Exhibit 10.31

 

SUBSCRIPTION AGREEMENT

(Membership Interests in Extra Space Development, LLC)

 

THIS SUBSCRIPTION AGREEMENT (“Agreement”) is made this 31 day of December, 2007,
by and among Extra Space Development, LLC (“Company”), and Extra Space Storage
LLC (“Subscriber”), (the Company and the Subscriber are sometimes collectively
referred to as “Parties.”)

 

WITNESSETH:

 

WHEREAS, the Company has entered into six agreements with the Subscriber for the
purchase and sale of limited liability company interests, as identified in the
attached Exhibit A (“Six Sale Agreements”); and

 

WHEREAS, Subscriber desires to acquire certain membership interests in the
Company for the consideration set forth herein; and

 

WHEREAS, the Parties desire to enter into this Agreement to set forth with
specificity and detail the terms and conditions upon which the foregoing
subscription and acquisition of membership interests shall be accomplished.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound, the Parties hereto agree as
follows:

 

1.             Sale of Membership Interest. The Subscriber agrees to contribute,
and the Company agrees to accept from Subscriber, the sum of $356,718.90 as a
capital contribution to Company in exchange for a membership interest in the
Company as described below.

 

2.             Admission/ Operating Agreement. Subscriber hereby consents to the
Amended and Restated Operating Agreement of the Company dated January 1, 2004
(“Operating Agreement”) and agrees to be bound thereby, subject to the further
Second Amended and Restated Operating Agreement attached hereto as Exhibit B,
which shall be effective as of the Effective Date of this Agreement.

 

3.             Subscriber Review of Disclosure Materials. Subscriber
acknowledges that it has received no representations or warranties from the
Company, the Manager, Kenneth M. Woolley or by any person acting on behalf of
the Company, with respect to the proposed business of the Company, or any other
aspects or consequences of a purchase of membership interests, and that
Subscriber has not relied upon any information concerning the Company, written
or oral. Subscriber represents and warrants to Company and Manager that it has
had full access to Company records and has made such inquiry regarding the
Company and its business, as Subscriber deems necessary.

 

4.             Subscriber Representations and Warranties. The Subscriber further
represents and warrants to the Company as follows:

 

(a)           Economic Risk. The Subscriber is aware that the membership
interests are speculative investments involving a high degree of risk.

 

(b)           Counsel. Subscriber, its counsel, its advisors, and such other
persons, with whom it has found it necessary to consult, have sufficient
knowledge and experience in business and financial matters

 

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to evaluate the Company, and the merits and risks of the investment, and to make
an informed investment decision with respect thereto.

 

(c)           Examination. The Company has made available to the Subscriber, its
counsel and advisors, prior to the date hereof, the opportunity to ask questions
of, and to receive answers from, the Company and its representatives, concerning
the terms and conditions of the investment, and access to obtain any
information, documents, financial statements, records and books (i) relative to
the Company, the business, and an investment in the Company, and (ii) necessary
to verify the accuracy of any information furnished to the Subscriber.

 

(d)           Transfer Restrictions. The membership interests are subject to
restrictions on transferability and resale and may not be transferred or resold
except as permitted under the Operating Agreement, and applicable state and
federal securities laws, pursuant to registration or an exemption therefrom.
Subscriber should be aware that it might be required to bear the financial risks
of this investment for an indefinite period.

 

(e)           Correctness, Remaking of Warranties. The foregoing representations
and warranties are true and correct as of the date hereof and each such
representation and warranty shall survive the purchase of membership interests.

 

5.             Company Representations and Warranties: AS IS, WHERE IS. The
Company represents and warrants to the Subscriber as follows:

 

(a)           Company is a Utah limited liability company, and duly formed,
existing and in good standing in the State of Utah

 

(b)           Company has adopted a Plan of Dissolution in form attached as
Exhibit C, which includes a plan for a series of redemptions of the membership
interests of all of the existing members of the Company other than the
Subscriber.

 

(c)           The Company, and its members and managers, make no representations
or warranties to the Subscriber other than as specifically set forth herein.
Otherwise, and in all respects, the membership interest of the Company hereby
subscribed for, and the organizational documents of the Company, and the assets,
liabilities, and business of the Company are hereby approved by and conveyed to
the Subscriber “AS IS, WHERE IS” and without warranty of any kind.

 

6.             Miscellaneous.

 

(a)           Utah Law. This Subscription Agreement shall be construed in
accordance with and be governed by the laws of the State of Utah. The parties
hereto hereby agree to submit to the jurisdiction of the state of federal courts
in Utah to resolve all claims or disputes arising under this Subscription
Agreement.

 

(b)           Successors and Assigns. This Subscription Agreement shall be
binding upon and inure to the benefit of the successors, heirs, assigns and
personal representatives of all parties; provided, however, that Subscriber may
not assign its rights or delegate his duties under this Subscription Agreement.

 

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(c)           Effective Date. This Subscription Agreement shall become Effective
upon execution by all parties named below.

 

(d)           Entire Agreement. It is expressly understood that this
Subscription Agreement and the documents referred to herein constitute the
entire agreement of the parties hereto with respect to the subject matter
hereof. All prior understandings or commitments of any kind, oral or written,
pertaining thereto are hereby superseded and canceled.

 

(end of text)

 

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IN WITNESS WHEREOF, the Parties to this Agreement have duly executed it on the
date and year first above written.

 

COMPANY:

 

Extra Space Development, LLC

 

 

By:

/s/ Kenneth M. Woolley

 

Its: Manager

 

 

SUBSCRIBER:

 

Extra Space Storage LLC

 

 

By:

/s/ Kent W. Christensen

 

Its: Manager

 

CONSENT TO ADMISSION OF MEMBER

 

Pursuant to Article 3.06 of the Operating Agreement, the undersigned,
representing greater than 50% of the Membership Interests in the Company waive
any rights of first refusal set forth in the Operating Agreement and consent to
the transaction described above and the admission of Extra Space Storage LLC as
a Member of the Company.

 

MEMBERS:

KRISPEN FAMILY HOLDINGS, L.C., Member

 

 

 

 

/s/ Kenneth M. Woolley

 

By:

/s/ Spencer F. Kirk

Kenneth M. Woolley, Member

Spencer F. Kirk

Percentage Interest: 32.630%

Its: Manager

 

Percentage Interest: 20.195%

 

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EXHIBIT A

 

SIX SALE AGREEMENTS

 

1.    Agreement for Purchase and Sale of Limited Liability Company Interest
(Extra Space of Culver City LLC– ESS# 1160)

 

2.    Agreement for Purchase and Sale of Limited Liability Company Interest
(Extra Space of Middletown LLC– ESS# 1192)

 

3.    Agreement for Purchase and Sale of Limited Liability Company Interest
(Extra Space of Jamaica Plain– ESS# 1098)

 

4.    Agreement for Purchase and Sale of Limited Liability Company Interest
(Extra Space of Elk Grove LLC– ESS# 1166)

 

5.    Agreement for Purchase and Sale of Limited Liability Company Interest
(Extra Space of Extra Space West Two LLC)

 

6.    Agreement for Purchase and Sale of Limited Liability Company Interest
(Storage Associates Holdco)

 

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LC# 029047

 

 

 

 

 

RECEIVED

 

 

 

 

ARTICLES OF ORGANIZATION

SEP 22 1998

 

 

 

 

OF

 

 

 

 

[g361793kq01i001.jpg]

EXTRA SPACE DEVELOPMENT, LLC

 

 

The undersigned hereby form a limited liability company (the “Company”) —
pursuant to the Utah Limited Liability Company Act and adopt as the Articles of
Organization of such limited liability company the following:

 

1.             Name of the Company:

 

The name of the Company shall be “EXTRA SPACE DEVELOPMENT, LLC”

 

2.             Period of its Duration:

 

The duration of the Company shall be forty (40) years from the date of filing of
these Articles of Organization with the Division of Corporations & Commercial
Code of the State of Utah.

 

3.             Purposes of the Company.

 

The purposes for which the Company is organized are to develop, finance, lease,
construct, own, operate, maintain and sell real and personal property of all
types, and other related business within the State of Utah. In addition, the
Company shall have unlimited power to engage in and do any lawful act concerning
any or all lawful businesses for which limited liability companies may be
organized according to the laws of the State of Utah, including all powers and
purposes now and hereafter permitted by law to a limited liability company.

 

4.             Principal Place of Business and Registered Agent.

 

The address of the principal place of business of the Company is as follows:

 

 

Extra Space Development, LLC

 

488 East Winchester, Suite 150

 

Salt Lake City, UT 84107

 

The name and address of the agent for service of process is:

 

 

Kenneth M.Woolley

 

488 East Winchester, Suite 150

 

Salt Lake City, UT 84107

 

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However, if the agent appointed therein cannot be found or served with the
exercise of reasonable diligence, or if said agent’s authority has been revoked,
then the Utah Division of Corporations & Commercial Code is appointed as the
agent of the company for service of process.

 

5.             Management.

 

The Company is to be managed by a manager. The name and address of the manager
who is to serve until its successors are elected and qualify is:

 

 

Kenneth M. Woolley

 

488 East Winchester, Suite 150

 

Salt Lake City, UT 84107

 

6.             Operations.

 

The Company shall be governed by a written Operating Agreement, the terms of
which shall supplement the provisions of Utah law.

 

DATED: September 17, 1998.

 

 

 

/s/ KENNETH M. WOOLLEY

 

 

KENNETH M. WOOLLEY, Manager

 

 

ACCEPTANCE BY REGISTERED AGENT:

 

/s/ Kenneth M. Woolley

 

Kenneth M. Woolley

 

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LL 029047

 

Nov 29 1999

 

 

ARTICLES OF AMENDMENT
TO THE
ARTICLES OF ORGANIZATION
OF
EXTRA SPACE DEVELOPMENT, LLC

 

THE UNDERSIGNED, pursuant to the Utah Limited Liability Company Act, hereby
adopts these Articles of Amendment to the Articles of Organization for Extra
Space Development, LLC (the “Company”), and certifies that:

 

 

FIRST:

The name of the Company is Extra Space Development, LLC

 

 

 

 

SECOND:

The date of registration of the Company with the Utah Division of Corporations
and Commercial Code was September 22, 1998.

 

 

 

 

THIRD:

The Articles of Organization are hereby amended by replacing the initial Period
of Duration in Article 2 with the following new Period of Duration:

 

 

 

 

 

 

The duration of the Company shall be sixty (60) years from the date of filing of
the Articles of Organization with the Division of Corporations and Commercial
Code of the State of Utah.

 

 

 

 

FOURTH:

Except as amended by this Certificate, the Articles of Organization shall remain
unchanged.

 

IN WITNESS WHEREOF, this Certificate of Amendment was executed on the date given
below by the undersigned member/manager of the Company, who is duly authorized
to execute and file this Certificate of Amendment and to affirm, under penalties
of perjury, that the facts stated in this Certificate of Amendment are true.

 

DATED this 16th day of November, 1999.

 

 

 

/s/ Kenneth M.Woolley

 

 

Kenneth M.Woolley

 

Member/Manager

 

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[g361793kq01i002.jpg]

 

CERTIFICATE OF GOOD STANDING
FOREIGN LIMITED LIABILITY COMPANY

 

I, KEVIN SHELLEY, Secretary of State of the State of California, hereby certify:

 

That on the 18th day of November, 1998, EXTRA SPACE DEVELOPMENT, LLC, complied
with the requirements of California law in effect on that date for the purpose
of registering to transact intrastate business in the State of California; and
further purports to be a limited liability company organized and existing under
the laws of Utah as EXTRA SPACE DEVELOPMENT, LLC, and;

 

That the above limited liability company is entitled to transact intrastate
business in the State of California as of the date of this certificate subject,
however, to any licensing requirements otherwise imposed by the laws of this
state; and

 

That no information is available in this office on the financial condition,
business activity or practices of this limited liability company.

 

 

[g361793kq01i003.jpg]

 

IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the
State of California this day of April 8, 2004.

 

 

 

 

 

/s/ KEVIN SHELLEY

 

KEVIN SHELLEY
Secretary of State

 

 

 

 

 

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AMENDED AND RESTATED OPERATING AGREEMENT
FOR
EXTRA SPACE DEVELOPMENT, LLC

 

THIS AMENDED AND RESTATED OPERATING AGREEMENT FOR EXTRA SPACE DEVELOPMENT, LLC
(the “Agreement”) is made and entered effective as of the 1st day of January,
2004, by, between, and among the Members and the Manager(s) of the Company, as
such terms are defined below.

 

RECITALS

 

a.             The Articles of Organization for Extra Space Development, LLC
(hereinafter the “Articles of Organization”) were filed with the Division on
September 22, 1998. Extra Space Storage LLC, a Delaware limited liability
company, was the sole member of the Company.

 

b.             Pursuant to that certain Plan of Reorganization (Extra Space
Development, LLC) dated effective as of the same date as this Agreement between
Extra Space Storage LLC, the Company, and the Members, the Extra Space Storage
LLC has distributed all of the membership interests in the Company to the
Members.

 

c              The Members have each reviewed this Agreement, in its entirety,
and desire to cause the same to be adopted as and for the operating agreement of
the Company, in accordance with the Act.

 

AGREEMENT:

 

Pursuant to the Act, and all other pertinent laws of the State of Utah and its
political subdivisions, and in exchange for good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the undersigned
Members mutually agree and covenant as follows:

 

ARTICLE 1: ORGANIZATION

 

1.01         Adoption of Operating Agreement. The Members hereby unanimously
adopt this Agreement as the Operating Agreement for the Company pursuant to the
provisions of the Act.

 

1.02         Name.  The name of the Company shall be EXTRA SPACE DEVELOPMENT,
LLC

 

1.03         Commencement of Business. The existence of the Company commence as
of the date of filing of the Company’s Articles of Organization with the
Division and shall continue thereafter until terminated as provided herein. For
purposes of this Section 1.03, the Articles of Organization of the Company shall
be deemed filed with the Division on the date indicated by the Division as part
of its stamp or seal on the original Articles of Organization which are filed
with the office of the Division.

 

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1.04         Registered Office, Registered Agent, Designated Office. The Company
shall continuously maintain a registered office and registered agent in the
State of Utah as required by the Act. The registered agent of the Company in the
State of Utah is Kenneth M. Woolley, and the registered office of the Company in
the State of Utah is 2795 E. Cottonwood Parkway, Suite 400, Salt Lake City, Utah
84121. The designated office of the Company in the State of Utah for purposes of
Section 48-2c-l11 of the Act shall be 2795 E. Cottonwood Parkway, Suite 400,
Salt Lake City, Utah 84121. The Company may designate or maintain any registered
agent, registered office or other office in any jurisdiction whether or not
required by law, and any such designation heretofore made is hereby ratified and
approved. The registered office, registered agent and designated office of the
Company may be changed at any time and from time to time by the Manager(s).

