FILED: NEW YORK COUNTY CLERK 04/21/ :11 PM INDEX NO /2017 NYSCEF DOC. NO. 61 RECEIVED NYSCEF: 04/21/2017

Transcription

1 OPERATING AGREEMENT OF PMG SULLWAN STREET LLC (a Delaware limited liability company)

2 TABLE OF CONTENTS Page ARTICLE I GENERAL PROVISIONS Definitions Name Principal Office Service of Process; Agent Formation; Filing Certificate of Formation; Term Purpose 5 ARTICLE II POWERS; MANAGEMENT; LIABILITY Powers and Management Liability of Members Exculpation of Member-Managers Indemnification 8 ARTICLE III CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS Capital Contributions; Percentage Interests Capital Accounts Distributions Allocations Special Allocations 11 ARTICLE W DISSOLUTION; WINDING UP; TERMINATION Dissolution Winding Up and Termination Assets Reserved and Pending Claims 13 ARTICLE V ADDITIONAL MEMBERS; ASSIGNABILITY; WITHDRAWAL Admission of New Members Assignability Withdrawal by Member Change in Interests 14 ARTICLE VI ACCOUNTING; FINANCIAL AND TAX MATTERS Books and Records Accounting Basis Bank Accounts Tax Matters 15 ARTICLE VII MISCELLANEOUS Amendments; Waiver Successors and Assigns No Waiver 15

3 Page 7.4 Survival of Certain Provisions Notices Severability Counterparts Headings, Etc Gender No Right to Partition No Third Party Rights Entire Agreement Applicable Law 17 ii

4 OPERATING AGREEMENT OF PMG SULLIVAN STREET LLC OPERATING AGREEMENT (this "Agreement") of PMG SULLIVAN STREET LLC (the "Company"), dated as of June, 2012, by and among KM. SULLIVAN LLC, a Delaware limited liability company with an address at 5 East 17th Street, Second Floor, New York, New York ("KM Sullivan" or "Managing Member"), EJ SULLIVAN LLC, a Delaware limited liability company with an address at 5 East 17th Street, Second Floor, New York, New York ("EJ Sullivan"), MS SULLIVAN LLC, a Delaware limited liability company with an address at 5 East 17th Street, Second Floor, New York, New York ("MS Sullivan") and Richard Lam, with an address at 5 East 17th Street, Second Floor, New York, New York ("Lam or "Operating Member') (each, a "Member" and collectively, the "Members") pursuant to and in accordance with the Delaware Limited Liability Company Act codified at Del. Code Ann. Tit. 6, to , as amended from time to time (the "Company Law"). NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, mutually covenant and agree as follows: 1.1 Definitions ARTICLE I GENERAL PROVISIONS meanings: For the purpose of this Agreement, the following terms shall have the following "Capital Account" shall have the meaning set forth in Section 3.2(4 "Capital Contribution" shall mean, with respect to each Member, the amount of cash contributed by such Member to the capital of the Company from time to time pursuant to Section 3.1. "Certificate of Formation" shall have the meaning set forth in Section 1.5(b). time. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to "Company" shall have the meaning set forth in the Recitals. "Company Law" shall have the meaning set forth in the Recitals. "DE SOS" shall have the meaning set forth in Section 1.5(b). PMG Sullivan Street LLC Operating Agreement

