Document:

Exhibit 10.2 Purchase and Sale Agreement -Waycross Panola Properties

EXHIBIT 10.2

PURCHASE AND SALE AGREEMENT
DATED AS OF MARCH 13, 2014
BETWEEN
FORESTREE VI LP and FORESTREE VI TEXAS LP,
AS SELLER

AND
CATCHMARK TIMBER TRUST, INC.,
AS BUYER

PURCHASE AND SALE AGREEMENT

WAYCROSS - PANOLA

THIS PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into as of the 13th day of March, 2014 (the “Effective Date”), by and among FORESTREE VI LP, a Delaware limited partnership (“ForesTree”), and FORESTREE VI TEXAS LP, a Delaware limited partnership (“ForesTree Texas”) (ForesTree and ForesTree Texas each may be referred to herein independently as a "Seller”, and collectively, as the  “Sellers”) and CATCHMARK TIMBER TRUST, INC., a Maryland corporation (“Buyer”) (Buyer and Seller may each be referred to herein as a “Party” or collectively, as the “Parties”).  

RECITALS

		
	A. 
	ForesTree is the owner of approximately 17,863 acres of timberlands and timber rights located in Appling and Wayne Counties, Georgia, that it wishes to sell, assign, transfer or convey together with certain other assets, rights under certain continuing leases, licenses, contracts and other agreements, to Buyer in accordance with the terms and subject to the conditions set forth in this Agreement. 

		
	B. 
	ForesTree Texas is the owner of approximately 18,477 acres of timberlands and timber rights located in Hardin, Jasper, Newton, Orange, Polk and Tyler Counties, Texas, that it wishes to sell, assign, transfer or convey together with certain other assets, rights under certain continuing leases, licenses, contracts and other agreements, to Buyer in accordance with the terms and subject to the conditions set forth in this Agreement.

		
	C. 
	Buyer wishes to acquire and accept such timberlands and other assets, rights under certain continuing leases, licenses, contracts and other agreements, being transferred to it in accordance with the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing, their respective representations, warranties, covenants and agreements set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I
PROPERTY AND PURCHASE PRICE

Section 1.1    Agreement to Purchase and Sell.   Subject to and in accordance with the terms and provisions of this Agreement, for the consideration stated herein, and upon satisfaction of the conditions set forth in Article X, Seller shall at the Closing sell, assign, transfer and convey to Buyer, and Buyer shall acquire, assume and accept from Seller, all right, title and interest to the following assets (collectively, the “Property”), subject to the Permitted Exceptions, as defined below, but free and clear of all Liens, as defined below:
		
	(a)
	Timberlands.  The real property held by Sellers in fee simple identified in Exhibit A, together with (i) all down and standing trees or timber located thereon, excluding the timber which may be harvested and removed in Georgia in accordance with the supply agreement as described in Schedule 1.1(a)(A) (the  “Georgia Supply Agreement”) (ii) all buildings thereon, (iii) all roads, bridges and other improvements and fixtures thereon, (iv) without warranty, all right, title and interest in and to all gas, 

oil, minerals, coal, sand, gravel and all other substances or minerals of any kind or character underlying or relating to such land to the extent not retained or conveyed out by Seller’s predecessors in title, (v) all other privileges, appurtenances, easements (including the Buyer Easements in respect thereof) and other rights appertaining thereto ( the “Timberlands”), subject to the Permitted Exceptions.  The Georgia Supply Agreement affects only those portions of the Timberlands located in Georgia. Additional terms related to the Georgia Supply Agreement and Seller’s obligation to cause certain amounts of timber to be cut and delivered to the purchaser under the Georgia Supply Agreement are set forth in Section 5.6, Section 6.7, Section 12.1 and Schedule 1.1(a)(A).  
		
	(b)
	Assumed Contracts.  The rights of Seller under the contracts in effect at the Effective Time that (i) exclusively relate to all or any portion of the Timberlands, including, but not limited to, the Georgia Supply Agreement, or are necessary to the forest operations conducted on the Timberlands and (ii) are described in Exhibit B, but excluding the rights of Seller under any Real Property Lease (collectively, the “Assumed Contracts”).  

		
	(c)
	Real Property Leases.  The rights of Seller with respect to the leases in effect at the Effective Time (i) that relate to all or any portion of the Timberlands to which Seller is a lessor and are described in Exhibit C, including any lease under which Seller has granted to a third party hunting or other recreational rights with respect to the Timberlands (or, with respect to any hunting lease in respect of the Timberlands listed on Exhibit C that expires prior to the Closing Date, any new hunting lease entered into with the same person or entity prior to the Closing Date on terms no less favorable to Seller as the applicable prior lease) or (ii) under which a Seller is a lessee of facilities related to the forest operations on the Timberlands and are described on Exhibit C (collectively, the “Real Property Leases”).

Unless expressly identified or described in this Section 1.1, no other assets of Seller are included in the Property.
Section 1.2    Assumed Liabilities.  Subject to the terms and provisions of this Agreement and upon satisfaction of the conditions set forth in Article X, each Seller shall at the Closing assign to Buyer, and Buyer shall assume from each Seller, the liabilities and obligations of Sellers under the Assumed Contracts and the Real Property Leases, to the extent such liabilities and obligations accrue or arise, or are related to periods commencing, on or after the Effective Time (collectively, the “Assumed Liabilities”).
Section 1.3    Purchase Price.      The purchase price for the Property is SEVENTY-FOUR MILLION AND NO/100 DOLLARS ($74,000,000.00), subject to adjustment as provided herein (the “Purchase Price”). At Closing (defined below), Buyer shall pay Sellers by wire transfer or otherwise immediately available federal funds (US Dollars) the entire Purchase Price, of which the Earnest Money (defined below) is a part.  

ARTICLE II
EARNEST MONEY; ESCROW

Section 2.1    Earnest Money; Escrow.  Within three (3) business days after all parties have executed and delivered this Agreement, Buyer will deposit with the First American Title Insurance Company based in Atlanta, Georgia (Attn:  Mr. Kevin Wood) (the “Escrow Agent”), the amount of THREE MILLION SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS ($3,700,000.00), in immediately available federal funds (US Dollars), paid or delivered as earnest money (said amount, together with all interest earned thereon, the "Earnest Money").  The Earnest Money shall either (i) be applied to the Purchase Price at Closing (defined below) or returned to Buyer at Closing provided that Buyer delivers the entire Purchase Price to Escrow Agent, or (ii) be disbursed in accordance with the terms of this Agreement if the Closing does not occur.  Upon mutual execution of this Agreement, the parties shall execute and deliver the escrow agreement in the form of Exhibit D.  

ARTICLE III
CLOSING

Section 3.1    Closing.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place, subject to the satisfaction, or waiver by the Party entitled to the benefit thereof, of the conditions set forth in Article X, at the office of Buyer’s counsel, Smith, Gambrell & Russell, LLP, 1230 Peachtree Street, N.E., Suite 3100, Atlanta, Georgia 30309-3592, or another place mutually agreed upon by Buyer and Sellers (or through escrow established with the Title Company), at 9:00 a.m., on or before April 11, 2014, in accordance with this Agreement or at such other time and date as the Parties shall agree in writing (the date on which the Closing occurs, the “Closing Date”).  Upon completion of the Closing, the transactions contemplated by this Agreement shall be deemed effective as of 12:01 a.m. Eastern Time on the Closing Date (the “Effective Time”).  Closing shall mean the point at which all documentation and monies required to close the transaction pursuant to the terms of this Agreement have been delivered in escrow to Escrow Agent (with necessary authorizations to release and disburse same), including signed closing statements and escrow instructions.  Buyer shall have the right to a one-time extension of the Closing Date for up to fourteen (14) days, which right shall be exercised by notice to Seller delivered on or before April 7, 2014, and if Buyer timely exercises its right to extend the Closing Date as provided in this Section 3.1, (i) Buyer shall be required to deposit with Escrow Agent on or before April 7, 2014, as an additional deposit the amount of One Million and No/100 Dollars ($1,000,000.00), which amount shall be considered upon delivery, a part of the Earnest Money, and (ii) and all references to $250,000.00 in Section 9.1 and Section 9.2 shall be increased to $1,000,000.00.  THE PARTIES AGREE THAT TIME IS OF THE ESSENCE WITH RESPECT TO CLOSING AND THIS AGREEMENT.

ARTICLE IV
TITLE

Section 4.1    Condition of Title and Title Insurance.  

(a)    As of the Closing Date, title to the Timberlands is to be free of all encumbrances or defects except the “Permitted Exceptions” described on Exhibit X.    

(b)        Sellers have provided or made available current title commitments prepared by the Title Company (such commitments together with legible copies of all documentary exceptions referred to in such commitments are hereinafter, collectively referred to as the “Title Commitment”), to Buyer at Sellers' expense.  Sellers shall pay the search and exam fees and other costs of preparing and delivering to Buyer the Title Commitment.  Buyer shall pay for any title insurance premiums and any premiums, costs and expenses associated with expanded title insurance coverage or title endorsements. 

(c)    Buyer shall have until seven (7) days prior to the Closing Date (the “Due Diligence Period”) to deliver to Sellers written notice of any objection to any matters reflected in any Title Commitment, which, in Buyer’s reasonable judgment, would materially adversely affect the use or enjoyment by Buyer of any parcel or portion of the Timberlands for growing, managing, and commercially harvesting timber (each, a “Title Objection” and collectively, the “Title Objections”); provided, however, that  Buyer shall be permitted to object to all Title Failures affecting the Timberlands.  For the purposes of this Agreement, the term “Title Failure” shall mean any portion of the Timberlands that is not, or immediately prior to the Closing will not be, (i) owned by Seller or (ii) insurable by the Title Company without exception (other than the Permitted Exceptions).  Notwithstanding anything to the contrary set forth herein, Buyer shall have no right to object to any Permitted Exceptions and, for the purposes of this Agreement, such items will not be considered Title Objections.  Upon receipt of the Title Objections, Seller may elect (but shall not be obligated) to cure or cause to be cured any such Title Objection, and Seller shall notify Buyer in writing within ten (10) days after receipt of the Title Objections whether Seller elects to cure the same.  Failure of Seller to respond in writing within such time period shall be deemed an election by Seller not to cure such Title Objections.  Any Title Objection shall be deemed to be cured if Seller causes the Title Company, at no additional cost to Buyer, to issue an owner’s title policy for the affected Timberlands affirmatively insuring over such Title Objection 

in the owner’s title policy.  Notwithstanding the foregoing, Seller shall be obligated to cure, on or before the Closing Date, all Liens against the Timberlands evidencing a debt (other than Liens for non-delinquent real estate Taxes or assessments) (“Monetary Liens”) created as a result of the acts or omissions of Seller or its affiliates.  For the purposes of this Agreement, the term “Lien” means any mortgage, lien, charge, pledge, hypothecation, assignment, deposit, arrangement, encumbrance, security interest, assessment, adverse claim, levy, preference or priority or other security agreement of any kind or nature whatsoever (whether voluntary or involuntary, affirmative or negative (but excluding all negative pledges), and whether imposed or created by operation of law or otherwise) in, on or with respect to, or pledge of, any Property, or any other interest in the Property, designed to secure the repayment of debt or any other obligation, whether arising by contract, operation of law or otherwise.  If Seller does not receive written notice of the Title Objections for any objection to matters reflected in the Title Commitment on or before the expiration of the Due Diligence Period, Buyer shall be deemed to have waived its right to object to any and all matters reflected in the Title Commitment and Buyer shall be deemed to accept title to the Timberlands encompassed within such Title Commitment subject to such matters; provided, however, that Buyer shall have the right to object to any matters affecting title not appearing in any Title Commitment as of the end of the Due Diligence Period and/or first appearing of record between the effective date of the Title Commitment and the Closing Date, which right may be exercised by delivering to Seller a subsequent notice of Title Objections on or before the Closing Date, and such subsequent Title Objections shall be resolved in the same manner as set forth above for Title Objections raised within the Due Diligence Period.  Any Title Objection waived (or deemed waived) by Buyer shall be deemed to constitute a Permitted Exception, and the Closing shall occur as herein provided without any reduction of the Purchase Price therefor.
With regard to Title Objections or Title Failures timely raised by Buyer per the terms of this Section, Seller shall have the right, but not the obligation, to cure and remove such items within thirty (30) days after Seller’s receipt of Buyer’s written notice of Title Objections or Title Failures.  For purposes of this Agreement, curing a Title Objection or Title Failure may include obtaining affirmative title coverage insuring against loss or damage arising from such Title Objection or Title Failure.  In the event Seller elects not to cure a Title Objection or Title Failure timely made by Buyer, Buyer shall have the right, at its option, to accept the Timberlands subject to the uncured Title Objection or Title Failure or to reduce the Purchase Price by the fair market value of the affected parcel and require Seller to proceed to the Closing with those portions of the Timberlands that are subject to the Title Failure or Title Objection excluded from the Property to be conveyed to Buyer at Closing (a “Title Carveout”).  Said fair market value shall be determined by Buyer and Seller by reference to the agreed upon land and timber values for the Timberlands, which values are set forth on Schedule 4.1 attached hereto and hereby made a part hereof (the “Value Table”).  If the Parties are unable to agree upon the fair market value of any Title Carveout, said fair market value shall be determined as provided in Section 9.3 below.  Notwithstanding the foregoing, if any portion or parcel of the Timberlands is to be excluded from the transaction pursuant to this Section 4.1 or as otherwise provided in this Agreement and such parcel comprises less than all of a discrete parcel of land with an adequate, insurable legal description, Seller shall determine (subject to Buyer’s right of reasonable approval as to shape or configuration and provided that the Title Carveout is a Marketable Parcel) the exact boundaries and dimensions of the portion of the Timberlands to be retained by Seller, and Seller shall make arrangements to have said portion of the Timberlands surveyed by a surveyor licensed to practice in the applicable State in order to produce an insurable legal description for said retained parcel.  Seller shall pay all costs of any surveys so obtained.  Seller shall also obtain any and all subdivision approvals required for Seller’s retention of the Title Carveouts.  Buyer agrees to grant without cost to Seller access easements over and across any portion of the Timberlands acquired by Buyer upon reasonable terms and over reasonable routes as may be necessary for Seller’s access to any Title Carveouts, and Seller agrees to grant to Buyer without cost access easements over and across the Title Carveouts (and any other portion of the Timberlands retained by Seller) upon reasonable terms and over reasonable routes as may be necessary for Buyer’s access to the Timberlands.  For purposes of this Agreement, “Marketable Parcel” means a parcel or tract of land containing at least forty (40) acres.  The Closing Date shall be extended for any applicable cure periods under this Section. 

ARTICLE V
INSPECTION; CONDITION OF PROPERTY

Section 5.1    Inspection.  Buyer acknowledges that Buyer has been given the opportunity to inspect the Property and that neither Sellers nor their agents, officers, employees or assigns shall be held to any covenant respecting the condition of the Property or any improvements thereof nor shall Buyer or Sellers or the assigns of either be held to any covenant or agreement for alterations, improvements or repairs unless the  covenant or agreement relied on is contained herein or is in writing and attached to and made a part of this Agreement or is contained in the Deeds.  Buyer acknowledges and agrees that any documents, cruises, compilations, timber inventories, surveys, plans, specifications, reports and studies (the "Information") made available to Buyer by Seller are or have been provided as information only, and Seller makes no warranty with respect to the accuracy or completeness of the Information except as otherwise expressly provided herein or in the Deeds. 

Upon reasonable prior written notice to Seller (which notice can be by email to Sellers’ designated representative), and receipt of authorization from Seller (which shall not be unreasonably withheld), prior to the Closing Date or termination of this Agreement in accordance with the terms of this Agreement, Buyer, through its authorized agents or representatives, may enter upon the Timberlands at all reasonable times for the purposes of making inspections and other studies; provided, however, that neither Buyer nor its agents or representatives shall (i) enter upon the Timberlands, for the purpose of preparing Phase II Environmental Reports or making any soil borings or other invasive or other subsurface environmental investigations relating to all or any portion of the Timberlands, (ii) prepare or instruct its agents or representatives to prepare Phase II Environmental Reports or make any soil borings or other invasive or other subsurface environmental investigations relating to all or any portion of the Timberlands, or (iii) except as may be required by applicable law and except pursuant to the ordinary course of Buyer’s due diligence investigations, contact any official or representative of any governmental authority regarding hazardous substances on or the environmental condition of the Timberlands without Seller’s prior written consent thereto.  Upon the completion of such inspections and studies, Buyer, at its expense, shall repair any damage caused to the Timberlands and remove all debris and all other material placed on the Timberlands in connection with Buyer’s inspections and studies.  Buyer hereby agrees to assume all liability for and shall indemnify, defend and hold harmless Seller, Hancock Natural Resource Group, Inc., Hancock Forest Management, Inc., John Hancock Timber Resource Corporation and their respective officers, employees, and agents (“HNRG Parties”) against any and all damages, claims, fines, penalties, demands, costs (including, without limitation, reasonable attorneys’ fees and court costs), or causes of action, of every kind, nature and description, arising out of or in any way connected with Buyer’s due diligence process or Buyer’s inspection of the Timberlands, except to the extent the same arise out of the intentional misconduct or negligence of any of the HNRG Parties.  Notwithstanding anything to the contrary set forth in this Agreement, the foregoing indemnification shall survive any termination, cancellation or expiration of the Agreement or the Closing.  Buyer agrees that from and after the date of this Agreement until Closing, Buyer, and the contractors, representatives and agents of Buyer who enter upon the Timberlands, shall maintain commercial general liability insurance with a reputable insurer naming Seller, Hancock Natural Resource Group, Inc., Hancock Forest Management, Inc., and John Hancock Timber Resource Corporation, as additional insureds in an amount not less than $2,000,000.  Upon written request of Seller, Buyer shall provide evidence of such insurance (in form reasonably acceptable to Seller) to Seller.  

Section 5.2    Condition of Property.  Buyer specifically acknowledges and agrees that except as set forth in Sellers’ limited warranty of title in the Deeds and as set forth in Section 6 below  and as set forth in any other instrument delivered by Sellers in connection with the Closing, (1) Sellers do not make any representations or warranties of any kind whatsoever, either express or implied, with respect to and shall have no liability for the Property (or any related matters), and (2) the Property is sold to Buyer in an “AS IS” and “WITH ALL FAULTS” condition as of the Closing, including, without limitation, (i) the existence or non-existence of legal access to or from the Timberlands or any portion thereof; (ii) the number of acres comprising the Timberlands; (iii) the volume, condition or quality of timber on the Timberlands; (iv) logging conditions or feasibility; (v) the stability of soils; (vi) suitability, habitability, merchantability or fitness of the Timberlands 

for any construction or development, or for the Buyer’s intended use; (vii) the condition of any other structure or improvements on the Timberlands; (viii) encroachment or boundary questions; (ix) compliance with any laws; (x) drainage, availability or adequacy of water, sewer or other utilities, zoning, access and similar matters; and (xi) any other matters related to the Property.

Section 5.3    Continued Operation. Between the Effective Date and the Closing Date,  Sellers shall (i) maintain and keep the Timberlands in substantially the same condition as existed on the Effective Date, (ii) not remove or permit the removal of any timber, harvestable crop, improvements, or other items from the Timberlands, except as may be permitted under the Georgia Supply Agreement, (iii) not encumber or enter into any contract, lease or other agreement (including any amendment to any of the Assumed Contracts, the Real Property Leases or the Georgia Supply Agreement) (other than the proposed amendment to the Georgia Supply Agreement previously provided to Buyer) the Timberlands without the prior written consent of Buyer, which consent may be withheld in Buyer’s sole discretion.  

Section 5.4    No Reliance.  Buyer acknowledges that any materials provided to it, including any cost or other estimates, projections, acreage, and timber information, the Confidential Information Memorandum for “Project Waycross - Panola” any management presentations and any materials and information provided on data disks or in any on-line data rooms, are not and shall not be deemed representations or warranties by or on behalf of Seller or any other person and are not to be relied upon by Buyer, except as otherwise provided herein.

Section 5.5    Environmental Report. Buyer acknowledges receipt of (i) that certain Phase I environmental site assessment for the Timberlands located in Georgia conducted by SLR, Inc. (the “Environmental Consultant”), dated January, 2014, and (ii)  that certain Phase I environmental site assessment for the Timberlands located in Texas conducted by the Environmental Consultant dated December, 2013 (collectively, the “Phase I Assessments”).  Buyer has no objections to the matters set forth in the Phase I Assessments.  On or before Closing, Sellers shall cause the Environmental Consultant to either issue in favor of Buyer and Buyer’s lender, CoBank, ACB, as Administrative Agent (“CoBank”) a reliance letter for the Phase I Assessments in form reasonably acceptable to Buyer (the “Reliance Letter”) or to revise and amend the Phase I Assessments to name Buyer and CoBank as an additional intended users of the Phase I Assessments.  Sellers and Buyer shall share equally the cost of the Phase I Assessments.  Seller has advised Buyer that said total cost will not exceed $13,000.00.

Section 5.6    Georgia Supply Agreement.  The Timberlands located in Georgia are subject to the Georgia Supply Agreement. FORESTREE VI LP and Georgia Biomass, LLC, purchaser under the Georgia Supply Agreement (“Georgia Biomass”), have agreed upon the Annual Purchase Amount, as defined in the Georgia Supply Agreement, and the stands of Timber, as defined in the Georgia Supply Agreement, to be thinned during the 2014 Harvesting Year, as defined in the Georgia Supply Agreement, to satisfy the Annual Purchase Amount (the “2014 Stands”).  The 2014 Stands are also set forth in Schedule 1.1(a)(A).   Seller may cause the harvesting and removal of Timber under the Georgia Supply Agreement to resume on March 4, 2014 (the “Adjustment Date”).   

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER

Representations and Warranties of Seller.  Sellers represent and warrant to Buyer as of this date and as of the date of the Closing:

Section 6.1    Organization and Good Standing.  Each Seller is a limited partnership which is duly organized and validly existing under the laws of the State of Delaware. Each Seller is qualified to conduct business in the State of Georgia and the State of Texas.

Section 6.2    Power and Authority for Transaction.  Except as expressly provided in Section 16.21 below, each Seller has the power and authority to execute, deliver and perform this Agreement and the transactions contemplated herein in accordance with the terms hereof.

Section 6.3    Authorization; No Violation or Conflicts.   The execution and delivery by each Seller of this Agreement and the due consummation of the transactions contemplated herein have been duly and validly authorized by all necessary corporate actions on the part of each Seller and this Agreement constitutes a valid and legally binding agreement of each Seller.  Neither the execution and delivery of this Agreement by each Seller nor the consummation by each Seller of the transactions contemplated herein constitute a violation of applicable law or of each Seller's partnership agreement or other organizational documentation or agreements or result in the breach of, or the imposition of any lien on any assets of each Seller pursuant to, or constitute a default under, any indenture or bank loan or credit agreement, or other agreement or instrument to which each Seller is a party or by which it or any of its properties may be bound or affected.  Except for consents, approvals, or authorizations which will have been obtained or actions which will have been taken on or prior to the Closing Date, no consent, approval, authorization or action by any governmental authority or any person or entity having legal rights against or jurisdiction over each Seller is required in connection with the execution and delivery by each Seller of this Agreement or for consummation by each Seller of the transactions contemplated herein.

Section 6.4    Litigation and Condemnation.  There is no pending or, to each Seller’s knowledge, threatened action or proceeding (including, but not limited to, any condemnation or eminent domain action or proceeding) before any court, governmental agency or arbitrator which may adversely affect each Seller’s ability to perform this Agreement or which may affect the Property. 

Section 6.5    Compliance with Laws.  To Sellers’ knowledge, (i) Sellers’ use of the Timberlands is in material compliance with all statutes, ordinances, rules, regulations, orders and requirements of all federal, state and local authorities and any other governmental entity having jurisdiction over the Timberlands (“Laws”), and (ii)   Sellers have not received any notice from any such governmental entity of any violation of any Laws. 

Section 6.6    Environmental Matters.  To Sellers’ knowledge, except as may be otherwise specifically identified in the Phase I Assessments, (x) the Timberlands has not at any time been used for the generation, transportation, management, handling, treatment, storage, manufacture, emission disposal, release or deposit of any hazardous substances or fill or other material containing hazardous substances in material violation of levels permitted under applicable laws; provided, however, the Timberlands may contain small, unauthorized household dump sites typical of rural timberlands; (y) there are no underground storage tanks on the Timberlands, and (z) Sellers have received no written notice from any federal, state or local governmental authority, to the effect that any portion of the Timberlands is not in compliance with applicable federal, state or local environmental laws, including, without limitation and as the same may be amended from time to time: (i) the Resource Conservation and Recovery Act of 1976, 42 USC §6901 et. seq. (RCLA); (ii) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 USC §9601 et. seq. (CERCLA); (iii) the Hazardous Materials Transportation Act, 49 USC §1801, et. seq.; (iv) applicable laws of the States of Georgia and Texas, and (v) any federal, state or local regulations, rules or orders issued or promulgated under or pursuant to any of the foregoing or otherwise by any department, agency or other administrative, regulatory or judicial body. 

Section 6.7    Harvest Rights.  Except for any timber harvest operations conducted under the Georgia Supply Agreement, there are no outstanding contracts or agreements entered into by Sellers pursuant to which any party has the contractual right to cut or remove timber from the Timberlands.  To Sellers’ knowledge:  (i) there has been no timber harvested or removed from the Timberlands located in Georgia since January 11, 2014 (the “Georgia Inventory Date”); (ii) there has been no timber harvested or removed from the Timberlands located in Texas since January 8, 2014 (the “Texas Inventory Date”); and (iii) Sellers shall not permit any harvesting or removal of timber from the Timberlands under the Georgia Supply Agreement until the Adjustment Date.  From and after the Adjustment Date, Timber may be harvested 

and removed from the Timberlands located in Georgia pursuant to the terms of the Georgia Supply Agreement.

Section 6.8    ERISA.  For purposes of Section 3(14) of the Employee Retirement and Income Security Act of 1974, as amended (hereinafter referred to as “ERISA”), Sellers are not a party in interest with Buyer.  The Property does not constitute an asset of an employee benefit plan affiliated with Sellers, as defined in Section 3(3) of ERISA.

Section 6.9    OFAC.  Sellers are not, and will not become, a person or entity with whom U.S. persons are restricted from doing business with under the regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of Treasury (including those named on OFAC’s Specially Designed and Blocked Persons list) or under any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), the US Patriot Act, or other governmental action.

Section 6.10    Assumed Contracts and Real Property Leases.  With respect to each Assumed Contract and Real Property Lease: (i) such Assumed Contract and Real Property Lease is legal, valid, binding, enforceable and in full force and effect and has not been modified or amended except as indicated on Exhibit B or Exhibit C attached hereto; (ii) the transactions contemplated by this Agreement will not result in a breach or default under any such Assumed Contract or Real Property Lease, or otherwise cause such Assumed Contract or Real Property Lease to cease to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing; (iii) neither Sellers, nor to Sellers’ knowledge, any other party to any such Assumed Contract or Real Property Lease is in breach or default under such Assumed Contract or Real Property Lease; and (iv) to Sellers’ knowledge, no event has occurred or failed to occur or circumstances exist which, with the delivery of notice, the passage of time or both, would constitute a breach or default under any such Assumed Contract or Real Property Lease or permit the termination, modification or acceleration of rent under such Assumed Contract or Real Property Lease.  