 

1.05         Purposes. The principal business purposes for which the Company is
organized are to acquire, own, develop, mortgage, encumber, hypothecate, lease,
sell, maintain, improve, alter, remodel, expand, manage, and otherwise operate
and deal with real and personal property from time to time acquired by the
Company and for any other lawful purpose for which a limited liability company
may be organized under the laws of the State of Utah.

 

1.06         No Liability of Managers, Members, Organizers, Officers and
Employees. Except as otherwise agreed by such Organizer, Member, Manager officer
or employee, no Organizer, Member, Manager, officer or employee of the Company
is or shall be personally liable under a judgment, decree, or order of a court,
or in any other manner, for a debt, obligation, or liability of the Company or
for the acts or omissions of the Company or any other Organizer, Member,
Manager, officer or employee of the Company. The failure of the Company to
maintain records, to hold meetings, or to observe any formalities or
requirements imposed by the Act or by the Articles of Organization or this
Agreement is not a ground for imposing personal liability on any Member,
Manager, Officer or employee of the Company for any debt, obligation or
liability of the Company.

 

1.07         Title to Property. All real and personal property owned by the
Company shall be owned by the Company as an entity and no Member shall have any
ownership interest in such property in its individual name or right, and each
Member’s interest in the Company shall be personal property for all purposes.
Except as otherwise provided in this Agreement, the Company shall hold all of
its real and personal property in the name of the Company and not in the name of
any Member.

 

1.08         Payments of Individual Obligations. The Company’s credit and assets
shall be used solely for the benefit of the Company, and no asset of the Company
shall be transferred or encumbered for or in payment of any individual
obligation of a Member.

 

1.09         Independent Activities: Transactions With Affiliates.

 

(a)           Each Member and Manager and any of their respective Affiliates
shall be required to devote only such time to the affairs of the Company as such
Member or Manager determines in its sole discretion may be necessary, and each
Affiliate of a Member or Manager, to the extent not otherwise directed by the
Member or Manager, shall be free to serve any other Person or enterprise in any
capacity that it may deem appropriate in its discretion.

 

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(b)           Insofar as permitted by applicable law, any Member, Manager and
their respective Affiliates may, notwithstanding this Agreement, engage in
whatever activities they choose, whether the same are competitive with the
Company or otherwise, without having or incurring any obligation to offer any
interest in such activities to the Company or any Member, and neither this
Agreement nor any activity undertaken pursuant hereto shall prevent any Member,
Manager or Affiliate of any of them from engaging in such activities, or require
any Member or Manager to permit the Company or any Member, Manager or Affiliate
of any of them to participate in any such activities, and as a material part of
the consideration for the execution of this Agreement by each Member, each
Member hereby waives, relinquishes, and renounces any such right or claim of
participation. This provision shall not be construed to be in derogation of any
obligation which any Person may have to the Company arising out of such Person’s
employment by, or position as an officer of the Company, or any contract or
agreement such Person may have with the Company.

 

(c)           To the extent permitted by applicable law and except as otherwise
provided in this Agreement, the Company is hereby authorized to purchase
property from, sell property to, or otherwise deal with any Member or Manager,
acting on its own behalf, or any Affiliate of any Member or Manager, provided
that any such purchase, sale, or other transaction shall be made on terms and
conditions which are no less favorable to the Company than if the sale,
purchase, or other transaction had been entered into with an independent third
party.

 

ARTICLE 2: DEFINITIONS

 

2.01         Definitions.  The terms used in this Agreement shall have the
following meanings:

 

(a)           Act means the Utah Revised Limited Liability Company Act, Title
48, Chapter 2c, Utah Code Annotated.

 

(b)           Adverse Act means, with respect to any Member, any of the
following:

 

(1)           A Transfer of all or any portion of such Member’s interest in the
Company except as expressly permitted or required by this Agreement;

 

(2)           Transfer of all or any portion of any Person’s interest in any
Member except as expressly permitted or required by this Agreement;

 

(3)           An attempt by such Member to withdraw from the Company or dissolve
the Company or take any action in breach of Section 11.02 hereof;

 

(4)           Any termination, dissolution or liquidation of a corporation,
limited liability company, or partnership which is a Member, or the taking of
any action by its directors, majority shareholders or general partners looking
to the termination, dissolution or liquidation of such Member, unless
substantially all assets of such Member are transferred, or are to be
transferred, to a Wholly Owned Affiliate of such Member;

 

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(5)           The Bankruptcy of such Member or the occurrence of any other event
which would permit a trustee or receiver to acquire control of the affairs or
assets of such Member;

 

(6)           A determination by the Third Judicial District Court of Salt Lake
County, State of Utah, or any other court having jurisdiction over the Company
and the Members, that such Member has taken an action, or has failed to take an
action within the scope of his duties hereunder, that results, or can reasonably
be expected to result in, such Member becoming liable to indemnify the Company
for a material sum pursuant to any provision of this Agreement or that would
justify a decree of dissolution of the Company under the Act; or

 

(7)           In the case of a Member who is a natural person, his or her death
or the entry of an order by a court of competent jurisdiction adjudicating him
or her incompetent to manage his or her person or his or her estate.

 

(c)           Adverse Member means any Member with respect to whom an Adverse
Act pursuant to Section 2.01(b) has occurred.

 

(d)           Affiliate means, with respect to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, (ii) any other Person owning or controlling interests in such
Person possessing the right to cast ten percent (10%) or more of the total votes
entitled to be cast for the election of management of such Person or to be cast
with respect to management decisions of such Person, (iii) any officer,
director, manager, or general partner of such Person, or (iv) any other Person
who is an Affiliate of any other Person described in clauses (i) through (iii)
of this sentence. For purposes of this definition, the term “controls,” “is
controlled by,” or “is under common control with” shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through the ownership of
voting securities, by contract or otherwise.

 

(e)           Aggregate Buy-Sell Price has the meaning set forth in Section
10.03 hereof.

 

(f)            Appraisers’ Notice has the meaning set forth in Section 9.06
hereof.

 

(g)           Articles of Organization means the Articles of Organization of the
Company as filed with the Division.

 

(h)           Bankruptcy means, with respect to any Person, a “Voluntary
Bankruptcy” or an “Involuntary Bankruptcy.” A “Voluntary Bankruptcy” means, with
respect to any Person, the filing of any petition or answer by such Person
seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of such Person or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking,
consenting to, or acquiescing in the entry of an order for relief or the
appointment of a receiver, trustee, custodian, or other similar official for
such Person or for any substantial

 

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part of its property; or corporate action taken by such Person to authorize any
of the actions set forth above. An “Involuntary Bankruptcy” means, with respect
to any Person, without the consent or acquiescence of such Person, the entering
of an order for relief or approving a petition for relief or reorganization or
any other petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other similar relief under any present
or future bankruptcy, insolvency or similar statute, law or regulation, or the
filing of any such petition against such Person which petition shall not be
dismissed within ninety (90) days, or, without the consent or acquiescence of
such Person, the entering of an order appointing a trustee, custodian, receiver
or liquidator of such Person or of all or any substantial part of the property
of such Person which order shall not be dismissed within sixty (60) days.

 

(i)            Business Day means any day other than a Saturday or Sunday on
which banks are not required or authorized to close in the state of Utah.

 

(j)            Capital Account means the Capital Account of each Member as
described in Section 4.01 below.

 

(k)           Capital Contributions means collectively all contributions of cash
or other Property to the Company.

 

(l)            Code means the Internal Revenue Code of 1986, as amended.

 

(m)          Division means the Division of Corporations and Commercial Code of
the Department of Commerce, State of Utah.

 

(n)           Election Day has the meaning set forth in Section 10.02 hereof.

 

(o)           Election Period has the meaning set forth in Section 10.02 hereof.

 

(p)           First Appraiser has the meaning set forth in Section 10.05 hereof.

 

(q)           Fiscal Year means (i) the period commencing on the effective date
of this Agreement and ending on December 31, next following (ii) any subsequent
twelve (12) month period commencing on January 1 and ending on December 31, or
(iii) any portion of the period described in clause (ii) for which the Company
is required to allocate Profits, Losses and other items of Company income, gain,
loss or deduction pursuant to ARTICLE 4 hereof.

 

(r)            Interest or Member’s Interest means an individual Member’s share
of the Company capital, assets, profits, surplus or losses, and all rights of a
Member of a limited liability company under the Act and all rights of a Member
of the Company under this Agreement.

 

(s)           Involuntary Bankruptcy has the meaning set forth in Section
2.01(b) hereof.

 

(t)            Liquidating Event has the meaning set forth in Section 11.03
hereof.

 

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(u)           Manager(s) shall have the meaning set forth in Section 6.01 below.

 

(v)           Member or Members means the persons named in ARTICLE 3 below, and
such other Members as may be admitted from time to time in accordance with this
Agreement, but shall not mean the husband, wife, child or parent of any Member
unless such husband, wife, child or parent is expressly named herein as a
Member.

 

(w)          Net Cash From Operations means the gross cash proceeds from Company
operations less the portion thereof used to pay, or establish reserves for, all
Company expenses (including without limitation, operating expenses, development
expenses, debt payments, capital improvements, replacements, and contingencies),
all as determined by the Manager(s). Net Cash From Operations does not include
Net Cash From Sales or Net Cash From Refinancings. Net Cash From Operations
shall not be reduced by depreciation, amortization, cost recovery deductions, or
similar allowances, but shall be increased by any reductions of reserves
previously established pursuant to the first sentence of this Section 2.01(w)
and Sections 2.01(x) and 2.01(y).

 

(x)            Net Cash From Refinancings means the net cash proceeds from any
initial financing and all refinancings of Property, less any portion thereof
used to establish reserves, all as determined by the Manager(s).

 

(y)           Net Cash From Sales means the net cash proceeds from all sales and
other dispositions of Property, less any portion thereof used to establish
reserves, all as determined by the Manager(s). Net Cash From Sales shall include
all principal and interest payments with respect to any note or other obligation
received by the Company in connection with the sale or other disposition of
Property.

 

(z)            Net Equity has the meaning set forth in Section 10.04 hereof.

 

(aa)         Percentage Interest means the Percentage Interest in the Company of
each Member as set forth in Section 3.01 below.

 

(bb)         Person means any individual, partnership, limited liability
company, corporation, trust, or other entity.

 

(cc)         Profits and Losses means the net profits or losses of the Company
for federal income tax purposes as determined by the accountants employed by the
Company; provided, however, that in the event the profits or losses of the
Company are later adjusted in any manner, as the result of an audit by the
Internal Revenue Service, or otherwise, then the net profits or losses of the
Company shall be adjusted to the same extent.

 

(dd)         Property means all real and personal property acquired by the
Company and any improvements thereto, and shall include both tangible and
intangible property.

 

(ee)         Purchase Notice has the meaning set forth in Section 10.02 hereof.

 

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(ff)           Regulations means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).

 

(gg)         Second Appraiser has the meaning set forth in Section 10.05 hereof.

 

(hh)         Third Appraiser has the meaning set forth in Section 10.05 hereof.

 

(ii)           Transfer means, as a noun, any voluntary or involuntary transfer,
sale, or other disposition and, as a verb, voluntarily or involuntarily to
transfer, sell, or otherwise dispose of.

 

(jj)           Voluntary Bankruptcy has the meaning set forth in Section 2.01(h)
hereof.

 

(kk)         Wholly Owned Affiliate of any Person shall mean (i) an Affiliate of
such Person one hundred percent (100%) of the voting stock or beneficial
ownership of which is owned directly by such Person, or by any Person who,
directly or indirectly, owns one hundred percent (100%) of the voting stock or
beneficial ownership of such Person, (ii) an Affiliate of such Person who,
directly or indirectly, owns one hundred percent (100%) of the voting stock or
beneficial ownership of such Person, and (iii) any Wholly Owned Affiliate of any
Affiliate described in clause (i) or clause (ii) of this Section 2.01(kk).

 

ARTICLE 3: MEMBERS OF THE COMPANY

 

3.01         Members. The names, addresses and Percentage Interests of the
Members of the Company are set forth on
Exhibit A attached hereto and by this reference made a part hereof. The Members
agree that the Members interests in the capital, Profits, Losses and other items
of Company income, gain, loss or deduction, and distributions from the Company
shall be in accordance with their respective Percentage Interests.

 

3.02         Classes of Members. There shall be one class of Members. There
shall be no distinction between the rights and liabilities of Members.

 

3.03         Additional Capital Contributions. From time to time, upon written
consent of the Members holding more than fifty percent (50%) of the Percentage
Interests, each of the Members may contribute additional cash and other
properties into the Company upon such terms as are approved by Members holding
more than fifty percent (50%) of the Percentage Interests. Such contributions
shall constitute additional Capital Contributions.

 

3.04         Withdrawal of Capital Contributions. Except as otherwise expressly
provided in this Agreement:

 

(a)           only after the dissolution and winding-up of the Company may any
of the Capital Contributions be withdrawn;

 

(b)           no Member shall have priority over any other Member, either as to
the return of Capital Contributions or as to Profits, Losses, or distributions;

 

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(c)           no Member shall be personally liable to any other Member for the
return of any part of the Members’ Capital Contributions; and

 

(d)           Capital Contributions shall not bear interest.

 

3.05         Member’s Compensation. Except as otherwise approved by the Members
or provided in this Agreement, no Member shall receive any interest, salary, or
drawing with respect to Capital Contributions or for services rendered on behalf
of the Company or otherwise in the capacity as Member. The Members agree that
the Manager(s) may receive such salaries and other compensation as are approved
from time to time by the Members.

 

3.06         Admission of New Members. Except as otherwise provided in this
Section 3.06 and ARTICLE 9 hereof, relating to Transfers of Company interests,
no Person shall be admitted to the Company as a Member without the consent of
Members holding more than fifty percent (50%) of the aggregate Percentage
interests of all Members. With the approval of Members holding more than fifty
percent (50%) of the Percentage Interests, the Manager(s) may admit one or more
Persons as new Members of the Company upon such terms as are approved by Members
holding more than fifty percent (50%) of the Percentage Interests.

