Common use of CAPITAL AND CAPITAL CONTRIBUTIONS Clause in Contracts

CAPITAL AND CAPITAL CONTRIBUTIONS. 3.1. Each Member will contribute to the capital of the Company as the Member’s initial Capital Contribution the money or property _____________[or services] specified in Exhibit B. The initial Fair Market Value of each item of contributed property (net of liabilities secured by that property) which the Company is considered to assume or to take “subject to” under IRC section 752, is also set forth in Exhibit B, together with the description and amount of these liabilities. If a Member fails to make the initial Capital Contributions specified in this Section within 30 days after the effective date of this Agreement, that Member’s entire Membership Interest will terminate, and that Member will indemnify and hold the Company and the other Members harmless from any loss, cost, or expense, including reasonable attorney fees caused by the failure to make the initial Capital Contribution. 3.2. No Member will be required to make any additional Capital Contributions. No Member may voluntarily make any additional Capital Contribution. 3.3. If a Member fails to make an additional Capital Contribution required under Section 3.2 of this Agreement within 30 days after it is required to be made (a Defaulting Member), the Manager will within 5 days after that failure notify each other Member (a Nondefaulting Member) in writing of the total amount of Defaulting Member Capital Contributions not made (the Additional Capital Shortfall), and will specify a number of days within which each Nondefaulting Member may make an additional Capital Contribution, which will not be less than an amount bearing the same ratio to the amount of Additional Capital Shortfall as the Nondefaulting Member’s Capital Account balance bears to the total Capital Accounts of all Nondefaulting Members. If the total amount of Additional Capital Shortfall is not so contributed, the Manager may use any reasonable method to provide Members the opportunity to make additional Capital Contributions, until the Additional Capital Shortfall is as fully contributed as possible. Following the Nondefaulting Members’ making of those additional Capital Contributions, each Member’s Percentage Interest will be adjusted to reflect the ratio that the Member’s Capital Account bears to the total Capital Accounts of all Members. 3.4. If a Member fails for 30 days to make an additional Capital Contribution required under Section 3.2: (a) The Defaulting Member will indemnify and hold the Company and the other Members harmless from any loss, cost, or expense, including reasonable attorney fees caused by the failure to make the additional Capital Contribution. In this Agreement, those additional Capital Contributions that are not made by a Defaulting Member are referred to as Additional Capital Shortfall. A Member who makes the required additional Capital Contributions (Nondefaulting Member) will have the right, but not the obligation, to advance an amount bearing the same ratio to the total amount of the Additional Capital Shortfall as a Nondefaulting Member’s Capital Account bears to the total Capital Accounts of all Nondefaulting Members. A Member advancing an additional Capital Contribution for a Defaulting Member under this Section 3.4(a) will: (1) be paid interest by the Defaulting Member on the amount of the advance at an annual rate, from the date of the advance until paid, equal to the floating rate of _________[insert rate] percent over the prime rate charged by __________[name of bank] Bank, or the highest rate permitted by applicable law, whichever rate is lower; and (2) receive all distributions that the Defaulting Member would otherwise be entitled to receive under the provisions of this Agreement as though the advances by the Nondefaulting Member were Capital Contributions made by the Nondefaulting Member, which distributions will be applied first to attorneys’ fees, costs, and expenses, if any; then to accrued and unpaid interest; and, finally, in reduction of the principal amount of the advance. The Defaulting Member grants any Nondefaulting Members who make advances to the Company in accordance with this Section 3.4(a) a security interest in the Defaulting Member’s Membership Interest to secure the Defaulting Member’s obligations under this Section 3.4(a). The Defaulting Member will, within 5 days of written notice, execute any documents or instruments reasonably necessary to enable Nondefaulting Members who make advances under this Section to perfect the foregoing security interests. Each Member irrevocably appoints each other Member, and any one of them acting alone, as his, her, or its attorney-in-fact for the limited purpose of executing, on behalf of the Member, if the Member becomes a Defaulting Member, any of the foregoing