SERVICES AND MEMBERSHIP INTEREST GRANT AGREEMENT

SERVICES AND MEMBERSHIP INTEREST GRANT AGREEMENT

THIS SERVICES AND MEMBERSHIP INTEREST GRANT AGREEMENT (this “Agreement”) is entered into effective as of XXXX(the “Effective Date”), by and between ARIDA WEST ENTERPRISES LLC, a XXXX limited liability company (the “Company”), and XXX (“XXX”). Each of the Company and XXX is sometimes collectively referred to herein as the “Parties” and individually as a “Party.”

WHEREAS, XXX is providing certain services to Company as set forth on Exhibit A attached hereto and incorporated herein by this reference (the “XXX Services”).

WHEREAS, in exchange for the XXX Services, the Company desires to issue and grant, and XXX desires to accept, on the terms and conditions set forth herein, a membership interest in the company with a twenty percent (20%) percentage interest in the Company (the “Granted Membership Interest”), which shall vest in 5% percentage interest increments over the period of 18 months as specified herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

Section 1. XXX  Services and Grant of Membership Interest. In exchange for XXX providing the Company with the XXX Services, the Granted Membership Interest shall vest in XXX in increments as follows:

  1. Five percent (5%) membership interest concurrent with the execution of

this agreement;

  1. Five percent (5%) membership interest after six (6) months of performance under the agreement, May 15, XXX;
  1. Five percent (5%) membership interest after twelve (12) months of performance under the agreement, XXX;
  1. A final five percent (5%) membership interest after eighteen (18) months of performance under the agreement, XXX;

In exchange for the Grant of Membership Interest described herein, XXX shall provide the Company with the XXX Services for a period of twenty four (24) months; however, the Parties may agree for the Sanchez Services to continue thereafter for the success of the Company and the benefit of both Parties.

Section 2. Forfeiture and Cancellation. The Granted Membership Interest is subject to forfeiture and cancellation if XXX fails to perform the XXX Services at any time during the first twenty-four (24) months after the Effective Date (the “Vesting Period”). This forfeiture restriction shall lapse ratably as to the Granted Membership Interest over the duration of the Vesting Period. Upon cancellation and forfeiture, XXX will retain only the percentage interest already vested and granted to XXX.

Section 3. Repurchase upon Termination of Services Agreement. If Sanchez ceases to provide the Company with the Sanchez Services at any time, (i) the unvested portion of the Granted Membership Interest shall be automatically forfeited back to the Company, and (ii) the Company shall have the right, but not the obligation, to repurchase the vested portion of the Granted Membership Interest owned by Sanchez after application of the forfeiture provisions set forth in Section 2 (the “Vested Membership Interest”). The price at which the Company may repurchase the Vested Membership Interest pursuant to this Section shall be based on the then market valuation of the Company (the “Purchase Price”). The Parties shall each use best efforts to mutually agree upon the Purchase Price. If the Parties are unable to agree upon the Purchase Price within thirty (30) days, each Party shall appoint one appraiser, and the two appraisers shall within a period of five (5) days agree upon and appoint a third appraiser. The third appraiser shall, within sixty (60) days after such appraiser’s appointment, determine in writing the Purchase Price and submit a report to the Parties. For purposes of this Section, the term “appraiser” shall mean an investment banking, accounting, or appraisal firm with a reputation in the State of California who is qualified, knowledgeable and experienced in the appraisal of companies in the Company’s particular industry, and is neither an Affiliate (as defined in the Operating Agreement) nor a direct or indirect employee or agent of a Member, except in connection with any determinations to be made pursuant to this Agreement. The Parties shall split equally the costs of the appraiser and any and all other costs and expenses relating to the determination of Purchase Price.