Section 6.11    Endangered, Threatened or Listed Species.  To Sellers’ knowledge, there are no activity centers for species listed as endangered or threatened under the Federal Endangered Species Act located on the Timberlands.  Seller has not received any written notice of any threatened or contemplated actions against Seller or the Timberlands based upon the presence of any species listed as endangered or threatened under the Federal Endangered Species Act on the Timberlands.

Section 6.12    No Casualty.  To Sellers’ knowledge, no trees or timber having an aggregate value in excess of $100,000.00 have been lost or damaged by fire or other Casualty since the applicable Inventory Date.  For purposes of this Agreement, Casualty shall mean any physical damage to or loss of the timber on any portion of the Timberlands by fire, earthquake, flood, insects, disease or other casualty, or as a result of timber trespass or unauthorized harvest.  

Section 6.13    Unrecorded Documents.  To Sellers’ knowledge, Sellers have not entered into any unrecorded agreements, easements, permits or contracts that will affect the Timberlands after Closing, except for the Georgia Supply Agreement, the Assumed Contracts and the Real Property Leases.

Section 6.14    Title.  To Sellers’ knowledge, (i) FORESTREE VI LP owns fee-simple title to the Timberlands, as described in the Title Commitments, located in Georgia, and (ii) FORESTREE VI TEXAS LP owns fee-simple title to the Timberlands, as described in the Title Commitments, located in Texas, free and clear of all monetary liens, but expressly subject to all Permitted Exceptions, the Georgia Supply Agreement, the Real Property Leases and the Assumed Contracts.

Section 6.15    Boundary Disputes.  Except as described in Schedule 6.15, to Sellers’ knowledge, there are no boundary disputes and no encroachments affecting the Timberlands or any portion thereof, nor is any person or entity adversely possessing or using any of the Timberlands or any portion thereof.

Section 6.16    Georgia Supply Agreement.  No consent is required for the assignment by FORESTREE VI LP of the Georgia Supply Agreement, and all of the property subject to the Georgia Supply Agreement is included in the Georgia Timberlands.

Section 6.17    Mining.  Except as described in Schedule 6.17, to Sellers’ knowledge, there have been no active mining operations conducted on the Timberlands during the past five (5) years, and Seller has no knowledge of any proposed mineral activity on the Timberlands.

Section 6.18    Property Taxes.  To Sellers’ knowledge, (i) no taxes or assessments relating to the Timberlands are delinquent, and (ii) there are no special taxes, assessments or charges proposed, pending or threatened against the Timberlands.  Neither Sellers nor, to Sellers’ knowledge, any other person or entity has applied the Timberlands or any portion thereof to a use other than agricultural or silvicultural.  

For the purpose of this Agreement, the phrase “to Sellers’ knowledge” or “to Seller’s knowledge” shall be defined as the present, actual knowledge only, and not any implied, imputed or constructive knowledge, without any independent investigation having been made or any implied duty to investigate, of the following listed officers and employees of Sellers and Hancock Natural Resource Group, Inc.:  (a) for the portion of the Timberlands located in Georgia:  David Kimbrough, Manager, Dispositions - North America, Tim Jarrell, Area Forester, and Benjamin Addison, Area Manager; and (b) for the portion of the Timberlands located in Texas:  David Kimbrough, Lee Wise, Area Forester, and Christy Nichol, Area Manager.

The truth of the representations and warranties set forth above is a condition to Buyer's obligation to purchase, and if any of the representations and warranties are not true at the date of Closing, then Buyer may rescind this Agreement and receive a return of the Earnest Money, and in the event any such false representation or warranty constitutes a default by Sellers hereunder, Buyer may also exercise any available remedy permitted under this Agreement.  The representations and warranties set forth above shall survive Closing for a period of twelve (12) months after Closing, however, unless Buyer notifies Sellers in writing of an apparent or claimed breach of representation or warranty within twelve (12) months of Closing, then Sellers shall have no further liability resulting from the breach of said representations or warranties.  Buyer shall have no right to bring any action against Sellers as a result of any breach, untruth or inaccuracy of the representations and warranties contained herein unless and until the aggregate amount of all liability and losses, claims, causes of action, damages, costs and expenses, including reasonable attorneys’ fees and expenses (collectively, “Loss”) arising out of any such untruth or inaccuracy or breach, together with the Loss resulting from any other such untruth, inaccuracy or breach exceeds or is reasonably likely to exceed $200,000.00.  The maximum amount of Sellers’ aggregate liability resulting from any such untruth, inaccuracy or breach of a representation and warranty hereunder shall in no event exceed an aggregate amount in excess of $14,800,000.00.  Sellers shall have no liability with respect to any breach of Seller’s representations and warranties herein if, prior to the Closing, Buyer obtains actual knowledge of any such breach or contradiction of a representation or warranty of Sellers herein, including, without limitation, as a result of Buyer’s due diligence or the inclusion of information in a written disclosure by Sellers to Buyer, and Buyer nevertheless consummates the transaction contemplated by this Agreement.  In addition, Sellers shall be liable for actual damages only and shall have no liability hereunder for indirect, special, consequential or punitive damages.  For purposes of this paragraph, Buyer’s actual knowledge shall mean the actual knowledge of Jerry Barag, Buyer’s President and Chief Executive Officer, and John D. Capriotti, Buyer’s Director of Acquisitions.

ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER

Representations and Warranties of Buyer.  Buyer represents and warrants to Sellers that as of this date and as of the date of the Closing:

Section 7.1    Organization.  Buyer is a corporation duly organized and validly existing under the laws of the State of Maryland. 

Section 7.2    Power and Authority for Transaction.  Buyer has the power and authority to execute, deliver and perform this Agreement and the transactions contemplated herein in accordance with the terms hereof.

Section 7.3    Authorization; No Violation or Conflicts.  The execution and delivery of this Agreement by Buyer and the due consummation of the transactions contemplated herein have been duly and validly authorized by all necessary [partnership or corporate] action on the part of Buyer, and this Agreement constitutes a valid and legally binding agreement of Buyer.  Neither the execution and delivery of this Agreement by Buyer nor the consummation by Buyer of the transactions contemplated herein constitute a violation of applicable law or of Buyer’s partnership agreement, charter or bylaws or other organizational documentation or agreements or result in the breach of, or the imposition of any lien on any assets of Buyer pursuant to, or constitute a default under, any indenture or bank loan or credit agreement, or other agreement or instrument to which Buyer is a party or by which it or any of its properties may be bound or affected.  Except for consents, approvals, or authorizations which will have been obtained or actions which will have been taken on or prior to the Closing Date, no consent, approval, authorization or action by any governmental authority or any person or entity having legal rights against or jurisdiction over Buyer is required in connection with the execution and delivery by Buyer of this Agreement or for consummation by Buyer of the transactions contemplated herein.

Section 7.4    Funding.   Buyer has available or has binding subscriptions for, and will at the Closing have available, sufficient funds to pay the Purchase Price and to pay all other amounts due and payable by Buyer pursuant to the terms of this Agreement.

Section 7.5    OFAC. Buyer is not, and will not become, a person or entity with whom U.S. persons are restricted from doing business with under the regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of Treasury (including those named on OFAC’s Specially Designed and Blocked Persons list) or under any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), the US Patriot Act, or other governmental action.

The representations and warranties set forth above shall survive Closing for a period of twelve (12) months after Closing, however, unless Seller notifies Buyer in writing of an apparent or claimed breach of warranty within twelve (12) months of Closing, then Buyer shall have no further liability to Seller with respect to the representations or warranties.  Buyer shall have no liability with respect to a breach of a representation or warranty herein if, prior to the Closing, Seller obtains knowledge of such breach or contradiction of a representation or warranty of Buyer herein, including, without limitation, as a result the inclusion of information in a written disclosure by Buyer to Seller, and Seller nevertheless consummates the transaction contemplated by this Agreement.  In addition, Buyer shall be liable for actual damages only and shall have no liability hereunder to Seller or Seller’s successors and assigns for indirect, special, consequential or punitive damages in favor of Seller.

ARTICLE VIII
ENVIRONMENTAL RELEASE

Section 8.1    Environmental Release.  From and after the date which is twelve (12) months after the Closing Date (the “Release Date”), Buyer hereby releases Sellers from all costs, losses, liabilities, obligations and claims, of any nature whatsoever, known and unknown, that Buyer may have against Sellers based in whole or in part upon the presence, release or disposal of any hazardous substance, solid waste, or any other environmental contamination on, within, or from the Timberlands before or as of the Closing Date.  Anything to the contrary notwithstanding, Buyer’s waiver and release of Sellers as described above shall not eliminate Sellers’ liability for the warranty and representation set forth in Section 6.6 hereof, or for any claim made by Buyer prior to the Release Date.  Buyer or its successors and assigns shall have no obligation at any time or as a result of this release to indemnify, defend or save harmless Sellers from claims 

by third parties for any conditions, actions or omissions which occurred prior to the Closing Date regardless of whether claims are brought before or after Closing.  As used in this Section, the term “applicable environmental laws” shall mean all state, federal, or local laws, statutes, ordinances, rules, regulations or orders pertaining to health or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) and the Resource Conservation and Recovery Act of 1976 (“RCRA”), as each may be amended from time to time.  As used herein, the terms “hazardous substance” and “release” have the meanings specified in CERCLA, and the terms “solid waste” and “disposal” (or “disposed”) have the meanings specified in RCRA.  If either CERCLA or RCRA is amended to broaden the meaning of any term defined thereby, the broader meaning shall apply to this Section after the effective date of the amendment.  Moreover, to the extent that Georgia or Texas law establishes a meaning for “hazardous substance,” “release,” “solid waste,” or “disposal” that is broader than that specified in either CERCLA or RCRA, the broader meaning shall apply.  In addition, this Section shall survive the date of closing for all purposes and shall not be deemed to have merged into any of the documents executed or delivered at Closing. 

ARTICLE IX
CONDEMNATION; CASUALTY

Section 9.1    Buyer’s Risk.  Buyer shall bear the risk of loss or damage to the Timberlands from Casualty loss or any other cause whatsoever, or condemnation of any portion of the Timberlands, prior to Closing, if, but only if, such loss, damage or condemnation does not cause a reduction in the value of the Property greater than $250,000.00, it being assumed for purposes of this computation that the value of the land and timber comprising the Timberlands is the value shown on the Value Table.  Notwithstanding the occurrence of any such loss, damage or condemnation which is $250,000.00 or less, Buyer and Sellers shall complete the Closing without adjustment of the Purchase Price. 

Section 9.2    Sellers’ Risk.  Sellers shall bear the risk of loss or damage to the Timberlands and improvements thereon from Casualty loss or any other cause whatsoever, or condemnation of any portion of the Timberlands, prior to Closing if, but only if, such loss, damage or condemnation causes a reduction in the value of the Property greater than $250,000.00. In the event of such loss, damage, or condemnation prior to Closing which causes a reduction in value of the Property greater than $250,000.00 but less than ten percent (10%) of the Purchase Price, Buyer shall proceed with Closing provided that (i) in the case of damage, Buyer shall receive a reduction in the Purchase Price equal to the amount of such damage as determined in accordance with Section 9.3 below, or (ii) in the case of a condemnation, Sellers shall assign all of Sellers’ rights to such condemnation award or proceeds for the Property to Buyer.  In the event that such loss, damage or condemnation occurs prior to Closing and causes a reduction in the value of the Property in excess of ten percent (10%), Buyer, at its election, may terminate this Agreement without any further liability of either party to the other, except that Sellers shall direct the Escrow Agent to refund the Earnest Money to Buyer or if Buyer fails to terminate this Agreement as provided herein within five (5) business days after the determination of the reduction in value of the Property, then Buyer shall be deemed to have waived such termination right and Buyer and Sellers shall complete the Closing provided that (i) in the case of damage, Buyer shall receive a reduction in the Purchase Price equal to the amount of such damage as determined in accordance with Section 9.3 below, or (ii) in the case of a condemnation, Sellers shall assign all of Sellers’ rights to such condemnation award or proceeds for the Property to Buyer.

Section 9.3    Adjustment.  In the event it shall become necessary, pursuant to Sections 9.1 or 9.2, to determine the amount of any change in the value of the Property, and Sellers and Buyer are unable to agree on the amount of such change within ten (10) days after the occurrence of such loss, damage or condemnation, then such determination shall be made by a majority of a panel of three (3) independent professional forestry consultants each of whom has no less than ten (10) years’ experience in the practice of forestry in the general area of the Timberlands.  One such consultant shall be appointed by Sellers, one such consultant shall be appointed by the Buyer, and the third consultant shall be chosen by the first two consultants.  The decision of such consultants shall be final and binding on both parties, and the costs of such determination shall be divided equally between Buyer and Sellers.  Said consultants shall use the land 

and timber values set forth in the Value Table in making their determination.  The date of Closing shall be extended to the extent reasonably necessary to permit the determination of the amount of any change in the value of the Property and/or to permit any election made pursuant to the provisions of this Section 9.3. 

ARTICLE X
CONDITIONS PRECEDENT

Section 10.1    Conditions to Obligations of Each Party to Close.  The obligations of the Parties to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver, on or before the Closing Date, of the following conditions:
		
	(a)
	No Injunction.  There shall be no injunction, restraining order or decree of any nature of any court or Governmental Authority that is in effect, that does not result from the default of any party to this Agreement and that restrains or prohibits the consummation of the transactions contemplated by this Agreement or imposes conditions on such consummation not otherwise provided for herein.

		
	(b)
	No Investigation.  No Party shall have been advised by any United States federal government agency (which advisory has not been officially withdrawn on or prior to the Closing Date) that such government agency is investigating the transactions contemplated by this Agreement to determine whether to file or commence any litigation that seeks or would seek to enjoin, restrain or prohibit the consummation of the transactions contemplated by this Agreement.

		
	(c)
	Purchase Price Reduction Limit.  In the event the aggregate fair market value of (i) Title Carveouts, and (ii) the fair market value of the lost and damaged timber from all losses arising from Casualty or condemnation exceeds an amount equal to twenty percent (20%) of the Purchase Price, prior to any adjustment as contemplated by Section 12.1, either Party may terminate this Agreement by delivering written notice of the same to the other Party, in which event this Agreement shall terminate, the Earnest Money shall be returned immediately to Buyer, and neither Party shall have any further liability hereunder (except for such liabilities as expressly survive termination of this Agreement).

Section 10.2    Conditions to Obligations of Buyer to Close.  The obligation of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver, on or before the Closing Date, of the following conditions:
		
	(a)
	Representations and Warranties.  Each of the representations and warranties of Sellers contained in this Agreement shall be true and correct, in each case as of the date of this Agreement and as of the Closing with the same effect as though made as of the Closing (except to the extent expressly made as of an earlier date, in which case as of such date).

		
	(b)
	Agreements and Covenants.  Sellers shall have performed or complied with, in all material respects, all agreements and covenants required by this Agreement to be performed or complied with by Seller on or prior to the Closing.

		
	(c)
	Seller Deliveries.  Sellers shall have tendered for delivery or caused to be tendered for delivery to Buyer the items set forth in Section 12.3 (a).

		
	(d)
	Title Policies.  Buyer shall have received, in the form of a “marked binder” delivered at Closing, one or more owners policies of title insurance issued by First American Title Insurance Company (or, another national title insurance company acceptable to Buyer) in the amount of the Purchase Price (as adjusted) insuring title to the Timberlands as of the date of Closing subject only to the Permitted Exceptions, and otherwise in form and content (with endorsements reasonably acceptable to Buyer) satisfactory to Buyer.

Section 10.3    Conditions to Obligations of Sellers.  The obligation of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver, on or before the Closing Date, of the following conditions:
		
	(a)
	Representations and Warranties.  Each of the representations and warranties of Buyer contained in this Agreement shall be true and correct in each case as of the date of this Agreement and as of the Closing with the same effect as though made as of the Closing (except to the extent expressly made as of an earlier date, in which case as of such date).

		
	(b)
	Agreements and Covenants.  Buyer shall have performed or complied with, in all material respects, with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing.

		
	(c)
	Deliveries.  Buyer shall have tendered for delivery or caused to be tendered for delivery to Sellers the items set forth in Section 12.3(b).

ARTICLE XI
ASSIGNMENT

Section 11.1    Assignment.  Except as expressly set forth below, this Agreement shall not be assigned or encumbered, or otherwise transferred in any way, by Buyer without the prior written consent of Sellers, and shall not be recorded in any County records or other office where public records are maintained.  Buyer may assign this Agreement to any institutional lender or lenders as security for obligations to such lender or lenders in respect of financing arrangements of Buyer or any Affiliates thereof with such lender or lenders.  Buyer may assign its rights and obligations under this Agreement to effectuate a like-kind exchange of real property pursuant to Section 1031(a) of the Internal Revenue Code 1986 as amended and the parties agree to cooperate with each other in effecting such an exchange and will execute the necessary documentation for an exchange.  Following any such assignment Buyer shall remain liable for the performance of Buyer’s obligations hereunder and any such assignment and activities relating thereto cannot extend Closing.  Any expenses incurred by Sellers in connection with such assignment activity will be paid to Sellers by Buyer.  In addition, Sellers agree that Buyer may assign its rights and obligations under the Agreement in its sole discretion to one or more entities directly or indirectly controlled by, controlling or under common control with, or whose timber investments are managed by, Buyer (each an “Affiliate”) and cause Sellers to deed such Timberlands directly to such Affiliates as long as Buyer remains obligated for the performance of this Agreement.  Sellers shall not incur any additional cost or liability by reason of the this Section 11, and Buyer shall give Sellers at least ten (10) days prior written notice before Closing of the identity of the grantee of the Deed, if other than Buyer.

ARTICLE XII
APPORTIONMENTS; CLOSING COSTS; CLOSING DELIVERIES

Section 12.1    Apportionments.  Except as provided in Section 12.2, the following shall be apportioned between Buyer and Sellers as of the Effective Time (on a per diem basis): (i) property and other non-income taxes and assessments in respect of the Property with respect to the tax period in which the Effective Time occurs; (ii) revenue from the Real Property Leases, including hunting and other recreational lease revenue; (iii) revenues or expenses and payments received or made by Sellers in respect of any Assumed Contract ((i) - (iii) collectively, “Apportionments”); provided, however, all revenue received by Seller under the Georgia Supply Agreement for all Timber cut from and after the Adjustment Date shall be credited (dollar for dollar) against the Purchase Price.  At Closing, and again thirty (30) days after Closing to the extent such revenues are received by Seller after Closing, Seller shall provide Buyer with an accounting of (1) the volume of Timber harvested, and (2) all revenue received by Seller, from and after the Adjustment Date under the Georgia Supply Agreement.  Not later than sixty (60) days after the later of the Closing Date or the date that all the applicable tax rates have been fixed or the value assessments have been made and finally determined with respect to all of the Timberlands for the applicable tax periods in which the Effective 

Time occurs, Sellers and Buyer shall determine the Apportionments, and the Purchase Price shall be increased or decreased, as applicable, by the aggregate amount of such Apportionments; provided if the net aggregate amount of such apportionments relating to property Taxes is $1,000.00 or less, no adjustment shall be made.  Any adjustment to be made pursuant to this Section 12.1 shall be made no later than five (5) Business Days following the determination of the aggregate amount of the Apportionments.  Sellers and Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all Apportionment calculations made pursuant to this Section 12.1.  Except for the adjustment set forth above, there shall not be any proration of property taxes or other non-income taxes and assessments and, as between Buyer and Sellers, Buyer agrees that Buyer shall be solely responsible for all such property taxes and other non-income taxes and assessments due and payable in respect of the Property after the Closing.  In addition, Sellers shall be responsible for payment of any rollback, recapture, or other taxes related to or caused by a change of use of the Timberlands due to actions of Sellers (other than merely the sale of the Timberlands to Buyer).  Sellers’ responsibility for such taxes shall survive the Closing.

Section 12.2    Closing Costs.   Each Party shall be responsible for its own attorneys’ fees and expenses.  Sellers shall be responsible for the preparation of the Deeds at Sellers’ expense.  Sellers shall pay the following costs and expenses in connection with the transactions contemplated by this Agreement:  (i) search and exam fees to prepare the Title Commitment; (ii) one-half of any escrow fees, if any, charged by the Escrow Agent; (iii) one-half of the costs to prepare and issue the Phase I Assessment; and (iv) one-half of all sales, use, excise, documentary, stamp duty, registration, transfer, conveyance, economic interest transfer and other similar taxes related to the conveyance of the Timberlands from Sellers to Buyer arising in connection with the transactions contemplated by this Agreement (collectively, “Transfer Taxes”).  Buyer shall pay the following costs and expenses in connection with the transactions contemplated by this Agreement:  (i) one-half of all Transfer Taxes; (ii) one-half of any escrow fees, if any, charged by the Escrow Agent; (iii) one-half of the costs to prepare and issue the Phase I Assessment and all costs incurred for the Reliance Letter; (iv) all recording and filing fees associated with recording or filing any documents, including the Deeds; (v) all title insurance premiums, premiums for expanded title coverage and endorsement fees and premiums; and (vi)  any recapture, reassessment, roll-back taxes or changes in tax assessments in respect of the Timberlands that may become due and payable after the Effective Time caused by any action or inaction of Buyer with respect to the continuation or removal of the Timberlands after the Effective Time from the present classification, or changes in use after the Effective Time, except to the extent the same are caused by actions of the Sellers (other than the mere transfer of the Timberlands to Buyer).  The Party having primary responsibility under applicable law shall timely prepare and file tax returns in respect of such Transfer Taxes with the applicable taxing authority.  All other costs shall be paid by the Party incurring such costs.

Section 12.3.    Closing Deliveries.
		
	(a)
	Closing Deliveries by Sellers.  Sellers shall deliver the following items to Buyer at the Closing:

		
	(i)
	duly executed special or limited warranty deeds (one or more for each county, at Buyer’s election pursuant to Section 11.1 above) warranting only against persons claiming by, though or under each Seller and subject only to the Permitted Exceptions, in each case substantially in the form of Exhibit E (Georgia) and Exhibit E-1 (Texas) attached hereto (collectively, the “Deeds”);

		
	(ii)
	duly executed counterparts of assignment and assumption agreements under which each Seller assigns to Buyer all of each Seller’s right, title and interest in and to the Real Property Leases and Buyer assumes all of each Seller’s obligations, covenants and responsibilities under the Real Property Leases in each case substantially in the form of Exhibit F (each, an “Assignment and Assumption of Real Property Leases”);

		
	(iii)
	duly executed counterparts of assignment and assumption agreements under which each Seller assigns to Buyer all of each Seller’s right, title and interest in and to the Assumed 

Contracts, and Buyer assumes all of each Seller’s obligations, covenants and responsibilities under the Assumed Contracts in each case substantially in the form of Exhibit G -1 (each, an “Assignment and Assumption of Assumed Contracts”);
		
	(iv)
	duly executed counterparts of assignment and assumption agreements under which FORESTREE VI LP assigns to Buyer all of FORESTREE VI LP’s right, title and interest in and to the Georgia Supply Agreement, and Buyer assumes all of FORESTREE VI LP’s obligations, covenants and responsibilities under the Georgia Supply Agreement substantially in the form of Exhibit G-2 (the “Assignment and Assumption of Georgia Supply Agreement”);

		
	(v)
	duly executed certificate of each Seller certifying that each  Seller’s respective representations and warranties set forth in Article VI of this Agreement are  true, correct and complete as of the Closing Date;

		
	(vi)
	an affidavit stating the taxpayer identification number of each Seller and that each Seller is not a “foreign person” for purposes of Section 1445 of the Code and the Treasury Regulations thereunder;

		
	(vii)
	an Owner’s Title Affidavit reasonably requested by the Title Company, substantially in the form of Exhibit H;

		
	(viii)
	an Affidavit of Seller’s Residence, substantially in the form of Exhibit I;

		
	(ix)
	such assignments, affidavits, certificates of title and other instruments of assignment and conveyance, all in form reasonably satisfactory to Buyer, as are necessary to convey fully and effectively to Buyer Sellers’ interest in the Property in accordance with the terms hereof and in order to permit Buyer to obtain title insurance on the Timberlands, as contemplated herein; 

		
	(x)
	an executed closing statement with respect to the transactions contemplated hereby; and

		
	(xi)
	an estoppel letter in a form provided in the Georgia Supply Agreement from Georgia Biomass under the Georgia Supply Agreement, to the extent requested by Buyer.

		
	 (b)
	Closing Deliveries by Buyer.  At the Closing, Buyer shall deliver the following items to Seller:

		
	(i)
	the balance of the Purchase Price, subject to Apportionments and adjustments as set forth herein;

		
	(ii)
	duly executed counterparts of the Assignment and Assumption of Assumed Contracts;

		
	(iii)
	duly executed counterparts of the Assignment and Assumption of Georgia Supply Agreement; 

		
	(iv)
	duly executed counterparts of the Assignment and Assumption of Real Property Leases;

		
	(v)
	duly executed certificate of Buyer certifying that Buyer’s representations and warranties set forth in Article VII of this Agreement are true, correct and complete as of the Closing Date;

		
	(vi)
	intentionally deleted; 

		
	(vii)
	such assignments, certificates of title and other instruments of assignment and conveyance, all in form reasonably satisfactory to Seller, as are necessary to consummate the transactions contemplated by this Agreement; and

		
	(viii)
	an executed closing statement with respect to the transactions contemplated hereby.

		
	(c)
	Other Closing Deliveries.  The Parties shall each execute and deliver such other and further certificates, assurances and documents as may reasonably be required by the other Parties in connection with the consummation of the transactions contemplated by this Agreement.  Seller 

acknowledges that Buyer and CoBank may request that Georgia Biomass execute a consent to Buyer’s collateral assignment of the Georgia Supply Agreement, and  Sellers covenant and agree to (i) deliver such consent documentation to Georgia Biomass within seven (7) days after receipt of same from Buyer, and (ii) use good faith efforts, at no cost or expense to Sellers, to obtain the execution and delivery of such consent documentation by Georgia Biomass; provided, however, Sellers and Buyer acknowledge and agree that the execution and delivery of such consent documentation by Georgia Biomass is not a condition to closing.     

ARTICLE XIII
BROKER’S COMMISSION

Section 13.1    Commission.   Buyer and Sellers each represent and warrant to the other that, no broker, agent or finder, licensed or otherwise has been engaged by it, respectively, in connection with the transaction contemplated by this Agreement.  In the event of any such claim for broker’s, agent’s or finder’s fee or commission in connection with the negotiation, execution or consummation of this transaction, the party upon whose alleged statement, representation or agreement such claim or liability arises shall indemnify, hold harmless and defend the other party from and against such claim and liability, including without limitation, reasonable attorney’s fees and court costs.  Buyer and Sellers acknowledge that the representations and warranties contained in this Section shall survive the Closing.

ARTICLE XIV
CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS

Section 14.1    Confidentiality.  Each Party will hold, and will cause its officers, employees, accountants, counsel, financial advisors and other representatives and affiliates to hold, any nonpublic information confidential in accordance with the terms of that certain Confidentiality Agreement dated January 8, 2014, entered into by and between the parties (the “Confidentiality Agreement”).