documents or instruments. (b) If the Defaulting Member fails to pay all sums due and owing to any Members who make advances under Section 3.4(a), for a period of 180 days after the advance, each Member who has made advances under Section 3.4(a) may foreclose on any security interest granted under this Section 3.4 by causing the principal amount of the advance to be transferred from the Defaulting Member’s Capital Account and added to the Capital Account of the Member who has made the advances, with a corresponding adjustment in that Member’s and the Defaulting Member’s Percentage Interests. Accrued and unpaid interest and other amounts owed to Members who have made those advances (the Noncapital Costs) will also be paid out of the Defaulting Member’s Capital Account, and if the Capital Account is not sufficient to fully pay Noncapital Costs, the available balance will be shared pro rata in accordance with the amounts of the Nondefaulting Members’ respective advances. The Defaulting Member’s Percentage Interest will be further adjusted (but not below zero) following application to Noncapital Costs. All Members agree that the foregoing constitutes and will constitute a disposition of collateral in a commercially reasonable manner within the meaning of California Commercial Code §9610. Reduction of a Defaulting Member’s Capital Account to satisfy that member’s repayment obligations under this Section 3.4(b) will be deemed a return of capital to that Member to the extent of the reduction. (c) On the occurrence of, and for the duration of, a Default by any Member, the Defaulting Member will not have any right to vote the Defaulting Member’s Membership Interest or otherwise participate in the management or control of the business and affairs of the Company, and any and all provisions of this Agreement relating to management and control will be implemented without including the Membership Interest of the Defaulting Member. The foregoing provisions will be in addition to the Company’s remedies under Corporations Code §17201(a)(2). On satisfaction of a Defaulting Member’s obligations (whether by enforcement of a remedy or otherwise) under Section 3.4(b), that Member will be restored to full membership status to the extent of any remaining Percentage Interest. 3.5. An individual Capital Account for each Member will be maintained in accordance with the requirements of Treasury Reg. §1.704-1(b)(2)(iv) and adjusted in accordance with the following provisions: (a) A Member’s Capital Account will be increased by that Member’s Capital Contributions, that Member’s share of Profits, and any items in the nature of income or gain that are specially allocated to that Member under Article IV. (b) A Member’s Capital Account will be increased by the amount of any Company liabilities assumed by that Member subject to and in accordance with the provisions of Treasury Reg. §1.704-1(b)(2)(iv)(c). (c) A Member’s Capital Account will be decreased by: (a) the amount of cash distributed to that Member; (b) the Fair Market Value of any property of the Company so distributed, net of liabilities secured by the distributed property that the distributee Member is considered to assume or to be subject to under IRC §752; and (c) the amount of any items in the nature of expenses or losses that are specially allocated to that Member under Article IV. (d) A Member’s Capital Account will be reduced by the Member’s share of any expenditures of the Company described in IRC §705(a)(2)(B) or which are treated as IRC §705(a)(2)(B) expenditures under Treasury Reg. §1.704-1(b)(2)(iv)(i) (including syndication expenses and losses nondeductible under IRC §267(a)(1) or 707(b)). (e) If any Economic Interest (or portion thereof) is Transferred, the transferee of the Economic Interest or portion will succeed to the transferor’s Capital Account corresponding to the interest or portion. (f) The principal amount of a promissory note that is not readily traded on an established securities market and that is contributed to the Company by the maker of the note will not be included in the Capital Account of any Person until the Company makes a taxable disposition of the note or until (and to the extent) principal payments are made on the note, all in accordance with Treasury Reg. §1.704-1(b)(2)(iv)(d)(2). (g) Each Member’s Capital Account will be increased or decreased as necessary to reflect a revaluation of the Company’s property assets in accordance with the requirements of Treasury Reg. §§1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(g), including the special rules under Treasury Reg. §1.701-1(b)(4), as applicable. The provisions of this Agreement respecting the maintenance of Capital Accounts are intended to comply with Treasury Reg. §1.704-1(b) and will be interpreted and applied in a manner consistent with those Regulations.

