Execution Counterpart
LIMITED LIABILITY COMPANY AGREEMENT
OF
XXXXXX XXXXX ASSOCIATES LLC
Dated as of March 31, 2004
THE INTERESTS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED OR
QUALIFIED UNDER THE APPLICABLE STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION AND QUALIFICATION PROVIDED IN THE SECURITIES ACT
AND THE APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION OR REGISTRATION UNDER THE APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED.
IN ADDITION, THE INTERESTS ISSUED UNDER THIS AGREEMENT MAY BE SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH
HEREIN.
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS..........................................................1
ARTICLE 2 LIMITED LIABILITY COMPANY............................................6
2.1 Certificate of Formation.....................................6
2.2 Name.........................................................6
2.3 Principal Office, Resident Agent and Registered Office.......6
2.4 Purpose......................................................6
2.5 Term.........................................................7
2.6 Fiscal Year..................................................7
ARTICLE 3 CAPITAL CONTRIBUTIONS AND LOANS BY MEMBERS...........................7
3.1 Initial Capital Contributions................................7
3.2 Additional Capital Contributions.............................7
3.3 General......................................................8
3.4 No Third Party Rights........................................8
3.5 Return of Capital............................................8
ARTICLE 4 MANAGEMENT...........................................................8
4.1 Designation of Managing Member and Grant of Authority........8
4.2 Officers....................................................10
4.3 Limitations on Certain Transfers............................10
4.4 Advisory Board..............................................11
4.5 Affiliate Agreements........................................11
4.6 Limitation on Authority of Other Members to Act on
Behalf of Company.........................................11
4.7 Permissible Activities of the Members.......................11
4.8 Exculpation.................................................12
4.9 Bank Accounts...............................................12
4.10 Restrictions on Transfers After Seven Years.................12
ARTICLE 5 COMPENSATION AND FEES...............................................13
5.1 Reimbursement of Expenses...................................13
5.2 No Additional Fees..........................................14
ARTICLE 6 COVENANTS, WARRANTIES AND REPRESENTATIONS OF MEMBERS................14
6.1 Representations and Warranties of SP........................14
6.2 Representations and Warranties of Killington................14
ARTICLE 7 BOOKS AND RECORDS; AUDITS; CERTAIN TAX MATTERS......................15
7.1 Books and Records; Audits; Certain Tax Matters..............15
ARTICLE 8 CAPITAL ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS........................16
8.1 Capital Accounts............................................16
8.2 Allocations.................................................17
8.3 Distributions...............................................18
8.4 Withholding.................................................18
8.5 Final Distribution..........................................18
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ARTICLE 9 DISSOLUTION.........................................................19
9.1 Dissolving Events...........................................19
9.2 Methods of Liquidation......................................19
9.3 Reasonable Time for Liquidating.............................20
9.4 Date of Liquidation.........................................20
9.5 Withdrawals.................................................20
ARTICLE 10 SALE; ASSIGNMENT; TRANSFER.........................................20
10.1 Transfers of Interests in Company...........................20
10.2 Restraining Order; Specific Performance; Other Remedies.....21
10.3 Compliance with Law.........................................21
10.4 Substitute Members..........................................21
10.5 Overall Transfer Prohibitions...............................22
10.6 Section 754 Election........................................22
10.7 Release of Liability........................................22
ARTICLE 11 NOTICES............................................................23
11.1 In Writing; Address.........................................23
11.2 Method......................................................24
ARTICLE 12 MISCELLANEOUS......................................................24
12.1 Additional Documents and Acts...............................24
12.2 Governing Law and Jurisdiction..............................24
12.3 Pronouns....................................................24
12.4 Entire Agreement............................................24
12.5 References to this Agreement................................24
12.6 Headings....................................................25
12.7 Binding Effect..............................................25
12.8 Counterparts................................................25
12.9 Amendments..................................................25
12.10 Estoppel Certificates.......................................25
12.11 Exhibits....................................................25
12.12 Severability................................................25
12.13 Waiver; Modification........................................25
12.14 Third-Party Beneficiaries...................................25
12.15 Reliance on Authority of Person Signing Agreement;
Designated Representatives; Authority of Managing Member..26
12.16 Indemnity...................................................26
12.17 Herein......................................................27
12.18 Including...................................................27
12.19 Cost of Counsel.............................................27
12.20 Days........................................................27
12.21 Time of Essence.............................................27
12.22 General Exculpation.........................................27
12.23 Partition...................................................27
12.24 Securities Trading of Membership Interests..................27
-ii-
Exhibits
Exhibit A - Description of Development Property
Exhibit B - Designated Representations
Exhibit C - Tax Exhibit
Exhibit D - List of Certain Agreements Affecting Development Property
-iii-
LIMITED LIABILITY COMPANY AGREEMENT
OF
XXXXXX XXXXX ASSOCIATES LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of XXXXXX XXXXX
ASSOCIATES LLC, a Delaware limited liability company (the "Company"), is
executed as of March 31, 2004, by and among SP LAND COMPANY, LLC, a Delaware
limited liability company ("SP"), and KILLINGTON, LTD., a Vermont corporation
("Killington").
W I T N E S S E T H :
WHEREAS, the Members formed the Company pursuant and subject to the
Delaware Limited Liability Company Act (as amended from time to time, the "Act")
pursuant to that certain Certificate of Formation of the Company, dated as of
March 23, 2004, and filed with the Secretary of State of the State of Delaware
on March 23, 2004 (the "Certificate of Formation");
WHEREAS, in connection with the formation of the Company and in exchange
for certain Membership Interests therein, as more fully hereinafter set forth,
Killington and SP have contributed to the Company their respective undivided
fifty percent (50%) interests in and to the Development Property (as defined
below).
WHEREAS, SP and Killington now desire to enter into this Agreement to (i)
reflect the contributions described above, and SP's and Killington's admission
as Members in the Company as a result thereof, (ii) set forth the Members
respective Membership Interests as a result of such contributions, and (iii)
otherwise establish the Members respective rights in the Company and the terms
and provisions upon which the Company shall operate.
NOW, THEREFORE, in consideration of the premises and the mutual promises,
obligations and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be, and hereby being, legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the following meanings when used herein:
"Act": As defined in the Recitals.
"Additional Capital Contributions": With respect to SP or Killington, any
Capital Contribution made by SP or Killington pursuant to Section
3.2(b) hereof.
"Affiliate": With respect to any designated Person, any other Person which,
directly or indirectly, controls or is controlled by or is under
common control with such designated Person. "Control" means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person.
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"Affiliate Agreement": Any contract, agreement or other arrangement, oral
or written, entered into between the Company and any Person which is
an Affiliate of a Member with respect to the provision of services to,
or supplies, machinery or equipment for, the Company Assets or any
portion thereof.
"Agreement": This Limited Liability Company Agreement, as the same may be
amended from time to time in accordance herewith.
"ASC": American Skiing Company, a Delaware corporation.
"ASCRP": American Skiing Company Resort Properties, Inc., a Maine
Corporation.
"Business Day": A day which is not a Saturday or Sunday or a legally
recognized public holiday in the United States or the State of New
York.
"Capital Account": As defined in Section 8.1.
"Capital Contributions": (a) with respect to Killington, the Initial
Capital Contribution made, or deemed made, by Killington pursuant to
Section 3.1(a); and (b) with respect to SP, the sum of (i) the Initial
Capital Contribution made, or deemed made, by SP pursuant to Section
3.1(b), plus (ii) any Additional Capital Contributions made by SP
pursuant to Section 3.2 after the date hereof.
"Cash Flow": Cash Flow for any period shall mean:
(a) the gross cash receipts of the Company for such period from
all sources, including, but not limited to, all receipts from the
operation of the Development Property or any other Company Assets, the
sale or lease of any portion of the Development Property or any other
Company Assets, net proceeds available to the Company from any
financing or refinancing, the cash proceeds attributable to any
Additional Capital Contributions, made during such period and net
reductions in funded reserves or sinking funds of the Company (other
than any such reductions used to pay Company expenditures); less
(b) without duplication of any amounts deducted in determining
(a) above, the gross cash expenditures of the Company for such period
for all purposes with respect to the Company including both operating
and capital expenditures, including any amounts paid with respect to
any Loans, determined in accordance with cash basis accounting
principles consistently applied (excluding expenditures made from
previously established reserves); less
(c) deposits or allocations into reserve accounts for the
Development Property or any other Company Assets.
"Certificate of Formation": As defined in the Recitals.
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"Code": The Internal Revenue Code of 1986, as amended.
"Company": As defined in the Preamble.
"Company Assets": All interests, rights and properties of any kind owned by
the Company, including the Development Property and any interest in
any partnership, limited partnership, joint venture, limited liability
company or similar organization or joint participation arrangement in
which the Company shall, directly or indirectly, be a partner, member,
venturer, investor or other beneficial interest owner or otherwise
participate in connection with the Development Property (or any
portion thereof) or any other property acquired by the Company, or
otherwise in connection with the Company's purpose as hereinafter set
forth.
"Developed Property": Shall mean any (i) property upon which buildings or
homes are constructed, and (ii) any finished lots (i.e., lots upon
which infrastructure, such as utilities and road access, have been
constructed) which are sold to retail buyers (i.e., the ultimate
homeowner) or to builders, so long as no more than four (4) lots are
sold to any such builder.
"Development Entity": As defined in Section 4.1(e).
"Development Property": Collectively, the real property described on
generally on Exhibit A attached hereto, and all buildings, structures,
improvements, fixtures, equipment, and other installations now or
hereafter erected on, in, under, or above such real property, together
with all rights related thereto, including all entitlements,
development rights, contract rights, leases, easements, utility rights
and other appurtenances thereto.
"First Offer Property": As defined in Section 4.10.
"Fiscal Year": As defined in Section 2.6.
"Index": The Consumer Price Index for All Urban Consumers (CPI-U), United
States City Average (all items) (base year 1982-84 = 100), promulgated
by the United States Department of Labor, Bureau of Labor Statistics
(or should such index no longer be published or available, any
successor index of equivalent measurement and geographical area; or
should no successor be published or available, the index of equivalent
or comparable measurement).
"Initial Capital Contribution": Shall mean the amounts contributed, or
deemed contributed, by Killington and SP pursuant to Section 3.1
hereof.
"Initial Preference Amount": Shall mean, (a) with respect to Killington
(and its successors and/or assigns) only, the amount of $1,500,000,
such amount being equal to Killington's Initial Capital Contribution
pursuant to Section 3.1(a) hereof, and (b) with respect to SP (and its
successors and/or assigns) only, the amount of $100, such amount being
equal to SP's Initial Capital Contribution pursuant to Section 3.1(b)
hereof.
"Killington": As defined in the Preamble.
"Killington Resort": Shall mean the ski trails, lifts, day lodges, and
related ski facilities located on and around Killington Mountain in
Killington, Vermont.
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"Loan": Any indebtedness or obligation for money borrowed by the Company.