5 "Depreciation" means, with respect to any fiscal year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for Federal income tax purposes, except that if the Gross Asset Value of the asset differs from its adjusted tax basis, Depreciation shall be determined in accordance with the methods used for Federal income tax purposes and shall equal the amount that bears the same ratio to the Gross Asset Value of such asset as the depreciation, amortization or 'other cost recovery deduction computed for Federal income tax purposes with respect to such asset bears to the adjusted Federal income tax basis of such asset; provided, however, that if any such asset that is depreciable or amortizable has an adjusted federal income tax basis of zero, the rate of Depreciation shall be as determined by the Members. "Dissolution Event" shall have the meaning set forth in Section 4.1. "Distributable Cash" means, with respect to any Fiscal Year or other applicable fiscal period, the excess, if any, as determined by the Managing Member, of (a) all cash of the Company from all sources for such period, including, without limitation, receipts from operations, contributions of capital by the Members, proceeds of borrowing or from the issuance of securities by the Company, interest income from purchase money financing provided by the Company, deposits and all other. Company cash sources and all Company cash reserves on hand at the beginning of such period over (b) all cash expenses and capital expenditures of the Company for such period, including, but not limited to, all payments of principal and interest on account of Company indebtedness, construction and operating costs, development, sales and marketing fees, administration and management fees and costs, closing costs, and such reasonable cash reserves as the Managing Member deems necessary for any Company needs (or those mandated by law, contract or the Company's debt instruments), including but not limited to the payment of any debt (whether acquisition, construction, permanent or mezzanine). "Fiscal Year" shall mean each fiscal year of the Company (or portion thereof), which shall end on December 31; provided, however, that upon Termination of the Company, "Fiscal Year" shall mean the period from the January 1 immediately preceding such Termination to the date of such Termination. "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for Federal income tax purposes, except that (i) the Gross Asset Value of any asset contributed to the Company shall be its gross fair market value (as determined by the Members) at the time such asset is contributed or deemed contributed for purposes of computing Capital Accounts, (ii) upon a contribution of money or other property to the Company by a new or existing Member as consideration for an interest in the Company and upon a distribution of money or other property to a retiring or continuing Member as consideration for an interest in the Company, the Gross Asset Value of all of the assets of the Company shall be adjusted to equal their respective gross fair market values (as determined by the Members), to the extent such adjustment is determined by the Members to be necessary or appropriate to reflect the Members' relative interests in the Company, (iii) the Gross Asset Value of any asset distributed in kind to any Member shall be the gross fair market value of such asset (as determined by the Members) on the date of such distribution, (iv) the Gross Asset Value of any asset determined pursuant to clause (i) or (ii) above shall thereafter be adjusted from time to time by the Depreciation taken into account with respect to such asset for purposes of determining Net Profit or Net Loss and (v) the Gross Asset PMG Sullivan Street LLC Operating Agreement 2

6 Value of any assets of the Company shall be increased or decreased to the extent required by section (b)(2)(iv)(m) in the event that the adjusted tax basis of such asset is adjusted pursuant to sections 732, 734 or 743 of the Code. "Indemnitees" shall have the meaning set forth in Section 2.4. "Managing Member" shall have the meaning set forth in the recitals. "Members" shall have the meaning set forth in the recitals. "Net Profit" or "Net Loss" means, with respect to any fiscal year, the taxable income or loss of the Company as determined for federal income tax purposes, with the following adjustments: (i) Such taxable income or loss shall be increased by the amount, if any, of tax-exempt income received or accrued by the Company; (ii) Such taxable income or loss shall be reduced by the amount, if any, of all expenditures of the Company described in section 05(a)(2)(B) of the Code, including expenditures treated as so described under section (b)(2)(iv)(i) of the Treasury Regulations; (iii) If the Gross Asset Value of any asset is adjusted pursuant to clause (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account, immediately prior to the event giving rise to such adjustment, as gain or loss from the disposition of such asset for purposes of computing Net Profit or Net Loss; (iv) Gain or loss resulting from any disposition of any asset with respect to which gain or loss is recognized for Federal income tax purposes shall be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that such Gross Asset Value differs from the adjusted tax basis of such asset; (v) In lieu of the depreciation, amortization, or other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year; and (vi) Notwithstanding any other provision of this definition, any items that are specially allocated pursuant to Section 3.5 shall not be taken into account in computing Net Income and Net Loss. "Percentage Interest" shall mean, with respect to any Member, as adjusted from time to time pursuant to Article 5 the percentage set forth opposite such Member's name on Schedule 1 hereto, as such percentage may be adjusted from time to time pursuant to Section 3.1. "Person" shall mean an individual, a corporation, a company, a voluntary association, a partnership, a joint venture, a limited liability company, a trust, an estate, an unincorporated organization, a governmental authority or other entity. PMG Sullivan Street LLC Operating Agreement 3

7 "Prime Rate" shall mean the rate of interest published from time to time in The Wall Street Journal, Eastern Edition, and designated as the prime rate. "Preferred Return" shall mean an amount that is equal to a ten percent (10%) per annum return, calculated from the respective dates that the Capital Contribution upon which such return calculated are contributed by the applicable Member from time to time to the respective dates that the Capital Contribution has been repaid to such Member. "Property" shall collectively or individually, as the context may require, the Sullivan Property, and/or the Triangle Parcel. Owner. "Property Owner" shall mean, collectively, the Sullivan Owner and the Triangle "Property Owner Managing Member" shall mean the entity known as PMG- Madison Sullivan Development LLC, a Delaware limited liability company, which directly or indirectly (either through Sullivan Member LLC a Delaware limited liability company or through another limited liability company) is the managing member of each Property Owner. "Regulations" shall mean the regulations promulgated under the Code. "Sullivan Owner" shall mean the owner of the Sullivan Property. "Sullivan Property" shall mean mean the fee interest in and to certain real property and improvements located at 72 Sullivan Street, New York, New York. "Triangle Owner" shall mean the owner of the Triangle Parcel. "Triangle Parcel" shall mean the fee interest in and to certain real property and improvements located at 124 Sixth Avenue, New York, New York. "Termination" shall mean the date of the cancellation of the Certificte of Formation of the Company following the end of the Winding Up Period by the filing of a Certificate of Cancellation or its equivalent in the Office of the Secretary of State of the State of Delaware. "Winding Up Period" shall mean the period from the Dissolution Event to the Termination of the Company. 1.2 Name The name of the Company shall be PMG SULLIVAN STREET LLC. 1.3 Principal Office The principal office of the Company shall be at 5 East 17th Street, Second Floor, New York, New York 10003, or at such other place in the United States as may from time to time be designated by the Members. PMG Sullivan Street LLC Operating Agreement 4