 

ARTICLE 4: CAPITAL ACCOUNTS; ALLOCATIONS OF PROFITS AND LOSSES

 

4.01         Capital Accounts. A separate Capital Account shall be maintained
for each Member. Each Member’s Capital Account shall be credited with each
Member’s share of the capital of the Company. Each Member’s Capital Account
shall be increased by the additional Capital Contributions made by such Member
and by such Member’s share of gains and profits of the Company as allocated
under Section 4.01 below. Such account shall be decreased by any distributions
to such Member under Sections 5.01 and, and by such Member’s share of losses and
deductions of the Company as allocated under Section 4.01 below. Solely for
accounting purposes among the Members, a Member may have a minus or debit
balance in his or her Capital Account, but any such minus or debit balance shall
not represent a liability of such Member to the Company and no Member shall have
any obligation to restore a negative balance in such Member’s Capital Account.

 

4.02         Allocation of Profits and Losses. The Profits and Losses of the
Company shall be allocated to the Members in accordance with their Percentage
Interests; provided, however, that if a Member has contributed appreciated
property to the Company in kind, and the property is later transferred by the
Company (including but not limited to sales or distributions in kind to Members
other than the contributing Member), to the extent required by Section 704(c) of
the Code, income, gain, loss or other deductions, other than depreciation, shall
be allocated to the contributing Member.

 

ARTICLE 5: DISTRIBUTIONS

 

5.01         Distributions of Net Cash From Operations. Net Cash From Sales. and
Net Cash From Refinancings. Net Cash from Operations, Net Cash from Sales, and
Net Cash from Refinancings shall be distributed, at such times as the Manager(s)
may determine, to the Members in accordance with the respective Percentage
Interests.

 

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5.02         Reinvestment of Net Cash From Operations and Net Cash From Sales
and Net Cash From Refinancings. The Manager(s) may, from time to time, reinvest
all or any portion of Net Cash From Operations and Net Cash From Sales and Net
Cash From Refinancings.

 

5.03         Distribution in Kind. Distributions of property other than cash
shall be apportioned among the members on the same basis as would be a
distribution of Net Cash From Sales in the amount of the fair market value of
the distributed property as of the date of distribution, with the same effect on
the apportionment of the distribution and all future distributions of cash or
other property as a distribution of cash in such amount.

 

ARTICLE 6: MANAGEMENT

 

6.01         Management. The business, operations and properties of the Company
shall be managed by the Manager(s). The initial Manager(s) shall be Kenneth M.
Woolley. Kenneth M. Woolley shall serve as Manager(s) of the Company until the
dissolution of the Company, as hereinafter provided, or until otherwise replaced
as set forth in this Agreement. The Manager(s) can be replaced upon a vote of
the Members at a regular meeting of the Members or special meeting of the
Members called for that purpose. If the Manager(s) should fail or cease to serve
then a replacement Manager(s) shall be elected by a vote of the Members at a
regular or special meeting of the Members, called for that purpose. At any time
when more than one Manager is serving, every action, determination, vote,
consent, or approval of the Manager(s) shall require the unanimous consent of
the Manager(s). If the Manager(s) cannot agree upon any particular matter, such
matter shall be determined by the Members.

 

6.02         General Powers of Manager(s). The Manager(s) shall be solely
responsible for the management of the Company’s business and activities with all
rights and powers generally conferred by law or necessary, advisable or
consistent in connection therewith. In the event that the Manager(s) are unable
to agree upon any matter calling for the vote, consent, approval, action, or
determination of the Manager(s), the matter shall be determined by the Members.
Except as expressly provided otherwise in this Agreement, no Member, in the
capacity of a Member, shall have any right to participate in the management of
the Company or to vote with respect to any matter to be determined by the
Members of the Company.

 

6.03         Specific Powers of the Manager(s). In addition to any other rights
and powers which a manager may possess, the Manager(s) shall have all specific
rights and powers required or appropriate to his management of the Company
business, conferred by this Agreement, by the Act or otherwise, including by way
of illustration and not by way of limitation the following:

 

(a)           To acquire, hold and dispose of any real or personal property,
interest therein, or appurtenance thereto, as well as personal or mixed property
connected with any real property, including the purchase, lease development,
improvement, maintenance, exchange, trade or sale of such properties, at such
price, rental or amounts, for cash, securities or other property, and upon such
terms, as are deemed by such Manager(s) to be in the best interest of the
Company;

 

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(b)           To authorize any entity in which the Company holds an interest to
acquire, hold and dispose of any real or personal property, interest therein, or
appurtenance thereto, as well as personal or mixed property connected with any
real property, including the purchase, lease development, improvement,
maintenance, exchange, trade or sale of such properties, at such price, rental
or amounts, for cash, securities or other property, and upon such terms, as are
deemed by such
Manager(s) to be in the best interest of the Company;

 

(c)           To borrow money and, if security is required therefore, to
mortgage or lien any portion of the property of the Company, to obtain
replacements of any mortgage or other security device, and to prepay, in whole
or in part, refinance, increase, modify, consolidate, or extend any mortgage or
other security device, all of the foregoing at such terms and in such amounts as
are deemed by such Manager(s) to be in the best interest of the Company;

 

(d)           To authorize any entity in which the Company owns an interest to
borrow money and, if security is required therefore, to authorize such entity to
mortgage or lien any portion of the property of such entity, to obtain
replacements of any mortgage or other security device, and to prepay, in whole
or in part, refinance, increase, modify, consolidate, or extend any mortgage or
other security device, all of the foregoing at such terms and in such amounts as
are deemed by such
Manager(s) to be in the best interest of the Company;

 

(e)           To place record title to, or the right to use, Company assets in
the name or names of a nominee or nominees for any purpose convenient or
beneficial to the Company;

 

(f)            To acquire and enter into any contract or insurance which the
Company deems necessary and proper for the protection of the Company, for the
conservation of its assets, or for any purpose convenient, or beneficial to the
Company;

 

(g)           To employ from time to time persons, firms or corporations for the
operation and management of the Company business, including but not limited to,
supervisory and managing agents, brokers, attorneys, accountants and other
professionals, on such terms and for such compensation as the Manager(s) shall
determine;

 

(h)           To pay any and all organizational expenses incurred in the
creation of the Company;

 

(i)            To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Company and to commence or defend litigation with respect to the
Company or any assets of the Company as the Manager(s) may deem advisable, all
or any of the above matters being at the expense of the Company;

 

(j)            To borrow money from banks, other lending institutions, and other
lenders for any Company purpose including the maintenance of a margin account
with any securities broker (except as specifically prohibited by this
Agreement), and in connection therewith issue notes, debentures and other debt
securities and hypothecate the assets of the Company to secure repayment of
borrowed sums; and no bank, other lending institution, or other lender to which
application is made for loan by the Manager(s) shall be required to inquire as
to the

 

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purposes for which such loan is sought, and as between this Company and such
bank, other lending institution, or other lender, it shall be conclusively
presumed that the proceeds of such loan are to be and will be used for the
purposes authorized under this Agreement;

 

(k)           To authorize any entity in which the Company holds an interest to
borrow money from banks, other lending institutions, and other lenders for any
purpose of such entity including the maintenance of a margin account with any
securities broker (except as specifically prohibited by this Agreement), and in
connection therewith issue notes, debentures and other debt securities and
hypothecate the assets of such entity to secure repayment of borrowed sums; and
no bank, other lending institution, or other lender to which application is made
for loan by such entity, as authorized by the Manager(s), shall be required to
inquire as to the purposes for which such loan is sought, and as between this
Company and such bank, other lending institution, or other lender, it shall be
conclusively presumed that the proceeds of such loan are to be and will be used
for the purposes authorized under this Agreement;

 

(l)            To maintain, at the expense of the Company, accurate records and
accounts of all operations and expenditures and furnish the Members with annual
statements of account as of the end of each Company Fiscal Year, together with
tax reporting information, and quarterly reports on the operations of the
Company;

 

(m)          To purchase, at the expense of the Company, liability and other
insurance to protect the Company’s properties and business and to protect the
Manager(s), his or her agents and employees, and the Members;

 

(n)           To execute instruments, enter into agreements and contracts with
parties, and give receipts, releases and discharges with respect to all of the
foregoing matters set forth in subsections 6.03(a) through 6.03(m) above, and
any matters incident thereto as the Manager(s) may deem advisable or
appropriate;

 

(o)           To make certain elections under the tax laws of the United States,
the State of Utah, and other relevant jurisdictions as to the treatment of items
of Company income, gain, loss, deduction and credit, and as to all other
relevant matters (including without limitation elections under Section 754 of
the Code as the Manager(s) believes necessary or desirable.

 

6.04         Limitations on Manager(s). Notwithstanding anything in this
Agreement to the contrary, without the consent of the Members, the Manager(s)
shall have no authority to:

 

(a)           Do any act in contravention of this Agreement;

 

(b)           Do any act which would make it impossible to carry on the ordinary
business of the Company;

 

(c)           Confess a judgment against the Company;

 

(d)           Possess Company property or assign the rights of the Company in
specific Company property for other than a Company purpose; or

 

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(e)                                  Admit a Person as a Member, except as
otherwise provided in this Agreement.

 

6.05                           Manager(s)’ Time. Each Manager shall devote such
of his time to the business of the Company as he or she may, in his or her sole
discretion, deem to be necessary to conduct the Company’s business. No Manager
shall be required to devote his or her full time to the Company’s business. The
Manager(s) shall be entitled to such compensation for their services as may be
approved, from time to time, by the Members.

 

6.06                           Reimbursement. Each Manager shall be reimbursed
for all out-of-pocket expenses incurred in organizing the Company, including all
legal and accounting fees incurred. Thereafter the Manager shall be reimbursed
for all goods and materials used for or by the Company. All expenses of the
Company shall be billed directly to and paid by the Company. The
Manager(s) shall be reimbursed for any administrative expenses including
salaries, rent, travel expenses, and other items generally within the purview of
furthering the Company business.

 

6.07                           Exculpation. The Manager(s) shall not be liable
to the Company or to any of its Members for honest mistakes of judgment or for
losses due to such mistakes or to the negligence, dishonesty or bad faith of any
employee or agent of the Company; provided that such employee or agent was
selected, engaged or retained by the Manager(s) as authorized by the Company
with reasonable care. The Manager(s) may rely upon the advice of legal counsel
to the Company in determining what acts or omissions are within the scope of
authority conferred by this Agreement. The Company shall indemnify and hold
harmless each Manager and his or her agents from and against any loss, expense,
damage or injury suffered or sustained by them by reason of or in furtherance of
the interest of the Company, including, but not limited to any judgment, award,
settlement, reasonable attorneys’ fees and other costs or expenses incurred in
connection with the defense of any action or threatened action, proceeding or
claim, provided that the acts, omissions, or alleged acts or omissions upon
which such action or threatened action, proceedings or claims are based were
performed or omitted in good faith and not fraudulently, in bad faith, as a
result of wanton and willful misconduct or gross negligence.

 

ARTICLE 7: MEETINGS OF MEMBERS

 

7.01                           Regular Meetings. The Company may hold regular
meetings as from time to time designated by Members holding over 20% of the then
issued and outstanding Percentage Interests, or by the Manager(s). Such regular
meetings shall be held at such time and place as designated by the Members or by
the Manager(s), designating such meetings, as the case may be.

 

7.02                           Notice of Members Meetings. The Manager(s) shall,
and any Member may, give written notice stating the place, day, and hour of both
regular and special meetings, and in the case of a special meeting, the purpose
or purposes for which the meeting is called, which shall be delivered not less
than ten (10) nor more than thirty (30) days before the date of the meeting to
each Member of record entitled to vote at such meeting. Notice of any meeting of
Members, annual or special, shall be given in the manner specified in
Section 14.01.

 

If any notice addressed to a Member at the address of such Member appearing on
the books of the Company is returned to the Company by the United States Postal
Service marked to indicate

 

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that the United States Postal Service is unable to deliver the notice to the
Member at such address, all future notices or reports shall be deemed to have
been duly given without further mailing if the same shall be available to the
Member upon written demand of the Member at the principal executive office of
the Company for a period of one (1) year from the date of the giving of such
notice. A certificate or an affidavit of the mailing, transmission or other
means of giving any notice of any Members’ meeting shall be executed by a
Manager, and shall be filed and maintained in the minute book of the Company.

 

7.03                           Waiver of Notice. If, under the provisions of the
Act, the Articles of Organization, or this Agreement, notice is required to be
given to a Member or to the Manager(s), a waiver in writing signed by the person
or persons entitled to the notice, whether made before or after the time for
notice to be given, is equivalent to the giving of notice.

 

7.04                           Quorum. Members owning more than 50% of the
Percentage Interests of the Company represented in person or by proxy, shall
constitute a quorum at a meeting of Members. If Members holding less than 50% of
the Percentage Interests of the Company are represented at a meeting, Members
holding a majority of the Percentage Interests so represented may adjourn the
meeting from time to time without further notice. At a meeting resumed after any
such adjournment at which a quorum shall be present or represented, any business
may be transacted which might have been transacted at the meeting as originally
noticed. The Members present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of Members
in such number that less than a quorum remain.

 

7.05                           Voting. A holder of a Percentage Interest,
entitled to vote at a meeting, may vote at such meeting in person or by proxy.
Except as may otherwise be provided in the Articles of Organization, every
Member shall be entitled to a vote equal to the Percentage Interest in the
Company of such Member standing in his name on the records of the Company.
Except as herein or in the Articles of Organization otherwise provided, all
matters which call for a vote, consent, approval or determination of the Members
shall be determined by the concurrence of Members owning more than fifty percent
(50%) of the Percentage Interests then outstanding.

 

7.06                           Proxies/Power of Attorney. At all meetings of
Members, a Member may vote in person or by proxy executed in writing by the
Member or by his duly authorized attorney in fact. Such proxy shall be filed
with the Company before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy.

 

7.07                           Action by Written Consent. Any action which may
be taken by the Members at a Meeting held pursuant to this ARTICLE 7 or as
provided elsewhere in this Agreement may be taken without a meeting, upon the
written consent to such action of Members holding the amount of Percentage
Interests as is required to take such action.

 

ARTICLE 8: ACCOUNTING, BOOKS AND RECORDS

 

8.01                           Accounting, Books and Records. The Company shall
maintain at its principal place of business separate books of account for the
Company which shall show a true and accurate record of all costs and expenses
incurred, all charges made, all credits made and received, and all income

 

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derived in connection with the operation of the Company business in accordance
with generally accepted accounting principles consistently applied and, to the
extent inconsistent therewith, in accordance with this Agreement. The Company
shall use the cash method of accounting in preparation of its annual reports and
for tax purposes and shall keep its books accordingly. Each Member shall, at his
sole expense, have the right, at any time without notice to any other Member, to
examine, copy, and audit the Company’s books and records during normal business
hours.