Section 4. Joinder to Operating Agreement. Concurrently with the execution of this Agreement and as a condition of the grant of the Granted Membership Interest hereunder, XXX shall execute a joinder to the Operating Agreement of the Company, as such Operating Agreement may be amended and/or restated from time to time (the “Operating Agreement”), in the form attached as Exhibit B. Sanchez acknowledges receipt of a copy of the Operating Agreement and that XXX has reviewed the Operating Agreement. XXX understands that the rights granted to XXX under the Operating Agreement are complex in nature and have certain legal, tax, and financial consequences to XXX . has been advised by the Company to consult, and Sanchez has consulted to the extent XXX desired to do so, with XXX own legal, tax, and financial advisors with respect to these consequences. XXX understands, acknowledges. and agrees that, upon execution of this Agreement and the joinder to the Operating Agreement, XXX shall, without further action or deed, thereupon be bound by the Operating Agreement, as it may thereafter be amended and/or restated, as though a direct signatory thereto. Sanchez shall thereby be admitted as a Member of the Company with respect to the Granted Membership Interest from and after the Effective Date.

Section 5. Section 83(b) Election. XXX understands that under Section 83 of the Internal Revenue Code of 1986, as amended, the excess of the fair market value of the Granted Membership Interest on the date any forfeiture restrictions applicable to the Granted Membership Interest lapse over the purchase price paid for the Granted Membership Interest may be reportable as ordinary income at that time, and, to the extent that Sanchez desires to file an election under Section 83(b) in the form attached as Exhibit C, Sanchez acknowledges that it is Sanchez’s sole responsibility, and not the Company’s, to file a timely election under Section 83(b), even if Sanchez asks the Company or its representatives to make such filing on Sanchez’s behalf.

 

Section 6. Representations and Warranties of the Company. The Company makes the following representations and warranties to XXX:

  1. Organization, Good Standing and Qualifications. The Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of California and has all requisite corporate power and authority to carry on its business. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.
  1. Authorization. All limited liability action on the part of the Company, its officers, managers, and members, necessary for the authorization, execution, and delivery of this Agreement and the performance of all obligations of the Company hereunder and the authorization, issuance, and delivery of the Granted Membership Interest (the “Securities”) has been taken on or before the Effective Date, and the Agreement, when executed and delivered by the Company, will constitute the valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally, as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
  1. Valid Issuance of Securities. The Granted Membership Interest being issued to Sanchez hereunder, when issued and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and free of restrictions on transfer other than restrictions on transfer under the Agreement and the Operating Agreement and applicable state and federal securities laws. Based in part upon the representations of XXX in this Agreement, the Granted Membership Interest will be issued in compliance with all applicable federal and state securities laws.
  1. No Conflict. The execution and delivery of this Agreement does not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the organizational documents of the Company, or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration, or cancellation of, or require payment under, or result in the creation of a lien on, any of the properties or assets of the Company pursuant to any contract to which the Company is a party or by which the Company or any of its properties is bound.

Section 7. Representations, Warranties, and Acknowledgments of Sanchez. Sanchez represents and warrants to the Company that:

  1. Exemption to Registration. Sanchez is receiving the Granted Membership Interest under this Agreement based upon an exemption from registration under the Securities Act of 1933 (the “Securities Act”) under Securities and Exchange Commission Rule 701 promulgated under the Securities Act, and a comparable exemption from qualification under applicable state securities laws, as each may be amended from time to time.

 

  1. HIGH-RISK INVESTMENT. SANCHEZ ACKNOWLEDGES TO THE COMPANY THAT SANCHEZ IS ABLE TO FEND FOR HIMSELF, HERSELF, OR ITSELF, CAN BEAR THE ECONOMIC RISK OF AN INVESTMENT IN THE COMPANY, AND HAS SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL OR BUSINESS MATTERS THAT SANCHEZ IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF ACQUIRING THE GRANTED MEMBERSHIP INTEREST. SANCHEZ UNDERSTANDS AND ACKNOWLEDGES THAT THE ACQUISITION OF THE GRANTED MEMBERSHIP INTEREST INVOLVES A HIGH DEGREE OF RISK, INCLUDING THE RISK THAT SANCHEZ COULD LOSE ALL OR PART OF SANCHEZ’S INVESTMENT. SANCHEZ SHOULD NOT ACQUIRE THE GRANTED MEMBERSHIP INTEREST IF SANCHEZ MIGHT HAVE NEED FOR THE FUNDS THAT WOULD OTHERWISE BE RECEIVED BY SANCHEZ IN RESPECT OF THE SERVICES PERFORMED, AND SERVICES THAT WILL BE PERFORMED IN THE FUTURE, FOR THE COMPANY.
  1. Illiquid Investment. XXX acknowledges and understands that the Granted Membership Interest is an illiquid investment, which means that Sanchez must bear the economic risk of the investment for an indefinite period of time because:
  1. there is no market for the Granted Membership Interest, and none