Section 14.2 Public Announcements. This Agreement (or a memorandum thereof) shall not be recorded by Buyer in any real property records.  If this Agreement (or a memorandum thereof) is so recorded by Buyer, each Seller may, at its option, terminate this Agreement.  Notwithstanding anything to the contrary set forth in Section 14.1 or the Confidentiality Agreement, except as required by applicable Law (including rules and regulations promulgated by the SEC) or stock exchange rules, (i) any press release or public announcement by Buyer regarding the transactions contemplated by this Agreement shall only be made simultaneously with or after a press release or public announcement by Sellers on or after the Effective Date regarding the transactions contemplated by this Agreement, and (ii) Sellers and Buyer shall consult with each other before issuing, and will provide each other the opportunity to review, comment upon and concur with, and use commercially reasonable efforts to agree on, any press release and other public announcement with respect to the transactions contemplated by this Agreement, including the time, form and content of such press release or public announcement, and shall not issue any such press release or make any such public announcement prior to such consultation; provided, however, that any disclosure required to be made under applicable Law, stock exchange rules or rules and regulations promulgated by the SEC may be made without such mutual agreement if a Party required to make such disclosure has determined in good faith that it is necessary to do so and has used commercially reasonable efforts, prior to the issuance of the disclosure, to provide the other Party with a copy of the proposed disclosure and to discuss the proposed disclosure with the other Party.  For the purposes of this Agreement, the term “Law” shall mean any rule, regulation, statute, order, ordinance, guideline, code or other legally enforceable requirement, including common law, state and federal laws and laws of foreign jurisdictions.

ARTICLE XV
DEFAULT

Section 15.1    Buyer Default. If the purchase and sale contemplated hereby is not consummated because of a default by Buyer under this Agreement, then Escrow Agent will deliver the Earnest Money to 

Seller as full liquidated damages (the parties hereto acknowledging that Seller’s damages as a result of such default are not capable of exact ascertainment and that said liquidated damages are fair and reasonable), said payment being Sellers’ sole and exclusive remedy hereunder on account of any default by Buyer, whereupon this Agreement will terminate and neither party hereto will have any further rights or obligations hereunder. 

Section 15.2    Seller Default If the purchase and sale contemplated hereby is not consummated because of a default by Seller under this Agreement, Buyer may elect, in its sole discretion either (i) to terminate this Agreement whereupon the Escrow Agent will return the Earnest Money to Buyer and to obtain a reimbursement from Seller for Buyer’s actual third party expenses incurred in connection with this Agreement, not to exceed $250,000.00, or (ii) to seek specific performance of this Agreement, in which event Escrow Agent shall continue to hold the Earnest Money until the final disposition of the action for specific performance, whereupon the Earnest Money shall be applied to the Purchase Price, or, if specific performance is not final, after disposition of all appeals which may have been taken, decreed to Buyer, then Escrow Agent shall pay the Earnest Money to Buyer. 

ARTICLE XVI
GENERAL PROVISIONS

Section 16.1    Attorneys’ Fees.  In the event any legal proceeding should be brought to enforce the terms of this Agreement or for breach of any provision of this Agreement, the non-prevailing Party shall reimburse the prevailing Party for all reasonable costs and expenses of the prevailing Party (including its attorneys’ fees and disbursements).  For purposes of the foregoing, (i) “prevailing Party” means (A) in the case of the Party initiating the enforcement of rights or remedies, that it recovered substantially all of its claims, and (B) in the case of the Party defending against such enforcement, that it successfully defended substantially all of the claims made against it, and (ii) if no Party is a “prevailing Party” within the meaning of the foregoing, then no Party will be entitled to recover its costs and expenses (including attorney’s fees and disbursements) from any other Party.

Section 16.2.    Governing Law.  This Agreement shall be interpreted, construed and enforced according to the laws of the State of Georgia.  Each party irrevocably submits to the jurisdiction of the Courts of the State of  Georgia and the Federal Courts of the United States of America in and for the City of Atlanta, Georgia for the purpose of any action or proceeding arising out of this Agreement.

Section 16.3    Notices.  All notices, requests, demands, and other communications hereunder shall be in writing, and shall be deemed to have been duly given if delivered in person, sent by facsimile or electronic mail transmission or sent by overnight courier service (with all fees prepaid) as follows:
If to Sellers, to:

ForesTree VI LP and ForesTree VI Texas LP
c/o Hancock Natural Resource Group, Inc.
13950 Ballantyne Corporate Place, Suite 150
Charlotte, NC  28277
Attention:  David Kimbrough, Manager, Dispositions - North America
Email:  dkimbrough@hnrg.com;  Facsimile: 617.210.8672
with a copy to:

ForesTree VI LP and ForesTree VI Texas LP
c/o John Hancock Timber Resource Corporation
99 High Street, 26th Floor
Boston, MA  02110
Attention: Donna Frankel, General Counsel 
Email:  dfrankel@hnrg.com; Facsimile: 617.747.1536
and

Womble Carlyle Sandridge & Rice, LLP
One West Fourth Street
Winston-Salem, NC 27101
Attention: Trent E. Jernigan
Email:  tjernigan@wcsr.com; Facsimile: 336.726.8082

If to Buyer:

CatchMark Timber Trust, Inc.
6200 The Corners Parkway
Norcross, Georgia 30092-3365
Attention: John D. Capriotti
Email: john.capriotti@catchmark.com; Facsimile: 770.243.8172
 
With a copy to:

Smith, Gambrell & Russell, LLP
Promenade, Suite 3100
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
Attention:  Mark G. Pottorff
Email: mpottorff@sgrlaw.com; Facsimile: 404.685.6897  

Any such notice, request, demand or other communication shall be deemed to be given and effective if delivered in person, on the date delivered, if sent by overnight courier service, on the date sent as evidenced by the date of the bill of lading, or if sent by facsimile or email transmission, on the date transmitted; and shall be deemed received if delivered in person, on the date of personal delivery, if sent by overnight courier service, on the first business day after the date sent, or if by facsimile or email transmission, on the date sent (provided that such delivery by facsimile or email transmission is followed by delivery on the next business day in person or by overnight courier service).  Any notice, request, demand or other communication shall be given to such other representative or at such other address as a Party may furnish to the other Parties in writing pursuant to this Section.
Section 16.4    Time of Performance.  Time is of the essence of this Agreement and of all acts required to be done and performed by the parties hereto, including, but not limited to, the proper tender of each of the sums required by the terms hereof to be paid.

Section 16.5    Section Headings.  The word or words appearing at the commencement of Sections and sub-Sections of this Agreement are included only as a guide to the contents thereof and are not to be considered as controlling, enlarging or restricting the language or meaning of those Sections or sub-Sections.

Section 16.6    Severability of Provisions.  If any provision of this Agreement (including any phrase, sentence, clause, Section or subsection) is inoperative, invalid, illegal or unenforceable for any reason, all other provisions of this Agreement shall remain in full force and effect so long as the economic or legal 

substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party.  Upon any such determination, the Parties shall negotiate in good faith to modify this Agreement so as to give effect to the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 

Section 16.7    Legal Relationships.  The Parties to this Agreement execute the same solely as a seller and a buyer.  No partnership, joint venture or joint undertaking shall be construed from these presents, and except as herein specifically provided, neither party shall have the right to make any representation for, act on behalf of, or be liable for the debts of the other.  All terms, covenants and conditions to be observed and performed by either of the parties hereto shall be joint and several if entered into by more than one person on behalf of such party, and a default by any one or more of such persons shall be deemed a default on the part of the party with whom said person or persons are identified.  No third party is intended to be benefited by this Agreement.

Section 16.8     Possession.  Unless a different date is provided for herein, Buyer shall be entitled to possession of the Timberlands on the Closing Date, subject to the Permitted Exceptions.
    
Section 16.9    Entire Agreement; Waiver.  All understandings and agreements previously existing between the parties, if any, are merged into this Agreement, which alone fully and completely expresses their agreement, and the same is entered into after full investigation, neither party relying upon any statement or representation made by the other not embodied herein.  This Agreement may not be amended or modified in any manner other than by an agreement in writing signed by all of the Parties or their respective successors or permitted assigns.  No waiver under this Agreement shall be valid or binding unless set forth in a writing duly executed and delivered by each Party against whom enforcement of such waiver is sought.  Neither the waiver by any of the Parties of a breach of or a default under any provision of this Agreement, nor the failure by any of the Parties, on one or more occasions, to enforce any provision of this Agreement or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder.  
Section 16.10    Interpretation.  This Agreement has been reviewed by both Parties and each Party has had the opportunity to consult with independent counsel with respect to the terms hereof and has done so to the extent that such party desired.  No stricter construction or interpretation of the terms hereof shall be applied against either Party as the drafter hereof.

Section 16.11    Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original instrument.  All such counterparts together shall constitute a fully executed Agreement.  Electronic signatures shall constitute originals.

Section 16.12      Business Day or Legal Holiday.  If any date set forth in this Agreement for the performance of any obligation by any Party, or for the delivery of any instrument or notice as herein provided, should be a Saturday, Sunday or legal holiday, the compliance with such obligation or delivery shall be deemed acceptable on the next day which is not a Saturday, Sunday or legal holiday.  As used herein, the term “legal holiday” means any state or federal holiday for which financial institutions or post offices are generally closed in the State of Georgia or the State of Texas for observance thereof.  For the purposes of this Agreement, the term “business days” shall mean each day that is not a Saturday, Sunday or legal holiday.

Section 16.13    Survival and Indemnity.  Except as expressly  provided in this Agreement, all  representations and warranties set forth in this Agreement and all provisions of this Agreement, the full performance of which is not required prior to Closing, shall not survive Closing and shall be merged in any Deed.

Section 16.14    Amendment.  This Agreement may not be modified or amended except by the written agreement of the Parties.

Section 16.15    Anti-Solicitation.  Except as otherwise expressly set forth herein, the provisions of the Confidentiality Agreement governing solicitation for employment, inducing or attempting to induce to leave the employ of Sellers or any affiliate of Sellers, and employing or hiring certain employees of Sellers, shall remain in effect until the termination of such provisions in accordance with their terms under the Confidentiality Agreement.

Section 16.16    No Third Party Beneficiaries.  Except as expressly set forth herein, nothing in this Agreement or any of the documents delivered at Closing, whether express or implied, is intended or shall be construed to confer upon or give to any person other than the Parties hereto, any right, remedy or other benefit under or by reason of this Agreement.

Section 16.17    Recitals and Exhibits.  The Recitals set forth above and Exhibits attached hereto are incorporated herein as matters of contract.

Section 16.18    Intentionally Deleted.

Section 16.19    No Solicitation.  From and after the Effective Date and until the Closing Date or the earlier termination of this Agreement pursuant to the terms of this Agreement, each Seller agrees that it shall not directly or indirectly, through any officer, director, employee, agent or otherwise, (a) solicit, initiate or encourage submission of proposals, offers or expressions of interest from any person or entity relating to any acquisition or purchase of all or a substantial portion of the Timberlands (any of the foregoing proposals, offers or expressions of interest being referred to herein as an “Acquisition Proposal”), or (b) participate in any negotiations or discussions regarding, or furnish to any person any nonpublic information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any Acquisition Proposal.

Section 16.20    Property Information.  To the extent not already delivered to Buyer, Sellers shall deliver to Buyer at Closing, without any representation or warranty of any kind whatsoever, including, but not limited to, any representation or warranty as to accuracy or completeness, all maps, surveys, title information, inventory information, planting and harvesting history, GIS information, certification (SFI) documents related to the Timberlands and all other information relating to the Property in the physical possession of Sellers (the “Property Information”).  Sellers shall deliver hard copies or electronic versions of the Property Information in the physical possession of Sellers as Buyer may request. 

Section 16.21    Seller Board Approval.  This Agreement and Sellers’ obligations hereunder shall be subject to Sellers’ obtaining final approval of this Agreement by the Hancock Natural Resource Investment Committee (“Committee”), which approval shall be deemed approved if Sellers do not give written notice of Sellers’ inability to obtain such approval to Buyer on or before March 20, 2014.  If Sellers deliver written notice to Buyer on or before March 20, 2014, of Sellers’ inability to obtain the requisite approval of this Agreement by the Committee, this Agreement shall terminate, the Earnest Money shall be returned immediately to Buyer, and neither Party shall have any further liability hereunder (except for such liabilities as expressly survive termination of this Agreement).

THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK

IN WITNESS WHEREOF, the Parties hereto have executed this Purchase and Sale Agreement in duplicate the day and year first above written.

SELLERS:

FORESTREE TEXAS:

FORESTREE VI TEXAS LP

By:    ForesTree VI GP Atlas LLC
its General Partner

By:    Hancock Natural Resource Group, Inc.
its Manager

By:    __/s/ David Kimbrough_________________________
Name:    _David Kimbrough__________________________
Title:    __Vice President_________________________

FORESTREE:

FORESTREE VI LP

By:    John Hancock Timber Resource Corporation
its General Partner

By:    __/s/ David Kimbrough_____________
Name:    __David Kimbrough_  ______________
Title:    __Vice President___ ______________

[Signatures continue on following page]

BUYER:

CATCHMARK TIMBER TRUST, INC.

By    /s/__Jerrold Barag  ______________
Name    ___Jerrold Barag______________
Title    ____President_________        __

 

EXHIBIT AND SCHEDULE INDEX

Exhibit A    Timberlands
Exhibit B    Assumed Contracts
Exhibit C    Real Property Leases
Exhibit D    Escrow Agreement
Exhibit E    Georgia Deed
Exhibit E-1    Texas Deed
Exhibit F    Assignment and Assumption of Real Property Leases
Exhibit G-1    Assignment and Assumption of Assumed Contracts
Exhibit G-2    Assignment and Assumption of Georgia Supply Agreement
Exhibit H    Title Affidavit
Exhibit I    Affidavit of Seller’s Residence

Exhibit X    Permitted Exceptions

LIST SCHEDULES

Schedule 1.1(a)(A)    Georgia Supply Agreement
Schedule 4.1            Value Table
Schedule 6.15        Boundary Disputes
Schedule 6.17        Mining Activity

EXHIBIT A

Timberlands
Timberlands Legal Descriptions

The Timberlands shall be those properties as generally identified on Sellers’ GIS maps previously made available to Buyer on Sellers’ data site for Waycross - Panola and referred to in the Compartment List attached hereto as Exhibit A-1.  Notwithstanding the foregoing, but subject to Buyer’s rights set forth in Article 4 above, (i) the Timberlands shall be conveyed by Sellers to Buyer by the historical descriptions contained in the Seller’s vesting deeds, and (ii) the Timberlands are not being conveyed by the acre.

EXHIBIT A-1
Georgia - Waycross
Compartment Map List

EXHIBIT B

Assumed Contracts

		
	1.
	Pulpwood Supply Agreement (Waycross Property) between FORESTREE VI LP, as Seller, and GEORGIA BIOMASS LLC, as Buyer, dated December 16, 2009, [Note:  Pulpwood Supply Agreement to be amended prior to the Closing Date pursuant to Section 5.3 of the Agreement].

		
	2.
	Apiary License Agreement between FORESTREE VI LP, as Owner, and H & R APIARIES, LLC, as Licensee, dated March 10, 2014.

		
	3.
	Apiary License Agreement between FORESTREE VI LP, as Owner, and SHELL HONEY FARM, as Licensee, dated May 1, 2013 [Note:  new Apiary License Agreement between FORESTREE VI LP, as Owner, and SHELL HONEY FARM, as Licensee, has been sent to Licensee for execution and will likely be executed prior to the Closing Date].

EXHIBIT C

Real Property Leases

Panola

	
					
	Club
	EFFECTIVE DATE
	TERMINATION DATE
	COUNTY
	COMPARTMENT

	Billiams Creek I
	May 1, 2013
	April 30, 2014
	Tyler
	PA6015

	Billiams Creek IV
	May 1, 2013
	April 30, 2014
	Tyler
	PA6009, PA6015

	Buckshot Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA6720

	C & I Hunt Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA6827

	Chris Jones Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6922

	Dupuy Family Circle
	May 1, 2013
	April 30, 2014
	Jasper
	PA6827

	F B S Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6819, PA6825

	G & S Hunting Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6009

	Artesian Springs Ridge Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6921, PA6922

	Hauck Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA7004

	N/A
	 
	 
	 
	 

	Kimble Creek Com. Past. Assn.
	May 1, 2013
	April 30, 2014
	Tyler
	PA6245

	L & T Hunting Club
	May 1, 2013
	April 30, 2014
	Polk & Tyler
	PA6245

	Lee's Mill Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6911

	Gallier Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6922

	M & D #2  Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA7003

	Magnolia Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA7026

	Morgan Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6825

	Murphy's Hunting Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6141

	Old Olive Hunting Club
	May 1, 2013
	April 30, 2014
	Hardin
	PA6614

	Pineywoods Hunting Club
	May 1, 2013
	April 30, 2014
	Hardin
	PA6613

	Pouncey Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA6701

	Raiders Hunting Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6021

	Triangle H/C & W/L Conservation
	May 1, 2013
	April 30, 2014
	Tyler
	PA6245

	Ty-Hard Game Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6004, PA6008, PA6009

	W W W Hunting Club
	May 1, 2013
	April 30, 2014
	Orange
	PA7348

	Zion Hill Hunt Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA7003, PA7004, PA7008

	Forse Lease
	May 1, 2013
	April 30, 2014
	Newton
	PA6921

	Dixie Drive Hunting Club
	May 1, 2013
	April 30, 2014
	Orange
	PA7350

	Not Leased
	 
	 
	Jasper
	PA6827

	Not Available For Lease
	 
	 
	Newton
	PA7353, PA7354, PA7355

	Billiams Creek V
	May 1, 2013
	April 30, 2014
	Tyler
	PA6008, PA6009

	MC2 Hunting Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6004, PA6008

	
					
	Club
	EFFECTIVE DATE
	TERMINATION DATE
	COUNTY
	COMPARTMENT

	Billiams Creek I
	May 1, 2013
	April 30, 2014
	Tyler
	PA6015

	Billiams Creek IV
	May 1, 2013
	April 30, 2014
	Tyler
	PA6009, PA6015

	Buckshot Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA6720

	C & I Hunt Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA6827

	Chris Jones Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6922

	Dupuy Family Circle
	May 1, 2013
	April 30, 2014
	Jasper
	PA6827

	F B S Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6819, PA6825

	G & S Hunting Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6009

	Artesian Springs Ridge Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6921, PA6922

	Hauck Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA7004

	N/A
	 
	 
	 
	 

	Kimble Creek Com. Past. Assn.
	May 1, 2013
	April 30, 2014
	Tyler
	PA6245

	L & T Hunting Club
	May 1, 2013
	April 30, 2014
	Polk & Tyler
	PA6245

	Lee's Mill Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6911

	Gallier Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6922

	M & D #2  Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA7003

	Magnolia Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA7026

	Morgan Hunting Club
	May 1, 2013
	April 30, 2014
	Newton
	PA6825

	Murphy's Hunting Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6141

	Old Olive Hunting Club
	May 1, 2013
	April 30, 2014
	Hardin
	PA6614

	Pineywoods Hunting Club
	May 1, 2013
	April 30, 2014
	Hardin
	PA6613

	Pouncey Hunting Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA6701

	Raiders Hunting Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6021

	Triangle H/C & W/L Conservation
	May 1, 2013
	April 30, 2014
	Tyler
	PA6245

	Ty-Hard Game Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6004, PA6008, PA6009

	W W W Hunting Club
	May 1, 2013
	April 30, 2014
	Orange
	PA7348

	Zion Hill Hunt Club
	May 1, 2013
	April 30, 2014
	Jasper
	PA7003, PA7004, PA7008

	Forse Lease
	May 1, 2013
	April 30, 2014
	Newton
	PA6921

	Dixie Drive Hunting Club
	May 1, 2013
	April 30, 2014
	Orange
	PA7350

	Not Leased
	 
	 
	Jasper
	PA6827

	Not Available For Lease
	 
	 
	Newton
	PA7353, PA7354, PA7355

	Billiams Creek V
	May 1, 2013
	April 30, 2014
	Tyler
	PA6008, PA6009

	MC2 Hunting Club
	May 1, 2013
	April 30, 2014
	Tyler
	PA6004, PA6008

Real Property Leases

Waycross

	
						
	Club
	County
	Effective Date
	Termination Date
	Compartment
	 

	Apache Hunting Club
	Appling
	1-Jul-13
	30-Jun-14
	WC0035 WC0047 WC0046
	 

	JR Hunt Club
	Appling
	1-Jul-13
	30-Jun-14
	WC0017 WC0013 WC0020
	 

	County Line Hunting Club
	Appling Appling Appling Wayne
	1-Jul-13
	30-Jun-14
	WC0030 WC0031 WC0067 WC0073
	 

	Barber Break Hunt Club
	Appling
	1-Jul-13
	30-Jun-14
	WC0045
	 

	Pine Ridge Hunt Club
	Appling
	1-Jul-13
	30-Jun-14
	WC0020
	 

	Polecat Bay Hunting Club
	Appling
	1-Jul-13
	30-Jun-14
	WC0028
	 

	Poor Boy Hunting Club
	Appling
	1-Jul-13
	30-Jun-14
	WC0050
	 

	Tilly Hawk Hunting Club
	Appling
	1-Jul-13
	30-Jun-14
	WC0015    WC0012    WC0005    WC0001     WC0008     WC0048
	 

	Wheaton Break Hunting Club
	Appling
	1-Jul-13
	30-Jun-14
	WC0037   WC0041     WC0034    WC0051     WC0047     WC0032
	 

EXHIBIT D

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (“Escrow Agreement”) made and entered into as of the _____ day of March 2014, by and among FORESTREE VI LP, a Delaware limited partnership (“ForesTree”), and FORESTREE VI TEXAS LP, a Delaware limited partnership (“ForesTree Texas”) (ForesTree and ForesTree Texas each may be referred to herein independently as a “Seller”, and collectively as the “Sellers”) and CATCHMARK TIMBER TRUST, INC., a Maryland corporation (“Buyer”), and FIRST AMERICAN TITLE INSURANCE COMPANY (“Escrow Agent”).

W I T N E S S E T H :

WHEREAS, Seller and Buyer have entered into that certain Purchase and Sale Agreement (the “Purchase Agreement”) dated as of March ___, 2014, with respect to certain real property located in the States of Georgia and Texas (the “Property”). 

WHEREAS, Seller and Buyer desire that Escrow Agent hold the Earnest Money and any additional amounts, as required under the Purchase Agreement, in escrow pursuant to the terms hereof.

NOW, THEREFORE, in consideration of the above recitals, the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, the parties covenant and agree as follows:

1.     Seller and Buyer hereby appoint First American Title Insurance Company as Escrow Agent hereunder.

2.     On or before March _____, 2014, Buyer will deposit with Escrow Agent the amount of THREE MILLION SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS ($3,700,000.00) representing the Earnest Money (“Earnest Money”) as required by the Purchase Agreement. The Escrow Agent agrees to immediately deposit said funds in an interest bearing, custodial account and to hold and disburse said funds, and any interest earned thereon, as hereinafter provided. Any additional amounts deposited with Escrow Agent shall be added to the initial Earnest Money deposit and together with the Earnest Money and any and all interest and other earnings thereon shall be referred to herein collectively as the “Escrow Fund”.

3.     Upon written notification from Seller and Buyer that the contemplated transaction is to be consummated, Escrow Agent shall deliver the Escrow Fund and any accrued interest as instructed in writing by Seller and Buyer.  Buyer’s Federal Taxpayer Identification Number is ____-__________.

4.     Upon written notification from Seller and Buyer that the contemplated transaction shall not take place, Escrow Agent shall deliver the Escrow Fund and accrued interest, if any, in accordance with written instructions provided by Seller and Buyer.

5.     The parties hereto covenant and agree that in performing any of its duties under this Escrow Agreement, Escrow Agent shall not be liable for any loss, costs or damage which it may incur in the capacity of Escrow Agent, except for any loss, costs or damage arising out if its default or negligence.

Accordingly, Escrow Agent shall not incur any liability with respect to (i) any action taken or omitted to be taken in good faith upon advice of counsel given with respect to any questions relating to duties and responsibilities, or (ii) to any action taken or omitted to be taken in reliance upon any documents, including any written notice of instruction provided for in this Escrow Agreement, not only as to its execution and the validity and effectiveness of its provisions, but also to the truth and accuracy of any information contained 

therein, which Escrow Agent shall in good faith believe to be genuine, to be signed or presented by a proper person or persons and to conform with the provisions of this Escrow Agreement.

In an event of a dispute between any of the parties hereto, Escrow Agent shall tender into the registry or custody of any court of competent jurisdiction, all money in its hands held under the terms of this Escrow Agreement, together with such legal pleading as is appropriate and thereupon be discharged.

6.  Any notice given pursuant to this Escrow Agreement shall be given in the same manner as stated in Section 16.3 of the Purchase Agreement.  The notice address for Escrow Agent is as follows: 
ESCROW AGENT:     First American Title Insurance Company
5607 Glenridge Drive, NE, Suite 275
Atlanta, Georgia 30342
Attention:  Kevin Wood
Telephone:  (404) 836-6354
Facsimile:  (404) 303-1235
Email: kwwood@firstam.com 

1.This Escrow Agreement shall be binding upon and inure to the benefit of the parties respective successors and assigns.
2.This Escrow Agreement shall be governed by and construed in accordance with the laws of the state of Georgia.
3.This Escrow Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which, when taken together, shall constitute but one and the same instrument.  All signatures of the parties to this Escrow Agreement may be transmitted by facsimile or other electronic transmission, which will, for all purposes, be deemed to be the original signature of such party whose signature it reproduces and will be binding upon such party.
4.Time shall be of the essence of this Escrow Agreement and each and every term and condition hereof.
5.In the event a dispute arises between Buyer and Seller under this Escrow Agreement, the losing party shall pay the attorney’s fees and court costs of the prevailing party.
6.This Escrow Agreement may be amended, modified, superseded, rescinded, or cancelled only by written instrument executed by the Seller, Buyer and Escrow Agent.
7.The failure of any party to this Escrow Agreement at any time or times to require performance of any provision under this Escrow Agreement shall in no manner affect the right at a later time to enforce the same performance.  A waiver by any party to this Escrow Agreement of any such condition or breach of any term, covenant, representation, or warranty contained in this Escrow Agreement, in any one or more instances, shall neither be construed as a further or continuing waiver of any such condition or breach nor a waiver of any other condition or breach of any other term, covenant, representation, or warranty contained in this Escrow Agreement.

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF, the undersigned have caused this Escrow Agreement to be duly executed and its seal to be affixed hereto as of the day and year first above written.

SELLER:

FORESTREE TEXAS:

FORESTREE VI TEXAS LP

By:    ForesTree VI GP Atlas LLC
its General Partner

By:    Hancock Natural Resource Group, Inc.
its Manager

By:    ___________________________
Name:    ___________________________
Title:    ___________________________

FORESTREE:

FORESTREE VI LP

By:    John Hancock Timber Resource Corporation
its General Partner

By:    ________________________________
Name:    ________________________________
Title:    ________________________________

[Signatures continue on next page]

BUYER:

CATCHMARK TIMBER TRUST, INC., a Maryland corporation

By    ___________________________
Name    ___________________________
Title    ___________________________

[Signatures continue on next page]

ESCROW AGENT:
                    
FIRST AMERICAN TITLE INSURANCE
COMPANY 

By:                          
Name:                      
Title:      

                    

EXHIBIT E

Georgia Deed

After recording return to:

____________________________
____________________________
____________________________
____________________________

STATE OF GEORGIA

COUNTY OF             

LIMITED WARRANTY DEED
THIS LIMITED WARRANTY DEED (this “Deed”) made as of the ____ day of ______________, 2014, between ForesTree VI LP, a Delaware limited liability company (the “Grantor”) whose address is c/o Hancock Natural Resource Group, Inc., 99 High Street, 26th Floor, Boston, Massachusetts 02110,  and ________________________________, a ______________________ (the “Grantee”), whose address is __________________________.