8 1.4 Service of Process; Agent The Secretary of State of the State of Delaware is designated as agent of the Company upon whom process against it may be served. The address to which the Secretary of State of the State of Delaware shall mail a copy of any process is Harvard Business Services, Inc., Coastal Highway, Lewes, County of Sussex, Delaware 19958, or at such other place in the United States as may from time to time be designated by the Members. 1.5 Formation; Filing Certificate of Formation; Term (a) Formation. The Company was formed as a limited liability company under the Company Law on June 7, (b) Filing Certificate of Formation. Susan L. Saslow, acting as an "authorized person" within the meaning of the Company Law, executed and delivered a Certificate of Formation (the "Certificate of Formation") to the Secretary of State of the State of Delaware (the "DE SOS"), which Certificate of Formation was filed, and the Company formed, on June 7, Upon the filing of the Certificate of Formation with the DE SOS, Susan L. Saslow's powers as an "authorized person" ceased, and the Members thereupon became the designated "authorized person" and shall continue as the "authorized person" within the meaning of the Act. (c) Term. The term of the Company commenced on the date of the filing of the Certificate of Formation with the DE SOS and shall continue until the occurrence of an event hereinafter set forth which causes the termination of the Company. 1.6 Purpose The purpose of the Company is to engage in the following activities: (a) to acquire, own, hold, assign and/or transfer direct or indirect equity interests in the Property Owner Managing Member; (b) to cause, directly or indirectly, the Property Owner Managing Member to: (i) cause the Property Owner acquire, develop, own, operate, lease, manage and maintain the Property and engage in the activities incidental thereto, including to incur indebtedness, secured and unsecured, to mortgage, finance, refinance, encumber, lease, sell, exchange, convey, transfer or otherwise deal with or dispose of the Property; (ii) enter into and perform contracts and agreements of any kind necessary to, in connection with or incidental to the business of the Property; and (iii) to carry on any other lawful activities necessary to, in connection with or incidental to the foregoing; as permitted under the Company Law; (c) to itself enter into and perform contracts and agreements of any kind necessary to, in connection with or incidental to the business of the Company; and (d) to carry on any other lawful activities necessary to, in connection with or incidental to the foregoing, as permitted under the Company Law and that the Managing Member in its discretion may deem desirable. ARTICLE II POWERS; MANAGEMENT; LIABILITY 2.1 Powers and Management PMG. Sullivan Street LLC Operating Agreement 5

9 (a) Powers of Company. The Company shall have the power and authority to take any and all actions necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purpose set forth in Section 1.6, including, but not limited to, the power: (i) to make, own, manage or dispose of investments and rights to investments and to engage in activities incidental or ancillary to such transactions; (ii) to possess, transfer, pledge or otherwise deal in, and to exercise all rights, powers, privileges and other incidents of ownership or possession with respect to property held or owned by it; (iii) to employ, retain or consult, or terminate the services of, such Persons for the operation and management of the Company including, without limitation, brokers, accountants, attorneys, actuaries or specialists in any field of endeavor whatsoever; (iv) to deposit and withdraw the funds of the Company in any bank or trust company and to entrust to such bank or trust company any of the investments, monies, documents and papers belonging to or relating to the Company; to deposit in and entrust to any brokerage firm that is a member of any national securities exchange any of said funds, investments, monies, documents and papers belonging to or relating to the Company; or to enter into custodial arrangements with any Person with respect to the assets of the Company; (v) to invest, pay, retain and distribute its funds in a manner consistent with the provisions of this Agreement, including, without limitation, to make distributions to the Members in cash, in kind or otherwise; (vi) to borrow monies and incur liabilities and in connection therewith to issue, accept, endorse and execute promissory notes, guarantees, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any of the foregoing by pledge, conveyance or assignment in trust of the whole or any part of the property whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such obligations for its purposes; (vii) to set aside funds for reasonable reserves, reasonably anticipated contingencies and reasonable working capital; (viii) to make such elections under the Code and other relevant tax laws as to the treatment of items of Company income, gain, loss and deduction, and as to all other relevant matters, including, without limitation, elections referred to in Section 754 of the Code, determination of which items of cash outlay are to be capitalized or treated as current expenses, and selection of the method of accounting and bookkeeping procedures to be used by the Company; (ix) to sue, prosecute, settle or compromise all claims against third parties, to compromise, settle or accept judgment in respect of claims against the Company and to execute all documents and make all representations, admissions and waivers in connection therewith; PMG Sullivan Street LLC Operating Agreement 6

