EX-4 2 kl11018_ex4.txt EXHIBIT 4 LIMITED LIABILITY CO. AGREEMENT Exhibit 4 WEST PUTNAM HOUSING INVESTORS III LLC LIMITED LIABILITY COMPANY AGREEMENT This Limited Liability Company Agreement (as the same may be amended from time to time, this "Agreement") of West Putnam Housing Investors III LLC, a Delaware limited liability company (the "Company"), is made and entered into by and among the persons executing this Agreement as Members and shall be effective as of the Effective Date (as defined below). Article One DEFINITIONS For purposes of this Agreement, unless the context otherwise requires, terms shall be used with the meanings given to them under the Act, and the following terms shall have the meanings set forth hereafter: 1.1. "Act" means the Delaware Limited Liability Company Act and any and all amendments and modifications thereto. 1.2. "Change of Control" means, with respect to a given Member, that (a) any Person becomes the beneficial owner of 50% or more of such Member's voting equity interests; provided, however, that a Change of Control will not occur if the Person owning the voting equity interests of such Member as of the Effective Date transfers the economic rights of such Member's voting equity interests to one or more immediate family members but retains the voting rights of such voting equity interests; (b) individuals or entities who constitute the managing member(s), director(s), general partner(s) or other governing individuals or body of such Member at the time of such Member is admitted as a member of the Company cease to constitute a majority of such governing individuals or body; (c) any merger or consolidation of a Member with or into any other entity is approved by the equity holders thereof; or (d) the equity holders of such Member approve a plan of liquidation of such Member or an agreement for the sale or disposition by the Member of all or substantially all of such Member's assets. 1.3. "Capital Contribution" means any contribution of Property actually made by or on behalf of a Member. 1.4. "Disposition" means any sale, assignment, transfer, exchange, mortgage, pledge, grant, hypothecation or other transfer, whether absolute or as security or encumbrance (including dispositions by operation of law). "Dispose" means to make a Disposition. 1.5. "Dissolution Event" means an event, the occurrence of which will result in the dissolution of the Company under Article Eight hereof. 1.6. "Effective Date" means the date on which the certificate of formation of the Company was filed with the Delaware Secretary of State. 1.7. "Managing Member" means West Putnam Housing Investors II LLC or any Person elected as a successor Managing Member pursuant to the terms of this Agreement. 1.8. "Member" means each Person who executes this Agreement as a Member for so long as such Person remains a member of the Company and any successor or other Person subsequently admitted as a member of the Company. 1.9. "Percentage Interest" means a Member's percentage ownership interest of the equity in the Company as set forth in Schedule A hereto, as the same may be amended from time to time. 1.10. "Person" means any individual, estate, corporation, trust, joint venture, partnership or limited liability company of every kind and nature, and any other individual or entity in its own or any representative capacity. 1.11. "Property" means any property, real or personal, tangible or intangible, including money, and any legal or equitable interest in such property, but excluding services and promises to perform services in the future. Article Two FORMATION 2.1. Organization. The Members hereby organize the Company as a Delaware limited liability company pursuant to the provisions of the Act. 2.2. Term. The Company shall be dissolved and its affairs wound up as provided in the Act and this Agreement on July 15, 2050, unless the Company shall be sooner dissolved and its affairs wound up in accordance with the Act or this Agreement. 2.3. Registered Agent and Office. The registered agent for the service of process and the registered office shall be Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801-1120. In the event the registered agent ceases to act as such for any reason or the registered office shall change, the Members shall promptly designate a replacement registered agent or file a notice of change of address, as the case may be. 2.4. Principal Office. The principal office of the Company shall be located at 599 West Putnam Avenue, Greenwich, Connecticut 06830, or such other location as the Managing Member shall designate by notice to the Members. 