EXHIBIT 10.15
OPERATING AGREEMENT
OF
LANTANA DEVELOPMENT LLC
TABLE OF CONTENTS
Page
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ARTICLE I FORMATION OF LIMITED LIABILITY COMPANY...............................1
ARTICLE II NAME................................................................1
ARTICLE III DEFINITIONS........................................................1
ARTICLE IV PURPOSE.............................................................4
ARTICLE V NAMES AND ADDRESSES OF MEMBERS.......................................5
ARTICLE VI TERM................................................................5
ARTICLE VII PLACE OF BUSINESS AND AGENT FOR PROCESS............................5
7.1 Place of Business................................................5
7.2 Agent for Process................................................5
ARTICLE VIII INITIAL CAPITAL AND ADDITIONAL CAPITAL CONTRIBUTIONS..............5
8.1 Capital Accounts.................................................5
8.2 No Right to Return of Contributions..............................6
8.3 No Interest on Capital...........................................6
8.4 Loans to Company.................................................6
8.5 Additional Members...............................................6
8.6 Failure to Make Capital Contributions............................7
8.7 Transferee Succeeds to Transferor's Capital Account..............7
8.8 Additional Capital...............................................7
8.9 Return of Unused Capital Contributions...........................7
ARTICLE IX ALLOCATIONS.........................................................7
9.1 Allocation of Income, Gains and Losses...........................7
9.2 Allocations in Event of Asset Sale...............................8
9.3 Special Allocations..............................................8
9.4 Tax Allocations..................................................9
9.5 Special Fee Allocation...........................................9
9.6 Consent to Allocation............................................9
ARTICLE X DISTRIBUTIONS.......................................................10
10.1 Distributions of Net Cash From Operations......................10
10.2 Other Cash Distributions.......................................10
ARTICLE XI BOARD OF GOVERNORS.................................................11
11.1 Authority of Board.............................................11
11.2 Appointment of Board; Term.....................................11
11.3 Compensation...................................................11
11.4 Place and Time of Meetings.....................................12
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11.5 Waiver of Notice; Previously Scheduled Meetings................12
11.6 Quorum.........................................................12
11.7 Acts of Board..................................................12
11.8 Participation by Electronic Communications.....................12
11.9 Absent Governors...............................................12
11.10 Action Without a Meeting.......................................13
11.11 Limits of Authority............................................13
ARTICLE XII MANAGER AND VICE MANAGER; CONFLICTS OF INTEREST; INDEMNIFICATION..13
12.1 Manager........................................................13
12.2 Management and Control of the Company..........................14
12.3 Authority of Manager...........................................15
12.4 Restrictions on Authority of Manager...........................16
12.5 Obligations of Manager.........................................16
12.6 Tax Matters Partner............................................17
12.7 Conflicts of Interest; Other Activities........................17
12.8 Reimbursement..................................................18
12.9 Indemnification of Manager and Covered Persons.................18
12.10 Liability Under Other Agreements...............................19
ARTICLE XIII BOOKS OF ACCOUNT AND REPORTS; PROJECT RESERVE....................19
13.1 Books of Account...............................................19
13.2 Accounting Practices...........................................19
13.3 Bank Accounts..................................................19
13.4 Report to Members..............................................19
13.5 Tax Information................................................20
13.6 Tax Elections..................................................20
13.7 Project Reserve................................................20
ARTICLE XIV TRANSFER OF MEMBERSHIP INTERESTS..................................20
14.1 Prohibition Against Transfer...................................20
14.2 Conditions to Assignment.......................................20
14.3 Permitted Pledge...............................................21
14.4 Transfer to Person who is Not a Member.........................21
14.5 Acquit Company.................................................21
14.6 New Members Bound by Agreement.................................21
14.7 Distributions After Transfer...................................22
ARTICLE XV LIABILITY OF MEMBERS...............................................22
XVI AMENDMENT OF AGREEMENT....................................................22
XVII DISSOLUTION..............................................................22
17.1 Dissolution....................................................22
17.2 Distributions on Liquidation...................................23
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ARTICLE XVIII DISPUTE RESOLUTION..............................................24
ARTICLE XIX MISCELLANEOUS.....................................................25
19.1 Notice.........................................................25
19.2 Partition......................................................25
19.3 Consent and Waiver.............................................25
19.4 Entire Agreement...............................................25
19.5 Governing Law; Venue...........................................25
19.6 Successors.....................................................26
19.7 Interpretation.................................................26
19.8 Severability...................................................26
19.9 Counterparts...................................................26
19.10 Necessary Instruments..........................................26
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OPERATING AGREEMENT OF
LANTANA DEVELOPMENT LLC
THIS AGREEMENT is made and entered into effective as of the _____ day
of March, 2000, by and among XXXXXX INVESTMENT CORPORATION, a __________
corporation ("TIC"), and *, A DELAWARE LIMITED LIABILITY COMPANY ("*") (TIC and
* are collectively herein referred to as the "MEMBERS").
ARTICLE I
FORMATION OF LIMITED LIABILITY COMPANY
Xxxx Xxxx acted as the organizer to form a limited liability company
under the laws of the State of Delaware by the filing of Certificate of
Formation for Lantana Development LLC (the "COMPANY") pursuant to the Delaware
Limited Liability Company Act, Delaware Code, Title 6, Section 18-101 et seq.
(the "ACT"). By executing this Agreement, the Members ratify, confirm and
acknowledge the actions of Xxxxxxx X. Xxxxxxx as organizer.
ARTICLE II
NAME
The business of the Company shall be conducted under the name of
"LANTANA DEVELOPMENT LLC" or such other name as the Members may designate.
ARTICLE III
DEFINITIONS
The terms used in this Agreement with their initial letters
capitalized, shall, unless the context otherwise requires, have the meanings
specified in this Article III. The singular shall include the plural and the
masculine gender shall include the feminine and neuter, and vice versa, as the
context requires. Wherever used in this Agreement, unless another meaning is
explicitly indicated by the context:
3.1 "AFFILIATE" or "AFFILIATED PERSON" means any of the following: (i)
any Person that directly or indirectly through one or more intermediaries
controls or is controlled by or is under common control with the specified
Person, (ii) any Person that is an officer, partner or trustee of, or serves in
a similar capacity with respect to, the specified Person or of which the
specified Person is an officer, partner or trustee, or with respect to which the
specified Person serves in a similar capacity, or (iii) any Person that directly
or indirectly is the beneficial owner of ten percent (10%) or more of any class
of equity securities of, or otherwise has a substantial beneficial interest in,
the specified Person or of which the specified Person is directly or indirectly
the owner of ten percent (10%) or more of any class of equity securities or in
which the specified Person has a substantial beneficial interest.
3.2 "ADMINISTRATIVE EXPENSES" means expenses reasonably incurred by the
Manager and its Affiliates during the operation of the Company directly
attributable to administering the day to day operations of the Company
(including financial and tax reporting, accounting and
payment of accounts and distributions) not to exceed the amount budgeted
therefor in the Project Operating Budget without the prior unanimous approval of
the Board.
3.3 "AGREEMENT" means this Operating Agreement as amended, modified or
supplemented from time to time.
3.4 "BOARD OF GOVERNORS" or "BOARD" has the meaning set forth in
Article XI hereof.
3.5 "CAPITAL ACCOUNT" has the meaning set forth in Section 8.1 hereof.
3.6 "CAPITAL CONTRIBUTIONS" means the initial capital contributions
made by the Members as set forth in Exhibit A attached hereto as increased or
decreased from time to time as provided for herein.
3.7 "CERTIFICATE" means the certificate of formation filed on behalf of
the Company with the Delaware Secretary of State, as amended from time to time.
3.8 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
3.9 "COMMITTED CAPITAL" means the aggregate Capital Contributions to be
made by the Members, in addition to the initial Capital Contributions to be made
by the Members, as set forth in Exhibit A attached hereto.
3.10 "COMPANY" means the Limited Liability Company formed pursuant to
the Certificate and subject to this Agreement.
3.11 "COMPANY PROPERTY" means the Project and all other real and
personal property acquired and held from time to time by the Company and any
improvements, and shall include both tangible and intangible property.