10 (x) to enter into, make and perform all contracts, agreements, instruments and other undertakings necessary, advisable or incidental to the carrying out of the foregoing objects and purposes; and (xi) to take all actions that may be necessary or appropriate for the continuation of the Company's valid existence as a limited liability company under the Company Law and of each other jurisdiction in which such action is necessary to protect the limited liability of the Members or to enable the Company to conduct the business in which it is engaged. (b) Management. (i) The management of the Company shall be solely vested in the Managing Member who shall be KM Sullivan LLC. The Managing Member shall be deemed to be a manager for purposes of applying the provisions of the Company Law, unless the context otherwise requires, and such Managing Member shall have and be subject to all of the duties and liabilities of a manager provided in the Company Law. The Managing Member shall have the power to do any and all acts necessary or convenient to or for the furtherance of the purposes of the Company set forth in this Agreement, including all powers of the Members under the Company Law. (ii) The Managing Member shall manage the day-to-day business operations and affairs of the Company. The Managing Member shall have the sole responsibility for all matters relating to construction (including, without limitation, coordination of the architects, engineers, contractors, subcontractors, trades, expediters, consultants and other professionals needed in connection with developing the Property), design and sales including, without limitation, coordination of third-party sales brokers. (iii) Anything herein to the contrary notwithstanding, all decisions on behalf of the Company shall be solely made by the Managing Member and no other Member shall have any right to vote or approve of any decisions on behalf of the Company except as expressly stated in this Agreement; provided, however, that the Managing Member shall not take any action or make any decision to modify this Agreement that would have the effect of decreasing or removing any rights of a Member hereunder or increasing or adding any obligations or liabilities of a Member hereunder. (iv) Except as otherwise expressly provided in this Agreement, none of the Members shall have any duties or liabilities to the Company or any other Member (including any fiduciary duties), whether or not such duties or liabilities otherwise arise or exist in law or in equity, and each Member hereby expressly waives any such duties or liabilities; provided, however, that this sentence shall not eliminate or limit the liability of such parties (A) for acts or omissions that involve fraud, intentional misconduct or a knowing and culpable violation of law, or (B) for any transaction not permitted or authorized under or pursuant to this Agreement from which such party derived a personal benefit unless all of the Members have approved in writing such transaction; provided further, however, that the duty of care of each of such parties is to not commit fraud, intentional misconduct or a knowing and culpable violation of law. PMG Sullivan Street LLC Operating Agreement 7