 

8.02                           Records Required by the Act. The Company shall
keep the following records at its Designated Office:

 

(a)                                  a current list in alphabetical order of the
full name and last-known business, residence, or mailing address of each member
and each manager;

 

(b)                                 a copy of the stamped articles of
organization and all certificates of amendment thereto, together with a copy of
all signed powers of attorney pursuant to which the articles of organization or
any amendment has been signed;

 

(c)                                  a copy of a writing prepared by the Person
or Persons who signed and filed the Articles of Organization which sets forth;

 

(1)                                  the name and street address of each initial
Member of the Company;

 

(2)                                  the name and street address of each initial
Manager of the Company (if any);

 

(3)                                  a copy of the Company’s federal, state and
local income tax returns and reports, if any, for the three most recent years;

 

(4)                                  a copy of any financial statements of the
Company, if any, for the three most recent years;

 

(5)                                  a copy of the Company’s operating
agreement, if any, and all amendments thereto; and

 

(6)                                  a copy of the minutes, if any, of each
meeting of Members and of any written consents obtained from Members.

 

8.03                           Reports. Within one hundred and twenty (120) days
after the end of each Fiscal Year, the Company shall cause each Member to be
furnished with a copy of the balance sheet of the Company as of the last day of
the applicable period, a statement of income or loss for the Company for such
period, and a statement of the Company’s cash flow for such period.

 

8.04                           Tax Returns: Information. The Manager(s) shall
cause the Company to prepare all income and other tax returns of the Company and
shall cause the same to be filed in a timely manner. The Company shall furnish
to each Member a copy of each such return, together with any schedules or other
information which each Member may require in connection with such Member’s own
tax affairs.

 

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8.05                           Special Basis Adjustment. In connection with any
Transfer of a Company interest, the Company shall, at the written request of the
transferor or the transferee, on behalf of the Company and at the time and in
the manner provided in Regulations Section 1.754-1(b), make an election to
adjust the basis of the Company’s property in the manner provided in Sections
734(b) and 743(b) of the Code, and such transferee shall pay all costs incurred
by the Company in connection therewith, including, without limitation,
reasonable attorneys’ and accountants’ fees.

 

8.06                           Tax Matters Partner. A “Tax Matters Partner”
shall be designated by the Members in accordance with the applicable provisions
of the Code and to act in any similar capacity under state or local law. All of
the Members shall be required to cooperate fully with the Tax Matters Partner in
the discharge of its responsibility as such. Kenneth M. Woolley is hereby
designated the Tax Matters Partner, and may be replaced as such by determination
of the Members.

 

ARTICLE 9: TRANSFER OF MEMBERSHIP INTERESTS

 

9.01                           Prohibition on Hypothecation by Members. No
Member shall mortgage or grant a security interest in his Interest in the
Company.

 

9.02                           Restrictions on Transfers. Except as expressly
permitted or required by this Agreement, no Member shall Transfer all or any
portion of his interest in the Company or any rights therein without the consent
of Members holding at more than fifty percent (50%) of the aggregate Percentage
Interests of all Members. Any Transfer or attempted Transfer by any Member in
violation of the preceding sentence shall be null and void and of no force or
effect whatever. Notwithstanding anything to the contrary in this Agreement, the
Members hereby agree to consent to Transfers of interests in the Company by any
Member and agree to consent to the substitution of the transferees of such
Transfers as substitute members of the Company provided that (a) such transfers
are made to a limited liability company, trust, partnership, or other entity for
estate planning purposes, (b) such Member retains the ability, directly or
indirectly, to direct the outcome of any determination of such transferee,
whether by vote, consent or otherwise, without the vote, consent or approval of
any other Person, (c) appropriate amendments are made to this Agreement to
reflect such Transfer, and (d) such Transfer and the transferor and transferee
of such Transfer comply with the provisions of Sections 9.04 and 9.08. Each
Member hereby acknowledges the reasonableness of the restrictions on Transfer
imposed by this Agreement in view of the Company purposes and the relationship
of the Members. Accordingly, the restrictions on Transfer contained herein shall
be specifically enforceable. Each Member hereby further agrees to hold the
Company and each Member (and each Member’s successors and assigns) wholly and
completely harmless from any cost, liability, or damage (including, without
limitation, liabilities for income taxes and costs of enforcing this indemnity)
incurred by any of such indemnified Persons as a result of a Transfer or an
attempted Transfer in violation of this Agreement.

 

9.03                           Transfers to Other Members. If, but only if, a
Member (hereinafter the “Selling Member”) receives from another Member
(hereinafter the “Purchasing Member”) a written offer to purchase all of the
Interest of the Selling Member which written offer (hereinafter the “Purchase
Offer”) the Selling Member desires to accept, the Selling Member shall give all
of the other Members written notice of that fact (hereinafter the “Sale
Notice”). The Selling Member shall attach to the Sale Notice a copy of the
Purchase Offer. For a period (hereinafter the “Election Period”)

 

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ending at 11:59 P.M. (local time at the Company’s principal place of business)
on the forty-fifth day following the day on which the Sale Notice is given
(hereinafter the “Election Day”), the Members other than the Selling Member may
elect, by notice to the Selling Member, to purchase all or any portion of the
Interest of the Selling Member, which notice shall state the maximum Percentage
Interest that such Member is willing to purchase. Said election and purchase
shall be made by giving notice thereof (the “Purchase Notice”) to all Members,
which Purchase Notice shall not be valid unless it states the maximum Percentage
Interest that such Member (a “Purchase Notice Member”) is willing to purchase.
If the aggregate Percentage Interests that Purchase Notice Members are willing
to purchase pursuant to valid Purchase Notices equals or exceeds the entire
Percentage Interests of the Selling Member, such Purchase Notice Members shall
become “Purchasing Members” and shall be obligated to purchase all of the
Interest of the Selling Member and the Selling Member shall be obligated to sell
its Interest to the Purchasing Members. Each Purchasing Member shall be
obligated to purchase that portion of the Selling Members’ Interest that
corresponds to the ratio of the Percentage Interests that such Purchasing Member
indicated willingness to purchase in his Purchase Notice to the aggregate
Percentage Interests that all such Purchasing Members indicated willingness to
purchase under all Purchase Notices. In the event that the Members other than
the Selling Member do not elect to purchase the entire Interest of the Selling
Member, the Selling Member shall be free to sell his Interest to the Purchasing
Member for the price, and on the terms specified and described in the Purchase
Offer; provided, however, that if the sale contemplated by the Purchase Offer is
not consummated within thirty (30) days after the expiration of the Election
Period, the Selling Member shall again give a Sale Notice with respect to such
Purchase Offer and follow the procedures outlined and required by this Section
9.03 as if such procedures had not previously been followed with respect to such
Purchase Offer. If the Members other than the Selling Member elect to purchase
the entire Interest of the Selling Member, the purchase price and other terms of
purchase shall be identical to those set forth in the Purchase Offer; provided,
however, that the closing shall occur on or before the date that is thirty (30)
days after the expiration of the Election Period, at the Company’s principal
place of business. A Person who acquires all or any part of the Interest of a
Selling Member (either pursuant to this Section 9.03 or pursuant to a Purchase
Offer after the Selling Member has complied with the provisions of this Section
9.03) shall, upon satisfaction of the requirements specified in Sections 9.04
and 9.07, acquire such Interest in the capacity as a Member and shall have all
of the rights of a Member with respect to such Interest (or any part thereof)
and particularly, without limiting the generality of the foregoing, the
Percentage Interest relating to such Interest shall thereafter be deemed part of
the total Percentage Interest owned by the Member for all purposes of this
Agreement.

 

9.04         Conditions to Transfers. Any Transfer not approved under this
ARTICLE 9 shall be null and void and of no force or effect whatever.

 

(a)           Any transferor and transferee shall execute such documents and
instruments of conveyance and assumption as may be necessary or appropriate in
the opinion of counsel to the Company to effect such Transfer and to confirm the
Transferee’s agreement to be bound by the provisions of this Agreement and
assumption of all monetary obligations of the transferor Member with respect to
the interest being transferred and the transferor Member’s agreement to
guarantee the prompt payment and performance of such assumed obligations.

 

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(b)                                 The Company shall receive, prior to any
Transfer, an opinion of counsel satisfactory to the Company confirming that such
Transfer will not terminate the Company for federal income tax purposes.

 

(c)                                  The transferor and transferee shall furnish
the Company with the transferee’s taxpayer identification number, sufficient
information to determine the transferee’s initial tax basis in the interest
transferred, and any other information reasonably necessary to permit the
Company to file all required federal and state tax returns and other legally
required information statements or returns. Without limiting the generality of
the foregoing, the Company shall not be required to make any distribution
otherwise provided for in this Agreement with respect to any transferred
interest until it has received such information.

 

(d)                                 A Member making a Transfer of all or a
portion of his Company interest and the Transferee thereof shall pay all
reasonable costs and expenses incurred by the Company in connection with such
Transfer.

 

9.05                           Admission of Transferee as a Member. A Transferee
of an interest in the Company shall be admitted as a Member in the Company only
upon the consent of the Members owning more than fifty percent (50%) of the
aggregate Percentage Interests of all Members. The rights of a Transferee who is
not admitted as a Member shall be limited to the right to receive allocations
and distributions from the Company with respect to the interest transferred, as
provided by this Agreement. The Transferee of such interest shall not be a
Member with respect to such interest, and, without limiting the foregoing, shall
not have the right to vote as a Member, inspect the Company’s books, act for or
bind the Company, or otherwise interfere in its operations.

 

9.06                           Effect of Transfer on Company. The Members intend
that the Transfer of an interest in the Company shall not cause the dissolution
of the Company under the Act; however, notwithstanding any such dissolution, the
Members shall continue to hold the Company’s assets and operate its business in
limited liability company form under this Agreement as if no such dissolution
had occurred.

 

9.07                           Distribution Among Members. If a Transfer of an
interest in the Company approved under ARTICLE 9 occurs during any Fiscal Year,
Profits, Losses, each item thereof, and all other items attributable to such
interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Members. All distributions on
or before the date of a Transfer approved under ARTICLE 9 shall be made to the
transferor, and all distributions thereafter shall be made to the transferee. If
a Transfer was not approved under ARTICLE 9, all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the Fiscal Year during
which the Transfer occurs, was the owner of the Company interest. The Members
and the Company shall incur no liability for making allocations and
distributions in accordance with the provisions of this Section 9.07, whether or
not any of the Members or the Company has knowledge of any Transfer or purported
Transfer of ownership of any interest in the Company.

 

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9.08                           Additional Restrictions. Notwithstanding the
provisions of this ARTICLE 9, a Member may only sell, assign, or otherwise
transfer any Interest in the Company if:

 

(a)                                  The proposed transfer will not result in
the termination of the Company as provided in Section 708(b) of the Code, or
otherwise adversely affect the Company’s tax status as a partnership thereunder.
The Members are expressly authorized to enforce this provision by notifying the
Selling Members that all transfers or assignments will be suspended for a period
of up to twelve (12) months whenever interests in the Company representing
aggregate interests of thirty five percent (35%) or more in Company capital or
revenues shall have been effectively transferred in any twelve (12) month
period;

 

(b)                                 Such Selling Member and his purchaser,
transferee or assignee execute such instruments of transfer and assignment with
respect to such transactions as are in form and substance satisfactory to the
non-selling Members; and

 

(c)                                  The assignor or transferor delivers to the
Company an opinion of counsel, in form acceptable to counsel to the Company;
that:

 

(1)                                  the proposed transfer or assignment of the
Interest complies with all federal and state laws and regulations, including the
Securities Act of 1933, and

 

(2)                                  the proposed transfer or assignment will
not affect the availability to the Company of the exemption from registration of
the interest provided by the Securities Act of 1933 or any Rule or Regulation
promulgated by the Securities and Exchange Commission or the similar exemption
from registration under the securities laws of any applicable state.

 

In the event of a transfer of a Member’s Interest, if it is in the best interest
of the Company to do so, the Company may make an election, as provided for in
Section 754 of the Code, to adjust the basis of the Company assets.

 

ARTICLE 10: BUY-SELL

 

10.01                     Determination of Net Equity of Adverse Member’s
Interest. Prior to the end of the sixtieth day following the day upon which a
Member (an “Adverse Member”) commits or suffers an Adverse Act, or the sixtieth
day after the day any Member other than the Adverse Member receives actual
notice of such Adverse Act, any Member may send notice to the Adverse Member of
the Adverse Act, and such Adverse Member shall have thirty days following the
date of such notice (the “Notice Period”) within which to cure the Adverse Act
which is the subject of the notice. At any time prior to the end of the sixtieth
day following the end of the Notice Period, any Member, by notice to all other
Members (“Member Notice”), may cause the Net Equity of the Adverse Member’s
interest in the Company to be determined as of the date of such Member Notice.
Such notice shall designate the First Appraiser as required by Section 10.05
hereof and the Adverse Member shall appoint the Second Appraiser within ten
(10) Business Days of receiving such notice designating the First Appraiser.

 

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10.02                             Election to Purchase Interest of Adverse
Member. For a period (the “Election Period”) ending at 11:59 P.M. (local time at
the Company’s principal place of business) on the thirtieth day following the
day on which notice of the Adverse Member’s Net Equity is given pursuant to
Section 10.04 hereof (the “Election Day”), the Members other than the Adverse
Member may elect, by notice to the Adverse Member, to purchase all or any
portion of the interest of the Adverse Member, which notice shall state the
maximum Percentage Interest that such Member is willing to purchase. Said
election and purchase shall be made by giving notice thereof (the “Purchase
Notice”) to all Members, which Purchase Notice shall not be valid unless it
states the maximum Percentage Interest that such Member (a “Purchase Notice
Member”) is willing to purchase. If the aggregate Percentage Interests that
Purchase Notice Members are willing to purchase pursuant to valid Purchase
Notices equals or exceeds the entire Percentage Interests of the Adverse Member,
the Purchase Notice Members shall become “Purchasing Members” and shall be
obligated to purchase all of the interests of the Adverse Member and the Adverse
Member shall be obligated to sell its interests to the Purchasing Members. Each
Purchasing Member shall be obligated to purchase that portion of the Selling
Members’ interests that corresponds to the ratio of the Percentage Interests
that such Purchasing Member indicated willingness to purchase in his Purchase
Notice to the aggregate Percentage Interests that all such Purchasing Members
indicated willingness to purchase under all Purchase Notices. In the event that
the other Members do not elect to purchase the entire interest of the Adverse
Member, the Adverse Member shall be under no obligation to sell any portion of
its interest to any Member. The cost of determining Net Equity shall be borne
one-half by the Adverse Member and one-half by the Company and the amount borne
by the Company shall be treated as an expense of the Company for purposes of
such determination.