"Managing Member": SP, in its capacity as the Managing Member or any of its
successors in their respective capacities as the Managing Member
admitted to the Company as the Managing Member hereunder in accordance
with the terms of this Agreement, for so long as any such Person is
designated as the Managing Member under the terms of this Agreement.
"Master Agreement": That certain Agreement Regarding Killington Resort and
Certain Nearby Properties dated as of March 31, 2004, between ASC,
ASCRP, Killington and SP.
"Member" or "Members": Each of Killington and SP, in their respective
capacities as Members, any of their permitted successors in their
respective capacities as Members admitted to the Company as Members
hereunder in accordance with the terms of this Agreement, for so long
as any such Person is a Member under the terms of this Agreement.
"Membership Interest": With respect to any Member, such Member's entire
interest in the Company including such Member's right to receive
distributions and to participate in the management of the business and
affairs of the Company on the terms and conditions hereinafter set
forth, including the right to vote on, consent to or otherwise
participate in any decision or action of or by the Members granted
pursuant to this Agreement and the Act.
"Membership Percentage": With respect to any Member, that Member's
percentage ownership interest in the Company. The initial Membership
Percentages are as follows:
SP 50%
Killington 50%
"Mortgage(s)": Any mortgage, deed of trust, deed to secure debt, bond,
collateral assignment, indenture, pledge or other lien or security
interest in all or any part of the Development Property or any other
Company Assets.
"Offer Notice": As defined in Section 4.10.
"Offer Price": As defined in Section 4.10.
"Offer Property": As defined in Section 4.10.
"Person": An individual, partnership, joint venture, corporation, trust or
other entity.
"Pledge": Any voluntary pledge, mortgage, deed of trust, security interest
or other consensual lien or hypothecation of, in or on any Member's
Membership Interest, including on any right of such Member to receive
distributions from the Company.
4
"Return Rate": A daily interest factor for an annual interest rate
(compounded annually) equal to the mean annual increase in the Index
from (i) the Index last published prior to the last determination
date, to (ii) the Index last published prior to the current
determination date, with the first determination date being the date
of this Agreement and with the subsequent determination dates being
each subsequent anniversary of the date of the Agreement.
"ROFO": As defined in Section 4.10.
"ROFO Period": As defined in Section 4.10.
"Securities Act": As defined on the cover page of this Agreement.
"Shortfall": As defined in Section 3.2(a).
"Ski Resort Operator": As defined in Section 4.3.
"SP": As defined in the Preamble.
"SP LLC Agreement": That certain Amended and Restated Limited Liability
Company Agreement of SP dated of even date herewith.
"Tax Matters Partner": As defined in Section 7.1(g).
"Transfer": As defined in Section 10.1(a).
"Unpaid Initial Preferred Return": With respect to the applicable Member(s)
(and its successors and/or assigns) only, as of the end of any day
during the term hereof, an amount equal to (a) the Unpaid Initial
Preferred Return of such Member as of the end of the immediately
preceding day, plus (b) the product of the Unpaid Initial Preferred
Return of such Member as of the end of the immediately preceding day
multiplied by the Return Rate, plus (c) the product of the Unrecovered
Initial Preference Amount of such Member as of the end of the
immediately preceding day multiplied by the Return Rate, minus (d) any
distributions made to such Member during the day in question pursuant
to Section 8.3(a) hereof.
"Unrecovered Initial Preference Amount": Shall mean, (a) with respect to
Killington (and its successors and/or assigns) only, Killington's
Initial Preference Amount, as decreased by the amount of any
distributions hereafter paid to Killington (or its successors or
assigns) pursuant to Section 8.3(b) hereof; and (b) with respect to SP
(and its successors and/or assigns) only, SP's Initial Preference
Amount, as decreased by the amount of any distributions hereafter paid
to SP (or its successors or assigns) pursuant to Section 8.3(b)
hereof.
"Unpaid Additional Preferred Return": With respect to the applicable
Member(s) (and its successors and/or assigns) only, as of the end of
any day during the term hereof, an amount equal to (a) the Unpaid
Additional Preferred Return of such Member as of the end of the
immediately preceding day, plus (b) the product of the Unpaid
Additional Preferred Return of such Member as of the end of the
immediately preceding day multiplied by the Return Rate, plus (c) the
product of the Unrecovered Additional Preference Amount of such Member
as of the end of the immediately preceding day multiplied by the
Return Rate, minus (d) any distributions made to such Member during
the day in question pursuant to Section 8.3(c) hereof.
5
"Unrecovered Additional Preference Amount": Shall mean, (a) with respect to
Killington (and its successors and/or assigns) only, any amounts
contributed by Killington pursuant to Section 3.2 hereof, as decreased
by the amount of any distributions hereafter paid to Killington (or
its successors or assigns) pursuant to Section 8.3(d) hereof; and (b)
with respect to SP (and its successors and/or assigns) only, any
amounts contributed by SP pursuant to Section 3.2 hereof, as decreased
by the amount of any distributions hereafter paid to SP (or its
successors or assigns) pursuant to Section 8.3(d) hereof.
ARTICLE 2
LIMITED LIABILITY COMPANY
2.1 Certificate of Formation. The Certificate of Formation has been filed
with the Office of the Secretary of State of the State of Delaware. The
Certificate of Formation may hereafter be amended whenever, and within the time
periods, required by the Act.
2.2 Name. The name of the Company is Xxxxxx Xxxxx Associates LLC, in which
name all assets belonging to the Company shall be held and under which name all
business and affairs of the Company shall be conducted, except to the extent
otherwise required by the laws of the State of Delaware or any other state in
which the Company is doing business.
2.3 Principal Office, Resident Agent and Registered Office. The principal
office of the Company shall initially be located at 000 Xxxxxxxx Xxxxx, Xxxxx
000, Xxxxxx, Xxxxx 00000, or at such other place or places as the Managing
Member may from time to time designate, provided, however, that the Company
shall at all times maintain a registered agent and a registered office in the
State of Delaware. The name and address of the registered agent for service of
process on the Company in the State of Delaware is The Corporation Trust
Company, Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000. The address of the registered office of the Company in the State of
Delaware is The Corporation Trust Company, Corporation Trust Center, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. Such principal office, registered agent or
registered office may be changed by the Managing Member, so long as in
accordance with the Delaware Act; concurrently with any such change, written
notice thereof shall be given to each Member. Promptly following execution and
delivery of this Agreement, the Managing Member shall cause the Company to
register as a foreign limited liability company in the State of Vermont.
2.4 Purpose. The objects and purposes of the Company are solely to invest
in, acquire, hold, own, operate, manage, maintain, improve, subdivide,
pre-develop, develop, sell, finance, lease, and otherwise use or deal with the
Development Property and any other Company Assets, for profit and as an
investment, and in all respects to act as owner of the Company Assets. In
furtherance of the foregoing, the Company's purposes shall include to make,
enter into, deliver and perform all contracts, agreements and other
undertakings, pay all costs and expenses, and do all such other acts and things
as the Managing Member may deem necessary or advisable to carry out the
foregoing objects and purposes upon and subject to the terms and conditions of
this Agreement. The Company may do any of the foregoing through wholly-owned
subsidiaries or, subject to Section 4.3 below, through any Development Entity in
which the Company shall, directly or indirectly, be a partner, member, venturer,
investor or other beneficial interest owner.
6
2.5 Term. The term of the Company shall continue until the liquidation and
dissolution of the Company pursuant to Article 9 hereof.
2.6 Fiscal Year. The fiscal year of the Company (the "Fiscal Year") shall
end on the 31st day of December in each year. The Company shall have the same
Fiscal Year for income tax and accounting purposes.
ARTICLE 3
CAPITAL CONTRIBUTIONS AND LOANS BY MEMBERS
3.1 Initial Capital Contributions.
(a) Killington. Prior the date hereof, Killington has contributed to the
Company an undivided fifty percent (50%) interest in and to the Development
Property, in exchange for Killington's Membership Interest in the Company. As of
the date hereof, Killington's Initial Capital Contribution is equal to
$1,500,000 and its Membership Percentage is fifty percent (50%).
(b) SP. On the date hereof, SP has contributed to the Company the remaining
undivided fifty percent (50%) interest in and to the Development Property, in
exchange for SP's Membership Interest in the Company. As of the date hereof,
SP's Initial Capital Contribution is equal to $100 and its Membership Percentage
is fifty percent (50%).
3.2 Additional Capital Contributions. (a) If at any time or from time to
time, additional funds are required (or are expected to be required) to pay any
operating expenses of the Company (e.g., taxes, insurance, security, repair,
maintenance, capital expenditures) or the Managing Member, in its sole
discretion, otherwise determines that additional capital is otherwise needed to
meet the obligations or needs of the Company or to enable the Company to fulfill
its purpose (a "Shortfall"), the Managing Member shall provide written notice to
all Members of the existence (or expected existence) of such Shortfall, which
notice shall include information evidencing the basis for the Shortfall and the
Managing Member's recommendation as to meeting such Shortfall, which
recommendation may, in the Managing Member's sole discretion, include, seeking
third party financing for all or a portion of the Shortfall.
(b) In the event that (i) the Company has experienced a Shortfall (or is
expected to experience a Shortfall), and (ii) all or a portion of such Shortfall
is not funded pursuant to any third party financing as contemplated by Section
3.2(a), SP and Killington shall each have the right, but not the obligation, to
make additional Capital Contributions in the amount of the Shortfall (any such
contribution, an "Additional Capital Contribution"). If Killington does not make
an Additional Capital Contribution, then SP may make an Additional Capital
Contribution for the full amount of the Shortfall. If both SP and Killington
desire to make an Additional Capital Contribution, they shall do so in such
amounts as agreed to, or in the absence of agreement, seventy-five percent (75%)
of the Shortfall will be contributed by SP and twenty-five percent (25%) of the
Shortfall will be contributed by Killington. Notwithstanding the foregoing, in
no event shall SP or Killington or any other Member be obligated to make any
Additional Capital Contributions for the Shortfall or to make any other Capital
Contributions (other than the Initial Capital Contributions pursuant to Section
3.1 above).
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3.3 General.
(a) Except for the Initial Capital Contributions, no Member shall be
obligated to contribute capital to, and no Member may withdraw capital from, the
Company. To the extent any monies which any Member is entitled to receive
pursuant to Article 8 below would constitute a return of capital, each of the
Members consents to the withdrawal of such capital.
(b) Interest earned on Company funds shall inure solely to the benefit of
the Company. Unless otherwise specifically provided herein, no interest shall be
paid on any Capital Contributions or advances to the capital of the Company, nor
upon any undistributed or reinvested income or profits of the Company.
3.4 No Third Party Rights. The right of the Members to make any Additional
Capital Contributions after the date hereof under the terms of this Agreement
shall not be construed as conferring any rights or benefits to or upon any
Person not a party to this Agreement, or the holder of any indebtedness of the
Company, or the holder of any obligations secured by a Mortgage or other lien or
encumbrance upon or affecting the Company or any interest of a Member therein or
in the Company Assets or any part thereof or any interest therein, except to the
extent expressly agreed in writing by all Members.