is expected ever to develop,

  1. the transfer of the Granted Membership Interest is subject to significant restrictions under applicable securities laws and the Operating Agreement, and
  1. in addition to the transfer restrictions set forth in the Operating Agreement, the Granted Membership Interest may not be sold, transferred, or otherwise disposed of in the absence of registration under the Securities Act and all applicable state securities laws or an opinion of counsel satisfactory to the Company that no such registrations are required.
  1. No Obligation to Register Granted Membership Interest. Sanchez understands that the Company is under no obligation to register the Granted Membership Interest under the Securities Act or under any state securities law.
  1. No Regulatory Review. The terms of this Agreement and the Operating Agreement have not been submitted to or reviewed by any securities regulatory agency or any governmental agency.
  1. Financial Ability. Sanchez represents that XXX financial commitment to all investments (including XXX proposed investment in the Granted Membership Interest) is reasonable in relationship to XXXX net worth.
  1. Authorization. XXX has all requisite power and authority to execute and deliver this Agreement and the Operating Agreement and consummate the transactions contemplated hereby and thereby, and the execution, delivery and performance by XXX of this Agreement and the Operating Agreement have been duly authorized by all requisite action by Sanchez, and each such agreement constitutes a valid and binding obligation of Sanchez enforceable against Sanchez in accordance with its terms, subject to applicable bankruptcy,

insolvency, reorganization, fraudulent conveyance, moratorium, or other similar laws and subject to general principles of equity.

  1. No Conflict. The execution and delivery of this Agreement does not, and the performance of this Agreement by Sanchez will not, (i) if Sanchez is a corporation, partnership, trust, estate, or other entity, conflict with or violate the organizational documents of Sanchez, or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, or result in the creation of a lien on, any of the properties or assets of Sanchez pursuant to any contract to which Sanchez is a party or by which Sanchez or any of his properties is bound.
  1. Purchase Entirely for Own Account. Sanchez understands that this Agreement is made by the Company with Sanchez in reliance upon Sanchez’s representation, to the Company herein, which by XXX execution of this Agreement, XXX confirms, that the Securities to be acquired by Sanchez will be acquired for investment for XXX own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Sanchez has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Securities Act or applicable state securities laws. Sanchez does not presently have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participations to such person or to any third person, with respect to any of the Securities. Sanchez has full power and authority to enter into this Agreement. Sanchez has not been formed for the specific purpose of acquiring the Securities.
  1. Familiarity with Company; Disclosure of Information. Sanchez is familiar with the business of the Company. Sanchez has had an opportunity to discuss the Company’s business, management, financial affairs, and the terms and conditions of the offering of the Granted Membership Interest with the Company’s management and has had an opportunity to review the Company’s facilities. Sanchez has had an opportunity to discuss with representatives of the Company the condition of any prospects for the continued operation and financing of the Company and such other matters as Sanchez has deemed appropriate in considering whether to invest in the Granted Membership Interest. Sanchez understands that the Company’s business plan and any other written information issued by the Company were intended to describe the aspects of the Company’s business that the Company believes are material.
  1. Pre-Existing Relationship. XXX either has a pre-existing personal or business relationship with the Company or one or more of its officers, managers, members, controlling persons, or Affiliates, or is otherwise experienced in evaluating and investing in securities of private companies.
  1. Restricted Securities. XXX understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act, which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of XXX representations as expressed herein. XXX understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, XXX must hold the Securities indefinitely unless they are registered with the Securities and Exchange

 

Commission and qualified by state authorities or an exemption from such registration and qualification requirements is available. Sanchez acknowledges that the Company has no obligation to register or qualify the Securities for resale, except as provided in the Operating Agreement. Sanchez further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company that are outside of such Sanchez’s control, and that the Company is under no obligation and may not be able to satisfy, except as provided in the Operating Agreement.