11 (v) Lam is hereby appointed as the Operating Member of the Company. The Operating Member shall be responsible for the effectuation of the day to day operations of the Business of the Company under the direction of the Managing Member, and shall have such other duties as the Managing Member may direct. The Operating ;Member shall not have the right to sign contracts on behalf of the Company without the express written consent of the Managing Member. The Operating Member shall maintain all records relating to his duties and shall allow the Managing Member to have access to such records as and when requested by the Managing Member. The Operating Member shall report to the Managing Member on a regular and as requested basis and shall provide such information, documentation and financial reports and/or budgets as and when they may request and/or direct. The Managing Member may remove and/or replace the Operating Member at any time for cause. As used in this Section, the term "for cause" means (i) an act or omission which such Operating Member knew, at the time of the act or omission, was clearly in conflict with the interests of the Company, (ii) any transaction from which such Operating Member derived an improper personal benefit, (iii) gross negligence in performing his duties as Operating Member, (iv) fraud or (v) other willful misconduct or (vi) the failure to perform his duties as Operating Member. 2.2 Liability of Members The Members shall not have any liability for the obligations or liabilities of the Company except to the extent provided in the Company Law. 2.3 Exculpation of Member-Managers A Member, including, without limitation, the Managing Member, exercising management powers or responsibilities for or on behalf of the Company shall not have personal liability to the Company or its members for damages for any breach of duty in such capacity, provided that nothing in this Section 2.3 shall eliminate or limit (a) the liability of any such Member if a judgment or other final adjudication adverse to him, her or it establishes that his, hers or its acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law, or that he, she or it acted without the unanimous consent of all Members, or that he, she or it personally gained in fact a fmancial profit or other advantage to which he, she or it was not legally entitled, or that with respect to a distribution to Members the subject of subdivision (a) of Section 508 of the Company Law his or her acts were not performed in accordance with Section 409 of the Company Law or (b) the liability of any such Member for any act or omission prior to the date of first inclusion of this Section 2.3 in this Agreement. 2.4 Indemnification To the fullest extent permitted by law, the Company shall indemnify and hold harmless, and may advance expenses to, any Member, manager or other person, or any testator or intestate of such Member, manager or other person (collectively, the "Indemnitees"), from and against any and all claims and demands whatsoever; provided, however, that no indemnification may be made to or on behalf of any Indemnitee if a judgment or other final adjudication adverse to such Indemnitee establishes (a) that his or her acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or (b) that he or she acted without the unanimous consent of all Members, or (c) that he or she PMG Sullivan Street LLC Operating Agreement 8

12 personally gained in fact a financial profit or other advantage to which he or she was not legally entitled. The provisions of this Section 2.4 shall continue to afford protection to each Indemnitee regardless of whether such Indemnitee remains a Member, manager, employee or agent of the Company. ARTICLE HI CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS 3.1 Capital Contributions: Percentage Interests. (a) Each Member has contributed or is deemed to have contributed to the Company an initial Capital Contribution set forth opposite such Member's name on Schedule 1 hereto. (b) Notwithstanding any provision in this Agreement to the contrary, the Members acknowledge and agree that MS Sullivan and EJ Sullivan have each determined not to proceed with any further investment in the Company and that their respective interests in the Company shall be passive in nature. As a result, MS Sullivan and EJ Sullivan shall not be required to make any additional Capital Contribution to the Company. In addition, at no time shall Lam be required to make any Capital Contribution to the Company. If the Managing Member determines, from time to time, that additional capital is necessary or advisable in connection with the Company's Business or for any other Company purpose, only KM Sullivan shall contribute such Additional Capital. (c) Except as otherwise expressly provided in this Agreement, no Member shall have the right to withdraw capital from the Company, to receive interest on such Member's Capital Contributions or to receive any distribution or return of such Member's Capital Contributions. (d) The KM Sullivan, MS Sullivan and EJ Sullivan (collectively, the "Capital Members") each acknowledge and agree that at all times their respective Percentage Interests shall be based on the then ratio of. a Capital Member's then total Capital Contribution compared to the then total of all Capital Members' Capital Contributions and that the Capital Member's Percentage Interests set forth in Schedule I hereto is based on the ratio of the Capital Member's individual Initial Capital Contribution compared to the total of all Capital Members' Inititial Capital Contributions. The Managing Member shall amend Schedule I hereto from time to time to reflect the Percentage Interests after the making of any additional Capital Contributions by the Capital Members. (e) The Members acknowledge and agree that in the event that the Company, in the sole discretion of the Managing Member, admits a new member (other than by a transfer of a Member's membership interest as provided in Section 5.2 hereof) who contributes capital to the Company in exchange for a membership interest, then all of the then Members' then Percentage Interests, including Lam's, will be diluted proportionately pari passu. PMG Sullivan Street LLC Operating Agreement 9