3.5 Return of Capital. Except as otherwise provided in Article 8 or 9, no
Member shall have the right to demand or to receive the return of all or any
part of its contributions to the capital of the Company. In addition, no Member
has the right to demand or to receive property other than cash in return for its
contributions to the capital of the Company.
ARTICLE 4
MANAGEMENT
4.1 Designation of Managing Member and Grant of Authority. Except as
otherwise provided in this Agreement, the Managing Member (i) shall have the
sole and exclusive power and authority on behalf of the Company to carry out any
and all of the purposes of the Company and to perform all acts and enter into
and perform all contracts and other undertakings that it may in its sole and
absolute discretion deem necessary or advisable or incidental thereto, and (ii)
shall have full and absolute authority in its discretion to exercise, on behalf
of and in the name of the Company, all rights and powers of a manager or
managing member under the Act. Without in any manner limiting the foregoing, the
Members hereby stipulate, confirm, acknowledge and agree that the Managing
Member, acting directly or through any duly appointed Officers of the Company,
may cause the Company to do, or cause to be done, on behalf and as an act of the
Company, any act which is necessary or desirable to carry out any of the
purposes of the Company, including any of the following:
8
(a) Enter into, make, deliver and perform all contracts, agreements,
instruments and other undertakings as the Managing Member may, in its sole and
absolute discretion, determine to be necessary, advisable, appropriate or
incidental to the carrying out of the objects and purposes set forth above or
contemplated by this Agreement, the taking of such action by the Managing Member
to be conclusive evidence of such determination;
(b) Acquire, either directly or indirectly, real property and tangible and
intangible personal property of any kind, character or nature;
(c) Arrange financing for the Company and cause the Company to directly or
indirectly borrow money or otherwise directly or indirectly incur, guarantee or
otherwise become liable for any amount of indebtedness (including indebtedness
for accrued expenses or ordinary trade payables) in connection with the any of
the Company Assets and/or the operation of the Company's business activities;
(d) Mortgage, pledge, assign or otherwise create a lien, encumbrance or
security interest in or on all or any part of the Company Assets in order to
secure Loans or advances to the Company or any Person in which the Company has a
direct or indirect interest (including any Development Entity), or any
obligation of the Company or any Person in which the Company has a direct or
indirect interest (including any Development Entity), or for any other Company
purpose;
(e) Subject to Section 4.3 below, cause the Company to be a venturer,
member, partner, stockholder, holder of a beneficial interest or other
participant or owner in, and to contribute all or any portion of the Company
Assets to, a wholly owned subsidiary of SP or a joint venture, partnership
(whether limited, limited liability or general), corporation, limited liability
company, trust or other venture or enterprise (any of the foregoing a
"Development Entity");
(f) Subject to Section 4.3 below, sell, assign, transfer, exchange, master
lease, or otherwise liquidate and dispose of all or any portion of, or interest
in, the Company Assets, including entering into or modifying any sale, transfer,
lease or other agreement or contract with respect thereto;
(g) Manage, maintain, operate, repair, improve, subdivide, pre-develop,
develop, lease or otherwise deal in any manner with, all or any portion of the
Company Assets, including entering into or modifying any development, leasing,
management, easement, restrictive covenant, or other agreement, for or with
respect to all or any portion of, or interest in, the Company Assets;
(h) Seek, obtain, amend or modify any zoning, regulatory approvals or
permits, subdivision approvals or permits, acquire other entitlements or
otherwise deal in any manner with the Development Property (or any portion
thereof) or any other property acquired by the Company;
(i) Guaranty or provide indemnifications for the obligations of any Person;
9
(j) Employ or consult such Persons (including any partner, shareholder,
officer, director, agent, advisor or employee of any Affiliate of a Member) as
the Managing Member shall deem necessary, appropriate or advisable for the
operation and management of the Company, including brokers, accountants,
engineers, attorneys or specialists in any field of endeavor whatsoever, and
authorize any such Person to act for and on behalf of the Company;
(k) Make expenditures as are required to operate and manage the Company and
the Company Assets and to otherwise carry out any of the activities described in
this Section 4.1;
(l) Deposit the funds of the Company in the Company's name in any bank or
trust company and entrust to such bank or trust company any of the securities,
monies, documents and papers belonging to or relating to the Company; or deposit
with and entrust to any brokerage firm that is a member of any national
securities exchange any of said funds, securities, monies, documents and papers
belonging to or relating to the Company;
(m) Possess, monitor, manage, or otherwise deal in, and exercise all
rights, powers, privileges and other incidents of ownership or possession with
respect to Company Assets or any other property held or owned by the Company;
(n) Make appropriate elections and other decisions with respect to tax and
accounting matters; prepare and file all tax returns for the Company (but
without any obligation hereunder to prepare or file the tax returns or other
reports of the Members);
(o) Bring and defend actions and proceedings at law or equity before any
court or governmental, administrative or regulatory agency, body or commission
or otherwise;
(p) Acquire and enter into any contract of insurance necessary or desirable
for the protection or conservation of the Company and/or the Company Assets or
otherwise in the interest of the Company (including directors and officers
insurance or the equivalent thereof) as the Managing Member, in its sole
discretion, shall determine;
(q) Distribute funds to the Company by way of cash or otherwise, all in
accordance with the provisions of this Agreement; and
(r) Do any other act which is necessary or desirable to carry out any of
the purposes of the Company.
4.2 Officers. The Managing Member may designate one or more Persons to be
officers of the Company ("Officers"), and any Officer so designated shall have
such title, authorities, duties, and salaries as the Managing Member may
delegate to them. Any Officer may be removed as such, either with or without
cause, by the Managing Member at any time.
4.3 Limitations on Certain Transfers. Any actions described in Section
4.1(e) shall require the prior written consent of Killington, which consent
shall not be unreasonably withheld. Until April 1, 2011, any actions described
in Section 4.1(f) shall require the prior written consent of Killington, which
consent shall not be unreasonably withheld. On and after April 1, 2011, actions
described under Section 4.1(f) shall not require the consent of Killington, but
shall be subject to (i) the consent of a majority of the advisory board pursuant
to Section 4.4, and (ii) the provisions of Section 4.10. Notwithstanding
anything in this Agreement to the contrary, sales of Developed Property shall
not require the consent of Killington nor shall such sales be subject to the
provisions of Section 4.10.
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4.4 Advisory Board. The Company shall at all times have an advisory board
consisting of two (2) representatives of SP and one (1) representative of
Killington. The initial members of the advisory board shall be, on behalf of SP,
Xxxxxx X. Xxxxx and Xxxx X. Xxxxxx, III, and, on behalf of Killington, Xxxxx X.
Xxxxxx. The advisory board shall meet at least once per calendar quarter, on a
date and at a time reasonably acceptable to the board members, to discuss and
review the Company's development plans and activities, operating budgets and
such other activities of, or matters relating to, the Company, the Development
Property and/or the Development Entities, as the board members may determine.
Such meetings may be in person or by telephone (or by such other medium as the
board members may agree). Notwithstanding the foregoing, in no event shall the
review, consent, approval or authorization of the advisory board be required for
any activity of the Company, nor for any action taken by the Managing Member
pursuant to Section 4.1 above or otherwise. Members of the advisory board may be
replaced, by the party that appointed such member, at any time by delivery of
written notice to the Company by either SP or Killington; a copy of said notice
shall also be delivered to all other Members. Notwithstanding anything herein to
the contrary, the sale of any land owned by the Company or the contribution of
any land by the Company to a joint venture or other entity shall require a
majority vote of the advisory board.
4.5 Affiliate Agreements. The Managing Member may cause the Company to
enter into Affiliate Agreements and the validity of any such transaction or
agreement (or any payment thereunder) shall not be affected by reason of any
relationship between the Company and a Member or any Affiliate of a Member,
provided that such agreements are on terms no less favorable to the Company than
those that would be applicable without such Affiliate relationship.
4.6 Limitation on Authority of Other Members to Act on Behalf of Company.
The Members (other than the Managing Member) in their capacities as Members have
no authority to act for or bind the Company and may not participate in the
general management, conduct or control of the Company's business or affairs.
Notwithstanding the foregoing, to the extent specifically requested in writing
by the Managing Member, each Member shall cooperate with the Managing Member in
connection with any of the activities of the Company described in Section 4.1(h)
above.
4.7 Permissible Activities of the Members. Except as may be restricted by
the Master Agreement, the Members and their Affiliates may individually and/or
with others (i.e., other than in their capacity as Members) engage in other
activities for profit, whether in the real estate business or otherwise,
including the ownership, operation, development, leasing and management of other
properties similar to the Development Property, and may in the future
participate in partnerships or other ventures for such purposes. Neither the
Company nor the Members shall have any right by virtue of this Agreement in or
to such independent ventures or to the income or profits derived therefrom.
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4.8 Exculpation.
(a) The Managing Member shall not be liable or accountable, in damages or
otherwise, to the Company or to any other Member for any act performed or
failure to act by it that arises out of, or in connection with, this Agreement
or the Company's business and affairs, unless such act or failure to act is
attributable to (i) fraud, (ii) gross negligence, (iii) willful misconduct, or
(iv) material breach of the terms and provisions of this Agreement; provided,
however, that, solely for purposes of clause (iv) of this Section 4.8(a), the
Managing Member shall not be liable or accountable, in damages or otherwise, to
the Company or to any other Member for any breach of the terms and provisions of
this Agreement with respect to which the Managing Member can establish that (A)
such act or failure to act was undertaken with due regard for the terms and
provisions of this Agreement and (B) in the reasonable good faith judgment of
the Managing Member, such act or failure to act was not a violation of the terms
and provisions of this Agreement.
(b) The Company (but not any Member) shall indemnify and hold harmless the
Managing Member (and its partners, members, and Affiliates) and any Officers of
the Company, for any loss, damage, liability, cost, or expense (including
reasonable attorneys' fees) claimed by a third party and incurred by virtue of
the Managing Member's or the Officer's activities hereunder and arising out of
any act performed or failure to act by it (or them) if such act or failure to
act arises out of, or in connection with, this Agreement or the Company's
business and affairs, and is not an act for which such Managing Member is liable
under Section 4.8(a)(i) through (iv) above.
4.9 Bank Accounts. On behalf of and at the expense of Company, the Managing
Member shall maintain accounts in the name of the Company and operating accounts
in the name of the Company in banks or trust companies in the continental U.S.,
for the deposit and disbursement of all funds relating to the Company. All such
Company funds shall be promptly deposited in such accounts, to be held and
disbursed only as provided herein.