  1. Accredited Investor. Sanchez is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act.
  1. Dilution. Sanchez acknowledges that the Granted Membership Interest may be diluted by (i) investments in the Company, (ii) additional grants of membership interests in the Company to other parties, or (iii) other events involving changes in ownership or capitalization of the Company.
  1. Non-Compete. XXXX represents and warrants that during the term of this Agreement, he shall not, directly or indirectly, either for himself or any other person, own, manage, control, materially participate in, invest in, permit his name to be used by, act as consultant or advisor to, render material services for (alone or in association with any person, firm, corporation or other business organization) or otherwise assist in any manner any business which is a competitor of a substantial portion of the Company’s business or of the business of any subsidiary of the Company (collectively, a “Competitor”).

Section 8. Miscellaneous.

  1. Survival of Warranties. Unless otherwise set forth in this Agreement, the warranties, representations, and covenants of the Company and XXX contained in or made pursuant to this Agreement will survive the execution and delivery of this Agreement.
  1. Indemnification. XXX and the Company hereby agree to indemnify and hold each other harmless, and their respective officers, directors, agents, employees, and Affiliates, from and against any and all loss, damage, or liability due to or arising out of a breach of this Agreement.
  1. Transfer; Successors, and Assigns. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and assigns of the Parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the Parties or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
  1. Governing Law; Jurisdiction. This Agreement and the transactions contemplated hereby shall be governed by and construed according to the laws of the state of California. With respect to any dispute arising out of or related to this Agreement or the Operating Agreement, the Parties hereby consent to the exclusive jurisdiction of the United States District Court for the Central District of California (or if that court is unable to exercise jurisdiction for any reason, the Parties hereby consent to the exclusive jurisdiction of the California Superior Court for and in the County of Los Angeles, California). The Parties waive any objection based on improper venue or inconvenient forum. THE PARTIES HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE

ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE OPERATING AGREEMENT.

  1. Warranties. Each of Sanchez and the Company understands that the respective other Party will be relying on the accuracy and completeness of his, her, or its representations, warranties, and other statements contained herein, and Sanchez and the Company will notify each other immediately of any material change in any representation, warranty, or other statement made herein that occurs.
  1. Counterparts. This Agreement may be executed in any number of counterparts, each of which is an original and all of which taken together constitute one instrument. Any Party may execute this Agreement by executing any such counterpart.
  1. Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
  1. No Strict Construction. Each of the Parties acknowledges and agrees that this Agreement has been prepared jointly by the Parties and their respective counsel and that this Agreement shall not be strictly construed against either Party by virtue of the person or entity who may have drafted the subject provision.
  1. Assignment. Neither this Agreement nor any of the rights, interests, or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of the respective other Party, and any such assignment without such prior written consent shall be null and void.
  1. Notices. Any notice or other communication required or permitted by this Agreement will be in writing and will be deemed sufficient upon delivery, when delivered personally or by overnight delivery service, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the Party to be notified at such Party’s address as set forth on the signature pages below or as subsequently modified by notice to the other Party.
  1. Attorney’s Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of this Agreement, the prevailing party will be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.
  1. Amendments and Waivers. Any term of this Agreement may be amended, either prospectively or retrospectively, and any provision hereof may be waived, with the written consent of the Company and Sanchez. Any amendment or waiver effected in accordance with this Section will be binding upon Sanchez and each transferee of the Granted Membership Interest and each future holder of all such securities, to the extent permitted under the Operating Agreement, and the Company.
  1. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the Parties will renegotiate such provision in good faith. In

the event that the Parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision will be excluded from this Agreement, (ii) the balance of the agreement will be interpreted as if such provision were so excluded; and (iii) the balance of the Agreement will be enforceable in accordance with its terms.

