THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS SUBSCRIPTION AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES SUBSCRIBED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. THEREFORE, THE SECURITIES CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is entered into as of the date set forth on the signature page hereto as the "Subscription Effective Date" between the undersigned investor (the "Investor"), OLSON CAPITAL MANAGEMENT, LLC, a Delaware limited liability company (the "Manager"), and OLSON REAL ESTATE ACQUISITION SPV I, LLC, a Delaware limited liability company (the "Company" or the “SPV”)).
Background Statement
Securities Offered and Timing
This offering (the “Offering”) covers the offer and sale of Seven Hundred Fifty (750) Class B Units (“Class B Units”) of Olson Real Estate Acquisition SPV I, LLC, a Delaware limited liability company (the “Company” or the “SPV”) Seven Million Five Hundred Thousand ($7,500,000) Dollars (the "Offering Amount") of Class B Units in the Company (the "Securities") and will be held open until Dec 31st, 2021, for the initial Closing of not less than One Million Dollars ($1,000,000) unless the Offering is fully subscribed at an earlier date or the Company extends the Offering (the "Termination Date"). The Manager may hold additional Closings. For each additional Closing of not less than One Million Dollars ($1,000,000), until 100% of the Class B units have been subscribed to and funded, the subsequent closing deadline will be extended an additional six (6) months beginning from the prior closing Date, for each additional set of Subscribers.
The Company plans to conduct the closing upon acceptance by the Company acting through the sole manager of Company (Olson Capital Management, LLC, a Delaware limited liability company (the “Manager”) of subscriptions for Capital Contributions representing not less than the Offering Amount (the "Closing").
Subscription Withdrawal
Initial Subscribers may withdraw their subscriptions if the Closing is not held on or before Dec 31st, 2021 (the Withdrawal Rights Date”) as described in the Offering Memorandum and this Subscription Agreement. For each additional Closing, until 100% of the Class B units have been subscribed to and funded, the closing deadline will be extended by six (6) additional months for each additional set of Subscribers.
Good Faith Deposit
The Company is requiring a good faith deposit equal to Ten (10%) Percent of the Capital Commitment (the “Good Faith Deposit”). The Company will hold the Good Faith Deposit in an account of the Company other than the account from which the Company pays its expenses a “Segregated Company Account”). The Company will not use the Good Faith Deposit for any reason unless the Closing is held, but (i) there will not be any escrow agent and (ii) the Good Faith Deposit will be subject to the claims of creditors of the Company.
Capital Call for Closing
The Manager may elect to require the persons and entities (“Subscribers” or “Investors”) who execute and deliver agreements to purchase Class B Units attached hereto that have been accepted by the Manager on behalf of the Company (“Subscription Agreements”) to make the Capital Contributions set forth in the Subscription Agreements (“Capital Commitments”) when the Manager determines in its sole discretion that the conditions to the purchase of the Target Property set forth in their Subscription Agreements (“Closing Conditions”) are likely occur within the time set forth in the Subscription Agreements by providing written notice to the persons who have executed and delivered Subscription Agreement (herein a “Capital Call Notice”).
IMPORTANT: See the definitions of this Subscription Agreement for the Conditions Precedent to Closing.
Becoming Owner of the Securities and becoming Member of the Company
A Subscriber will not become a Member of the Company and will not own the Securities until the later of
(i) the Company accepts their subscription in the manner described herein;
(ii) the Manager sends the Capital Call Notice;
(iii) the Subscriber pays its Capital Commitments as and when specified in the Capital call Notice; and
(iv) the Company purchases the Target Property (described in the Offering Memorandum).
The materials provided in the Subscription Package, including the Offering Memorandum, supersede all prior communications about the Company and the Securities being sold. Investors should not rely on prior communications, including slide presentations, website content or other marketing materials, which were prepared without legal advice solely to assess whether there was sufficient interest by investors in a Company of this nature. After careful review of the Offering Memorandum, the Operating Agreement (as defined in the Offering Memorandum), this Agreement, and Investor's completed Information Form and Questionnaire included within the Subscription Package (the "Investor Questionnaire"), the Investor desires to subscribe for and purchase Securities in and become a member of the Company.
The parties are entering into this Agreement to set forth the terms and conditions on which the Investor will subscribe for and purchase Securities and become a member of the Company.
Statement of Agreement
Now therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. Capitalized terms not set forth below have the meanings set forth in the main body of this Agreement, or if not defined below or in the main body of this Agreement, capitalized terms have the meanings given to them in the Operating Agreement.