4.10 Restrictions on Transfers After Seven Years. Notwithstanding anything
in Section 4.1(f) and Section 4.3 to the contrary, on or after April 1, 2011,
Managing Member may cause Company to do any of the actions described in Section
4.1(f) without the consent of Killington but with the consent of a majority of
the advisory board pursuant to Section 4.4, so long as Managing Member complies
with the provisions of this Section 4.10. Commencing on and after April 1, 2011,
Company hereby grants and conveys unto Killington, a right of first offer (the
"ROFO") with respect to any real property owned by Company (other than the
Developed Property) on or after April 11, 2011 (collectively, the "First Offer
Property"), on and subject to the terms and conditions hereinafter set forth. In
the event the Managing Member desires to cause Company to sell or convey any
portion of the First Offer Property at any time on or after April 1, 2011 (the
"ROFO Period"), Managing Member, prior to selling such portion of the First
Offer Property, shall first deliver to Killington a written notice (the "Offer
Notice") stating the intention of the Managing Member to cause the Company to
sell the applicable portion of the First Offer Property (such portion, the
"Offer Property") and setting forth the price (the "Offer Price") which the
Managing Member requires for the Offer Property. The Offer Notice shall also
contain a detailed metes and bounds description of the Offer Property and all
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material terms the Managing Member requires or is willing to consider with
respect to the sale of the Offer Property (e.g., material easement rights
retained, possibility of seller-provided financing, timing for due diligence and
closing (with a minimum due diligence and closing period of thirty (30) and
sixty (60) days, respectively, being provided), and amount of xxxxxxx money
required). If Killington fails to deliver written notice to the Managing Member
exercising its ROFO with respect to the applicable Offer Property within thirty
(30) days after Killington's receipt of the Offer Notice, the Managing Member
shall be free to cause the Company to sell the Offer Property to any third party
without the consent of Killington (but subject to the consent of a majority of
the advisory board) on the following terms and conditions: (i) the final sales
price (as reasonably estimated by the Managing Member taking into consideration
all compensation paid by the purchaser, may be no less than ninety percent (90%)
of the original Offer Price set forth in the original Offer Notice, (ii) the
Company must enter into a binding contract of sale with respect to the Offer
Property within twelve (12) months after the date Killington declined to
exercise its ROFO, and (iii) the closing of the sale of the Offer Property must
occur not later than eighteen (18) months after the date Killington declined to
exercise its ROFO. If any of the conditions in clauses (i) through (iii) above
are not satisfied in the time periods provided above, the ROFO shall be
reinstated with respect to the applicable Offer Property and the Managing Member
shall again be required to cause the Company to offer to sell the Offer Property
to Killington prior to selling it to a third party by delivering a supplemental
Offer Notice setting forth the applicable (revised or reduced as applicable)
Offer Price and other relevant terms of the offer. The sale of less than all of
the First Offer Property shall not extinguish the ROFO as to the portion(s)
thereof not sold, and the ROFO shall continue to apply to the unsold portions on
the terms set forth above. Notwithstanding the foregoing, the ROFO (i) shall be
subordinate to the liens and security interests of any lender of Company holding
a lien on Company Assets, (ii) shall not apply to sales or transfers of Company
Assets to Affiliates or the transfers described in Section 4.1(e) (provided,
however, such ROFO shall survive any such transfer to any Affiliate and shall be
binding on such Affiliates and shall apply to any sale or transfer by any such
Affiliate during the ROFO Period), and (iii) shall not apply to Developed
Property.
ARTICLE 5
COMPENSATION AND FEES
5.1 Reimbursement of Expenses. The Company shall pay to the Managing
Member, as and when requested, the amounts necessary to reimburse the Managing
Member for the direct, third party, out-of-pocket expenses incurred by the
Managing Member in administering the Company hereunder. In addition, the Company
shall pay to the Managing Member, as and when requested, (a) the amounts
necessary to reimburse the Managing Member for the travel expenses and any fees,
salaries, benefits, commissions and other compensation or reimbursements paid to
or for the benefit of any Officers or employees of the Company, (b) the amount
of the normal and customary overhead expenses anticipated to be incurred by the
Managing Member in the execution of its duties for the Company with respect to
the period in question that are properly allocable to the business, operations,
and activities of the Company, including an allocable portion of the travel
expenses and any fees, salaries, benefits, commissions and other compensation or
reimbursements paid to or for the benefit of any officers or employees of the
Managing Member, including specifically, Xxxxxx X. Xxxxx. .
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5.2 No Additional Fees. As of the date of this Agreement, the Company has
not agreed to pay any fees to a Member or its Affiliate other than as set forth
in this Article 5.
ARTICLE 6
COVENANTS, WARRANTIES AND REPRESENTATIONS OF MEMBERS
6.1 Representations and Warranties of SP. In addition to the covenants,
warranties and representations made elsewhere in this Agreement, SP does hereby
covenant, warrant and represent that, as of the date of this Agreement:
(a) SP has all requisite power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
(b) All acts and other proceedings required to be taken by SP to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and properly taken.
(c) This Agreement has been duly executed and delivered by SP and
constitutes the valid and binding obligation of SP, enforceable against it in
accordance with its terms, except as may be limited by bankruptcy, insolvency
and other similar laws and general equitable principles.
(d) SP has obtained all approvals and consents required to be obtained by
it in connection with the execution and delivery of this Agreement by SP and the
consummation of the transactions contemplated hereby from all governmental
authorities having any approval rights with respect thereto and all Persons
having consent rights, to the extent that the failure to obtain such approval or
consent would have a material adverse effect on the Company or its assets.
(e) SP has not contracted with or authorized any broker, agent, or finder
to act on its behalf with respect to this Agreement, the Company or the
Development Property.
6.2 Representations and Warranties of Killington. In addition to the
covenants, warranties and representations made elsewhere in this Agreement,
Killington does hereby covenant, warrant and represent that, as of the date of
this Agreement:
(a) Killington has all the requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
(b) All acts and other proceedings required to be taken by Killington to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and properly
taken.
(c) This Agreement has been duly executed and delivered by Killington and
constitutes the valid and binding obligation of Killington, enforceable against
it in accordance with its terms, except as may be limited by bankruptcy,
insolvency and other similar laws and general equitable principles.
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(d) Killington has obtained all approvals and consents required to be
obtained by it in connection with the execution and delivery of this Agreement
by Killington and the consummation of the transactions contemplated hereby from
all governmental authorities having any approval rights with respect thereto and
all Persons having consent rights, to the extent that the failure to obtain such
approval or consent would have a material adverse effect on the Company or its
assets.
(e) Killington has no actual knowledge of any litigation or the threat of
any litigation, including any condemnation proceedings, affecting or concerning
the Company, the Development Property, title to the Development Property (or any
water, utility, development or other rights with respect to the Development
Property) or any right to use or develop the Development Property.
(f) Except for the contracts, agreements and title exceptions specifically
listed and described on Exhibit D attached hereto, the Development Property is
currently not encumbered or subject to any management, service, supply or other
agreements, contracts, or arrangements with any party.
(g) Killington has disclosed to SP all material facts and information of
which Killington or its Affiliates have actual knowledge concerning the
Development Property. No statement of fact made by or on behalf of Killington to
SP contains any untrue statement of a material fact or omits to state any
material fact necessary to make such statements not misleading.
(h) Killington has not contracted with or authorized any broker, agent, or
finder to act on its behalf with respect to this Agreement, the Company, or the
Development Property.
ARTICLE 7
BOOKS AND RECORDS;
AUDITS; CERTAIN TAX MATTERS
7.1 Books and Records; Audits; Certain Tax Matters.
(a) Books and Records. The Managing Member shall keep and maintain the
books and records of the Company and the Company Assets, which shall be prepared
in accordance with [generally accepted accounting principles] consistently
applied. Any Member shall have access to such books and records upon prior
written notice, and each shall have the right to copy said records at its own
expense.
(b) Where Maintained. The books, accounts and records of the Company shall
at all times be maintained at the principal office of the Company.
(c) Audits; Access to Information by Members. Upon at least thirty (30)
days notice to the Managing Member, any Member may, at its option and at its own
expense, conduct audits of the books, records and accounts of the Company. The
Managing Member shall provide the Member's appraisers, accountants and advisors
with access to all information related to the value of the Company Assets and to
the management personnel involved directly or indirectly in the affairs of the
Company and shall cause such personnel to cooperate fully with such Member or
its designees and to furnish information requested by it or its designees, as to
the status of the affairs of the Company.
15
(d) Reports. The Managing Member shall prepare and distribute such reports
and information to the Members as shall be reasonably requested by such Members
in order to enable them to be fully informed about the affairs of the Company.
In addition, the Managing Member shall deliver to the Members copies of any
reports furnished by the Company to the holders of any Loans or Mortgages on or
secured by the Company Assets. Further, not later than ninety (90) days after
the end of each Fiscal Year, the Company shall provide certified financial
statements and other financial information concerning the Company, so as to
allow each Member and its Affiliates to timely file all necessary U.S. tax
returns and to publish relevant financial statements.
(e) Tax Returns. The Managing Member shall prepare and file (or cause the
Company's accountants to prepare and file) in a timely manner after the end of
each Fiscal Year all federal, state and local tax returns for the Company for
such Fiscal Year and shall cause a copy thereof to be delivered to the Members.
(f) Cost of Accounting and Statements. Any costs incurred by the Company or
the Managing Member in connection with the foregoing subsections (a), (c), (d),
and (e) shall be an expense of the Company.
(g) Tax Matters Partner. The Managing Member shall have full power and
authority to act for the Company and the Members as "Tax Matters Partner", as
defined in Section 6231(a)(7) of the Code, with all the rights and
responsibilities of that position described in Sections 6222-32 of the Code and
to act in any similar capacity under applicable state or local law. The Tax
Matters Partner shall keep the Members informed as to the status of any
correspondence or communication that relates to (or may culminate in) an audit
of the Company's income, employment or payroll tax affairs by the Internal
Revenue Service. The Company shall reimburse the Tax Matters Partner for all
costs and expenses incurred by it in the exercise of the rights and/or the
performance of the responsibilities referred to in this Section 7.1(g). The
Company shall indemnify and hold harmless the Tax Matters Partner from all
claims, liabilities, costs and expenses, including reasonable attorneys' fees
and court costs, incurred by it in the exercise of the rights and/or the
performance of the responsibilities referred to in this Section 7.1(g).
ARTICLE 8
CAPITAL ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS
8.1 Capital Accounts. A "Capital Account" shall be maintained for each
Member. The Members' Capital Accounts shall be, as of the date hereof, initially
equal to: $1,500,000, in the case of Killington, and $100 in the case of SP.
Such Capital Account shall thereafter be increased by (i) the amount of
16
additional cash (including with respect to SP only, any Additional Capital
Contributions hereafter made by SP pursuant to Section 3.2 hereof) and the fair
market value of any additional property contributed by such Member to the
capital of the Company (net of liabilities secured by such contributed property
that the Company is considered to assume or to take subject to under Section 752
of the Code), (ii) the amount of any Profits (as defined in Exhibit C) allocated
to such Member pursuant to Section 8.2(a) and (iii) the amount of any special
allocations of income or gain to such Member pursuant to Section 2.1 of Exhibit
C and decreased by (a) the amount of money distributed to such Member by the
Company, (b) the fair market value of any property distributed to such Member by
the Company (net of liabilities secured by such distributed property that such
Member is considered to assume or take subject to under Section 752 of the
Code), (c) the amount of any Losses (as defined in Exhibit C) allocated to such
Member pursuant to Section 8.2(b) and (d) the amount of any special allocation
of deductions or losses to such Member pursuant to Section 2.1 of Exhibit C. The
foregoing Capital Account definition and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulation Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations.
