Exhibit 10.25
OPERATING AGREEMENT OF
GLENBROOK HOMES, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
In accordance with the Xxxxxxx-Xxxxxx Limited Liability Company Act
and subject to the Articles of Organization, which were filed on
August 6,2002 with the Secretary of State of California, the members
of GLENBROOK HOMES, LLC listed on the signature page, make
the following agreement on August 9,2002 regarding the conduct of
the business and affairs of GLENBROOK HOMES, LLC, a California
limited liability company ("Company"):
ARTICLE 1. DEFINITION OF TERMS
1.01 When used in this agreement, the following terms have the
meanings set forth here:
(a) "Act" means California's Xxxxxxx-Xxxxxx Limited Liability
Company Act, as set forth in Corporations Code Title 2.5.
(b) "Agreement" means this operating agreement, as originally
executed and as amended from time to time.
(c) "Approved Costs" means all costs, including Financing and
the Management Fee, incurred in carrying out the Project.
Approved Costs include, but are not limited to: hard and soft costs,
developments costs, design and engineering costs, marketing costs,
labor costs, supplier costs, legal, administrative and accounting costs
attributable to the Project, salaries of the project xxxxxxx, permit costs,
site trailer costs, materials costs, and insurance costs.
(d) "Articles" means the Articles of Organization for the Company
as originally filed with the Secretary of State and as amended from time to
time.
(e) "Available Cash" of the Company means all cash funds of the
Company on hand from time to time (other than cash funds obtained as
contributions to the capital of the Company by the members and cash
funds obtained from loans to the Company), after (1) payment of all
operating expenses of the Company as of such time, (2) provision for
payment of all outstanding and unpaid current obligations of the
Company as of such time, and (3) provision for a working capital reserve,
as defined below.
(f.) "Bankruptcy" means, and a Member is deemed a "Bankrupt
Member" on, (1) the entry of a decree or order for relief against the
Member by a court of competent jurisdiction in any involuntary case
brought against the Member under any bankruptcy, insolvency, or similar
law ("Debtor Relief Laws") that generally affect the rights of creditors
and relief of debtors; (2) the appointment of a receiver, liquidator,
assignee, custodian, conservator, trustee or similar agent under Debtor
Relief Laws for the Member or for any substantial portion of the
Member's assets; (3) the issuance of an order for the winding up
and/or liquidation of the Member's affairs; (4) the filing of a petition
in any involuntary bankruptcy case that remains undismissed or
suspended under the federal bankruptcy laws; (5) the commencement
by a Member of voluntary case under any applicable Debtor Relief
Law; (6) the written admission of a Member that the Member is
unable to pay the Member's debts as they become due; (7) the consent
by any Member to the entry of an order for relief in any involuntary
case, or to the appointment of (or the taking of possession by) a receiver,
liquidator, assignee, custodian, conservator, trustee or similar agent
under Debtor Relief Law for the Member or for any substantial
portion of the Member's assets; or (8) the making by a
Member of any general assignment for the benefit of creditors.
(g) "Capital Account" means the individual accounts
established and maintained pursuant to Paragraph 3.05.
(h) "Capital Contribution" means the total value of cash and
agreed fair market value of property contributed and agreed to be
contributed to the Company by each member, as shown in Exhibit "A",
as the same may be amended from time to time.
(i) "Code" means the Internal Revenue Code of 1986, as
amended. All references in this Agreement to sections of the Code
include any corresponding provision or provisions of succeeding law.
(j) "Company" means GLENBROOK HOMES, LLC,
a California limited liability company.
(k) "Company Minimum Gain" shall have the meaning
ascribed to the term "Partnership Minimum Gain" in Regulations
Section 1.704-2(d).
(1) "Distributable Cash" means the amount of cash which
the Manager deems available for distribution to the Members,
taking into account all debts, liabilities, and obligations of the
Company then due, and working capital and other amounts which
the Manager deems necessary for the Company's business or to
place into reserves for customary and usual claims with respect
to such business.
(m) "Entity" means any association, corporation, general
partnership, limited partnership, limited liability company
joint stock association, joint venture, firm, trust, business trust,
cooperative, and foreign association of like structure.