"Accepted Capital Commitment" shall mean the amount of Investor's Requested Capital Commitment that has been accepted by the Company (which will cover a specific number of units), each as set forth on the signature page to this Agreement, it being understood that if no amount is indicated, the Company shall be deemed to have accepted the entire Requested Capital Commitment.
“Closing of Target Property Acquisition” shall mean the acquisition by the Company of the Target Property described in the Offering Memorandum.
“Closing of Investment” shall mean the Company having the right to use or transfer Capital Contributions made by Investor at or about the time of the Closing of the Target Property Acquisition and Investor becoming a Member of the Company and owning Class B Units.
"Conditions Precedent to Investment Closing" shall mean:
(i) receipt by the Company of this Agreement, the Investor Questionnaire, and the Joinder Agreement (completed and signed by the Investor) and, if required, a completed and executed Verification Letter;
(ii) (ii) the information and representations of Investor provided in the Investor Subscription Information being complete, true and correct as of the date of this Agreement, as of the Subscription Effective Date and as of the Payment Date;
(iii) (iii) receipt of the Initial Capital Contribution by the Company (either through the release of such amounts from escrow or direct payment by the Investor); (
(iv) delivery by the Company to the Investor of a fully executed copy of this Agreement and a copy of the Operating Agreement with Investor’s executed Joinder Certificate attached;
(v) if necessary, the return any amounts paid toward any rejected portion of the Investor’s subscription, without interest, as described above; and (vi) satisfaction of the Minimum Offering Amount by the Termination Date (as described in the Memorandum);
(vi) the Company acquires the Target Property (as defined in the Offering Memorandum) either (x) without material changes that are adverse to the Company to the terms described in the Offering Memorandum or (y) on such other terms as the Company describes in a supplement to the Offering Memorandum, if the Company describes the new acquisition terms in a supplement to the Offering Memorandum (an “Updating Disclosure”) and following such Updating Disclosure Investor (x) reconfirms in writing its subscription and (y) pays the amount of its Accepted Capital Commitment (the “Target Property Acquisition Condition”); and
(vii) the Company obtains financing for acquisition of the Target Property (as defined in the Offering Memorandum).
"Good Faith Deposit" shall mean Ten (10%) Percent of the Accepted Capital Contribution (or such other amount paid by Investor approved by the Manager).
"Requested Capital Commitment" shall mean the maximum number or amount of Securities (representing Investor's Capital Commitment), as set forth on the signature page to this Agreement, Investor subscribes for and offers to purchase in the Offering, subject to acceptance by the Company.
“Withdrawal Right” shall mean the right of Investor to (i) terminate this Subscription Agreement, (ii) receive the refund of any Good Faith Deposit Investor paid and (ii) receive the refund of any Capital Contribution the Investor paid.
“Withdrawal Right Conditions” shall mean any of the following: (i) the failure of the Closing of the Target Property Acquisition to occur on or before Dec 31st, 2021 for the initial Subscribers, or within 6 months after any prior closing for any additional set of Subscribers(the “Withdrawal Rights Date”) or (ii) the Closing of the Target Property Acquisition occurred and the Target Property Acquisition Condition has not occurred or (iii) the Closing of the Target Property Acquisition occurred and the Financing Condition has not occurred.
2. Subscription. Investor hereby subscribes for and offers to purchase from the Company the Requested Capital Commitment on the terms and conditions set forth herein. Investor understands that payment of the Initial Capital Commitment is due on or prior to the Payment Date in connection with the Investment Closing (defined above) in the manner set forth below. Investor understands that payments made prior to the Investment Closing will be held in an account established by the Company for purposes of this Offering, but will not be held or administered by any independent escrow agent and will be subject to the claims of the creditors of the Company. The Securities have the rights and obligations, and are subject to the restrictions (including restrictions on transfers), set out in the Operating Agreement. Investor acknowledges and agrees that, as set forth in more detail in the Operating Agreement, the Securities are subject to forfeiture in the event Investor fails to comply with any call for Capital Commitments.
(a) The Investor acknowledges and agrees that (i) this Agreement does not constitute a binding offer by the Company to sell any Securities to the undersigned, (ii) the Company may accept or reject all or any portion of the Investor’s requested subscription in its sole discretion, and (iii) if all or any part of the Investor’s subscription is accepted by the Company at the Closing, the Investor shall be deemed to have purchased such number of Securities representing a Capital Commitment equal to the Accepted Capital Commitment.
