Formation of the LLC. The organizer and the Members have formed the LLC pursuant to the provisions of the Act by the filing of the Articles of Organization.

2.2 Resignation of Organizer. The parties to this Agreement acknowledge and agree that the organizer of the LLC solely for the purpose of filing the Articles of Organization with the Secretary of State as described herein and that, immediately upon the adoption and execution of this Agreement by its Members, the organizer shall be deemed to have automatically resigned, without notice and without liability or obligation of any kind to the LLC or its Members. Accordingly, the parties to this Agreement hereby acknowledge and affirm all actions heretofore taken on behalf of the LLC by said organizer.

2.3 Name. The name of the LLC is “_________________.” The Manager shall operate the Business of the LLC under such name and/or under any trade names or such other similar names as it shall determine to be in compliance with the Act and applicable law.

2.4 Principal Offices. The LLC shall maintain its principal executive office at ___________________________________________________ and the mailing address of ____________________________________, _____________, CALIFORNIA ______, which shall also be its office of record in California required to be pursuant to Section 17057(a) of the Act. Subject to the applicable provisions of the Act, the principal offices of the LLC may be changed from time to time as mutually agreed upon by the Manager and a Majority in Interest of the Members.

2.5 Agent for Service of Process. The name and address of the LLC's agent for service of process in the State of California is _____________________, whose business address in California is _______________________________________, ___________, CALIFORNIA _____.

2.6 Perpetual Existence. As set forth in the Articles of Organization of the LLC, the LLC shall have perpetual existence, until the LLC is terminated or dissolved in accordance with this Agreement. The existence of the LLC shall commence as of the date of the filing of the Articles of Organization.

2.7 Business and Purpose of the LLC. The general business and purpose of the LLC shall be to open, own, operate and manage the __________________ Store (the “Business”). The LLC may conduct or otherwise engage in any other lawful activities which the LLC deems is necessary, incidental to or desirable in connection with the Business of the LLC and in maximizing the economic benefit of the LLC, including, but not limited to, conducting or engaging in any other lawful activities for which a LLC may be organized under the Act, provided that the LLC shall not conduct any banking, insurance or trust company business or any other business otherwise prohibited by this Agreement or by law. In accomplishing its purposes and carrying on its Business, the LLC may obtain or contract for such services and advice that it may from time to time deem advisable.

2.8 No Individual Authority. Except for any authority given to an individual Manager pursuant to Article 6 hereof, no Member who is not a Manager, acting alone or with any other non-Manager Member, shall have the authority to act for, or to undertake or assume, any obligation, debt, duty or responsibility on behalf of the LLC.

2.9 Title to LLC Property in the Name of the LLC. All LLC Property owned, leased, consigned to or purchased by the LLC shall be held and owned, and conveyance made, in the name of the LLC. All agreements, documents, certificates and other instruments providing for the acquisition, consignment or sale, mortgage or disposition of LLC Property shall be valid and binding upon it, except as otherwise provided herein, if executed at the direction of the Manager by the President or authorized officer of the LLC.

2.10 Adoption of Company Seal. The Manager shall adopt a Company seal, circular in form, containing the words “_________________” together with the date of organization of the Company.

2.11 Maintenance of Company Minute Book; Record Keeping Duties. The Secretary of the LLC (if one has been appointed as provided for herein), and if no Secretary has been appointed, then the Manager, shall keep, or cause to be kept, at the LLC's principal office or such other place as the Manager may direct, a minute book containing a record of all meetings, proceedings and actions of the Members (if any) and of committees appointed by the Manager (if any). The minutes of meetings or consents in lieu thereof shall include the time and place that the meeting was held or the action was taken, whether the meeting was regular or special, and, if special, how authorized, the notice given, the names of those present at committee meetings (if any), the percentage of Membership Interests represented at any Members meetings and the proceedings thereof. The Secretary (or the Manager, as the case may be) shall also keep or cause to be kept a copy of the Articles of Organization of the LLC and this Agreement, and all amendments thereto, at the principal executive office or business office in accordance with Section 17058 of the Act.

ARTICLE 3
MEMBERS AND CAPITAL CONTRIBUTIONS

3.1 Names and Addresses of the Members. The Members of the LLC are _______ ______________, as a Class A Member, and _________________, as a Class B Member, unless and until additional Members or transferee Members, as the case may be, are admitted to the LLC in accordance with this Agreement. The full legal names and current addresses of the Members of the LLC are set forth on EXHIBIT A attached hereto and made a part of this Agreement, which exhibit may be amended or modified from time to time.

3.2 Member Capital Contributions. The Capital Contributions of the Members shall be as follows:

3.2.1 *** CAPITAL’s Contribution. _____________ shall make an aggregate Capital Contribution to the LLC, in cash, in the maximum amount of up to _____________ _________________________ DOLLARS ($____________), which amount shall be contributed to the LLC from time to time at such times and in such amounts as deemed necessary and appropriate by the Manager.

3.2.2 _________________’s Contribution. _________________ shall make an aggregate Capital Contribution to the LLC, in cash, in the amount of _________________ DOLLARS ($______), which amount shall be contributed to the LLC following the execution of this Agreement.

All Capital Contributions of the Members shall be set forth on EXHIBIT A attached hereto and made a part of this Agreement, which exhibit may be amended or modified from time to time. In the case of additional Members hereafter subscribing for a Membership Interest in the LLC, such Member’s Capital Contribution shall not be deemed made to the LLC until the subscribing Member submits an executed counterpart signature page to this Agreement or a Member’s Investment Certification and Signature Page (as the case may be) and his or her subscription has been accepted by the Manager.

3.3 Additional Capital Contributions and Loans. Except as shall be expressly set forth herein, no Member shall be required or permitted to make any additional Capital Contributions to the LLC or to make any loan or cause to be loaned any money or other assets to the LLC.

3.4 Rights With Respect to Capital.

3.4.1 LLC Capital. No Member shall have the right to withdraw or to receive any return of its Capital Contribution, and no Capital Contribution may be returned in the form of property other than cash, except as specifically provided for herein.

3.4.2 No Interest on Capital Contributions. No Capital Contribution of any Member shall bear any interest or otherwise entitle the contributing Member to any compensation for use of the contributed capital.

3.4.3 Establishment of Capital Accounts. A separate Capital Account shall be established and maintained for each Member. Sections 3.5 and 3.6 below describe the appropriate accounting treatment for tax purposes of the Capital Accounts.

3.4.4. No Payment of Salaries or Draws. No Member shall receive or be entitled to receive any payment of salaries or draws with respect to its Capital Contribution or the balance in its Capital Account or for services rendered on behalf of the LLC or otherwise in its capacity as a Member, except as expressly provided for in this Agreement or any other written agreement between the LLC and a Member.

3.5 General Rules for Determining Capital Accounts. The Capital Account of each Member shall be determined as follows:

3.5.1 Increases. The Capital Account of a Member shall be increased by:

3.5.1.1 Such Member's cash contributions;

3.5.1.2 The Gross Asset Value of property contributed by such Member (net of liabilities secured by such contributed property that the LLC is considered to assume or take subject to under Code section 752);

3.5.1.3 All liabilities of the LLC assumed by such Member, excluding those provided for in Section 3.5.2.2 below; and

3.5.1.4 All Net Profits of the LLC allocated to such Member pursuant to Article 4 or other items in the nature of income or gain specially allocated hereunder, and in each case, appropriately adjusted to take into account book and tax differences.

3.5.2 Decreases. The Capital Account of a Member shall be decreased by:

3.5.2.1 The amount of cash distributed to such Member;

3.5.2.2 The Gross Asset Value of all actual and deemed distributions of property made to such Member pursuant to this Agreement (net of liabilities secured by such distributed property that the Member is considered to assume or take subject to under Code section 752);

3.5.2.3 All liabilities of the Member assumed by the LLC, excluding those provided for in Section 3.5.1.2 above; and

3.5.2.4 All Net Losses of the LLC allocated to such Member pursuant to Article 4 or other items in the nature of loss or deduction specially allocated hereunder, and in each case, appropriately adjusted to take into account book and tax differences.

3.6 Special Rules With Respect to Capital Accounts.

3.6.1 Time of Adjustment for Capital Contributions. For purposes of computing the balance in a Member's Capital Account, no credit shall be given for any Capital Contribution which such Member is to make until such contribution is actually made. “Capital Contribution” refers to the total amount of cash and the Gross Asset Value (net of liabilities) of any property contributed to the LLC by that Member and any subsequent contributions of cash and the Gross Asset Value (net of liabilities) of any other property subsequently contributed to the LLC by that Member.

3.6.2 Intent to Comply With Treasury Regulations. The foregoing provisions of Sections 3.4 and 3.5 and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704 1(b), and shall be interpreted and applied in a manner consistent with such Regulations section. To the extent such provisions are inconsistent with such Regulations section or are incomplete with respect thereto, Capital Accounts shall be maintained in accordance with such Regulations section.

3.7 Transferee's Capital Account. In the event a Member, or the holder of an Economic Interest, transfers an Interest in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Interest.

3.8 Limitations on Liability and Obligations of Members and Manager. Except as provided in California Corporations Code Section 17254 relating to distributions by an LLC, and Section 17101(b) thereof relating to responsibility of Members for certain unsatisfied debts or obligations of an LLC, no Member or Manager shall be liable under a judgment, decree or order of court, or in any other manner, for a debt, obligation or liability of the LLC whether or not that liability or obligation arises in contract or tort. No Member shall be required to loan any funds to the LLC. No Member shall be required to make any contribution to the LLC by reason of any negative balance in its Capital Account, nor shall any negative balance in a Member's Capital Account create any liability on the part of the Member to any third party.