(n) "Financing" means all loans, if any, procured by the
Company for the purpose of completing the Project, including
any construction loan.
(o) "Interest" in the Company means the entire ownership
interest of a Member in the Company at any particular time,
including the right of the Member to any and all benefits to which
a Member may be entitled as provided in this Agreement and under
the Act, together with the obligations of the Member to comply with
all of the terms and provisions of this Agreement.
(p) "Management Fee" means the fee paid to Member
JB Valley Development Corporation equal to one and one half
percent (1.5%) of the selling price as to each of the homes-sold in
the Project for its performance of services in connection with the
management of the Company. The Management Fee does not cover
any contractor fees in connection with the construction of the Project.
(q) "Manager" means an individual or entity appointed
by consent of all Members and having the authority as set
forth in this Agreement.
(r) "Member" means each person or entity who is an original
signatory to the Agreement and has been admitted to the
Company as a Member, or who is an assignee that has been admitted
to the Company as a Member that has not resigned, withdrawn,
or been dissolved, or who is subsequently admitted to the Company
as a Member.
(s) "Member Nonrecourse Debt" shall have the meaning
ascribed to the term "Partner Nonrecourse Debt" in Regulations
Section 1.704-2(b)(4).
(t) "Member Nonrecourse Deductions" shall mean items of
Company loss, deduction, or Code Section 705(a)(2)(B) expenditures
which are attributable to Member Nonrecourse Debt.
(u) "Membership Interest" means a Member's Interest in the
Company.
(v) "Percentage Interest" of a Member means the percentage
of the Member set forth opposite the name of the Member in
Exhiibit "A" attached to this Agreement, as the percentage may
be adjusted from time to time pursuant to the terms of this Agreement.
(w) "Principal office" means the office of the agent of this
Company as shown in its Articles.
(x) "Project" means the construction of dwellings on lots acquired
from time to time by the Company in the Glenbriar Estates subdivision
situated in the City of Xxxxx, County of San Xxxxxxx, California, as
shown in Exhibit "B" attached hereto, and the subsequent sale of the
lots and dwellings situated thereon.
(y) "Pro Rata Part" means the proportion that a percentage
interest of a Member bears to the aggregate interest in the Company
of all Members.
(z) "Regulations" means, unless the context clearly indicates
otherwise, the regulations in force as final or temporary that have
been issued by the U.S. Department of Treasury pursuant to its
authority under the Code, and any successor regulations.
(aa) "Share" refers to an interest in the Company representing
a contribution to capital. Whenever reference is made to "percentage
interest," a share maybe converted into the same by dividing a Member's
number of shares by the total of all shares outstanding.
(bb) "Substitute Member" means any individual or entity that
is admitted into membership on the written consent of all Members
in accordance with Paragraph 3.11.
(cc) "Tax Matters Member, means the Member chosen
pursuant to Internal Revenue Code Section 62 3 1 (a)(7) to deal with
the Internal Revenue Service on tax matters.
ARTICLE 2. ORGANIZATION OF COMPANY
2.01 Formation of Company. The Members have formed a
limited liability company under the Act by properly executing and filing
the Articles and executing this Agreement. The rights, duties, and
liabilities of the Members and the Manager are determined pursuant to
the Act, the Articles, and this Agreement.
2.02 Company Name. The name of the Company is
GLENBROOK HOMES, LLC. The Company will transact business under
that name. However, the Manager may conduct business under another
name if the Manager thinks it advisable, provided that the Manager
complies with the Act and any other applicable laws, file fictitious
name certificates and the like, and file any necessary amendments.
2.03 Company Purpose. The purpose of the Company is to
engage in any business activity permitted by the Act. The Company
will own, hold sell, assign, transfer, operate, lease and otherwise deal
with real and personal property and improvements thereon.
2.04 Duration of Company and Agreement. The Company
existence commenced on the Effective Date and shall continue until
dissolved and liquidated pursuant to the provisions of Article 21 below.
