Amendment No. 1

Amendment No. 1 to the Limited Liability Company Agreement of Pleasant Valley Property, LLC

This Amendment No. 1 (this “Amendment”) to the Limited Liability Company Agreement of Pleasant Valley Property, LLC, dated January 1, 2024 (the “Agreement”), is adopted by the Members owning a Majority in Interest pursuant to Section 13.10 of the Agreement.

All capitalized terms used but not defined herein shall have the meanings given in the Agreement.

1. Enhance “Capitalization Default” with Penalty Interest and Buy-Out Right

Replace the existing definition of “Capitalization Default” in Section 1.01 with the following:

Capitalization Default means:

1. The failure of PV Legacy Investment, LP to timely make any required Initial Investment, Subsequent Investment or Ongoing Investment;
2. The failure to cure such missed Capital Contribution within thirty (30) days after written notice (the “Cure Notice”) to PV Legacy; or
3. The second or any subsequent failure by PV Legacy to timely make a Capital Contribution within any consecutive twelve-month period, regardless of cure.

Upon occurrence of a Capitalization Default, the following shall apply until PV Legacy fully cures:

• Default Interest accrues on the overdue Capital Contributions at an annual rate of one and one-half percent (1.5%) above the Company Interest Rate, compounded monthly, from the due date until paid in full.
• Within ten (10) Business Days after expiration of the thirty-day cure period, the non-defaulting Members may deliver a written Buy-Out Notice to PV Legacy stating their election to purchase all (but not less than all) of PV Legacy’s Membership Interest (the “Buy-Out Right”), on the following terms:
  • Buy-Out Price = Book Value of PV Legacy’s Capital Account as of the date of Buy-Out Notice × (1 – 10%).
  • Payment may be made 20% in cash at closing and 80% by a promissory note over four (4) years at the Default Interest Rate.
• If the non-defaulting Members or the Company do not exercise the Buy-Out Right within thirty (30) days after the Cure Notice deadline, PV Legacy’s interest is subject to dilution as provided in Section 6.01(b).

2. Mirror Transfer Lock-Up for PV Legacy Affiliates

Amend Section 9.02 to read:

9.02 Permitted Transfers.
No Member may Transfer any Membership Interest except:

1. To its Spouse, or certain trusts or Affiliates for the benefit of the Member or its Spouse; or
2. To an Affiliate only if the transferring Member remains liable for all obligations and the transferee executes a Joinder Agreement; provided that such Affiliate is bound by the same transfer restrictions, lock-up periods and “Involuntary Transfer” provisions as the original Member.

3. Revise Right of First Refusal (ROFR) / Tag-Along

Replace Section 9.03 with:

9.03 Right of First Refusal & Tag-Along.

1. ROFR. After Full Capitalization, if a Member (“Offering Member”) receives an arm’s-length bona fide offer for all or any portion of its interest, it must first offer those interests to the other Members on identical terms. The ROFR Notice Period is forty-five (45) days.
2. Tag-Along. If PV Legacy elects not to purchase, and the Offering Member nonetheless sells to a third party, PV Legacy may include up to 100% of its interest in the same transaction on the same terms (the “Tag-Along Right”).
3. Drag-Along. If Members holding at least 85% of all outstanding Interests elect to sell to a bona fide third-party buyer, all remaining Members must consent and sell on the same terms.

4. Require Member Consent for All Issuances

Amend Section 7.05(b) by striking the carve-out for PV Legacy’s Subsequent Investments and Ongoing Investments, so that it reads:

7.05(b) Except with the unanimous approval of all Members, the Company shall not issue additional Membership Interests or admit additional Members.

Deep Dive: Amended “Capitalization Default” Definition

Original Defect:

• No economic penalty beyond a 20% haircut on sale.
• No mechanism to remove or buy out a delinquent PV Legacy.

Key Enhancements:

• Expanded default triggers to cover repeat misses.
• Added Default Interest Rate (CPI + 1.5% pa) to discourage funding lapses.
• Created an explicit Buy-Out Right at a fair formula price, exercisable by non-defaulting Members.
• Retained dilution/dilution-trigger on unsold Interests as a last resort.

Why It Works:

• You gain immediate leverage upon default—interest and buy-out.
• PV Legacy faces real economic consequences beyond delaying distributions.
• Clear formulas eliminate valuation disputes.

What section would you like me to tackle next in depth? We could drill into:

• Article VII (Management & Removal)
• Article VI (Distributions safeguards)
• Article X (Indemnification enhancements)

Just let me know where you’d like to go deeper.