W I T N E S S E T H

That Grantor, for and in consideration of the sum of Ten and NO/100 Dollars ($10.00) and other good and valuable consideration, to it in hand paid by Grantee, the receipt and sufficiency whereof are hereby acknowledged, hereby grants, sells and conveys with special warranty to Grantee, its successors and assigns forever, the following described land, situate, lying and being in the County of ____________, State of Georgia, to wit (the “Land”):
See Exhibit “A” attached hereto and by this
reference made a part hereof.
TOGETHER with (i) all down and standing trees or timber located thereon, (ii) all buildings thereon, (iii) all roads, bridges and other improvements and fixtures thereon, (iv) without warranty, all right, title and interest in and to all gas, oil, minerals, coal, sand, gravel and all other substances or minerals of any kind or character underlying or relating to such Land to the extent not retained by or conveyed out by Grantor’s predecessors in title, and (v) all other privileges, appurtenances, easements  and other rights appertaining to the Land (together with the Land, collectively, the “Property”), subject to the permitted exceptions set forth on Exhibit “B” attached hereto and by this reference made a part hereof (the “Permitted Exceptions”),reference to which shall not operate to reimpose the same.
Grantee specifically acknowledges and agrees that except as set forth in Grantor’s limited warranty of title herein or as set forth in any other instrument delivered by Grantor to Grantee in connection with the 

conveyance of the Property to Grantee, (1) Grantor does not make any representations or warranties of any kind whatsoever, either express or implied, with respect to and shall have no liability to Grantee or its successors and assigns for the Property (or any related matters), and (2) the Property is sold to Grantee in an “AS IS” and “WITH ALL FAULTS” condition as of the date set forth above, including, without limitation, (i) the existence or non-existence of legal access to or from the Property or any portion thereof; (ii) the number of acres comprising the Property; (iii) the volume, condition or quality of timber on the Property; (iv) logging conditions or feasibility; (v) the stability of soils; (vi) suitability, habitability, merchantability or fitness of the Property for any construction or development, or for the Grantee’s intended use; (vii) the condition of any other structure or improvements on the Property; (viii) encroachment or boundary questions; (ix) compliance with any laws; (x) drainage, availability or adequacy of water, sewer or other utilities, zoning, access and similar matters; and (xi) any other matters related to the Property.

TO HAVE AND TO HOLD the Property in fee simple forever.

And Grantor, for itself and its successors and assigns, does hereby warrant the title to said Property, will defend the same against the lawful claims of all persons claiming by, through, or under Grantor, but not otherwise, and will execute such further assurances thereof as may be requisite.

    

[SIGNATURE PAGE FOLLOWS]
    

IN WITNESS WHEREOF, the Grantor has caused this instrument to be executed in its name by its duly authorized representative the day and year first above written.

ForesTree VI LP
    
By:  John Hancock Timber Resource      Corporation
        Its General Partner

Signed, sealed and delivered in the
presence of:    
                        
By:    ___________________________________
Name:    ___________________________________
Title:    ___________________________________
Print Name:     ___________________________________

______________________________    
Notary Public

My commission expires:     

[AFFIX NOTARIAL STAMP & SEAL]

    

Address of Grantor:
ForesTree VI LP
c/o John Hancock Timber Resource Corporation
99 High Street
26th Floor
Boston, MA 02110

EXHIBIT “A”
Legal Description
[To be attached]

EXHIBIT “B”
Permitted Exceptions
[Insert Permitted Exceptions from Exhibit X of the Purchase and Sale Agreement and Final Title Commitment]

EXHIBIT E-1
TEXAS Deed

NOTICE OF CONFIDENTIALITY RIGHTS:  IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE ITS FILED FOR RECORD IN THE PUBLIC RECORDS:  YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.
SPECIAL WARRANTY DEED
R.E. No. ____________
THIS INDENTURE, made the ____ day of ______________, 2014, between FORESTREE VI TEXAS LP, a Delaware limited partnership (the “Grantor”), having its principal place of business at c/o Hancock Natural Resource Group, Inc., 99 High Street, 26th Floor, Boston, MA 02110-2320 (617-572-6000) and ________________________________, a ______________________ (the “Grantee”), having its principal place of business at __________________________. (the “Grantee”).
WITNESSETH, that the Grantor, for the sum of Ten and 00/100 ($10.00) Dollars, and other good and valuable consideration, to it paid by the Grantee, the receipt of which is hereby acknowledged, has GRANTED, SOLD and CONVEYED, and by these presents does GRANT, SELL and CONVEY unto the said Grantee the following described land, situated in the County of ______________, and State of Texas, to wit (the “Land”):
See Exhibit “A” attached hereto and by this
reference made a part hereof.
Being part of the property conveyed to Grantor by that certain ________ Deed from ______________, a ______________, dated ______________, and filed for record in the Official Public Records of __________ County, Texas and recorded in Book ____ Page ____.
TOGETHER with (i) all down and standing trees or timber located thereon, (ii) all buildings thereon, (iii) all roads, bridges and other improvements and fixtures thereon, (iv) without warranty, all right, title and interest in and to all gas, oil, minerals, coal, sand, gravel and all other substances or minerals of any kind or character underlying or relating to such Land to the extent not retained by or conveyed out by Grantor’s predecessors in title, and (v) all other privileges, appurtenances, easements  and other rights appertaining to the Land (together with the Land, collectively, the “Property”), subject to permitted exceptions set forth on Exhibit “B” attached hereto and by this reference made a part hereof (the “Permitted Exceptions”).
Grantee specifically acknowledges and agrees that except as set forth in Grantor’s limited warranty of title herein or as set forth in any other instrument delivered by Grantor to Grantee in connection with the conveyance of the Property to Grantee, (1) Grantor does not make any representations or warranties of any kind whatsoever, either express or implied, with respect to and shall have no liability to Grantee or its successors and assigns for the Property (or any related matters), and (2) the Property is sold to Grantee in an “AS IS” and “WITH ALL FAULTS” condition as of the date set forth above, including, without limitation, (i) the existence or non-existence of legal access to or from the Property or any portion thereof; (ii) the number of acres comprising the Property; (iii) the volume, condition or quality of timber on the Property; (iv) logging 

conditions or feasibility; (v) the stability of soils; (vi) suitability, habitability, merchantability or fitness of the Property for any construction or development, or for the Grantee’s intended use; (vii) the condition of any other structure or improvements on the Property; (viii) encroachment or boundary questions; (ix) compliance with any laws; (x) drainage, availability or adequacy of water, sewer or other utilities, zoning, access and similar matters; and (xi) any other matters related to the Property.
TO HAVE AND TO HOLD the above-described Property in fee simple forever.
And Grantor, for itself and its successors and assigns, does hereby warrant the title to said Property, will defend the same against the lawful claims of all persons claiming by, through, or under Grantor, but not otherwise, and will execute such further assurances thereof as may be requisite.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Grantor has caused this instrument to be executed in its name by its duly authorized representative the day and year first above written.
FORESTREE VI TEXAS LP, a Delaware limited partnership
By:    ForesTree VI GP Atlas LLC, a Delaware limited
liability company, its General Partner
By:    Hancock Natural Resource Group, Inc.,
a Delaware corporation, its Manager
By:        
Name:    David Kimbrough
Title:    Vice President
	
			
	STATE OF NORTH CAROLINA
	)
	 

	 
	)
	ss

	COUNTY OF MECKLENBURG
	)
	 

I, Cynthia L. Tringali, a Notary Public in and for said County and State, hereby certify that David Kimbrough, whose name as Vice President of Hancock Natural Resource Group, Inc., a Delaware corporation, and Manager of ForesTree VI GP Atlas LLC, a Delaware limited liability company, on behalf of ForesTree VI Texas LP, a Delaware limited partnership, in its capacity as General Partner, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, s/he, as such officer and with full authority, executed the same voluntarily (on the day the same bears date) on behalf of such entities for and as the act of said entities.
Given under my hand and official seal on ___________________.
    
Notary Public
My commission expires:  September 19, 2017
Prepared by:

EXHIBIT “A”
Legal Description
[To be attached]

EXHIBIT “B”
Permitted Exceptions
[Insert Permitted Exceptions from Exhibit X of the Purchase and Sale Agreement and Final Title Commitment]

EXHIBIT F

ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASES

THIS ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASES (the “Assignment”) is made and entered into as of this        day of ______________, 2014, by and between ___________________________, a ______________________ (“Assignor”), and ___________________________, a ______________________ (“Assignee”).

W I T N E S S E T H

WHEREAS, pursuant to that certain Purchase and Sale Agreement dated as of _________________, 2014, by and between Assignor, as Seller, and ____________, as Purchaser (the “Purchase Agreement”), Assignor desires to sell, assign, transfer and convey all of the Assignor’s right, title and interest in  and to those certain Real Property Leases (as such term is defined in the Purchase Agreement) described on Exhibit A attached hereto (the “Real Property Leases”) to Assignee, and Assignee desires to undertake, assume and agree to perform, pay, become liable for and discharge when due any and all liabilities and obligations under the Real Property Leases first arising from and after the Closing Date.  Capitalized terms used but not defined in this Assignment shall have the meanings ascribed to them in the Purchase Agreement.

NOW, THEREFORE, in consideration of good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.Assignment.  Assignor hereby sells, assigns, transfers and conveys to Assignee all of Assignor’s right, title and interest in and to the Real Property Leases.

2.Assumption.  Subject to the terms of the Purchase Agreement, Assignee hereby purchases, acquires, assumes and accepts from Assignor all of Assignor’s rights, title and interests in and to the Real Property Leases, and Assignee hereby undertakes, assumes and agrees to perform, pay and become liable for and discharge when due all obligations, covenants, responsibilities and liabilities of Assignor with respect to the Real Property Leases first arising from and after the Closing Date.  

3.Purchase Agreement Controls.  The obligations of the parties under this Assignment with respect to the Real Property Leases are governed by the terms of the Purchase Agreement, and such duties and obligations shall survive the Closing Date in accordance with the provisions of the Purchase Agreement. The terms of the Purchase Agreement shall govern any conflict between the terms of the Purchase Agreement and the terms of this Assignment.

4.Amendment and Waiver.  This Assignment may not be amended or modified in any manner other than by an agreement in writing signed by the parties or their respective successors or permitted assigns. No waiver under this Assignment shall be valid or binding unless set forth in a writing duly executed and delivered by the party against whom enforcement of such waiver is sought. Neither the waiver by any of the parties of a breach or default under any of the provisions of this Assignment, nor the failure by any of the parties, on one or more occasions, to enforce any of the provisions of this Assignment or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder.

5.Governing Law.   THIS ASSIGNMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF GEORGIA, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

6.Successors and Assigns.  This Assignment shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.

7.Entire Agreement.  This Assignment and the Purchase Agreement constitute the entire agreement and understanding of the parties and supersede any prior agreements or understandings, whether written or oral, between the parties with respect to the subject matter hereof.

8.Counterparts.  This Assignment may be signed in any number of counterparts, each of which shall be deemed an original and, when taken together, shall constitute one agreement.

9.Notice.  Any notice given pursuant to this Assignment shall be given in the same manner as stated in Section 16.3 of the Purchase Agreement.

10.    Indemnification.  Assignee agrees to indemnify, defend, and hold Assignor harmless from any and all claims, demands, liabilities, losses, damages, costs, and expenses (including, but not limited to, reasonable attorneys’ fees) suffered, incurred by, or asserted against any Assignor which relate to the Real Property Leases and which result from or arise out of any act or omission from, on and after the Closing Date.  Assignor agrees to indemnify, defend, and hold Assignee harmless from any and all claims, demands, liabilities, losses, damages, costs, and expenses (including, but not limited to, reasonable attorneys’ fees) suffered, incurred by, or asserted against Assignee which relate to the Real Property Leases and which result from or arise out of any act or omission prior to the Closing Date.

- signature pages follow -

IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and Assumption of Real Property Leases, effective as the date first stated above.
 
ASSIGNOR:

                            

By:    ______________________________
    
Name:    ______________________________

Title:    ______________________________

                        
[Signatures continue on following page]
                    

ASSIGNEE:

                            

By:    ______________________________
    
Name:    ______________________________

Title:    ______________________________
                
                            

EXHIBIT A
Real Property Leases 

[To be attached]
 

EXHIBIT G-1

ASSIGNMENT AND ASSUMPTION OF Assumed Contracts

THIS ASSIGNMENT AND ASSUMPTION OF ASSUMED CONTRACTS (the “Assignment”) is made and entered into as of this        day of ______________, 2014, by and between ___________________________, a ______________________ (“Assignor”), and ___________________________, a ______________________ (“Assignee”).

W I T N E S S E T H

WHEREAS, pursuant to that certain Purchase and Sale Agreement dated as of _________________, 2014, by and between Assignor, as Seller, and ____________,, as Purchaser (the “Purchase Agreement”), Assignor desires to sell, assign, transfer and convey all of the Assignor’s right, title and interest in  and to those certain Assumed Contracts (as such term is defined in the Purchase Agreement) described on Exhibit A attached hereto (the “Assumed Contracts”) to Assignee, and Assignee desires to undertake, assume and agree to perform, pay, become liable for and discharge when due any and all liabilities and obligations under the Assumed Contracts first arising from and after the Closing Date.  Capitalized terms used but not defined in this Assignment shall have the meanings ascribed to them in the Purchase Agreement.

NOW, THEREFORE, in consideration of good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1.Assignment.  Assignor hereby sells, assigns, transfers and conveys to Assignee all of Assignor’s right, title and interest in and to the Assumed Contracts.

2.Assumption.  Subject to the terms of the Purchase Agreement, Assignee hereby purchases, acquires, assumes and accepts from Assignor all of Assignor’s rights, title and interests in and to the Assumed Contracts, and Assignee hereby undertakes, assumes and agrees to perform, pay and become liable for and discharge when due all obligations, covenants, responsibilities and liabilities of Assignor with respect to the Assumed Contracts first arising from and after the Closing Date.  

3.Purchase Agreement Controls.  The obligations of the parties under this Assignment with respect to the Assumed Contracts are governed by the terms of the Purchase Agreement, and such duties and obligations shall survive the Closing Date in accordance with the provisions of the Purchase Agreement. The terms of the Purchase Agreement shall govern any conflict between the terms of the Purchase Agreement and the terms of this Assignment.

4.Amendment and Waiver.  This Assignment may not be amended or modified in any manner other than by an agreement in writing signed by the parties or their respective successors or permitted assigns. No waiver under this Assignment shall be valid or binding unless set forth in a writing duly executed and delivered by the party against whom enforcement of such waiver is sought. Neither the waiver by any of the parties of a breach or default under any of the provisions of this Assignment, nor the failure by any of the parties, on one or more occasions, to enforce any of the provisions of this Assignment or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder.

5.Governing Law.   THIS ASSIGNMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF GEORGIA, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

6.Successors and Assigns.  This Assignment shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.

7.Entire Agreement.  This Assignment and the Purchase Agreement constitute the entire agreement and understanding of the parties and supersede any prior agreements or understandings, whether written or oral, between the parties with respect to the subject matter hereof.

8.Counterparts.  This Assignment may be signed in any number of counterparts, each of which shall be deemed an original and, when taken together, shall constitute one agreement.

9.Notice.  Any notice given pursuant to this Assignment shall be given in the same manner as stated in Section 16.3 of the Purchase Agreement.

10.    Indemnification.  Assignee agrees to indemnify, defend, and hold Assignor harmless from any and all claims, demands, liabilities, losses, damages, costs, and expenses (including, but not limited to, reasonable attorneys’ fees) suffered, incurred by, or asserted against any Assignor which relate to the Assumed Contracts and which result from or arise out of any act or omission from, on and after the Closing Date.  Assignor agrees to indemnify, defend, and hold Assignee harmless from any and all claims, demands, liabilities, losses, damages, costs, and expenses (including, but not limited to, reasonable attorneys’ fees) suffered, incurred by, or asserted against Assignee which relate to the Assumed Contracts and which result from or arise out of any act or omission prior to the Closing Date.

- signature pages follow -

IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and Assumption of Assumed Contracts, effective as the date first stated above.
 
ASSIGNOR:

                            

By:    ______________________________
    
Name:    ______________________________

Title:    ______________________________

                        
[Signatures continue on following page]
                    

ASSIGNEE:

                            

By:    ______________________________
    
Name:    ______________________________

Title:    ______________________________
                
                            

EXHIBIT A
Assumed Contracts 

[To be attached]
 

EXHIBIT G-2

ASSIGNMENT AND ASSUMPTION OF Georgia Supply Agreement

THIS ASSIGNMENT AND ASSUMPTION OF GEORGIA SUPPLY AGREEMENT (the “Assignment”) is made and entered into as of this        day of ______________, 2014, by and between ___________________________, a ______________________ (“Assignor”), and ___________________________, a ______________________ (“Assignee”).

W I T N E S S E T H

WHEREAS, pursuant to that certain Purchase and Sale Agreement dated as of _________________, 2014, by and between Assignor, as Seller, and ____________,, as Purchaser (the “Purchase Agreement”), Assignor desires to sell, assign, transfer and convey all of the Assignor’s right, title and interest in  and to those certain Georgia Supply Agreement (as such term is defined in the Purchase Agreement) described on Exhibit A attached hereto (the “Georgia Supply Agreement”) to Assignee, and Assignee desires to undertake, assume and agree to perform, pay, become liable for and discharge when due any and all liabilities and obligations under the Georgia Supply Agreement first arising from and after the Closing Date.  Capitalized terms used but not defined in this Assignment shall have the meanings ascribed to them in the Purchase Agreement.

NOW, THEREFORE, in consideration of good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1.Assignment.  Assignor hereby sells, assigns, transfers and conveys to Assignee all of Assignor’s right, title and interest in and to the Georgia Supply Agreement.

2.Assumption.  Subject to the terms of the Purchase Agreement, Assignee hereby purchases, acquires, assumes and accepts from Assignor all of Assignor’s rights, title and interests in and to the Georgia Supply Agreement, and Assignee hereby undertakes, assumes and agrees to perform, pay and become liable for and discharge when due all obligations, covenants, responsibilities and liabilities of Assignor, including, but not limited to, the obligation to supply the Pine Pulpwood volumes as defined in the Georgia Supply Agreement, with respect to the Georgia Supply Agreement first arising from and after the Closing Date.  

3.Purchase Agreement Controls.  The obligations of the parties under this Assignment with respect to the Georgia Supply Agreement are governed by the terms of the Purchase Agreement, and such duties and obligations shall survive the Closing Date in accordance with the provisions of the Purchase Agreement. The terms of the Purchase Agreement shall govern any conflict between the terms of the Purchase Agreement and the terms of this Assignment.

4.Amendment and Waiver.  This Assignment may not be amended or modified in any manner other than by an agreement in writing signed by the parties or their respective successors or permitted assigns. No waiver under this Assignment shall be valid or binding unless set forth in a writing duly executed and delivered by the party against whom enforcement of such waiver is sought. Neither the waiver by any of the parties of a breach or default under any of the provisions of this Assignment, nor the failure by any of the parties, on one or more occasions, to enforce any of the provisions of this Assignment or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, 

rights or privileges hereunder.

5.Governing Law.   THIS ASSIGNMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF GEORGIA, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

6.Successors and Assigns.  This Assignment shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.

7.Entire Agreement.  This Assignment and the Purchase Agreement constitute the entire agreement and understanding of the parties and supersede any prior agreements or understandings, whether written or oral, between the parties with respect to the subject matter hereof.

8.Counterparts.  This Assignment may be signed in any number of counterparts, each of which shall be deemed an original and, when taken together, shall constitute one agreement.

9.Notice.  Any notice given pursuant to this Assignment shall be given in the same manner as stated in Section 16.3 of the Purchase Agreement.

10.    Indemnification.  Assignee agrees to indemnify, defend, and hold Assignor harmless from any and all claims, demands, liabilities, losses, damages, costs, and expenses (including, but not limited to, reasonable attorneys’ fees) suffered, incurred by, or asserted against any Assignor which relate to the Georgia Supply Agreement and which result from or arise out of any act or omission from, on and after the Closing Date.  Assignor agrees to indemnify, defend, and hold Assignee harmless from any and all claims, demands, liabilities, losses, damages, costs, and expenses (including, but not limited to, reasonable attorneys’ fees) suffered, incurred by, or asserted against Assignee which relate to the Georgia Supply Agreement and which result from or arise out of any act or omission prior to the Closing Date.

- signature pages follow -

IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and Assumption of Georgia Supply Agreement, effective as the date first stated above.
 
ASSIGNOR:

                            

By:    ______________________________
    
Name:    ______________________________

Title:    ______________________________

                        
[Signatures continue on following page]
                    

ASSIGNEE:

                            

By:    ______________________________
    
Name:    ______________________________

Title:    ______________________________
                
                            

EXHIBIT A
Georgia Supply Agreement 

		
	1.
	 That certain Pulpwood Supply Agreement between ForesTree VI LP, as Seller, and Georgia Biomass, LLC, as Buyer, dated December 16, 2009, as amended by that certain First Amendment to Pulpwood Supply Agreement dated ____________, 2014.  

“2014 Stands”:

	
						
	Tract
	Stand
	Treatment
	Acres
	Pine Pulpwood Tons/Acre
	Pine Pulpwood Total Tons

	WC0001
	25
	1ST Thin
	146.7
	40
	5,868

	WC0015
	26
	1ST Thin
	65.4
	40
	2,616

	WC0020
	1
	1ST Thin
	98.1
	40
	3,924

	WC0037
	22
	1ST Thin
	302
	40
	12,080

	WC0045
	13
	1ST Thin
	234
	40
	9,360

	WC0048
	1,19
	1ST Thin
	40
	40
	1,600

	 
	 
	 
	886
	 
	35,448

 

EXHIBIT h

TITLE AFFIDAVIT

I, _________________, as _________________ of _____________________, the duly authorized ____________[Title] of  _____________________________("Seller"), being first duly sworn, on oath depose and state that based upon an owner’s title insurance policy issued to Seller, the Seller does own the Property (as defined below) and during all the time that it has owned the Property, Seller has received no written notice to its knowledge that record title to said property has been disputed and more particularly:  
1.That this affidavit pertains to those certain tracts or parcels of real property located in Appling and Wayne Counties, Georgia and Hardin Jasper, Newton, Orange, Polk and Tyler Counties, Texas, said real property being more particularly described on Exhibit A attached hereto and incorporated herein by reference (the “Property”).
2.That there are no parties occupying, renting, leasing, residing or possessing the Property or any portion thereof pursuant to an agreement with Seller, except those listed in Exhibit B attached hereto, and to the present, actual knowledge (without the requirement of further investigation) of Seller, and there are no parties claiming title to the Property or any portion thereof by reason of adverse possession, except those listed on Exhibit B attached hereto.
3.That to the knowledge of the undersigned there are no pending suits, proceedings, judgments, bankruptcies or executions against Seller which might affect the Property either in the aforesaid counties or any other county in the States of Georgia and Texas, except those listed on Exhibit C attached hereto.
4.The Seller, at present, and for a period of one hundred eighty (180) days, (a) has not caused construction, erection, alteration or repairs of any structures or improvements on the premises above cited to be done (“Improvements”), nor has contracted for any material to be delivered to the property (“Materials”) or (b) if it has so caused Improvements or delivery of Materials, the charges therefor do not remain unpaid. 
5.The Seller has no knowledge of any unpaid real estate taxes or installments of special assessments for the property which are currently due and payable, and Seller has no knowledge of any outstanding unpaid liens or assessments for municipal services or improvements, special taxing liens or assessments, or municipal utility services such as water, sewer or gas services.   
6.The Seller has received no written notice of any violation of any covenants, restrictions, agreements, or conditions affecting title to the property.  
7.In consideration of First American Title Insurance Company issuing its policy effective as of the date closing occurs without making exception therein to encumbrances upon title which may be recorded between said date of closing and the date the documents creating the interest being insured have been filed for record, the Seller agrees to promptly defend, remove, bond or otherwise dispose of any encumbrance upon title executed by Seller which may be filed against the Property during the period of time between the date of closing and the date of recording of all closing instruments.
This affidavit is given to induce First American Title Insurance Company to issue its title insurance policy or policies in reliance upon any of the statements contained herein.  

[SIGNATURE PAGE TO FOLLOW]

SELLER:
_________________________________________    

ATTEST:                    By:    ___________________________________
Its _______________
                    
(Assistant Secretary)                By:                        
Print Name:                         Title:    ______________________________
Print Name:    ________________________

[SEAL]

STATE OF NORTH CAROLINA    )
) ss
COUNTY OF MECKLENBURG    )

I, Cindy L. Tringali , a Notary Public in and for the State and County aforesaid, hereby certify that _______________ (Name), whose name as ______________ (Title) of ________________________, a __________________________, the _________ of _______________________________, a ____________________, is signed to the foregoing Affidavit and who is known to me or has produced sufficient identification to me, acknowledged before me on this day that being informed of the contents of the foregoing Affidavit, s/he, as such Officer and with full authority, did execute the same voluntarily for and as the act of said corporation.

Given under my hand and official seal on this ___ day of _________________, 2014.

Notary Public
                                
My commission expires: 

______________________________

[Notary Seal]

EXHIBIT A

Legal Descriptions

EXHIBIT B

Assumed Contracts and Real Property Leases

EXHIBIT C
Pending Suits, Proceedings, Litigation

None. 
 