8.2 Allocations.
(a) Except as provided in Section 2.1 of Exhibit C, and subject to Section
2.2 of Exhibit C, any Profits realized by the Company for a Fiscal Year shall be
allocated among the Members as follows and in the following order of priority.
(i) First, Profits shall be allocated among the Members in proportion
to the deficit balances in their respective Capital Accounts, until the
deficit balance in each such Member's Capital Account has been eliminated.
(ii) Next, Profits shall be allocated to each Member to the least
extent necessary to cause such Member's Capital Account balance to equal
the sum of its Unpaid Initial Preferred Return and its Unrecovered Initial
Preference Amount.
(iii) Next, Profits shall be allocated to each Member to the least
extent necessary to cause such Member's Capital Account balance to equal
the sum of its Unpaid Initial Preferred Return, its Unrecovered Initial
Preference Amount, its Unpaid Additional Preferred Return, and its
Unrecovered Additional Preference Amount.
(iv) Then, all remaining Profits shall be allocated among the Members,
pro rata in accordance with their respective Membership Percentages.
(b) Except as provided in Section 2.1 of Exhibit C, and subject to Section
2.2 of Exhibit C, any Losses realized by the Company for a Fiscal Year shall be
allocated among the Members as follows and in the following order of priority.
(i) First, Losses shall be allocated to each Member to the least
extent necessary to reduce such Member's Capital Account balance to an
amount equal to the sum of its Unpaid Initial Preferred Return, its
Unrecovered Initial Preference Account, its Unpaid Additional Preferred
Return, and its Unrecovered Additional Preference Amount.
17
(ii) Next, Losses shall be allocated to each Member to the least
extent necessary to reduce such Member's Capital Account balance to an
amount equal to the sum of its Unpaid Initial Preferred Return and its
Unrecovered Initial Preference Account.
(iii) Next, Losses shall be allocated among the Members in proportion
to their respective positive Capital Account balances, until the Capital
Account balance of each such Member is reduced to zero (0).
(iv) Then, all remaining Losses shall be allocated among the Members
according to their respective Membership Percentages.
8.3 Distributions. Subject to the provisions of Section 9.2, undistributed
Cash Flow, if any, in excess of reserves provided for in the definition of "Cash
Flow," shall be distributed to the Members periodically as follows:
(a) First, to each Member, in proportion to the amount of their respective
Unpaid Initial Preference Returns, until such Member's Unpaid Initial Preferred
Return has been reduced to zero (0);
(b) Second, to each Member, in proportion to the amount of their respective
Unrecovered Initial Preference Amounts, until such Member's Unrecovered Initial
Preference Amount has been reduced to zero (0);
(c) Third, to each Member, in proportion to the amount of their respective
Unpaid Additional Preference Returns, until such Member's Unpaid Additional
Preferred Return has been reduced to zero (0);
(d) Fourth, to each Member, in proportion to the amount of their respective
Unrecovered Additional Preference Amounts, until such Member's Unrecovered
Additional Preference Amount has been reduced to zero (0); and
(e) Fifth, to the Members, pro rata in accordance with their respective
Membership Percentages.
8.4 Withholding. The Managing Member is authorized to withhold from
distributions to the Members and to pay over to federal, state or local
government authorities any amounts required to be so withheld pursuant to the
Code or any other applicable federal, state or local law and shall allocate any
amounts so withheld to the Members. Any amounts so allocated to a Member shall
be treated as an amount distributed to such Member pursuant to this Article 8
for all purposes of this Agreement.
8.5 Final Distribution. The final distributions following dissolution shall
be made in accordance with the provisions of Section 9.2.
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ARTICLE 9
DISSOLUTION
9.1 Dissolving Events. The Company shall be dissolved in the manner
hereinafter provided upon the happening of any of the following events:
(a) the written agreement of the Members holding 51% or more of the
Membership Interests in the Company to terminate the Company;
(b) the disposition of all or substantially all of the Company Assets and
the collection of all amounts derived from any such disposition, including all
amounts payable to the Company under any promissory notes or other evidences of
indebtedness derived by the Company from any such disposition; or
(c) any other event which under applicable law would cause the dissolution
of the Company, provided, however, that, unless required by law or objected to
by Members holding 51% or more of the Membership Interests in the Company, the
Company shall not be liquidated as a result of any such event and the Company
shall be reconstituted.
9.2 Methods of Liquidation. If the Company is dissolved and not
reconstituted, an accounting of the Company assets, liabilities and operations
through the last day of the month in which the dissolution occurs shall be made
by the Managing Member, and the affairs of the Company shall be wound up and
terminated. The Managing Member shall serve as the liquidating trustee of the
Company. The liquidating trustee shall be responsible for winding up and
terminating the affairs of the Company and shall determine all matters in
connection therewith (including the arrangements to be made with creditors, to
what extent and under what terms the assets of the Company are to be sold and
the amount or necessity of cash reserves to cover contingent liabilities) as it
deems advisable and proper. The liquidating trustee thereafter shall liquidate
the assets of the Company as promptly as is consistent with obtaining the fair
value thereof, and the proceeds therefrom, to the extent sufficient therefor,
shall be applied and distributed in accordance with the following:
(a) First, to the payment of the debts and liabilities of the Company,
other than to the Members, and to the expenses of liquidation in the order of
priority as provided by law; then
(b) Second, to the establishment of, or addition to, any reserves deemed
necessary by the liquidating trustee for any contingent or unforeseen
liabilities or obligations of the Company; provided, however, that any such
reserves established hereunder may be paid over to a bank or other escrow agent
to be held in escrow for the purpose of paying any such contingent or unforeseen
liabilities or obligations and, at the expiration of such period as the
liquidating trustee deems advisable, of distributing the balance of such
reserves in the manner provided hereinafter in this Section 9.2; then
(c) Third, to the Members in accordance with the order and priority set
forth in Section 8.3 (and subject to the provisions of Section 8.4).
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The vote of Members holding 51% or more of the Membership Interests in the
Company shall be sufficient to continue the life of the Company in the event a
termination of the Company would otherwise have occurred.
9.3 Reasonable Time for Liquidating. A reasonable time shall be allowed for
the orderly liquidation of the Company's assets pursuant to Section 9.2 above in
order to minimize the losses normally attendant upon such a liquidation.
9.4 Date of Liquidation. The Company shall be liquidated and terminated
when all of its assets have been converted into cash, all promissory notes or
other evidences of indebtedness derived by the Company from such conversion of
its assets have been collected or otherwise converted into cash and all such
cash has been applied and distributed in accordance with the provisions of
Section 9.2 above. The establishment of any reserves shall not have the effect
of extending the term of the Company, but such reserves shall be distributed in
accordance with Section 9.2 and in the manner and within the time period as the
liquidating trustee deems advisable and appropriate.
9.5 Withdrawals. The Members do hereby covenant and agree that they shall
not withdraw or retire from the Company except as a result of a permitted
Transfer of their entire respective Membership Interests and that they shall
carry out their duties and responsibilities hereunder until the Company is
terminated, liquidated and dissolved under this Article 9.
ARTICLE 10
SALE; ASSIGNMENT; TRANSFER
10.1 Transfers of Interests in Company.
(a) Except as otherwise permitted in this Article 10, no Member may sell,
transfer, assign, convey or otherwise dispose of or Pledge or encumber, either
directly or indirectly, voluntarily or by operation of law (collectively,
"Transfer"), all or any part of its Membership Interest. Any such act in
violation of this Section 10.1(a) shall be null and void ab initio. The approval
of any such transaction in any one or more instances shall not limit or waive
the requirement for such approval in any other or future instance. In no event
shall less than all of the Membership Interest of a Member be directly
Transferred by any Member. All Transfers hereinafter permitted are subject to
Sections 10.3, 10.4 and 10.5.
(b) Notwithstanding the provisions of Section 10.1(a), but subject to
satisfaction of Sections 10.3, 10.4 and 10.5, Transfers of direct and indirect
interests in SP shall be permitted, without the consent of the Members, to the
extent such Transfers are expressly permitted by Section 10.1(b) or 10.1(c) of
the SP LLC Agreement. Additionally, notwithstanding the provisions of
Section 10.1(a), SP shall have the right, without the consent of Killington, to
Pledge, encumber or otherwise grant security interests in SP's Membership
Interest in the Company to Fleet National Bank as additional security for a loan
to SP by Fleet National Bank.
(c) Notwithstanding the provisions of Section 10.1(a), but subject to
satisfaction of Sections 10.3, 10.4 and 10.5, (i) Killington may Transfer all of
its Membership Interest in the Company to an Affiliate of Killington, without
20
the consent of SP, (ii) Killington may Transfer all of its Membership Interest
in the Company to any third party which acquires all of Killington's right,
title and interest in the Killington Resort, provided (x) SP receives at least
fifteen (15) days prior written notice of such Transfer, and (y) Killington and
the applicable transferee have fully complied with the provisions of
Sections 10.3, 10.4 and 10.5, (iii) Transfers of direct and indirect interests
in Killington shall be permitted, without the consent of SP, so long as
Killington remains an Affiliate of ASC following any such Transfer, (iv)
Transfers to any lender making a loan to Killington in connection with the
ownership and operation of the Killington Resort shall also be permitted, and
(v) Transfers to any lender making a loan to Company or SP in connection with
the ownership and operation of Company Assets or SP's assets. Any change in the
ownership of the investors holding a direct or indirect interest in Killington
shall not be deemed a Transfer unless as a result of the change Killington does
not remain an Affiliate of ASC.
10.2 Restraining Order; Specific Performance; Other Remedies.
(a) In the event that any Member shall attempt to Transfer all or any
portion of any Membership Interest in the Company in violation of the provisions
of this Agreement and any rights hereby granted, then the other Members, in
addition to all rights and remedies hereunder, at law and/or in equity, shall be
entitled to a decree or order restraining and enjoining such Transfer, and the
offending party shall not plead in defense thereto that there would be an
adequate remedy at law; it being hereby expressly acknowledged and agreed that
damages at law shall be an inadequate remedy for a breach or threatened breach
or violation of the provisions concerning Transfers set forth in this Agreement.
(b) In addition, it is expressly agreed that the remedy at law for breach
of any of the obligations set forth in Section 10.1 is inadequate in view of
(i) the complexities and uncertainties in measuring the actual damages that
would be sustained by reason of the failure of a party to comply fully with each
of said obligations and (ii) the uniqueness of each Member's business and assets
and the relationship of the Members. Accordingly, in addition to all other
remedies available at law or in equity, each of the aforesaid obligations shall
be, and is hereby expressly made, enforceable by specific performance.