3.9 No Responsibility or Liability for Pre-Formation Commitments. In the event any Member (or any such Member's shareholders, members, partners or Affiliates) has incurred any indebtedness or obligation prior to the commencement of the existence of the LLC that related to or otherwise effects the LLC, neither the LLC nor any other Member shall have any responsibility or liability for, or with respect to such indebtedness or obligation, unless assumed by the LLC pursuant to a written instrument duly signed by all Members.

ARTICLE 4
ALLOCATION OF NET PROFITS AND NET LOSSES

4.1 Allocation of Net Profits and Net Losses. Except as otherwise provided in this Article 4, Net Profits and Net Losses of the LLC in each Fiscal Year shall be allocated between the Members in accordance with their Percentage Interests.

4.2 Residual Allocations. Except as otherwise provided in this Agreement, all items of LLC income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided between the Members in the same proportions as they share Net Profits or Net Losses, as the case may be, for the Fiscal Year.

4.3 Qualified Income Offset. If any Member unexpectedly receives any adjustments, allocation or distributions described in clauses (4), (5) or (6) of Regulations Section 1.704 1(b)(2) (ii)(d), items of LLC income shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 4.3 is intended to constitute a “qualified income offset” within the meaning of Regulations Section 1.704 1(b)(2)(ii)(d)(3).

4.4 Minimum Gain Chargeback. If there is a net decrease in LLC Minimum Gain during a Fiscal Year, each Member will be allocated, before any other allocation under this Article 4, items of income and gain for such Fiscal Year (and if necessary, subsequent years) in proportion to and to the extent of an amount equal to such Member's share of the net decrease in LLC Minimum Gain determined in accordance with Regulations Section 1.704- 2(g)(2). This Section 4.4 is intended to comply with, and shall be interpreted consistently with, the “minimum gain chargeback” provisions of Regulations Section 1.704 2(f).

4.5 Member Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding any other provision of this Article 4, but except Section 4.4, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year of the LLC, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704 2(i)(5), shall be specially allocated items of LLC income and gain for such year (and, if necessary, subsequent years) in an amount equal such Member'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 Regulations Section 1.704 2(i)(4). This Section 4.5 is intended to comply with a minimum gain chargeback requirement of that Section of the Regulations and shall be interpreted consistently therewith.

4.6 Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Fiscal Year or other period shall be specially allocated to the Member who bears (or is deemed to bear) 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)(2).

4.7 Special Allocations. Any special allocations of items of Net Profits pursuant to Sections 4.4, 4.5 and 4.6 shall be taken into account in computing subsequent allocations of Net Profits pursuant to Section 4.1, so that the net amount of any items so allocated and the gain, loss and any other item allocated to each Member pursuant to Section 4.1 shall, to the extent possible, be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of this Article 4 if such special allocations had not occurred.

4.8 Fees to Members or Affiliates. Notwithstanding the provisions of Section 4.1, in the event that any fees, interest, or other amounts paid to any Member or any Affiliate thereof pursuant to this Agreement or any other agreement between the LLC and any Member or Affiliate thereof providing for the payment of such amount, and deducted by the LLC in reliance on Code section 707(a) and/or Code section 707(c), are disallowed as deductions to the LLC on its federal income tax return and are treated as LLC distributions, then:

4.8.1 The Net Profits or Net Losses, as the case may be, for the Fiscal Year in which such fees, interest, or other amounts were paid shall be increased or decreased, as the case may be, by the amount of such fees, interest, or other amounts that are treated as LLC distributions; and

4.8.2 There shall be allocated to the Member to which (or to whose Affiliate) such fees, interest, or other amounts were paid, prior to the allocations pursuant to Section 4.1, an amount of gross income for the Fiscal Year equal to the amount of such fees, interest, or other amounts that are treated as LLC distributions.

4.9 Section 704(c) Allocation. Any item of income, gain, loss, and deduction with respect to any property (other than cash) that has been contributed by a Member to the capital of the LLC and which is required or permitted to be allocated to such Member for income tax purposes under Code section 704(c) so as to take into account the variation between the tax basis of such property and its Gross Asset Value at the time of its contribution shall be allocated to such Member solely for income tax purposes in the manner so required or permitted. In the event the Gross Asset Value of any LLC Property is adjusted in accordance with Section 1.19.2, subsequent allocations of income, gain, loss and deduction with respect to such LLC Property shall take into account any variation between the adjusted basis of such LLC Property for federal income tax purposes and its Gross Asset Value in the same manner as under section 704(c) and the Regulations promulgated thereunder. Any elections or other decisions relating to such allocations shall be made in any manner that reasonably reflects the purpose and intention of this Agreement. To the extent permitted by Regulations Section 1.704-1(b)(4)(i), all items of income, gain, loss and deduction for federal and state tax purposes shall be allocated in accordance with the corresponding book items.

ARTICLE 5
DISTRIBUTIONS OF DISTRIBUTABLE CASH

5.1 Distributions. Subject to Section 5.2 below, the LLC shall distribute the Distributable Cash among the Members in accordance with their respective Percentage Interests in the LLC. Except for the Tax Liability Shortfall set forth below, the Manager shall distribute the Distributable Cash so allocated to the Members from time to time as the Manager deems practicable, in its sole discretion. The Manager shall consider the reasonable needs of the LLC's Business in exercising its discretion. Generally, distributions will be made quarterly, subject to the payment of LLC expenses and costs, including the establishment and maintenance of reasonable reserves to conduct its Business, for contingencies and for inventory for the LLC Business and/or repairs, improvements, maintenance, alteration and replacement of LLC Property or the __________________ Store.

5.2 Tax Distributions. Except as otherwise may be prohibited by any agreements between the LLC and its lenders, within ninety (90) days after the conclusion of each Fiscal Year, the Manager shall determine and provide written notice to the Members of the amount (the “Tax Liability Shortfall Amount”), if any, by which (a) the aggregate federal and state tax liability (if any) incurred by the Members with respect to the net income of the LLC for such preceding Fiscal Year (which tax liability shall be determined by applying the highest effective individual tax rates then in effect for the Fiscal Year in question), exceeds (b) the aggregate distributions of Distributable Cash made by the LLC with respect to such Fiscal Year (including any distributions made to the Members with respect to the final fiscal quarter of such Fiscal Year). The Manager shall use all reasonable efforts to cause the LLC to distribute the Tax Liability Shortfall Amount to the Members in the time and manner required hereunder, including, but not limited to, borrowing on behalf of the LLC sufficient funds to enable the LLC to distribute such Tax Liability Shortfall Amount. Each such distribution shall be made to the Members as soon as practicable after such funds are available. It is the objective of the Members that while the Tax Liability Shortfall Amount will be determined at the end of each Fiscal Year, to the extent possible and subject to the foregoing, distributions will be made in respect thereof on a quarterly basis to facilitate the Members’ ability to make quarterly estimated tax payments with respect to their net income from the LLC. Distributions made pursuant to this Section 5.3 shall be taken into account in connection with any subsequent distributions under Sections 5.1 and 5.2 above so that, to the extent possible, the Members shall obtain distributions in the same order and priority they would have obtained if this Section 5.3 were not in this Agreement. At the end of each Fiscal Year as contemplated above, final adjustments shall be made to reflect the actual results of such Fiscal Year.
ARTICLE 6
MANAGEMENT OF THE LLC

6.1 Management of the LLC. Subject to the provisions of the Act and any limitations set forth in the Articles of Organization and this Agreement (as may be amended from time to time) relating to actions required to be approved by the Members, the Business and affairs of the LLC shall be managed, and all Company powers shall be vested in, the Manager. Except for those powers delegated to the officers of the Company as set forth in Article 7 hereof, all Company powers shall be exercised exclusively by the LLC's Manager, who shall have the powers, duties and responsibilities described in Section 6.2 below.

6.1.1 Number and Qualification of Managers. The LLC shall at all times have one (1) Manager, unless an increase in the number of Managers is approved by the Members. A Manager need not be a Member of the LLC or a natural person.

6.1.2 Appointment of Manager. The initial Manager of the LLC shall be ___________________, individually, who is hereby appointed by all of the Members executing this Agreement.

6.1.3 Removal or Resignation of the Manager. Subject to the rights, if any, of the Manager under any written employment contract, if any, approved by the Members, the Manager may be terminated or removed at any time, with or without cause, by a Vote of a Majority in Interest of the Members. Subject to the rights, if any, of the LLC under any written contract approved by the Members to which the Manager is a party, the Manager may resign or withdraw at any time upon ninety (90) days’ prior written notice to the Members.

6.1.4 Election of Successor Manager. Upon the Manager's resignation or withdrawal from office or his termination or removal from office pursuant to Section 6.1.3 above, a Majority in Interest of the Members shall elect a successor Manager who shall hold office until a successor Manager is duly elected and qualified in accordance with this paragraph.

6.1.5 Subordinate Officers. The Manager may, in his discretion, appoint a President, Secretary, a Chief Financial Officer, and such other officers of the LLC as the Business of the LLC may require, each of whom shall hold office for such period, have such authority and perform such duties as may be provided for in Article 7 of this Agreement or as the Manager may determine from time to time. The Manager may delegate from time to time to the President and such subordinate officers any or all of his powers and duties described in Section 6.2 below as he shall deem appropriate.