 

10.03                     Terms of Purchase: Closing. The closing of the
purchase and sale of the Adverse Member’s interests shall occur on a date and
time mutually agreeable to the Purchasing and the Adverse Members, which shall
not be later than 10:00 A.M. (local time at the place of the closing) on the
first Business Day occurring on or after the sixtieth day following the last day
of the Election Period and at such place as is mutually agreeable to the
Purchasing Members and Adverse Member, or upon the failure to agree, at the
Company’s principal place of business. At the closing each Purchasing Member
shall pay to the Adverse Member, by cash or other immediately available funds,
that portion of the Buy-Sell Price of such Adverse Member’s interest that
corresponds to a fraction, the numerator of which is the portion of the
Aggregate Buy-Sell Price for which such Purchasing Member is liable, and the
denominator of which is the Aggregate Buy-Sell Price, and the Adverse Member
shall deliver to each Purchasing Member good title, free and clear of any liens,
claims, encumbrances, security interests or options (other than those granted by
this Agreement) to the portion of the Adverse Member’s interest thus Purchased.
Each Purchasing Member shall be liable only for the Purchasing Member’s
individual portion of the Buy-Sell Price to Adverse Member. In the event that
any Purchasing Member shall fail to perform his obligation to purchase
hereunder, and no other Purchasing Member elects to purchase the portion of the
Adverse Member’s interest thus not purchased, such Adverse Member shall not be
obligated to sell any portion of his interest to any Purchasing Member.

 

At the closing the Members shall execute such documents and instruments of
conveyance as may be necessary or appropriate to confirm the transactions
contemplated hereby, including, without limitation, the Transfer of the Company
interests of the Adverse Member to the Purchasing Members and the assumption by
each Purchasing Member of each Adverse Member’s obligation with respect

 

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to the portion of the Adverse Member’s interest transferred to such Purchasing
Member. The reasonable costs of such Transfer and closing, including, without
limitation, attorneys’ fees and filing fees, shall be divided equally between
the Adverse Member and the Purchasing Members.

 

The price at which the interest of the Adverse Member is purchased and sold
under this Section 10.03 (the “Buy-Sell Price” of such interest) is ninety
percent (90%) of the Net Equity thereof, determined as of the Election Day,
unless the Adverse Member is an Adverse Member solely because of a transfer of
an interest in a Member upon the death of any Person owning, directly or
indirectly, an interest in a Member, in which event the Buy-Sell Price of such
interest shall be one hundred percent (100%) of the Net Equity thereof,
determined as of the Election Day. The aggregate price of all interests required
to be bought and sold hereunder is the “Aggregate Buy-Sell Price.”

 

10.04                     Net Equity. The “Net Equity” of a Member’s interest in
the Company, as of any day, shall be the amount that would be distributed to
such Member in liquidation of the Company pursuant to ARTICLE 11 hereof if
(1) all of the Company’s assets were sold for their Gross Appraised Values,
(2) the Company paid its accrued, but unpaid, liabilities and established
reserves pursuant to Section 11.06 hereof for the payment of reasonably
anticipated contingent or unknown liabilities, and (3) the Company distributed
the remaining proceeds to the Members in liquidation, all as of such day,
provided that in determining such Net Equity, no reserve for contingent or
unknown liabilities shall be taken into account if such Member (or his successor
in interest) agrees to indemnify the Company and all other Members for that
portion of any such reserve as would be treated as having been withheld pursuant
to Section 11.06 hereof from the distribution such Member would have received
pursuant to Section 11.05 hereof if no such reserve were established.

 

The Net Equity of a Member’s interest in the Company shall be determined,
without audit or certification, from the books and records of the Company by a
firm of independent certified public accountants designated by the Manager(s).
The Net Equity of a Member’s interest shall be determined within sixty (60) days
of the day upon which such accountants are appraised in writing of the Gross
Appraised Value of the Assets of the Company, and the amount of such Net Equity
shall be disclosed to the Company and each of the Members by written notice,
prepared and delivered by such accountants, the Manager(s), or any Member, to
the Members. The Net Equity determination of such accountants shall be final and
binding in the absence of a showing of gross negligence or willful misconduct.

 

10.05                     Gross Appraised Value of the Assets of the Company.
“Gross Appraised Value of the Assets of the Company,” as of any day, shall be
equal to the fair market value of all of the assets of the Company as of such
day. As used herein, as of any day, the “fair market value” of the assets of the
Company means the maximum amount that a single buyer would reasonably be
expected to pay for all of the Assets of the Company, on such day, determined on
an asset by asset basis, free and clear of all liens and encumbrances, in a
single cash purchase.

 

In situations under this Agreement in which it is necessary to determine the
Gross Appraised Value of the Assets of the Company, the provision requiring such
determination provides the manner and time for the appointment of two appraisers
(the “First Appraiser” and the “Second Appraiser”). If the Second Appraiser is
timely designated, the First and Second Appraisers shall each, within forty-five
(45) days of such appointment, give written notice to the Company, the Members,
and the

 

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firm of independent certified public accountants designated by the Manager(s),
of their respective determinations of the Gross Appraised Value of the Assets of
the Company. If the difference between the separate determinations of the Gross
Appraised Value of the Assets of the Company of the First Appraiser and the
Second Appraiser is less than $500,000.00, the Gross Appraised Value of the
Assets of the Company shall, for purposes of this Agreement, be equal to the
average of the determinations of the Gross Appraised Value of the Assets of the
Company of the First Appraiser and the Second Appraiser. If the difference
between the separate determinations of the Gross Appraised Value of the Assets
of the Company of the First Appraiser and the Second Appraiser is more than
$500,000.00, then at any time after such period, either the Persons who
appointed the First Appraiser or the Persons who appointed the Second Appraiser,
by written notice to the First Appraiser and Second Appraiser, may demand that
they appoint a Third Appraiser (the “Third Appraiser”). If the First Appraiser
and Second Appraiser have not appointed the Third Appraiser (who shall have
agreed to serve) by the twentieth day after such demand, either the Persons who
appointed the First Appraiser or the Persons who appointed the Second Appraiser
may request any judge of the Fourth Judicial District Court of the State of Utah
to appoint the Third Appraiser. The Third Appraiser shall, within thirty (30)
days after his or her appointment, make a determination of the Gross Appraised
Value of the Assets of the Company and provide written notice of that
determination to the Company, the members and the firm of independent certified
public accountants designated by the Manager(s). Upon the determination of the
Gross Appraised Value of the Assets of the Company by the Third Appraiser, the
Gross Appraised Value of the Assets of the Company shall, for purposes of this
Agreement, be equal to the average of the two closest determinations of the
Gross Appraised Value of the Assets of the Company by the First, Second, and
Third Appraisers.

 

If a Second Appraiser is not timely appointed in the manner provided by this
Agreement, and if such Second Appraiser remains unappointed for more than ten
(10) days after the Person entitled to make such appointment is given written
notice that such Second Appraiser has not been timely appointed as provided in
this Agreement, the Gross Appraised Value of the Assets of the Company shall be
determined solely by the First Appraiser who shall give notice of such Gross
Appraised Value of the Assets of the Company to the Company, the Members, and
the firm of independent certified public accountants designated by the
Manager(s) within thirty (30) days of the last day on which the Second Appraiser
could have been timely designated.

 

Each appraiser appointed hereunder shall be disinterested and shall be a member
of the Appraisal Institute or other appropriate body and qualified to appraise
business similar to that of the Company.

 

ARTICLE 11: DISSOLUTION AND WINDING-UP

 

11.01                     Waiver of Partition. No Member shall, either directly
or indirectly, take any action to require partition, file a bill for Company
accounting or appraisement of the Company or of any of its assets or properties
or cause the sale of any Company property, and notwithstanding any provisions of
applicable law to the contrary, each Member (and each of his legal
representatives, successors, or assigns) hereby irrevocably waives any and all
rights it may have to maintain any action for partition or to compel any sale
with respect to his Company interest, or with respect to any assets or
properties of the Company, except as expressly provided in this Agreement.

 

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11.02                     Covenant Not to Withdraw or Dissolve. Notwithstanding
any provision of the Act, each Member hereby covenants and agrees that the
Members have entered into this Agreement based on their mutual expectation that
all Members will continue as Members and carry out the duties and obligations
undertaken by them hereunder and that, except as otherwise expressly required or
permitted hereby, each Member hereby covenants and agrees not to (a) take any
action to file a certificate of dissolution or its equivalent with respect to
itself, (b) take any action that would cause a Voluntary Bankruptcy of such
Member, (c) withdraw or attempt to withdraw from the Company, (d) exercise any
power under the Act to dissolve the Company, (e) Transfer all or any portion of
his interest in the Company, (f) petition for judicial dissolution of the
Company, or (g) demand a return of such Member’s contributions or profits (or a
bond or other security for the return of such contributions or profits) without
the consent of the Members holding more than fifty percent (50%) of the
Percentage Interests.

 

11.03                     Dissolution and Termination of the Company. The
Company shall be dissolved and terminated upon the first to occur of any of the
following (“Liquidating Events”):

 

(a)                                  By written agreement of Members holding
more than fifty percent (50%) of the Percentage Interests;

 

(b)                                 The happening of any other event that makes
it unlawful or impossible to carry on the business of the Company; or

 

(c)                                  When the Company is not the successor or
survivor entity in any merger or consolidation between the Company and any one
(1) or more other entities.

 

(d)                                 If the Company has not previously been
dissolved and terminated, on the date which is thirty (30) years after the date
on which the Articles of Organization for the Company were first filed with the
Division of Corporations and Commercial Code of the Department of Commerce for
the State of Utah.

 

11.04                     Effect of Bankruptcy, Death or Incompetency of a
Member. The bankruptcy, death, dissolution, liquidation, termination or
adjudication of incompetency of a Member shall not cause the termination or
dissolution of the Company and the business of the Company shall continue. Upon
any such occurrence and unless the trustee, receiver, executor, administrator,
committee, guardian or conservator of such Member is admitted as a Member of the
Company in accordance with the Operating Agreement, the trustee, receiver,
executor, administrator, committee, guardian or conservator of such Member shall
have the rights specified in Section 9.05 of this Agreement. The transfer by
such trustee, receiver, executor, administrator, committee, guardian or
conservator of any Company Interest shall be subject to all of the restrictions
set forth in this Agreement to which such transfer would have been subject if
such transfer had been made by such bankrupt, deceased, dissolved, liquidated,
terminated or incompetent Member.

 

11.05                     Winding Up. Upon the dissolution of the Company, the
Company shall continue solely for the purpose of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Members and no Member shall take any action that is inconsistent
with, or not necessary to or appropriate for, winding up the Company’s business
and

 

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affairs. To the extent not inconsistent with the foregoing, all covenants and
obligations in this Agreement shall continue in full force and effect until such
time as the Property has been distributed pursuant to this Section 11.05 and the
Company has terminated. The Members shall be responsible for overseeing the
winding up and liquidation of the Company, shall take full account of the
Company’s liabilities and Property, shall cause the Property to be liquidated as
promptly as is consistent with obtaining the fair market value thereof, and
shall cause the proceeds therefrom, to the extent sufficient therefore, to be
applied and distributed in the following order:

 

(a)                                  First, to the payment and discharge of all
of the Company’s debts and liabilities to creditors, including debts and
liabilities to creditors who are Members, and to the establishment of reserves
for the payment of the debts and liabilities of the Company in accordance with
applicable law;

 

(b)                                 The balance, if any, to the Members in
accordance with their Percentage Interests.

 

11.06                     Reserve for Liabilities. In the discretion of the
Members, a pro rata portion of the distributions that would otherwise be made to
the Members pursuant to Section 11.05(b) hereof may be:

 

(a)                                  distributed to a trust established for the
benefit of the Members for the purposes of liquidating Company assets,
collecting amounts owed to the Company, and paying any contingent or unforeseen
liabilities or obligations of the Company or of the Members arising out of or in
connection with the Company. The assets of any such trust shall be distributed
to the Members from time to time, in the reasonable discretion of the Members,
in the same proportions as the amount distributed to such trust by the Company
would otherwise have been distributed to the Members pursuant to Section 11.05
hereof; or

 

(b)                                 withheld to provide a reasonable reserve for
Company liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Company, provided that such
withheld amounts shall be distributed to the Members as soon as practicable.

 

11.07                     Deemed Distribution and Recontribution.
Notwithstanding any other provisions of this ARTICLE 11, in the event the
Company is liquidated within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g) but no Liquidating Event has occurred, the Property shall
not be liquidated, the Company’s liabilities shall not be paid or discharged,
and the Company’s affairs shall not be wound up. Instead, the events described
in Regulations Section 1.708-l(b)(1)(iv) as in effect at the time of the
liquidation described in the previous sentence shall be deemed to have occurred.

 

11.08                     Return of Capital. Each Member shall look solely to
the assets of the Company and to the Company property remaining after the
payment or discharge of the debts and liabilities of the Company to the Member.
If such assets and property are insufficient to return the Capital Contributions
of each Member, the Members shall have no recourse against any other Member or
against the Manager(s) irrespective of such Member’s capital balance, be it a
debit or credit balance. However, any Member with a debit or negative balance in
his capital balance, upon the dissolution

 

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and winding up of the Company, shall not be entitled to a distribution as to
capital or his share of profits.

 

11.09                     Winding Up of the Company. Upon a dissolution of the
Company, the winding up of the affairs of the Company and the distribution of
its assets shall be conducted by the Manager(s) who are hereby authorized to do
any and all acts and things reasonably necessary to accomplish the foregoing. In
this regard, the Manager(s) may delegate their obligation to a receiver or a
trustee.

 

A reasonable time shall be allowed for the orderly liquidation of the assets of
the Company and the discharge of liabilities to creditors so as to enable the
Manager(s) to minimize the losses customarily attendant to distressed
dispositions of property. In liquidating the assets of the Company, all assets
of a saleable value which the Manager(s) determine are not suitable for an
equitable distribution shall be sold at public or private sale as the
Manager(s) deem advisable. Any Member may purchase such assets at any such sale.

 

11.10                     Final Accounting. The Company shall furnish each of
the Members with a statement prepared by an accountant designated by the
Manager(s) which shall set forth the assets and liabilities of the Company as of
the date of termination and which shall disclose the sources and applications of
Company assets and proceeds thereof during the course of winding up the Company
affairs and dissolution. Upon completion of the winding up and termination of
the Company, the Members shall execute, acknowledge and cause to be filed
Articles of Dissolution of the Company.

 

11.11                     Method of Distribution of Assets. To the extent
feasible, all distributions in liquidations shall be made pro rata to the
Members in kind. Distribution of specific assets shall be determined by the
Manager(s).