ARTICLE 3. MEMBERS AND MEMBERSHIP INTERESTS
3.01 Names, Addresses, and Initial Capital Contributions of
Members. Members, their respective addresses, their initial capital
contributions to the Company, and their respective percentage interests
in the Company are set forth on Exhibit "A", attached to this Agreement
and made a part of it. Each Member agrees to make the initial
contribution set out in Exhibit A within thirty (3 0) days of the execution
of this Agreement. If a Member fails to make a required Capital
Contribution within thirty (30) days after the effective date of this
Agreement, that Member's entire Membership Interest shall terminate
and that Member shall indemnify and hold the Company and the other
Member's harmless from any loss, cost, or expense, including reasonable
attorney fees, caused by the failure to make such Capital Contribution.
3.02 Future Contributions. Members maybe required to make
additional capital contributions to the Company other than the capital
contribution required to be made under Paragraph 3.01 without any
Member's prior written consent when directed by the Manager based
on his, her or its determination. Subsequent contributions must be in
amounts and may be in any type of property as is determined by the
Manager. If subsequent contributions are required, Members may
make additional Capital Contributions on a pro rata basis
in accordance with the Member's Capital Account and in proportion
to the Member's Percentage Interest. Upon such determination, the
Manager shall give written notice to each Member. Each Member
shall have fourteen (14) days from the date such notice is given to
contribute his, her or its share of the additional capital to the
Company. Each Member shall receive a credit to its Capital Account
in the amount of any additional capital which he, she or it contributes
to the Company.
3.03 Failure to Make Contributions. If a Member does not
timely contribute capital when required, that Member shall be in default
under this Agreement. In such event, the Manager shall send the
defaulting Member written notice of such default, giving the
Member fourteen (14) days from the date such notice is given to
contribute the entire amount of his, her or its required capital contribution
(if the defaulting Member did not make a required contribution of
property or services, the Company may instead require the defaulting
Member to contribute cash equal to that portion of the fair market value
of the contribution that has not been made). If the defaulting-Member
does not contribute its required capital to the Company within said
fourteen (14)-day period, the Manager or the non-defaulting Member
may elect any or all of the following remedies:
(a) The non-defaulting Members may advance funds to the
Company to cover those amounts which the defaulting Member
fails to contribute. Amounts which a non-defaulting Member so
advances on behalf of the defaulting Member shall become a loan
due and owing from the defaulting Member to the non-defaulting
Member and bear interest at the rate of ten percent (10%) per annum,
payable monthly. All cash distributions otherwise distributable to the
defaulting Member under this Agreement shall instead be paid to the
non-defaulting Members making such advances until such advances
and interest thereon are paid in full. In any event, such advances
shall be evidenced by a promissory note and be due and payable by
the defaulting Member one (1) year from the date that such advance
was made. Any amounts repaid shall first be applied to interest and
thereafter to principal. Effective upon a Member becoming a defaulting
Member, each Member grants to the non-defaulting Members who
advance funds a security interest in his, her or its Economic Interest
to secure his, her or its obligation to repay such advances and agrees
to execute and deliver a promissory note as described herein together
with a security agreement and such UCC- I financing statements and
assignments of certificates of membership (or other documents of
transfer) as such non-defaulting Members may reasonably request.
(b) The defaulting Members shall have no right to receive any
distributions from the Company until the non-defaulting Members have
first received distributions in an amount equal to the additional capital
contributed by each non-defaulting Member to the Company plus a
cumulative, non-compounded return thereon at the rate of ten percent
(10%) per annum.
Each Member acknowledges and agrees that (i) a default by
any Member in making a required capital contribution will result in
the Company and the non-defaulting Members incurring certain costs
and other damages in an amount that would be extremely difficult or
impractical to ascertain and (ii) the remedies described in Paragraph
3.03 bear a reasonable relationship to the damages which the Members
estimate maybe suffered by the Company and the non-defaulting
Members by reason of the failure of the defaulting Member to make
any required Capital Contribution and the election of any or all of the
above described remedies is not unreasonable under the circumstances
existing as of the date hereof.
3.04 Member Loans or Services. Loans or services by any
Member to the Company may not be considered to be contribution to
the capital of the Company.
3.05 Capital and Capital Accounts.
(a) The initial Capital Contribution of each Member is as set
forth in Exhibit "A". Interest may be paid on any other Capital Contribution.