3.12 "COST" means, when used with respect to services furnished by the
Manager or its Affiliates to, or on behalf of, the Company, the lesser of (i)
the actual expenses incurred by such Manager and Affiliates in providing
services necessary to the prudent operation of the Company, (ii) the price that
would be charged by unaffiliated parties rendering similar services in the same
geographic location, or (iii) the amount budgeted therefor in either the
Preliminary Cost Statement or the Project Operating Budget.
3.13 "COVERED PERSON" means a Member (including the Manager and the
Vice Manager) any Affiliate of a Member, any member of the Board of Governors,
or any managers, members, officers, directors, shareholders, partners,
employees, representatives or agents of a Member or its Affiliates.
3.14 "DEVELOPMENT EXPENSES" mean the actual expenses incurred by the
Company under the direction of the Manager to develop the Project, including the
"hard" and "soft" costs
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set forth in the Preliminary Cost Statement and the salary, payroll and other
expenses of the Manager to maintain an on-site manager and sales staff for the
Project, all of which expenses shall not exceed the amount budgeted therefore in
the Project Operating Budget without the prior unanimous approval of the Board.
Overhead expenses shall be charged only if directly attributable to such
services and shall be allocated based upon the amount of time personnel actually
spend providing such services, or such other method of allocation as is
acceptable to the Company's independent accountants.
3.15 "GOVERNORS" shall mean the members of the Board of Governors
established pursuant to Article XI hereof.
3.16 "INITIAL LOAN DOCUMENTS" means those documents that are required
by Omnibank, N.A. (the "LENDER") to be executed and delivered by the Company to
secure at $1.5 million first deed of trust loan for acquisition and development
of the Project, including but not limited to a promissory note, deed of trust,
assignment of leases and contracts, UCC financing statements, all as more fully
described in the Lender's correspondence to TIC dated March 6, 2000.
3.17 "INVOLUNTARY TRANSFER" means any transfer of title or beneficial
ownership of an interest in the Company upon divorce, insolvency, default,
forfeiture, foreclosure, court order, bankruptcy, an assignment for the benefit
of creditors, or the like.
3.18 "LOT" or "LOTS" means one or more [RESIDENTIAL AND/OR
RECREATIONAL] lots to be developed and sold by the Company as part of the
Project.
3.19 "MEMBER" or "MEMBERS" means each of the Persons signing this
Agreement as a Member, in such capacity as a Member, and each other person who
shall be admitted to the Company as a Member.
3.20 "MEMBERSHIP INTEREST" or "INTEREST" means the Percentage Interest
of a Member in the Company and the appurtenant rights, powers and privileges.
3.21 "NET CASH FROM OPERATIONS" means the gross cash proceeds from
Company operations, which operations will predominately be the development and
sale of Lots, less the portion used to pay or establish reserves for all Company
expenses, operating and improvement expenses, debt payments, capital
improvements, replacements, reserves and contingencies, all as determined by the
unanimous vote of the members of the Board of Governors. "NET CASH FROM
OPERATIONS" shall not be reduced by depreciation, amortization, cost recovery
deductions, or similar allowances, but shall be increased by any reduction of
reserves previously established. Net Cash From Operations shall not include Net
Cash From Refinancings.
3.22 "NET CASH FROM REFINANCINGS" means the net cash proceeds from all
refinancings of Company Property, less any portion used to establish reserves,
all as determined by unanimous consent of the members of the Board of Governors.
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3.23 "OVERHEAD EXPENSES" means the actual expenses incurred by the
Manager or its Affiliates to manage the Project (other then Development
Expenses) including salaries and expenses of Xxxxxxx X. Xxxxxx and Xxxx Xxxx and
other Manager personnel, which expenses shall not exceed the amounts budgeted
therefor in the Project Operating Budget. Overhead Expenses shall be charged
only if directly attributable to such Project Management services and shall be
allocated based upon the amount of time personnel actually spend providing such
services, or such other method of allocation as is acceptable to the Company's
Members.
3.24 "PERSON" means any individual, partnership, limited liability
company, corporation, trust or other entity.
3.25 "PERCENTAGE INTEREST" means the percentage interest of a Member in
the Company and shall be in the amount set forth on Exhibit A attached hereto
and incorporated herein by reference, or as adjusted in accordance with Section
8.6 hereof.
3.26 "PRELIMINARY COST STATEMENT" means the Preliminary Cost Statement,
relating to the Project, attached as Exhibit B hereto, which is intended to
serve as the initial sources and uses of funds statement for the Project.
3.27 "PROJECT" means the Company's acquisition, development and sale of
approximately 626 acres in Comal County, Texas to be developed, sold and known
as Lantana Ridge, consisting of between 300 and 350 residential building sites;
the property comprising the Project will be acquired in two phases, the first of
which is expected to close on or about the date hereof (the "INITIAL CLOSING
DATE") and the second of which is expected to close within one year from the
date hereof (the "SECOND CLOSING DATE").
3.28 "PROJECT FEE" means the development fee totaling $250,000.00, half
of which shall be paid to TIC upon the Initial Closing Date and half of which
shall be paid to TIC on the Second Closing Date.
3.29 "PROJECT OPERATING BUDGET" means the three-year operating budget
for the development and sale of the Project attached as Exhibit C hereto, which
is intended to serve as the initial budget for the Project.
3.30 "PROJECT RESERVE" shall have the meaning ascribed thereto in
Section 13.7 hereof.
ARTICLE IV
PURPOSE
The purpose and character of the business of the Company shall be to
acquire fee interest in the Project upon such terms and conditions as the Board
shall determine; to own, manage and develop the Project and to sell the Lots
created in the Project for a profit; to enter into agreements pertaining to the
ownership, financing, management, development and sale of Lots within the
Project; to borrow funds for such purposes and to mortgage or otherwise encumber
any or all Company Property and the Project to secure such borrowings; to sell
or otherwise
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dispose of Company Property, the Project and/or the Lots within the Project; and
to undertake and carry on all activities necessary or advisable in connection
with the acquisition, development, operating, management and sale of the Project
or Lots within the Project.
ARTICLE V
NAMES AND ADDRESSES OF MEMBERS
The names and addresses of the Members are set forth on Exhibit A.
ARTICLE VI
TERM
The Company shall continue until dissolved as hereinafter provided or
December 31, 2015, whichever is earlier.
ARTICLE VII
PLACE OF BUSINESS AND AGENT FOR PROCESS
7.1 Place of Business. The principal place of business of the Company
shall be c/x Xxxxxx Investment Corporation, Attn: Xxxxxx X. Xxxxxx, 00 Xxxx
Xxxxxx XX, Xxxxx 000, Xxxxxxxxxxx, XX 00000. The Manager may from time to time
change the location of the principal office of the Company and, in such event,
the Manager shall give notice to the Members within twenty (20) days of the
effective date of such change. The Manager may in their discretion establish
additional places of business of the Company.
7.2 Agent for Process. The name and address of the agent for service of
process on the Company shall be Xxxxxx X. Xxxxxx, c/x Xxxxxx Investment
Corporation, 00 Xxxx Xxxxxx XX, Xxxxx 000, Xxxxxxxxxxx, XX 00000.
ARTICLE VIII
INITIAL CAPITAL AND ADDITIONAL CAPITAL CONTRIBUTIONS
The capital of the Company shall be contributed by the Members and
accepted by the Manager as follows:
8.1 Capital Accounts. A separate Capital Account shall be maintained
for each Member in accordance with the provisions of Article 704(b) of the Code
and any applicable regulations. The Initial Capital Contributions of the Members
shall be as set forth in Exhibit A. The Capital Account of each Member shall be
increased by (i) the amount of any contribution such Member makes to the capital
of the Company pursuant to Section 8.8; (ii) the fair market value of property
contributed by such Member to the Company, net of liabilities which the Company
assumes or to which the property is subject; (iii) the share of Company income
and gains (including income and gains exempt from tax) allocated to such Member
under the provisions of Article IX; and shall be decreased by (iv) any
distribution made by the Company to such Member pursuant to the provisions of
Article X; (v) the fair market value of any property distributed to the Member
by the Company, net of liabilities attached to such property which the
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Member assumes or to which the property is subject; and (vi) the share of
Company losses and deductions (including any expenditures of the Company
described in Article 705(a)(2)(B) of the Code or treated as such expenditures
pursuant to Treasury Regulation ` 1.704-1(b)(2)(iv)(i), allocated to such Member
under the provisions of Article IX.