13 (f) In the event that Lam resigns as the Operating Member and/or is removed by Maloney as the Operating Member "for cause" pursuant to Section 2.1(b)(v), then Lam's Membership Interest and Membership Percentage will be equitably diluted based on the completion of the then Business of the Company and Lam's diluted Membership Interest and Percentage will be assigned to the Capital Members, pari passu. 3.2 Capital Accounts (a) Maintenance of Capital Accounts. The Company shall maintain a "Capital Account" for each Member on the books of the Company in accordance with the following provisions: Each Member's Capital Account shall be increased by the amount of: (A) such Member's contributions to the capital of the Company pursuant to Section 3.1; (B) any Net Income or other item of income or gain allocated to such Member pursuant to Section 3.4 or Section 3.5; and (C) Company liabilities, if any, assumed by such Member or secured, in whole or in part, by any Company assets that are distributed to such Member. (ii) Each Member's Capital Account shall be decreased by the amount of: (A) cash and the fair market value on the date of distribution of any other Company property distributed to such Member pursuant to Section 3.3 and Section 4.2, (B) any Net Loss or other item of loss or deduction allocated to such Member pursuant to Section 3.4 or Section 3.5; and (C) liabilities, if any, of such Member assumed by the Company. (b) Succession to Capital Accounts. In the event any person becomes a substituted Member in accordance with this Agreement, such substituted Member shall succeed to the Capital Account of the transferor Member to the extent such Capital Account relates to the transferred interest (or portion thereof). 3.3 Distributions (a) Any distribution to the Members shall be made solely to the extent of Distributable Cash (as determined by the Managing Member) at such time and from time to time as the Managing Member may determine, in the following order and priority: (i) First 100% to the Members, pari passu, until the Members have received the Preferred Return due on the balance of their respective aggregate Capital Contributions until same have been reduced to zero ($0.00); (ii) Second, 100% to the Members, pan passu, in return of their respective aggregate Capital Contributions until the same has been reduced to zero ($0.00); and (iii) Thereafter. 100% to the Members, pail passu, in proportion to their respective total Percentage Interests. PMG Sullivan Street LLC Operating Agreement 10

14 (b) Distributions in Kind. Distributions may be made in cash or in kind. The amount by which the fair market value of any property to be distributed in kind to the Members exceeds or is less than the basis of such property shall, to the extent not otherwise recognized by the Company, be taken into account in computing gain or loss of the Company for purposes of crediting or charging the Capital Accounts of the Members pursuant to Section 3.4 (Allocations). (c) Limitations on Distributions. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution of capital to the Members on account of their interest in the Company if such distribution would violate Section of the Company Law or any other applicable law or would constitute a default under any financing documents applicable to the Company or the Property. No distribution may be made if, after giving effect to the distribution, all liabilities of the Company, other than liabilities to Members on account of their membership interests and liabilities for which the recourse of creditors is limited and liabilities for which the recourse of creditors is limited to specified property of the Company, exceed the fair value of the assets of the Company, except that the fair value of property of the Company that is subject to a liability for which the recourse of creditors is limited shall be included only to the extent that the fair value of that property exceeds that liability. 3.4 Allocations (a) Net Income and Net Loss. Net Income and Net Loss for each Fiscal Year (or portion thereof) shall be allocated among the Members in proportion to their respective Percentage Interests. (b) Tax Allocations. For United States federal, state and local income tax purposes, items of income, gain, loss, deduction and credit shall be allocated to the Members in accordance with the allocations of the corresponding items for Capital Account purposes under Sections 3.4 and 3.5, except that items with respect to which there is a difference between tax and book basis will be allocated in accordance with section 704(c) of the Code, the Regulations thereunder and Regulation section (b)(4)(i). 3.5 Special Allocations The provisions of Sections 3.2, and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulation section (b) and shall be interpreted and applied in a manner consistent with such intent. In furtherance of the foregoing, this Agreement shall be deemed to include a "qualified income offset" in accordance with Regulation section (b)(2)(ii)(d). The Managing Member shall be authorized to make appropriate amendments to the allocations of items pursuant to Section 3.4 if necessary in order to comply with section 704 of the Code or applicable Regulations thereunder; provided, that no such change shall have an adverse effect upon the amount distributable to any Member pursuant to this Agreement. ARTICLE IV DISSOLUTION; WINDING UP; TERMINATION PMG Sullivan Street LLC Operating Agreement 11

15 4.1 Dissolution The Company shall commence its winding up upon the first to occur of the following (the "Dissolution Event"): (a) (b) (c) Company Law. the insolvency or bankruptcy of the Company; the written consent of all of the Members; or the entry of a decree of judicial dissolution under Section 702 of the The Dissolution Event shall be effective on the day on which such event occurs and immediately thereafter the Company shall commence the Winding Up Period during which its affairs shall be wound up in accordance with Sections 4.2 and Winding Up and Termination (a) Winding Up. Upon the occurrence of the Dissolution Event, the property and business of the Company shall be wound up by the Managing Member. Subject to the requirements of applicable law and the further provisions of this Section 4.2, the Managing Member shall determine whether to sell or otherwise dispose of Company assets or to distribute the same in kind and the timing and manner of such disposition or distribution. (b) Distributions Upon Winding Up. Within a reasonable period of time following the occurrence of the Dissolution Event, after allocating all Net Income, Net Loss and other items of income, gain, loss or deduction pursuant to Sections 3.4 and 3.5, the Company's assets (except for assets reserved pursuant to Section 4.3) shall be applied and distributed in the following manner and order of priority: (i) the claims of all creditors of the Company (including Members except to the extent not permitted by law) shall be paid and discharged other than liabilities for which reasonable provision for payment has been made; and (ii) thereafter, to the Members in proportion to the positive balances of their respective Capital Accounts. Notwithstanding anything to the contrary in this Agreement, liquidating distributions shall be made no later than the last to occur of (x) 90 days after the date of disposition (including pursuant to Section 4.3) of the last remaining asset of the Company and (y) the end of the Company's taxable year in which the disposition referred to in clause (x) above shall occur. This Section 4.2(b) is intended to comply with, and shall be interpreted consistently with, the requirements of Regulation section (b)(2)(ii)(b)(2) (c) Distributions In Kind. Company assets for distribution in kind shall be allocated to the Members. Notwithstanding any other provision of this Agreement, the amount by which the fair market value of any property to be distributed in kind to the Members (including property distributed in liquidation, and property distributed pursuant to Section 3.3) PMG Sullivan Street LLC Operating Agreement 12