6.1.6 Duties of the Manager; Liability for Certain Acts. The Manager shall perform his managerial duties in good faith, in a manner he reasonably believes to be in the best interests of the LLC, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. A Manager who so performs the duties of Manager shall not have any liability by reason of being or having been a Manager of the LLC. A Manager shall not be liable to the LLC or to any Member for any loss or damage sustained by the Company or any Member, unless the loss or damage shall have been the result of fraud, deceit, gross negligence, willful misconduct, breach of a fiduciary duty, or a wrongful taking by a Manager. A Manager shall not be liable for any loss or damage to the Company caused by strikes, labor troubles, riot, fires, explosions, tornadoes, floods, acts of a public enemy, insurrections, acts of God, failure to carry out the provisions hereof due to provisions of law or rules or regulations promulgated by any governmental agency or any other demand or requisition of any government, or from any other cause beyond the control of a Manager.

6.2 Powers, Duties and Responsibilities of the Manager. In addition to all other powers enumerated by law or elsewhere in this Agreement, the Manager shall be charged with the rights, duties, powers, authority and responsibilities as specified herein, subject only to the limitations set forth in this Article 6. The Manager shall have responsibility for the general supervision, direction and control of the Business of the LLC and for conducting the day-to-day operations of the LLC and for making all management decisions in connection therewith.

Subject to the limitations set forth in Section 6.3 below, the following matters (listed by way of example and not in limitation thereof), unless otherwise delegated to a subordinate officer, shall be determined exclusively by the Manager:

6.2.1 To conduct, manage and control the affairs and Business of the LLC, and the day-to-day activities and business of the __________________ store, and to make such rules and not inconsistent with law, the Articles of Organization or this Agreement, as the Manager may deem best.

6.2.2 To select and remove all subordinate officers, agents and employees of the LLC; prescribe the powers and duties for them as may not be inconsistent with law, the Articles of Organization or amend those powers and duties as set forth in this Agreement; fix their compensation; and require from any such subordinate officers, agents and employees security for faithful service.

6.2.3 To accept or reject the subscription of any Member hereafter subscribing for a Membership Interest in the LLC, or to consent to or reject the transfer of any Member, and to authorize the issuance of membership certificates of Interests of the LLC evidencing such accepted subscriptions or transferee Member, all upon such terms and for such consideration as may be lawful or otherwise set forth in this Agreement.

6.2.4 To borrow funds from any lender to open, operate or maintain the __________________ Store or for any other purpose which is otherwise in furtherance of the Business of the LLC; to issue evidences of indebtedness in connection therewith; to refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any indebtedness or obligation of the LLC; and to secure any indebtedness or obligation of the LLC by mortgage, pledge, granting a security interest in or other lien on the LLC's assets.

6.2.5 To execute and deliver on behalf of the LLC, as lessor, a commercial lease agreement for the __________________ Store.

6.2.6 To prepare, execute, file and obtain on behalf of the LLC all necessary applications, licenses, permits and other clearances, and to otherwise communicate and deal with any and all governmental and public agencies or utilities having jurisdiction over or in any way affecting the Business or any part thereof, or as may be required by the LLC to lease, construct, open, acquire and maintain inventory, operate and maintain the __________________ Store, or any other aspect of the Business.

6.2.7 To make any ordinary and necessary expenditures and incur reasonable obligations necessary for the conduct of the activities of the LLC's Business and to negotiate, execute and perform on any terms it deems appropriate any contract or agreement customarily employed in like industries with any third parties, if such arrangement is considered by the Manager to be useful or necessary to the conduct of such operations or the implementation of powers granted it under this Agreement.

6.2.8 To execute and deliver bonds and indemnities by or on behalf of the LLC in connection with the build-out, construction, ownership and/or operation of the __________________ Store or any other LLC Property.

6.2.9 To engage contractors, subcontractors, consultants, architects, engineers, interior designers, maintenance personnel and other Persons necessary or appropriate to build-out and open the __________________ Store and to carry out the Business of the LLC.

6.2.10 To select employees and outside consultants, experts and contractors to employ attorneys, accountants and others to prosecute or defend claims by or against the LLC or affecting title to any LLC Property, and to determine and execute the terms of any such employment, hiring or engagement, including the payment of compensation. Without limiting the generality of the foregoing, the Manager shall have the power and authority, at the expense of the LLC, to contest any determination by the Internal Revenue Service to disallow any deductions claimed by the LLC or any Member, and to pay all legal expenses and costs incurred in litigation or in the settlement of claims against the LLC.

6.2.11 To purchase liability and other insurance to protect the Business of the LLC, its Manager and employees.

6.2.12 To store LLC Property in such manner and in such place or places and to obtain insurance coverage thereon as is necessary or desirable to protect LLC Property, the LLC and its Business from hazard, and to take such steps or actions as the Manager may deem appropriate in completing all transactions concerning any or all LLC Property.

6.2.13 To extend any credit to purchasers of any LLC Property in the ordinary course of Business of the LLC and to establish guidelines therefor.

6.2.14 To negotiate the terms of and enter into such management or other service agreements with Persons it deems necessary and appropriate to conduct, or is otherwise in furtherance of, the LLC's Business, and to amend, modify or supplement the terms of any such agreement as from time to time is necessary or appropriate. The fact that a Member is directly or indirectly affiliated or connected with any such Person contracted by the LLC shall not prohibit the Manager or the LLC's officers from dealing with that Person.

6.2.15 To hold and own any LLC Property in the name of the LLC.

6.2.16 To invest any funds of the LLC temporarily (by way of example, but not limitation) in government securities or other short-term securities, including money market funds, time deposits, short-term governmental obligations, commercial paper or other investments prior to the expenditure of such capital in connection with Business operations, provided that the Manager shall not be required to make any such investment.

6.2.17 To enter into any and all other agreements on behalf of the LLC with any other Person for any purpose necessary or appropriate to the conduct of the Business of the LLC and in the ordinary course of business of the LLC.

6.2.18 To pay reimbursements from the LLC of all expenses of the LLC reasonably incurred and paid by the Manager or LLC officers on behalf of the LLC.

6.2.19 To prepare, execute and file a Certificate of Amendment to the Articles of Organization to reflect any change in the information contained in the Articles of Organization, and to make any changes or corrections to the Member information contained in EXHIBIT A hereto.

6.2.20 Prepare, execute and file on behalf of the LLC the biennial Statement of Information or amendments thereto with the Secretary of State and to pay all filing fees therefor.

6.2.21 Subject to any borrowing limitations set forth in this Section 6.2 (if any), to acquire assets on behalf of the LLC, including inventory for the _________________ Store, interests in other limited liability companies, limited partnership or partnerships, which may be Affiliates or non-Affiliates of the LLC, and to manage, encumber, hypothecate, exchange or dispose of any or all of the assets of the LLC, whether tangible or intangible, movable or immovable; provided that the LLC assets shall only be mortgaged, pledged, hypothecated, sold or used for the benefit of the LLC and shall not be mortgaged, pledged, hypothecated, sold or otherwise used for the benefit of the Manager, except to the extent of its interest therein.

6.2.22 To secure any indebtedness or obligation of the LLC by mortgage, pledge, granting a security interest in or other lien on the LLC's Property.

6.2.23 To make such classifications, determinations and allocations as it may deem advisable, subject to the terms and provisions of this Agreement.

6.2.24 To confess a judgment against the LLC, or approve the filing of or settlement of any claims, including litigation matters, for or against the LLC, not in excess of FIFTY THOUSAND DOLLARS ($50,000).

6.2.25 To call a meeting of the Members.

6.2.26 To generally act on behalf of and in the name of the LLC to do or perform, or cause to be done or performed, all such other acts or things and to negotiate, execute, acknowledge and deliver all agreements, documents and instruments in connection with the duties and responsibilities enumerated herein.

6.2.27 To do and perform all other acts as may be necessary or appropriate to the conduct of the Business of the LLC.

6.3 Limitations on the Manager. The Manager shall not have the authority to do any of the following without the prior Vote of a Majority in Interest of the Members:

6.3.1 Except as provided for in Section 6.2 above, to amend the Articles of Organization.

6.3.2 To terminate, dissolve and wind up the Business and affairs of the LLC.

6.3.3 To materially change the character of the Business of the LLC.

6.3.4 To make any material amendment to this Agreement, including any increase in the number of Managers of the LLC pursuant to Section 6.1 above.

6.3.5 To sell, exchange or otherwise dispose of all or substantially all of the LLC Property, occurring as part of a single transaction or plan of a series of transactions.

6.3.6 To merge the LLC with any other limited liability company, limited partnership or other entity.

6.3.7 To authorize any transaction outside the ordinary course of Business.

6.3.8 To elect a successor Manager pursuant to Section 6.1 above.

6.3.9 To do any act or thing or exercise any power not otherwise authorized by Section 6.2 above or which is in contravention of this Agreement or any valid amendment hereto, the Articles of Organization or any amendment thereof.

6.3.10 To knowingly perform any act (other than any act required by this Agreement or by law or an act taken in good faith) which would, at the time of such act, subject any member of the LLC to any personal liability in any jurisdiction.