CAPITAL AND CAPITAL CONTRIBUTIONS. 3.1. Each Member will shall contribute to the capital of the Company as the Member’s initial Capital Contribution the money or and property _____________[or services] specified in Exhibit B. The initial Fair Market Value of each item of contributed property (net of liabilities secured by that such property) which that the Company is considered to assume or to take “subject to” under IRC section 752, is also set forth in Exhibit B, together with the description and amount of these liabilities. If a Member fails to make the initial Capital Contributions specified in this Section within 30 ninety (90) days after the effective date of this Agreement, that Member’s entire Membership Interest will shall terminate, and that Member will shall indemnify and hold the Company and the other Members harmless from any lossLoss, cost, or expense, including reasonable attorney fees caused by the failure to make the initial Capital Contribution. 3.2. No Member will shall be required to make any additional Capital Contributions, except as outlined in this Operating Agreement as the Initial Capital Contribution (which may be paid quarterly until paid in full). No Member may voluntarily make any additional Capital Contribution. 3.3. The Managers may determine from time to time that Capital Contributions in addition to the Members’ initial Capital Contributions are needed to enable the Company to conduct its business. On making such a determination, the Managers shall give notice to all Members in writing at least 90 days before the date on which such additional Capital Contribution is due. The Notice shall set forth the amount of additional Capital Contribution needed, the purpose for which it is needed, and the date by which the Members shall contribute. Each Member shall be required to make an additional Capital Contribution in an amount that bears the same proportion to the total additional Capital Contribution that such Member’s Capital Account balance bears to the total Capital Account balances of all Members. No Member may voluntarily make any additional Capital Contribution. 3.4. If a Member fails to make an additional Capital Contribution required under Section 3.2 of this Agreement above within 30 days after it is required to be made (a Defaulting Member), the Manager will shall within 5 five days after that said failure notify each other Member (a Nondefaulting Member) in writing of the total amount of Defaulting Member Capital Contributions not made (the Additional Capital Shortfall), and will shall specify a number of days within which each Nondefaulting Member may make an that additional Capital Contribution, which will not be less than an amount bearing the same ratio to the amount of Additional Capital Shortfall as the Nondefaulting Member’s Capital Account balance bears to the total Capital Accounts of all Nondefaulting Members. If the total amount of Additional Capital Shortfall is not so contributed, the Manager may use any reasonable method to provide Members the opportunity to make additional Capital Contributions, until the Additional Capital Shortfall is as fully contributed as possible. Following the Nondefaulting Members’ making of those such additional Capital Contributions, each Member’s Percentage Interest will shall be adjusted to reflect the ratio that the Member’s Capital Account bears to the total Capital Accounts of all Members. 3.4. If a Member fails for 30 days to make an additional Capital Contribution required under Section 3.2: (a) The Defaulting Member will indemnify and hold the Company and the other Members harmless from any loss, cost, or expense, including reasonable attorney fees caused by the failure to make the additional Capital Contribution. In this Agreement, those additional Capital Contributions that are not made by a Defaulting Member are referred to as Additional Capital Shortfall. A Member who makes the required additional Capital Contributions (Nondefaulting Member) will have the right, but not the obligation, to advance an amount bearing the same ratio to the total amount of the Additional Capital Shortfall as a Nondefaulting Member’s Capital Account bears to the total Capital Accounts of all Nondefaulting Members. A Member advancing an additional Capital Contribution for a Defaulting Member under this Section 3.4(a) will: (1) be paid interest by the Defaulting Member on the amount of the advance at an annual rate, from the date of the advance until paid, equal to the floating rate of _________[insert rate] percent over the prime rate charged by __________[name of bank] Bank, or the highest rate permitted by applicable law, whichever rate is lower; and (2) receive all distributions that the Defaulting Member would otherwise be entitled to receive under the provisions of this Agreement as though the advances by the Nondefaulting Member were Capital Contributions made by the Nondefaulting Member, which distributions will be applied first to attorneys’ fees, costs, and expenses, if any; then to accrued and unpaid interest; and, finally, in reduction of the principal amount of the advance. The Defaulting Member grants any Nondefaulting Members who make advances to the Company in accordance with this Section 3.4(a) a security interest in the Defaulting Member’s Membership Interest to secure the Defaulting Member’s obligations under this Section 3.4(a). The Defaulting Member will, within 5 days of written notice, execute any documents or instruments reasonably necessary to enable Nondefaulting Members who make advances under this