(b) Notwithstanding anything contained herein to the contrary, the Investor may exercise its Withdrawal Rights upon occurrence Withdrawal Rights Conditions. If the Investor properly exercises its Withdrawal Rights, the Company shall promptly cancel Investor's subscription and return to the Investor any amounts paid by the Investor toward the Investor’s subscription, without interest, and this Agreement shall be of no further force and effect.
(c) In the case of the failure of the Closing of the Target Property Acquisition to occur on or before the Withdrawal Rights Date, the Investor shall cease to be able to exercise its Withdrawal Rights, unless the Investor provides the Company with written notice of exercise of its Withdrawal Rights at least thirty (30) days before the Closing of the Target Property Acquisition occurs or (ii) not more than at thirty (30) days after the date the subscription is submitted to the Company if submitted after the Withdrawal Rights Date. If Withdrawal Rights arise for any other Withdrawal Right Condition, the Withdrawal Right will automatically terminate, unless the Investor provides the Company written notice of exercise of its Withdrawal Rights within Thirty (30) days after Investor first becomes aware of the occurrence of the Withdrawal Right Condition.
3. Acceptance of Subscription.
(a) It is understood and agreed that the Company shall have the sole right, at its complete discretion, to accept or reject this subscription, in whole or in part for any reason and that the same shall be deemed to be accepted by the Company only when this Agreement is signed by a duly authorized officer of the Company and delivered to the undersigned at the Closing.
(b) By countersigning this Agreement, indicating the amount of the Accepted Capital Commitment , the Company accepts the Investor's subscription for the Accepted Capital Commitment and at the Closing, the Company agrees to issue and sell to the Investor such number or amount of Securities representing the Accepted Capital Commitment as of the Member Effective Date.
(c) Notwithstanding anything contained herein to the contrary, until actual delivery by Investor of the Capital Contribution, acceptance by the Company of the Capital Contribution and completion of the Conditions Precedent to Closing, the Company shall have no obligation to Investor. The Company may revoke a prior acceptance of this Agreement at any time prior to delivery to and acceptance by the Company of the Initial Capital Contribution, this Agreement and the Joinder Agreement.
(d) The Investor agrees that the Accepted Capital Commitment is the Investor’s entire Capital Commitment to the Company. Investor shall make payment of the Initial Capital Contribution at or prior to the Payment Date by check or wire transfer of immediately available funds or other means approved by the Company directly to the account the Company designates in writing.
(e) If Accepted Capital Commitment is less than the Requested Capital Commitment, then (i) the Investor’s subscription shall for all purposes be deemed to have been rejected by the Company, but only to the extent of the difference between the Requested Capital Commitment and the Accepted Capital Commitment, (ii) to the extent any amounts have been paid by Investor to the Company (or to any account designated by the Company) prior to the Member Effective Date, the Company shall promptly return to the Investor any amounts paid by the Investor toward such rejected portion of the Investor’s subscription, without interest, and (iii) this Agreement shall be of no further force and effect with respect to such rejected portion of the Investor’s subscription. If the Investor’s subscription is rejected in its entirety, the Company shall promptly return to the Investor any amounts paid by the Investor toward the Investor’s subscription, without interest, and this Agreement shall be of no further force and effect.
(f) The Investor acknowledges that, in accepting all or any portion of the Investor’s subscription and in making their representations and warranties as set forth in Section 9, the Company is relying on the Investor’s representations and warranties contained in this Agreement, the Investor Questionnaire, Verification Letter and any other documentation provided by Investor in connection with its subscription (the "Investor Subscription Information").
(g) Subscriptions need not be accepted in the order received, and the Securities may be allocated among subscribers. Notwithstanding anything in this Subscription Agreement to the contrary, the Company shall have no obligation to issue any of the Securities to any person who is a resident of a jurisdiction in which the issuance of Securities to such person would constitute a violation of the securities, "blue sky" or other similar laws of such jurisdiction.
4. Adoption of Operating Agreement.
(a) The Investor acknowledges that, as of the Member Effective Date, it shall become a Member of the Company and that the Operating Agreement shall become binding on the Investor in accordance with its terms at the Closing upon satisfaction of the Conditions Precedent to Closing.
(b) The Investor acknowledges and agrees that, pursuant to the terms of the Operating Agreement, (i) Investor's Securities will be automatically forfeited in the event Investor fails to make timely payment of its remaining Capital Contribution; (ii) ownership of the Securities are subject to other risks outlined in the Memorandum and in the Operating Agreement.
5. Closing; Payment Date. The closing of the purchase and sale of the Securities (the "Closing" and payment of the Capital Contribution (the "Payment Date") shall take place at such time and place as may be selected by the Company in its sole discretion upon satisfaction of the Conditions Precedent to Closing. In furtherance of the foregoing, the Company is entitled to designate the Payment Date, the Subscription Effective Date and/or the Member Effective Date on the signature page hereto or by any other written communication.