(b) The Company will establish and maintain individual
Capital Accounts on behalf of each Member, including any additional or
Substituted Member who shall subsequently receive any interest
in the Company. The capital account of each Member consists of
(1) the amount of cash the Member has contributed to the Company,
less any liabilities assumed by the Company or to which the property is
subject, plus (3) the amount of profits or income (including tax-exempt
income) allocated to the Member, less (4) the amount of losses and
deductions allocated to the Member, less (5) the amount of all cash
distributed to the Member, less (6) the fair market value of any property
distributed to the Member, net of any liability assumed bythe Member
or to which the property is subject, less (7) the Member's share of any
other expenditures that are not deductible by the Company for federal
income tax purposes or , that are not allowable as additions to the basis
of Company property, and (8) subject to any other adjustments
that may be required under the Code. The Capital Account of a
Member is not affected by any adjustments to basis made pursuant
to Section 743 of the Internal Revenue Code, but must
be adjusted with respect to adjustments to basis made pursuant to
Section 734 of the Internal Revenue Code.
(c) No Member has the right to withdraw his, her or its
capital contribution or to demand and receive property of the
Company or any distribution in return for his, her or its Capital
Contribution, except as may be specifically provided in this Agreement
or required by law. No Member may receive out of Company property
any part of his, her, or its capital contribution until (1) all liabilities
of the Company, except liabilities to the Members on account of their
loans, have been paid or sufficient Company property remains to pay
them, and (2) all Members consent.
(d) Subject to the provisions of subparagraph (c) of this
paragraph, a Member may rightfully demand the return of his,
her or its Capital Contribution (1) on the dissolution of the Company,
or (2) with the consent of all the members. A Member may demand
and receive only cash in return for the Member's Capital Contribution.
The Members' initial Capital Contributions are as set forth in Exhibit
"A" attached herewith.
3.06 Admission of Additional Capital. Additional capital
may be contributed to the Company, as provided in Article 3 and upon
the written consent by all of the Members.
3.07 Admission of Additional Members. The Members may
admit to the Company additional members to participate in the profits,
losses, available cash flow, and ownership of the assets of the Company
on such terms as are determined by all of the Members. Admission of
any additional Member requires the written consent of all of the Members
then having any interest in the Company. Any additional Members are
allocated gain, loss, income, or expense by the method provided in
this Agreement.
3.08 Limitation on Liability. No Member is liable under a
judgment, decree, or order of the court, or in any other manner, for a
debt, obligation, or liability of the Company, except as provided by
law. No Member is required to loan any funds to the Company.
3.09 No Individual Authority. Unless expressly provided in
this Agreement, no Member, acting alone, has any authority to act for,
or to undertake or assume, any obligation, debt, or responsibility on
behalf of, any other Member of the Company.
3.10 No Member Responsible for Other Member's
Commitment. In the event that a Member (or a Member's shareholders,
partners, members, owners, or affiliates) has incurred any indebtedness
or obligation before the date of this Agreement that relates to or
otherwise affects the Company, neither the Company nor any other
Member has any liability or responsibility with respect to
the indebtedness or obligation unless the indebtedness or
obligation is assumed by the Company pursuant to a written instrument
signed by all Members. Furthermore, neither the Company nor any
Member is responsible or liable for any indebtedness or obligation that
is subsequently incurred by any other Member (or a Member's
shareholder, partners, members, owners, or affiliates). In the event that
a Member (or a Member's shareholders, partners, members, owners,
or affiliates; collectively called the "liable Member"), whether before
or after the date of this Agreement, incurs (or has incurred) any debt
or obligation that neither the Company nor any of the other Members
is to have any responsibility or liability for, the liable Member must
indemnify and hold harmless the Company and the other Members
from any liability or obligation they may incur in respect of the debt
or obligation.
3.11 Transfer and Assignment of Membership Interests.
(a) No Member may assign, convey, sell, encumber, or in
anyway alienate all or any part of his, her or its Interest in the
Company as a Member without prior written consent of all of the
Members, which consent maybe given or withheld, conditioned or
delayed (as allowed by this Agreement or the Act), as the remaining
Members may determine in their sole discretion. Transfers in violation
of this section are effective only to the extent set forth in Paragraph
3.14(b), below.