 

11.12                     Judicial Dissolution. Notwithstanding anything to the
contrary in this Agreement, a court having jurisdiction of the Company and the
Members may, in an action commenced by a Member, decree dissolution of the
Company if in such action it is established that the Members are deadlocked in
the management of the affairs of the Company and because of such deadlock either
irreparable injury to the Company is threatened or being suffered or the
business and the affairs of the Company can no longer be conducted to the
advantage of the Members generally.

 

ARTICLE 12: AMENDMENT

 

12.01                     Amendment of Articles of Organization. The Company’s
Articles of Organization shall be amended whenever:

 

(a)                                  There is a change in the name of the
Company;

 

(b)                                 There is a change in the character of the
business of the Company from that specified in the Company’s Articles of
Organization;

 

(c)                                  There is a false or erroneous statement in
the Articles of Organization;

 

(d)                                 There is a change in the time, as stated in
the Articles of Organization, for the dissolution of the Company;

 

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(e)                                  The Members determine to fix a time not
previously specified in the Articles of Organization for the dissolution of the
Company; or

 

(f)                                    The Members desire to make a change in
any of the provisions of the Articles of Organization in order for the Articles
of Organization to accurately represent the agreement among them.

 

12.02                     Amendment of Agreement. Amendments to this Agreement
may be proposed by any Member. The Member proposing such an Amendment shall
submit to the Members a verbatim statement of any proposed amendment and shah
seek the written vote of the Members on the proposed amendment or shall call a
meeting to vote thereon. A proposed amendment shall be adopted and be effective
as an amendment hereto only if it receives approval of the Members holding at
least sixty percent (60%) of the Percentage Interests.

 

ARTICLE 13: INDEMNIFICATION

 

13.01                     Agents. Proceedings and Expenses. For the purposes of
this Section 13.01, “agent” means any Person who is or was a Member, officer,
employee, or other agent of this Company, or is or was serving at the request of
this Company as an officer, employee, or agent of another foreign or domestic
corporation, company, joint venture, trust or other enterprise, or was an
employee, or agent of foreign or domestic corporation which was a Member of this
Company. The term “proceeding” means any threatened, pending or completed action
or proceeding, whether civil, criminal, administrative, or investigative. The
term “expenses” includes, without limitation, attorney’s fees and any expenses
of establishing a right to indemnification under Subsection 13.01(d), or
Subsection 13.01(e) of this Section 13.01.

 

(a)                                  Actions Other Than By The Company. The
Company shall indemnify any Person who was or is a party, or is threatened to be
made party, to any proceeding (other than an action by or in the right of this
Company) by reason of the fact that such Person is or was an agent of this
Company, against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such proceeding if that
Person acted in good faith and in a manner that person reasonably believed to
not be contrary to the best Interests of this Company and, in the case of a
criminal proceeding, had no reasonable cause to believe the conduct of that
person was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in the best
interests of this Company or that the Person had reasonable cause to believe
that the Person’s conduct was unlawful.

 

(b)                                 Actions By The Company. The Company shall
indemnify any Person who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action by or in the right of this
Company to procure a judgment in its favor by reason of the fact that Person is
or was an agent of this Company, against expenses actually and reasonably
incurred by that Person in connection with the defense or settlement of that
action if that Person acted in good faith, in a manner that person believed to
not he contrary to the best interests of this Company and with such care,
including reasonable inquiry, as an ordinarily

 

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prudent person in a like position would use under similar circumstances. No
indemnification shall be made under this Subsection 13.01(b):

 

(1)                                  In respect of any claim, issue or matter as
to which that Person shall have been adjudged to be liable to the Company in the
performance of that Person’s duty to the Company, unless and only to the extent
that the court in which that action was brought shall determine upon application
that, in view of all the circumstances of the case, that Person is fairly and
reasonably entitled to indemnity for the expenses which the court shall
determine;

 

(2)                                  Of amounts paid in settling or otherwise
disposing of a threatened or pending action, with or without court approval; or

 

(3)                                  Of expenses incurred in defending a
threatened or pending action which is settled or otherwise disposed of without
court approval.

 

(c)                                  Successful Defense By Agent. To the extent
that an agent of this Company has been successful on the merits in defense of
any proceeding referred to in Subsection 13.01(b) or 13.01 (c), or in the
defense of any claim, issue, or matter therein, the agent shall be indemnified
against expenses actually and reasonably incurred by the agent in connection
therewith.

 

(d)                                 Advance of Expenses. Expenses incurred in
defending any proceeding shall be advanced by this Company before the final
disposition of the proceeding on receipt of an agreement by or on behalf of the
agent to repay the amount of the advance unless it shall be determined
ultimately that the agent is not entitled to be indemnified as authorized in
this ARTICLE 13.

 

(e)                                  Other Contractual Rights. Nothing contained
in this ARTICLE 13 shall affect any right to indemnification to which persons
other than Members, any officer or agents of this Company or any subsidiary
hereof may be entitled by contract or otherwise.

 

13.02                     Other Indemnification. The indemnification herein
provided shall not be deemed exclusive of any rights to which those seeking
indemnification may be entitled under any agreement, vote of Members (whether
disinterested or not), or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such position, and shall
continue as to a person who has ceased to be a Member or employee, and shall
inure to the benefit of the heirs, executors and administrators of such person.

 

13.03                     Insurance. The Company may purchase and maintain
insurance on behalf of any person who is or was a Member, officer, or employee
of the Company, or is or was serving at the request of the Company as a member,
employee or agent of another company, joint venture, trustor other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Company would
have the power to indemnify him against liability.

 

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13.04                     Settlement by Company. The right of any person to be
indemnified shall be subject always to the right of the Company, in lieu of such
indemnity, to settle any such claim, action, suit or proceeding at the sole
expense of the Company by the payment of the amount of such settlement and the
costs and expenses incurred in connection therewith.

 

ARTICLE 14: MISCELLANEOUS

 

14.01                     Notices. Each Member shall maintain with the records
of the Company an address for notices from the Company to such Member. Each
Member agrees that as of the date of this Agreement, the address for notices to
such Member is set forth in ARTICLE 3 above. Each Member may, by notice given to
all of the other Members and the Company at the designated office specified in
Section 1.04 above in the manner specified in this Section 14.01 designate
another address to which notices are to be sent pursuant to this Agreement. Any
notice, payment, demand, or communication required or permitted to be given by
any provision of this Agreement shall be in writing and sent by overnight
courier, or by telephone or facsimile, if such telephone conversation or
facsimile is followed by a hard copy of the telephone conversation or facsimile
communication sent by registered mail, return receipt requested, postage
prepaid, addressed in the manner specified above in this Section 14.01. Any such
notice shall be deemed to be delivered, given, and received as of the earlier of
the date so delivered or delivery is refused.

 

14.02                     Title and Captions. Article and Section titles or
captions contained in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof.

 

14.03                     Gender. Whenever the singular number is used in this
Agreement and when required by the context, the same shall include the plural,
and the masculine gender shall include the feminine and neuter genders and the
word “person” shall include corporation, firm, company, or other form of
association.

 

14.04                     Counterparts. This Agreement may be executed in
several counterparts, and all so executed shall constitute one agreement binding
on all parties hereto, notwithstanding that all the parties are not signatory to
the original or the same counterpart.

 

14.05                     Governing Law. This Agreement and all amendments
hereto shall be governed by the laws of the State of Utah.

 

14.06                     Survival of Terms and Provisions. The terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the respective Members.

 

14.07                     Severability. The invalidity or unenforceability of
any part of this Agreement shall not invalidate or affect the validity or
enforceability of any other provision of this Agreement, which shall continue to
govern the rights and obligations of the parties hereto as though the invalid or
unenforceable provisions(s) were not a part hereof.

 

14.08                     Further Instruments. The Members agree that they will
execute any and all other documents or legal instruments that may be necessary
or required to carry out and effectuate all of the provisions hereof.

 

27

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14.09                     Preparation of Agreement. The Members acknowledge that
they have all participated in the preparation of this Agreement and, in the
event that any question arises regarding its interpretation, no presumption
shall be drawn in favor of or against any Member with respect to the drafting
hereof.

 

14.10                     Entire Agreement. This Agreement constitutes and
represents the entire agreement of the Members with respect to the subject
matter hereof, and all other prior agreements, covenants, promises and
conditions, verbal or written, between the Members are incorporated herein. No
Member hereto has relied upon any other promise, representation or warranty,
other than those contained herein, in executing this Agreement.

 

14.11                     Waiver of Lis Pendens and Partition. The Members
recognize that no Member has any direct right in any Company property, but only
an interest in the Company which is personal property. Accordingly, because the
Company may suffer irreparable financial loss if a lis pendens were filed or an
action for partition were brought with respect to Company property by a Member
arising out of a Company dispute, each Member does hereby waive any such right
to file a lis pendens against any property of the Company or bring an action for
partition thereof.

 

14.12                     Litigation. In the event any Member or the Company
finds it necessary to bring an action at law or other proceeding against any
Member to enforce any of the terms, covenants or conditions hereof, or by reason
of any breach or difficulty hereunder, the party prevailing in any such action
or other proceeding shall be entitled to recover against the other party all
reasonable attorney’s fees and associated costs. In the event any judgment is
secured by such prevailing party, all such attorneys’ fees and associated costs
shall be determined by the court and not a jury and shall be included in any
judgment.

 

14.13                     Qualification in Other States. If the business of the
Company is conducted in states in addition to the State of Utah, then the
Members agree that this Company shall exist under the laws of each state in
which such business is actually conducted to the extent that it is necessary in
order to do business in such state but that otherwise the laws of the State of
Utah shall govern this Company and each Member agrees to execute such other and
further documents as may be required in order to qualify the Company to conduct
its business in other states. To the extent that business of the Company shall
be conducted in another state, the Members may designate a principal place of
business and other offices in such state or states.

 

14.14                     Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members and their respective heirs,
legatees, legal representatives, successors, transferees, and assigns.

 

14.15                     Construction. Every covenant, term, and provision of
this Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. The terms of this Agreement are intended to
embody the economic relationship among the Members and shall not be subject to
modification by, or be conformed with, any actions by the Internal Revenue
Service except as this Agreement may be explicitly so amended and except as may
relate specifically to the filing of tax returns.

 

28

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14.16                     Time. Time is of the essence with respect to this
Agreement.

 

14.17                     Incorporation by Reference. Every exhibit, schedule,
and other appendix attached to this Agreement and referred to herein is not
incorporated in this Agreement by reference unless this Agreement expressly
otherwise provides.

 

14.18                     Further Action. Each Member agrees to perform all
further acts and execute, acknowledge, and deliver any documents which may be
reasonably necessary, appropriate, or desirable to carry out the provisions of
this Agreement.

 

14.19                     Variation of Pronouns. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the person or persons may require.

 

[The Rest of This Page Is Intentionally Left Blank]

 

29

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DATED effective as of January 1, 2004.

 

 

MANAGER:

 

 

 

 

 

/s/ Kenneth M. Woolley

 

Kenneth M. Woolley

 

 

 

 

 

MEMBERS:

 

 

 

 

 

/s/ Kenneth M. Woolley

 

Kenneth M. Woolley

 

 

 

 

 

/s/ Charles L. Allen

 

Charles L. Allen

 

 

 

 

 

/s/ Dean A. Anderson

 

Dean A. Anderson

 

 

 

 

 

/s/ Timothy Arthurs

 

Timothy Arthurs

 

 

 

 

 

/s/ Kenneth R. Beck

 

Kenneth R. Beck

 

 

 

 

 

 

 

K. Bruce Boucher

 

30

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/s/ Robert L. Burns

 

Robert L. Burns

 

 

 

 

 

 

 

Larendee B. Call

 

 

 

 

 

/s/ Kent W. Christensen

 

Kent W. Christensen

 

 

 

 

 

 

 

Monty J. Conrad

 

 

 

 

 

 

 

Alex Engel

 

 

 

 

 

 

 

James Hafen

 

 

 

 

 

 

 

Russell Brent Hardy

 

 

 

 

 

/s/ William E. Hoban

 

Bill Hoban

 

31

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KRISPEN FAMILY HOLDINGS, L.C., a Utah

 

limited liability company

 

 

 

 

 

By:

/s/ Spencer F. Kirk

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

Mark M. Landes

 

 

 

 

 

 

 

 

 

 

 

Todd A. Lucas

 

 

 

 

 

 

 

 

/s/ Diane Manning

 

 

Diane Manning

 

 

 

 

 

 

 

 

/s/ James L. Overturf

 

 

James L. Overturf

 

 

 

 

 

 

 

 

/s/ David L. Rasmussen

 

 

David L. Rasmussen

 

 

 

 

 

 

 

 

/s/ Brian G. Sheppard

 

 

Brian G. Sheppard

 

 

32

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SSA VENTURES, L.L.C., a Utah limited liability

 

company

 

 

 

 

 

 

 

 

By:

/s/ Stephen C. Aldous

 

 

Name:

Stephen C. Aldous

 

 

Title:

Manager

 

 

 

 

 

 

 

 

/s/ Jim M. Stevens

 

 

Jim M. Stevens

 

 

 

 

 

 

 

 

/s/ Robert Strandt

 

 

Robert Strandt

 

 

 

 

 

 

 

 

/s/ Peter Scott Stubbs

 

 

Peter Scott Stubbs

 

 

 

 

 

 

 

 

 

 

 

Richard S. Tanner

 

 

 

 

 

 

 

 

Ann Maureen King, as Trustee of the Ann Maureen

 

King Trust dated June 26, 1998

 

 

 

 

 

 

 

 

Kenneth M. High, as Trustee of the High Family

 

Trust dated December 31, 2000

 

 

33

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Sandra J. High, as Trustee of the High Family Trust

 

dated December 31, 2000

 

 

 

 

 

THE KIRK 101 TRUST

 

 

 

 

 

 

 

 

By:

 

 

 

 

David R. Spafford, Trustee

 

 

 

 

 

 

 

 

By:

/s/ Stephen C. Aldous, Trustee

 

 

 

Stephen C. Aldous, Trustee

 

 

 

 

 

 

 

 

Thomas P. Pecht, as Trustee of the Pecht Family

 

Trust dated April 11, 1997

 

 

 

 

 

 

 

 

Karen M. Pecht, as Trustee of the Pecht Family

 

Trust dated April 11, 1997

 

 

 

 

 

THE SFKC KIRK CHARITABLE REMAINDER TRUST

 

 

 

 

 

 

 

By:

 

 

 

 

Leland S. McCullough, Trustee

 

 

 

 

 

 

 

 

By:

 

 

 

 

David R. Spafford, Trustee

 

 

34

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Robert C. Weiss, in his capacity as Trustee of the

 

Weiss Trust dated August 2, 1996

 

 

 

 

 

 

 

Gwynneth F. Weiss, in her capacity as Trustee of

 

the Weiss Trust dated August 2, 1996

 

 

 

 

 

 

 

/s/ Kenneth T. Woolley

 

 

Kenneth T. Woolley

 

 

35

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EXHIBIT B

 

SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF
EXTRA SPACE DEVELOPMENT, LLC

 

--------------------------------------------------------------------------------

 

SECOND AMENDED AND RESTATED OPERATING AGREEMENT
FOR
EXTRA SPACE DEVELOPMENT, LLC

 

THIS SECOND AMENDED AND RESTATED OPERATING AGREEMENT (this “Agreement”) is made
as of December 31, 2007 (the “Effective Date”) by and between KENT W.
CHRISTENSEN and CHARLES L. ALLEN, as the Managers, and EXTRA SPACE STORAGE LLC
(referred to as the “Member”), with reference to the following facts:

 

A.              Extra Space Development, LLC (“Company”) a limited liability
company organized under the laws of the State of Utah, has previously filed
Articles of Organization (the “Articles”), with the Utah Secretary of State.