EXHIBIT I

Affidavit of Seller’s Residence

EXHIBIT X

Permitted Exceptions

The following shall be deemed Permitted Exceptions:

		
	(a)
	Restrictions on the ability to build upon or use the Timberlands imposed by any current or future applicable development standards, building or zoning ordinances or any other Laws (including but not limited to applicable environmental laws);

		
	(b)
	To the extent a tract included in the Timberlands is bounded or traversed by a river, stream, branch, lake or other water source:

		
	i. 
	the rights, if any, of upper and lower riparian owners and the rights of others to navigate such river or stream;

		
	ii.
	the right, if any, of neighboring riparian owners and the public or others to use any public waters, and the right, if any, of the public to use the beaches or shores for recreational purposes or to gain access thereto; 

		
	iii.
	any claim of lack of title to the Timberlands formerly or presently comprising the shores or bottomland  of navigable waters or as a result of the change in the boundary due to accretion or avulsion; and 

		
	iv.
	any portion of the Timberlands which is sovereignty lands or any other land that may lie within the bounds of navigable rivers as established by Law;

		
	(c)
	To the extent any portion of the Timberlands is bounded or traversed by a public road or maintained right of way, the rights of others, if any (whether owned in fee or by easement), in and to any portion of the Timberlands that lies within such road or maintained right of way;

		
	(d)
	Railroad tracks and related facilities, if any (whether owned in fee or by easement), and related railroad easements or rights of way, if any, traversing the Timberlands and the rights of railroad companies to any tracks, siding, ties and rails associated therewith;

		
	(e)
	Intentionally Deleted;

		
	(f)
	Subject to the apportionment provisions of the Agreement, (a) all ad valorem property or other taxes (other than income taxes) not yet due and payable in respect of the Timberlands for the tax period during which the Closing occurs and all subsequent tax periods, (b) all other assessments and other charges of any kind or nature imposed upon or levied against or on account of the Timberlands by any governmental authority having jurisdiction over the Timberlands for the tax period during which the Closing occurs and all subsequent tax periods, (c) any additional or supplemental taxes that may result from a reassessment of the Timberlands for the tax period during which the Closing occurs and all subsequent tax periods, and (d) any potential roll back, recapture or greenbelt type of taxes related to any agricultural, forest or open space exemption that is subject to recapture pursuant to applicable law arising or due to a change in use of the Timberlands by Buyer or its successors or assigns or otherwise arising from the action or inaction of Buyer or its successors or assigns;

		
	(g)
	Easements, discrepancies or conflicts in boundary lines, cemeteries, burial grounds, shortages in area, vacancies, excesses, encroachments or any other facts that a current and accurate survey or inspection of the Timberlands would disclose that are not otherwise objected to by Buyer;

		
	(h)
	All oil, gas and other minerals or other substances of any kind or character as may have been previously reserved by or conveyed to others and any leases concerning any of such oil, gas, other minerals or other substances in, on or under the Timberlands;

		
	(i)
	Rights, if any, relating to the construction and maintenance in connection with any public utility of wires, poles, pipes, conduits and appurtenances thereto, on, under, above or across the Timberlands;

		
	(j)
	Reservations in federal patents and acts authorizing the same;

		
	(k)
	Indian treaty or aboriginal rights, including easements and equitable servitudes;

		
	(l)
	Any matter affecting title to the Timberlands that is not objected to by Buyer and any Title Objection that Seller has elected or is deemed to have elected not to cure pursuant and subject to the terms of the Agreement;

		
	(m)
	Rights of others under any of the Assumed Contracts or Real Property Leases, including, but not limited to, rights of parties in possession; and

		
	(n)
	Any claim of lack of access rights to any portion of the Timberlands where (i) permission to access has been granted verbally or in writing, or (ii) Seller or its predecessors in interest have otherwise historically enjoyed access to a parcel or portion of the Timberlands for timber management purposes, with or without express or implied permission by a landowner over whose property a road exists that Seller or its predecessors have historically used.

Schedule 1.1(a)(A)

Georgia Supply Agreement

		
	1. 
	That certain Pulpwood Supply Agreement between ForesTree VI LP, as Seller, and Georgia Biomass, LLC, as Buyer, dated December 16, 2009, as amended.  

“2014 Stands”:

	
						
	Tract
	Stand
	Treatment
	Acres
	Pine Pulpwood Tons/Acre
	Pine Pulpwood Total Tons

	WC0001
	25
	1ST Thin
	146.7
	40
	5,868

	WC0015
	26
	1ST Thin
	65.4
	40
	2,616

	WC0020
	1
	1ST Thin
	98.1
	40
	3,924

	WC0037
	22
	1ST Thin
	302
	40
	12,080

	WC0045
	13
	1ST Thin
	234
	40
	9,360

	WC0048
	1,19
	1ST Thin
	40
	40
	1,600

	 
	 
	 
	886
	 
	35,448turv_ex101.htm

Exhibit 10.1

 

LIMITED LIABILITY COMPANY AGREEMENT

 

among

 

TR Capital Partners, LLC

 

and

 

Members Named in Schedule 1

 

Dated as of January __, 2014

 

 

  

  

  

 

 

Table of Contents

 

Page

 

	
Article I.  Definitions

	
 

	1
	
Section 1.01

	
Definitions

	
1

	
Section 1.02

	
Interpretation

	
11

	
Article II.  Organization

	 	
12

	
Section 2.01

	
Formation

	
12

	
Section 2.02

	
Name

	
12

	
Section 2.03

	
Principal Office

	
12

	
Section 2.04

	
Registered Office and Agent

	
12

	
Section 2.05

	
Purpose and Powers

	
13

	
Section 2.06

	
Term

	
13

	
Section 2.07

	
No State-Law Partnership

	
13

	
Article III.  Units

	 	
13

	
Section 3.01

	
Units Generally

	
13

	
Section 3.02

	
Authorization and Issuance of Preferred Units

	
13

	
Section 3.03

	
Authorization and Issuance of Common Units

	
13

	
Section 3.04

	
Authorization and Issuance of Incentive Units

	
14

	
Section 3.05

	
Other Issuances

	
15

	
Section 3.06

	
Certification of Units

	
15

	
Section 3.07

	
Action by Consent

	
15

	
Article IV.  Members

	 	
16

	
Section 4.01

	
Admission of New Members

	
16

	
Section 4.02

	
Representations and Warranties of Members

	
16

	
Section 4.03

	
No Personal Liability

	
17

	
Section 4.04

	
No Withdrawal

	
17

	
Section 4.05

	
Death

	
17

	
Section 4.06

	
Voting

	
17

	
Section 4.07

	
Power of Members

	
17

	
Section 4.08

	
No Interest in Company Property

	
18

	
Article V.  Capital Contributions; Capital Accounts

	
18

	
Section 5.01

	
Existing Capital Contributions

	
18

	
Section 5.02

	
Additional Capital Contributions

	
18

	
Section 5.03

	
Maintenance of Capital Accounts

	
18

	
Section 5.04

	
Succession Upon Transfer

	
19

	
Section 5.05

	
Negative Capital Accounts

	
19

	
Section 5.06

	
No Withdrawal

	
19

	
Section 5.07

	
Treatment of Loans From Members

	
19

	
Section 5.08

	
Modifications

	
19

	  	  	  
	
Article VI.  Allocations

	 	
19

	
Section 6.01

	
Allocation of Net Income and Net Loss

	
19

	
Section 6.02

	
Regulatory and Special Allocations

	
19

	
Section 6.03

	
Tax Allocations

	
21

	
Section 6.04

	
Allocations in Respect of Transferred Units

	
21

	
Section 6.05

	
Curative Allocations

	
21

	
Article VII.  Distributions

	 	
22

	
Section 7.01

	
General

	
22

	
Section 7.02

	
Distributions on Preferred Units

	
22

	
Section 7.03

	
Priority of Distributions

	
23

	
Section 7.04

	
Limitations on Distributions to Incentive Units

	
24

	
Section 7.05

	
Tax Withholding; Withholding Advances

	
24

	
Section 7.06

	
Distributions in Kind

	
25

	
Article VIII.  Management

	 	
26

	
Section 8.01

	
Establishment of the Board

	
26

	
Section 8.02

	
Board Composition; Vacancies

	
26

	
Section 8.03

	
Removal; Resignation

	
26

	
Section 8.04

	
Meetings

	
27

	
Section 8.05

	
Quorum; Manner of Acting

	
27

	
Section 8.06

	
Action By Written Consent

	
27

	
Section 8.07

	
Compensation; No Employment

	
28

	
Section 8.08

	
Committees

	
28

	
Section 8.09

	
Officers

	
28

	
Section 8.10

	
No Personal Liability

	
28

	
Article IX.  Exchanges of Preferred Units

	
29

	
Section 9.01

	
Exchange Agreement

	
29

	
Section 9.02

	
Termination of Preferred Unit Rights Upon Exchange

	
29

	
Article X.  Transfers

	 	
29

	
Section 10.01

	
General Restrictions on Transfer

	
29

	
Section 10.02

	
Incentive Units Call Right

	
30

	
Section 10.03

	
Incentive Units Put Right

	
32

	
Article XI.  Confidentiality

	 	
33

	
Section 11.01

	
Nondisclosure

	
33

	
Section 11.02

	
Permtted Disclosures

	
34

	
Section 11.03

	
Excluded Information

	
34

	
Article XII.  Tax Matters

	 	
34

	
Section 12.01

	
Tax Matters Member

	
34

	
Section 12.02

	
Tax Returns

	
35

	
Section 12.03

	
Company Funds

	
35

	
Article XIII.  Dissolution and Liquidation

	
35

	
Section 13.01

	
Events of Dissolution

	
35

	
Section 13.02

	
Effectiveness of Dissolution

	
36

	
Section 13.03

	
Liquidation

	
36

	
Section 13.04

	
Cancellation of Articles

	
37

	
Section 13.05

	
Survival of Rights, Duties and Obligations

	
37

	
Section 13.06

	
Recourse for Claims

	
37

	
Article XIV.  Exculpation and Indemnification

	
37

	
Section 14.01

	
Exculpation of Covered Persons

	
37

	
Section 14.02

	
Liabilities and Duties of Covered Persons

	
38

	
Section 14.03

	
Indemnification

	
38

	
Section 14.04

	
Survival

	
40

	
Article XV.  Miscellaneous

	 	
40

	
Section 15.01

	
Further Assurances

	
40

	
Section 15.02

	
Notices

	
40

	
Section 15.03

	
Severability

	
40

	
Section 15.04

	
Entire Agreement

	
40

	
Section 15.05

	
Successors and Assigns

	
41

	
Section 15.06

	
No Third-Party Beneficiaries

	
41

	
Section 15.07

	
Amendment

	
41

	
Section 15.08

	
Waiver

	
41

	
Section 15.09

	
Governing Law

	
41

	
Section 15.10

	
Submission to Jurisdiction

	
41

	
Section 15.11

	
Waiver of Jury Trial

	
42

	
Section 15.12

	
Equitable Remedies

	
42

	
Section 15.13

	
Remedies Cumulative

	
42

	  	  	  
	
Exhibit A

	
Form of Joinder Agreement

	  
	
Schedule 1

	
Member Schedule

	  

 

 

 

  

  

  

 

This Limited Liability Company Agreement of TR Capital Partners, LLC, a Colorado limited liability company (the “Company”), is entered into as of January __, 2014 among the Company and Two Rivers Water & Farming Company and each other individual or entity that after the date hereof becomes a member of the Company and a party hereto by executing a Joinder Agreement (as defined below).

 

Recitals

 

Whereas, the Company was formed under the laws of the State of Colorado by the filing of Articles of Organization with the Secretary of State of the State of Colorado on December 19, 2013 (the “Articles of Organization”);

 

Now, Therefore, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

Definitions

 

Section 1.01. Definitions. The following terms shall have the meanings set forth or referenced below:

 

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

 

	
  

	
(a)

	
crediting to such Capital Account any amount that such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(I HBY); and

 

	
  

	
(b)

	
debiting to such Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

“Affiliate” means, with respect to any Person, any other Person who, directly or indirectly (including through one or more intermediaries), controls, is controlled by, or is under common control with, such Person.  For purposes of this definition, “control,” when used with respect to any specified Person, shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or partnership or other ownership interests, by contract or otherwise; and the terms “controlling” and “controlled” shall have correlative meanings.

 

This “Agreement” means this Limited Liability Company Agreement, as executed and as it may be amended, modified, supplemented or restated from time to time, as provided herein.

 

“Applicable Law” means all applicable provisions of:

 

	
  

	
(a)

	
constitutions, treaties, statutes, laws (including the common law), rules, regulations, decrees, ordinances, codes, proclamations, declarations or orders of any Governmental Authority;

 

	
  

	
(b)

	
any consents or approvals of any Governmental Authority; and

 

	
  

	
(c)

	
any orders, decisions, advisory or interpretative opinions, injunctions, judgments, awards, decrees of, or agreements with, any Governmental Authority.

 

  

  

  

       “Articles of Organization” has the meaning set forth in the Recitals.

 

“Award Agreement” means an award agreement entered into by the Company with a Service Provider to whom the Company grants Incentive Units.

 

“Bankruptcy” means, with respect to a Member, the occurrence of any of the following:

 

	
  

	
(a)

	
the filing of an application by such Member for, or a consent to, the appointment of a trustee of such Member’s assets;

 

	
  

	
(b)

	
the filing by such Member of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing such Member’s inability to pay its debts as they come due;

 

	
  

	
(c)

	
the making by such Member of a general assignment for the benefit of such Member’s creditors;

 

	
  

	
(d)

	
the filing by such Member of an answer admitting the material allegations of, or such Member’s consenting to, or defaulting in answering a bankruptcy petition filed against such Member in any bankruptcy proceeding; or

 

	
  

	
(e)

	
the expiration of sixty days following the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Member a bankrupt or appointing a trustee of such Member’s assets.

 

“Board” means the board of managers of the Company established in accordance with Section 8.01.

 

“Book Depreciation” means, with respect to any Company asset for each Fiscal Year, the Company’s depreciation, amortization or other cost recovery deductions determined for federal income tax purposes, except that if the Book Value of an asset differs from its adjusted tax basis at the beginning of such Fiscal Year, Book Depreciation shall be an amount that bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero and the Book Value of the asset is positive, Book Depreciation shall be determined with reference to such beginning Book Value using any permitted method selected by the Board in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3).

 

“Book Value” means, with respect to any Company asset, the adjusted basis of such asset for federal income tax purposes, except as follows:

 

	
  

	
(a)

	
the initial Book Value of any Company asset contributed by a Member to the Company shall be the gross Fair Market Value of such Company asset as of the date of such contribution;

 

	
  

	
(b)

	
immediately prior to the Distribution by the Company of any Company asset to a Member, the Book Value of such asset shall be adjusted to its gross Fair Market Value as of the date of such Distribution;

 

	
  

	
(c)

	
the Book Value of all Company assets shall be adjusted to equal their respective gross Fair Market Values, as determined by the Board, as of the following times:

 

 

  

2

  

 

	
(i)  

	
the acquisition of an additional Membership Interest in the Company by a new or existing Member in consideration of a Capital Contribution of more than a de minimis amount;

 

	
(ii)  

	
the Distribution by the Company to a Member of more than a de minimis amount of property (other than cash) as consideration for all or a part of such Member’s Membership Interest in the Company;

 

	
(iii)  

	
the grant to a Service Provider of any Incentive Units; and

 

	
(iv)  

	
the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g);

 

provided that adjustments pursuant to clauses (i), (ii) and (iii) above need not be made if the Board reasonably determines that such adjustment is not necessary or appropriate to reflect the relative economic interests of the Members and that the absence of such adjustment does not adversely and disproportionately affect any Member;

 

	
  

	
(d)

	
the Book Value of each Company asset shall be increased or decreased, as the case may be, to reflect any adjustments to the adjusted tax basis of such Company asset pursuant to Code Section 734(b) or 743(b), but only to the extent that such adjustments are taken into account in determining Capital Account balances pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m); provided that Book Values shall not be adjusted pursuant to this clause (d) to the extent that an adjustment pursuant to clause (c) above is made in conjunction with a transaction that would otherwise result in an adjustment pursuant to this clause (d); and

 

	
  

	
(e)

	
if the Book Value of a Company asset has been determined pursuant to clause (a) above or adjusted pursuant to clause (c) or (d) above, such Book Value shall thereafter be adjusted to reflect the Book Depreciation taken into account with respect to such Company asset for purposes of computing Net Income and Net Losses.

 

“Call Purchase Price” means the Cause Purchase Price or Fair Market Value, as applicable pursuant to Section 10.02(a).

 

“Capital Account” has the meaning set forth in Section 5.03.

 

“Capital Contribution” means, for any Member, the total amount of cash and property contributed to the Company by such Member, as set forth opposite the name of such Member in the Member Schedule.

 

“Cause,” with respect to any particular Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “Cause” means any of the following:

 

	
  

	
(a)

	
such Service Provider’s repeated failure to perform substantially such Service Provider’s duties as an employee or other associate of the Company or any of the Subsidiaries (other than any such failure resulting from his Disability) which failure, whether committed willfully or negligently, has continued unremedied for more than thirty days after the Company has provided written notice thereof; provided that a failure to meet financial performance expectations shall not, by itself, constitute a failure by the Service Provider to substantially perform such Service Provider’s duties;

 

 

  

3

  

 

	
  

	
(b)

	
such Service Provider’s fraud or embezzlement;

 

	
  

	
(c)

	
such Service Provider’s material dishonesty or breach of fiduciary duty against the Company or any of the Subsidiaries;

 

	
  

	
(d)

	
such Service Provider’s willful misconduct or gross negligence that is injurious to the Company or any of the Subsidiaries;

 

	
  

	
(e)

	
any conviction of, or the entering of a plea of guilty or nolo contendere to, a crime that constitutes a felony (or any state-law equivalent) or that involves moral turpitude, or any willful or material violation by such Service Provider of any federal, state or foreign securities laws;

 

	
  

	
(f)

	
any conviction of any other criminal act or act of material dishonesty, disloyalty or misconduct by such Service Provider that has a material adverse effect on the property, operations, business or reputation of the Company or any of the Subsidiaries;

 

	
  

	
(g)

	
the unlawful use (including being under the influence) or possession of illegal drugs by such Service Provider on the premises of the Company or any of the Subsidiaries while performing any duties or responsibilities with the Company or any of the Subsidiaries;

 

	
  

	
(h)

	
the material violation by such Service Provider of any rule or policy of the Company or any of the Subsidiaries; or

 

	
  

	
(i)

	
the material breach by such Service Provider of any covenant undertaken in Section 11.01 or any effective Award Agreement, employment agreement or written non-disclosure, non-competition or non-solicitation agreement with the Company or any of the Subsidiaries.

 

“Cause Purchase Price” means, with respect to an Incentive Unit, the lesser of such Incentive Unit’s Fair Market Value and its Initial Cost.

 

“Change of Control” means:

 

	
  

	
(a)

	
the sale of all or substantially all of the consolidated assets of the Company and the Subsidiaries to a Third-Party Purchaser;

 

	
  

	
(b)

	
a sale resulting in no less than a majority of the Common Units on a Fully Diluted Basis being held by a Third-Party Purchaser; or

 

	
  

	
(c)

	
a merger, consolidation, recapitalization or reorganization of the Company with or into a Third-Party Purchaser that results in the inability of the Members to designate or elect a majority of the Managers (or the board of directors (or its equivalent) of the resulting entity or its parent company).

 

“Code” means the Internal Revenue Code of 1986.

 

“Colorado Act” means the Colorado Limited Liability Company Act, Title 7, Article 80, Sections 80-101, et seq., and any successor statute, as it may be amended from time to time.

 

 

  

4

  

 

“Common Managers” has the meaning set forth in Section 8.02(a)(i).

 

“Common Members” means the Members who own Common Units as listed in the Member Schedule.

 

“Common Units” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Common Units” in this Agreement.

 

“Company” has the meaning set forth in the Preamble.

 

“Company Interest Rate” means a rate equal to the prime rate published in The Wall Street Journal on the date of payment plus two percent per annum.

 

“Company Minimum Gain” means “partnership minimum gain” as defined in Treasury Regulations Section 1.704-2(b)(2), substituting the term “Company” for the term “partnership” as the context requires.

 

“Confidential Information” has the meaning set forth in Section 11.01.

 

“Covered Person” has the meaning set forth in Section 14.01(a).

 

“Delay Condition” means any of the following conditions:

 

	
  

	
(a)

	
the Company is prohibited from purchasing any Incentive Units by any Financing Document or by Applicable Law;

 

	
  

	
(b)

	
a default has occurred under any Financing Document and is continuing;

 

	
  

	
(c)

	
the purchase of any Incentive Units would, or in the good-faith opinion of the Board could, result in the occurrence of an event of default under any Financing Document or create a condition that would or could, with notice or lapse of time or both, result in such an event of default; or

 

	
  

	
(d)

	
the purchase of any Incentive Units would, in the good faith opinion of the Board, be imprudent in view of the financial condition of the Company, the anticipated impact of the purchase of such Incentive Units on the Company’s ability to meet its obligations under any Financing Document or otherwise in connection with its business and operations.

 

“Disability,” with respect to any Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “Disability” means such Service Provider’s incapacity due to physical or mental illness that:

 

	
  

	
(a)

	
shall have prevented such Service Provider from performing his duties for the Company or any of the Subsidiaries on a full-time basis for more than ninety or more consecutive days or an aggregate of 180 days in any 365-day period; or

 

	
  

	
(b)

	
(i) the Board determines, in compliance with Applicable Law, is likely to prevent such Service Provider from performing such duties for such period of time and (ii) thirty days have elapsed since delivery to such Service Provider of the determination of the Board and such Service Provider has not resumed such performance (in which case the date of termination in the case of a termination for “Disability” pursuant to this clause (b) shall be deemed to be the last day of such thirty-day period).

 

 

  

5

  

 

“Distribution” means a distribution made by the Company to a Member, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided that none of the following shall be a Distribution:  (a) any redemption or repurchase by the Company or any Member of any Units or Unit Equivalents; (b) any recapitalization or exchange of securities of the Company, including any exchange of Preferred Units pursuant to the Exchange Agreement; (c) any subdivision (by a split of Units or otherwise) or any combination (by a reverse split of Units or otherwise) of any outstanding Units; or (d) any fees or remuneration paid to any Member in such Member’s capacity as a Service Provider for the Company or a Subsidiary.  “Distribute” when used as a verb shall have a correlative meaning.

 

“Electronic Transmission” means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process.

 

“Exchange Agreement” means the Exchange Agreement dated as of the date hereof among the Company, Two Rivers Water & Farming Company and each of the Preferred Members from time to time.

 

“Fair Market Value” means, with respect to an asset as of a specified date, the purchase price that a willing buyer having all relevant knowledge would pay a willing seller for such asset in an arm’s-length transaction on such date, as determined in good faith by the Board based on such factors as the Board, in the exercise of its reasonable business judgment, considers relevant.

 

“Financing Document” means any credit agreement, guarantee, financing or security agreement or other agreements or instruments governing indebtedness of the Company or any of the Subsidiaries.

 

“Fiscal Quarter” means the first three-month period, second three-month period, third three-month period or fourth three-month period of a Fiscal Year.

 

“Fiscal Year” means the calendar year, unless the Company is required to have a taxable year other than the calendar year, in which case Fiscal Year shall be the period that conforms to the Company’s taxable year.

 

“Forfeiture Allocations” has the meaning set forth in Section 6.02(e).

 

“Fully Diluted Basis” means, as of any date of determination:

 

	
  

	
(a)

	
with respect to all Units, all issued and outstanding Units and all Units issuable upon the exercise of any outstanding Unit Equivalents as of such date, whether or not such Unit Equivalents are then exercisable; or

 

	
  

	
(b)

	
with respect to any specified type, class or series of Units, all issued and outstanding Units designated as such type, class or series and all such designated Units issuable upon the exercise of any outstanding Unit Equivalents as of such date, whether or not such Unit Equivalents are then exercisable.

 

“GAAP” means U.S. generally accepted accounting principles in effect from time to time.

 

 

  

6

  

 

“Good Reason,” with respect to any Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider or, if none, then “Good Reason” means any of the following actions taken without the Service Provider’s written consent:

 

	
  

	
(a)

	
a material reduction in the Service Provider’s base salary or the Service Provider’s ability to participate in Company incentive or bonus plans (other than a general reduction in base salary or bonuses that affects all salaried Service Providers equally);

 

	
  

	
(b)

	
the failure by the Company to pay to the Service Provider any material portion of the salary, bonus or other benefits owed to such Service Provider;

 

	
  

	
(c)

	
a substantial adverse change in the Service Provider’s duties and responsibilities or a material diminution in the Service Provider’s title, responsibility, or authority; or

 

	
  

	
(d)

	
a transfer of the Service Provider’s primary workplace by more than fifty miles from the Service Provider’s current workplace;

 

provided that Good Reason shall not be deemed to exist unless (i) the Company fails to cure the event giving rise to Good Reason within thirty days after written notice thereof given by the Service Provider to the Board, which notice shall (A) be delivered to the Board no later than twenty days following the Service Provider’s initial detection of the condition and (B) specifically set forth the nature of such event and the corrective action reasonably sought by the Service Provider and (ii) the Service Provider terminates his employment within thirty days following the last day of the foregoing cure period.

 

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.

 

“Incentive Liquidation Value” means, as of the date of determination and with respect to new Incentive Units to be issued, the aggregate amount that would be Distributed to the Members pursuant to Section 7.03 if, immediately prior to the issuance of such Incentive Units, all of the assets of the Company were sold for Fair Market Value, the Company was immediately liquidated, the Company’s debts and liabilities were satisfied in full, and the proceeds of the liquidation were Distributed pursuant to Section 13.03(c).

 

“Incentive Plan” means a written plan, as in effect from time to time, pursuant to which Incentive Units may be granted in compliance with Rule 701 under the Securities Act or another applicable exemption.

 

“Incentive Units” means Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Incentive Units” in this Agreement and includes both Restricted Incentive Units and Unrestricted Incentive Units.

 

“Initial Cost” means, with respect to any Unit, the purchase price paid to the Company with respect to such Unit by the Member to whom such Unit was originally issued.

 

“Intended Call Closing Date” has the meaning set forth in Section 10.02(c)(i).

 

 

7

 

 

“Intended Put Closing Date” has the meaning set forth in Section 10.03(c)(i).

 

“Joinder Agreement” means a written undertaking substantially in the form of the joinder agreement attached as Exhibit A.

 

“Liquidator” has the meaning set forth in Section 13.03(a).

 

“Losses” has the meaning set forth in Section 14.03(a).

 

“Manager” has the meaning set forth in Section 8.01.

 

“Member” means:

 

	
  

	
(a)

	
Two Rivers Water & Farming Company, which as of the date of this Agreement holds 50,000,000 Common Units, has executed this Agreement and is identified as a Member on the Member Schedule, so long as it continues to be shown on the Member Schedule (as updated from time to time) as the owner of one or more Units; and

 

	
  

	
(b)

	
each Person who is hereafter admitted as a Member in accordance with the terms of this Agreement and the Colorado Act, in each case so long as such Person is shown on the Member Schedule (as updated from time to time) as the owner of one or more Units.

 

The Members shall constitute the “members” (as that term is defined in the Colorado Act) of the Company.

 

“Member Nonrecourse Debt” means “partner nonrecourse debt” as defined in Treasury Regulations Section 1.704-2(b)(4), substituting the term “Company” for the term “partnership” and the term “Member” for the term “partner” as the context requires.

 

“Member Nonrecourse Debt Minimum Gain” means, with respect to any Member Nonrecourse Debt, an amount equal to the Company Minimum Gain that would result if the Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i)(3).

 

“Member Nonrecourse Deduction” means “partner nonrecourse deduction” as defined in Treasury Regulations Section 1.704-2(i), substituting the term “Member” for the term “partner” as the context requires.

 

“Member Schedule” has the meaning set forth in Section 3.01.

 

“Membership Interest” means an interest in the Company owned by a Member, including such Member’s right (based on the type and class of Unit or Units held by such Member), as applicable, to:

 

	
  

	
(a)

	
a Distributive share of Net Income, Net Losses and other items of income, gain, loss and deduction of the Company,

 

	
  

	
(b)

	
a Distributive share of the assets of the Company,

 

	
  

	
(c)

	
vote on, consent to or otherwise participate in any decision of the Members as provided in this Agreement, and

 

 

  

8

  

 

	
  

	
(d)

	
any and all other benefits to which such Member may be entitled as provided in this Agreement or the Colorado Act.

 

“Misallocated Item” has the meaning set forth in Section 6.05.

 

“National Exchange” means the NASDAQ Global Market (including the NASDAQ Global Select Market), the NASDAQ Capital Market, the NYSE MKT, the New York Stock Exchange or any successor to any of the foregoing.