Section to perfect the foregoing security interests. Each Member irrevocably appoints each other Member, and any one of them acting alone, as his, her, or its attorney-in-fact for the limited purpose of executing, on behalf of the Member, if the Member becomes a Defaulting Member, any of the foregoing documents or instruments. (b) If the Defaulting Member fails to pay all sums due and owing to any Members who make advances under Section 3.4(a), for a period of 180 days after the advance, each Member who has made advances under Section 3.4(a) may foreclose on any security interest granted under this Section 3.4 by causing the principal amount of the advance to be transferred from the Defaulting Member’s Capital Account and added to the Capital Account of the Member who has made the advances, with a corresponding adjustment in that Member’s and the Defaulting Member’s Percentage Interests. Accrued and unpaid interest and other amounts owed to Members who have made those advances (the Noncapital Costs) will also be paid out of the Defaulting Member’s Capital Account, and if the Capital Account is not sufficient to fully pay Noncapital Costs, the available balance will be shared pro rata in accordance with the amounts of the Nondefaulting Members’ respective advances. The Defaulting Member’s Percentage Interest will be further adjusted (but not below zero) following application to Noncapital Costs. All Members agree that the foregoing constitutes and will constitute a disposition of collateral in a commercially reasonable manner within the meaning of California Commercial Code §9610. Reduction of a Defaulting Member’s Capital Account to satisfy that member’s repayment obligations under this Section 3.4(b) will be deemed a return of capital to that Member to the extent of the reduction. (c) On the occurrence of, and for the duration of, a Default by any Member, the Defaulting Member will not have any right to vote the Defaulting Member’s Membership Interest or otherwise participate in the management or control of the business and affairs of the Company, and any and all provisions of this Agreement relating to management and control will be implemented without including the Membership Interest of the Defaulting Member. The foregoing provisions will be in addition to the Company’s remedies under Corporations Code §17201(a)(2). On satisfaction of a Defaulting Member’s obligations (whether by enforcement of a remedy or otherwise) under Section 3.4(b), that Member will be restored to full membership status to the extent of any remaining Percentage Interest. 3.5. An individual Capital Account for each Member will shall be maintained in accordance with the requirements of Treasury Reg. Reg §1.704-1(b)(2)(iv) and adjusted in accordance with the following provisions: (a) A Member’s Capital Account will shall be increased by that Member’s Capital Contributions, that Member’s share of Profits, and any items in the nature of income or gain that are specially allocated to that Member under pursuant to Article IV. (b) A Member’s Capital Account will shall be increased by the amount of any Company liabilities assumed by that Member subject to and in accordance with the provisions of Treasury Reg. Reg §1.704-1(b)(2)(iv)(c). (c) A Member’s Capital Account will shall be decreased by: by (a) the amount of cash distributed to that Member; (b) the Fair Market Value of any property of the Company so distributed, net of liabilities secured by the such distributed property that the distributee Member is considered to assume or to be subject to under IRC §section 752; and (c) the amount of any items in the nature of expenses or losses Losses that are specially allocated to that Member under pursuant to Article IV. (d) A Member’s Capital Account will shall be reduced by the Member’s share of any expenditures of the Company described in IRC §section 705(a)(2)(B) or which are treated as IRC §section 705(a)(2)(B) expenditures under Treasury Reg. §1.704-pursuant to Reg section 1.704- 1(b)(2)(iv)(i) (including syndication expenses and losses nondeductible under IRC §sections 267(a)(1) or 707(b)). (e) If any Economic Interest (or portion thereof) is Transferred, the transferee of the Economic Interest or portion will succeed to the transferor’s Capital Account corresponding to the interest or portion. (f) The principal amount of a promissory note that is not readily traded on an established securities market and that is contributed to the Company by the maker of the note will not be included in the Capital Account of any Person until the Company makes a taxable disposition of the note or until (and to the extent) principal payments are made on the note, all in accordance with Treasury Reg. §1.704-1(b)(2)(iv)(d)(2). (g) Each Member’s Capital Account will shall be increased or decreased as necessary to reflect a revaluation of the Company’s property assets in accordance with the requirements of Treasury the Reg. §§1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(g)Code. 3.6. No interest shall be paid on Capital Contributions or on the balance of a Member’s Capital Account. 3.7. A Member shall not be bound by, including or be personally liable for, the special rules under Treasury Reg. §1.701-1(b)(4)expenses, liabilities, or obligations of the Company except as applicable. The provisions of otherwise provided in the Act or in this Agreement respecting the maintenance of Capital Accounts are intended to comply with Treasury Reg. §1.704-1(b) and will be interpreted and applied in a manner consistent with those RegulationsAgreement.

