WARRANT FOR MEMBERSHIP INTEREST
THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH, OR PURSUANT TO
AN EXEMPTION FROM, THE REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND IN
COMPLIANCE WITH THE PURCHASE AGREEMENT (AS DEFINED
HEREIN).
0000-0000 XXXXXXX XX XX LLC
WARRANT FOR MEMBERSHIP INTEREST
Issue
Date: April 30, 2021
This
Warrant (this “Warrant) is issued in connection with
that certain Commercial Loan Agreement dated as of even date herewith (the
“Loan
Agreement”) by and among 0000-0000 XXXXXXX XX XX LLC, a
District of Columbia limited liability company (the
“Company”), and
RED OAK
CAPITAL FUND V, LLC, a Delaware limited liability company
(the “Holder”),
and the Holder is entitled to the benefit thereof. Capitalized
terms used herein without definition shall have the respective
meanings ascribed to them in the Loan Agreement. The following is a
statement of the rights of the Holder under this Warrant and the
conditions to which this Warrant is subject, to which the Holder,
by acceptance of this Warrant, agrees:
1. WARRANT
GRANT.
FOR VALUE RECEIVED, the Company hereby certifies and agrees that
upon the earlier of the Maturity Date or the date of any prepayment
(a “Prepayment
Date”) of the Loan, the Holder shall be entitled to
purchase from the Company up to a four percent (4%) membership
interest in the Company (the “Warrant Interest”) in exchange for
the waiver, or partial waiver, of the payment of the Exit Fee in
cash. In the event that the Fair Market Value of the Warrant
Interest (as defined below) is less than the Exit Fee, or any
portion of the Exit Fee, waived by the Company pursuant to any
exercise hereof, the Company shall pay the difference between the
amount of the Exit Fee, or portion thereof, waived in order to
exercise this Warrant, and the aggregate portion of the Exit Fee
that otherwise would have been due as of the date of the issuance
of the Warrant Interest, or any portion thereof pursuant to
exercise of this Warrant, to Holder in cash in accordance with
Section 2.5 of the
Loan Agreement. The Holder may exercise such right as of the
Maturity Date or any Prepayment Date, in accordance with Section 3
hereof.
1.1 “Fair
Market Value of the Warrant Interest” shall mean four
percent (4%), as adjusted for any partial exercise of the Warrant,
of the Net Property Value as of the applicable Maturity Date or
Prepayment Date.
1.2 “Net
Property Value” shall mean the Appraised Value of the
Property less the outstanding amount of all Indebtedness of the
Company as of the applicable Maturity Date or Prepayment Date,
which, for the avoidance of doubt, shall include the principal
balance of a loan borrowed by the Company to refinance the Loan (a
“Refinance
Loan”).
1.3 “Appraised
Value” means the appraised value of the Property in an
appraisal certified to the lender of any Refinance Loan, or, if
there be no such appraisal, the appraised value of the Property as
determined by a MAI certified appraiser selected by Holder in its
sole discretion.
1.4 In
the event that Holder selects an appraiser to perform an appraisal
in accordance with Section
1.3, the Company shall bear all costs and expenses of any
such appraisal. The value of the Warrant Interest shall be
determined by an appraisal of the Property prepared by an appraiser
licensed in the jurisdiction in which the Property is located and
acceptable to Holder in its reasonable discretion. The value of the
Warrant Interest shall be four percent (4%) of the appraised value
of the Property reduced by the Outstanding Principal
Balance.
The
terms defined in this Section 2
whenever used in this Warrant shall have the respective meanings
hereinafter specified. Each capitalized term not defined herein
shall have the meaning ascribed to it in the Purchase
Agreement.
“Operating Agreement” means that
certain Limited Liability Company Operating Agreement of the
Company effective November 1, 2020 as amended, restated,
supplemented or otherwise modified from time to time.
“Securities Act” means the
Securities Act of 1933, as amended.
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3. EXERCISE
OF WARRANT.
3.1 Generally.
No later than fifteen (15) days prior to the Maturity or any
Prepayment Date, Holder may deliver a Notice of Exercise in the
form attached hereto as Exhibit A, exercising this
Warrant, in whole or in part, in accordance with Section 3.2; provided, however
that if the Company has given Holder less than twenty (20) days
notice of a voluntary prepayment of the Loan , then Holder shall
have fifteen (15) days from the date of such notice to exercise
this Warrant and may, in lieu of waiver of the Exit Fee, return any
portion of the Exit Fee actually received in cash by the Holder on
the applicable Prepayment Date as consideration for the exercise of
this Warrant.