  1. Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any Party under this Agreement, upon any breach or default of any other Party under this Agreement, will impair any such right, power, or remedy of such non-breaching or non-defaulting party nor will it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor will any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent, or approval of any kind or character on the part of any Party of any breach or default under this Agreement, or any waiver on the part of any Party of any provisions or conditions of this Agreement, must be in writing and will be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any Party, will be cumulative and not alternative.
  1. Entire Agreement. This Agreement and the Operating Agreement constitute the entire agreement between the Parties pertaining to the subject matter hereof, and any and all other written or oral agreements relating to the subject matter hereof existing between the Parties are expressly cancelled.
  1. Confidentiality. Except with the prior written permission of the other Party, or as required by law, each Party will at all times keep confidential and not divulge, furnish, or make accessible to anyone any confidential information, knowledge, or data concerning or relating to the business or financial affairs of the other Party to which such Party has been or will become privy by reason of this Agreement, discussions or negotiations relating to this Agreement, the performance of its obligations hereunder, or the ownership of the Granted Membership Interest; provided, however, that such confidential information may be provided by any Party to its attorneys, accountants, partners, members, investors, or agents; and provided further that such confidential information may be provided to potential transferees of the Granted Membership Interest, to the extent permitted under the Operating Agreement, only upon written consent of the Company (which consent will not be unreasonably withheld).
  1. Expenses. Each Party will bear its own legal and other expenses with respect to the transactions contemplated by this Agreement.
  2. Termination. This Agreement shall terminate forthwith upon the failure by Sanchez to perform the services under this Agreement. This provision is subject to Section 8 (s).  Following termination per this Section, the provisions of Sections 2 and 3 shall apply.
  3. Force Majeure. In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.

IN WITNESS WHEREOF, the Parties have executed, or caused this Agreement to be executed, as of the date first above written.

Company: XXX:

ARIDA WEST ENTERPRISES LLC

By: _____________________________ By: _____________________________

XXX

Title: Manager

Address for Notices: Address for Notices:

XXX

XXX

Signature Page to Services and Membership Interest Grant Agreement

EXHIBIT A

XXX

(Attached)

EXHIBIT B

ARIDA WEST ENTERPRISES LLC

Limited Liability Company Operating Agreement Joinder

The undersigned hereby acknowledges that the undersigned has received and reviewed a true and correct copy of that certain Amended and Restated Limited Liability Company Operating Agreement of ARIDA WEST ENTERPRISES LLC, a XXX limited liability company, dated as of XXX XXX (the “LLC Agreement”).

This Limited Liability Company Agreement Joinder (this “Joinder”) is hereby incorporated into and made a part of the LLC Agreement for all purposes. Company hereby acknowledges and agrees that the undersigned is hereby deemed a “Member” under the LLC Agreement for all purposes with the same effect as if the undersigned had been a signatory as a Member to the LLC Agreement initially, provided, however, that the undersigned’s right to participate in the profits, losses and distributions of Company pursuant to the LLC Agreement shall begin as of the date of this Joinder.

The undersigned hereby approves, consents to and agrees to be bound by the terms, conditions and other provisions of the LLC Agreement to the extent that such terms, conditions and other provisions are expressly imposed upon the undersigned as a Member as provided therein. Company acknowledges and agrees that, as set forth in this Joinder, the undersigned shall have all of the rights of a Member subject to the terms, conditions and other provisions of the LLC Agreement.

Each capitalized term used in this Joinder, but not otherwise defined herein, shall have the meaning ascribed to such term in the LLC Agreement.

XXXX

XXX

 

EXHIBIT C

SECTION 83(B) ELECTION

This statement is made under Section 83(b) of the Internal Revenue Code of 1986, as amended, pursuant to Treasury Regulations Section 1.83-2.

  1. The taxpayer who performed the services is: Name:

Address:

Social Security No.:

  1. The property with respect to which the election is made is a membership interest in
ARIDA WEST ENTERPRISES LLC with a % percentage interest.
(3) The property was transferred on __, .
(4) The taxable year for which the election is made is the calendar year .
  1. The property is subject to forfeiture if for any reason taxpayer’s service with the

issuer terminates.  The forfeiture condition lapses in a series of installments over a

____-year period ending on __, .

  1. The fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction that by its terms will never lapse) is $______________.
  1. No amount was paid for such property.
  1. A copy of this statement was furnished to XXXX  ENTERPRISES LLC, for whom taxpayer rendered the services underlying the transfer of such property.

(9) This statement is executed on __, .

Spouse (if any) Taxpayer

Within 30 days after the date of transfer, this election must be filed with the Internal Revenue Service Center where the Transferee files his or her federal income tax returns. The filing should be made by registered or certified mail, return receipt requested. The Transferee must (a) file a copy of the completed form with his or her federal tax return for the current tax year and (b) deliver an additional copy to the Company.

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