6. Other Subscription Agreements. The Investor acknowledges and agrees that the Company has previously entered into and may in the future enter into separate subscription agreements ("Other Subscription Agreements") with other investors ("Other Investors") pursuant to which the Company has issued or shall issue Securities to such Other Investors. The Investor acknowledges and agrees that (a) this Agreement and each Other Subscription Agreement are separate agreements, (b) some or all of the Other Subscription Agreements may differ from this Agreement in one or more material respects, (c) the sale of Securities to the undersigned and the Other Investors shall be deemed separate sales, and (d) subject to the Operating Agreement, each such sale, and the admission of the Other Investors as Members, may be effected without the Investor’s consent.
7. Representations and Warranties of the Investor. The Investor hereby represents and warrants to each of the Company and the Manager that the representations, warranties, understandings, acknowledgments, obligations, and agreements of Investor set forth below and otherwise set forth in the Investor Subscription Information are true and accurate as of the date hereof, shall be true and accurate as of the Subscription Effective Date and the Payment Date and shall survive thereafter.
(a) General.
(i) If the Investor is a natural person, the Investor is 21 years of age or older and a U.S. citizen.
(ii) If the Investor is a corporation, trust, partnership, limited liability company or other entity, it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation, it has the power and authority to own its property and carry on its business as presently conducted, and it is duly qualified to do business and is in good standing in each of the jurisdictions in which the nature of its business so requires or in which it is required for the performance of its obligations hereunder and under the Operating Agreement.
(iii) The Investor has the full right, power and authority to execute and deliver this Agreement and the Operating Agreement and to perform all of the Investor’s obligations hereunder and thereunder, and if the Investor is a corporation, trust, partnership, limited liability company or other entity, the execution, delivery and performance by the Investor of this Agreement and the Operating Agreement have been duly authorized by all necessary organizational action.
(iv) Upon the Investor’s execution and delivery of this Agreement and the Operating Agreement, such agreements shall constitute the legal, valid and binding obligation of the Investor and shall be enforceable against the Investor in accordance with their terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights or by general principles of equity (whether in a court of law or equity). Neither the execution and delivery of such agreements, the consummation of the transactions contemplated hereby or thereby, nor the compliance by the Investor with any of the provisions hereof or thereof shall conflict with, result in the breach of, constitute a default under, accelerate the performance required by the terms of, or result in the creation of any lien, claim or any other encumbrance upon the Investor’s Securities pursuant to any law, rule or regulation of any government or governmental or regulatory agency, any judgment, order, writ, decree, permit or license of any court or governmental or regulatory agency to which the Investor or any of its assets may be subject, any contract, agreement, commitment or instrument to which the Investor is a party or by which it or any of its assets is bound or committed, or the Investor’s constituent documents or other governing instruments in any way that would restrain or prohibit the Investor from consummating the transactions contemplated hereunder in any material respect. The execution and delivery of this Agreement by the Investor and the performance and consummation of the transactions contemplated hereby do not require any registration, filing, qualification, consent or approval under any such law, rule, regulation, judgment, order, writ, decree, permit, license, contract, agreement, commitment, document or instrument.
(v) There is no action, suit, claim, proceeding or arbitration pending against the Investor, or threatened against it, at law or in equity, before or by any governmental or regulatory department, commission, board, bureau, agency or instrumentality, domestic or foreign, which, if adversely determined, would call into question the validity or prevent the consummation of the transactions contemplated by this Agreement or the Operating Agreement or materially and adversely affect the Investor’s ability to Company the Investor’s Capital Commitment pursuant to the terms of this Agreement and the Operating Agreement.
(vi) The Investor currently has, and had immediately prior to receipt of any offer regarding the Company, such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the Company. The Investor understands that there is no guarantee of any financial return on the Investor’s purchase of Securities or investment in the Company and that the Investor runs the risk of losing its entire investment. The Investor is able now, and was able at the time of receipt of any offer regarding the Company, to bear the economic risks of its investment in the Company, including the complete loss of the investment. The Investor’s overall commitment to investments that are not readily marketable, including the Securities, is not disproportionate to the Investor’s overall net worth.
(vii) All information about the Investor set forth in the Investor Subscription Information, is correct and complete (subject to such knowledge, materiality and other qualifiers as may be specifically set forth herein). All other information that the Investor has provided to the Company concerning the Investor is correct and complete.
