Operating Agreement

Our initial intention has been to tokenize a contract in the form of an operating agreement from the token issuer (i.e. the owner of a property) to the token holders. The operating agreement will state that the token holders have a claim on a percentage of the sale of the property upon its sale (when the title of the property changes hands) and the income it produces equal to their percentage held through the token. In order to provide security to buyers of IRETs, the token issuer will place a voluntary lien on their property guaranteeing the proceeds to go to the IRET holders. Should the property be mortgaged, the token issuer can still tokenize his property, however the proceeds must be used to pay off the property's mortgage in full and leave the property free and clear of any other liens.

There will be many different types of properties that will be tokenized into IRETs including, but not limited to: land, single family homes (including condos), multifamily, office, retail, hospitality, and agricultural properties. The IRETs will be split into two categories, income producing and non-income producing. The income producing IRETs will pay dividends on a daily or hourly basis (TBD) to the token holders, whereas the non-income producing IRETs will provide value to the holder upon speculation or sale of the property.

The operating agreement for the IRET will be what ties the real estate to the token and in essence represent the sale of property. Additionally, the operating agreement, in the form of a contract binding the title holder of a property to the token holders, is what holds the title holder liable to the token holders. This contract will explicitly state the following:

• The IRET represents the value of the equity in a property. If the title of the property is transferred the proceeds of the sale of the property will be distributed according to the percentage of the IRET held by the individuals.

• If the IRET’s underlying property is an income producing property, dividends will be distributed according to the percentage of the IRET held by the individuals. Financial statements and rental agreements will also be available to all of the IRET holders.

• If the IRET’s underlying property is an income producing property, should the title holder own at least 51% of the tokens, he will be entitled to a 10% management fee on each rental distribution

• It is recommended that there should be a sole holder of at least 51% of the IRET at all times to maintain and control the property. If the owner of an IRET would like to sell more than 50% of the IRET to multiple parties, the control of the property will be under the DAO dedicated to that individual IRET. REX protocol will facilitate contracting property managers for the properties that are DAO controlled and the DAO can make all choices pertaining to managing the property.

• REX Protocol will have the right of first refusal for every tokenized property to be sold on the open market. This is to ensure that properties trade at a fair market value in an arms-length transaction.

• The title holder has a fiduciary duty to the IRET holders. The title holder shall not do anything to the property that may decrease its value or sell the property on the open market below fair market value. Token holders maintain the right to sue the title holder for any actions or transactions that may be perceived as violating this fiduciary duty.