(b) Any Member may transfer, assign or convey all or
any part of his, her or its Interest in the Company for estate
planning purposes to the Member's family limited partnership,
trust or other entity without prior written consent of all the Members
upon ten (10) days prior written notice to all the Members pursuant to
the requirements of Paragraph 23.09 herein.
3.12 Further Restrictions on Membership Transfers. No
Member may assign, convey, sell, encumber, or in anyway alienate all
or any part of his, her or its interest in the Company (1) without
registration under applicable federal and state securities laws, or unless
he, she or it delivers an opinion of counsel satisfactory to the Company
that registration under those laws is not required; or (2) if the interest to
be sold or exchanged, when added to the total of all other sold or
exchanged in the preceding twelve (12) consecutive months
prior to that time, would result in the tax termination of the Company
under Section 708 of the Internal Revenue Code.
3.13 Substitute Members. A transferee may become a
Substitute Member if (1) the requirements of Paragraphs 3.07 and 3.11,
above, are met; (2) the person or entity executes an instrument
satisfactory to the remaining Members accepting and
adopting the terms and provisions of this Agreement; and (3) the
person or entity pays all reasonable expenses in connection with his
or her admission as a remaining Member.
3.14 Effect of Transfer.
(a) Any permitted transfer of all or any portion of a Member's
interest in the Company takes effect on the first day of the month
following receipt by the Members of written notice of transfer. Any
transferee of an interest in the Company takes subject to the
restrictions on transfer imposed by this Agreement.
(b) On a transfer of a Member's interest in the Company in
violation of this Agreement, the transferee has no right to
participate in the management of the business and affairs of the
Company or to become a Member, but the transferee is entitled only
to receive the share of profits or other compensation by way of income
and the return of contributions to which the transferor of the interest in
the Company would otherwise be entitled.
3.15 Right of First Negotiation. If any Member desires to
transfer all or any part of his, her or its Membership Interest, such
Member shall notify the Company and the other Members in writing
of such desire and, for a period of thirty (3 0) days thereafter, the
Members and the Company shall negotiate with respect to the
purchase of such Member's Membership Interest. During such
period, the Member desiring to transfer such Membership Interest
may not solicit a transferee for such Membership Interest.
3.16 Right of First Refusal. period described in Paragraph
3.15 expires without an agreement being reached as to the purchase
of the Membership interest referred to therein, the Member desiring
to transfer his, her or its Membership Interest may solicit
transerees. In such event, each time a Member proposed to transfer
all or any part of his, her or its Membership interest, such Member
shall first offer such Membership Interest to the Company and the
non-transferring Members in accordance with the following
provisions:
(a) Such Member shall deliver a written notice
("Option Notice") to the Company and the other Members
stating (i) such Member's bona fide intention to transfer such
Membership Interest, (ii) the Membership Interest to be
transferred, (iii) the purchase price and terms of payment for which t
he Member proposes to transfer such Membership Interest and (iv)
the name and address of the proposed transferee.
(b) Within thirty (30) days after receipt of the Option
Notice, the Company shall have the right, but not the obligation,
to elect to purchase all or any part of the Membership Interest upon
the price and terms of payment designated in the Option Notice.
If the Option Notice provides for the payment of non-cash
consideration, the Company may elect to pay the consideration in
cash equal to the good faith estimate of the present fair market
value of the non-cash consideration offered as determined by the
Manager. If the Company exercises such right within such thirty
(30) day period, the Manager shall give written notice of that fact
to the transferring and non-transferring Members.
(c) If the Company fails to elect to purchase the entire
Membership Interest proposed to be transferred within the thirty
(30) day period described in Paragraph 3.16(b), the non-transferring
Members shall have the right, but not the obligation, to elect to
purchase any remaining share of such Membership Interest upon
the price and terms of payment designated in the Option Notice.
If the Option Notice provides for the payment of non-cash
consideration, such purchasing Members each may elect to pay the
consideration in cash equal to the good faith estimate of the
present fair market value of the noncash consideration offered as
determined by the Manager. Within sixty (60) days after receipt
of the Option Notice, each non-transferring Member shall notify
the Manager in writing of his or her desire to purchase a
portion of the Membership Interest proposed to be so transferred.