3.2 Rule
144. For purposes of Rule 144 under the Securities Act, it
is intended, understood and acknowledged that the Warrant Interest
issued pursuant thereto shall be deemed to have been acquired by
the Holder, and the holding period for the Warrant Interest shall
be deemed to have been commenced, on the date of this Warrant to
the extent permitted by law.
3.3 Amount
of Exercise.
(a) Maturity Date. Upon the
Maturity Date, the Holder may exercise this Warrant for the
acquisition of up to the entirety of the Warrant Interest, less any
amount of the Warrant Interest previously issued to the Holder
pursuant to the partial exercise of this Warrant upon a partial
prepayment of the Loan.
(b) Prepayment Date. Upon any
Prepayment Date, the Holder may exercise this Warrant for the
acquisition of up to a partial proportion of the Warrant Interest
equal to the proportion of the Exit Fee payable as of any such
Prepayment Date.
3.4 Capital
Contribution Credit. Effective as of the date of issuance of
the Warrant Interest or any portion thereof, the Holder shall be
credited with a capital contribution to the Company equal to the
value of the Exit Fee waived or returned as consideration for the
exercise hereof.
3.5 Operating
Agreement Amendment. Upon delivery of the initial Notice of
Exercise delivered pursuant to this Warrant, the Company and the
Holder shall mutually amend, or amend and restate, the Operating
Agreement to provide for such changes as are necessary or desirable
to cause such Operating Agreement to contain provisions appropriate
for the governance of a multi-member limited liability
company.
(a) Notwithstanding the
generality of the foregoing, any such amendment or amendment and
restatement of the Operating Agreement shall contain, at a minimum,
provision for:
(1) Distribution of the
Company’s net cash flow to the Company’s members on at
least a quarterly basis within 30 days of quarter end, subject to
the retention of reasonable reserves for Company expenses at the
discretion of the Company’s managing member; and
(2) Reporting of
Financial Statements which, at a minimum, consist of Income
Statement, Balance Sheet, and Rent Roll within 30 days of quarter
end; and
(3) Distributions to
the Company’s members to be made not later than 90 days
following the end of any calendar year in amount equal to at least
such members maximum tax liability resulting from the allocation of
Company net profits to its members (“Tax Distributions”); provided,
that any such Tax Distributions shall be reduced,
dollar-for-dollar, by amounts of Company net cash flow distributed
to the members during the prior calendar year excluding Tax
Distributions.
The
provisions of this Section
3.5 shall be binding om the sole member of the Company and
his successors and assigns, if any.
3.6 Call
Agreement. Concurrently with, and effective as of the date
of, the issuance of the Warrant Interest, or any portion thereof
(the “Issued
Interest”), pursuant to an exercise of this Warrant
Agreement, the Company and Holder shall enter into a Call Agreement
with respect to such Issued Interest in the form attached hereto as
Exhibit
B.
4. RESERVATION
OF WARRANT INTEREST.
The Company will at all times from and after the date of this
Warrant reserve and keep available, solely for issuance or delivery
upon the exercise of this Warrant, the Warrant Interest to be
issued upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer and free and clear of all
preemptive rights.
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5. FULLY
PAID; TAXES. The
Company agrees that the Warrant Interest delivered on the exercise
of this Warrant and waiver or return of the applicable proportion
of the Exit Fee shall, at the time of such delivery, be validly
issued and outstanding, fully paid and non-assessable, to the
extent such concepts apply to the Company’s membership
interests (i.e., equity interests in a limited liability company).
The Company further covenants and agrees that it will pay, when due
and payable, all federal and state stamp, original issue or similar
taxes, if any, which are payable in respect of the issue of this
Warrant and/or any Warrant Interest, or portion thereof, or
certificates therefor, but excluding any federal, state or local
taxes based on the income of the Holder.
6. COMPANY
INFORMATION. Company
will provide information reasonably requested by Holder that is
reasonably necessary to enable Holder to comply with Holder’s
accounting or reporting requirements.