Upon the occurrence of a contribution to or distribution from the
Company described in Treasury Regulations ` 1.704-1(b)(2)(iv)(f)(5) or as
otherwise permitted, the Manager may, at the written request of Members
representing at least one hundred percent (100%) of the Interests shall,
increase or decrease the Capital Accounts of the Members to reflect a
revaluation of Company Property on the Company's books, and, in that event,
allocations of Company income, gain, loss and deduction (and items thereof)
shall, for all purposes of this Section 8.1 be determined in the manner provided
in Section 704(b) or Section 704(c) of the Code, as the case may be, and the
Treasury Regulations thereunder.
This Section 8.1 and the other provisions of the Agreement relating to
the maintenance of Capital Accounts shall be interpreted and applied in a manner
consistent with Section 704(b) of the Code and any applicable regulations and
the economic sharing of profits and losses of the Company by the Members. In the
event the Manager shall determine that it is prudent to modify the manner in
which the Capital Accounts or any increase or decrease thereto are computed in
order to comply with Section 704(b) and any applicable regulations, the Manager
may make such modifications, provided that such modifications are not likely to
have a material effect on the amount distributable to any Member pursuant to
Section 17.2 hereof upon liquidation of the Company.
8.2 No Right to Return of Contributions. The Members shall have no
right to the withdrawal or the return of their respective contributions to the
capital of the Company except to the extent set forth in Section 8.8, Article X
and Section 17.2 hereof.
8.3 No Interest on Capital. No interest shall be paid by the Company on
the Initial Capital or any subsequent contribution to the capital of the
Company.
8.4 Loans to Company. A Member may lend money to the Company from time
to time in excess of its contribution to the capital of the Company and any such
loan shall not be treated as a contribution to the Capital of the Company for
any purpose or entitle such Member to any increase in its share of the income,
gain, losses, deductions, credits or distributions of the Company. The Company
shall be obligated to such Member for the amount of any such loan, with interest
at the rate of two percent (2%) over the prime rate announced by the Wall Street
Journal (Midwest Edition) on the date that such loan is made.
8.5 Additional Members. Additional Members may be admitted to the
Company only upon terms and conditions as may be established by written approval
of Members holding one hundred percent (100%) of the Interests. Upon such
consent and issuance of additional Membership Interests, Exhibit A shall be
appropriately amended. Nothing in this Section 8.5 shall be construed to limit
the effect of Section 14.1 with respect to the assignment or other transfer of
Interests by Members.
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8.6 Failure to Make Capital Contributions. In the event a Member fails
to pay any installment of the Capital Contributions when due from such Member
and such default is not cured within ten (10) days after written notice has been
given to the Member by the Manager that such default has occurred, the amount of
such Member's Percentage Interest shall be accordingly reduced to reflect the
reduction in the Capital Contributions of such defaulting Member. After, and in
addition to, the reduction in Percentage Interests required by the preceding
sentence, such Member shall be subject to interest charges on the defaulted
installment or installments of twelve percent (12%) per annum or the highest
rate permitted by Minnesota law, whichever is less, which interest charges may
be deducted by the Company from the capital contributions theretofore made by
such Member in such Member's Capital Account, and the resulting reduction in
such Member's Percentage Interest shall then be allocated among the remaining,
nondefaulting Members in proportion to their respective Percentage Interests.
This Agreement shall be deemed amended to reflect the revised Percentage
Interests.
8.7 Transferee Succeeds to Transferor's Capital Account. If any Member
transfers all or a part of an Interest in the Company, the transferee Member
shall succeed to the Capital Account of the transferor Member to the extent of
the Interest transferred, in accordance with Treasury Regulation `
1.704-1(b)(2)(iv)(1).
8.8 Additional Capital. The Members shall not be obligated to make any
additional contributions to the capital of the Company or to make any loan or
pay any assessment to the Company, except that the Members shall make additional
Capital Contributions to the Company up to the amount of each Member's Committed
Capital set forth in Exhibit A to the extent the Manager determines the Company
requires additional cash with respect to the Project and such additional capital
contributions shall be made ratably by the Members in proportion to their
Percentage Interests within ten (10) business days of the Members' receipt of
notice from the Manager that such contributions are to be made (each such
instance is hereafter a "CAPITAL CALL"). Each Capital Call shall be requested by
the Manager in total Member increments of $50,000.00. If the Board at any time
or from time to time, determines that the Company requires capital in addition
to the Members' Committed Capital, the Manager may obtain such additional
capital by borrowing in accordance with the provisions of Article XI.
8.9 Return of Unused Capital Contributions. In the event that any
portion of the Members' Capital Contributions are not used by the Company or, in
the judgment of the Board, are not committed by the Company in conjunction with
the acquisition, development, operation, management or sale of the Project
(including the funding of the Project Reserve) within three (3) months of the
date any such Capital Contributions were made, then such unused portions shall
be distributed to the Members, ratably in proportion to their Capital
Contributions made as of the date of such distribution, without interest paid
thereon, as a return of capital.
ARTICLE IX
ALLOCATIONS
9.1 Allocation of Income, Gains and Losses. All income, gains, losses,
deductions and credits of the Company shall be computed as of the end of each
fiscal year of the Company in accordance with the accrual method of accounting,
which shall be followed by the Company
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for federal income tax purposes. Except as otherwise provided in this Article
IX, the income, gains, losses, deductions and credits of the Company for each
fiscal year for book purposes, whether taxable or non-taxable, shall be
allocated to each Member pro rata in accordance with the cash and property
distributed to each Member in such fiscal year, if any, and if there is no cash
or property distributed, then pro rata in accordance with the Capital Accounts
for each Member.
9.2 Allocations in Event of Asset Sale. Notwithstanding anything to the
contrary contained herein, any gain or loss on the sale of all or substantially
all of the assets of the Company shall be allocated to the Members in such a
manner as to increase or decrease, as the case may be, the Members' respective
Capital Accounts so that the positive Capital Account balances of the Members,
after such allocation, are sufficient to permit the distributions to the Member
contemplated in Section 16.2 of this Agreement.
9.3 Special Allocations. If any special allocations within the meaning
of '704(b) of the Code occur, the following rules shall apply:
a. Minimum Gain Charge Back. "PARTNERSHIP MINIMUM GAIN" within
the meaning of Treasury Regulation ` 1.704-2(b)(2) means an amount of
gain that would be realized by the Company on the disposition of
Company Property subjects to nonrecourse indebtedness (within the
meaning of Treasury Regulation ` 1.704-2(b)(3)), equal to the amount by
which such nonrecourse indebtedness exceeds the adjusted tax basis (or
book value, if the property has been properly entered on the books of
the Company at a value different from its then adjusted tax basis) of
such property. If for any Company fiscal year, there is a net decrease
in Partnership Minimum Gain, each Member shall be allocated items of
Company income and gain in accordance with Treasury, Regulation `
1.704-2(f)(1) (a "MINIMUM GAIN CHARGE BACK") for such year (and, if
necessary, for subsequent years) in an amount equal to such Member's
share of such net decrease of Partnership Minimum Gain. For this
purpose, a Member's share of the net decrease in Partnership Minimum
Gain shall be determined under Treasury Regulations ` 1.704-2(g)(2).
This Article 9.3(a) is intended to comply with Treasury Regulation `
1.704-2(f)(1) and shall be interpreted as meeting the referenced
requirements.
b. Qualified Income Offset. If any Member at any time
unexpectedly receives any adjustment, allocation or distribution
described in Treasury Regulation " 1.704-l(b)(2)(ii)(d)(4),
1.704-l(b)(2)(ii)(d)(5) or 1.704-l(b)(2)(ii)(d)(6), and if such
adjustment, allocation or distribution results in a negative balance in
such Member's Capital Account in excess of the sum of (i) the amount
such Member is obligated to restore to the Company under this Agreement
and (ii) the amount such Member is deemed to be obligated to restore to
the Company pursuant to the penultimate sentences of Treasury
Regulations " 1.704-2(g)(1)(ii) and 1.704-2(i)(5), then items of
Company income and gain shall be specially allocated to such Member so
as to eliminate, to the extent required by Treasury Regulation `
1.704-l(b)(2)(ii)(d), such negative balance in his or her Capital
Account as quickly as possible.