The failure of any Member to submit a notice within the
applicable period shall constitute an election on the part of that
Member not to purchase any of the Membership Interest which
maybe so transferred. Each Member so electing to purchase
shall be entitled to purchase a portion of such Membership
Interest in the same proportion that the Percentage Interest
of such Member bears to the aggregate of the Percentage
Interests of all of the Members electing to so purchase the
Membership Interest being transferred. In the event any Member
elects to purchase none or less than all of his, her or its pro rata
share of such Membership Interest, then the other Members can
elect to purchase more than their pro rata share.
(d) If the Company and the other Members elect to
purchase or obtain any or all of the Membership Interest
designated in the Option Notice, then the closing of such purchase
shall occur within the ninety (90) days after receipt of such notice
and the transferring Member, the Company and/or the other
Members shall execute such documents and instruments and
make such deliveries as may be reasonably required to consummate
such purchase.
(e) If the Company and the other Members elect not to
purchase or obtain, or default in their obligation to purchase or
obtain, all of the Membership Interest designated in the Option
Notice, then the transferring Member may transfer the portion of
the Membership Interest described in the Option Notice not so
purchased, to the proposed transferee, providing such transfer
(i) is completed within thirty (30) days after the expiration of the
Company's and the other Members' right to purchase such
Membership Interest, (ii) complies with Paragraphs 3.07,3.11,
3.12 and3.13 relating to unanimous consent of Members,
securities and tax requirements.
ARTICLE 4. POWER TO AMEND AGREEMENT
4.01 The Power to adopt, alter, amend, or repeal this
Agreement is vested entirely in the Members of the Company.
ARTICLE 5. MANAGEMENT RIGHTS IN MANAGER
5.01 The right to exercise the powers of the Company and
to manage the business and affairs of the Company is vested entirely
in the Manager, subject to review by the Members.
5.02 The Manager shall establish budgets as maybe required
by the Members. The Manager shall, either personally or by delegation,
approve all costs and disbursements necessary to operate the Company's
business, subject to review by the Members.
ARTICLE 6. ELECTION OF MANAGER
6.01 (a) The initial Manager specified in Exhibit "A' hereto
will serve as the Company's Manager until resignation or removal.
(b) The Manager maybe elected at a special meeting
called for the purpose of electing Manager. Manager may also be
designated by the unanimous written consent of the Members.
(c) The term of service for the Manager is perpetual
unless removed by the affirmative vote of all of the Members.
ARTICLE 7. REMOVAL OF MANAGER
7.01 (a) The Members may remove a Manager before
the expiration of the Manager's term specified in this Agreement by
the affirmative vote of all of the Members.
(b) At any meeting of Members called expressly
for the purpose, a Manager may be removed for any reason, with or
without cause, on a resolution unanimously adopted by the Members.
ARTICLE 8. ACTION BY MANAGER
8.01 The Manager has full authority to act on behalf of the
Company and its Members in its best interest.
ARTICLE 9. COMPENSATION OF MANAGER
9.01 It is acknowledged that the Manager has other business
interests to which the Manager devotes part of the Manager's time.
The Manager shall devote such time to the conduct of the business of
the Company as the Manager, in the Manager's own good faith and
discretion which he or she believes necessary for the successful
operation of the business.
9.02 The Manager shall be entitled to compensation for the
Manager's services as determined by the Members, and to
reimbursement for all expenses reasonably incurred by the Manager
in the performance of the Manager's duties.
ARTICLE 10. EXECUTION OF DOCUMENTS
10.01 The Manager has the authority to execute documents
and instruments for the acquisition, mortgage, or disposal of property
on behalf of the Company, to enter into and bind the Company to
contractual relations and receive and disburse funds on behalf of the
Company.
ARTICLE 11. MEETINGS OF MEMBERS
11.01 (a) No meetings of Members are required. However,
to the extent meetings are held, all meetings of Members will take
place at 0000 Xxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx.
(b) Any Member may call a special meeting by giving at
least ten (10) days' written notice to all other Members. The notice
must specify the date, time, and place of the special meeting and the
purpose for calling the meeting. Notice of the meeting must be
delivered personally to the Members or sent to each Member by
United States mail or facsimile machine at the Member's address
as shown on the records of the Company. For mailed notice, the
notice must be deposited in the United States mail at least twelve
(12) days before the time the meeting is held.