2 Article Three PURPOSE The Company has been formed for the principal purpose of acquiring and investing in certain limited partnership interests, and buying, selling, investing, reinvesting, owning, managing and otherwise dealing with any other type of property hereafter acquired by the Company, whether real or personal, tangible or intangible. The Company may engage in any other lawful act or activity for which a limited liability company may be formed under the Act, including, without limitation, borrowing money and entering into loan, security, guarantee and or other agreements related thereto. Article Four RIGHTS AND DUTIES OF MEMBERS 4.1. Management Rights. (a) Subject to Section 4.1(b), the business and affairs of the Company shall be managed by its Managing Member and, except as may be specifically provided in this Agreement, no other Member, as such, shall have the right or authority to bind the Company. Subject to Section 4.1(b), the Managing Member shall have the power, on behalf of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company. West Putnam Housing Investors II LLC shall be the initial Managing Member of the Company and shall continue in that capacity until it is dissolved or resigns or is removed by the Members. In the event that the Managing Member shall die, be dissolved, resign, or be removed, the Members shall elect one or more successor Managing Member(s) by vote of Members holding a majority of all Percentage Interests. Any action which may be taken at a meeting of the Members may be taken without a meeting if Members casting votes sufficient to approve such action consent thereto in writing. (b) Notwithstanding anything in Section 4.1(a) to the contrary, the following actions by the Company shall require the unanimous consent of the Members: (i) altering any of the terms of any tender offer conducted by the Company for the units of limited partnership interest ("Units") of Secured Income L.P., a Delaware limited partnership ("Secured Income"), including, without limitation, extending or terminating such tender offer or changing the per-Unit purchase price thereof; (ii) exercising any rights as a holder of Units, including, without limitation, selling or otherwise disposing such Units or exercising the voting rights of such Units; (iii) making any distribution of Company Property to Unit Holders; or (iv) causing the Company to be dissolved or liquidated or its affairs to be wound up. (c) In carrying out its duties and responsibilities hereunder, the Managing Member may, but shall not be obligated to, appoint individuals as officers of the Company in each of the following positions: President, Executive Vice President, 3 Senior Vice President, Vice President, Assistant Vice President, Secretary and Treasurer. Each of such individuals shall serve at the pleasure of the Managing Member. An officer may but need not be a Member or an employee of a Member of the Company. 4.2. Authority to Bind the Company. Unless all of the Members otherwise agree in writing, no agreement, undertaking, instrument, written obligation, certificate or other commitment shall be made by or on behalf of the Company unless made in an instrument signed by the Managing Member. 4.3. Percentage Interests. The Percentage Interests may be adjusted from time to time as agreed by all of the Members. The Managing Member may amend Schedule A hereto from time to time to reflect any addition, withdrawal, or change in Members or any adjustments to any Member's Capital Contribution or Percentage Interest. 4.4. Reimbursement. The Managing Member and any affiliates of the Managing Member shall be reimbursed for all costs and expenses incurred by them on behalf of the Company, including, but not limited to, legal fees relating to the formation of the company, current and recurring legal and accounting expenses, and other costs associated with the Company's operations. 4.5. Liability. Except as otherwise provided under Section 4.6, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company. The Managing Member, any other Member, and their respective members, officers, and other controlling persons through which the Managing Member or Member acts (collectively, "Controlling Persons") shall not be obligated personally for any such debt, obligation or liability of the Company or any other Member solely by reason of being the Managing Member, a Member, or a Controlling Person. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs under this Agreement or the Act shall not be grounds for imposing personal liability on a Managing Member, any other Member, or any Controlling Person for the liabilities of the Company. 4.6. Exculpation. The Managing Member, any other Member, their respective Controlling Persons, and any officer of the Company shall not be liable to the Company or any Member for any loss, damage or claim incurred by reason of any act or omission of such Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Person by this Agreement. 