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x. Xxxxx Income Allocation. If any Member would have a
negative balance in his or her Capital Account at the end of any
Company taxable year in excess of the sum of (i) the amount such Member
is obligated to restore to the Company under this Agreement and (ii)
the amount such Member is deemed to be obligated to restore to the
Company pursuant to the penultimate sentences of Treasury Regulations "
1.704-2(g)(1)(ii) and 1.704-2(i)(5), then such Member shall be
specially allocated items of Company income (including gross income) in
the amount of such excess as quickly as possible.
d. Curative Allocations. Any allocation to a Member under
sections a through c of this Section 9.3 (a "REGULATORY ALLOCATION")
shall be taken into account in determining subsequent allocations, so
that the net amount of Regulatory Allocations and all other items
allocated under the provisions of this Article IX shall, to the extent
possible, be equal to the net amount that would have been allocated to
such Member under the provisions of this Article IX if no Regulatory
Allocation had been made.
9.4 Tax Allocations. In accordance with Section 704(c) of the Code and
any applicable regulations, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its fair market value as of the date of contribution.
In the event any Company asset is adjusted as a result of a revaluation
pursuant to Article 8.1 hereof, subsequent allocations of income, gain, loss and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes and its fair
market value as of the date of such revaluation in the same manner as under
Section 704(c) of the code and the Treasury Regulations thereunder. Any election
or other decision relating to such allocations shall be made by the Manager in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 9.4 are solely for purposes of
federal, state and local taxes and shall not affect, or in any way be taken into
account in computing, any Member's Capital Account or share of income, profits,
gains, losses, expenses, deductions, credits or other items or distributions
pursuant to any provision of this Agreement.
9.5 Special Fee Allocation. If any fee or other amount payable to a
Member is determined for tax purposes to be a payment to such Member of a
distributive share of Company income or gain (rather than being a fee or
expenditure in the nature of an amount payable to a person who is not a Member
or other than in such person's capacity as a Member), then such amount shall be
treated (for tax purposes and for purposes of determining Capital Accounts) as
an allocation of gross income to such Member in the year such amount is accrued,
and a distribution in the year such amount is paid. However, the priority of
payment of any such item shall be unaffected by such treatment.
9.6 Consent to Allocation. Each Member expressly consents to the above
methods for the allocation of Company profits and losses.
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ARTICLE X
DISTRIBUTIONS
10.1 Distributions of Net Cash From Operations. Distributions of Net
Cash from Operations shall be made for each calendar month of each fiscal year
of the Company within thirty (30) days of the end of each such month and shall
be paid to the Members in the following manner:
a. first, to the Members who have made loans to the Company,
until such loans and all accrued interest thereon have been repaid;
b. second, to the Members in an amount equal to a cumulative
preferential return equal to fifteen percent (15%) per annum,
compounded, on the Capital Contributions made by the Member from the
date the Capital Contributions were made to the date of payment,
ratably in proportion to the Members respective Percentage Interests in
the Company, until such preferential return has been fully paid (the
"MEMBERS' PREFERRED RETURN");
c. third, to the extent any Members have made any additional
Capital Contributions in excess of such Members' Committed Capital,
then to such Members, ratably in proportion to such additional Capital
Contributions;
d. fourth, ten percent (10%) of the monthly Net Cash from
Operations remaining after the distributions set forth in subsections
(a), (b) and (c) above shall be placed in a reserve for payment of an
annual contribution to the TIC profit-sharing plan, and annual
distributions from such reserve to such profit-sharing plan shall
require the unanimous consent of the Governors; and
e. fifth, to the Members in an amount equal to one hundred
percent (100%) of their Capital Contributions up to their Committed
Capital, ratably in proportion to the Members respective Percentage
Interest in the Company, until such Capital Contributions have been
fully repaid; and
f. thereafter, thirty seven percent (37%) of Net Cash From
Operations shall be distributed to * and sixty three percent (63%) of
Net Cash From Operations shall be distributed to TIC.
10.2 Other Cash Distributions.
a. Distribution of any net proceeds upon the sale, exchange or
other disposition of any Company Property shall be made in accordance
with Section 17.2.
b. Distributions of Net Cash From Refinancings shall be made
to the Members in the following manner:
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i. first, to the Members who have made loans to the
Company, until such loans and all accrued interest thereon
have been repaid;
ii. second, to the extent the Members' Preferred
Return has not been fully paid, such sums as are necessary to
fully pay the Members' Preferred Return shall be paid to
Members ratably in proportion to their respective Percentage
Interests;
iii. third, to the extent any Members have made any
additional Capital Contributions in excess of such Members'
Committed Capital, then to such Members, ratably in proportion
to such additional Capital Contributions;
iv. fourth, to the Members in an amount equal to one
hundred percent (100%) of their Capital Contributions up to
their Committed Capital, ratably in proportion to the Members
respective Percentage Interests in the Company, until such
Capital Contributions have been fully repaid; and
v. thereafter, the balance, if any, shall be
distributed thirty seven percent (37%) to * and sixty three
percent (63%) to TIC.
ARTICLE XI
BOARD OF GOVERNORS
11.1 Authority of Board. Except as otherwise provided in this
Agreement, the business and affairs of the Company shall be managed by or under
the direction of the Board of Governors.
11.2 Appointment of Board; Term. There shall be a total of three (3)
Governors, both of which shall be natural persons, two of which shall be
appointed by TIC and, one of which shall be appointed by *. The Members hereby
appoint the following individuals as the initial Board of Governors:
Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxx
Xxxx X. Xxxx
In the event Xxxxxxx X. Xxxxxxx (or any other successor Governor appointed by *)
is unable or unwilling to continue as a Governor at any time, his successor
shall be appointed by *. In the event Xxxxxx X. Xxxxxx or Xxxx X. Xxxx (or any
other successor Governor appointed by TIC) is unable or unwilling to continue as
a Governor at any time, his successor shall be appointed by TIC. Each Governor
shall serve for an indefinite term and shall hold office until a successor has
been appointed or until his or her sooner death, resignation, removal or
disqualification.
11.3 Compensation. Unless otherwise agreed by all Members, the
Governors shall serve without compensation and without a right of reimbursement
from the Company for expenses incurred by them in performing services as
Governors.
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11.4 Place and Time of Meetings. Each meeting of the Board of Governors
shall be held at the principal place of business of the Company or at such other
place as may be designated from time to time by the Governors. Regular meetings
of the Board of Governors for the transaction of any business shall be held
quarterly (on such day as the Governors may mutually agree), without notice. A
special meeting of the Board of Governors may be called for any purposes at any
time by any Governor or the Manager by giving not less than two business days'
notice to all Governors of the date, time and place of the meeting, provided
that when notice is mailed, at lease four days' notice shall be given. The
notice need not state the purpose of the meeting.
11.5 Waiver of Notice; Previously Scheduled Meetings. Governors may
waive notice of meetings as follows:
a. A Governor of the Company entitled to notice of a meeting
of the Board may waive notice of the date, time and place of the
meeting, which waiver is effective whether given before, at, or after
the meeting, and whether given in writing, orally or by attendance.
Attendance by a Governor at a meeting shall constitute waiver of notice
of that meeting, unless the Governor objects at the beginning of the
meeting the transaction of business because the meeting is not lawfully
called or convened and thereafter does not participate in the meeting.
b. If the date, time, and place of a Board meeting have been
announced at a previous meeting of the Board, no notice is required.
Notice of an adjourned meeting need not be given other than by
announcement at the meeting at which adjournment is taken of the date,
time, and place at which the meeting will be reconvened.
11.6 Quorum. All of the Governors currently holding office shall be
necessary to constitute a quorum for the transaction of business.
11.7 Acts of Board. Except as otherwise required by law or specified in
the Agreement, the Board shall take action by the unanimous vote of the
Governors.
11.8 Participation by Electronic Communications. A Governor may
participate in a Board meeting by any means of communication through which the
Governor and other Governors may simultaneously hear each other during the
meeting. A Governor so participating shall be deemed present in person at the
meeting. A meeting held entirely by conference telephone call shall qualify as a
meeting under this Article XI.