6.4 Other Activities of the Manager. The Manager needs to devote only such time and attention to the Business and affairs of the LLC as he shall deem necessary and appropriate, in the exercise of his own reasonable judgment. The Manager and his Affiliates shall have the right (for his own account and/or for the account of others), alone or with others, or as a part of any limited liability company, partnership, joint venture, corporation or other entity to: (i) purchase or otherwise acquire, own, hold, operate, manage, invest in or otherwise dispose of a like business of the LLC's Business (and interests therein), of any kind or nature; and (ii) otherwise engage in any or all aspects of a like business of the LLC's Business. The Members agree that the activities permitted by this paragraph shall not require approval by the Members and shall not be deemed a breach of any duty a Manager may have to the LLC or the Members, and that neither the Members nor the LLC shall have any interest in any profits or losses which may be realized by the Manager or his Affiliates with respect to any such activity.

6.5 Rights of Inspection. The Manager shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind, and to inspect the physical properties of the LLC and also of its subsidiary limited liability companies, domestic or foreign. Such inspection by a Manager may be made in person or by agent or attorney and includes the right to copy and obtain abstracts.

6.6 Furnishing LLC Information. The Manager may release such information concerning the Business and operations of the LLC to such sources as is customary or required by law or by rule or regulation or order of any regulatory body.

6.7 Restrictions on Distributions. No distribution to the LLC's Members is valid unless such distribution has been approved either immediately before or immediately after approval by the Manager.

6.8 Manager's and/or Affiliates’ Compensation and Reimbursement. The Manager and/or his Affiliates shall be entitled to receive the following compensation and reimbursement, which amounts are hereby acknowledged and approved by each Member’s execution of this Agreement:

6.8.1 The LLC shall reimburse the Manager or any of his Affiliates for any costs incurred which are directly attributable to the formation and organization of the LLC.

6.8.2 The LLC shall reimburse the Manager for any direct costs incurred by the Manager which are directly attributable to the LLC or to its Business.

6.8.3 The Manager may receive reasonable compensation for his services hereunder as may be approved by a Majority in Interest of the Members.

6.9 Expense Reimbursement to Members. The LLC shall reimburse the Members for any expense paid by them that properly is to be borne by the LLC, as approved from time to time by the Manager.

6.10 Establishment of Bank Accounts. The Manager shall authorize the establishment of one or more depository accounts for the funds of the LLC and designate Persons authorized to deposit and draw against such accounts on behalf of the LLC. Cash balances on hand may be invested by the Manager on behalf of the LLC as provided for in this Agreement. LLC funds shall not be commingled with the funds of the Manager, any Member, any officer or any other party or used as compensating balances for any other obligations of the Manager, any Member, any officer or any other party.

ARTICLE 7
OFFICERS

7.1 Titles; Appointment; Term. This LLC may have a President, Chief Financial Officer/Treasurer and Secretary, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Chief Financial Officers/Treasurers, or any other such officers as the Manager may from time to time designate and appoint. Any two or more offices may be held by one person. The officers of the LLC shall be appointed by, and shall serve at the pleasure of, the Manager and shall hold their respective offices until their resignation, removal or other disqualification from service, or until their respective successors shall be duly elected and qualified in accordance with this Agreement.

7.2 Designation of Initial Officers. The initial officers of the LLC shall be as follows:

Name of Officer Office

_________________ President
_________________ Vice President

7.3 Additional Subordinate Officers. The Manager may appoint such other officers as the Business of the LLC may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in this Agreement, or as the Manager may from time to time determine.

7.4 Responsibilities of Officers. The officers of the LLC shall have such powers, duties and responsibilities as may be customary and as may be assigned to them by the Manager from time to time. Subject to the limitations set forth in this Agreement, the President shall have the following duties and responsibilities:

7.4.1 President. Subject to the control of the Manager and subject to the scope of the supervisory powers the Manager may give to the President from time to time, _________________, as the President of the LLC, shall:

(a) Oversee the build-out of the __________________ Store, including obtaining all necessary permits; selecting furniture and fixtures; preparing a construction budget for the Manager’s approval; and purchasing all such furniture and fixtures pursuant to the construction budget approved by the Manager.

(b) Prepare an initial operating budget for approval by the Manager.

(c) Establish inventory purchasing policies for the __________________ Store and, subject to the approval by the Manager, purchase the opening and operating inventory for the __________________ Store.

(d) Have general management of and oversee the day-to-day activities of the __________________ Store.

(e) Keep and maintain, or cause to be kept and maintained, adequate and correct books of account showing the receipts, disbursements and other transactions of the __________________ Store, and an account of its cash and other assets and liabilities. The books of account shall be open to inspection by the Manager and his representatives at all times.

(f) Send or cause to be given to the Members and/or the Manager such financial statements and reports as are required to be given by law, by this Agreement or by the Manager, and prepare and distribute such financial statements for the LLC as required by this Agreement.

(g) Subject to the scope of authority given by the Manager, receive and have custody of all funds and securities of the __________________ Store and the LLC; deposit, or cause to be deposited, all money and other valuables in the name and to the credit of the LLC with such depositories as the Manager may from time to time designate; shall disburse the LLC's funds as the Manager may order; and shall render to the Manager, when requested, an account of all transactions and of the financial condition of the LLC and the __________________ Store.

(h) Hire and supervise all employees of the __________________ Store.

(i) Obtain all necessary licenses, permits, insurance and surety bonds for the __________________ Store.

(j) Establish security procedures and, subject to the approval by the Manager, purchase any security equipment required for the __________________ Store.

(k) Sign as President all contracts and other instruments in writing which have been first approved by the Manager.

(l) See that all orders and resolutions of the Manager are carried into effect.

Further, the Manager may delegate any other of his powers to the President as set forth in Section 6.2 above.

7.5 Compensation of Officers. In consideration for her full-time, exclusive services to the LLC, the President of the LLC shall receive a salary in the aggregate amount of _____________________________ DOLLARS ($__________) per year, payable in twenty-four (24) semi-monthly installments on the first(1st) and fifteenth (15th) day of each calendar month commencing on _____________. The Manager shall have the discretion to determine the amount and terms of any compensation which may be paid to any other officer from time to time and shall have the authority to determine any increases or decreases in the compensation paid to the President or any other officer.

ARTICLE 8
MEMBERS' MEETINGS; MEMBERS' RIGHTS

8.1 Meetings of the Members; Persons Authorized to Call Meetings. Meetings of the Members may be called by the Manager or by any Member or Members holding Ten Percent (10%) or more of the Percentage Interests of the LLC to Vote on any matter set forth in Section 6.3 hereof or on any other matter requiring the Vote or approval by the Members as set forth in this Agreement.

8.2 Place of Meetings. Meetings of the Members shall be held at the principal executive office of the LLC, unless some other appropriate and convenient location, either within or without the state where the Articles of Organization were filed, shall be designated for that purpose from time to time by the Manager.

8.3 Notice of Meetings. Notice of meetings shall be given by the Manager to the Members in writing not less than ten (10) nor more than sixty (60) days before the date of the meeting. Notices for meetings shall be given personally, by mail, or by facsimile, and shall be sent to each Member's last known business address appearing on the books of the LLC. Such notice shall be deemed given at the time it is delivered personally, or deposited in the mail, or sent by facsimile. Notice of any meeting of Members shall specify the place, the day and the hour of the meeting, and (i) the general nature of the business to be transacted, or (ii) those matters which the Manager, at the date of mailing, intends to present for action by the Members.

8.4 Validation of Members’ Meetings. The transactions of a meeting of Members which was not called or noticed pursuant to the provisions of this Article 8 shall be valid as though transacted at a meeting duly held after regular call and notice, if Members holding in the aggregate of more than seventy-five percent (75%) of the Percentages Interests of the Members are present, and if, either before or after the meeting, each of the Members entitled to Vote but not present (whether in person or by proxy, as that term is used in the Act) at the meeting signs either a written waiver of notice, a consent to the holding of such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the records of the LLC. Attendance shall constitute a waiver of notice, unless objection shall be made.

8.5 Actions Without a Meeting.

8.5.1 Any action which may be taken at any meeting of Members may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be approved by a Majority in Interest of the Members, unless a lesser Vote is authorized or a greater vote is required by this Agreement.

8.5.2 Unless the consents of all Members have been given in writing, notice of any consent or approval of the Members without a meeting by less than unanimous written consent shall be given at least ten (10) days before the consummation of the action authorized by such approval. Any Member giving a written consent may revoke the consent by a writing received by the LLC prior to the time that written consents of Members required to authorize the proposed action have been filed with the LLC. Such revocation is effective upon its receipt by the LLC.

8.6 Quorum and Effect of Vote. Each Member shall have a number of Votes equal to the Percentage Interest held by such Member, provided that if, pursuant to the Act or the terms of this Agreement, a Member is not entitled to Vote on a specific matter, then such Member's number of Votes and Percentage Interest shall not be considered for purposes of determining whether a quorum is present, or whether approval by a Vote of the Members has been obtained in respect of such specific matter. Members holding an aggregate of more than seventy-five percent (75%) of the Percentage Interests of the Members or more shall constitute a quorum at all meetings of the Members for the transaction of business, and the Vote of the Members holding 75% or more of the Percentage Interests of the Members at any such meeting where a quorum is present shall be required to approve any action, unless a greater Vote is required or a lesser Vote is provided for by this Agreement or by the Act.

8.7 Voting Rights. Unless otherwise specified in this Agreement, all other voting rights granted to the Members herein are granted pursuant to the Act. A Member shall not be deemed to be participating in the control of the LLC's Business by virtue of possessing or exercising the voting rights granted in this Agreement.

ARTICLE 9
RESTRICTIONS ON TRANSFER;
ADMISSION OF NEW MEMBERS AND TRANSFEREES

9.1 Restrictions on Transfer of Membership Interests and Economic Interests. No Membership Interest or Economic Interest may be transferred, hypothecated, encumbered or assigned without the prior written consent of the Manager in his sole discretion.