 

“Net Income” and “Net Loss” mean, for each Fiscal Year, Fiscal Quarter or other period specified in this Agreement, an amount equal to the Company’s taxable income or taxable loss, or particular items thereof, determined in accordance with Code Section 703(a) (where, for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or taxable loss), but with the following adjustments:

 

	
  

	
(a)

	
any income realized by the Company that is exempt from federal income taxation, as described in Code Section 705(a)(1)(B), shall be added to such taxable income or taxable loss, notwithstanding that such income is not includable in gross income;

 

	
  

	
(b)

	
any expenditures of the Company described in Code Section 705(a)(2)(B), including any items treated under Treasury Regulations Section 1.704-1(b)(2)(iv)(i) as items described in Code Section 705(a)(2)(B), shall be subtracted from such taxable income or taxable loss, notwithstanding that such expenditures are not deductible for federal income tax purposes;

 

	
  

	
(c)

	
any gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property so disposed, notwithstanding that the adjusted tax basis of such property differs from its Book Value;

 

	
  

	
(d)

	
any items of depreciation, amortization and other cost recovery deductions with respect to Company property having a Book Value that differs from its adjusted tax basis shall be computed by reference to the property’s Book Value (as adjusted for Book Depreciation) in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g);

 

	
  

	
(e)

	
if the Book Value of any Company property is adjusted as provided in the definition of Book Value, then the amount of such adjustment shall be treated as an item of gain or loss and included in the computation of such taxable income or taxable loss; and

 

	
  

	
(f)

	
to the extent an adjustment to the adjusted tax basis of any Company property pursuant to Code Section 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulations Section 1.704 1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).

 

“New Interests” has the meaning set forth in Section 3.05.

 

“Nonrecourse Liability” has the meaning set forth in Treasury Regulations Section 1.704-2(b)(3).

 

 

  

9

  

 

“Offering Service Provider” has the meaning set forth in Section 10.03(a).

 

“Officers” has the meaning set forth in Section 8.09.

 

“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

 

“Preferred Managers” has the meaning set forth in Section 8.02(a)(ii).

 

“Preferred Members” means Members who own Preferred Units as listed in the Member Schedule.

 

“Preferred Units” means Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Preferred Units” in this Agreement.

 

“Profits Interest” has the meaning set forth in Section 3.04(d).

 

“Profits Interest Hurdle” means an amount set forth in each Award Agreement reflecting the Incentive Liquidation Value of the relevant Incentive Units at the time the units are issued.

 

“Put Purchase Price” has the meaning set forth in Section 10.03(a).

 

“Regular Daily Accumulation” has the meaning set forth in Section 7.02(a)(ii).

 

“Regular Quarterly Accumulation” has the meaning set forth in Section 7.02(a)(ii).

 

“Regulatory Allocations” has the meaning set forth in Section 6.02(d).

 

“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

 

“Restricted Incentive Units” means any Incentive Units that have not vested pursuant to the terms of the Incentive Plan and any associated Award Agreement.

 

“Securities Act” means the Securities Act of 1933.

 

“Service Provider Sale Notice” has the meaning set forth in Section 10.03(b)(i).

 

“Service Providers” has the meaning set forth in Section 3.04(a).

 

“Subsidiary” means any Person of which a majority of the outstanding shares or other equity interests having the power to vote for directors or comparable managers are owned, directly or indirectly, by the Company.

 

“Tax Matters Member” has the meaning set forth in Section 12.01.

 

“Taxing Authority” has the meaning set forth in Section 7.05(b).

 

“Third-Party Purchaser” means any Person who, immediately prior to a contemplated transaction:

 

	
  

	
(a)

	
does not directly or indirectly own or have the right to acquire any outstanding Preferred Units or Common Units (or applicable Unit Equivalents) or

 

 

  

10

  

 

	
  

	
(b)

	
is not a Permitted Transferee of any Person who directly or indirectly owns or has the right to acquire any Preferred Units or Common Units (or applicable Unit Equivalents).

 

“Transfer” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Units owned by a Person or any interest (including a beneficial interest) in any Units or Unit Equivalents owned by a Person.  “Transfer” when used as a noun shall have a correlative meaning.  “Transferor” and “Transferee” mean a Person who makes or receives a Transfer, respectively.

 

“Treasury Regulations” means final or temporary regulations issued by the U.S. Department of Treasury pursuant to authority under the Code, and any successor regulations.

 

“Unallocated Item” has the meaning set forth in Section 6.05.

 

“Unit” means a unit representing a fractional part of the Membership Interests of the Members and shall include all types and classes of Units, including Preferred Units, Common Units and Incentive Units, provided that any type or class of Unit shall have the privileges, preference, duties, liabilities, obligations and rights set forth in this Agreement and the Membership Interests represented by such type or class or series of Unit shall be determined in accordance with such privileges, preference, duties, liabilities, obligations and rights.

 

“Unit Equivalents” means any security or obligation that is by its terms, directly or indirectly, convertible into, exchangeable or exercisable for Units and any option, warrant or other right to subscribe for, purchase or acquire Units.

 

“Unrestricted Incentive Units” means any Incentive Units that have vested pursuant to the terms of the Incentive Plan and any associated Award Agreement.

 

“Withholding Advances” has the meaning set forth in Section 7.05(b).

 

Section 1.02. Interpretation

 

. For purposes of this Agreement:

 

	
  

	
(a)

	
headings used in this Agreement are for convenience of reference only and shall not, for any purpose, be deemed a part of this Agreement;

 

	
  

	
(b)

	
any references herein to an Article, Section or Exhibit refer to an Article or Section of, or Exhibit attached to, this Agreement, unless specified otherwise;

 

	
  

	
(c)

	
the word “day” refers to a calendar day;

 

	
  

	
(d)

	
the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole;

 

	
  

	
(e)

	
the words “include,” “includes” and “including” as used herein shall not be construed so as to exclude any other thing not referred to or described;

 

	
  

	
(f)

	
the word “or” is not exclusive;

 

	
  

	
(g)

	
the definition given for any term in this Agreement shall apply equally to both the singular and plural forms of the term defined;

 

 

  

11

  

 

	
  

	
(h)

	
whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

 

	
  

	
(i)

	
unless the context otherwise requires, (1) references herein to an agreement, instrument or other document mean such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (2) references herein to a statute means such statute as amended from time to time and includes any successor legislation thereto and any rules and regulations promulgated thereunder; and

 

	
  

	
(j)

	
this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

ARTICLE II

Organization

 

Section 2.01. Formation.

 

(a) The Company was formed on December 19, 2013, pursuant to the provisions of the Colorado Act, upon the filing of the Articles of Organization with the Secretary of State of the State of Colorado.

 

(b) This Agreement shall constitute the “operating agreement” (as that term is used in the Colorado Act) of the Company.  The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Colorado Act and this Agreement.  To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than they would be under the Colorado Act in the absence of such provision, this Agreement shall, to the extent permitted by the Colorado Act, control.

 

Section 2.02. Name. The name of the Company shall be “TR Capital Partners, LLC” or such other name or names as the Board may from time to time designate; provided that the name shall always contain the words “Limited Liability Company” or the abbreviation “L.L.C.” or the designation “LLC.”

 

Section 2.03. Principal Office. The principal office of the Company shall be located at 2000 South Colorado Boulevard, Tower 1, Suite 3100, Denver, Colorado, or such other place as may from time to time be determined by the Board.  The Board shall give prompt notice of any such change to each of the Members.

 

Section 2.04. Registered Office and Agent.

 

(a) The registered office of the Company shall be the office of the initial registered agent named in the Articles of Organization or such other office (which need not be a place of business of the Company) as the Board may designate from time to time in the manner provided by the Colorado Act and other Applicable Law.

 

(b) The registered agent for service of process on the Company in the State of Colorado shall be the initial registered agent named in the Articles of Organization or such other Person or Persons as the Board may designate from time to time in the manner provided by the Colorado Act and other Applicable Law.

 

 

  

12

  

 

Section 2.05. Purpose and Powers.

 

(a) The purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be formed under the Colorado Act and in any and all activities necessary or incidental thereto.

 

(b) The Company shall have all the powers necessary or convenient to carry out the purposes for which it is formed, including the powers granted by the Colorado Act.

 

Section 2.06. Term. The term of the Company commenced on December 19, 2013 and shall continue perpetually until the Company is dissolved in accordance with the provisions of this Agreement.

 

Section 2.07. No State-Law Partnership. The Members intend that the Company shall be treated as a partnership for federal and, if applicable, state and local income tax purposes, and, to the extent permissible, the Company shall elect to be treated as a partnership for such purposes.  The Company and each Member shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment and no Member shall take any action inconsistent with such treatment.  The Members intend that the Company shall not be a partnership (including a limited partnership) or joint venture and that no Member, Manager or Officer of the Company shall be a partner or joint venturer of any other Member, Manager or Officer of the Company, for any purposes other than as set forth in the first sentence of this Section 2.07.

 

ARTICLE III

Units

 

Section 3.01. Units Generally. Membership Interests of the Members shall be represented by issued and outstanding Units, which may be divided into one or more types, classes or series.  Each type, class or series of Units shall have the privileges, preference, duties, liabilities, obligations and rights, including voting rights, if any, set forth in this Agreement with respect to such type, class or series.  The Board shall maintain a schedule (the “Member Schedule”) setting forth the name and address of each Member and, with respect to each type, class or series of Units held by such Member, (a) the number and issue date thereof, (b) the number of the certificate (if any) issued therefor, (c) the Capital Contribution of the Member with respect thereto, and (d) such other information as the Board may determine to be desirable.  The Company shall update the Member Schedule upon the issuance or Transfer of any Units to any new or existing Member.  A copy of the Member Schedule as of the date of this Agreement is attached as Schedule 1.

 

Section 3.02. Authorization and Issuance of Preferred Units.  Subject to compliance with Section 10.01(a), the Company is hereby authorized to issue a class of Units designated as Preferred Units, of which no Preferred Units are outstanding as of the date of this Agreement.  The Company may issue up to a total of 32,500,000 Preferred Units on or prior to September 30, 2014, but may neither issue a greater number of Preferred Units nor issue any Preferred Units after September 30, 2014, without obtaining the consent of Preferred Members holding a majority of the Preferred Units outstanding as of the date of such consent.

 

Section 3.03. Authorization and Issuance of Common Units.  The Company is hereby authorized to issue a class of Units designated as Common Units and, as of the date hereof, 50,000,000 Common Units have been issued and are outstanding.

 

 

  

13

  

 

Section 3.04. Authorization and Issuance of Incentive Units.

 

(a) The Company is hereby authorized to issue a class of Units designated as Incentive Units and to adopt the Incentive Plan.  Incentive Units may be issued to Managers, Officers, employees, consultants or other service providers of the Company or any Subsidiary (collectively, “Service Providers”).  In connection with issuances of Incentive Units, the Company is hereby authorized and directed to enter into an Award Agreement with each Service Provider whom the Board determines from time to time should receive Incentive Units.  Each Award Agreement shall include such terms, conditions, rights and obligations as may be determined by the Board, in its sole discretion, consistent with the terms herein, and should be executed and delivered on behalf of the Company by an Officer designated by the Board.

 

(b) The Board shall establish such vesting criteria for the Incentive Units as it determines in its discretion and shall include such vesting criteria in the Incentive Plan or the applicable Award Agreement for any grant of Incentive Units.

 

(c) In connection with each issuance of Incentive Units, the Board shall determine in good faith the Incentive Liquidation Value applicably to such Incentive Units.  In each Award Agreement for Incentive Units, the Board shall include an appropriate Profits Interest Hurdle for such Incentive Units on the basis of the Incentive Liquidation Value immediately prior to the issuance of such Incentive Units.

 

(d) The Company and each Member hereby acknowledge and agree that, with respect to any Service Provider, such Service Provider’s Incentive Units constitute a “profits interest” in the Company within the meaning of Rev. Proc. 93-27 (a “Profits Interest”) and that any and all Incentive Units received by a Service Provider are received in exchange for the provision of services by the Service Provider to or for the benefit of the Company in a Service Provider capacity or in anticipation of becoming a Service Provider.  The Company and each Service Provider who receives Incentive Units hereby agree to comply with the provisions of Rev. Proc. 2001-43, and neither the Company nor any Service Provider who receives Incentive Units shall perform any act or take any position inconsistent with the application of Rev. Proc. 2001-43 or any future Internal Revenue Service guidance or other Governmental Authority that supplements or supersedes the foregoing Revenue Procedures.

 

(e) Incentive Units shall receive the following tax treatment:

 

(i) The Company and each Service Provider who receives Incentive Units shall treat such Service Provider as the holder of such Incentive Units from the date of their receipt, and the Service Provider receiving such Incentive Units shall take into account his Distributive share of Net Income, Net Loss, income, gain, loss and deduction associated with the Incentive Units in computing such Service Provider’s income tax liability for the entire period during which such Service Provider holds the Incentive Units.

 

(ii) Each Service Provider who receives Incentive Units shall make a timely and effective election under Code Section 83(b) with respect to such Incentive Units and shall promptly provide a copy to the Company.  Except as otherwise determined by the Board, the Company and all Members shall (A) treat such Incentive Units as outstanding for tax purposes, (B) treat such Service Provider as a partner for tax purposes with respect to such Incentive Units and (C) file all tax returns and reports consistently with the foregoing.  Neither the Company nor any of its Members shall deduct any amount (as wages, compensation or otherwise) with respect to the receipt of such Incentive Units for federal income tax purposes.

 

 

  

14

  

 

(iii) In accordance with the finally promulgated successor rules to proposed Treasury Regulations Section 1.83-3(l) and IRS Notice 2005-43, each Member, by executing this Agreement, authorizes and directs the Company to elect a safe harbor under which the fair market value of any Incentive Units issued after the effective date of such proposed Treasury Regulations (or other guidance) will be treated as equal to the liquidation value (within the meaning of the proposed Treasury Regulations or successor rules) of the Incentive Units as of the date of issuance of such Incentive Units.  In the event that the Company makes a safe harbor election as described in the preceding sentence, each Member hereby agrees to comply with all safe harbor requirements with respect to Transfers of Units while the safe harbor election remains effective.

 

Section 3.05. Other Issuances. In addition to the Preferred Units, Common Units and Incentive Units, the Company is hereby authorized, subject to compliance with Section 10.01(a), to authorize and issue or sell to any Person any of the following (collectively, “New Interests”): (i) any new type, class or series of Units not otherwise described in this Agreement, which Units may be designated as classes or series of the Preferred Units, Common Units or Incentive Units but having different rights; and (ii) Unit Equivalents.  The Board is hereby authorized, subject to Section 15.06, to amend this Agreement to reflect such issuance and to fix the relative privileges, preference, duties, liabilities, obligations and rights of any such New Interests, including the number of such New Interests to be issued, the preference (with respect to Distributions, in liquidation or otherwise) over any other Units, and any contributions required in connection therewith.

 

Section 3.06. Certification of Units.  The Board shall cause the Company to issue to each Member a certificate or certificates representing the Units held by the Member.  In addition to any other legend required by Applicable Law, all certificates representing issued and outstanding Units shall bear a legend substantially in the following form:

 

“THE UNITS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LIMITED LIABILITY COMPANY AGREEMENT AMONG THE COMPANY AND ITS MEMBERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.  NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH LIMITED LIABILITY COMPANY AGREEMENT.

 

“THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUE THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

Section 3.07. Action by Consent.  Any matter that is to be voted on, consented to or approved by the holders of any type, class or series of Membership Interests (including Common Units and Preferred Units) may be taken without a meeting, without prior notice and without a vote if consented to, in writing or by Electronic Transmission, by a Member or Members holding not less than a majority of such type, class or series of Membership Interests.  A record shall be maintained by the Board of each such action taken by written consent of a Member or Members.

 

 

  

15

  

 

ARTICLE IV

Members

 

Section 4.01. Admission of New Members.

 

(a) New Members may be admitted from time to time (i) subject to compliance with the provisions of Sections 4.01(b) and 11.01(b) in connection with an issuance of Units by the Company and (ii) subject to compliance with the provisions of Section 4.01(b) and Article XI in connection with a Transfer of Units.

 

(b) In order for any Person not already a Member to be admitted as a Member, whether pursuant to an issuance or a Transfer of Units, such Person shall have executed and delivered a Joinder Agreement to the Company.  Upon the amendment of the Member Schedule by the Board and the satisfaction of any other applicable conditions (including, if a condition, the receipt by the Company of payment for the issuance of the applicable Units), such Person shall be admitted as a Member and issued such Units and the Board shall adjust the Capital Accounts of the Members as necessary in accordance with Section 5.03.

 

Section 4.02. Representations and Warranties of Members. By execution and delivery of this Agreement or a Joinder Agreement, as applicable, each of the Members, whether admitted as of the date hereof or pursuant to Section 4.01, represents and warrants to the Company and acknowledges that:

 

(a) The Units have not been registered under the Securities Act or the securities laws of any other jurisdiction, are issued in reliance upon federal and state exemptions for transactions not involving a public offering and cannot be disposed of unless (i) they are subsequently registered or exempted from registration under the Securities Act and (ii) the provisions of this Agreement have been complied with.

 

(b) Such Member is an “accredited investor” within the meaning of Rule 501 under the Securities Act and agrees that such Member will not take any action that could have an adverse effect on the availability of the exemption from registration provided by Rule 501 under the Securities Act with respect to the offer and sale of the Units.

 

(c) Such Member’s Units are being acquired for its own account solely for investment and not with a view to resale or distribution thereof.

 

(d) Such Member has conducted its own independent review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and the Subsidiaries, and such Member acknowledges that it has been provided adequate access to the personnel, properties, premises and records of the Company and the Subsidiaries for such purpose.

 

(e) The determination of such Member to acquire Units has been made by such Member independent of any other Member and independent of any statements or opinions as to the advisability of such purchase or as to the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and the Subsidiaries that may have been made or given by any other Member or by any agent or employee of any other Member.

 

(f) Such Member has such knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of an investment in the Company and making an informed decision with respect thereto.

 

 

  

16

  

 

(g) Such Member is able to bear the economic and financial risk of an investment in the Company for an indefinite period of time.

 

(h) The execution, delivery and performance of this Agreement have been duly authorized by such Member and do not require such Member to obtain any consent or approval that has not been obtained and do not contravene or result in a default in any material respect under any provision of any law or regulation applicable to such Member or other governing documents or any agreement or instrument to which such Member is a party or by which such Member is bound.

 

(i) This Agreement is valid, binding and enforceable against such Member in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights or general equity principles (regardless of whether considered at law or in equity).

 

(j) Neither the issuance of any Units to any Member nor any provision contained herein will entitle the Member to remain in the employment of the Company or any Subsidiary or affect the right of the Company or any Subsidiary to terminate the Member’s employment at any time for any reason, other than as otherwise provided in such Member’s employment agreement or other similar agreement with the Company or such Subsidiary, if applicable.

 

None of the foregoing shall replace, diminish or otherwise adversely affect any Member’s representations and warranties made by it in any purchase agreement or Award Agreement, as applicable.

 

Section 4.03. No Personal Liability. Except as otherwise provided in the Colorado Act, by other Applicable Law or expressly in this Agreement, no Member will be obligated personally for any debt, obligation or liability of the Company, any Subsidiary or any other Member, whether arising in contract, tort or otherwise, solely by reason of being a Member.

 

Section 4.04. No Withdrawal. A Member shall not cease to be a Member as a result of the Bankruptcy of such Member.  So long as a Member continues to hold any Units, such Member shall not have the ability to withdraw or resign as a Member prior to the dissolution and winding up of the Company and any such withdrawal or resignation or attempted withdrawal or resignation by a Member prior to the dissolution or winding up of the Company shall be null and void.  As soon as any Person who is a Member ceases to hold any Units, such Person shall no longer be a Member; provided that this Agreement shall continue to apply with respect to any Units that have been surrendered for exchange pursuant to Section 10.02 until full payment is made therefor in accordance with the terms of this Agreement.

 

Section 4.05. Death. The death of any Member shall not cause the dissolution of the Company.  In such event the Company and its business shall be continued by the remaining Member or Members and the Units owned by the deceased Member shall automatically be Transferred to such Member’s heirs; provided that within a reasonable time after such Transfer, the applicable heirs shall sign a Joinder Agreement.

 

Section 4.06. Voting.  Except as otherwise provided by this Agreement (including Section 15.07) or as otherwise required by the Colorado Act or other Applicable Law, (a) each Member shall be entitled to one vote per Common Unit on all matters upon which the Members have the right to vote under this Agreement; and (b) Preferred Units and Incentive Units shall not entitle the holders thereof to vote on any matters required or permitted to be voted on by the Members.

 

Section 4.07. Power of Members. The Members shall have the power to exercise any and all rights or powers granted to Members pursuant to the express terms of this Agreement and the Colorado Act.  Except as otherwise specifically provided by this Agreement or required by the Colorado Act, no Member, in its capacity as a Member, shall have the power to act for or on behalf of, or to bind, the Company.

 

 

  

17

  

 

Section 4.08. No Interest in Company Property. No real or personal property of the Company shall be deemed to be owned by any Member individually, but shall be owned by, and title shall be vested solely in, the Company.  Without limiting the foregoing, each Member hereby irrevocably waives during the term of the Company any right that such Member may have to maintain any action for partition with respect to the property of the Company.

 

ARTICLE V

Capital Contributions; Capital Accounts

 

Section 5.01. Existing Capital Contributions. Two Rivers Water & Farming Company has made the Capital Contribution giving rise to its initial Capital Account and is deemed to own 50,000,000 Common Units on the date hereof.

 

Section 5.02. Additional Capital Contributions.

 

(a) No Member shall be required to make any additional Capital Contributions to the Company.  Any future Capital Contributions made by any Member shall only be made with the consent of the Board.

 

(b) No Member shall be required to lend any funds to the Company or shall have any personal liability for the payment or repayment of any Capital Contribution by or to any other Member.

 

Section 5.03. Maintenance of Capital Accounts. The Company shall establish and maintain for each Member a separate capital account (a “Capital Account”) on its books and records in accordance with this Section 5.03.  Each Capital Account shall be established and maintained in accordance with the following provisions:

 

(a) Each Member’s Capital Account shall be increased by the amount of:

 

	
(i)  

	
such Member’s Capital Contributions, including such Member’s initial Capital Contribution;

 

	
(ii)  

	
any Net Income or other item of income or gain allocated to such Member pursuant to Article VI; and

 

	
(iii)  

	
any liabilities of the Company that are assumed by such Member or secured by any property Distributed to such Member.

 

(b) Each Member’s Capital Account shall be decreased by:

 

	
(i)  

	
the cash amount or Book Value of any property Distributed to such Member pursuant to Article VII and Section 13.03(c);

 

	
(ii)  

	
the amount of any Net Loss or other item of loss or deduction allocated to such Member pursuant to Article VI; and

 

	
(iii)  

	
the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

 

 

  

18

  

 

Section 5.04. Succession Upon Transfer. In the event that any Membership Interests of Members are Transferred in accordance with the terms of this Agreement, the Transferee shall succeed to the Capital Account of the Transferor to the extent it relates to the Transferred Units and, subject to Section 6.04, shall receive allocations and Distributions pursuant to Article VI, Article VII and Article XIII in respect of such Units.

 

Section 5.05. Negative Capital Accounts. In the event that any Member shall have a deficit balance in its Capital Account, such Member shall have no obligation, during the term of the Company or upon dissolution or liquidation thereof, to restore such negative balance or make any Capital Contributions to the Company by reason thereof, except as may be required by Applicable Law or in respect of any negative balance resulting from a withdrawal of capital or dissolution in contravention of this Agreement.

 

Section 5.06. No Withdrawal. No Member shall be entitled to withdraw any part of its Capital Account or to receive any Distribution from the Company, except as provided in this Agreement.  No Member shall receive any interest, salary or drawing with respect to its Capital Contributions or its Capital Account, except as otherwise provided in this Agreement.  The Capital Accounts are maintained for the sole purpose of allocating items of income, gain, loss and deduction among the Members and shall have no effect on the amount of any Distributions to any Members, in liquidation or otherwise.

 

Section 5.07. Treatment of Loans From Members. Loans by any Member to the Company shall not be considered Capital Contributions and shall not affect the maintenance of such Member’s Capital Account, other than to the extent provided in (iii), if applicable.

 

Section 5.08. Modifications. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations.  If the Board determines that it is prudent to modify the manner in which the Capital Accounts, or any increases or decreases to the Capital Accounts, are computed in order to comply with such Treasury Regulations, the Board may authorize such modifications.

 

ARTICLE VI

Allocations

 

Section 6.01. Allocation of Net Income and Net Loss. For each Fiscal Year (or portion thereof), except as otherwise provided in this Agreement, Net Income and Net Loss (and, to the extent necessary, individual items of income, gain, loss or deduction) of the Company shall be allocated among the Members in a manner such that, after giving effect to the special allocations set forth in Section 6.02 and the Preferred Unit Distributions set forth in Section 7.02, the Capital Account balance of each Member, immediately after making such allocations, is, as nearly as possible, equal to (a) the Distributions that would be made to such Member pursuant to Section 13.03(c) if the Company were dissolved and its affairs wound up, its assets sold for cash equal to their Book Value, all Company liabilities were satisfied (limited with respect to each Nonrecourse Liability to the Book Value of the assets securing such liability), the net assets of the Company were Distributed, in accordance with Section 13.03(c), to the Members immediately after making such allocations, minus (b) such Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets.

 

Section 6.02. Regulatory and Special Allocations. Notwithstanding the provisions of Section 6.01:

 

 

  

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(a) If there is a net decrease in Company Minimum Gain (determined according to Treasury Regulations Section 1.704-2(d)(1)) during any Fiscal Year, each Member shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g).  The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2).  This Section 6.02(a) is intended to comply with the “minimum gain chargeback” requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

 

(b) Member Nonrecourse Deductions shall be allocated in the manner required by Treasury Regulations Section 1.704-2(i).  Except as otherwise provided in Treasury Regulations Section 1.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Fiscal Year, each Member that has a share of such Member Minimum Gain shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to that Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain.  Items to be allocated pursuant to this paragraph shall be determined in accordance with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2).  This Section 6.02(b) is intended to comply with the “minimum gain chargeback” requirements in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

 

(c) In the event any Member unexpectedly receives any adjustments, allocations or Distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), Net Income shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or Distributions as quickly as possible.  This Section 6.02(c) is intended to comply with the qualified income offset requirement in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

(d) The allocations set forth in paragraphs (a), (b) and (c) above (the “Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations under Code Section 704.  Notwithstanding any other provisions of this Article VI (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating Net Income and Net Losses among Members so that, to the extent possible, the net amount of such allocations of Net Income and Net Losses and other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to such Member if the Regulatory Allocations had not occurred.

 

(e) The Company and the Members acknowledge that allocations like those described in Proposed Treasury Regulations Section 1.704-1(b)(4)(xii)(c) (“Forfeiture Allocations”) result from the allocations of Net Income and Net Loss provided for in this Agreement.  For the avoidance of doubt, the Company is entitled to make Forfeiture Allocations and, once required by applicable final or temporary guidance, allocations of Net Income and Net Loss will be made in accordance with Proposed Treasury Regulations Section 1.704-1(b)(4)(xii)(c) or any successor provision or guidance.

 

(f) If the Company from time to time holds municipal bonds or other securities and receives from such securities interest payments that are exempt from federal or state income taxes, any such interest payments shall be allocated first, and solely, to Preferred Members to the extent of Net Income allocable to the Preferred Members.

 

 

  

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Section 6.03. Tax Allocations.