10.3 Compliance with Law. The Members hereby agree that no sale or other
Transfer of any interest in the Company shall be made which would result in (a)
the violation of any applicable law, order, rule or regulation of the United
States of America or the States of Delaware or Vermont to the extent applicable
to such sale or other Transfer, including the United States Securities Act of
1933, as amended, or (b) a breach or default under the terms of any Mortgage or
any other Fleet Loan Document (as defined in the SP LLC Agreement).
10.4 Substitute Members. In the event any Member Transfers its Membership
Interest in compliance with the other provisions of this Article 10, the
transferee thereof shall have the right to become a substituted Member of the
Company only upon satisfaction of the following:
(a) the transferring Member and its transferee execute such instruments as
any other Member deems reasonably necessary or desirable to effect such
substitution;
21
(b) the transferee accepts and agrees in writing to be bound by all of the
terms and provisions of this Agreement accruing on and after the date of such
substitution in accordance with this Section 10.4; and
(c) except in connection with substitution of membership resulting from the
exercise of any rights and remedies of a lender holding a security interest on a
Membership Interest and the initial transfer by such lender or its affiliated
nominee thereafter, such transferee pays a transfer fee to the Company which is
sufficient to cover all reasonable expenses, including attorneys' and
accountants' fees, transfer taxes and expenses incurred by the Company or its
Members in connection with the admission of such Person as a Member, including
any amendment to this Agreement.
10.5 Overall Transfer Prohibitions.
(a) Notwithstanding anything to the contrary herein contained, except for a
Transfer pursuant to Sections 10.1(c)(iv) and (v) hereof, no interest in the
Company may be Transferred, directly or indirectly, if the non-Transferring
Member(s) delivers to the Member desiring to effect such Transfer an opinion of
counsel, with reasonable experience and expertise with respect to the subject
matter of the opinion, that the Transfer would impose material adverse tax or
legal consequences upon the Company or any non-Transferring Member(s) as a
result thereof, including resulting in a default under any Loan (which is deemed
for those purposes to have such a material adverse effect), except that, if the
opinion states that the Transfer would effect no material adverse tax or legal
consequences, other than a tax termination of the Company, the interest in the
Company may be transferred.
(b) In order to afford the non-Transferring Member(s) sufficient time to
determine whether or not it should obtain an opinion of counsel described
herein, the Member whose interest in the Company is to be the subject of any
Transfer shall, if not otherwise required pursuant to any other provision of
this Article 10, give the non-Transferring Member(s) at least thirty (30) days'
written notice prior to attempting to effect any such Transfer.
10.6 Section 754 Election. Upon the request of any Member transferring
substantially all of its Membership Interest in the Company pursuant to this
Agreement, or upon the request of the transferee, the Company shall file an
election pursuant to Section 754 of the Code to adjust the basis of Company
property in the manner provided in Section 743 of the Code. The incremental cost
of making such an election shall be borne by the requesting party; provided
that, if the requesting party is the transferor and such transferor is not a
Member immediately after such transfer, or subsequently ceases to be a Member,
such cost shall be borne by the transferee.
10.7 Release of Liability. In the event any Member shall sell its entire
interest in the Company (other than in a sale of the Company Assets or the
entire Membership Interests of all Members) in compliance with the provisions of
this Agreement without retaining any interest therein, directly or indirectly,
then the transferring Member shall be relieved of any further liability arising
hereunder for events occurring from and after the date of such Transfer.
22
ARTICLE 11
NOTICES
11.1 In Writing; Address. All notices, demands, consents, reports and other
communications provided for in this Agreement shall be in writing, shall be
given by a method prescribed in Section 11.2 and shall be given to the Member to
whom it is addressed at the address set forth below or at such other address(es)
as such party hereto may hereafter specify by at least fifteen (15) days' prior
written notice.
To SP: SP Land Company, LLC
c/o Eiger, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
With a copy to: Ski Partners LLC
c/o Eiger, Inc.
000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxxx, III
Fax: (000) 000-0000
With a copy to: Xxxxx Xxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attn: Xxxx X. Xxx Xxxx
Fax: (000) 000-0000
To Killington: Killington, Ltd.
0000 Xxxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
With a copy to: American Skiing Company
Xxx Xxxxxxxx Xxx
Xxxxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxxxx
Fax: (000) 000-0000
Any party hereto may change the address to which notice may be delivered
hereunder by the giving of written notice thereof to the other Members as
provided in Section 11.2 below.
23
11.2 Method. Such notice or other communication may be mailed by United
States certified mail, return receipt requested, postage prepaid, deposited in a
United States post office or a depository for the receipt of mail regularly
maintained by the Post Office. Such notices, demands, consents and reports may
also be delivered (i) by hand or nationally recognized overnight courier which
maintains evidence of receipt or (ii) by facsimile with a confirmation copy
delivery by overnight courier which maintains evidence of receipt. Any notices,
demands, consents or other communications shall be deemed given when received at
the address for which such party has given notice in accordance with the
provisions hereof if received on a Business Day and if not received on a
Business Day, then on the next Business Day. Notwithstanding the foregoing, no
notice or other communication shall be deemed ineffective because of refusal of
delivery to the address specified for the giving of such notice in accordance
herewith. Notice shall be effective only upon receipt or refusal of receipt
after delivery in accordance with the methods hereinabove set forth in this
Section 11.2.
ARTICLE 12
MISCELLANEOUS
12.1 Additional Documents and Acts. In connection with this Agreement, as
well as all transactions contemplated by this Agreement, each Member agrees to
execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.
12.2 Governing Law and Jurisdiction. This Agreement, the rights and
obligations of the parties hereto and any claims or disputes relating thereto
shall be governed by and construed in accordance with the laws of the State of
Delaware (other than the choice of law rules).
12.3 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the Person or Persons may require.
12.4 Entire Agreement. This instrument contains all of the understandings
and agreements of whatsoever kind and nature existing between the parties hereto
with respect to this Agreement and the rights, interests, understandings,
agreements and obligations of the respective parties pertaining to the formation
and continuing operations of the Company. Representatives of all parties have
participated equally in the negotiation and drafting of this Agreement, and
accordingly, this Agreement shall not be more strictly construed against any
party hereto on account of the role played by such party's representative in the
negotiation and drafting hereof.
12.5 References to this Agreement. Numbered or lettered Articles and
Sections herein contained refer to Articles and Sections of this Agreement
unless otherwise expressly stated.
24
12.6 Headings. All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
12.7 Binding Effect. Except as herein otherwise expressly stipulated to the
contrary, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors and
permitted assigns.
12.8 Counterparts. This Agreement may be executed in a number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement.
12.9 Amendments. This Agreement may not be amended, altered or modified
except by a written instrument signed by each of the Members.
12.10 Estoppel Certificates. Each Member agrees, upon written demand of any
other Member, to execute and deliver to the other Member(s), within ten (10)
days after such demand (which demand shall make reference to such ten (10) day
response period), a certificate stating that this Agreement is unmodified and in
full force and effect (or, if this Agreement has been modified, that the same is
in full force and effect as modified and stating such modifications), whether or
not, to the best knowledge of such Member, there exists any material default
hereunder and if so, specifying the details of such default and such other
matters as the other Member(s) may reasonably request.
12.11 Exhibits. All Exhibits attached hereto are incorporated herein and
made a part hereof by this reference.
12.12 Severability. Every provision of this Agreement is hereby declared to
be independent of, and separable from, every other provision of this Agreement.
If any such provisions shall be held to be invalid or unenforceable, that
holding shall be without effect upon the validity or enforceability of any other
provision of this Agreement. It is the intention of the parties hereto that, in
lieu of each provision of this Agreement which is determined to be invalid or
unenforceable, there shall be added, as part of this Agreement, such an
alternative provision as may be valid or enforceable but otherwise as close to
the applicable original provision as possible.
12.13 Waiver; Modification. Failure by any Member to insist upon or enforce
any of its rights shall not constitute a waiver thereof, and nothing shall
constitute a waiver of such Member's right to insist upon strict compliance with
the provisions hereof. Any Member may waive the benefit of any provision or
condition for its benefit contained in this Agreement.
12.14 Third-Party Beneficiaries. This Agreement is made solely and
specifically between and for the benefit of the parties hereto and their
respective successors and assigns subject to the express provisions hereof
relating to Transfers, and no other Person or party shall have any rights,
interest or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third-party beneficiary or otherwise.
25
12.15 Reliance on Authority of Person Signing Agreement; Designated
Representatives; Authority of Managing Member.
(a) In the event that a Member is a partnership, limited liability company,
limited partnership, joint venture, corporation or any entity other than a
natural person, the Members and the Company (i) shall not be required to
determine the authority of the Person signing this Agreement to make any
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such Person;
(ii) shall not be required to see to the application or distribution of proceeds
paid or credited to Persons signing this Agreement or any document executed in
connection herewith on behalf of such entity; and (iii) shall be entitled to
rely on the authority of the Person signing this Agreement or any document in
connection herewith with respect to the voting of the Membership Interest of
such entity and with respect to the giving of consent on behalf of such entity
in connection with any matter for which consent is permitted or required under
this Agreement or any document in connection herewith.
(b) Each Member shall designate in writing to the Company one or more
representatives who shall be authorized to act under this Agreement for and on
behalf of such Member. Any act, approval, consent or vote of any representative
of a Member that is so designated shall be deemed to be the act, approval,
consent or vote of said Member, and no Person, including the Company and the
other Members, shall be required to inquire into the authority of such
representative as to such act, approval, consent or vote on behalf of the Member
who has designated said representative. Any representative may be replaced by a
successor representative by written notice to the Company and designation of a
substitute for such representative. Until written notice of any change is given
pursuant to Article 11, the designated representatives ("Designated
Representative(s)") of the Members shall be as provided on Exhibit B.
(c) In dealing with the Managing Member, no Person shall be required to
inquire as to its authority to bind the Company. Any act of the Managing Member
purporting to bind the Company shall bind the Company. The Managing Member shall
have the full right and authority to execute and deliver any and all agreements,
contracts, documents and instruments relating to the business and affairs of the
Company without the joinder of the other Members or any other Person, and any
Person dealing with the Company may rely upon the Managing Member's execution
and delivery of any agreement, contract, document or instrument as the act and
deed of the Company, without the necessity for further inquiry and
notwithstanding any other provision of this Agreement.
12.16 Indemnity. Except as provided in this Section 12.16, the Company, to
the extent of its assets, shall and does hereby indemnify the Managing Member
and any Officers of the Company against, and agree to hold, save and defend the
Managing Member and any such Officers wholly harmless from, any liability,
claim, cause of action, loss, expense or damage (including reasonable attorneys'
fees and expenses and court costs actually incurred) suffered or incurred by
such party by reason of anything the Managing Member or any such Officer may in
good faith do or refrain from doing for or on behalf of the Company; provided,
however, that the Company shall not be required to indemnify the Managing Member
or any such Officer for any liability, claim, cause of action, loss, expense or
damage which such the Managing Member or any such Officer may suffer or incur as
a result of its fraud, willful misconduct or gross negligence.