CAPITAL AND CAPITAL CONTRIBUTIONS. 3.1. Each Member will contribute to the capital of the Company as the Member’s initial Capital Contribution the money or property _____________[or services] specified in Exhibit B. The initial Fair Market Value of each item of contributed property (net of liabilities secured by that property) which the Company is considered to assume or to take “subject to” under IRC section 752, is also set forth in Exhibit B, together with the description and amount of these liabilities. If a Member fails to make the initial Capital Contributions specified in this Section within 30 days after the effective date of this Agreement, that Member’s entire Membership Interest will terminate, and that Member will indemnify and hold the Company and the other Members harmless from any loss, cost, or expense, including reasonable attorney fees caused by the failure to make the initial Capital Contribution. 3.2. No Member will be required to make any additional Capital Contributions. No Member may voluntarily make any additional Capital Contribution. 3.3. If a Member fails to make an additional Capital Contribution required under Section 3.2 of this Agreement within 30 days after it is required to be made (a Defaulting Member), the Manager will within 5 days after that failure notify each other Member (a Nondefaulting Member) in writing of the total amount of Defaulting Member Capital Contributions not made (the Additional Capital Shortfall), and will specify a number of days within which each Nondefaulting Member may make an additional Capital Contribution, which will not be less than an amount bearing the same ratio to the amount of Additional Capital Shortfall as the Nondefaulting Member’s Capital Account balance bears to the total Capital Accounts of all Nondefaulting Members. If the total amount of Additional Capital Shortfall is not so contributed, the Manager may use any reasonable method to provide Members the opportunity to make additional Capital Contributions, until the Additional Capital Shortfall is as fully contributed as possible. Following the Nondefaulting Members’ making of those additional Capital Contributions, each Member’s Percentage Interest will be adjusted to reflect the ratio that the Member’s Capital Account bears to the total Capital Accounts of all Members. 3.4. If a Member fails for 30 days to make an additional Capital Contribution required under Section 3.2: (a) The Defaulting Member will indemnify and hold the Company and the other Members harmless from any loss, cost, or expense, including reasonable attorney fees caused by the failure to make the additional Capital Contribution. In this Agreement, those additional Capital Contributions that are not made by a Defaulting Member are referred to as Additional Capital Shortfall. A Member who makes the required additional Capital Contributions (Nondefaulting Member) will have the right, but not the obligation, to advance an amount bearing the same ratio to the total amount of the Additional Capital Shortfall as a Nondefaulting Member’s Capital Account bears to the total Capital Accounts of all Nondefaulting Members. A Member advancing an additional Capital Contribution for a Defaulting Member under this Section 3.4(a) will: (1) be paid interest by the Defaulting Member on the amount of the advance at an annual rate, from the date of the advance until paid, equal to the floating rate of _________[insert rate] percent over the prime rate charged by __________[name of bank] Bank, or the highest rate permitted by applicable law, whichever rate is lower; and (2) receive all distributions that the Defaulting Member would otherwise be entitled to receive under the provisions of this Agreement as though the advances by the Nondefaulting Member were Capital Contributions made by the Nondefaulting Member, which distributions will be applied first to attorneys’ fees, costs, and expenses, if any; then to accrued and unpaid interest; and, finally, in reduction of the principal amount of the advance. The Defaulting Member grants any Nondefaulting Members who make advances to the Company in accordance with this Section 3.4(a) a security interest in the Defaulting Member’s Membership Interest to secure the Defaulting Member’s obligations under this Section 3.4(a). The Defaulting Member will, within 5 days of written notice, execute any documents or instruments reasonably necessary to enable Nondefaulting Members who make advances under this Section to perfect the foregoing security interests. Each Member irrevocably appoints each other Member, and any one of them acting alone, as his, her, or its attorney-in-fact for the limited purpose of executing, on behalf of the Member, if the Member becomes a Defaulting Member, any of the foregoing documents or instruments. (b) If the Defaulting Member fails to pay all sums due and owing to any Members who make advances under Section 3.4(a), for a period of 180 days after the advance, each Member who has made advances under Section 3.4(a) may foreclose on any security interest granted under this Section 3.4 by causing the principal amount of the advance to be transferred from the Defaulting Member’s Capital Account and added to the Capital Account of the Member who has made the advances, with a corresponding adjustment in that Member’s and the Defaulting Member’s Percentage Interests. Accrued and unpaid interest and other amounts owed to Members who have made those advances (the Noncapital Costs) will also be paid out of the Defaulting Member’s Capital Account, and if the Capital Account is