 

(a) Subject to clauses (b) through (e) of this Section 6.03, all income, gains, losses and deductions of the Company shall be allocated, for federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses and deductions among the Members for computing their Capital Accounts, except that if any such allocation for tax purposes is not permitted by the Code or other Applicable Law, the Company’s subsequent income, gains, losses and deductions shall be allocated among the Members for tax purposes, to the extent permitted by the Code and other Applicable Law, so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.

 

(b) Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall be allocated among the Members in accordance with Code Section 704(c) and the traditional method of Treasury Regulations Section 1.704-3(b), 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 Book Value.

 

(c) If the Book Value of any Company asset is adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) as provided in clause (c) of the definition of Book Value, subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c).

 

(d) Allocations of tax credit, tax credit recapture and any items related thereto shall be allocated to the Members according to their interests in such items as determined by the Board taking into account the principles of Treasury Regulations Section 1.704-1(b)(4)(ii).

 

(e) Allocations pursuant to this Section 6.03 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Losses, Distributions or other items pursuant to any provisions of this Agreement.

 

Section 6.04. Allocations in Respect of Transferred Units. In the event of a Transfer of Units during any Fiscal Year made in compliance with the provisions of Article X, Net Income, Net Losses and other items of income, gain, loss and deduction of the Company attributable to such Units for such Fiscal Year shall be determined using the interim closing of the books method.

 

Section 6.05. Curative Allocations. In the event that the Tax Matters Member determines, after consultation with counsel experienced in income tax matters, that the allocation of any item of Company income, gain, loss or deduction is not specified in this Article VI (an “Unallocated Item”), or that the allocation of any item of Company income, gain, loss or deduction hereunder is clearly inconsistent with the Members’ economic interests in the Company (determined by reference to the general principles of Treasury Regulations Section 1.704-1(b) and the factors set forth in Treasury Regulations Section 1.704-1(b)(3)(ii)) (a “Misallocated Item”), then the Board may allocate such Unallocated Items, or reallocate such Misallocated Items, to reflect such economic interests; provided that (a) no such allocation will be made without the prior consent of each Member that would be adversely and disproportionately affected thereby and (b) no such allocation shall have any material effect on the amounts distributable to any Member, including the amounts to be distributed upon the complete liquidation of the Company.

 

 

  

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ARTICLE VII

Distributions

 

Section 7.01. General.

 

(a) Subject to Section 7.01(b) and 7.02, the Board shall have sole discretion regarding the amounts and timing of Distributions to Members, including to decide to forego payment of Distributions in order to provide for the retention and establishment of reserves of, or payment to third parties of, such funds as it deems necessary with respect to the reasonable business needs of the Company, which needs may include the payment or the making of provision for the payment when due of the Company’s obligations, including present and anticipated debts and obligations, capital needs and expenses, the payment of any management or administrative fees and expenses, and reasonable reserves for contingencies.

 

(b) Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make any Distribution to Members if such Distribution would violate either Colorado Act Section 80-606 or any other Applicable Law.

 

Section 7.02. Distributions on Preferred Units.

 

(a) Quarterly Distributions.

 

(i) Subject in all respects to the more specific provisions set forth in clause (ii) of this Section 7.02(a), it is generally intended that Preferred Members receive regular quarterly Distributions with respect to each Fiscal Year that are (A) calculated to provide to Preferred Members an aggregate amount of Distributions that represents a return of 8.0% per annum on the total amount of Preferred Members’ Capital Contributions from time to time and (B) then allocated to Preferred Members pro rata, based on the respective numbers of Preferred Units they hold from time to time.

 

(ii) Subject to Section 7.01(b), the Company shall, by no later than the forty-fifth day after the last day of a Fiscal Quarter (commencing with the Fiscal Quarter ending March 31, 2014), Distribute to each Member who holds a Preferred Unit as of such Distribution date, an amount  equal to the sum of the Regular Daily Accumulations for each of the days on which such Preferred Unit was outstanding as of 9 a.m., Mountain time, during such Fiscal Quarter (with respect to a specified Preferred Unit, a “Regular Quarterly Accumulation”).  For purposes of this Section 7.02, “Regular Daily Accumulation” shall mean, with respect to a specified day:

 

	
(A)  

	
8.0% divided by the total number of days in the Fiscal Year in which such day occurs, multiplied by

 

	
(B)  

	
the aggregate amount of Capital Contributions of Preferred Members attributable to all Preferred Units that are outstanding as of 9 a.m., Mountain time, on such day, divided by

 

	
(C)  

	
the total number of Preferred Units outstanding as of 9 a.m., Mountain time, on such day.

 

(iii) Upon request from a Preferred Member in connection with a proposed Transfer of Preferred Units, the Company will provide to such Preferred Member, as promptly as reasonably practicable, the total Regular Quarterly Accumulations with respect to such Preferred Units that have accumulated through a requested date but have not been Distributed.

 

 

  

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(b) Supplemental Annual Distributions.

 

(i) Subject in all respects to the more specific provisions set forth in clause (ii) of this Section 7.02(b), it is generally intended that Preferred Members are eligible to receive supplemental annual Distributions with respect to each Fiscal Year that are (A) calculated to provide to Preferred Members an aggregate amount of Distributions that represents an additional return of up to 4.0% per annum on the total amount of Preferred Members’ Capital Contributions from time to time, subject to limitations based upon specified operating results of the Company for such Fiscal Year, and (B) then allocated to Preferred Members pro rata, based on the respective numbers of Preferred Units they hold from time to time.

 

(ii) Subject to Section 7.01(b), the Company shall, by no later than the earlier of (y) the thirtieth day after Two Rivers Water & Farming Company receives from its independent accountants an audit report with respect to its consolidated financial statements for a Fiscal Year (commencing with the Fiscal Year ending December 31, 2014) and (z) the one hundred twentieth day after the last day of such Fiscal Year, Distribute to each Member who holds a Preferred Unit as of such Distribution date the amount, if any, by which the product of:

 

	
(A)  

	
the amount of the Company’s total revenue for such Fiscal Year less its cost of goods sold, interest expense, depreciation expense and amortization expense for such Fiscal Year (regardless of whether any such expense is reflected as a separate line item in the Company’s consolidated financial statements for such Fiscal Year or is included as part of a line item therein), each as determined in accordance with GAAP, multiplied by

 

	
(B)  

	
a fraction, the numerator of which shall be the total of the Regular Quarterly Accumulations with respect to such Preferred Unit for all Fiscal Quarters during such Fiscal Year, and the denominator of which shall be the sum of all Regular Quarterly Accumulations with respect to all Preferred Units for all Fiscal Quarters during such Fiscal Year (calculated on a Preferred Member-by-Preferred Member basis, and then totaled),

 

exceeds the total of the Distributions made pursuant to Section 7.02(a) with respect to such Preferred Unit for such Fiscal Year (that is, the total of the Regular Quarterly Accumulations with respect to such Preferred Unit for all Fiscal Quarters in such Fiscal Year); provided that, notwithstanding the foregoing, the Distribution made pursuant to this Section 7.02(b) with respect to such Preferred Unit for such Fiscal Year shall not in any event exceed 50% of the total of the Distributions made pursuant to Section 7.02(a) with respect to such Preferred Unit for such Fiscal Year (that is, 50% of the total of the Regular Quarterly Accumulations with respect to such Preferred Unit for the Fiscal Quarters during such Fiscal Year).

 

Section 7.03. Priority of Distributions. After making all Distributions then due to Preferred Members under Section 7.02 and subject to the priority of Distributions pursuant to Section 13.03(c), if applicable, all Distributions determined to be made by the Board pursuant to Section 7.01 shall be made in the following manner:

 

	
(a)  

	
first, to the Members pro rata in proportion to their holdings of Common Units, until Distributions under this clause (a) equal the aggregate amount of Capital Contributions attributable to the Members in respect of their acquisitions of Common Units; and

 

 

  

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(b)  

	
second, any remaining amounts to the Members holding Common Units and Incentive Units (subject to Section 7.04) pro rata in proportion to their aggregate holdings of Common Units and Incentive Units treated as one class of Units.

 

Section 7.04. Limitations on Distributions to Incentive Units.

 

(a) Notwithstanding the provisions of Section 7.03(b), no Distribution shall be made to a Member on account of its Restricted Incentive Units.  Any amount that would otherwise be Distributed to such a Member but for the application of the preceding sentence shall instead be retained in a segregated Company account to be Distributed in accordance with Section 7.03(b) by the Company and paid to such Member if, as and when the Restricted Incentive Unit to which such retained amount relates vests pursuant to Section 3.04(b).

 

(b) It is the intention of the parties to this Agreement that Distributions to any Service Provider with respect to Incentive Units be limited to the extent necessary so that the related Membership Interest constitutes a Profits Interest.  In furtherance of the foregoing, and notwithstanding anything to the contrary in this Agreement, the Board shall, if necessary, limit any Distributions to any Service Provider with respect to Incentive Units so that such Distributions do not exceed the available profits in respect of such Service Provider’s related Profits Interest. Available profits shall include the aggregate amount of profit and unrealized appreciation in all of the assets of the Company between the date of issuance of such Incentive Units and the date of such Distribution, it being understood that such unrealized appreciation shall be determined on the basis of the Profits Interest Hurdle applicable to such Incentive Unit.

 

Section 7.05. Tax Withholding; Withholding Advances.

 

(a) Tax Withholding. If requested by the Board, each Member shall, if able to do so, deliver to the Board:

 

	
(i)  

	
an affidavit in form satisfactory to the Board that the applicable Member (or its members, as the case may be) is not subject to withholding under the provisions of any federal, state, local, foreign or other Applicable Law;

 

	
(ii)  

	
any certificate that the Board may reasonably request with respect to any such laws; and

 

	
(iii)  

	
any other form or instrument reasonably requested by the Board relating to any Member’s status under such law.

 

If a Member fails or is unable to deliver to the Board the affidavit described in the preceding clause (i) of Section 7.05, the Board may withhold amounts from such Member in accordance with Section 7.05(b).

 

(b) Withholding Advances. The Company is hereby authorized at all times to make payments (“Withholding Advances”) with respect to each Member in amounts required to discharge any obligation of the Company (as determined by the Tax Matters Member based on the advice of legal or tax counsel to the Company) to withhold or make payments to any federal, state, local or foreign taxing authority (a “Taxing Authority”) with respect to any Distribution or allocation by the Company of income or gain to such Member and to withhold the same from Distributions to such Member.  Any funds withheld from a Distribution by reason of this Section 7.05(b) shall nonetheless be deemed Distributed to the Member in question for all purposes under this Agreement and, at the option of the Board, shall be charged against the Member’s Capital Account.

 

 

  

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(c) Repayment of Withholding Advances. Any Withholding Advance made by the Company to a Taxing Authority on behalf of a Member and not simultaneously withheld from a Distribution to that Member shall be, with interest thereon accruing from the date of payment at the Company Interest Rate:

 

	
(i)  

	
promptly repaid to the Company by the Member on whose behalf the Withholding Advance was made (which repayment by the Member shall not constitute a Capital Contribution, but shall credit the Member’s Capital Account if the Board shall have initially charged the amount of the Withholding Advance to the Capital Account); or

 

	
(ii)  

	
with the consent of the Board, repaid by reducing the amount of the next succeeding Distribution or Distributions to be made to such Member (which reduction amount shall be deemed to have been Distributed to the Member, but shall not further reduce the Member’s Capital Account if the Board shall have initially charged the amount of the Withholding Advance to the Capital Account).

 

Interest shall cease to accrue from the time the Member on whose behalf the Withholding Advance was made repays such Withholding Advance (and all accrued interest) by either method of repayment described above.

 

(d) Indemnification. Each Member hereby agrees to indemnify and hold harmless the Company and the other Members from and against any liability with respect to taxes, interest or penalties that may be asserted by reason of the Company’s failure to deduct and withhold tax on amounts Distributable or allocable to such Member.  The provisions of this Section 7.05(d) and the obligations of a Member pursuant to Section 7.05(c) shall survive the termination, dissolution, liquidation and winding up of the Company and the withdrawal of such Member from the Company or Transfer of its Units.  The Company may pursue and enforce all rights and remedies it may have against each Member under this Section 7.05, including bringing a lawsuit to collect repayment with interest of any Withholding Advances.

 

(e) Overwithholding.  Neither the Company nor the Board shall be liable for any excess taxes withheld in respect of any Distribution or allocation of income or gain to a Member.  In the event of an overwithholding, a Member’s sole recourse shall be to apply for a refund from the appropriate Taxing Authority.

 

Section 7.06. Distributions in Kind.

 

(a) The Board is hereby authorized, in its sole discretion, to make Distributions to the Members in the form of securities or other property held by the Company, provided that Distributions pursuant to Section 7.02 shall only be made in cash.  In any non-cash Distribution, the securities or property so Distributed will be Distributed among the Members in the same proportion and priority as cash equal to the Fair Market Value of such securities or property would be Distributed among the Members pursuant to Section 7.03.

 

(b) Any Distribution of securities shall be subject to such conditions and restrictions as the Board determines are required or advisable to ensure compliance with Applicable Law.  In furtherance of the foregoing, the Board may require that Members execute and deliver such documents as the Board may deem necessary or appropriate to ensure compliance with all federal and state securities laws that apply to such Distribution and any further Transfer of the Distributed securities and may appropriately legend the certificates that represent such securities to reflect any restriction on Transfer with respect to such laws.

 

 

  

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ARTICLE VIII

Management

 

Section 8.01. Establishment of the Board. The Board is hereby established and shall be comprised of natural Persons (each such Person, a “Manager”) who shall be appointed in accordance with the provisions of Section 8.02.  The business and affairs of the Company shall be managed, operated and controlled by or under the direction of the Board, and the Board shall have, and is hereby granted, the full and complete power, authority and discretion for, on behalf of and in the name of the Company, to take such actions as it may in its sole discretion deem necessary or advisable to carry out any and all of the objectives and purposes of the Company, subject only to the terms of this Agreement.

 

Section 8.02. Board Composition; Vacancies.

 

(a) The Company and the Members shall take such actions as may be required to ensure that the number of managers constituting the Board initially is three and, at all times at which Preferred Units are outstanding, five.  The Board shall be comprised as follows:

 

	
(i)  

	
three individuals designated by the Common Members (the “Common Managers”), who initially shall be John McKowen, Wayne Harding and Kirsty Cameron; and

 

	
(ii)  

	
at all times at which any Preferred Units are outstanding, two individuals designated by the Preferred Members (the “Preferred Managers”), who initially shall be [NAME] and [NAME].

 

(b) In the event that a vacancy is created on the Board at any time due to the death, Disability, retirement, resignation or removal of a Common Manager, then the Common Members shall have the right to designate and approve (in accordance with Section 3.07) an individual to fill such vacancy and the Company and each Member hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board.

 

(c) In the event that a vacancy is created on the Board at any time due to the death, Disability, retirement, resignation or removal of a Preferred Manager, then the Preferred Members shall have the right to designate an individual to fill such vacancy and the Company and each Member hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board.

 

Section 8.03. Removal; Resignation.

 

(a) A Common Manager may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the Common Members.

 

(b) A Preferred Manager may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the Preferred Members.

 

(c) A Manager may resign at any time from the Board by delivering a written resignation to the Board.  Any such resignation shall be effective upon receipt thereof unless it is specified to be effective at some other time or upon the occurrence of some other event.  The Board’s acceptance of a resignation shall not be necessary to make it effective.

 

 

  

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Section 8.04. Meetings.

 

(a) Generally. The Board shall meet at such time and at such place as the Board may designate.  Meetings of the Board may be held either in person or by means of telephone or video conference or other communications device that permits all Managers participating in the meeting to hear each other, at the principal office of the Company or such other place (either within or outside the State of Colorado) as may be determined from time to time by the Board.  Written notice of each meeting of the Board shall be given to each Manager at least 24 hours prior to each such meeting.

 

(b) Special Meetings. Special meetings of the Board shall be held on the call of any three Managers upon at least three days’ written notice (if the meeting is to be held in person) or 24 hours’ written notice (if the meeting is to be held by telephone communications or video conference) to the Managers, or upon such shorter notice as may be approved by all the Managers.  Any Manager may waive such notice as to himself.

 

(c) Attendance and Waiver of Notice. Attendance of a Manager at any meeting shall constitute a waiver of notice of such meeting, except where a Manager attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting.

 

Section 8.05. Quorum; Manner of Acting.

 

(a) Quorum. A majority of the Managers serving on the Board shall constitute a quorum for the transaction of business of the Board.  At all times when the Board is conducting business at a meeting of the Board, a quorum of the Board must be present at such meeting.  If a quorum shall not be present at any meeting of the Board, then the Managers present at the meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

 

(b) Participation. Any Manager may participate in a meeting of the Board by means of telephone or video conference or other communications device that permits all Managers participating in the meeting to hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.  A Manager may vote or be present at a meeting either in person or by proxy, and such proxy may be granted in writing, by means of Electronic Transmission or as otherwise permitted by Applicable Law.

 

(c) Binding Act. Each Manager shall have one vote on all matters submitted to the Board or any committee thereof.  With respect to any matter before the Board, the act of a majority of the Managers shall be the act of the Board.

 

Section 8.06. Action By Written Consent. Notwithstanding anything herein to the contrary, any action of the Board (or any committee of the Board) may be taken without a meeting if either (a) a written consent of a majority of the Managers on the Board (or committee) shall approve such action; provided that prior written notice of such action is provided to all Managers at least one day before such action is taken or (b) a written consent constituting all of the Managers on the Board (or committee) shall approve such action.  Such consent shall have the same force and effect as a vote at a meeting where a quorum was present and may be stated as such in any document or instrument filed with the Secretary of State of Colorado.

 

 

  

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Section 8.07. Compensation; No Employment.

 

(a) Managers shall be reimbursed for reasonable out-of-pocket expenses incurred in the performance of their duties as Managers, pursuant to such policies as are established by the Board from time to time.  Nothing contained in this Section 8.07 shall be construed to preclude any Manager from serving the Company in any other capacity and receiving reasonable compensation for such services.

 

(b) This Agreement does not, and is not intended to, confer upon any Manager any rights with respect to continued employment by the Company, and nothing herein should be construed to have created any employment agreement with any Manager.

 

Section 8.08. Committees.

 

(a) Establishment. The Board may, by resolution, designate from among the Managers one or more committees, each of which shall be comprised of one or more Managers; provided that in no event may the Board designate any committee with all of the authority of the Board.  Subject to the immediately preceding proviso, any such committee, to the extent provided in the resolution forming such committee, shall have and may exercise the authority of the Board, subject to the limitations set forth in Section 8.08(b).  The Board may dissolve any committee or remove any member of a committee at any time.

 

(b) Limitation of Authority. No committee of the Board shall have the authority of the Board in reference to:

 

	
(i)  

	
authorizing or making Distributions to Members;

 

	
(ii)  

	
authorizing the issuance of any Membership Rights other than Incentive Units;

 

	
(iii)  

	
approving a plan of merger or sale of the Company;

 

	
(iv)  

	
recommending to the Members a voluntary dissolution of the Company or a revocation thereof;

 

	
(v)  

	
filling vacancies in the Board; or

 

	
(vi)  

	
altering or repealing any resolution of the Board that by its terms provides that it shall not be so amendable or repealable.

 

Section 8.09. Officers. The Board may appoint individuals as officers of the Company (the “Officers”) as it deems necessary or desirable to carry on the business of the Company and the Board may delegate to such Officers such power and authority as the Board deems advisable.  No Officer need be a Member or Manager.  Any individual may hold two or more offices of the Company.  Each Officer shall hold office until his successor is designated by the Board or until his earlier death, resignation or removal.  Any Officer may resign at any time upon written notice to the Board.  Any Officer may be removed by the Board (acting by majority vote of all Managers other than the Officer being considered for removal, if applicable) with or without cause at any time.  A vacancy in any office occurring because of death, resignation, removal or otherwise, may, but need not, be filled by the Board.

 

Section 8.10. No Personal Liability. Except as otherwise provided in the Colorado Act, by other Applicable Law or expressly in this Agreement, no Manager will be obligated personally for any debt, obligation or liability of the Company or any Subsidiary, whether arising in contract, tort or otherwise, solely by reason of being a Manager.

 

 

  

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ARTICLE IX

Exchanges of Preferred Units

 

Section 9.01. Exchange Agreement. Contemporaneously with its execution and delivery of a Joinder Agreement, each Preferred Member shall execute and deliver to the Company and TRFW a written understanding pursuant to which such Preferred Member becomes a party to the Exchange Agreement.

 

Section 9.02. Termination of Preferred Unit Rights Upon Exchange.  Upon the effective time of an exchange of a Preferred Unit as provided in Section 3.01 or 3.02 of the Exchange Agreement, the surrendered Preferred Unit shall no longer be outstanding and all rights under this Agreement with respect to such Preferred Unit, including the right to receive Distributions, will terminate.  Thereafter, the Company may not resell such Preferred Unit except in accordance with the provisions of this Agreement relating to issuances of new Preferred Units, including the provisions of Sections 3.02 and 10.01.

 

ARTICLE X

Transfers

 

Section 10.01. General Restrictions on Transfer.

 

(a) Each Member acknowledges and agrees that it will not, directly or indirectly, Transfer any of its Units or Unit Equivalents, and the Company agrees that it shall not issue any Units or Unit Equivalents:

 

	
(i)  

	
except as permitted under the Securities Act and other applicable federal or state securities or blue sky laws, and then, with respect to a Transfer of Units or Unit Equivalents, if requested by the Company, only upon delivery to the Company of an opinion of counsel in form and substance satisfactory to the Company to the effect that such Transfer may be effected without registration under the Securities Act;

 

	
(ii)  

	
if such Transfer or issuance would cause the Company to be considered a “publicly traded partnership” under Code Section 7704(b) within the meaning of Treasury Regulations Section 1.7704-1(h)(1)(ii), including the look-through rule in Treasury Regulations Section 1.7704-1(h)(3);

 

	
(iii)  

	
if such Transfer or issuance would affect the Company’s existence or qualification as a limited liability company under the Colorado Act;

 

	
(iv)  

	
if such Transfer or issuance would cause the Company to lose its status as a partnership for federal income tax purposes;

 

	
(v)  

	
if such Transfer or issuance would cause a termination of the Company for federal income tax purposes;

 

	
(vi)  

	
if such Transfer or issuance would cause the Company or any of the Subsidiaries to be required to register as an investment company under the Investment Company Act of 1940; or

 

 

  

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(vii)  

	
if such Transfer or issuance would cause the assets of the Company or any of the Subsidiaries to be deemed “Plan Assets” as defined for purposes of the Employee Retirement Income Security Act of 1974 or result in any “prohibited transaction” thereunder involving the Company or any Subsidiary.

 

In any event, the Board may refuse the Transfer to any Person if such Transfer would have a material adverse effect on the Company as a result of any regulatory or other restrictions imposed by any Governmental Authority.

 

(b) Any Transfer or attempted Transfer of any Units or Unit Equivalents in violation of this Agreement shall be null and void, no such Transfer shall be recorded on the Company’s books and the purported Transferee in any such Transfer shall not be treated (and the purported Transferor shall continue be treated) as the holder of such Units or Unit Equivalents for all purposes of this Agreement.

 

(c) For the avoidance of doubt, any Transfer of Units or Unit Equivalents permitted by Section 10.02 or made in accordance with the procedures described in Section 10.03, as applicable, and purporting to be a sale, transfer, assignment or other disposal of the entire Membership Interest represented by such Units or Unit Equivalents, inclusive of all the rights and benefits applicable to such Membership Interest as described in the definition of the term “Membership Interest,” shall be deemed a sale, transfer, assignment or other disposal of such Membership Interest in its entirety as intended by the parties to such Transfer, and shall not be deemed a sale, transfer, assignment or other disposal of any less than all of the rights and benefits described in the definition of the term “Membership Interest,” unless otherwise explicitly agreed to by the parties to such Transfer.

 

Section 10.02. Incentive Units Call Right.

 

(a) Call Right. At any time prior to a Change of Control, following the termination of employment or other engagement of any Service Provider with the Company or any of the Subsidiaries, the Company may, at its election, require the Service Provider and any or all of such Service Provider’s Permitted Transferees to sell to the Company all or any portion of such Service Provider’s Incentive Units at the following respective purchase prices:

 

	
(i)  

	
for the Restricted Incentive Units, under all circumstances of termination, their Cause Purchase Price;

 

	
(ii)  

	
for the Unrestricted Incentive Units, their Cause Purchase Price in the event of:

 

	
(A)  

	
the termination of such Service Provider’s employment or other engagement by the Company or any of the Subsidiaries for Cause; or

 

	
(B)  

	
the resignation of such Service Provider for any reason other than Good Reason; and

 

	
(iii)  

	
for the Unrestricted Incentive Units, a price equal to their Fair Market Value in the event of:

 

	
(A)  

	
the termination of such Service Provider’s employment or other engagement by the Company or any of the Subsidiaries for a reason other than for Cause;

 

	
(B)  

	
the resignation of such Service Provider at any time for Good Reason; or

 

	
(C)  

	
the death or Disability of such Service Provider.

 

 

  

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(b) Procedures.

 

(i) If the Company desires to exercise its right to purchase Incentive Units pursuant to this Section 10.02, the Company shall deliver to the Service Provider, within ninety days after the termination of such Service Provider’s employment or other engagement, a written notice (the “Repurchase Notice”) specifying the number of Incentive Units to be repurchased by the Company (the “Repurchased Incentive Units”) and the purchase price therefor in accordance with Section 10.02(a).

 

(ii) Each applicable Service Provider shall, at the closing of any purchase consummated pursuant to this Section 10.02, represent and warrant to the Company that:

 

	
(A)  

	
such Service Provider has full right, title and interest in and to the Repurchased Incentive Units;

 

	
(B)  

	
such Service Provider has all the necessary power and authority and has taken all necessary action to sell such Repurchased Incentive Units as contemplated by this Section 10.02; and

 

	
(C)  

	
the Repurchased Incentive Units are free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement.

 

(iii) Subject to Section 10.02(c), the closing of any sale of Repurchased Incentive Units pursuant to this Section 10.02 shall take place no later than thirty days following receipt by the Service Provider of the Repurchase Notice.  Subject to the existence of any Delay Condition, the Company shall pay the Call Purchase Price for the Repurchased Incentive Units by certified or official bank check or by wire transfer of immediately available funds.  The Company shall give the Service Provider at least ten days’ written notice of the date of closing, which notice shall include the method of payment selected by the Company.

 

(c) Delay Condition. Notwithstanding the provisions of Section 10.02(b)(iii), the Company shall not be obligated to repurchase any Incentive Units if there exists a Delay Condition.  In such event, the Company shall notify the Service Provider in writing as soon as practicable of such Delay Condition and the Company may thereafter:

 

	
(i)  

	
defer the closing and pay the Call Purchase Price at the earliest practicable date on which no Delay Condition exists, in which case, the Call Purchase Price shall accrue interest at the Company Interest Rate from the latest date that the closing could have taken place pursuant to Section 10.02(b)(iii) (the “Intended Call Closing Date”) to the date the Call Purchase Price is actually paid; or

 

	
(ii)  

	
pay the Call Purchase Price with a subordinated note (fully subordinated in right of payment and exercise of remedies to the lenders’ rights under any Financing Document) bearing interest at the Company Interest Rate from the Intended Call Closing Date until paid in full.