9.2 Transfers of Interests During Fiscal Year. If all or any portion of an Interest is transferred during any Fiscal Year of the LLC upon the death of a Member or by operation of law or in any other manner, all items of income, gain, loss, cost, expense, deduction and credit with respect to the Interest so transferred shall be prorated between the transferor and the transferee in accordance with the number of days during the year each held the Interest (or any permissible method under Code section 706 and the Regulations promulgated thereunder). Notwithstanding the foregoing, distributions of Distributable Cash allocated pursuant to Article 5 hereof shall be made to the Person who was a Member on the record date established pursuant thereto.

9.3 Void Transfers. Any transfer of a Membership Interest or an Economic Interest which does not satisfy the requirements of Section 9.1 above shall be null and void, and the transferring Member shall continue to be a Member of the LLC and to be obligated under each and every provision of this Agreement.

9.4 Admission of New Members and Transferees. A Person or transferee of a Membership Interest (but not solely an Economic Interest) may be admitted into the LLC as a new Member only upon the prior written consent of the Manager and upon satisfaction of the following conditions:

9.4.1 The amount of Capital Contribution which must be paid by a new Member shall be determined by the Manager. In the case of a consented transfer of a Membership Interest, the Capital Account balance of the transferor shall succeed to the transferee.

9.4.2 A new Member or transferee of a Membership Interest shall not be deemed admitted into the LLC until (i) the Capital Contribution required of such new Member shall have been paid or the Capital Account has been transferred between the transferor and transferee, and (ii) such new Member or transferee has become a party to this Agreement by his or her execution and submission to the Manager of a form of Member's Investment Certification and Signature Page, if any, or a counterpart signature page to this Agreement, acknowledging his acceptance of, and agreeing to be bound by, the terms and conditions of this Agreement.

9.5 Substitution of Members. Upon the death of a Member or upon the valid transfer of a Member's Interest in accordance with Section 9.1 above, any Person may be substituted as a Member and admitted to the LLC, succeeding to all of the rights of any Member. The substituted Member shall have all the rights and powers and shall be subject to all the restrictions and liabilities of the transferring Member, except that the substitution of the transferee Member shall not release the transferring Member from liability to the LLC. No substituted Member shall be deemed admitted into the LLC until such substituted Member has become a party to this Agreement by executing and delivering to the Manager a counterpart signature page to this Agreement or a form of Member’s Investment Certification and Signature as may be required by the Manager, acknowledging his acceptance of, and agreeing to be bound by, the terms and conditions of this Agreement.

ARTICLE 10
ADMINISTRATION AND ACCOUNTING MATTERS

10.1 Maintenance of Books and Records. The LLC shall cause the books and records of the LLC to be maintained in accordance with generally accepted accounting principles and shall give reports to the Members in accordance with prudent business practices and the Act. There shall be kept at the principal office of the LLC, as well as at the office of record of the LLC in California specified in Section 2.4, if different, the following LLC documents:

10.1.1 A current list of the full name and last known business or residence address of each Member and of each holder of an Economic Interest in the LLC set forth in alphabetical order, together with the Capital Contributions and share in Net Profits and Net Losses of each Member and holder of an Economic Interest.

10.1.2 A current list of the full name and business or residence address of the Manager.

10.1.3 A copy of the Articles of Organization and any amendments thereto or restatements thereof, together with any powers of attorney pursuant to which the Articles of Organization and any amendments thereto or restatements thereof were executed.

10.1.4 Copies of the LLC's federal, state and local income tax or information returns and reports, if any, for the six (6) most recent Fiscal Years.

10.1.5 A copy of this Agreement and any amendments thereto, together with any powers of attorney pursuant to which this Agreement and any amendments thereto were executed.

10.1.6 Copies of the financial statements of the LLC, if any, for the six (6) most recent Fiscal Years.

10.1.7 The LLC's books and records as they relate to the internal affairs of the LLC for at least the current and past four (4) Fiscal Years.

10.1.8 Any other information required to be maintained by the LLC pursuant to the Act.

10.2 Annual Accounting. Within one hundred twenty (120) days after the close of each Fiscal Year of the LLC, the Manager shall (i) cause to be prepared and submitted to each Member a balance sheet and income statement for the preceding Fiscal Year of the LLC (or portion thereof) in substantial conformity with generally accepted accounting principles, and (ii) provide to the Members all information necessary for them to complete federal and state tax returns.

10.3 Inspection Rights. Each Member has the right upon reasonable request, for purposes reasonably related to the Interest of that Person, to inspect and copy during normal business hours any of the LLC's books and records required to be maintained by it in accordance with Section 10.1 hereof. Such right may be exercised by the Member or by that Member's agent or attorney. The determination of the Manager as to adjustments to the financial reports, books, records and returns of the LLC, in the absence of fraud or gross negligence, shall be final and binding upon the LLC and all of the Members.

10.4 Rights of Members. Upon the request of a Member, for purposes reasonably related to the interest of that Member, the Manager shall promptly deliver to the Member, at the expense of the LLC, a copy of this Agreement and a copy of the information listed in Sections 10.1.1, 10.1.2 and 10.1.4 of this Agreement.
Manager

10.5 Tax Matters Handled by Manager. The Manager shall act as the “Tax Matters” (defined as “Tax Matters” in Code section 6231) to represent the LLC (at the LLC's expense) in connection with all examinations of the LLC's affairs by tax authorities, including resulting judicial and administrative proceedings, and to expend LLC funds for professional services and costs associated therewith. In its capacity as Tax Matters Manager, the Manager shall oversee the LLC's tax affairs in the overall best interests of the LLC.

10.6 Federal Income Tax Elections. The Manager on behalf of the LLC may make or cause to make all elections for federal income tax purposes, including but not limited to, the following:

10.6.1 Entity Classification Election. As a domestic eligible entity, the Manager shall cause the LLC to elect to be classified as a partnership for federal tax purposes by filing Form 8832, Entity Classification Election, with the Internal Revenue Service in the time and manner prescribed by the applicable regulations. The election for such classification shall be effective as of the effective date of this Agreement.

10.6.2 Use of Accelerated Depreciation Methods. To the extent permitted by applicable law and regulations, the LLC may elect to use an accelerated depreciation method on any depreciable unit of the assets of the LLC.

10.6.3 Accounting Method. For financial reporting purposes, the books and records of the LLC shall be kept on the ACCRUAL METHOD OF ACCOUNTING applied in a consistent manner and shall reflect all transactions of the LLC and be appropriate and adequate for the purposes of the LLC.

10.6.4 Obligations of Members to Report Allocations. The Members are aware of the income tax consequences of the allocations made by this Agreement and hereby agree to be bound by the provisions of this Section 10.6 in reporting their shares of the LLC income and loss for income tax purposes.

10.6.5 Tax Year. The LLC shall adopt the CALENDAR YEAR as its taxable year.

10.6.6 Other Elections. The Manager shall have the right in his sole discretion at any time to make or not to make such other elections as are authorized or permitted by any law or regulation for income tax purposes (including, but not limited to, any election under sections 734, 743 and 754 of the Code to adjust the basis of the Property of the LLC in the event of a transfer of all or part of the Interest of any Member). Notwithstanding the above, no Member, nor the LLC, shall make an election to be excluded from the application of Subchapter K of the Code or any similar provisions of state law.

ARTICLE 11
TERMINATION AND DISSOLUTION

11.1 Termination and Dissolution. The LLC shall be dissolved upon the occurrence of any of the following events:

11.1.1 The affirmative Vote of a Majority in Interest of the Members to terminate and dissolve the LLC.

11.1.2 The affirmative Vote of a Majority in Interest of the Members to sell, exchange or otherwise dispose of all or substantially all of the LLC Property occurring as part of a single transaction or plan of a series of transactions intended to liquidate or dissolve the LLC.

11.1.3 The entry of a decree of judicial dissolution pursuant to California Corporations Code Section 17351.

11.2 Certificate of Dissolution. As soon as possible after the occurrence of any of the events specified in Section 11.1 above, the LLC shall execute a Certificate of Dissolution (Form LLC-3) in such form as prescribed by the Secretary of State.

11.3 Conduct of Business. Upon the filing of the Certificate of Dissolution with the Secretary of State, the LLC shall cease to carry on its Business, except insofar as may be necessary for the winding up of its Business, but the LLC's separate existence shall continue until the Certificate of Dissolution have been filed with the Secretary of State or until a decree dissolving the LLC has been entered by a court of competent jurisdiction.
11.4 Certificate of Cancellation. After the Certificate of Dissolution has been filed with the Secretary of State, the Manager, pursuant to Section 17356 of the Act, shall execute and file a Certificate of Cancellation of Articles of Organization (Form LLC-4/7) in such form as prescribed by the Secretary of State.

11.5 Distribution of Net Proceeds Upon Liquidation. The Members shall continue to divide Net Profits and Net Losses and Distributable Cash during the winding up period in the same manner and the same priorities as provided for in Articles 4 and 5 hereof. The proceeds from the liquidation of LLC Property shall be applied in the following order:

11.5.1 First, to the payment of creditors, in the order of priority as provided by law, except to Members on account of their Capital Contributions.

11.5.2 Second, to the payment of loans or advances that may have been made by any of the Members, the Manager or their Principals for working capital or other requirements of the LLC.