not sufficient to fully pay Noncapital Costs, the available balance will be shared pro rata in accordance with the amounts of the Nondefaulting Members’ respective advances. The Defaulting Member’s Percentage Interest will be further adjusted (but not below zero) following application to Noncapital Costs. All Members agree that the foregoing constitutes and will constitute a disposition of collateral in a commercially reasonable manner within the meaning of California Commercial Code §9610. Reduction of a Defaulting Member’s Capital Account to satisfy that member’s repayment obligations under this Section 3.4(b) will be deemed a return of capital to that Member to the extent of the reduction. (c) On the occurrence of, and for the duration of, a Default by any Member, the Defaulting Member will not have any right to vote the Defaulting Member’s Membership Interest or otherwise participate in the management or control of the business and affairs of the Company, and any and all provisions of this Agreement relating to management and control will be implemented without including the Membership Interest of the Defaulting Member. The foregoing provisions will be in addition to the Company’s remedies under Corporations Code §17201(a)(2). On satisfaction of a Defaulting Member’s obligations (whether by enforcement of a remedy or otherwise) under Section 3.4(b), that Member will be restored to full membership status to the extent of any remaining Percentage Interest. 3.5. An individual Capital Account for each Member will be maintained in accordance with the requirements of Treasury Reg. §1.704-1(b)(2)(iv) and adjusted in accordance with the following provisions: (a) A Member’s Capital Account will be increased by that Member’s Capital Contributions, that Member’s share of Profits, and any items in the nature of income or gain that are specially allocated to that Member under Article IV. (b) A Member’s Capital Account will be increased by the amount of any Company liabilities assumed by that Member subject to and in accordance with the provisions of Treasury Reg. §1.704-1(b)(2)(iv)(c). (c) A Member’s Capital Account will be decreased by: (a) the amount of cash distributed to that Member; (b) the Fair Market Value of any property of the Company so distributed, net of liabilities secured by the distributed property that the distributee Member is considered to assume or to be subject to under IRC §752; and (c) the amount of any items in the nature of expenses or losses that are specially allocated to that Member under Article IV. (d) A Member’s Capital Account will be reduced by the Member’s share of any expenditures of the Company described in IRC §705(a)(2)(B) or which are treated as IRC §705(a)(2)(B) expenditures under Treasury Reg. §1.704-1(b)(2)(iv)(i) (including syndication expenses and losses nondeductible under IRC §267(a)(1) or 707(b)). (e) If any Economic Interest (or portion thereof) is Transferred, the transferee of the Economic Interest or portion will succeed to the transferor’s Capital Account corresponding to the interest or portion. (f) The principal amount of a promissory note that is not readily traded on an established securities market and that is contributed to the Company by the maker of the note will not be included in the Capital Account of any Person until the Company makes a taxable disposition of the note or until (and to the extent) principal payments are made on the note, all in accordance with Treasury Reg. §1.704-1(b)(2)(iv)(d)(2). (g) Each Member’s Capital Account will be increased or decreased as necessary to reflect a revaluation of the Company’s property assets in accordance with the requirements of Treasury Reg. §§1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(g), including the special rules under Treasury Reg. §1.701-1(b)(4), as applicable. The provisions of this Agreement respecting the maintenance of Capital Accounts are intended to comply with Treasury Reg. §1.704-1(b) and will be interpreted and applied in a manner consistent with those Regulations.

CAPITAL AND CAPITAL CONTRIBUTIONS. 3.1. 3.1 Each Member will shall contribute to the capital of the Company as the Member’s 's initial Capital Contribution the money or property _____________[or services] amounts specified in Exhibit B. The initial Fair Market Value "A" attached hereto. 3.2 If either Member is at any time of each item of contributed property (net of liabilities secured by the opinion that property) which Capital Contributions in addition to the Company is considered to assume or to take “subject to” under IRC section 752, is also set forth in Exhibit B, together with the description and amount of these liabilities. If a Member fails to make the Members' initial Capital Contributions specified in this Section within 30 days after are needed to enable the effective date of this AgreementCompany to conduct its business, that Member’s entire Membership Interest will terminate, Member shall give notice to the other Member that it believes such funds are needed. The Members shall meet and that Member will indemnify and hold confer regarding the operating budget for the Company and the other Members harmless from any loss, cost, or expense, including reasonable attorney fees caused by the failure to make the initial Capital Contribution. 3.2. No Member will be required to make any need (if any) for additional Capital Contributions. If the Members agree upon the need for and the amount of additional Capital Contributions required each Member shall contribute additionally required capital to the Company in cash in an amount equal to the Member's Percentage Interest of the total additional capital that has been agreed to. No Member may voluntarily make any additional Capital ContributionContribution to the Company without the consent of the other Member. 