11.9 Absent Governors. A Governor of the Company may give advance
written consent or opposition to a proposal to be acted on at a Board meeting.
If the Governor is not present at the meeting, consent or opposition to a
proposal does not constitute presence for purposes of determining the existence
of a quorum, but consent or opposition shall be counted as a vote in favor of or
against the proposal and shall be entered in the minutes or other record of
action at the meeting, if the proposal acted on at the meeting is substantially
the same or has substantially the same effect as the proposal to which the
Governor has consented or objected.
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11.10 Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the Board of Governors may be taken without a meeting by
written action signed by all the Governors then in office. The written action is
effective when signed by all Governors, unless a different effective date is
provided in the written action.
11.11 Limits of Authority. The Company, upon unanimous resolution of
the members of the Board, has express authority to carry out the purposes of the
Company set forth in Article IV hereof. Notwithstanding the foregoing, the Board
of Governors shall not have authority to act on behalf of the Company with
respect to any of the following without the prior written consent of all
Members:
a. Except for execution and delivery of the Initial Loan
Documents, borrowing or lending money on behalf of the Company,
committing the Company to make loans or advances, or guarantying the
debts or obligations of another entity, except as authorized below in
Section 12.2(a) hereof;
b. Except for execution and delivery of the Initial Loan
Documents, mortgaging or granting security interests or other liens,
pledges, or encumbrances on any Company Property;
c. Entering into any agreements or undertakings for additional
real estate acquisitions or other transactions beyond the Project,
other than preliminary understandings expressly subject to Member
approval;
d. Selling, exchanging, or otherwise disposing of all or
substantially all of the Company's assets, or merging or combining the
Company with another company or legal entity;
e. Engaging in any business or endeavor incompatible with the
purposes of the Company set forth in Article IV hereof, or taking any
action contrary to the interest of the Members as expressed in this
Agreement.
ARTICLE XII
MANAGER AND VICE MANAGER; CONFLICTS OF INTEREST; INDEMNIFICATION
12.1 Manager. The Initial Members hereby appoint Xxxxxx Investment
Corporation, as the Manager of the Company and * as the Vice Manager of the
Company (to act in such instances where the Manager is not available to exercise
its rights and powers, the timely exercise of which would be in the best
interest of the Company). In the event that the Manager is terminated by the
Board or resigns, or is unwilling to or unable to perform its duties as Manager,
the management of the Company shall be vested in the Vice Manager, until a
successor Manager is appointed by the Board. The Manager and Vice Manager may,
but need not be, Members of the Company.
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12.2 Management and Control of the Company. Except as otherwise
provided in this Agreement, the Manager, and in the case of the Manager's
absence or inability or unwillingness to perform its duties, the Vice Manager
shall have the authority (but not the obligation to) control the conduct,
operation, and management of the business of the Company. The Manager or Vice
Managers, as the case may be, shall manage the affairs of the Company in a
prudent and businesslike fashion and shall use its best efforts to carry out the
purposes and the business of the Company. The Manager shall devote such of his
time as it deems necessary to the management of the business of the Company. In
the absence of the Manager or in the event of the Manager's inability or
unwillingness to perform the duties of Manager hereunder, the Vice Manager shall
have the same power and authority granted the Manager hereunder.
Anything else herein to the contrary notwithstanding, without the
unanimous approval of the Board, the Manager and Vice Manager shall not have
authority to act on behalf of the Company with respect to any matter within the
scope of any of the following:
a. Except for execution and delivery of the Initial Loan
Documents, borrowing or lending money on behalf of the Company, except
borrowing up to Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) from the Manager, the Vice Manager, or their Affiliates
to fulfill working capital and debt service reserve requirements
contained in any loan agreement between the Company and the financial
institution which lends to the Company.
b. Except for execution and delivery of the Initial Loan
Documents, entering into contracts or agreements, or performing any
acts where such contracts, agreements or acts bind the Company to any
obligation whatsoever in excess of Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00).
c. Except for execution and delivery of the Initial Loan
Documents, placing a mortgage upon or otherwise encumbering any Company
Property, except as approved or authorized by the Board.
d. Selling, exchanging or otherwise disposing of all or
substantially all of the Company's assets.
e. Taking any action which, in the prudent exercise of
business discretion, could reasonably be expected to have a material
adverse effect on the Company or the assets or operations thereof.
f. Acquiring, owning, holding and disposing of any Company
Property, whether real, personal or mixed, including the purchase,
lease, development, improvement, exchange, trade or sale of any Company
Property, other than the acquisition, development or sale of the Lots
within the Project.
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g. Expending, in any one line item category of either the
Preliminary Cost Statement or the Project Operating Budget, more than
the amount budgeted therefor in the Preliminary Cost Statement or the
Project Operating Budget, as the case may be.
h. Making distributions from the reserve established pursuant
to Section 10.1(d) hereof for contributions to the TIC profit-sharing
plan.
All such actions shall require the unanimous approval of the Board.
12.3 Authority of Manager. The Manager, and in the event of the
Manager's inability or unavailability to act, the Vice Manager, shall have all
necessary powers to carry out the purposes and business of the Company. Except
as provided in Sections 12.2 and 12.4, in addition to any other rights and
powers which the Manager may possess, the Manager (and the Vice Manager in the
event of the Manager's inability or unavailability to act) shall have all
specific rights and powers required or appropriate to the management of the
business of the Company including the following:
a. To the extent of Company assets, to prosecute, defend,
settle or compromise actions or claims at law or in equity at the
Company's expense as may be necessary or proper to enforce or protect
the Company's interests; and to satisfy any judgment, decree, decision
or settlement of any such suit or claim;
b. To enter into and carry out contracts and agreements and to
do and perform all such other things as may be in furtherance of
Company purposes; and to execute, acknowledge and deliver any and all
instruments which may be deemed necessary or convenient to effect the
foregoing;
c. To acquire and enter into any contracts of insurance which
the Manager deems necessary and proper for the protection of the
Company or for any purpose beneficial to the Company;
d. Subject to Sections 12.2, 12.4, 12.5 and 12.8 hereof, to
manage the day-to-day operations of the Company and to employ, engage
or retain, at the expense of the Company, such Persons to perform such
services as the Manager may deem necessary or advisable for the
efficient operation of the business of the Company and to pay to such
Persons such compensation as the Manager shall determine, provided that
such compensation is at the then prevailing rate for the type of
services and materials provided. Any person, whether a Member, an
Affiliate of a Member, or otherwise, may be employed or engaged by the
Company to render services, including, but not limited to, marketing,
property management, brokerage, accounting and legal services; and if
such Person is a Member or an Affiliate of a Member, such Person must
have been previously engaged in the business of rendering such services
or selling or leasing such goods, independent of the Company and as an
ordinary and on-going business, and such Person shall be paid,
compensation for such services, anything in this Agreement to the
contrary notwithstanding, provided that the compensation to be received
for such services is competitive with the amount and terms charged by
and paid to other non-affiliated
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persons rendering comparable services and is at the then prevailing
rate for the type of services and/or materials provided. The fact that
a Member, or an Affiliate of a Member, is employed by, or is directly
or indirectly interested in or connected with any Person employed by
the Company to render or perform any service, or from whom the Company
may buy merchandise or other property, shall not prohibit the Manager
or a Vice Manager, as the case may be, from employing such Person, or
from otherwise dealing with him, her or it.
e. To execute and deliver on behalf of the Company contracts
or agreements of any nature and any or all instruments necessary or
desirable to effectuate the foregoing powers.
f. To accept and value the contributions of Members to the
Company made pursuant to the provisions of this Agreement.
g. To expend sums from the a Project Reserve for a Project for
the purposes set forth in Section 13.7 hereof.
12.4 Restrictions on Authority of Manager. In addition to other acts
expressly prohibited or restricted by this Agreement or by law, the Manager
shall have no authority to act on behalf of the Company and is expressly
prohibited from the following:
a. Doing any act in contravention of this Agreement;
b. Doing any act which would make it impossible to carry on
the ordinary business of the Company, other than as permitted in this
Agreement;
c. Seizing Company property or assigning the rights of the
Company and specific Company property for other than a Company purpose;
d. Admitting a person as a Member except as provided in this
Agreement;
e. Performing any act (other than an act required by this
Agreement or an act taken in good faith or in reliance upon counsel's
opinion) which would, at the time such act occurred, subject any Member
to liability as a general partner in any jurisdiction;
f. Without the unanimous approval of the Board, engaging any
broker, property manager or property management firm to lease, manage,
develop or otherwise supervise the day-to-day operations of the
Project.