(viii) The Investor has not reproduced, duplicated or delivered to any other person or entity all or any portion of this Agreement, the Operating Agreement, the Memorandum or any other document containing Confidential Information, except as expressly permitted pursuant to the Operating Agreement.
(ix) No person or entity shall be entitled to any broker’s, finder’s or similar fees from the Company or the Manager or their affiliates in connection with the Investor’s purchase of the Securities pursuant to this Agreement by reason of any arrangements made or action taken by or on behalf of the Investor.
(x) The Investor has sufficient Capital available to it to pay the Capital Commitment to the Company.
(b) Access to and Receipt of Information.
(i) The Investor has received a copy of the Operating Agreement. The Investor has reviewed the Operating Agreement and understands the risks of, and other considerations relating to, the purchase of any Securities.
(ii) The Investor has read carefully and understands this Agreement and the Operating Agreement and has not relied, in connection with its investment in the Company, upon any representations or warranties other than those set forth in this Agreement and any Side Letters (as defined below). The Investor understands that the terms of its investment in the Company are governed by the terms of this Agreement, any such Side Letter, and the Operating Agreement, which supersede any summary or description included in any other documentation or information provided to the Investor.
(iii) The Investor has been furnished the Memorandum and any and all materials that it has requested relating to the Company and the offering of the Securities, and the Investor has been afforded the opportunity to obtain any additional information necessary to verify the accuracy of any such information. Furthermore, the Investor acknowledges that certain information contained in materials and disclosures provided by the Manager, the Company or any of their respective affiliates to the Investor constitute "forward-looking statements," which can be identified by the use of forward-looking terminology such as, but not limited to, "may," "will," "should," "expect," "anticipate," "project," "estimate," "intend," "continue," or "believe," or other variations thereon or comparable terminology. The Investor acknowledges that the actions of the persons and entities to be retained to operate the hotel and other assets the Company purchases, and who are not parties to this Agreement or any other agreement with Investor, may have a material impact on the Company's operations or its ability to achieve its investment objectives. The Investor further acknowledges that actual events or results or the actual performance of the Company or other subjects of such statements may differ materially from those reflected or contemplated in such forward-looking statements. The Company and the Manager have answered all inquiries that the Investor has made of them concerning the Company and the offering of Securities to the Investor’s satisfaction.
(c) Securities Matters.
(i) The Investor is an "accredited investor" as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder, the "Securities Act"), in each case for the reasons identified in the Investor Questionnaire submitted by the Investor to the Company concurrently with its execution and delivery of this Agreement.
(ii) Investor acknowledges that the Company has engaged in general solicitation of the Offering and consequently will rely on the federal securities exemption provided under Rule 506(c) of Regulation D promulgated under the Securities Act. Investor understands that the Company may condition acceptance of any subscription under this Agreement upon its receipt of written verification (in the form provided to Investor or such other form acceptable to the Company) (the "Verification Letter") from a registered broker-dealer, a SEC-registered investment adviser, a licensed attorney, or a certified public accountant of Investor's status as an accredited investor.
(iii) The Investor is a resident of or, if an entity, has its principal place of business in the state, territory or other jurisdiction identified in the address set forth in the Investor Questionnaire, and the offer to purchase any Securities was made to the Investor in such state, territory or other jurisdiction. If the Investor is a non-U.S. resident, has its principal place of business outside the U.S., or was offered the opportunity to purchase any Securities outside the U.S., the Investor shall have so indicated to the Company in writing at least five (5) business days prior to the date hereof, identifying the jurisdiction(s) in which it resides, in which it has its principal place of business, and where such offer was made.
(iv) The Investor is acquiring any Securities for its own account, as principal, for investment and not with an intent to resell or distribute all or any part of such Securities, and the Investor agrees that the Investor shall not resell, distribute or otherwise dispose of all or any part of its Securities except in compliance with the terms of the Operating Agreement and as permitted by law, including the Securities Act.
(v) [intentionally omitted]
(vi) The Investor acknowledges that the offering of any Securities to the Investor is being made pursuant to an exemption from the registration requirements of the Securities Act, that no materials relating to such offering have been filed with or reviewed by the Securities and Exchange Commission (the "SEC") or any state or non-U.S. securities regulatory agency, and that neither the SEC nor any state or non-U.S. securities regulatory agency has approved or disapproved of the Securities or determined if any materials relating to the transactions contemplated herein are truthful or complete.