7. LIMITED
TRANSFERABILITY. Neither
this Warrant nor the Warrant Interest have been registered under
the Securities Act, and may be transferred only pursuant to an
effective registration thereunder or an exemption from the
registration requirements of the Securities Act, and otherwise in
compliance with applicable state securities laws. This Warrant may
not be transferred if such transfer would require any registration
or qualification under, or cause the loss of exemption from
registration or qualification under, the Securities Act or any
applicable state securities law with respect to the Warrant or the
Warrant Interest. This Warrant and any certificated Warrant
Interest shall bear an appropriate legend with respect to such
restrictions on transfer. This Warrant is transferable only upon
the books that the Company shall cause to be maintained for such
purpose. Any assignment or transfer may be made by surrendering
this Warrant to the Company together with the attached assignment
form properly executed by the assignor or transferor. Upon such
surrender, the Company will execute and deliver, in the case of an
assignment or transfer in whole, a new warrant in the name of the
assignee or transferee or, in the case of an assignment or transfer
in part, a new warrant in the name of the assignee or transferee
named in such instrument of assignment or transfer and a new
warrant in the name of the assignor or transferor covering the
portion of this Warrant not assigned or transferred to the assignee
or transferee.
8. REPLACEMENT
OF WARRANT.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant, and of indemnity
in form and amount reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this
Warrant, if mutilated, and upon reimbursement of the
Company’s reasonable incidental expenses, the Company shall
execute and deliver to the Holder a new Warrant of like date, tenor
and denomination.
9. HOLDER
NOT AN EQUITY OWNER.
This Warrant does not confer upon the Holder any right to vote or
to consent or to receive notice as an equity owner of the Company,
as such, in respect of any matters whatsoever, or any other rights
or liabilities as a member, prior to the exercise
hereof.
10. NOTICES.
No notice or other communication under this Warrant shall be
effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in
writing and is delivered via hand delivery or mailed via FedEx
overnight delivery, postage prepaid, addressed to the Company at
0000-0000 XXXXXXX XX XX, #X0, XXXXXXXXXX, XX 00000.
11. HEADINGS.
The headings of this Warrant have been inserted as a matter of
convenience, and shall not affect the construction
hereof.
12. No
Limitation on Action. No provisions of this Warrant on
its own (for the avoidance of doubt, without regard to any
applicable provisions of the Purchase Agreement) and no right
granted hereunder shall in any way limit, affect or abridge the
exercise by the Company of any of its rights or powers to
recapitalize, amend its governing documents, reorganize,
consolidate or merge with or into another entity, or to transfer
all or any part of its property or assets, or the exercise of any
other of its rights and powers, provided that such actions do not
avoid or seek to avoid the observance or performance of any of the
terms of this Warrant or otherwise impair the rights of the Holder
hereunder.
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13. Amendments.
This Warrant may be amended only with the written consent of the
Company and the Holder.
14. GOVERNING
LAW. This Warrant
shall be governed by and construed in accordance with the laws of
the State of Michigan, without regard to its principles of
conflicts of laws.
15. CONSENT
TO FORUM. AS PART
OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY
PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE
COMPANY OR THE HOLDER, THE COMPANY CONSENTS AND AGREES THAT THE
FEDERAL AND STATE COURTS OF THE STATE OF MICHIGAN, SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY AND THE HOLDER PERTAINING TO, ARISING OUT OF,
OR RELATING TO THIS WARRANT. THE COMPANY WAIVES ANY OBJECTION BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR
SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY COMPLYING WITH THE PROVISIONS FOR GIVING
NOTICE AS SET FORTH IN THIS WARRANT. NOTHING IN THIS WARRANT SHALL
BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE HOLDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE
THE ENFORCEMENT BY THE HOLDER OF ANY JUDGMENT OR ORDER OBTAINED IN
SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS WARRANT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
16. WAIVER
OF JURY TRIAL. THE
COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL IN THE EVENT OF ANY
LITIGATION INSTITUTED IN RESPECT OF THIS WARRANT. THE COMPANY
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO
THE HOLDER’S ACCEPTING THIS WARRANT AGREEMENT AND ENTERING
INTO THE OTHER OPERATIVE DOCUMENTS AND THAT THE HOLDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH THE COMPANY.
THE COMPANY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THE
FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS WARRANT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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The
Company has duly executed this Warrant as of the date first set
forth above.
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COMPANY:
0000-0000 XXXXXXX XX XX LLC
By:
/s/Ali
Razjooyan
Ali
Razjooyan
Sole
Member
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The
sole member of the Company executes this Warrant for the sole
purpose of acknowledging the provisions of Section 3.5
hereof.
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/s/Ali Razjooyan
Ali Razjooyan
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