 

(d) Cooperation. The Service Provider shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 10.02, including entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate.

 

 

  

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(e) Closing. At the closing of any sale and purchase pursuant to this Section 10.02, the Service Provider shall deliver to the Company a certificate or certificates representing the Incentive Units to be sold (if any), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the Call Purchase Price.

 

Section 10.03. Incentive Units Put Right.

 

(a) Put Right. At any time prior to a Change of Control, if a Service Provider’s employment or other engagement with the Company or any of the Subsidiaries is terminated as a result of such Service Provider’s death or Disability, and the Company has not delivered a Repurchase Notice pursuant to Section 10.02(b)(i) within ninety days of such termination, then, subject to the other provisions of this Section 10.03, such Service Provider and any or all of his Permitted Transferees (collectively, the “Offering Service Provider”) may elect to sell to the Company all or any percentage of the Unrestricted Incentive Units held by such Person at a price equal to the Fair Market Value of such Unrestricted Incentive Units as of the date of termination (the “Put Purchase Price”).

 

(b) Procedures.

 

(i) If the Offering Service Provider desires to sell Unrestricted Incentive Units pursuant to this Section 10.03, such Offering Service Provider shall deliver to the Company not more than ninety days after the date of termination of the Service Provider’s employment or other engagement a written notice (the “Service Provider Sale Notice”) specifying the number of Unrestricted Incentive Units to be sold (the “Offered Unrestricted Incentive Units”) by such Offering Service Provider.

 

(ii) By delivering the Service Provider Sale Notice, the Offering Service Provider represents and warrants to the Company that:

 

	
(A)  

	
the Offering Service Provider has full right, title and interest in and to the Offered Unrestricted Incentive Units;

 

	
(B)  

	
the Offering Service Provider has all the necessary power and authority and has taken all necessary action to sell such Offered Unrestricted Incentive Units as contemplated by this Section 10.03; and

 

	
(C)  

	
the Offered Unrestricted Incentive Units are free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement.

 

(iii) Promptly following receipt of the Service Provider Sale Notice, the Company shall deliver to the Offering Service Provider a calculation of the Put Purchase Price for the Offered Unrestricted Incentive Units.  The Offering Service Provider shall have the right to irrevocably rescind the Service Provider Sale Notice for a period of ten days following the delivery of such calculation.

 

(iv) Subject to Section 10.03(c), the closing of any sale of Offered Unrestricted Incentive Units pursuant to this Section 10.03 shall take place no later than thirty days following receipt by the Company of the Service Provider Sale Notice, if not otherwise rescinded pursuant to Section 10.03(b)(iii).  Subject to the existence of any Delay Condition, the Company shall pay the Put Purchase Price for the Offered Unrestricted Incentive Units by certified or official bank check or by wire transfer of immediately available funds.  The Company shall give the Offering Service Provider at least ten days’ written notice of the date of closing, which notice shall include the method of payment selected by the Company.

 

 

  

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(c) Delay Condition. Notwithstanding the provisions of Section 10.03(b)(iv), the Company shall not be obligated to purchase any Offered Unrestricted Incentive Units if there exists a Delay Condition.  In such event, the Company shall notify the Offering Service Provider in writing as soon as practicable of such Delay Condition and shall permit the Offering Service Provider, within ten days of receipt thereof, to rescind the Service Provider Sale Notice.  If the Offering Service Provider does not rescind the Service Provider Sale Notice, the Service Provider Sale Notice shall remain outstanding and the Company may thereafter:

 

	
(i)  

	
defer the closing and pay the Put Purchase Price at the earliest practicable date on which no Delay Condition exists, in which case, the Put Purchase Price shall accrue interest at the Company Interest Rate from the latest date that the closing could have taken place pursuant to Section 10.03(b)(iv) (the “Intended Put Closing Date”) to the date the Put Purchase Price is actually paid; or

 

	
(ii)  

	
pay the Put Purchase Price with a subordinated note (fully subordinated in right of payment and exercise of remedies to the lenders’ rights under any Financing Document) bearing interest at the Company Interest Rate from the Intended Put Closing Date until paid in full.

 

(d) Cooperation. The Offering Service Provider shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 10.03, including entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate.

 

(e) Closing. At the closing of any sale and purchase pursuant to this Section 10.03, the Offering Service Provider shall deliver to the Company a certificate or certificates representing the Offered Unrestricted Incentive Units to be sold (if any), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the Put Purchase Price.

 

ARTICLE XI

Confidentiality

 

Section 11.01. Nondisclosure.  Each Preferred Member acknowledges that during the term of this Agreement, he will have access to and become acquainted with trade secrets, proprietary information and confidential information belonging to the Company, the Subsidiaries and their Affiliates that are not generally known to the public, including information concerning business plans, financial statements and other information provided pursuant to this Agreement, operating practices and methods, expansion plans, strategic plans, marketing plans, contracts, customer lists or other business documents which the Company treats as confidential, in any format whatsoever (including oral, written, electronic or any other form or medium) (collectively, “Confidential Information”).  In addition, each Preferred Member acknowledges that:  (a) the Company has invested, and continues to invest, substantial time, expense and specialized knowledge in developing its Confidential Information; (b) the Confidential Information provides the Company with a competitive advantage over others in the marketplace; and (c) the Company would be irreparably harmed if the Confidential Information were disclosed to competitors or made available to the public.  Without limiting the applicability of any other agreement to which any Preferred Member is subject, no Preferred Member shall, directly or indirectly, disclose or use (other than solely for the purposes of such Preferred Member monitoring and analyzing his investment in the Company or performing his duties as a Manager, Officer, employee, consultant or other service provider of the Company) at any time, including use for personal, commercial or proprietary advantage or profit, either during his association or employment with the Company or thereafter, any Confidential Information of which such Preferred Member is or becomes aware.  Each Preferred Member in possession of Confidential Information shall take all appropriate steps to safeguard such information and to protect it against disclosure, misuse, espionage, loss and theft.

 

 

  

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Section 11.02. Permitted Disclosures.  Nothing contained in Section 11.01 shall prevent any Preferred Member from disclosing Confidential Information: (a) upon the order of any court or administrative agency; (b) upon the request or demand of any regulatory agency or authority having jurisdiction over such Preferred Member; (c) to the extent compelled by legal process or required or requested pursuant to subpoena, interrogatories or other discovery requests; (d) to the extent necessary in connection with the exercise of any remedy hereunder; (e) to other Members; (f) to such Preferred Member’s Representatives who, in the reasonable judgment of such Preferred Member, need to know such Confidential Information and agree to be bound by the provisions of this Article XI as if a Preferred Member; or (g) to any potential Permitted Transferee in connection with a proposed Transfer of Units from such Preferred Member, as long as such Transferee agrees to be bound by the provisions of this Article XI as if a Preferred Member; provided that in the case of clause (a), (b) or (c), such Preferred Member shall notify the Company and other Members of the proposed disclosure as far in advance of such disclosure as practicable (but in no event make any such disclosure before notifying the Company and other Members) and use reasonable efforts to ensure that any Confidential Information so disclosed is accorded confidential treatment satisfactory to the Company, when and if available.

 

Section 11.03. Excluded Information.  The restrictions of Section 11.01 shall not apply to Confidential Information that:  (a) is or becomes generally available to the public other than as a result of a disclosure by a Preferred Member in violation of this Agreement; (b) is or becomes available to a Preferred Member or any of its Representatives on a non-confidential basis prior to its disclosure to the receiving Preferred Member and any of its Representatives in compliance with this Agreement; (c) is or has been independently developed or conceived by such Preferred Member without use of Confidential Information; or (d) becomes available to the receiving Preferred Member or any of its Representatives on a non-confidential basis from a source other than the Company, any other Member or any of their respective Representatives; provided that such source is not known by the recipient of the Confidential Information to be bound by a confidentiality agreement with the disclosing Member or any of its Representatives.

 

ARTICLE XII

Tax Matters

Section 12.01. Tax Matters Member.

 

(a) Appointment. The Members hereby appoint Two Rivers Water & Farming Company as the “Tax Matters Member” who shall serve as the “tax matters partner” (as such term is defined in Code Section 6231) for the Company.

 

(b) Tax Examinations and Audits. The Tax Matters Member is authorized and required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by Taxing Authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith.  Each Member agrees to cooperate with the Tax Matters Member and to do or refrain from doing any or all things reasonably requested by the Tax Matters Member with respect to the conduct of examinations by Taxing Authorities and any resulting proceedings.  Each Member agrees that any action taken by the Tax Matters Member in connection with audits of the Company shall be binding upon such Members and that such Member shall not independently act with respect to tax audits or tax litigation affecting the Company.

 

 

  

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(c) Income Tax Elections. The Tax Matters Member shall have sole discretion to make any income tax election it deems advisable on behalf of the Company; provided that the Tax Matters Member will make an election under Code Section 754, if requested in writing by Members holding a majority of the outstanding Common Units.  All determinations as to tax elections and accounting principles shall be made solely by the Tax Matters Member.

 

(d) Tax Returns and Tax Deficiencies. Each Member agrees that such Member shall not treat any Company item inconsistently on such Member’s federal, state, foreign or other income tax return with the treatment of the item on the Company’s return.  The Tax Matters Member shall have sole discretion to determine whether the Company (either on its own behalf or on behalf of the Members) will contest or continue to contest any tax deficiencies assessed or proposed to be assessed by any Taxing Authority.  Any deficiency for taxes imposed on any Member (including penalties, additions to tax or interest imposed with respect to such taxes) will be paid by such Member and if required to be paid (and actually paid) by the Company, will be recoverable from such Member as provided in Section 7.05(d).

 

(e) Resignation. The Tax Matters Member may resign at any time.  If Two Rivers Water & Farming Company ceases to be the Tax Matters Member for any reason, the holders of a majority of the Company shall appoint a new Tax Matters Member.

 

Section 12.02. Tax Returns. At the expense of the Company, the Board (or any Officer that it may designate pursuant to Section 8.09) shall endeavor to cause the preparation and timely filing (including extensions) of all tax returns required to be filed by the Company pursuant to the Code as well as all other required tax returns in each jurisdiction in which the Company and the Subsidiaries own property or do business.  As soon as reasonably possible after the end of each Fiscal Year, the Board or designated Officer will cause to be delivered to each Person who was a Member at any time during such Fiscal Year, IRS Schedule K-1 to Form 1065 and such other information with respect to the Company as may be necessary for the preparation of such Person’s federal, state and local income tax returns for such Fiscal Year.

 

Section 12.03. Company Funds. All funds of the Company shall be deposited in its name, or in such name as may be designated by the Board, in such checking, savings or other accounts, or held in its name in the form of such other investments as shall be designated by the Board.  The funds of the Company shall not be commingled with the funds of any other Person.  All withdrawals of such deposits or liquidations of such investments by the Company shall be made exclusively upon the signature or signatures of such Officer or Officers as the Board may designate.

 

ARTICLE XIII

Dissolution and Liquidation

 

Section 13.01. Events of Dissolution. The Company shall be dissolved and is affairs wound up only upon the occurrence of any of the following events:

 

	
(a)  

	
the determination of the Board to dissolve the Company;

 

	
(b)  

	
an election to dissolve the Company made by holders of a majority of the Common Units;

 

 

  

35

  

 

	
(c)  

	
the sale, exchange, involuntary conversion, or other disposition or Transfer of all or substantially all the assets of the Company; or

 

	
(d)  

	
the entry of a decree of judicial dissolution under Colorado Act Section 80-810.

 

Section 13.02. Effectiveness of Dissolution. Dissolution of the Company shall be effective on the day on which the event described in Section 13.01 occurs, but the Company shall not terminate until the winding up of the Company has been completed, the assets of the Company have been distributed as provided in Section 13.03 and the Articles of Organization shall have been cancelled as provided in Section 13.04.

 

Section 13.03. Liquidation. If the Company is dissolved pursuant to Section 13.01, the Company shall be liquidated and its business and affairs wound up in accordance with the Colorado Act and the following provisions:

 

(a) Liquidator. The Board, or, if the Board is unable to do so, a Person selected by the holders of a majority of the Common Units, shall act as liquidator to wind up the Company (the “Liquidator”).  The Liquidator shall have full power and authority to sell, assign, and encumber any or all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and business-like manner.

 

(b) Accounting. As promptly as possible after dissolution and again after final liquidation, the Liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company’s assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable.

 

(c) Distribution of Proceeds. The Liquidator shall liquidate the assets of the Company and Distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of Applicable Law:

 

	
(i)  

	
first, to the payment of all of the Company’s debts and liabilities to its creditors (including Members, if applicable) and the expenses of liquidation (including sales commissions incident to any sales of assets of the Company);

 

	
(ii)  

	
second, to the establishment of and additions to reserves that are determined by the Board in its sole discretion to be reasonably necessary for any contingent unforeseen liabilities or obligations of the Company;

 

	
(iii)  

	
third, to the Preferred Members in an amount equal to $1.00 for each Preferred Unit; and

 

	
(iv)  

	
fourth, to Members other than Preferred Members in the same manner as Distributions are made under Section 7.02.

 

(d) Discretion of Liquidator. Notwithstanding the provisions of Section 13.03(c) that require the liquidation of the assets of the Company, but subject to the order of priorities set forth in Section 13.03(c), if upon dissolution of the Company the Liquidator determines that an immediate sale of part or all of the Company’s assets would be impractical or could cause undue loss to the Members, the Liquidator may defer the liquidation of any assets except those necessary to satisfy Company liabilities and reserves, and may, in its absolute discretion, Distribute to the Members, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.03(c), undivided interests in such Company assets as the Liquidator deems not suitable for liquidation.  Any such Distribution in kind will be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operating of such properties at such time.  For purposes of any such Distribution, any property to be Distributed will be valued at its Fair Market Value.

 

 

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Section 13.04. Cancellation of Articles. Upon completion of the Distribution of the assets of the Company as provided in Section 13.03(c), the Company shall be terminated and the Liquidator shall cause the cancellation of the Articles of Organization in the State of Colorado and of all qualifications and registrations of the Company as a foreign limited liability company in jurisdictions other than the State of Colorado and shall take such other actions as may be necessary to terminate the Company.

 

Section 13.05. Survival of Rights, Duties and Obligations. Dissolution, liquidation, winding up or termination of the Company for any reason shall not release any party from any Loss which at the time of such dissolution, liquidation, winding up or termination already had accrued to any other party or which thereafter may accrue in respect of any act or omission prior to such dissolution, liquidation, winding up or termination.  For the avoidance of doubt, none of the foregoing shall replace, diminish or otherwise adversely affect any Member’s right to indemnification pursuant to Section 14.03.

 

Section 13.06. Recourse for Claims. Each Member shall look solely to the assets of the Company for all Distributions with respect to the Company, such Member’s Capital Account, and such Member’s share of Net Income, Net Loss and other items of income, gain, loss and deduction, and shall have no recourse therefor (upon dissolution or otherwise) against the Board, the Liquidator or any other Member.

 

ARTICLE XIV

Exculpation and Indemnification

 

Section 14.01. Exculpation of Covered Persons.

 

(a) Covered Persons. As used herein, the term “Covered Person” shall mean (i) each Member, (ii) each officer, director, shareholder, partner, member, controlling Affiliate, employee, agent or representative of each Member, and each of their controlling Affiliates, and (iii) each Manager, Officer, employee, agent or representative of the Company.

 

(b) Standard of Care. No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any action taken or omitted to be taken by such Covered Person in good-faith reliance on the provisions of this Agreement, so long as such action or omission does not constitute fraud or willful misconduct by such Covered Person.

 

(c) Good Faith Reliance. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, Net Income or Net Losses of the Company or any facts pertinent to the existence and amount of assets from which Distributions might properly be paid) of the following Persons or groups:  (i) another Manager; (ii) one or more Officers or employees of the Company; (iii) any attorney, independent accountant, appraiser or other expert or professional employed or engaged by or on behalf of the Company; or (iv) any other Person selected in good faith by or on behalf of the Company, in each case as to matters that such relying Person reasonably believes to be within such other Person’s professional or expert competence.  The preceding sentence shall in no way limit any Person’s right to rely on information to the extent provided in  the Colorado Act.

 

 

  

37

  

 

Section 14.02. Liabilities and Duties of Covered Persons.

 

(a) Limitation of Liability. This Agreement is not intended to, and does not, create or impose any fiduciary duty on any Covered Person.  Furthermore, each of the Members and the Company hereby waives any and all fiduciary duties that, absent such waiver, may be implied by Applicable Law, and in doing so, acknowledges and agrees that the duties and obligation of each Covered Person to each other and to the Company are only as expressly set forth in this Agreement.  The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Covered Person.

 

(b) Duties. Whenever in this Agreement a Covered Person is permitted or required to make a decision (including a decision that is in such Covered Person’s “discretion” or under a grant of similar authority or latitude), the Covered Person shall be entitled to consider only such interests and factors as such Covered Person desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Company or any other Person.  Whenever in this Agreement a Covered Person is permitted or required to make a decision in such Covered Person’s “good faith,” the Covered Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or any Applicable Law.

 

Section 14.03. Indemnification.

 

(a) Indemnification. To the fullest extent permitted by the Colorado Act, as the same now exists or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than the Colorado Act permitted the Company to provide prior to such amendment, substitution or replacement), the Company shall indemnify, hold harmless, defend, pay and reimburse any Covered Person against any and all losses, claims, damages, judgments, fines or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending against such losses, claims, damages, judgments, fines or liabilities, and any amounts expended in settlement of any claims (collectively, “Losses”) to which such Covered Person may become subject by reason of:

 

	
(i)  

	
any act or omission or alleged act or omission performed or omitted to be performed on behalf of the Company, any Member or any Affiliate of the foregoing in connection with the business of the Company; or

 

	
(ii)  

	
the fact that such Covered Person is or was acting in connection with the business of the Company as a partner, member, stockholder, controlling Affiliate, manager, director, officer, employee or agent of the Company, any Member, or any of their respective controlling Affiliates, or that such Covered Person is or was serving at the request of the Company as a partner, member, manager, director, officer, employee or agent of any Person including the Company or any Subsidiary;

 

provided that (A) such Covered Person acted in good faith and in a manner believed by such Covered Person to be in, or not opposed to, the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful and (B) such Covered Person’s conduct did not constitute fraud or willful misconduct, in either case as determined by a final, nonappealable order of a court of competent jurisdiction.  In connection with the foregoing, the termination of any action, suit or 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 Covered Person did not act in good faith or, with respect to any criminal proceeding, had reasonable cause to believe that such Covered Person’s conduct was unlawful, or that the Covered Person’s conduct constituted fraud or willful misconduct.

 

 

  

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(b) Reimbursement. The Company shall promptly reimburse (and/or advance to the extent reasonably required) each Covered Person for reasonable legal or other expenses (as incurred) of such Covered Person in connection with investigating, preparing to defend or defending any claim, lawsuit or other proceeding relating to any Losses for which such Covered Person may be indemnified pursuant to this Section 14.03; provided that if it is finally judicially determined that such Covered Person is not entitled to the indemnification provided by this Section 14.03, then such Covered Person shall promptly reimburse the Company for any reimbursed or advanced expenses.

 

(c) Entitlement to Indemnity. The indemnification provided by this Section 14.03 shall not be deemed exclusive of any other rights to indemnification to which those seeking indemnification may be entitled under any agreement or otherwise.  The provisions of this Section 14.03 shall continue to afford protection to each Covered Person regardless of whether such Covered Person remains in the position or capacity pursuant to which such Covered Person became entitled to indemnification under this Section 14.03 and shall inure to the benefit of the executors, administrators, legatees and distributees of such Covered Person.

 

(d) Insurance.  To the extent available on commercially reasonable terms, the Company may purchase, at its expense, insurance to cover Losses covered by the foregoing indemnification provisions and to otherwise cover Losses for any breach or alleged breach by any Covered Person of such Covered Person’s duties in such amount and with such deductibles as the Board may determine; provided that the failure to obtain such insurance shall not affect the right to indemnification of any Covered Person under the indemnification provisions contained herein, including the right to be reimbursed or advanced expenses or otherwise indemnified for Losses hereunder.  If any Covered Person recovers any amounts in respect of any Losses from any insurance coverage, then such Covered Person shall, to the extent that such recovery is duplicative, reimburse the Company for any amounts previously paid to such Covered Person by the Company in respect of such Losses.

 

(e) Funding of Indemnification Obligation. Notwithstanding anything contained herein to the contrary, any indemnity by the Company relating to the matters covered in this Section 14.03 shall be provided out of and to the extent of Company assets only, and no Member (unless such Member otherwise agrees in writing) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity by the Company.

 

(f) Savings Clause. If this Section 14.03 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Covered Person pursuant to this Section 14.03 to the fullest extent permitted by any applicable portion of this Section 14.03 that shall not have been invalidated and to the fullest extent permitted by Applicable Law.

 

(g) Amendment. The provisions of this Section 14.03 shall be a contract between the Company, on the one hand, and each Covered Person who served in such capacity at any time while this Section 14.03 is in effect, on the other hand, pursuant to which the Company and each such Covered Person intend to be legally bound.  No amendment, modification or repeal of this Section 14.03 that adversely affects the rights of a Covered Person to indemnification for Losses incurred or relating to a state of facts existing prior to such amendment, modification or repeal shall apply in such a way as to eliminate or reduce such Covered Person’s entitlement to indemnification for such Losses without the Covered Person’s prior written consent.

 

 

  

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Section 14.04. Survival. The provisions of this Article XIV shall survive the dissolution, liquidation, winding up and termination of the Company.

 

ARTICLE XV

Miscellaneous

 

Section 15.01. Further Assurances. In connection with this Agreement and the transactions contemplated hereby, the Company and each Member hereby agrees, at the request of the Company or any other Member, to execute and deliver such additional documents, instruments, conveyances and assurances and to take such further actions as may be required to carry out the provisions hereof and give effect to the transactions contemplated hereby.

 

Section 15.02. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given:  (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next day (other than a Saturday, Sunday or other day on which commercial banks in the City of Denver are authorized or required to close) if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.  Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 15.02):

 

	
If to the Company:

	
2000 South Colorado Boulevard

Tower 1, Suite 3100

Denver, Colorado  80222

Facsimile:  (303) 845-9400

E-mail:  info@2riverswater.com

Attention:  Chief Financial Officer

 

	
with a copy to:

	
K&L Gates LLP

One Lincoln Street

Boston, Massachusetts  02111-2950

Facsimile:  (617) 261-3175

E-mail:  mark.johnson@klgates.com

Attention:  Mark L. Johnson

 

If to a Member, to such Member’s mailing address as set forth on the Member Schedule

 

Section 15.03. Severability. If any term or provision of this Agreement is held to be invalid, illegal or unenforceable under Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.  Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 15.04. Entire Agreement. This Agreement, including the Exhibit and Schedule hereto, and the Exchange Agreement, including the Exhibits and Schedule thereto, constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.

 

 

  

40

  

 

Section 15.05. Successors and Assigns. Subject to the restrictions on Transfers set forth herein, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

Section 15.06. No Third-Party Beneficiaries. Except as provided in Article XIV, which shall be for the benefit of and enforceable by Covered Persons as described therein, this Agreement is for the sole benefit of the parties hereto (and their respective heirs, executors, administrators, successors and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any creditor of the Company, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 15.07. Amendment.  Except as otherwise expressly provided herein, no provision of this Agreement may be amended or modified except by an instrument in writing executed by the Company and Members holding a majority of the Common Units.  Any such written amendment or modification will be binding upon the Company and each Member; provided that (a) an amendment or modification altering any provision of this Agreement in a manner that adversely alters the powers, preferences or rights of the Preferred Units shall be effective only with the consent of the Members holding at least two-thirds of the Preferred Units and (b) an amendment or modification altering the rights or obligations of any Member in a manner that is disproportionately adverse to other Members holding the same class of Units shall be effective only with that Member’s consent.  Notwithstanding the foregoing, amendments to the Member Schedule following any new issuance, redemption, repurchase or Transfer of Units in accordance with this Agreement may be made by the Board without the consent of, or other action by, any of the Members.

 

Section 15.08. Waiver. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving.  No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver.  No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  For the avoidance of doubt, nothing contained in this Section 15.08 shall diminish any of the explicit and implicit waivers described in this Agreement, including in Sections 8.04(c) and 15.12.

 

Section 15.09. Governing Law. All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Colorado, without giving effect to any choice or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Colorado.

 

Section 15.10. Submission to Jurisdiction. The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort or otherwise, shall be brought in the United States District Court for the District of Colorado or in the Court of Chancery of the State of Colorado (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Colorado), so long as one of such courts shall have subject-matter jurisdiction over such suit, action or proceeding, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Colorado.  Each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient form.  Service of process, summons, notice or other document by registered mail to the address set forth in Section 15.02 shall be effective service of process for any suit, action or other proceeding brought in any such court.

 

 

  

41

  

 

Section 15.11. Waiver of Jury Trial. Each party hereto hereby acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby.

 

Section 15.12. Equitable Remedies.  Each party hereto acknowledges that a breach or threatened breach by such party of any of its obligations under this Agreement would give rise to irreparable harm to the other parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

 

Section 15.13. Remedies Cumulative. The rights and remedies under this Agreement are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise, except to the extent expressly provided in Section 14.02 to the contrary.

 

In Witness Whereof, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

COMPANY:

TR Capital Partners, LLC

By:       ___________________________________

Name:

Title:

COMMON MEMBER:

	
  

	
Two Rivers Farming & Water Company

By:       ___________________________________

Name:

Title:

 

 

  

42

  

Exhibit A

 

 

FORM OF JOINDER AGREEMENT

 

  

A-1  

  

 

JOINDER AGREEMENT

 

Reference is hereby made to the Limited Liability Company Agreement, dated as of January __, 2014, as amended from time to time (the “Agreement”), among TR Capital Partners, LLC and the Members Named in Schedule 1.  Pursuant to and in accordance with Section 4.01(b) of the Agreement, the undersigned hereby acknowledges that the undersigned has received and reviewed a complete copy of the Agreement and agrees that, upon execution of this Joinder Agreement by the undersigned and TR Capital Partners, LLC, the undersigned shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed, and is hereby admitted as, a Member for all purposes thereof and entitled to all the rights incidental thereto, and shall hold the status of [MEMBER STATUS].

 

In Witness Whereof, the parties hereto have executed the Agreement as of the date set forth below.  A signed copy of this Joinder Agreement delivered by facsimile, e-mail or other means of Electronic Transmission (as defined in the Agreement) shall be deemed to have the same legal effect as delivery of an original signed copy of this Joinder Agreement.

 

Date:  _____________________                                            [Name of New Member]

By:       ___________________________________

Name:

Title:

Agreed and Accepted:

TR Capital Partners, LLC

By:           ________________________________

Name:

Title:

 

 

  

A-2  

  

 

Schedule 1

 

 

MEMBER SCHEDULE

 

 

  

Sch. 1-1  

  

 

Common Units:

 

	

Member Name and Address

	

Number of Units

	

Date of Issue

	

Capital Contribution

	

Certificate Number

	
Two Rivers Farming & Water Company

2000 South Colorado Boulevard

Tower 1, Suite 3100

Denver, Colorado  80222

	
50,000,000

	
January 13, 2014

	
_________

	
CU-1

 

Preferred Units:                               None issued.

 

Incentive Units:                                None issued.

 

 

Sch. 1-2

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