16 exceeds or is less than the adjusted basis of such property shall, to the extent not otherwise recognized by the Company, be taken into account in computing income, gains and losses of the Company for purposes of crediting or charging the Capital Accounts of, and distributing proceeds to, the Members, pursuant to this Agreement. (d) Termination. When the Managing Member has completed the winding up described in this Section 4.2, the Managing Member shall cause the Termination of the Company. 4.3 Assets Reserved and Pending Claims (a) Assets Reserved. If, upon a Dissolution Event, there are any assets that, in the judgment of the Managing Member, cannot be sold or distributed in kind without sacrificing a significant portion of the value thereof or where such sale or distribution is otherwise impractical at the time of the Dissolution Event, such assets may be retained by the Company if the Managing Member determines that the retention of such assets is in the best interests of the Members. Upon the sale of such assets or a determination by the Managing Member that circumstances no longer require their retention, such assets (at their fair market value) or the proceeds of their sale shall be taken into account in computing Capital Accounts on winding up and amounts distributable pursuant to Section 4.2(b), and distributed in accordance with such value. (b) Pending Claims. If there are any claims or potential claims (including potential Company expenses in connection therewith) against the Company (either directly or indirectly, including potential claims for which the Company might have an indemnification obligation) for which the possible loss cannot, in the judgment of the Managing Member, be definitively ascertained, then such claims shall initially be taken into account in computing Capital Accounts upon winding up and distributions pursuant to Section 4.2(b) at an amount estimated by the Managing Member to be sufficient to cover any potential loss or liability on account of such claims (including such potential Company expenses), and the Company shall retain funds (or assets) determined by the Managing Member as a reserve against such potential losses and liabilities, including expenses associated therewith. The Managing Member may obtain insurance or create escrow accounts or make other similar arrangements with respect to such losses and liabilities. Upon final settlement of such claims (including such potential Company expenses) or a determination by the Managing Member that the probable loss therefrom can be definitively ascertained, such claims (including such potential Company expenses) shall be taken into account in the amount at which they were settled or in the amount of the probable loss therefrom in computing Capital Accounts on winding up and amounts distributable pursuant to Section 4.2(b), and any excess funds retained shall be distributed. ARTICLE V ADDITIONAL MEMBERS; ASSIGNABILITY; WITHDRAWAL 5.1 Admission of New Members PMG Sullivan Street LLC Operating Agreement 13

17 No additional Members shall be admitted to the Company, except: (a) additional Members approved by the Managing Member; or (b) as transferees of the interests in the Company of existing Members pursuant to Section 5.2. A Person shall be deemed admitted as a Member at the time that such Person: (i) executes an amendment, counterpart or supplement to this Agreement and such other instruments as the Managing Member may reasonably deem necessary or desirable to evidence such Person's agreement to be bound by and to comply with the terms and provisions hereof; and (ii) is named on the books and records of the Company. 5.2 Assignability No Member may assign, transfer or grant any interest in the Company, except with the written consent of the Managing. Member. Any purported assignment, transfer or grant by any Member of any interest in the Company not made strictly in accordance with the requirements of this Section 5.2 or otherwise permitted by this Agreement shall be entirely null and void. 5.3 Withdrawal by Member Upon the withdrawal of a Member from the Company for any reason, such Member shall cease to have any further right to or interest in distributions pursuant to Section Change in Interests Upon any change in the relative interests of the Members, whether by reason of the admission or withdrawal of a Member or otherwise, the Members' shares of all Company items shall be determined, except as otherwise required by law, by an interim closing of the Company's books. ARTICLE VI ACCOUNTING; FINANCIAL AND TAX MATTERS 6.1 Books and Records The books and records of the Company shall be maintained at the Company's office and shall be available for examination there by any Member or his, her or its duly authorized representatives at any and all reasonable times. Any Member, or his, her or its duly authorized representatives, upon paying the costs of duplication, shall be entitled to copies of the Company's books and records; provided, however, that such information shall be used only for purposes reasonably related to such Member's interest as a member of the Company. 6.2 Accounting Basis The books and records and financial statements and reports of the Company shall be kept on a cash basis. Additional determinations with respect to accounting principles shall be made by the Managing Member. PMG Sullivan Street LLC Operating Agreement 14