(vii) The Investor understands that transfers of the Securities are also subject to restrictions set forth in the Operating Agreement and are permitted only with the prior consent of the Manager, which consent may be withheld in its reasonable discretion. The Investor understands that the Securities are not divisible and may not otherwise be encumbered, except with the prior written consent of the Manager, which consent may be withheld in its reasonable discretion. The Investor understands that it will not have any rights to receive distributions or withdraw from the Company or to require the Company to redeem or repurchase its Securities prior to final liquidation and termination of the Company and as a result, it may be required to hold the Securities for the entire life of the Company.
(viii) The Investor understands that, in addition to the substantial restrictions on the transfer of Securities contained in the Operating Agreement, the Investor must bear the economic risks of its investment for an indefinite period of time because the Securities have not been registered under the Securities Act and therefore may not be sold or otherwise transferred unless they are registered under the Securities Act, or unless an exemption from such registration is available and, in either case, the Company consents to such transfer. The Investor also understands that the Company does not intend to register the Securities under the Securities Act or to supply the information that may be necessary to enable the Investor to sell its Securities thereunder. In particular, Investor is aware that the Securities may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all conditions of Rule 144 are met. Among the conditions for the use of Rule 144 may be the availability of current and adequate information to the public about the Company. Such information is not now available and, the Company has no obligation to make such information available.
(ix) The Investor understands that the Company is not registered, and does not intend to register, as an "investment company" under the Investment Company Act.
(x) Neither the Company, the Manager nor any of their respective agents, members or affiliates has exercised any discretionary authority or control with respect to the Investor’s purchase of its Securities, and neither the Company, the Manager nor any of their respective agents, members or affiliates has rendered individualized investment advice to the Investor based upon the Investor’s investment policies or strategy or overall portfolio composition or diversification.
(xi) The Investor understands that, except as specifically contemplated in the Investment Advisers Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Advisers Act"), the Company and not the Investor or any other Member is the "client" of the Manager for purposes of the Investment Advisers Act. The Investor further understands that various client approvals and other actions of the Company as a client of the Manager taken pursuant to or contemplated in the Investment Advisers Act may be granted or taken, as applicable, on behalf of the Company by the Manager or by less than all of the Members, including without the approval of the Investor.
(xii) The Investor has been advised to consult with its own attorneys regarding legal and regulatory matters concerning the Company and to consult with an independent tax advisor regarding the tax consequences of an investment in the Company. In acquiring its Securities, the Investor has relied only on the advice of the Investor’s own advisors, if any, none of which are affiliated with the Company or the Manager.
(d) Bad Actor. Neither Investor; nor any other "Covered Person" (as defined below) is a "Bad Actor" (as defined below).
(i) The term "Covered Person" includes: (1) the issuer of Securities being sold, including its predecessors and affiliated issuers; (2) any executive officer, director, general partner or managing member of the issuer; (3) any officer of the issuer who is participating in this offering of securities contemplated by this Agreement; (4) any beneficial owner of twenty (20%) percent or more of any class of the issuer's outstanding voting equity securities (calculated on the basis of voting power).
(ii) The term, "Bad Actor" includes any person or entity about which any of the following are true. The person or entity: (1) has been convicted, within ten years before the sale of securities contemplated by this Agreement (or five years, in the case of issuers, their predecessors and affiliated issuers), of any felony or misdemeanor: (a) in connection with the purchase or sale of any security; (b) involving the making of any false filing with the SEC; or (c) arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities; (2) is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years before such sale, that, at the time of such sale, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice: (a) in connection with the purchase or sale of any security; (b) involving the making of any false filing with the Commission; or (c) arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities; (3) is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U. S. Commodity Futures Trading Commission; or the National Credit Union Administration that: (a) at the time of such sale, bars the person from: (i) association with an entity regulated by such commission, authority, agency, or officer; (ii) engaging in the business of securities, insurance or banking; or (iii) engaging in savings association or credit union activities; or (b) constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within ten years before such sale; (4) is subject to an order of the Commission entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b) or 78o-4(c)) or section 203(e) or (f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(e) or (f)) that, at the time of such sale: (a) suspends or revokes such person's registration as a broker, dealer, municipal securities dealer or investment adviser; (b) places limitations on the activities, functions or operations of such person; or (c) bars such person from being associated with any entity or from participating in the offering of any penny stock; (5) is subject to any order of the Commission entered within five years before the sale of securities contemplated by this Agreement that, at the time of such sale, orders the person to cease and desist from committing or causing a violation or future violation of: (a) any scienter-based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (15 U.S.C. 77q(a)(1)), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and 17 CFR 240.10b-5, section 15(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78 o (c)(1)) and section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)), or any other rule or regulation thereunder; or (b) Section 5 of the Securities Act of 1933 (15 U.S.C. 77e); (6) is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade; (7) has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the Commission that, within five years before the sale of securities contemplated by this Agreement , was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of the sale of securities contemplated by this Agreement, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; or (8) is subject to a United States Postal Service false representation order entered within five years before the sale of securities contemplated by this Agreement, or is, at the time of the sale of securities contemplated by this Agreement, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.