 

B.              The Member has entered into a Subscription Agreement of even
date herewith, whereby Member has acquired membership interests in the Company.

 

C.              By operation of a Membership Interest Redemption Agreement,
Member is now the sole member of the Company.

 

D.              The Member desires to adopt and approve a Second Amended and
Restated Operating Agreement for the Company under the Revised Utah Limited
Liability Company Act as currently or hereinafter in effect in the State of Utah
(the “Act”).

 

NOW, THEREFORE, the Member by this Agreement sets forth the Operating Agreement
for the Company upon the terms and subject to the conditions of this Agreement.

 

ARTICLE I
ORGANIZATIONAL MATTERS

 

1.1             Name. The name of the company shall be “Extra Space Development,
LLC.” The Company may conduct business under that name or any other name
approved by the Member.

 

1.2             Term. This Agreement shall be effective from the date of the
adoption of this Agreement by all of the Members and the term of this Agreement
shall continue until dissolution of the Company as hereinafter provided.

 

1.3             Office and Agent. The Company shall continuously maintain an
office and registered agent in the State of Utah as required by the Act. At the
time of its formation, the registered office and registered agent of the Company
in the State of Utah is Extra Space Storage LLC of2795 E, Cottonwood Parkway,
#400, Salt Lake City, Utah 84121 Attn: David L. Rasmussen. In addition, the
Company shall maintain its principal office at 2795 E. Cottonwood Parkway, Suite
400, Salt Lake City, Utah 84121, or at such other place as the Manager(s) may
determine. The registered office, registered agent and principal office of the
Company may be changed at any time and from time to time by the Manager(s).

 

1.4             Business of the Company. The Company shall not engage in any
business other than the following without the consent of all of the Members:

 

1

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(a)           The purpose of the Company is to engage in any other lawful
activity for which a limited liability company may be organized under the Act;
and

 

(b)           Such other activities directly related to the foregoing activities
as may be necessary or advisable in the reasonable opinion of the Manager to
further such business.

 

ARTICLE II
CAPITAL CONTRIBUTIONS

 

2.1             Capital Contributions. The Member shall make a contribution to
the capital of the Company in the amount shown opposite the Member’s name on
Exhibit “A” attached hereto. No Member shall be required to make any additional
contributions to the capital of the Company. Additional contributions to the
capital of the Company shall be made only with the unanimous consent of the
Manager and the Member. Except as provided in this Agreement, no Member may
withdraw his or her capital contribution.

 

2.2             Capital Accounts. The Company shall establish an individual
capital account (“Capital Account”) for each Member. The Company shall determine
and maintain each Capital Account in accordance with Treasury Regulations
Section 1.704-1 (b)(2)(iv).

 

2.3             No Interest. The Company shall not pay any interest on capital
contributions.

 

ARTICLE III
MEMBERS

 

3.1             Member. The liability of the Member shall be limited as provided
in the Act, which generally provides that no Member is personally liable for the
debts, obligations, or liabilities of the Company.

 

3.2             Admission of Additional Members. Additional Members may be
admitted with the approval of all Members. Additional Members will participate
in the “Net Profits,” “Net Losses” (as such terms are defined in Section 5.1),
and distributions of the Company on such terms as are determined by the Members.
Exhibit “A” shall be amended upon the admission of an additional Member to set
forth such Member’s name and capital contribution.

 

3.3             Member Services: Reimbursement of Expenses. Unless otherwise
specifically agreed among the Members, no Member shall receive any payment or
compensation for performance of obligations under this Agreement. Subject to
reasonable regulations adopted by the Manager, the Company shall reimburse
Members for all reasonable direct out-of-pocket expenses incurred by them at the
request of the Company.

 

ARTICLE IV
MANAGEMENT AND CONTROL OF THE COMPANY

 

4.1             Manager to Manage Business.

 

(a)           The business of the Company shall be conducted under the exclusive
management of a manager or managers (the “Manager”) elected by the Members. The
initial Managers shall be Kent W. Christensen and Charles L. Allen. At all times
when there is more than one Manager for the Company, each Manager shall have
full power and authority to act on behalf of the Company and to bind the Company

 

2

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thereby, without the approval of any other Manager, except as otherwise
prohibited by other provisions of this Agreement.

 

(b)           The Manager shall act on behalf of the Company. The Manager may,
but need not, act at meetings.

 

4.2             Powers of Managers. The Manager is authorized on the Company’s
behalf to make all decisions as to: (i) management of all or any part of the
Company’s assets and business; (ii) borrowing money (including borrowing from
Members), and the granting of security interests in the Company’s assets; (iii)
prepayment, refinancing, or extension of any indebtedness of the Company for
borrowed money; (iv) compromise or release of any of the Company’s claims or
debts; and (v) employment of persons, firms, or corporations for the operation
and management of the Company’s business.

 

In the exercise of the Manager’s management powers, the Manager is authorized to
execute and deliver on behalf of the Company and in its name: (i) contracts,
conveyances, assignments, leases, subleases, franchise agreements, licensing
agreements, management contracts, and maintenance contracts covering or
affecting the Company’s business and assets; (ii) checks, drafts, and other
orders for the payment of the Company’s funds; (iii) promissory notes,
mortgages, deeds of trust, security agreements, and other similar documents; and
(iv) other instruments of any kind or character relating to the Company’s
affairs, whether like or unlike the foregoing.

 

4.3             Election of Managers.

 

(a)           The Company shall initially have two (2) Managers. The number of
Managers of the Company shall be fixed from time to time by the affirmative vote
or written consent of a majority of the Membership Interests, provided that in
no instance shall there be less than one Manager and provided further that if
the number of Managers is reduced from more than one to one, the Articles shall
be amended to so state, and if the number of Managers is increased to more than
one, the Articles shall be amended to delete the statement that the Company has
only one Manager. Unless he or she resigns or is removed, each Manager shall
hold office until a successor shall have been elected and qualified. Managers
shall be elected by the affirmative vote or written consent of Members holding a
majority of the Membership Interests. A Manager need not be a Member, an
individual, a resident of the State of Utah, or a citizen of the United States.

 

(b)           Any Manager may resign at any time by giving written notice to the
Members and remaining Manager, if any, without prejudice to the rights, if any,
of the Company under any contract to which the Manager is a party. The
resignation of any Manager shall take effect upon receipt of that notice or at
such later time as shall be specified in the notice. Unless otherwise specified
in the notice, the acceptance of the resignation shall not be necessary to make
it effective. The resignation of a Manager who is also a Member shall not affect
the Manager’s rights as a Member and shall not constitute a withdrawal of a
Member.

 

(c)           Any Manager may be removed at any time, with cause, by the
affirmative vote of a majority of the Membership Interest at a meeting called
expressly for that purpose, or by the written consent of a majority of the
Membership Interest. Any removal shall be without prejudice to the rights, if
any, of the Manager under any employment contract and, if the Manager is also a
Member, shall not affect the Manager’s rights as a Member or constitute a
withdrawal of a Member. For purposes of this Section, “cause” shall mean fraud,
gross negligence, willful misconduct, embezzlement or a breach of such Manager’s
obligations under this Agreement or any employment contract with the Company.

 

(d)           Any vacancy occurring for any reason in the number of Managers may
be filled by the affirmative vote or written consent of a majority of the
Membership Interest.

 

3

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4.4             Time Devoted to Business. The Manager shall devote such time to
the business of the Company as he in his discretion deems necessary for the
efficient operation of the Company’s business. The Manager and any person or
entity controlled by, controlling or under common control with the Manager (each
such person or entity is defined as an “Affiliate”) may engage or invest in any
activity, including, without limitation, those that might be in direct or
indirect competition with the Company. Neither the Company nor any Manager shall
have any right in or to such other activities or to the income or proceeds
derived therefrom.

 

4.5             Information Relating to Company. On request, the Manager shall
supply to any Member information regarding the Company or its activities. Each
Member or authorized representative of a Member shall have access to and may
inspect and copy all books, records, and materials in the Manager’s possession
regarding the Company or its activities. The exercise of the rights contained in
this Section shall be at the requesting Member’s expense.

 

4.6             Exculpation. Any act or omission of the Manager, the effect of
which may cause or result in loss or damage to the Company or the Members if
done in good faith to promote the best interests of the Company, shall not
subject the Manager to any liability to the Members.

 

4.7             Management Fee: Reimbursement of Expenses. The Company shall pay
the Manager a management fee and no Manager shall be prevented from receiving
any fee because the Manager is also a Member. In addition, the Company shall pay
the Manager or Affiliates of the Manager for services rendered or goods provided
to the Company. The Company shall reimburse the Manager for all reasonable
direct out-of-pocket expenses incurred by him or his Affiliates in managing the
Company.

 

ARTICLE V
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS

 

5.1             Definitions. When used in this Agreement, the following terms
shall have the meanings set forth below.

 

(a)           “Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time, the provisions of succeeding law, and to the extent
applicable, the Treasury Regulations.

 

(b)           “Company Minimum Gain” shall have the meaning ascribed to the term
“Partnership Minimum Gain” in the Treasury Regulations Section l.704-2(d).

 

(c)           “Member Nonrecourse Debt” shall have the meaning ascribed to the
term “Partner Nonrecourse Debt” in Treasury regulations Section 1.704-2(b)(4).

 

(d)           “Member Nonrecourse Deductions” shall mean items of Company loss,
deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to
Member Nonrecourse Debt.

 

(e)           “Net Profits” and “Net Losses” shall mean the income, gain, loss,
deductions, and credits of the Company in the Aggregate or separately stated, as
appropriate, determined in accordance with the method of accounting at the close
of each fiscal year employed on the Company’s information tax return filed for
federal income tax purposes.

 

(f)            “Nonrecourse Liability” shall have the meaning set forth in
Treasury Regulations Section 1.752-l(a)(2).

 

4

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(g)           “Treasury Regulations” shall mean the final or temporary
regulations that have been issued by the U.S. Department of Treasury pursuant to
its authority under the Code, and any successor regulations.

 

5.2             Allocations of Net Profit and Net Loss.

 

(a)           Net Loss. Net Loss shall be allocated to the Members in proportion
to their Membership Interest. Notwithstanding the previous sentence, loss
allocations to a Member shall be made only to the extent that such loss
allocations will not create a deficit Capital Account balance for that Member in
excess of an amount, if any, equal to such Member’s share of Company Minimum
Gain that would be realized on a foreclosure of the Company’s property. Any loss
not allocated to a Member because of the foregoing provision shall be allocated
to the other Members (to the extent the other Members are not limited in respect
of the allocation of losses under this Section 5.2(a)). Any loss reallocated
under this Section 5.2(a) shall be taken into account in computing subsequent
allocations of income and losses pursuant to this Article V, so that the net
amount of any item so allocated and the income and losses allocated to each
Member pursuant to this Article V, to the extent possible, shall be equal to the
net amount that would have been allocated to each such Member pursuant to this
Article V if no reallocation of losses had occurred under this Section 5.2(a).

 

(b)           Net Profit. Net Profit shall be allocated to the Members in
proportion to their Membership Interests.

 

5.3             Code Section 704(c) Allocations. Notwithstanding any other
provision in this Article V, in accordance with Code Section 70-4(c) and the
Treasury Regulations promulgated thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its fair market value on the date of
contribution. Allocations pursuant to this Section 5.4 are solely for purposes
of federal, state and local taxes. As such, they shall not affect or in any way
be taken into account in computing a Member’s Capital Account or share of
profits, losses, or other items of distributions pursuant to any provision of
this Agreement.

 

(a)           Distribution of Assets by the Company. Subject to applicable law
and any limitations contained elsewhere in this Agreement, Members holding at
least a majority of the Membership Interests may elect from time to time to
cause the Company to make distributions. Distributions shall be first to the
Members in proportion to their unreturned capital contributions until each
Member has recovered his or her capital contributions, and then to the Members
in proportion to their Membership Interests.

 

ARTICLE VI
CONSEQUENCES OF DISSOLUTION EVENTS AND
TERMINATION OF MEMBERSHIP INTEREST

 

6.1             Dissolution Event. Upon the occurrence of the death, withdrawal,
resignation, retirement, insanity or dissolution of any Member (“Dissolution
Event”), the Company shall dissolve unless all of the remaining Members
(“Remaining Members”) consent within ninety (90) days of the Dissolution Event
to the continuation of the business of the Company. If the Remaining Members so
consent, the Company and/or the Remaining Members shall have the right to
purchase, and if such right is exercised, the Member (or his or her legal
representative or estate) whose actions or conduct resulted in the Dissolution
Event (“Former Member”) shall sell, the Former Member’s Membership Interest
(“Former Member’s Interest”) as provided in this Article.

 

5

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6.2             Withdrawal. Notwithstanding Section 6.1, upon the withdrawal by
a Member such Member shall be treated as a Former Member, and, unless the
Company dissolves as a result of such withdrawal, the Company and/or the
Remaining Members shall have the right to purchase, and if such right is
exercised, the Former Member shall sell, the Former Member’s Interest as
provided in this Article.

 

6.3             Purchase Price. The purchase price for the Former Member’s
Interest shall be the fair market value of the Former Members Interest as
determined by an independent appraiser jointly selected by the Former Member and
by Remaining Members holding a majority of the remaining Membership Interests.
The Company and the Former Member shall each pay one-half of the cost of the
appraisal. Notwithstanding the foregoing, the Dissolution Event results from a
breach of this Agreement by the Former Member, the purchase price shall be
reduced by an amount equal to the damages suffered by the Company or the
Remaining Members as a result of such breach.