26
12.17 Herein. Wherever used in this Agreement, the words "herein," "hereof"
or words of similar import shall be deemed to refer to this Agreement in its
entirety and not to a specific section unless otherwise stated.
12.18 Including. Wherever used in this Agreement, the word "including"
shall be deemed to mean "including, without limitation."
12.19 Cost of Counsel. In any judicial action between the parties to
enforce any of the provisions of this Agreement or any right of any party under
this Agreement, regardless of whether such action or proceeding is prosecuted to
judgment and in addition to any other remedy, the unsuccessful party shall pay
to the prevailing party all costs and expenses, including reasonable attorneys'
fees and expenses, incurred therein by the prevailing party in connection with
such action.
12.20 Days. Unless otherwise stated, a day shall be deemed to mean a
calendar day.
12.21 Time of Essence. Time is the essence of each and every provision of
this Agreement.
12.22 General Exculpation. Notwithstanding any provision hereof to the
contrary, in no circumstances shall a member, shareholder, partner, director,
officer, employee or agent ("Special Party") of a Member (direct or indirect) or
of a Special Party of a Member hereto (direct or indirect) be personally liable
for any of the obligations of such Member under this Agreement except to the
extent, if any, provided in any separate agreement now or hereafter executed and
delivered by such Special Party.
12.23 Partition. Each of the Members irrevocably waives, during the term of
the Company and during any period of its liquidation following any dissolution,
any right that it may have to maintain any action for partition in kind with
respect to any of the assets of the Company.
12.24 Securities Trading of Membership Interests. The parties to this
Agreement acknowledge and agree that the Membership Interests of the Company (i)
are not and will not be dealt in or traded on a securities exchange or in a
securities market, (ii) are not and will not be an "investment company security"
(as defined in Section 8-103(b) of the Uniform Commercial Code or the equivalent
thereof), (iii) are not securities governed by Article 8 of the Uniform
Commercial Code of any jurisdiction, and (iv) are not and will not be held in or
credited to a securities account. The parties to this Agreement further agree
that the Membership Interests will not be certificated without the prior written
consent of Fleet National Bank, for so long as Fleet National Bank is a lender
to SP.
27
EXECUTED as of the date first above written.
SP:
SP LAND COMPANY, LLC,
a Delaware limited liability company
By: SKI PARTNERS LLC,
a Delaware limited liability company,
its managing member
By:
Name:
Title:
KILLINGTON:
KILLINGTON, LTD.,
a Vermont corporation
By:
Name:
Title:
28
EXHIBIT A
DESCRIPTION OF DEVELOPMENT PROPERTY
A-1
EXHIBIT B
DESIGNATED REPRESENTATIVES
Designated
Member Representative(s)
1. SP Xxxx X. Xxxxxx, III (Initial Advisory Board Member)
Xxxxxx X. Xxxxx (Initial Advisory Board Member)
2. Killington Xxxxx X. Xxxxxx (Initial Advisory Board Member)
B-1
EXHIBIT C
TAX EXHIBIT
ARTICLE I
TAX DEFINITIONS
Section 1.1 Definitions. All capitalized terms used herein shall have the
meanings assigned to them in the Limited Liability Company Agreement of SP Land
Company LLC dated as of March 31, 2004 (the "Agreement"), or as follows:
(a) Adjusted Capital Account Deficit. "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:
(i) Crediting to such Capital Account (x) any amount which such Member
is obligated to restore following the liquidation of such Member's Interest
in the Company (pursuant to the terms of this Agreement or otherwise) and
(y) any amount which such Member is deemed obligated to restore in
accordance with Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1)
and 1.704-2(i)(5); and
(ii) Debiting to such Capital Account the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6).
This definition is intended to comply with the provisions of Regulations
Section 1.704-1(b)(2)(ii)(d), and will be interpreted consistently therewith.
(b) Book Basis. "Book Basis" of any Company property shall initially be
equal to the Company's initial adjusted tax basis in such property; provided,
however, that the initial "Book Basis" of any property (or portion thereof)
contributed to the capital of the Company shall be equal to the fair market
value of such property (as determined by the Managing Member). Effective
immediately after giving effect to the allocations of Profits and Losses for
each Fiscal Year, the "Book Basis" of each Company property shall be adjusted
downward by the amount of Book Depreciation allowable to the Company for such
Fiscal Year with respect to such property. In addition, effective immediately
prior to any Revaluation Event, the "Book Basis" of each Company property shall
be further adjusted upward or downward, as necessary, so as to equal the fair
market value of such property at the time of such Revaluation Event (as
determined by the Managing Member taking Section 7701(g) of the Code into
account (i.e., such value shall not be agreed to be less than the amount of
Nonrecourse Liabilities to which such property is subject)).
(c) Book Depreciation. "Book Depreciation" allowable to the Company for any
Fiscal Year with respect to any Company property shall be equal to the product
of (i) the amount of Tax Depreciation allowable to the Company for such Fiscal
Year with respect to such property, multiplied by a fraction, the numerator of
which is the property's Book Basis as of the beginning of such Fiscal Year (or
C-1
the date of acquisition or contribution if the property is acquired or
contributed during such Fiscal Year) and (ii) the denominator of which is the
property's adjusted tax basis as of the beginning of such Fiscal Year (or the
date of acquisition if the property is acquired during such Fiscal Year). If the
denominator of the fraction described in clause (ii) above is equal to zero, the
amount of "Book Depreciation" allowable to the Company for any Fiscal Year with
respect to the Company property in question shall be determined under any
reasonable method selected by the Managing Member.
(d) Book/Tax Disparity Property. "Book/Tax Disparity Property" shall mean
any Company property that has a Book Basis which is different from its adjusted
tax basis to the Company. Thus, any property that is contributed to the capital
of the Company by a Member shall be a "Book/Tax Disparity Property" if its
initial Book Basis is not equal to the Company's initial tax basis in the
property. In addition, once the Book Basis of a Company property is adjusted in
connection with a Revaluation Event to an amount other than its adjusted tax
basis to the Company, the property shall thereafter be a "Book/Tax Disparity
Property."
(e) Member Nonrecourse Debt. "Member Nonrecourse Debt" shall mean any
Company liability that is treated as "partner nonrecourse debt" under Section
1.704-2(b)(4) of the Regulations.
(f) Member Nonrecourse Deductions. "Member Nonrecourse Deductions" of the
Company for a Fiscal Year shall mean any and all items of Book Depreciation and
other expenses that are treated as "partner nonrecourse deductions" under
Section 1.704-2(i)(2) of the Regulations.
(g) Member Nonrecourse Minimum Gain. "Member Nonrecourse Minimum Gain" of
the Company shall mean the amount of "minimum gain" of the Company that is
attributable to Member Nonrecourse Debt (as determined strictly in accordance
with Section 1.704-2(i)(3) of the Regulations). A Member's share of such "Member
Nonrecourse Minimum Gain" shall be calculated in accordance with the provisions
of Section 1.704-2(i)(5) of the Regulations.
(h) Nonrecourse Deductions. "Nonrecourse Deductions" of the Company
generally refers to any and all items of Book Depreciation and other expenses
that are treated as "nonrecourse deductions" under Sections 1.704-2(b)(1) and
(c) of the Regulations. Subject to the foregoing sentence, the aggregate amount
of "Nonrecourse Deductions" for any fiscal Year shall equal the excess (if any)
of
(i) the net increase in the amount of Nonrecourse Minimum Gain during
such Fiscal Year, over
(ii) the aggregate amount of any distributions during such Fiscal Year
of proceeds of a Nonrecourse Liability that are allocable to an increase in
Nonrecourse Minimum Gain.
(i) Nonrecourse Liability. "Nonrecourse Liability" of the Company shall
mean any Company liability treated as a "nonrecourse liability" under Section
C-2
1.752-1(a)(2) of the Regulations. Subject to the foregoing sentence,
"Nonrecourse Liability" shall mean any Company liability (or portion thereof) of
the Company for which no Member (and no related person to such Member within the
meaning of Section 1.752-4(b) of the Regulations) bears the economic risk of
loss within the meaning of Section 1.752-3(a)(3) of the Regulations. For
purposes of allocating "excess nonrecourse liabilities" under Section
1.752-3(a)(3) of the Regulations, the Members hereby agree that the Members'
interests in Company profits for purposes of Section 1.752-3(a)(3) shall mean
such percentage as Nonrecourse Deductions are allocated to the Members for such
Fiscal Year under Section 2.1(e) hereof.
(j) Nonrecourse Minimum Gain. "Nonrecourse Minimum Gain" of the Company
shall mean the amount of "minimum gain" of the Company that is attributable to
Nonrecourse Liabilities (as determined strictly in accordance with Section
1.704-2(d) of the Regulations). A Member's share of such "Nonrecourse Minimum
Gain" shall be calculated in accordance with the provisions of Section
1.704-2(g) of the Regulations.
(k) Profits or Losses. "Profits" or "Losses," as the case may be, for any
period, means an amount equal to the Company's Taxable Income or Taxable Loss
for such period, with the following adjustments:
(i) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits and Losses
pursuant to this definition will be added to such Taxable Income or will
reduce such Taxable Loss;
(ii) Any expenditure of the Company described in Code
Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition, will be subtracted from such Taxable Income or Losses;
(iii) If the Book Basis of any Company asset is adjusted pursuant to
clauses (ii)-(iv) of the definition of Revaluation Event, the amount of
such adjustment will be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from the disposition of any Company asset
with respect to which gain or loss is recognized for federal income tax
purposes will be computed by reference to the Book Basis of the asset
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Book Basis;
(v) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such Taxable Income or Loss,
there will be taken into account Book Depreciation for such fiscal year or
other period; and
Notwithstanding any other provision of this definition, any item which
is specially allocated pursuant to Section 2.1 of this Exhibit C will not
be taken into account in computing Profits or Losses.
C-3
(l) Regulations. "Regulations" shall mean the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as those
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
(m) Revaluation Event. "Revaluation Event" shall mean any of the following
occurrences: (i) the contribution of money or other property (other than a de
minimis amount) by a new or existing Member to the capital of the Company; (ii)
the distribution of money or other property (other than a de minimis amount) by
the Company to a retiring or continuing Member; (iii) the Liquidation of the
Company; or (iv) any other event so specified in Section 1.704-1(b)(2)(iv)(f) of
the Regulations.
(n) Taxable Income or Taxable Loss. "Taxable Income" or "Taxable Loss," as
the case may be, for any period, means the taxable income or taxable loss of the
Partnership for such period, determined in accordance with Code Section 703(a),
including all items of income, gain, loss or deduction.
(o) Tax Depreciation. "Tax Depreciation" for any Fiscal Year shall mean the
amount of depreciation, cost recovery or other amortization deductions allowable
to the Company for federal income tax purposes for such Fiscal Year.
(p) Tax Items. "Tax Items" shall mean, with respect to any property, all
items of income, gain, loss, deduction, and credit (including Tax Depreciation)
recognized by or allowable to the Company with respect to such property, as
computed for federal income tax purposes.