12.5 Obligations of Manager. In addition to the obligations expressly
provided by law or this Agreement, the Manager, to the extent of Company assets,
shall manage the Company's business and affairs in accordance with the
provisions of Section 12.3 hereof and do the following, all without remuneration
except as provided for in Section 12.8:
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a. Undertake all acts necessary or desirable, with respect to
the purposes of the Company, to acquire, finance, develop, lease,
manage, own and operate the Company Property;
b. File and publish all certificates, statements and other
instruments required by law for the formation, qualification and
operation of the Company and for the conduct of its business in all
appropriate jurisdictions;
c. Cause the Company to prepare or have prepared all financial
and tax statements and reports required under Article XIII; and
d. Cause the Company to keep at its principal office the
required records set forth in Article 18-305(a) of the Act.
12.6 Tax Matters Partner. The Manager shall serve as Tax Matters
Partner for federal income tax purposes. If on advice of counsel, the Tax
Matters Partner determines that it is in the best interest of the Members that
the final results of any administrative proceeding be appealed by the
institution of legal proceedings, the Tax Matters Partner is hereby authorized
to commence such legal proceedings in such forum as it, on advice of counsel,
determines to be appropriate. In the event the Tax Matters Partner selects a
forum for appeal in which it is required to deposit a proportionate share of any
disputed tax before making such appeal, it must obtain the approval of the Board
and if such approval is obtained, each of the Members will be required to
deposit and pay his or her proportionate share of such disputed tax before
participating in such appeal. The Members acknowledge that such deposit under
current law does not earn interest and that the failure so to deposit may
preclude a Member from pursuing any other sort of appeal by court action. The
Tax Matters Partner shall not be liable to any other Member for any action taken
with respect to any such administrative proceeding or appeal so long as the Tax
Matters Partner is not grossly negligent or guilty of willful misconduct. Any
costs paid or incurred by the Tax Matters Partner in connection with its
activities in such capacity shall be reimbursed by the Company. Each Member
acknowledges that any cost such Member may incur in connection with an audit of
such Member's income tax return, including an audit of investment in this
Company, is such Member's sole responsibility and obligation; and neither the
Company, the Manager nor the Tax Matters Partner shall be liable to any Member
for reimbursement or sharing of any such costs.
12.7 Conflicts of Interest; Other Activities. The Manager and its
Affiliates and may deal with, perform other services for and sell goods or
services to the Company without limitation; provided, however, that any
compensation for such services or goods shall be limited to amounts and rates
customary in the industry, as further set forth in Sections 12.3(d) and 12.8
hereof. The Manager, the Vice Manager, the Members, the Board or Governors and
their Affiliates may, during the term of the Agreement, engage in and possess an
interest, for their own account, in other business ventures of every nature and
description, independently or with others including, but not limited to, the
ownership, financing, leasing, operation and management of real estate
activities; and neither the Company nor any Member, by virtue of the Agreement
shall have any right in and to such independent venture or any income or profit
derived therefrom.
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12.8 Reimbursement.
a. Subject to the limitations set forth in Section 12.8(b),
the Company shall reimburse the Manager and its Affiliates at their
Cost: (i) for Administrative Expenses; (ii) Development Expenses; and
(iii) Overhead Expenses (which overhead expenses shall be allocated
based upon the amount of time personnel actually spend providing such
services, or such other method of allocation as is acceptable to the
Company's members) necessary for the prudent operation of the Company,
provided that any such expense reimbursements shall be subject to the
limitations set forth in Section 12.8(b).
b. The reimbursements pursuant to Section 12.8(a) to the
Manager and its Affiliates, will not exceed, the amounts budgeted
therefor as set forth in the Preliminary Cost Statement or the Project
Operating Budget, without the prior unanimous approval of the Board. If
the Manager and its Affiliates receive reimbursement for items set
forth in Section 12.8(a) in excess of the limitations set forth in this
section, the Manager will refund the difference to the Company within
30 days of discovery of such excess.
c. The Company's monthly report to Members (which the Manager
shall prepare and distribute within 30 days following the month for
which such report is issued) will contain information concerning
reimbursements made to the Manager and its Affiliates. The methods of
verification shall be in accordance with generally accepted auditing
standards and shall, accordingly, include such tests of the accounting
records and such other auditing procedures that the Manager consider
appropriate in the circumstances.
d. The Manager and its Affiliates will not be reimbursed or
otherwise paid for any services except as set forth in Section 12.8(a).
e. To the extent the Vice Manager or any member of the Board
of Governors performs any functions in the absence, unwillingness or
inability to act of the Manager, the Vice Manager or such Board member
shall be reimbursed for its or his reasonable expenses incurred on
behalf of the Company, and such reimbursement shall not be subject to
the reimbursement limitations set forth in Article 12.8(b) hereof.
12.9 Indemnification of Manager and Covered Persons. The Company shall
indemnify Covered Persons against any loss, claim, or liability incurred by a
Covered Person in connection with the business of the Company, provided the
Covered Person acted in good faith, and within the scope of this Agreement and
was not grossly negligent or guilty of willful or fraudulent misconduct. Any
amount paid to indemnify a Covered Person, however, shall be paid out of Company
assets only, and Members shall not be liable for such amounts to be paid, except
to the extent of any amount of the Capital Contribution of a Member that is due
and owing to the Company and remains unpaid. Neither the Company nor any Member
shall have any claim against a Covered Person based upon or arising out of any
act or omission of such Covered Person, provided that the Covered Person acted
in good faith, and within the scope of this Agreement, and was not grossly
negligent or guilty of willful or fraudulent misconduct.
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12.10 Liability Under Other Agreements. The obligations of the Manager,
the Vice Manager and their Affiliates pursuant to any agreement or contract
entered into with the Company shall be separate and distinct from their
obligations hereunder and any default or failure of performance with respect to
such separate agreements or contracts, unless otherwise specified in this
Agreement, shall have the consequences provided for in such separate agreements
or contracts or by applicable law and shall not constitute a breach hereunder.
ARTICLE XIII
BOOKS OF ACCOUNT AND REPORTS; PROJECT RESERVE
13.1 Books of Account. The Manager shall cause complete and accurate
accounts of all transactions of the Company in proper books of account to be
kept and shall cause to be entered therein a full and accurate account of each
and every Company transaction in accordance with accounting principles as
determined by the Manager based upon the advice of the Company's accountants.
The books and records of the Company shall be closed and balanced as of the end
of each fiscal year. The books of account and other records of the Company shall
at all times be kept at the place of business of the Company and each of the
Members shall have access to and may inspect and copy any of such books and
records at all reasonable times.
13.2 Accounting Practices. The books of account of the Company shall be
kept on according to generally accepted accounting principles consistently
applied or any other acceptable method elected by the Manager. The fiscal year
and tax year of the Company shall be the calendar year. The Manager shall have
the authority to designate and retain a firm of independent certified public
accountants to assist in the maintenance and preparation off such books, records
and reports as the Manager deem desirable.
13.3 Bank Accounts. The Company shall maintain separate bank accounts
for the Company in such bank or banks as may be selected by the Manager. All
withdrawals from such bank accounts shall be made by check, or other instrument,
signed by such Person or Persons as the Manager may designate.
13.4 Report to Members. Not later than thirty (30) days after the end
of each month of the Company, each Member shall be furnished with a report of
the business and operations of the Company during such month, which report shall
constitute the accounting of the Manager for such month. The report shall
contain (a) a balance sheet as of month end, a statement of operations for the
month then ended, a statement of Members' equity, and statement of cash flows;
(b) a report of the activities of the Company during the period covered by the
report; and (c) the amount of any fees or other reimbursements to the Manager or
any Affiliates of the Manager during the month to which such report relates,
including information required by Article 12.8. Such report shall set forth
distributions to Members for the period covered thereby and shall separately
identify distributions from (i) Net Cash From Operations during the period; (ii)
Project Reserves; (iii) proceeds from the disposition of any Company Property;
and (iv) reserves from the Capital Contributions obtained from the Members. The
financial information contained in the report will be prepared on the GAAP basis
or such other basis as is acceptable to
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the Members. Such report shall state income from every source, including net
gains from disposition or sale of Company assets.