11.5.3 Third, pro rata, among the Class A Members in an amount equal to their aggregate Adjusted Capital Contributions.

11.5.4 Fourth, pro rata, among the Class B Members in an amount equal to their aggregate Adjusted Capital Contributions.

11.5.5 Thereafter, pro rata, to the Class A Members and the Class B Members in accordance with their positive Capital Account balances.

Where the distribution pursuant to this Section 11.5 consists both of cash (or cash equivalents) and non cash assets, the cash (or cash equivalents) shall first be distributed, in a descending order, to fully satisfy each category starting with the most preferred category above. In the case of noncash assets, the distribution values are to be based on the fair market value thereof as determined in good faith by the liquidator, and the shortest maturity portion of such non cash assets (e.g., notes or other indebtedness) shall, to the extent such non cash assets are readily divisible, be distributed, in a descending order, to fully satisfy each category above, starting with the most preferred category.

ARTICLE 12
INDEMNIFICATION OF THE MEMBERS, MANAGER, THEIR
PRINCIPALS AND THEIR AFFILIATES

12.1 Indemnification of the Members, the Manager, Their Principals and Their Affiliates. The LLC shall indemnify and hold harmless the Members, the Manager, their Affiliates and their respective officers, directors, employees, agents and Principals (individually, an "Indemnitee") from and against any and all losses, claims, demands, costs, damages, liabilities, joint and several, expenses of any nature (including reasonable attorneys' fees and disbursements), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which the Indemnitee was involved or may be involved, or threatened to be involved, as a party, arising out of the Business of the LLC, excluding any liability for breach of the Manager’s duties as set forth in Section 17153 of the Act, regardless of whether the Indemnitee continues to be a Member, an Affiliate, or an officer, director, employee, agent or principal of the Member at the time any such liability or expense is paid or incurred, to the fullest extent permitted by the Act and all other applicable laws, provided that the Member or such Person acted in good faith, within what is reasonably believed to be the scope of his authority and for a purpose which it reasonably believed to be in the best interests of the LLC and the Members or otherwise in compliance with the provisions of this Agreement; provided, however, that (i) the LLC shall not be required to indemnify any Indemnitee, and any such Indemnitee shall be liable, for any loss, expense or damage which the LLC may suffer as a result of (A) such Indemnitee’s willful misconduct, gross negligence or bad faith in failing to perform his duties hereunder, (B) actions taken by such Indemnitee in violation of this Agreement, (C) the receipt by such Indemnitee of any financial benefits to which it is not entitled pursuant to this Agreement, or (D) the vote by such Indemnitee for a distribution of funds of the LLC in violation of this Agreement or the Act; (ii) the LLC shall not be required to indemnify any Indemnitee for any breach of the provisions of this Agreement, or for any loss, expense or damage which it may suffer as a result of the breach of this Agreement by the Member to which the Indemnitee is related; and (iii) any liability hereunder shall be limited solely to the assets and properties of the LLC, and no Member (or any Affiliate of any Member) shall have any liability or obligation by reason of these indemnification provisions.

The foregoing provisions of this Article 12 shall survive for a period of four (4) years from the date of dissolution of the LLC; provided, if at the end of such period, there are any actions, proceedings or investigations then pending, the Manager shall so notify the Members at such time (which notice shall include a brief description of each such action, proceeding or investigation and of the liabilities asserted therein), and the foregoing provisions of this Article 12 shall survive with respect to each such action, proceeding or investigation set forth in such notice (or any related action, proceeding or investigation based upon the same or similar claims) until such date as such action, proceeding or investigation is ultimately resolved.

The LLC shall not incur the cost of the portion of any insurance, other than public liability insurance, which insures the Manager against any liability as to which the Manager is herein prohibited from being indemnified.

12.2 Expenses. Expenses (including reasonable attorneys' fees and disbursements) incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding subject to Section 12.1 above may, from time to time, be advanced by the LLC prior to the final disposition of such claim if approved by the Members, demand, action, suit or proceeding upon receipt by the LLC of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that such Indemnitee is entitled to be indemnified as authorized in Section 12.1 above.

12.3. Indemnification Rights Nonexclusive. The indemnification provided by Section 12.1 shall be in addition to any other rights to which those indemnified may be entitled under any agreement approved by the Members, as a matter of law or equity or otherwise, both as to action in the Indemnitee's capacity as a Member, as an Affiliate or as an officer, director, employee, agent or Principal of a Member and as to any action in another capacity, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.

12.4 Assets of the LLC. Any indemnification under Section 12.1 shall be satisfied solely out of the assets of the LLC. No Member shall be subject to personal liability or required to fund or to cause to be funded any obligation by reason of these indemnification provisions.

ARTICLE 13
INVESTMENT REPRESENTATIONS AND WARRANTIES
OF THE MEMBERS

In consideration of their admission to the LLC as Members, each of the Members, individually or by an authorized representative, hereby represent they meet the suitability standards set forth in this Article 13 and further represent and warrant to the LLC, the Manager and to each of the other Members, the following:

13.1 The Member acknowledges that, as of the date of this Agreement, each of the statements contained herein shall be true and accurate and represent a full disclosure of all facts relevant to the matters contained herein and such representations and warranties shall survive the execution of this Agreement.

13.2 The Member, in the case of a partnership, corporation or other lawful entity, is, and shall at all times during the term of this Agreement remain, duly organized, validly existing and in good standing under the laws of the state in which it was formed. The Member is, and shall at all times during the term of this Agreement remain, duly licensed or qualified to do business and is in good standing in each of the jurisdictions in which the failure to be so licensed or qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder. The officer or other representative executing this Agreement has the requisite power and authority to execute and deliver this Agreement and to perform the Member's obligations hereunder, and the execution, delivery and performance of this Agreement has been duly authorized by all necessary actions. This Agreement constitutes the legal, valid and binding obligation of the Members, subject to applicable bankruptcy, insolvency or other laws affecting creditors' rights generally and to general equity principles.

13.3 The Member is investing in the LLC and acquiring his or her Interest therein as a Member for himself, or as a Principal, for investment purposes only and not with a view toward the distribution of all or any portion thereon.

13.4 The Member has not agreed to give any Person any legal or beneficial interest in or right with respect to the Membership Interest or right in the future, and that no Person, other than the subscribing Member, has any legal or beneficial interest in or right with respect to the Membership Interest.

13.5 The Member has made an independent determination of the investment, economic, accounting, legal and tax aspects of acquiring a Membership Interest in the LLC, making a decision to enter into and execute this Agreement, and in making the Capital Contributions set forth in this Agreement. The Member has relied on his or her own business and financial knowledge and experience, or on the advice of his or her own counsel and accountants and agrees he has not relied on the advice of any Manager or Member of the LLC.

13.6 The Member has received, carefully read and is familiar with the terms and provisions of this Agreement, and that all studies, reports, documents, books and records, and other information pertaining to his or her investment in the LLC have been made available to the Member and/or to the Member's personal investment, tax and legal advisors, if such advisor or advisors were utilized. The Member and/or his or her advisors have such knowledge and experience in business similar to the Business of the LLC, or other business and financial matters as will enable them to utilize the information which they have received in connection with the LLC and the Property to evaluate the merits and risks of an investment and to make an informed investment decision.

13.7 The Member is financially responsible, able to meet all obligations under this Agreement, and acknowledges that this investment will be long-term and is, by its nature, speculative.

13.8 The Member is capable of bearing the high degree of economic risks and burdens of the LLC, including, but not limited to, the possibility of complete loss of all Capital Contributions and the lack of a public market which may make it impossible to readily liquidate the investment whenever desired.

13.9 The Member is acquiring his or her Interest based upon his or her own investigation. The exercise by the Member of his or her rights and the performance of his or her obligations under this Agreement will be based upon his or her own investigation, analysis and expertise and will not be dependent upon the actions or expertise of any other Member or any Affiliate of any other Member.

13.10 The Member is aware of the substantial restrictions on transfer or sale of his or her Interest pursuant to this Agreement, as well as the Securities Act of 1933, as amended, and/or the securities acts of other relevant states.

13.11 No federal or state agency (including, but not limited to, the California Commissioner of Corporations) has made any findings as to the fairness of the sale of the Membership Interests and that no such federal or state agency will recommend or endorse the Membership Interest.

13.12 The Membership Interest has not been registered under the federal Securities Act of 1933, as amended, or qualified under the California Corporate Securities Law of 1968, as amended.

13.13 The Member cannot dispose of any or all of the Membership Interest absent such registration and qualification, that the instrument or certificate (if any) evidencing the Membership Interest will bear a legend reflecting these (and any other) restrictions on transfer, and that the LLC need not recognize or register any transfer, unless the Member provides evidence satisfactory to the LLC (which may, at the LLC's discretion, require an opinion of counsel satisfactory in form and substance to the LLC) that all restrictions on and conditions to transfer are satisfied.

13.14 The LLC has no obligation to register any or all of the Membership Interests under federal or state law for resale or distribution.

13.15 The LLC has not agreed with the Member to comply with the public information or other provision of Rule 144 or any other exemption under the federal or state law with respect to the resale or other transfer of the Membership Interest.

13.16 At no time was the Member presented with or solicited by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in a newspaper, magazine or similar media, or broadcast over television or radio; or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

13.17 The Member is currently a bona fide resident of the state set forth in his or her current address provided to the Manager, and the address and Social Security number or federal tax identification number provided to the Manager are true and correct. The Member has no present intention of becoming a resident of any other state or jurisdiction.