4.7. Indemnification. Any Person who was or is a Managing Member, Member, Controlling Person, or officer of the Company (an "Indemnified Party") shall be indemnified and held harmless by the Company from and against any and all losses, claims, damages, liabilities, expenses (including reasonable legal and other professional fees and disbursements), judgments, fines, settlements, and other amounts incurred (collectively, the "Indemnification Obligations") in connection with any and all claims, demands, actions, suits or proceedings (civil, criminal, administrative, or investigative), actual or threatened, in which such Indemnified Party may be involved, as a party or otherwise, by reason of such Indemnified Party's service to, or on behalf of, or management of the affairs of, the Company, or rendering of advice or consultation with respect thereto, whether or not the Indemnified Party continues to be serving in the above- 4 described capacity at the time any such Indemnification Obligation is paid or incurred. Notwithstanding the foregoing, the Company shall not provide indemnification regarding any Indemnification Obligation to the extent resulting from action or inaction of such Indemnified Party that, in each case, constituted gross negligence, willful misconduct, a breach of the Indemnified Party's fiduciary duty or duty of loyalty to the Company, or an act (a) that was in bad faith, (b) that involved a knowing violation of law, or (c) from which the Indemnified Party derived an improper personal benefit. The termination of a proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that such Indemnification Obligation resulted from the gross negligence or willful misconduct of such Indemnified Party. Expenses (including reasonable legal and other professional fees and disbursements) incurred in any proceeding will be paid by the Company, as incurred, in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such Indemnified Party to repay such amount if it shall ultimately be determined that such Indemnified Party is not entitled to be indemnified by the Company as authorized hereunder. Article Five CAPITAL CONTRIBUTIONS 5.1. Generally. The Members' Capital Contributions are as set forth beside their respective names in Schedule A hereto. The Members shall make such additional Capital Contributions to the Company as the Managing Member may require from time to time. Any such capital contributions shall be made in proportion to the Members' Percentage Interests in the Company. No interest shall accrue on any such Capital Contribution, and no Member shall have the right to withdraw or be repaid any such Capital Contribution, except as specifically provided in this Agreement. 5.2. Capital Accounts. (a) A capital account shall be established for each Member on the books of the Company. Each Member's capital account shall be credited with such Member's initial Capital Contribution as set forth in Schedule A hereto, any additional Capital Contributions made by or on behalf of such Member, such Member's distributive share of profits, and the amount of any Company liabilities that are assumed by such Member or that are secured by any Company property distributed to such Member. (b) Each Member's capital account shall be debited with the amount of cash and the value of any Company property distributed to such Member pursuant to any provision of this Agreement, such Member's distributive share of losses, and the amount of any liabilities of such Member that are assumed by the Company or that are secured by any property contributed by such Member to the Company. (c) In the event any Percentage Interest in the Company is transferred 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. 5 (d) The Managing Member shall maintain the Members' capital accounts in accordance with the Internal Revenue Code (the "Code") Section 704(b) and with Treasury Regulation Section 1.704-1(b). In the event the Managing Member shall determine that it is prudent to modify the manner in which the capital accounts, or any debits or credits thereto, are computed in order to comply with such Regulations, the Managing Member may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Member pursuant to Article Seven hereof or upon the dissolution of the Company. Article Six ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS The profits and losses from operations of the Company for any fiscal year or other period or from the sale or other disposition of all or any part of the Company's Property, whether or not they result in a dissolution and liquidation of the Company, shall be allocated to the Members in accordance with their Percentage Interests in the Company. Distributions of Property of the Company shall be made at such times, in such manner and in such amounts as the Managing Member may determine; provided, however, that each such distribution shall be made to the Members in accordance with their respective Percentage Interests in the Company. Article Seven DISPOSITION OF MEMBERSHIP INTERESTS 7.1. Generally. (a) Restrictions on Dispositions. (i) No Member shall sell, assign, transfer, bequeath, donate, or grant a security interest in, encumber, pledge, or in any way dispose of its interest in the Company (including any beneficial or economic interest therein) or any part thereof, either voluntarily or involuntarily, or withdraw or retire from the Company, without the consent of all Members, which consent may be withheld arbitrarily; provided, however, that a Member may transfer its membership interest to another entity that is under common control with such Member following written notice to the Company without the consent of the Members. For purposes of the preceding sentence, two Persons shall be deemed to be under "common control" if a single Person, directly or through one or more intermediaries, beneficially owns more than 50% of the voting equity interests that have the right to manage the business and affairs of such two Persons. (ii) Prior written notice of any transfer shall be promptly provided to the other Members and the Company, and such transfer shall not be deemed finally effected in the books and records of the Company unless and until the transferee shall execute such documents, as shall be prepared by counsel to the Company, to confirm the foregoing and to accept the terms and provisions of this Agreement. (b) The transferee of any Member's interest in the Company shall be subject to all the terms, conditions, restrictions and obligations of this Agreement, including the provisions of this Section. 6 (c) Change of Control. (i) Each Member shall give prompt written notice to the Company of any Change in Control with respect to such Member. The Company shall have the option to purchase the interest of such Member or its successor for a period of six (6) months from the date of such notice. The option shall be exercised by written notice to the Member or its successor. The purchase price, payment method and manner of closing shall be as set forth in Sections 7.1(d) and (e). (ii) If the Company shall not elect to purchase the entire interest of such Member within the six (6) month period described above, the remaining Members shall have the option to purchase all or the remaining part thereof, as the case may be, from such Member or its successor for a period of an additional three (3) months, in proportion to their interests in the Company. Members electing to purchase the interest of such Member shall have the right to purchase, pro rata, any portion of the interest not subscribed for by the other remaining Members. The Company and the other remaining Members in the aggregate must elect to purchase the entire interest offered or the option shall be deemed not exercised. The purchase price, payment method and manner of closing shall be as set forth in Sections 7.1(d) and (e). (d) Exercise of purchase option. (i) If the Company or remaining Members shall exercise the option granted pursuant to 7.1(c), the purchase price of such Member's interest in the Company shall be determined as hereinafter set forth. (ii) If the Company (or remaining Members) and the Member or its successor agree on a purchase price for the Member's interest, such agreed upon price shall be the purchase price. If the parties cannot agree on a purchase price for a Member's interest within ninety (90) days from the date of the written notice of election by the Company or remaining Members, the purchase price for such Member's interest shall be an amount equal to the net fair market value (i.e., after debts and obligations) of the Company's Property multiplied by such Member's Percentage Interest in the Company. In determining net fair market value, the Company (or remaining Members) and the Member or its successor in interest shall agree upon an appraiser who shall determine the net fair market value of the Company's Property. If the parties cannot agree upon an appraiser, each shall appoint an appraiser and the two appraisers so chosen shall appoint a third appraiser. If the two appraisers cannot agree upon a third appraiser, the third appraiser shall be selected under the Commercial Arbitration Rules of the American Arbitration Association. All of the appraisers shall be MAI certified unless all of the parties waive this requirement. The three appraisers shall determine the net fair market value of the Company's Property. However, if they are unable to agree upon a net fair market value, each appraiser shall submit a report as to his or its determination of net fair market value, and the average of the two closest computed net fair market values shall be the net fair market value. Each side shall bear the cost of its appraiser and shall share equally the cost of the third appraiser. The determination of net fair market value by the appraisers shall be made within forty-five (45) days after the expiration of the ninety (90) day period referred to above. 7 (e) Closing of purchase option sale. The closing of a sale pursuant to Section 7.1(d) shall be held at a mutually convenient place and on a mutually convenient business day within thirty (30) days following the determination of the purchase price. The Company (or remaining Members) shall have the right to elect to pay up to eighty percent (80%) of the purchase price by delivering a promissory note which (i) shall be due within five (5) years of the closing date, (ii) shall provide for interest at the "Prime Rate" announced by Fleet Bank, National Association, Hartford, Connecticut, as of the commencement date of each year that the note exists and payable on the outstanding principal balance of the note at the time payments of principal shall be due, (iii) shall provide for quarterly payments of principal at the end of each quarter that the note exists, which shall be sufficient to amortize the principal amount of the note over the