3.3. 3.3 If a Member fails to make an additional Capital Contribution required under Section 3.2 of this Agreement above within 30 days after it is required to be made (a "Defaulting Member"), the Manager will within 5 days after that failure notify each other Member member (a the "Nondefaulting Member") in writing of the total amount of Defaulting Member Capital Contributions not made (the Additional Capital Shortfall), and will specify a number of days within which each Nondefaulting Member may make an additional Capital Contribution, which will not be less than an amount bearing the same ratio Contribution up to the total amount required of the Defaulting Member (the "Additional Capital Shortfall"). Any amount of Additional Capital Shortfall as the Shortfall, which a Nondefaulting Member’s Capital Account balance bears to the total Capital Accounts Member so advances on behalf of all Nondefaulting Members. If the total amount of Additional Capital Shortfall is not so contributed, the Manager may use any reasonable method to provide Members the opportunity to make additional Capital Contributions, until the Additional Capital Shortfall is as fully contributed as possible. Following the Nondefaulting Members’ making of those additional Capital Contributions, each Member’s Percentage Interest will be adjusted to reflect the ratio that the Member’s Capital Account bears to the total Capital Accounts of all Members. 3.4. If a Member fails for 30 days to make an additional Capital Contribution required under Section 3.2: (a) The Defaulting Member will indemnify and hold the Company and the other Members harmless from any loss, cost, or expense, including reasonable attorney fees caused by the failure to make the additional Capital Contribution. In this Agreement, those additional Capital Contributions that are not made by a Defaulting Member are referred to as Additional Capital Shortfall. A Member who makes the required additional Capital Contributions (Nondefaulting Member) will have the right, but not the obligation, to advance an amount bearing the same ratio to the total amount of the Additional Capital Shortfall as shall become a Nondefaulting Member’s Capital Account bears to the total Capital Accounts of all Nondefaulting Members. A Member advancing an additional Capital Contribution for a Defaulting Member under this Section 3.4(a) will: (1) be paid interest by loan due and owing from the Defaulting Member on of such Nondefaulting Member and shall bear interest at the amount rate of five percent (5%) above the then current prime rate, as most recently reported by the Western Edition of the advance at an annual rate, from the date of the advance until paid, equal to the floating rate of _________[insert rate] percent over the prime rate charged by __________[name of bank] BankWall Street Journal, or the highest rate permitted allowed by applicable law, whichever rate is lower; and (2) receive all less, compounded monthly. All distributions that otherwise to be made to the Defaulting Member would otherwise be entitled to receive under the provisions of this Agreement as though shall instead be paid on behalf of the advances by Defaulting Member to the Nondefaulting Member were Capital Contributions made until such advances and interest thereon are paid in full. In any event, any such advances shall be due and payable by the Nondefaulting Member, which distributions will Defaulting Member one (1) year from the date that such advance was made. Any amounts repaid shall first be applied first to attorneys’ fees, costs, interest and expenses, if any; then thereafter to accrued and unpaid interest; and, finally, in reduction of the principal amount of the advanceprincipal. The Each Defaulting Member grants any Nondefaulting Members who make advances to the Company in accordance with Nondefaulting Member who advances funds under this Section 3.4(a) 3.3 a security interest in the Defaulting Member’s its Membership Interest to secure its obligation to repay such advances and agrees to execute and deliver a promissory note as described herein together with a security agreement in a form reasonably acceptable to the Defaulting Member’s obligations under this Section 3.4(a). The Defaulting Nondefaulting Member will, within 5 days and such UCC-1 financing statements and assignments of written notice, execute any certificates of membership (or other documents or instruments of transfer) as the Nondefaulting Member making such advances may reasonably necessary to enable Nondefaulting Members who make advances under this Section to perfect the foregoing security interests. Each Member irrevocably appoints each other Member, and any one of them acting alone, as his, her, or its attorney-in-fact for the limited purpose of executing, on behalf of the Member, if the Member becomes a Defaulting Member, any of the foregoing documents or instrumentsrequest. (b) If the Defaulting Member fails to pay all sums due and owing to any Members who make advances under Section 3.4(a), for a period of 180 days after the advance, each Member who has made advances under Section 3.4(a) may foreclose on any security interest granted under this Section 3.4 by causing the principal amount of the advance to be transferred from the Defaulting Member’s Capital Account and added to the Capital Account