 

6.4             Notice of Intent to Purchase. Within thirty (30) days after the
fair market value of the Former Member’s Interest has been determined in
accordance with Section 6.3, each Remaining Member shall notify the Members in
writing of his or her desire to purchase a portion of the Former Member’s
Interest. The failure of any Remaining Member to submit a notice within the
applicable period shall constitute an election on the part of the Member not to
purchase any of the Former Member’s Interest. Each Remaining Member so electing
to purchase shall be entitled to purchase a portion of the Former Member’s
Interest in the same proportion that the Membership Interest of the Remaining
Member bears to the aggregate of the Membership Interests of all of the
Remaining Members electing to purchase the Former Member’s Interest.

 

6.5             Election to Purchase Less Than All of the Former Member’s
Interest. If any Remaining Member elects to purchase none or less than all of
his or her pro rata share of the Former Member’s Interest, then the Remaining
Members can elect to purchase more than their pro rata share. If the Remaining
Members fail to purchase the entire interest of the Former Member, the Company
may purchase any remaining share of the Former Member’s Interest.

 

6.6             Payment of Purchase Price. The Company or the Remaining Members,
as the case may be, shall pay at the closing one-fifth (1/5) of the purchase
price and the balance of the purchase price shall be paid in four equal annual
principal installments, plus accrued interest, and be payable each year on the
anniversary date of the closing. The unpaid principal balance shall accrue
interest at the current applicable federal rate as provided in the Code for the
month in which the initial payment is made, but the Company and the Remaining
Members shall have the right to prepay in full or in part at any time without
penalty. The obligation of each purchasing Remaining Member, and the Company, as
applicable, to pay its portion of the balance due shall be evidenced by a
separate promissory note executed by the respective purchasing Remaining Member
or the Company, as applicable. Each such promissory note shall be in an original
principal amount equal to the portion owed by the respective purchasing
Remaining Member or the company, as applicable. The promissory note executed by
each purchasing Remaining Member shall be secured by a pledge of that portion of
the Former Member’s Interest purchased by such Remaining Member.

 

6.7             Closing of Purchase of Former Member’s Interest. The closing for
the sale of a Former Member’s Interest pursuant to this Article shall be held at
a time and place mutually agreed upon by the parties. At the closing, the Former
Member shall deliver to the Company or the Remaining Members an instrument of
transfer (containing warranties of title and no encumbrances) conveying the
Former Member’s Interest. The Former Member, the Company and the Remaining
Members shall do all things and execute and deliver all papers as may be
reasonably necessary fully to consummate such sale and purchase in accordance
with the terms and provisions of this Agreement.

 

6

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ARTICLE VII
ACCOUNTING, RECORDS, REPORTING BY MEMBERS

 

7.1             Books and Records. The books and records of the Company shall be
kept in accordance with the accounting methods followed for federal income tax
purposes.

 

7.2             Reports. The Company shall cause to be filed, in accordance with
the Act, all reports and documents required to be filed with any governmental
agency. The Company shall cause to be prepared at least annually information
concerning the Company’s operations necessary for the completion of the Members’
federal and state income tax returns. The Company shall send or cause to be sent
to each Member within ninety (90) days after the end of each taxable year (i)
such information as is necessary to complete the Members’ federal and state
income tax or information returns and (ii) a copy of the Company’s federal,
state and local income tax or information returns for the year.

 

7.3             Bank Accounts. The Manager shall maintain the funds of the
Company in one or more separate bank accounts in the name of the Company, and
shall not permit the funds of the Company to be commingled in fashion with the
funds of any other person. The Manager, acting alone, is authorized to endorse
checks, drafts and other evidences of indebtedness made payable to the order of
the Company.

 

7.4             Tax Matters for the Company. The Manager is designated at “Tax
Matters Partner” (as defined in Code Section 6231), to represent the Company (at
the Company’s expense) in connection with all examination of the Company’s
affairs by tax authorities and to expend Company funds for professional services
and costs associated therewith.

 

ARTICLE VIII
DISSOLUTION AND WINDING UP

 

8.1             Conditions of Dissolution. The Company shall dissolve upon the
occurrence of any of the following events:

 

(a)           Upon the happening of any event of dissolution specified in the
Articles;

 

(b)           Upon the entry of a decree of judicial dissolution pursuant to
Section 17351 of the Corporations Code;

 

(e)           Upon the vote of Members holding at least a majority of the
Membership Interests; or

 

(d)           The sale of all or substantially all of the assets of the Company.

 

8.2             Winding Up. Upon the dissolution of the Company, the Company’s
assets shall be disposed of and its affairs wound up. The Company shall give
written notice of the commencement of the dissolution to all of its known
creditors.

 

8.3            Order of Payment of Liabilities Upon Dissolution. After
determining that all the known debts and liabilities of the Company have been
paid or adequately provided for, the remaining assets shall be distributed to
the Members in accordance with their positive capital account balances, after
taking into account income and loss allocations for the Company’s taxable year
during which liquidation occurs.

 

8.4            Limitations on Payments Made in Dissolution. Except as otherwise
specifically provided in this Agreement, each Member shall be entitled to look
only to the assets of the Company for the return of his or

 

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her positive Capital Account balance and shall have no recourse for his or her
Capital Contribution and/or share of Net Profits against any other Member except
as provided in Article VIII.

 

8.5             Certificates. The Company shall file with the Utah Secretary of
State a Certificate of Dissolution upon the dissolution of the Company and a
Certificate of Cancellation upon the completion of the winding up of the
Company’s affairs.

 

ARTICLE IX
INDEMNIFICATION

 

9.1             Indemnification of Agents. The Company shall indemnify any
Manager and Member and may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that he or she is or was a Manager,
Member, officer, employee or other agent of the Company or that, being or having
been such a Manager, Member, officer, employee or agent, he or she is or was
serving at the request of the Company as a manager, director, office, employee
or other agent of another limited liability company, corporation, partnership,
joint venture, trust or other enterprise (all such persons being referred to
hereinafter as an “agent”), to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
hereafter from time to time permit.

 

ARTICLE X
INVESTMENT REPRESENTATIONS

 

Each Member hereby represents and warrants to, and agrees with, the Manager the
Members and the Company as follows:

 

10.1            Pre-existing Relationship or Experience. He or she has a
pre-existing personal or business relationship with the Company or one or more
of its officers or controlling persons, or by reason of his or her business or
financial experience, or by reason of the business or financial experience of
his or her financial advisor who is unaffiliated with and who is not
compensated, directly or indirectly, by the Company or any affiliate or selling
agent of the Company, he or she is capable of evaluating the risks and merits of
an investment in the Company and of protecting his or her own interests in
connection with this investment.

 

10.2            No Advertising. He or she has not seen, received, been presented
with, or been solicited by any leaflet, public promotional meeting, article or
any other form of advertising or genera! solicitation with respect to the sale
of the Membership Interest.

 

10.3            Investment Intent. He or she is acquiring the Membership
Interest for investment purposes for his or her own account only and not with a
view to or for sale in connection with any distribution of all or any part of
the Membership Interest. No other person will have any direct or indirect
beneficial interest in or right to the Membership Interest.

 

ARTICLE XI
MISCELLANEOUS

 

11.l             Complete Agreement. This Agreement and the Articles constitute
the complete and exclusive statement of agreement among the Members with respect
to the subject matter herein and therein and replace and supersede all prior
written and oral agreements among the Members. To the extent that any provision
of the Articles conflict with any provision of this Agreement, the Articles
shall control.

 

8

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11.2           Binding Effect. Subject to the provision of this Agreement
relating to transferability, this Agreement will be binding upon and inure to
the benefit of the Members, and their respective successors and assigns.

 

11.3           Interpretation. All pronouns shall be deemed to refer to the
masculine, feminine, or neuter, singular or plural, as the context in which they
are used may required. All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the interpretation of any
provision of this Agreement. Numbered or lettered articles, sections and
subsections herein contained refer to articles, sections and subsections of this
Agreement unless otherwise expressly stated. In the event any claim is made by
any Member relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular
Member or his or her counsel.

 

11.4           Jurisdiction. Each Member hereby consents to the exclusive
jurisdiction of the state and federal courts sitting in Utah in any action on a
claim arising out of, under or in connection with this Agreement or the
transactions contemplated by this Agreement. Each Member further agrees that
personal jurisdiction over him or her may be effected by service of process by
registered or certified mail addressed as provided in Section 11.6, and that
when so made shall be as if served upon him or her personally within the State
of Utah.

 

11.5           Severability. If any provision of this Agreement or the
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision to
persons or circumstances other than those to which it is held invalid shall not
be affected thereby.

 

11.6          Notices. Any notice to be given or to be served upon the Company
or any party hereto in connection with this Agreement must be in writing (which
may include facsimile) and will be deemed to have been given and received when
delivered to the address specified by the party to receive notice. Such notices
will be given to a Member at the address specified in Exhibit “A” hereto. Any
party may, at any time by given five days’ prior written notice to the other
Members, designate any other address in substitution of the foregoing address to
which such notice will be given.

 

11.7          Amendments. All amendments to this Agreement will be in writing
and signed by all of the Members.

 

11.8          Multiple Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.

 

11.9          Attorney Fees. In the event that any dispute between the Company
and the Members or among the Members should result in litigation or arbitration,
the prevailing party in such dispute shall be entitled to recover from the other
party all reasonable fees, costs and expenses of enforcing any right of the
prevailing party, including without limitation, reasonable attorneys’ fees and
expenses, all for which shall be deemed to have accrued upon the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment. Any judgment or order entered in such action shall contain a specific
provision providing for the recovery of attorney fees and costs incurred in
enforcing such judgment and an award of prejudgment interest from the date of
the breach at the maximum rate allowed by law. For the purposes of this Section:
(a) attorney fees shall include, without limitation, fees incurred in the
following: (1) post judgment motions; (2) contempt proceedings; (3) garnishment,
levy, and debtor and third party examinations; (4) discovery; and (5) bankruptcy
litigation and (b) prevailing party shall mean the party who is determined in
the proceeding to have prevailed or who prevails by dismissal, default or
otherwise.

 

9

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11.10         Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.

 

11.11         Qualification in Other States. In the event that the business of
the Company is conducted in states in addition to the State of Utah, then the
Members agree that this Company shall exist under the laws of each state in
which such business is actually conducted to the extent that it is necessary in
order to do business in such state but that otherwise the laws of the State of
Utah shall govern this Company and each Member agrees to execute such other and
further documents as may be required in order to qualify the Company to conduct
its business in other states. To the extent that business of the Company shall
be conducted in another state, the Manager(s) may, in their discretion,
designate a principal place of business and other offices in such state or
states.

 

10

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IN WITNESS WHEREOF, the Member and Managers of Extra Space Development, LLC, a
Utah limited liability company, have executed this Agreement, effective as of
the date written above.

 

 

MEMBER:

 

 

 

EXTRA SPACE STORAGE LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

 /s/ Kenneth M. Woolley

 

 

Its: Manager

 

 

 

 

 

MANAGERS:

 

 

 

 

 

/s/ Kent W. Christensen

 

 

Kent W. Christensen

 

 

 

 

 

/s/ Charles L. Allen

 

 

Charles L. Allen

 

11

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EXHIBIT “A”

 

CAPITAL CONTRIBUTION AND ADDRESSES OF
MEMBERS AS OF THE EFFECTIVE DATE

 

 

 

Capital

 

Membership

 

Member

 

Contribution

 

Interest

 

 

 

 

 

 

 

Extra Space Storage LLC
2795 E. Cottonwood Parkway, Suite 400
Salt Lake City, UT 84121

 

$

 

 

100

%

 

12

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EXHIBIT C

 

PLAN OF DISSOLUTION
OF
EXTRA SPACE DEVELOPMENT, LLC

 

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PLAN OF DISSOLUTION
OF
EXTRA SPACE DEVELOPMENT, LLC

 

This Plan of Dissolution of Extra Space Development, LLC, a Utah limited
liability company (“Company”), is made pursuant to the Amended and Restate
Operating Agreement for the Company, dated as of January 1, 2004.

 

WHEREAS, the manager of the Company, Kenneth M. Woolley, and the undersigned
holders of a majority-in-interest of the Percentage Interests of the Company
have determined that it is in the best interests of the Company and its members
for the Company to sell all of its assets and to wind up its affairs and
dissolve;

 

WHEREAS, the Company has negotiated an agreement with Extra Space Storage, Inc
and its subsidiaries for the purchase of all of the Company assets, with
provision for the payment of Company liabilities and a reserve for the expenses
of winding up it affairs.

 

IT IS RESOLVED, that the Company be dissolved and wind up its affairs in
accordance with the following (“Plan”):

 

1.       Enter into an agreement to sell all of the Company’s interest in its
property owning entities (subsidiaries and all joint venture interests) to Extra
Space Storage LLC, for the sum of $21,486,446.75 (which reflects the agreed upon
real estate values of the Company properties, less existing property level
debts, less a reduction for the interests of the Company’s joint venture
partners, adjusted for the actual net results of operation thru 11/30/07 per the
Company balance sheet, and further adjusted for the estimated results of
operations from 11/30/07 through 12/31/07).

 

2.       Pay in full the Company obligations on its line of credit from Zions
First National Bank in the approximate amount of $9,055,000.

 

3.       Retain a reserve of approximately $357,000 in cash and receivables, for
winding up expenses and for known and contingent liabilities and retained by the
Company.

 

4.       Accept a Subscription Agreement from Extra Space Storage LLC for a
membership interest in the Company, in exchange for payment equal to the
$357,000 in retained reserves.

 

5.       Distribute all remaining net proceeds of sale and all other cash, in
the approximate amount of $8,793,000, to its current members in proportion to
their Percentage Interests and in complete redemption of their respective
membership interests in the Company.

 

6.       Authorize Kenneth M. Woolley as manager to conduct and wind up the
final affairs of the Company, including preparation of a final accounting and
tax returns, and application of the reserves to the liabilities of the Company
(which will then be a wholly-owned

 

1

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subsidiary of Extra Space Storage LLC, with the reserved funds and any
contingent assets and liabilities which may remain isolated in the Company).

 

THE FOREGOING PLAN IS HEREBY APPROVED THIS December, 24 2007.

 

 

MANAGER

MEMBERS [majority-in-interest]

 

 

 

 

/s/ Kenneth M. Woolley

 

/s/ Kenneth M. Woolley

 

Kenneth M. Woolley

Kenneth M. Woolley

 

32.6300419%

 

 

 

 

 

Krispen Family Holdings, L.C.

 

 

 

 

 

By:

/s/ Spencer F. Kirk

 

 

Its:

MANAGER

 

 

20.1946641%

 

2

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