18 6.3 Bank Accounts Funds of the Company shall be deposited in a Company account or accounts in the bank or banks as selected by the Managing Member. Withdrawals from bank accounts shall only be made by the Managing Member or such other parties as may be approved by the Managing Member. 6.4 Tax Matters The Company shall prepare and file all tax returns of the Company and the Managing Member shall make all determinations as to tax elections by the Company. Unless otherwise required by law, the Managing Member shall be the initial "tax matters partner" of the Company within the meaning of section 6231(a)(7) of the Code. Prompt notice shall be given to the Members upon receipt of advice that the Internal Revenue Service or other taxing authority intends to examine any income tax return or.record or books of the Company. 7.1 Amendments; Waiver ARTICLE VII MISCELLANEOUS Any provision of this Agreement may be amended or waived by an instrument in writing executed by all of the Members. 7.2 Successors and Assigns This Agreement shall inure to the benefit of, and shall be binding upon, the successors and permitted assigns of the Members. 7.3 No Waiver The failure of any Member to seek redress for violation, or to insist on strict performance, of any covenant or condition of this Agreement shall not prevent a subsequent act which would have constituted a violation from having the effect of an original violation. 7.4 Survival of Certain Provisions Each of the Members agrees that the covenants and agreements set forth in Sections 2.2, 2.3 and 2.4 shall survive the Termination of the Company. 7.5 Notices All notices hereunder shall be in writing and shall be given by personal delivery, mailed by a nationally recognized overnight delivery service, or sent by telecopy or other electronic means (including , provided the recipient acknowledges receipt thereof, with a reply being deemed such an acknowledgment), and addressed: if to the Company, at its principal office and, if to a Member, to such Member at its address set forth above or the last known PMG Sullivan Street LLC Operating Agreement 15

19 address as disclosed on the records of the Company. Notices shall be deemed to have been given as of the date delivered (upon confirmed receipt by the delivery service) or telecopied (upon confirmed receipt) or ed (upon acknowledgement of receipt). The Company and any Member may change the address for notices by delivering or mailing as aforesaid, a notice stating the change and setting forth the changed address. 7.6 Severability In case any provision in this Agreement shall be deemed to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired hereby. 7.7 Counterparts This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. 7.8 Headings, Etc The headings in this Agreement are inserted for convenience of reference only and shall not affect the interpretation of this Agreement. 7.9 Gender As used herein, masculine pronouns shall include the feminine and neuter, neuter pronouns shall include the masculine and the feminine, and the singular shall be deemed to include the plural No Right to Partition The Members, on behalf of themselves and their shareholders, partners, successors and assigns, if any, hereby specifically renounce, waive and forfeit all rights, whether arising under contract or statute or by operation of law, except as otherwise expressly provided in this Agreement, to seek, bring or maintain any action in any court of law or equity for partition of the Company or any asset of the Company, or any interest which is considered to be Company property, regardless of the manner in which title to such property may be held No Third Party Rights Except as expressly provided in this Agreement, this Agreement is intended solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any Person other than the parties hereto Entire Agreement This Agreement (together with any Schedules attached hereto) constitutes the entire agreement among the Members with respect to the matters described herein and supersede any prior agreement or understanding among them with respect to such subject matter. PMG Sullivan Street LLC Operating Agreement 16

20 7.13 Applicable Law THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. PMG Sullivan Street LLC Operating Agreement 17

21 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. MS SULLIVAN LLC By: Name: *chael Stern Title: Sole Member RICHARD LAM is Signature Page Operating Agreement of PMG SULLIVAN STREET LLC

22 Member SCHEDULE.1 Initial Capital Contribution Percentage Interest KM Sullivan LLC ABM % EJ Sullivan LLC MS Sullivan LLC Richard Lam Total % PMG Sullivan Street LLC Operating Agreement