of the Member who has made the advances, with a corresponding adjustment in that Member’s and the Defaulting Member’s Percentage Interests. Accrued and unpaid interest and other amounts owed to Members who have made those advances (the Noncapital Costs) will also be paid out of the Defaulting Member’s Capital Account, and if the Capital Account is not sufficient to fully pay Noncapital Costs, the available balance will be shared pro rata in accordance with the amounts of the Nondefaulting Members’ respective advances. The Defaulting Member’s Percentage Interest will be further adjusted (but not below zero) following application to Noncapital Costs. All Members agree that the foregoing constitutes and will constitute a disposition of collateral in a commercially reasonable manner within the meaning of California Commercial Code §9610. Reduction of a Defaulting Member’s Capital Account to satisfy that member’s repayment obligations under this Section 3.4(b) will be deemed a return of capital to that Member to the extent of the reduction. (c) On the occurrence of, and for the duration of, a Default by any Member, the Defaulting Member will not have any right to vote the Defaulting Member’s Membership Interest or otherwise participate in the management or control of the business and affairs of the Company, and any and all provisions of this Agreement relating to management and control will be implemented without including the Membership Interest of the Defaulting Member. The foregoing provisions will be in addition to the Company’s remedies under Corporations Code §17201(a)(2). On satisfaction of a Defaulting Member’s obligations (whether by enforcement of a remedy or otherwise) under Section 3.4(b), that Member will be restored to full membership status to the extent of any remaining Percentage Interest. 3.5. An individual Capital Account for each Member will shall be maintained in accordance with the requirements of Treasury Reg. §Regulations Section 1.704-1(b)(2)(iv) and adjusted in accordance with the following provisions: (a) A Member’s 's Capital Account will shall be increased by that Member’s 's Capital Contributions, that Member’s 's share of Profitsprofits, and any items Tax Items in the nature of income or gain that are specially allocated to that Member under pursuant to Article IV. (b) A Member’s 's Capital Account will shall be increased by the amount of any Company liabilities assumed by that Member subject to and in accordance with the provisions of Treasury Reg. §Regulations Section 1.704-1(b)(2)(iv)(c). (c) A Member’s 's Capital Account will shall be decreased by: by (a) the amount of cash distributed to that Member; (b) the Fair Market Value of any property of the Company so distributed, net of liabilities secured by the such distributed property that the distributee Member is considered to assume or to be subject to under IRC §section 752; and (c) the amount of any items in the nature of expenses or losses that are specially allocated to that Member under pursuant to Article IV. (d) A Member’s 's Capital Account will shall be reduced by the Member’s 's share of any expenditures of the Company described in IRC §section 705(a)(2)(B) or which are treated as IRC §section 705(a)(2)(B) expenditures under Treasury Reg. §pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) (including syndication expenses and losses nondeductible under IRC §sections 267(a)(1) or 707(b)). (e) If any Economic Interest (or portion thereof) is Transferredtransferred in conformance with and not otherwise in violation of this Agreement, the transferee of the such Economic Interest or portion will shall succeed to the transferor’s 's Capital Account corresponding attributable to the such interest or portion. (f) The principal amount of a promissory note that is not readily traded on an established securities market and that is contributed to the Company by the maker of the note will shall not be included in the Capital Account of any Person until the Company makes a taxable disposition of the note or until (and to the extent) principal payments are made on the note, all in accordance with Treasury Reg. §Regulations Section 1.704-1(b)(2)(iv)(d)(2). (g) Each Member’s 's Capital Account will shall be increased or decreased as necessary to reflect a revaluation of the Company’s 's property assets in accordance with the requirements of Treasury Reg. §§Regulations Section 1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(g), including the special rules under Treasury Reg. §Regulations Section 1.701-1(b)(4), as applicable. The provisions of this Agreement respecting concerning the maintenance of Capital Accounts are intended to comply with Treasury Reg. §Regulations Section 1.704-1(b) and will shall be interpreted and applied in a manner consistent with those Regulations. 3.5 A Member shall not be entitled to withdraw any part of the Member's Capital Contribution or to receive any distributions, whether of money or property, from the Company except as provided in this Agreement. 3.6 No interest shall be paid on Capital Contributions or on the balance of a Member's Capital Account. 3.7 A Member shall not be bound by, or be personally liable for, the expenses, liabilities, or obligations of the Company except as otherwise provided in the Act or in this Agreement. 3.8 Except as otherwise expressly provided in this Agreement, no Member shall have priority over any other Member with respect to the return of a Capital Contribution or distributions or allocations of income, gain, losses, deductions, credits, or items thereof.