13.18 The Member is twenty-one (21) years of age or older.

13.19 The Member understands the meaning and legal consequences of the representations and warranties contained in this Agreement, and hereby indemnifies and holds harmless the LLC and its Affiliates, the Manager and all other Members of the LLC, and each of their respective officers, directors, shareholders, partners, agents, counsel, servants, employees, franchisees, affiliates, parents, subsidiaries, heirs, personal and legal representatives and administrators, successors and assigns from, of and against any and all loss, costs, claims, expenses and damages (including reasonable attorneys' fees and court costs), or liability due, which any one of them may incur by reason of failure of the undersigned to fulfill any of the terms or conditions of this Agreement, or arising out of or by reason of any representation or warranty of the Member, or any breach thereof, whether contained in this Agreement or the Member's Investment Certification and Signature Page or elsewhere.

ARTICLE 14
POWER OF ATTORNEY

Each Member does hereby irrevocably appoint the Manager as such Member's true and lawful attorney and agent, with full power and authority in such Member's name, place and stead, to execute, acknowledge, deliver, file and record in the appropriate public offices (i) all certificates or other instruments and amendments thereto which the Manager deems appropriate to qualify or continue the LLC as a LLC in the jurisdictions in which the LLC conducts Business; (ii) all instruments and amendments thereto to reflect any change or modification in the LLC or in its Members, if adopted in accordance with the terms of this Agreement; and (iii) all conveyances and other instruments which the Manager deems appropriate to evidence and reflect any sales or transfers by or the dissolution and termination of the LLC.

Each of the Members is aware that the terms hereof permit certain amendments of this Agreement to be effected and certain other actions to be taken or omitted by or with respect to the LLC, in each case without the approval of all of the Members. If (i) an amendment of this Agreement is proposed or an action is proposed to be taken or omitted by or with respect to the LLC which requires, under the terms of this Agreement, the approval of specified Percentage Interests (but less than all) of the Members, (ii) Members holding the Percentage Interests specified in this Agreement as being required for such amendment or action have approved such amendment or action in the manner contemplated by this Agreement, and (iii) a Member has failed or refused to approve such amendment or action (hereinafter referred to as a “Nonconsenting Member), each nonconsenting Member agrees that the special attorney specified above, with full power of substitution, is hereby authorized and empowered to execute, acknowledge, make, swear to, verify, deliver, record, file and publish, for and on behalf of such nonconsenting Member, in his or her name, place and stead, any and all instruments and documents which may be necessary or appropriate to permit such amendment to be lawfully made or action to be lawfully taken or omitted. Each consenting and nonconsenting Member is fully aware that he and each other Member have executed this special power of attorney, and that each Member will rely on the effectiveness of such powers with a view to the orderly administration of the LLC's affairs.

The foregoing grant of authority (i) is a special power of attorney coupled with an interest in favor of the Manager and as such shall be irrevocable and shall survive the death or insanity (or, in the case of a Member that is a corporation, association, partnership, joint venture, trust or other lawful entity, shall survive the merger, dissolution or other termination of existence) of the Member, (ii) may be exercised for the Member by a facsimile signature of the Manager or by listing all of the Members executing the instrument, including such Member, with the single signature of the Manager acting as attorney-in-fact for all of them, and (iii) shall survive the Transfer by the Member of the whole or any portion of its Interest, except that, where the transferee of the whole thereof has furnished a power of attorney and has been approved by the Manager for admission to the LLC as a substituted Member, this special power of attorney shall survive such Transfer for the sole purpose of enabling the Manager to execute, acknowledge and file any instrument necessary to effect such substitution and shall thereafter terminate with respect to the transferring Member.

ARTICLE 15
ISSUANCE OF LLC CERTIFICATES

15.1 Issuance of LLC Certificates. The interest of each Member in the LLC may be represented by an LLC Certificate. Upon the execution of this Agreement and the payment of the Capital Contributions by the Members pursuant to Article 3 hereof, the Manager may, in its discretion, cause the LLC to issue one or more LLC Certificates in the name of each Member certifying that the Person named therein is the record holder of the LLC Membership Interests set forth therein. For purposes of this Agreement, the term “record holder” shall mean the Person whose name appears in Section 3.1 as the Member owning the Membership Interest at issue.

15.2 Transfer of LLC Certificates. A Membership Interest which is transferred in accordance with the terms of Article 9 of this Agreement shall be transferable on the books of the LLC by the record holder thereof in person or by such record holder's duly authorized attorney, but, except as provided in Section 15.3 below with respect to lost, stolen or destroyed certificates, no transfer of a Membership Interest shall be entered until the previously issued LLC Certificate representing such Membership Interest shall have been surrendered to the LLC and canceled and a replacement LLC Certificate issued to the transferee of such Membership Interest in accordance with such procedures as the Manager may establish. The Manager shall issue to the transferring Member a new LLC Certificate representing the Membership Interests not being transferred by the Member, in the event such Member only transferred some, but not all, of the Membership Interests represented by the original LLC Certificate. Except as otherwise required by law, the LLC shall be entitled to treat the record holder of an LLC Certificate on its books as the owner thereof for all purposes regardless of any notice or knowledge to the contrary.

15.3 Lost, Stolen or Destroyed Certificates. The LLC shall issue a new LLC Certificate in place of any LLC Certificate previously issued if the record holder of the LLC Certificate:

15.3.1 Makes proof by affidavit, in form and substance satisfactory to the Manager, that a previously issued LLC Certificate has been lost, destroyed or stolen;

15.3.2 Requests the issuance of a new LLC Certificate before the LLC has notice that the LLC Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;

15.3.3 If requested by the Manager, delivers to the LLC a bond, in form and substance reasonably satisfactory to the Manager, with such surety or sureties and with fixed or open penalty as the Manager may direct, in his or her reasonable discretion, to indemnify the LLC against any claim that may be made on account of the alleged loss, destruction or theft of the LLC Certificate; and

15.3.4 Satisfies any other reasonable requirements imposed by the Manager.

If a Member fails to notify the LLC within a reasonable time after it has notice of the loss, destruction or theft of an LLC Certificate, and a transfer of the Membership Interest represented by the LLC Certificate is registered before receiving such notification, the LLC shall have no liability with respect to any claim against the LLC for such transfer or for a new LLC Certificate.

ARTICLE 16
AMENDMENTS

16.1 Amendment or Modification of the Agreement. Except for the authority granted to the Manager hereunder to update EXHIBIT A to this Agreement from time to time without the necessity of a formal amendment to this Agreement, the terms and provisions of this Agreement may not be altered, modified, amended, or repealed and a new operating agreement adopted, except by a written instrument approved by a Majority in Interest of the Members.

16.2 Amendment or Modification of Articles of Organization. Except as otherwise provided in Section 6.3.19 hereof, notwithstanding any other provision to the contrary in the Articles of Organization or this Agreement, in no event shall the Articles of Organization be amended without approval by a Majority in Interest of the Members.
16.3 Filings. The Manager shall, within a reasonable time after the effective date of any amendment to this Agreement, make any official filings or publications required or desirable to reflect such amendment.

ARTICLE 17
NOTICES

17.1 Methods of Notice. Any notice or communication required or permitted to be given hereunder shall be in writing and may be either (i) personally delivered, which shall be deemed received at the time of actual receipt thereof; or (ii) sent by registered or certified mail, with postage and charges prepaid, which shall be deemed delivered seventy two (72) hours after deposit in the United States mail; or (iii) delivered by facsimile transmission, which shall be deemed received on the date and at the time of electronic confirmation of such transmission, provided an original mechanical signed copy of such notice or other communication is also immediately deposited in the United States mail with first class postage and charges prepaid; or (iv) delivered by messenger, FedEx or other trackable courier service, which shall be deemed delivered on the date and at the time as tracked and confirmed by such courier service; and in each case, addressed or delivered to the party to whom the same is directed at such party’s address and/or facsimile number set forth below, or at such other address and/or facsimile number as that party may specify by written notice given to the other parties in accordance with this paragraph:

If to the LLC, then a copy to the Manager at:

_________________

With Courtesy Copies to (which shall not constitute valid notice to the above party):

If to the Members:

(The address of each Member is set forth on EXHIBIT A attached hereto and made a part of this Agreement, which exhibit may be amended from time to time as appropriate)

Where courtesy copies are provided for (if any), the service of any such courtesy copy shall not constitute notice to the party hereunder.

17.2 Waiver of Notice. Notwithstanding the foregoing, when, under the provisions of the Articles of Organization or this Agreement, notice is required to be given to a Member or to the Manager of the LLC, a waiver in writing signed by the Person or Persons entitled to the notice, whether before or after the time stated in it, is equivalent to the giving of notice.

ARTICLE 18
GENERAL PROVISIONS

18.1 Counterparts. This Agreement may be executed in several counterparts, and all counterparts so executed shall constitute one Agreement, binding on all of the parties hereto, notwithstanding that all of the parties are not signatory to the original or the same counterpart.

18.2 Survival of Rights. This Agreement shall be binding upon, and, as to permitted or accepted successors, transferees and assigns, inure to the benefit of the Members and the LLC and their respective heirs, legatees, legal representatives, successors, transferees and assigns, in all cases whether by the laws of descent and distribution, merger, reverse merger, consolidation, sale of assets, other sale, operation of law or otherwise.

18.3 Severability. In the event any section, subsection or any sentence within any section or subsection hereunder is declared by a court of competent jurisdiction to be void or unenforceable, such section, subsection or sentence shall be deemed severed from the remainder of this Agreement and the balance of this Agreement shall remain in full force and effect.