(e) Money Laundering.
(i) The Investor has reviewed the most current version of the Specially Designated Nationals and Blocked Persons List (the "SDNL") maintained by the U.S. Treasury Department’s Office of Foreign Assets Control ("OFAC"), reviewed the regulations promulgated by OFAC relating to trade sanctions against designated persons and countries and conducted such other investigation as the Investor deems necessary or prudent, prior to making the representations and warranties contained in this Section 7. The Investor acknowledges that U.S. federal regulations and executive orders administered by OFAC prohibit, among other things, engaging in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals, and if the Investor qualifies as a Prohibited Investor (as defined below), applicable law may require the Company, among other things, to freeze the Investor’s assets in the Company and notify appropriate legal authorities.
(ii) All evidence of identity provided to the Company in connection with the Investor’s acquisition of its Securities, including the Investor Subscription Information (including without limitation information provided by the Investor in the signature pages hereto, in response to written due diligence inquiries of the Company and in the representations and warranties set forth herein), is genuine and all related information furnished to the Company is true, accurate and complete.
(iii) No funds tendered for the acquisition of the Investor’s Securities are, and no funds tendered to the Company to satisfy the Investor’s obligation to make capital contributions thereto shall be, directly or indirectly, derived from unlawful activities or governments, entities or individuals subject to sanctions under OFAC regulations, or in contravention of U.S. federal, state or international laws and regulations, including treaties and anti-money laundering laws. Without limiting the generality of the foregoing, no contribution or payment to the Company by the Investor shall (to the extent that such matters are within the Investor’s control) cause the Company, the Manager or any of their respective affiliates to be in violation of the U.S. Bank Secrecy Act, the U.S. Money Laundering Control Act of 1986 or the U.S. International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.
(iv) Neither the Investor, nor any person controlling, controlled by, or under common control with the Investor, or for whom the Investor is acting as agent or nominee in connection with the acquisition of any Securities is any of the following (a "Prohibited Investor"):
(A) A country, government, territory, organization, person or entity named on the SDNL or is otherwise a person subject to sanctions under OFAC regulations;
(B) A person or entity that resides or has a place of business in a country or territory named on such lists or which is designated as a Non-Cooperative Jurisdiction by the Financial Action Task Force on Money Laundering or whose subscription Companys are transferred from or through such a jurisdiction;
(C) A "Foreign Shell Bank" within the meaning of the USA PATRIOT Act (i.e., a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision);
(D) A person or entity that resides in or is organized under the laws of a jurisdiction designated by the Secretary of the Treasury under Section 311 or 312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns; or
(E) Any other person with whom a transaction is prohibited by the USA PATRIOT ACT, Executive Order 13224, the Trading With the Enemy Act, or the foreign assets control regulation of the U.S. Treasury Department.
(v) Neither the Investor, nor any person controlling, controlled by, or under common control with the Investor, or for whom the Investor is acting as agent or nominee in connection with the acquisition of any Securities, is a "Covered Person" within the meaning of the Guidance on Enhanced Scrutiny for Transactions that May Involve the Proceeds of Foreign Official Corruption, issued by the Department of the Treasury, et al., January, 2001.
(f) Taxpayer Status.
(i) The Investor has provided its correct Social Security or taxpayer identification number in the Investor Questionnaire or, if no such number is provided, the Investor is waiting for such a number to be issued.
(ii) The Investor has provided the Manager a properly completed U.S. Internal Revenue Service Tax Form W-9, W-8BEN, W-8EXP, W-8IMY or W-8ECI, as appropriate. The Investor will, if applicable, provide the Company with a properly completed Form W-8BEN-E promptly once such form becomes available.
(iii) Either (a) the Investor is not an entity that is treated as a partnership, grantor trust or S corporation for U.S. federal income tax purposes, or (b) the Investor is such an entity but (i) less than 65% of the Investor’s value shall be attributable to the Investor’s Securities to be acquired by the Investor pursuant to this Agreement and (ii) permitting the Company to satisfy the 100-partner limitation in Section 1.7704 1(h)(1)(ii) of the Regulations is not a principal purpose of the Investor’s beneficial owners investing in the Company through the Investor, provided that if the Investor is unable to make either such representation, the Investor shall have so indicated to the Company in writing at least five (5) business days prior to the date hereof and shall have provided the Company with evidence (including opinions of counsel), satisfactory in form and substance to the Company, relating to the status of the Company under Section 7704 of the Code.