13.5 Tax Information. Appropriate tax information shall be delivered to
each Member within ninety (90) days after the end of each fiscal year. In
addition, concurrently with the delivery of such information, the Manager shall
deliver to each Member adequate information relating to the Company's operations
to enable each Member to complete and file all federal, state and local
estimated tax returns, for which the Member may be liable.
13.6 Tax Elections. In the event of a transfer or a repurchase by the
Company or distribution of property by the Company in exchange for all or part
of the Interest of any Member, the Company may elect, pursuant to Section 754 of
the Code (or any successor provision), to adjust the basis of the assets of the
Company. Such election must be agreed to by Members having aggregate Percentage
Interests of at least one hundred percent (100%) of the Interests in the
Company.
13.7 Project Reserve. The Members hereby agree that the Company shall
establish a reserve for the express purpose of funding future liabilities of the
Company, the development, maintenance, improvement, operation and marketing of
the Project, the accounting and tax return preparation expenses of the Company,
and other annual expenses of the Company (the "PROJECT RESERVE"). The Company
shall establish a separate reserve account exclusively for the Project. No
amounts shall be withdrawn from the Project Reserve for distribution to the
Members without the prior approval of the Board. The Project Reserve shall be
funded by the Company within ten days of the end of each calendar month with an
amount to be established by the Board.
ARTICLE XIV
TRANSFER OF MEMBERSHIP INTERESTS
14.1 Prohibition Against Transfer. Except as otherwise provided in this
Article XIV, no Member shall have the right to sell, exchange, assign, give
away, transfer, mortgage, pledge, charge or otherwise encumber or dispose of, or
suffer any third party to sell, exchange, assign, give away, transfer, mortgage,
pledge, charge or otherwise encumber or dispose of, or contract to do or permit
any of the foregoing, all or part of its interest in the Company, nor shall a
Member have the right to enter into any agreement as a result of which a Person
will obtain any interest in the Company, without the prior written approval of
the Board, which approval may be granted or withheld in the sole discretion of
the Board. In the event that a Member transfers all or any part of its Interest
in the Company in violation of this Article XIV, it shall immediately cease to
be a Member of the Company.
14.2 Conditions to Assignment. The Board may condition such approval
upon, among other things, upon receipt of (i) a legible photocopy of any offer
received by a Member to purchase such Member's Interest; (ii) an opinion of
counsel, satisfactory in form and substance to the Board to the effect that
either (a) the sale or assignment constitutes an exempt transaction and does not
require registration under any applicable securities laws or (b) the interest to
be sold or assigned is duly and properly registered under all applicable
securities laws; (iii) evidence of the proposed assignee's eligibility to become
a substitute Member pursuant to Section 14.4
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hereof if such substitution is a condition to the Bona Fide Offer and (iv) the
proposed assignee's agreement to comply with and be bound by the terms of this
Agreement and to execute any and all documents that the Board may reasonably
determine necessary in connection with the assignment and any substitution; (v)
evidence satisfactory in form and substance to the Board that the sale or
assignment will not impair the ability of the Company to be taxed as a limited
liability company for federal income tax purposes; (vi) written representations
of the proposed assignee in form and substance satisfactory to the Board that
(a) the proposed assignee is acquiring the Interest for its own account and for
investment and not with a view to the distribution thereof, and (b) the Interest
will not be resold by the proposes assignee unless properly registered under all
applicable securities laws or unless exempt from such registration.
14.3 Permitted Pledge. A Member may pledge, mortgage or hypothecate
("PLEDGE") all or any part of its Interest in the Company if such Pledge
constitutes security for a loan incurred (i) to enable the Member to acquire the
interest in the Company of a selling Member, or (ii) to make an additional
Capital Contribution in excess of the Member's Committed Capital set forth in
Exhibit A pursuant to this Agreement. If the Pledge is forfeited to satisfy such
loan or is foreclosed upon, and the Membership Interest sold at a public or
private sale or retained by the pledgee in full or partial satisfaction of the
law, the Person who obtains the Interest shall not be deemed a Member hereunder
unless approved by the Board pursuant to the terms of this Article XIV and the
provisions of Section 14. 4 hereof shall apply.
14.4 Transfer to Person who is Not a Member. Except as otherwise
expressly provided herein, if an interest in the Company is transferred to a
Person who is not already a Member, the transferee will not become an additional
or substitute Member unless such Person is accepted as an additional or
substitute Member by the written approval of the Board, which approval may be
granted, withheld or conditioned in the sole discretion of the Board, and such
Person shall pay all reasonable expenses in connection with such admission as a
substitute Member; including, but not limited to, legal fees and costs of
preparing, filing and publishing any amendment to the governmental filing of the
Company which is necessary or desirable in connection to his, her or its
admission. In the event the requisite approval is not granted, or the conditions
of such approval are not met, the Person shall not be entitled to any rights of
a Member under this Agreement but shall be entitled to its pro rata share of
Company profits, losses and distributions as are otherwise made available in
accordance with this Agreement. Any subsequent transfer of an interest in the
Company by a person who is not a Member shall remain subject to the provisions
of this Article XIV as if the person were a Member.
14.5 Acquit Company. In the absence of written notice to the Company of
any sale or assignment of an interest in the Company, any payment to the selling
or assigning Member or shall acquit the Company of liability to the extent of
such payment to any other person who may have an interest in such payment by
reason of any assignment or sale by the Member.
14.6 New Members Bound by Agreement. Any Person who is admitted to the
Company as a substitute Member shall be subject to and bound by all the
provisions of this Agreement as if originally a party to this Agreement,
including specifically the requirements hereof relating to additional Capital
Contributions.
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14.7 Distributions After Transfer. Distributions made on or after the
effective date of the transfer of an interest in the Company shall be made to
the transferee(s), regardless of when such distributions accrued on the books of
the Company.
ARTICLE XV
LIABILITY OF MEMBERS
Except as otherwise provided by the Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and no
Covered Person shall be obligated personally for any such debt, obligation or
liability of the Company solely by reason of being a Covered Person, and except
as otherwise expressly required by law, a Member, in its capacity as such, shall
have no liability in excess of (a) the amount of its Capital Contributions of
Committed Capital, (b) its share of assets and undistributed profits of the
Company, (c) its obligation to make other payments expressly provided for in
this Agreement, and (d) the amount of any distributions wrongfully distributed
to it.
ARTICLE XVI
AMENDMENT OF AGREEMENT
When circumstances occur requiring amendment of this Agreement by law,
or at any time the Manager or other Members holding at least a majority of the
aggregate Interests, may propose an amendment to this Agreement, the Manager or
such Members shall call a special meeting of all Members for the purpose of
considering such proposed amendment. At least ten (10) days prior to such
meeting, the Manager or such Members shall deliver to each Member written notice
of the meeting and a statement of the purposes of the amendment and such other
matters as the Manager or such Members deems material to consideration of the
amendment. The amendment so proposed shall be adopted if approved by the Members
representing at least one hundred percent (100%) of the Interests, or such
greater number as may be required by law in effect at the time of the vote.
Alternatively, this Agreement may be amended by a written action signed by the
Members representing at least one hundred percent (100%) of the Interests,
provided that all Members are given written notice of the proposed written
action at least ten (10) days before solicitation of signatures is begun and
provided that failure by a Member to respond either affirmatively or negatively
to any amendment within ten (10) days of the proposed solicitation shall be
construed as consent. Any amendment which would reduce the Interest of any
Member in the Company or increase the obligations of any Member shall require
the unanimous consent of the Members affected, except for amendments made
pursuant to Section 8.6 hereof.