term of the note, (iv) shall permit prepayment in full or in part without penalty or premium, together with all accrued and unpaid interest, (v) shall allow the holder to receive reasonable costs including attorneys' fees for collection of the note and (vi) shall provide for the acceleration of the note in the event of: the sale of all or substantially all of the assets of the Company (and, where purchased by remaining Members, the sale of any interest in the Company by any such remaining Member) of or a default in the payment of principal or interest on the note continuing for fifteen (15) days after the same is due. The note shall also contain such other acceleration and default provisions as typically would be contained in such a commercial note. 7.2. Non-compliant Dispositions Void - Any attempted Disposition of a Member's interest in the Company, or any part thereof, not in compliance with this Article Seven is null and void ab initio. Article Eight DISSOLUTION AND WINDING UP 8.1. Dissolution. The Company shall be dissolved and its affairs wound up, upon the first to occur of the following events (each of which shall constitute a Dissolution Event): (a) the expiration of the term established in Section 2.2 hereof; (b) the written consent of all Members; or (c) the entry of a decree of judicial dissolution under Section 18-802 of the Act. 8.2. Effect of Dissolution. Upon dissolution, the Company shall cease carrying on and begin winding up the Company business, but the Company is not terminated, and shall continue, until the winding up of the affairs of the Company is completed and a certificate of cancellation has been filed with the Delaware Department of State. 8.3. Distribution of Assets on Dissolution. Upon the winding up of the Company, the Property of the Company shall be distributed as provided in the Act and among the Members in accordance with their respective Percentage Interests in the Company. 8.4. Winding Up and Certificate of Cancellation. The winding up of the Company shall be completed when all debts, liabilities and obligations of the Company have been paid and discharged or reasonably adequate provision therefor has been made, and all of the remaining Property of the Company has been distributed to the Members. Upon the completion of winding 8 up of the Company, a certificate of cancellation, which shall set forth the information required by the Act, shall be filed in the Delaware Department of State. Article Nine MISCELLANEOUS PROVISIONS 9.1. Entire Agreement; Amendment. This Agreement represents the entire agreement among the Members and between the Members and the Company with respect to the subject matter hereof. This Agreement may be amended only by a written instrument signed by all of the Members. 9.2. Rights of Creditors and Third Parties under Agreement. This Agreement is entered into among the Company and the Members for the exclusive benefit of the Company, the Members and their successors and permitted transferees. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other Person. No such creditor or other Person shall have any rights under this Agreement or any agreement between the Company and any Member with respect to any capital contribution, any Member's interest in the Company or otherwise. 9.3. Counterparts. This Agreement may be executed in two or more counterparts, all of which taken together shall be deemed one agreement. 9.4. Notice. All notices made pursuant hereto shall be in writing. Notice to the Company shall be addressed to the Company at the address of its principal office established as provided in Section 2.4 hereof. Notice to a Member shall be addressed to the Member at the address of such Member reflected in the records of the Company. Notice shall be considered duly given (a) on the day when delivered personally, (b) on the business day when sent by facsimile provided receipt of such transmission is confirmed, (c) on the business day immediately succeeding the day on which Notice is sent by recognized overnight courier, and (d) when received if mailed by first class mail postage prepaid. [Remainder of page intentionally left blank; signature page follows] 9 IN WITNESS WHEREOF, the undersigned Members have executed this Agreement as of the Effective Date. WEST PUTNAM HOUSING INVESTORS II LLC By West Putnam Housing Investors LLC By: /s/ Gina K. Dodge ------------------------------ Name: Gina K. Dodge Title: Secretary SARGEANT CAPITAL VENTURES, LLC By: /s/ Daniel L. Nir ---------------------------- Name: Daniel L. Nir Title: Managing Member 10 Schedule A -------------------------------------------------------------------------------- Member Name & Address Capital Contribution Percentage Interest -------------------------------------------------------------------------------- West Putnam Housing Investors II LLC 50% 599 West Putnam Avenue Greenwich, CT 06830 -------------------------------------------------------------------------------- Sargeant Capital Ventures, LLC 50% 950 Third Avenue 29th Floor New York, NY 1022 -------------------------------------------------------------------------------- 11