ARTICLE II
REGULATORY ALLOCATIONS AND SECTION 704(C) ALLOCATIONS
Section 2.1 Allocations Required by Regulations.
(a) Nonrecourse Minimum Gain. Pursuant to Section 1.704-2(f) of the
Regulations (relating to minimum gain chargebacks), notwithstanding any other
provision of this Section 2.1, if there is a net decrease in Nonrecourse Minimum
Gain of the Company for such Fiscal Year (or if there was a net decrease in
Nonrecourse Minimum Gain for a prior Fiscal Year and the Company did not have
sufficient amounts of income during prior Fiscal Years to allocate to the
Members under this Section 2.1(a)), then items of Company gross income and gain
shall be allocated, before any other allocation is made pursuant to the
succeeding provisions of this Section 2.1 for such Fiscal Year, to each Member
in proportion to, and to the extent of, the total net decrease in such Member's
share of the Nonrecourse Minimum Gain (determined and adjusted in accordance
with the provisions of Section 1.704-2(g) of the Regulations); provided,
however, that the provisions of this clause shall not apply to any Member to the
extent described in Section 1.704-2(f) of the Regulations.
As provided in Section 1.704-2(j)(2) of the Regulations, income of the
Company allocated for any Fiscal Year under this Section 2.1(a) shall consist
C-4
first of items of gain recognized from the disposition of Company property
subject to Nonrecourse Liabilities, with any remaining allocated income deemed
to be made up of a pro rata portion of the Company's other items of income and
gain for such Fiscal Year (provided that gain from the disposition of property
which is subject to Member Nonrecourse Debt shall be allocated under this
Section 2.1(a) only to the extent not allocated under Section 2.1(b) hereof).
This Section 2.1(a) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Member Nonrecourse Minimum Gain. Except as otherwise provided in
Section 1.704-2(i) of the Regulations, if there is a net decrease in Member
Nonrecourse Minimum Gain for a Fiscal Year (or if there was a net decrease in
Member Nonrecourse Minimum Gain for a prior Fiscal Year and the Company did not
have sufficient amounts of income during prior Fiscal Years to allocate to the
Members under this Section 2.1(b)), then items of Company income and gain for
such Fiscal Year shall be specially allocated, before any other allocation is
made pursuant to the succeeding provisions of this Section 2.1 for such Fiscal
Year, to the Members with shares of such minimum gain as of the first day of
such Fiscal Year in proportion to, and to the extent of, such Member's share of
the net decrease in such minimum gain (determined in a manner and subject to
exceptions consistent with those referred to in Section 2.1(a) hereof, all as
provided under Section 1.704-2(i)(4) of the Regulations). This Section 2.1(b) is
intended to comply with the partner minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
As provided in Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations,
income of the Company allocated for any Fiscal Year under this Section 2.1(b)
shall consist first of items of gain recognized from the disposition of Company
property subject to Member Nonrecourse Debt, with any remaining allocated income
deemed to be made up of a pro rata portion of the Company's other items of gross
income and gain for such Fiscal Year (provided that items of gain from the
disposition of property which is subject to a Nonrecourse Liability shall be
allocated under this Section 2.1(b) only to the extent not allocated under
Section 2.1(a) hereof).
(c) Qualified Income Offset. If any Member unexpectedly receives any
adjustment, allocation or distribution described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6), that, after tentatively taking into account
all allocations that would be made for the current period under this Agreement
(other than allocations pursuant to this Section 2.1(c)), would cause or
increase an Adjusted Capital Account Deficit, items of Company income and gain
will be specially allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations under Code Section 704(b),
the Adjusted Capital Account Deficit as quickly as possible, provided that an
allocation pursuant to this Section 2.1(c) shall be made only if and to the
extent such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Section 2.1 and Section 8.2 of the
Agreement have been tentatively made as if this Section 2.1(c) were not
contained herein. This Section is intended to comply with the qualified income
offset requirement in Regulations Section 1.704-1(b)(2)(ii)(d) and will be
interpreted consistently therewith. Allocations under this Section 2.1(c) will
be comprised of a pro rata portion of each item of Company income (including
gross income) and gain for the year.
C-5
(d) Preventative Allocation. If any Member would have a deficit Capital
Account balance at the end of any Company fiscal year which is in excess of the
sum of (i) the amount such Member is obligated to restore to the Company on
liquidation, (ii) such Member's share of the partnership's minimum gain debt (as
defined in Regulations Sections 1.704-2(b)(2) and (d)) as of the end of such
fiscal year, and (iii) such Member's share of partner minimum gain debt (as
defined in Regulations Section 1.704-2(i)) as of the end of such fiscal year,
each such Member will be specially allocated items of Company income and gain in
the amount of such excess as quickly as possible. Allocations under this
Section 2.1(d) will be comprised of a pro rata portion of each item of Company
income (including gross income) and gain for the year.
(e) Overall Limitation on Allocation of Losses. Notwithstanding any other
provision of this Agreement, no Losses will be allocated to any Member if such
allocation would cause or increase an Adjusted Capital Account Deficit in such
Member's Capital Account. If the Capital Account of any Member would otherwise
have an Adjusted Capital Account Deficit at any time when the Capital Account of
any other Member would not otherwise have an Adjusted Capital Account Deficit,
the limitation set forth in this Section 2.1(e) shall be applied on a Member by
Member basis so as to allocate the maximum permissible deduction or loss to each
Member under Regulations Section 1.704-1(b)(2)(ii)(d). In the event any loss or
deduction shall be specially allocated to a Member pursuant to the preceding
sentence, an equal amount of income of the Company shall be specially allocated
to such Member prior to any allocation pursuant to Section 8.2 of the Agreement.
(f) Member Nonrecourse Deductions. All Member Nonrecourse Deductions
attributable to a Member Nonrecourse Debt shall be allocated to the Member
bearing the economic risk of loss for such debt within the meaning of Section
1.752-2 of the Regulations with respect to the Member Nonrecourse Debt to which
such Member Nonrecourse Deductions are attributable in accordance with Section
1.704-2(i)(1) of the Regulations; provided, however, that if each Member bears
some portion of the economic risk of loss for such debt, the Member Nonrecourse
Deductions attributable to such debt shall be allocated to and among the
Members, pro rata in the same proportion that their economic risks of loss bear
to one another.
(g) Nonrecourse Deductions. For any Fiscal Year, all Nonrecourse Deductions
shall be allocated among the Members in proportion to their respective Capital
Account balances as determined immediately prior to the allocations under this
Section 2.1(g).
(h) Curative Allocations. The allocations set forth in Section 2.1(a)
through 2.1(g) ("Regulatory Allocations") are intended to comply with certain
requirements of Regulations Sections 1.704-1(b) and 1.704-2. The Regulatory
Allocations may not be consistent with the manner in which the Members intend to
divide Company distributions. Accordingly, the Managing Member is hereby
authorized to divide other allocations of Profits, Losses, and other items among
the Members so as to prevent the Regulatory Allocations from distorting the
manner in which Company distributions will be divided among the Members pursuant
to this Agreement. In general, the Members anticipate that this will be
accomplished by specially allocating other Profits, Losses, and items of income,
gain, loss and deduction among the Members so that the net amount of the
Regulatory Allocations and such special allocations to each such Person is zero.
However, the Managing Member will have discretion to accomplish this result in
any reasonable manner.
C-6
(i) Allocation Savings Provision. Profits, Losses, and items thereof, of
the Company are intended to be allocated hereunder in a manner that would cause
the distributions to be made to the Members in respect of their respective
Interests in the order and priority set forth in Section 8.3 of the Agreement,
while at the same time complying with the applicable requirements of Subchapter
K of Chapter 1 of Subtitle A of the Code (in particular, Section 704 thereof)
and the Regulations promulgated thereunder. Notwithstanding anything in this
Exhibit C or in the Agreement to the contrary, the Managing Member shall have
the authority, and is hereby directed, to amend this Exhibit C and/or the
Agreement, without further approval, authorization or consent of the Members, to
correct any allocation provision hereunder as necessary to fulfill the intent
described in the preceding sentence.
Section 2.2 Allocation of Tax Items.
(a) General. Except as otherwise provided in Section 2.2(b) hereof, each
Tax Item shall be allocated among the Members in the same manner as each
correlative item comprising Profits and Losses are allocated pursuant to the
provisions of Section 8.2 of the Agreement or Section 2.1 of this Exhibit C.
(b) Book/Tax Disparity Property. The Members hereby acknowledge that all
Tax Items in respect of Book/Tax Disparity Property are required to be allocated
among the Members under Section 704(c) of the Code (as specified in Sections
1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(g) of the Regulations) and that the
principles of Section 704(c) of the Code require that such Tax Items must be
shared among the Members so as to take account of the variation between the
adjusted tax basis and Book Basis of each such Book/Tax Disparity Property.
Thus, notwithstanding anything in Sections 2.1 or 2.2(a) hereof to the contrary,
the Members' distributive shares of Tax Items in respect of each Book/Tax
Disparity Property shall be separately determined and allocated among the
Members in accordance with the principles of Section 704(c) of the Code, the
Regulations thereunder and Regulations Section 1.704-1(b)(4)(i), utilizing the
traditional method specified in Section 1.704-3(b) of the Regulations which is
elected by the Managing Member. Any election or other decision relating to
allocations pursuant to this Section 2.2(b) shall be made by the Managing
Member. Allocations pursuant to this Section 2.2(b) are for purposes of federal,
state and local taxes only and shall not affect or in any way be taken into
account in computing any Member's Capital Account balance or share of Profits,
Losses or distributions pursuant to any provision of the Agreement.
(c) Recapture Items. For purposes of determining the nature (as ordinary or
capital) of any item of income or gain allocated among the Members for Federal
income tax purposes, the portion of such profit required to be recognized as
ordinary income pursuant to Sections 1245 and/or 1250 of the Code shall be
deemed to be allocated among the Members in the same proportion that they were
allocated and claimed the Tax Depreciation deductions, or basis reductions,
directly or indirectly giving rise to such treatment under Sections 1245 and/or
1250 of the Code, but each Member shall be allocated recapture only to the
extent that such Member is allocated any taxable gain from the sale or other
disposition of such property. The balance of such recapture, if any, shall be
allocated to the Members whose share of taxable gain exceeds their share of such
recapture ("excess gain"), and such balance shall be allocated between such
Members in the proportion in which the excess gain of such Member bears to the
excess gains of all Members.
C-7
EXHIBIT D
LIST OF CERTAIN AGREEMENTS AFFECTING DEVELOPMENT PROPERTY
1. Master Easement Agreement between Killington, Ltd., and Xxxxxx Xxxxx
Associates, LLC, dated March 31, 2004 and recorded at Book ___, Page ____
of the Killington Land Records.
2. Agreement Regarding Killington Resort and Certain Nearby Properties by and
between Killington, Ltd., American Skiing Company Resort Properties, Inc.,
American Skiing Company and SP Land Company, LLC, dated March 31, 2004, a
Memorandum of which was recorded at Book ___, Page ____ of the Killington
Land Records.
D-1