(g) ERISA Matters. Unless otherwise disclosed in writing in the Investor Questionnaire, the Investor is not, and the Investor is not acting on behalf of (x) a plan subject to the provisions of Title I of ERISA; (y) a "plan" described in Section 4975(e)(1) of the Code (including individual retirement plans and Keogh plans); or (z) an entity which is deemed to hold "plan assets" within the meaning of Section 3(42) of ERISA and any related regulations.
8. Survival; Defense. The foregoing representations and warranties of the Investor shall survive the execution and delivery of this Agreement and the issuance of any Securities by the Company to the Investor. The Investor acknowledges and agrees that the foregoing representations and warranties may be used by the Company, the Manager and their respective affiliates as a defense in any action relating to the Company or the transactions contemplated herein, and that the Company would not be willing to enter into this Agreement or engage in the transactions contemplated herein if any such representations and warranties were not true and correct. The Investor acknowledges its obligation pursuant to Section 13 below to inform the Company of any inaccuracies in its representations and warranties that may exist at any time.
9. Representations and Warranties of the Manager and the Company. The Manager and the Company hereby represent and warrant to the Investor as of the Effective Date that:
(a) The Company is a limited liability company formed, validly existing and in good standing under the laws of the State of Delaware. The Manager is a limited liability company organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Company and the Manager has all requisite power and authority to own and operate its properties, to enter into this Agreement and, as applicable, the Operating Agreement, to perform its obligations under this Agreement and, as applicable, the Operating Agreement, and to issue and sell the securities offered hereby.
(b) Each of the Company and the Manager has the full right, power and authority to execute and deliver this Agreement and, if applicable, the Operating Agreement, and to perform all of its obligations hereunder and thereunder, and the execution, delivery and performance of this Agreement and, if applicable, the Operating Agreement by each of the Company and the Manager have been duly authorized by all necessary organizational action by each such party.
(c) Upon the execution and delivery of this Agreement and, if applicable, the Operating Agreement by each of the Company and the Manager, this Agreement and the Operating Agreement shall constitute the legal, valid and binding obligation of each such party and shall be enforceable against each such party in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights or by general principles of equity (whether in a court of law or equity). Neither the execution and delivery of this Agreement and, if applicable, the Operating Agreement, the consummation of the transactions contemplated hereby or thereby, nor the compliance by any such party with any of the provisions hereof or thereof shall constitute a breach or default under any agreement or other instrument or obligation to which such party is a party or by which such party is otherwise bound.
(d) There is no outstanding judgment, decree, injunction, rule, order or award of any court, governmental department, commission, board, bureau, agency, instrumentality, domestic or foreign, or arbitrator against the Company or the Manager that would prevent the consummation of the transactions contemplated by this Agreement or have a material adverse effect on the Company, and no action, suit or similar proceeding is pending or has been threatened against any of them that might have any such effect. Each of the Company and the Manager is in compliance in all material respects with all material laws, rules and regulations applicable to it.
(e) No consent, approval or authorization of, or declaration or filing with, any governmental authority on the part of the Company or the Manager, other than those that have been obtained, given or made as of the Effective Date as set forth on the signature page hereto, is required prior to such date for the valid execution and delivery of this Agreement by the Company or the Manager or the valid offer and sale of any Securities or other transactions contemplated by this Agreement.
(f) [intentionally omitted]
10. Conflicts of Interests. The Investor has read and reviewed the Operating Agreement and the Memorandum and has specifically noted that certain conflicts of interest involving the Company, the Manager and their respective affiliates exist or may arise and that the Company, the Manager and their respective affiliates may engage in certain affiliate transactions permitted by the Operating Agreement. The Investor also acknowledges and approves the representation of one or more of the Company, the Manager and their respective affiliates by the same legal counsel and hereby waives any claim against the Company, the Manager and their respective affiliates and such legal counsel in respect of any conflict of interest that exists or may arise by virtue of such representation.
11. [intentionally omitted]
12. Indemnification.
(a) To the extent permitted by law, each party shall indemnify and hold harmless the other parties hereto and their respective managers, members, directors, officers, agents, employees, representatives, affiliates and subsidiaries, and any other person subject to liability because of its relationship with the foregoing persons (collectively, the "Indemnified Parties") against all claims, losses, damages and liabilities (or actions in respect thereof) resulting from any breach by such indemnifying party (th