18.4 Construction. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any of the Members.

18.5 Section Headings. The captions of the Articles, Sections or subsections in this Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any of the provisions hereof, shall not be deemed part of this Agreement and shall not be used in construing or interpreting this Agreement.

18.6 Governing Law. This Agreement and any amendments or exhibits hereto, and the rights and obligations of the parties hereunder, is executed under and in conformity with the laws of the State of California relating to limited liability companies and is to be construed, enforced and governed in accordance therewith without giving effect to any conflict of law provision.

18.7 Additional Documents. Each Member, upon the request of another Member, agrees to perform all further acts and execute, acknowledge and deliver all documents which may be reasonably necessary, appropriate or desirable to carry out the provisions of this Agreement, including but not limited to acknowledging before a notary public any signature heretofore or hereafter made by a Member.

18.8 Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine and neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

18.9 Time of the Essence. Except as otherwise provided herein, time is of the essence in connection with each and every provision of this Agreement.

18.10 Further Actions. Each of the Members agrees to execute, acknowledge and deliver such additional documents, and take such further actions, as may reasonably be required from time to time to carry out each of the provisions, and the intent, of this Agreement, and every agreement or document relating hereto, or entered into in connection herewith.

18.11 Binding Arbitration of Disputes. ANY MEMBER (INCLUDING THE MANAGER) MAY REQUIRE THE ARBITRATION OF ANY DISPUTE ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT. SUCH MEMBER (OR MANAGER) MAY INITIATE AND REQUIRE ARBITRATION BY GIVING NOTICE TO THE OTHER PARTIES SPECIFYING THE MATTER TO BE ARBITRATED. IF LEGAL ACTION IS ALREADY PENDING ON ANY MATTER CONCERNING WHICH THE NOTICE IS GIVEN, THE NOTICE SHALL NOT BE EFFECTIVE UNLESS GIVEN BY THE DEFENDANT THEREIN AND GIVEN BEFORE THE EXPIRATION OF TWENTY (20) DAYS AFTER SERVICE OF PROCESS ON THE PERSON GIVING THE NOTICE. EXCEPT AS PROVIDED TO THE CONTRARY IN THESE PROVISIONS ON ARBITRATION, THE ARBITRATION SHALL BE IN CONFORMITY WITH AND SUBJECT TO APPLICABLE RULES AND PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION (OR ANY SUCCESSOR THERETO). IF THE AMERICAN ARBITRATION ASSOCIATION IS NOT THEN IN EXISTENCE AND THERE IS NO SUCCESSOR, OR IF FOR ANY REASON THE AMERICAN ARBITRATION ASSOCIATION FAILS OR REFUSES TO ACT, THE ARBITRATION SHALL BE IN CONFORMITY WITH AND SUBJECT TO THE PROVISIONS OF APPLICABLE CALIFORNIA STATUTES (IF ANY) RELATING TO ARBITRATION AT THE TIME OF THE NOTICE. THE ARBITRATORS SHALL BE BOUND BY THIS AGREEMENT AND ALL RELATED AGREEMENTS. PLEADINGS IN ANY ACTION PENDING ON THE SAME MATTER SHALL, IF ARBITRATION IS REQUIRED AS AFORESAID, BE DEEMED AMENDED TO LIMIT THE ISSUES TO THOSE CONTEMPLATED BY THE RULES PRESCRIBED ABOVE. EACH MEMBER SHALL PAY THE COSTS OF ARBITRATION, INCLUDING ARBITRATORS' FEES, AS AWARDED BY THE ARBITRATOR(S). THE NUMBER AND SELECTION OF ARBITRATOR(S) SHALL BE IN ACCORDANCE WITH THE RULES PRESCRIBED ABOVE, EXCEPT THAT (i) EACH ARBITRATOR SELECTED SHALL BE NEUTRAL AND REASONABLY FAMILIAR WITH THE PRINCIPAL SUBJECT MATTER OF THE ISSUES TO BE ARBITRATED, (ii) THE TESTIMONY OF WITNESSES SHALL BE GIVEN UNDER OATH, AND (iii) DEPOSITIONS AND OTHER DISCOVERY MAY BE ORDERED BY THE ARBITRATOR(S).

THE ARBITRATORS' DECISION AND ANY AWARD THEREUNDER (INCLUDING ALL COSTS AND ATTORNEYS' FEES) SHALL BE FINAL AND BINDING UPON ALL MEMBERS, THE MANAGER AND LLC. SAID AWARD SHALL BE ENFORCEABLE AND MAY BE CONFIRMED BY THE JUDGMENT OF A COURT OF COMPETENT JURISDICTION.

NOTICE: BY EXECUTING THIS AGREEMENT, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE `ARBITRATION OF DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION, AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY EXECUTING THIS AGREEMENT, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE APPLICABLE STATE STATUTE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

18.12 Waiver of Jury Trial. WITH RESPECT TO ANY DISPUTE ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, AS TO WHICH NO MEMBER INVOKES THE RIGHT TO ARBITRATION HEREIN PROVIDED, OR AS TO WHICH LEGAL ACTION NEVERTHELESS OCCURS, EACH MEMBER HEREBY IRREVOCABLY WAIVES ALL RIGHTS IT MAY HAVE TO DEMAND A JURY TRIAL. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY THE MEMBERS, AND EACH MEMBER ACKNOWLEDGES THAT NONE OF THE OTHER MEMBERS, MANAGER, NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES HAS MADE ANY REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE MEMBERS EACH FURTHER ACKNOWLEDGE THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. EACH OF THE MEMBERS FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.

18.13 Third Party Beneficiaries. There are no third party beneficiaries of this Agreement, except Affiliates and Principals of the Members.

18.14 No Partition. The Members agree that the LLC Property or any property in which it may have an interest is not suitable for partition. Each of the Members hereby irrevocably waives any and all rights that it may have to maintain any action for partition of any LLC Property which the LLC may at any time have an interest in.

18.15 Entire Agreement. This Agreement and the Articles of Organization constitute the entire agreement of the Members with respect to, and supersedes all prior written and oral agreements, understandings and negotiations with respect to, the subject matter hereof.

18.16 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

18.17 Attorneys' Fees. In the event of any arbitration, litigation or other dispute or proceeding arising as a result of or by reason of this Agreement, the prevailing party in any such arbitration, litigation or other dispute or proceeding shall be entitled to, in addition to any other damages assessed, its reasonable attorneys' fees and all other costs and expenses incurred in connection with settling or resolving such dispute. The reasonable attorneys' fees which the prevailing party is entitled to recover shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full. In addition to the foregoing award of attorneys' fees to the prevailing party, the prevailing party in any lawsuit or arbitration procedure on this Agreement shall be entitled to its reasonable attorneys' fees and costs incurred in any post judgment proceedings to collect or enforce the judgment. This attorneys' fees provision is separate and several and shall survive the merger of this Agreement into any judgment.

18.18 Acknowledgment and Waiver of Conflict of Interest. By execution of this Agreement, each Member recognizes and acknowledges that ___________________ (“_____”) serves as counsel to the Class A Member only, _________________ has not represented the Class B Member or _________________ Affiliates, and the Class B Member and her Affiliates waive all potential conflicts of interest resulting from _________________ representation of the Class A Member and its Affiliates on other transactions and of the LLC.

SIGNATURES OF THE PARTIES

IN WITNESS WHEREOF, the parties hereto have executed and delivered, or caused to be executed and delivered by a duly authorized representative, this OPERATING AGREEMENT OF _________________, LLC, the same day and year first above written.

Further, the undersigned, as Members of the LLC, acknowledge we have read and understand the foregoing Operating Agreement for __________________, LLC specifically, but not limited to, Sections 18.11 and 18.12, “Binding Arbitration of Disputes,” and “Waiver of Jury Trial,” respectively, and Section 18.18, “Acknowledgment and Waiver of Conflict of Interest,” and, as evidenced by our signatures below, the undersigned hereby acknowledge and agree to the provisions contained herein and that they have knowingly and voluntarily granted the waivers contained herein.

_________________, LLC
A California Limited Liability Company
By Its Members

CLASS A MEMBER:

__________________, an __________________

___________________________________________
__________________Print Name

CLASS B MEMBER:

__________________, an __________________

___________________________________________
__________________Print Name

(Acceptance of Appointment of Manager and Officers
Continued on the following page)

ACCEPTANCE OF APPOINTMENT BY THE MANAGER

The undersigned, ____________________, an individual, hereby accepts his appointment as the Manager of the LLC, and hereby agrees to undertake the performance of his duties, responsibilities and obligations in accordance with terms of this Operating Agreement, the Articles of Organization and the applicable provisions of the Act and California law, as any and all may be amended from time to time.

_______________, as to his appointment as Manager

ACCEPTANCE OF APPOINTMENT BY THE OFFICERS

The undersigned, __________________, individually, hereby accept her appointment as an officer of the LLC, and hereby agrees to undertake the performance of the duties, responsibilities and obligations of such office in accordance with terms of this Operating Agreement, the Articles of Organization and the applicable provisions of the Act and California law, as any and all may be amended from time to time.

__________________, as to her / his appointment as President

EXHIBIT A
to the
Operating Agreement of __________________, LLC

SCHEDULE OF THE MEMBERS
(Updated as of 7/18/07)

Names, Addresses and
Taxpayer ID Numbers of the Members of
__________________, LLC
Class
of
Membership

Capital
Contribution

Percentage
Interest

Class A
Member

%

Class B
Member

%

TOTAL:

$

100%

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