ARTICLE XVII
DISSOLUTION
17.1 Dissolution.
a. The Company shall be dissolved upon the occurrence of any
of the following events:
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i. upon expiration of the Term for the duration of
the Company as provided in Article VI;
ii. by the written agreement of all Members; or
iii. if after the death, retirement, resignation,
expulsion, bankruptcy, dissolution of a Member or occurrence
of any other event that terminates the continued membership of
a Member in the Company (a "DISSOLUTION EVENT"), all the
remaining Members agree in writing to dissolve the Company
within ninety (90) days of such Dissolution Event.
b. As soon as possible following the occurrence of any of the
events specified in this Article effecting the dissolution of the
Company upon the winding up of the Company, the appropriate
representative of the Company shall execute a certificate of
cancellation in such form as shall be prescribed by the Secretary of
State of Delaware, setting forth the information required under Section
18-203 of the Act, and shall file same with the Secretary of State's
office.
c. Upon dissolution of the Company, the Company shall cease to
carry on its business, except insofar as may be necessary for the
winding up of its business, but its separate existence shall continue
until a certificate of termination has been filed with such Secretary
of State or until a decree dissolving the Company has been entered by a
court of competent jurisdiction.
17.2 Distributions on Liquidation. Upon liquidation, the business of
the Company shall be wound up, the Manager shall take full account of the
Company assets and liabilities, and all assets shall be liquidated as promptly
as is consistent with obtaining the fair value thereof. If any assets are not
sold, gain or loss shall be allocated to the Members in accordance with Article
IX as if such assets had been sold at their fair market value at the time of the
liquidation. If any assets are distributed to a Member, rather than sold, the
distribution shall be treated as a distribution equal to the fair market value
of the assets at the time of the liquidation. The assets of the Company shall be
applied and distributed in the following order of priority:
a. To the payment of all debts and liabilities of the Company,
including all fees due the Manager, any Vice Manager and Affiliates,
and including any loans or advances that may have been made by the
Members to the Company, in the order of priority as provided by law;
b. To the establishment of any reserves deemed necessary by
the Manager or the person winding up the affairs of the Company for any
contingent or unforeseen liabilities or obligations of the Company;
c. To the Members in the following order of priority:
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i. First, to the extent the Members' Preferred Return
has not been fully paid, such sums as are necessary to fully
pay the Members' Preferred Return shall be paid to the Members
ratably in proportion to their Percentage Interests; then
ii. Second, to the Members to the extent of any
subsequent Capital Contributions any Members have made in
excess of such Member's Committed in Capital set forth in
Exhibit A, ratably in proportion to such subsequent Capital
Contributions; then
iii. Third, to the extent of any balance remaining
and to the extent the annual distributions to the TIC
profit-sharing plan were not previously made, ten percent
(10%), or such lesser amount as is owed, shall be paid to the
TIC profit-sharing plan; then
iv. Fourth, to extent of any balance remaining,
thirty seven percent (37%) to * and sixty three percent (63%)
to TIC.
ARTICLE XVIII
DISPUTE RESOLUTION
In the event any dispute arises with respect to this Agreement, its
validity or termination, or changes in the purposes or powers of the Company, or
the merger or consolidation of the Company, the interpretation of any provision
of this Agreement, or a breach of this Agreement (the "DISPUTE"), such dispute
shall be settled in the following manner. The Company or any Member who chooses
to exercise the provisions of this Article (an "INITIATING MEMBER"), shall give
written notice of the intention to resolve the Dispute as provided herein (the
"INITIATING NOTICE"). The Initiating Notice shall state with specificity the
claims, default or other reason or reasons constituting the Dispute and the
reasons for the Initiating Notice. The other Member(s) involved in the Dispute,
and/or the Company through its Manager if the Company is involved (the
"RESPONDING MEMBER"), shall respond within ten (10) days of receipt of the
initiating Notice (the "RESPONSE"). The Members shall seek to resolve the
subject of the Initiating Notice by informal negotiations conducted in good
faith during the next five (5) Business Days after receipt of the Response from
the Responding Member(s). In the event the Members do not resolve the Dispute
within such time, the Initiating Member shall submit the Dispute to mediation
through the Mediation Center, St. Xxxx, Minnesota (and if such Mediation Center
is no longer in business, to another reputable mediation service). The Mediation
Center shall appoint a mediator who has at least ten (10) years experience in
commercial real estate and business organizations relating to commercial real
estate in Minneapolis-St. Xxxx Metropolitan Area. The mediation proceeding shall
commence no later than thirty (30) days after the receipt of the Initiating
Notice, and the Members shall seek to resolve the Dispute through mediation for
no more than twenty (20) Business Days after the commencement of mediation.
In the event the Dispute is not resolved through mediation within said
20-day period, the Mediator shall immediately submit the Dispute to binding
arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association then in force by three (3) arbitrators
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selected by the Mediator. The arbitrators shall have at least ten (10) years
experience in commercial real estate and business organizations relating to
commercial real estate in the Minneapolis-St. Xxxx Metropolitan Area. Any award
rendered shall be final, binding and conclusive upon the Members.
The filing fees and other costs of mediation and arbitration shall be
borne equally between the parties to the Dispute, provided, however, the
prevailing party in the arbitration proceedings shall be entitled to claim and
recover the filing fees and other costs of arbitration, including the reasonable
attorney fees of the prevailing Member (or the Company if it prevails),
provided, however, the Company may offset any amounts owed to it or to a
prevailing Member by any other Member as a result of any stipulation reached in
mediation or any such arbitration award against any distributions, funds or
other property that are in the Company's possession and are owed by the Company
to the other Member.
ARTICLE XIX
MISCELLANEOUS
19.1 Notice. All notices, offers, demands, certificates or other
communications required or permitted under this Agreement shall be in writing,
signed by the Person giving the same. Notice it is shall be treated as given
when personally received or (except in the event of a mail strike) when sent by
facsimile, certified or registered mail, postage prepaid, return receipt
requested, to a Member at the address as shown from time to time on the records
of the Company. Any Member may specify a different address by notice to the
Manager.
19.2 Partition. The Members agree that the Company properties are not
and will not be suitable for partition. Accordingly, each of the Members hereby
irrevocably waives any and all rights that he, she or it may have to maintain
any action for partition of any Company Property.
19.3 Consent and Waiver. No consent under and no waiver of any
provision of this Agreement on any one occasion shall constitute a consent under
or waiver of any other provision on said occasion or on any other occasion, nor
shall it constitute a consent under or waiver of the consented to or waived
provision on any other occasion. No consent or waiver shall be enforceable
unless it is in writing and signed by the party against whom such consent or
waiver is sought to be enforced.
19.4 Entire Agreement. This Agreement constitutes the entire agreement
among the parties. It supersedes any prior agreement or understanding among
them, and it may not be modified or amended in any manner other than as set
forth herein.
19.5 Governing Law; Venue. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware. The Members and the Company irrevocably consent to the
jurisdiction of the Minnesota District Court for Hennepin County or the Federal
District Court of Minnesota, Fourth Division, as the appropriate venue for any
litigation involving the interpretation of application of this Agreement.
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19.6 Successors. Except as herein otherwise specifically provided, this
Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
assigns.
19.7 Interpretation. All references herein to Articles, sections and
subsections refer to Articles, section and subsections of this Agreement. All
Article and section headings are for reference purposes only and shall not
affect the interpretation of this Agreement.
19.8 Severability. If any provision of this Agreement or the
application of such provision to any Person or circumstances, shall be held
invalid, the remainder of the Agreement, or the application of such provision to
Persons or circumstances other than those to which it is held invalid, shall not
be affected thereby.
19.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement binding
on all Members.
19.10 Necessary Instruments. The Members covenant and agree that they
shall execute any further instruments and shall perform any acts which are or
may become necessary to effectuate and to carry out the terms and conditions of
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Operating
Agreement as of the day and year first above written.
XXXXXX INVESTMENT CORPORATION
By /s/ Xxxxxx X. Xxxxxx
--------------------------
Xxxxxx X. Xxxxxx
Its President
*
By
--------------------------
--------------------------
Its
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EXHIBIT A
LANTANA DEVELOPMENT LLC CAPITAL CONTRIBUTIONS
Initial Capital Maximum Committed
Member and Address Percentage Contribution Additional Capital
Interest Capital
Contributions
to be made
pursuant to
Section 8.8
1. Xxxxxx Investment Corporation 33.3% $333,000 $167,000 $500,000
00 Xxxx Xxxxxx XX, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
2. * 66.7% $667,000 $333,000 $1,000,000
Total 100% $1,000,000 $500,000 $1,500,000