(c) The transactions of the Members at any meeting,
however called or noticed, or wherever held, shall be as valid as
though transacted at a meeting duly held after call and notice if a
quorum is present and if, either before or after the meeting,
each Member not present signs a written waiver of Notice,
a consent to the holding of the meeting, or an approval of
the minutes of the meeting.
(d) Members may participate in the meeting through
the use of a conference telephone or similar communications
equipment, provided that all Members participating in the
meeting can hear one another.
(e) The Members shall keep or cause to be kept with
the books and records of the Company full and accurate minutes
of all meetings, notices and waivers of notices of meetings,
and all written consents in lieu of meetings.
ARTICLE 12. QUORUM
12.01 At all meetings of the Members, a majority of
Members must be present to constitute a quorum for transaction
of business.
ARTICLE 13. ACTIONS BY MEMBERS AND
VOTING RIGHTS
13.01 Votes Required to Act. Except for those acts
requiring unanimous consent, an act of the Members of record
is effective if the majority of Members votes adopt the act at a
meeting at which a quorum of Members is present. The voting rights
of the Members are to be distributed equally, one vote per Member,
to each Member of the Company.
13.02 Actions of Tax Matters Member. The Tax Matters
Member of the Company, chosen pursuant to Internal Revenue
Code Section 6231(a)(7), is JB VALLEY DEVELOPMENT
CORPORATION, a California corporation, 0000 Xxxxxx Xxxxxx,
Xxx Xxxxxxx, Xxxxxxxxxx, who has the same authority as granted
by the Internal Revenue Code to a tax matters partner.
ARTICLE 14. ACTION BY CONSENT
WITHOUT MEETING.
14.01 Any action permitted to betaken by the Members
maybe taken without a meeting if all of the Members individually
or collectively consent by signing a written approval of the action.
Any action by written consent shall have the same force and effect
as a unanimous vote of the Members.
ARTICLE 15. RECORD DATE
15.01. Only persons whose names are listed as members
in the official records of the Company fifteen (15) days before
any meeting of the Members are entitled to notice of or to vote
at that meeting.
ARTICLE 16. VOTE BY PROXY
16.01 Members may vote either in person or by proxy.
Proxies must be executed in writing by the Members. A telegram,
cablegram, or similar transmission by the Member or a photographic,
photostatic, facsimile, or similar reproduction of a writing executed
by a Member is deemed an execution in writing for purposes of
this Agreement.
ARTICLE 17. ALLOCATIONS OF NET PROFITS AND
NET LOSSES AND DISTRIBUTIONS
17.01 Allocations of Net Profit and Net Loss.
(a) Net Loss. Net Loss shall be allocated to the
Members in proportion to their Percentage Interests.
Notwithstanding the previous sentence, loss allocations to a
Member shall be made only to the extent that such loss allocations
will not create a deficit Capital Account balance for that Member
in excess of an amount, if any, equal to such Member's share of
Company Minimum Gain. Any loss not allocated to a Member
because of the foregoing provision shall be allocated to the
other Members to the extent the other Members are not limited
in respect of the allocation of losses under this Paragraph 17.01
(a). Any loss reallocated under this Paragraph 17.01(a) shall
be taken into account in computing subsequent allocations of
income and losses pursuant to this Article 17, so that the net
amount of any item so allocated and the income and losses
allocated to each Member pursuant to this Article 17, to
the extent possible, shall be equal to the net amount that
would have been allocated to each such Member pursuant
to this Article 17 if no reallocation of losses had occurred
under this Paragraph 17.01(a).
(b) Net Profit. Net Profit shall be allocated to the
Members in proportion to their Percentage Interests.
17.02 Special Allocations. Notwithstanding
Paragraph 17.01:
(a) Minimum Gain Chargeback. If there is a net
decrease in Company Minimum Gain during any Fiscal
Year, each Member shall be specially allocated items of
Company income and gain for such Fiscal Year and, if
necessary, in subsequent Fiscal Years, in an amount equal
to the portion of such Member's share of the net decrease in
Company Minimum Gain that is allocable to the disposition
of Company property subject to a Nonrecourse Liability,
which share of such net decrease shall be determined in
accordance with Regulations Section 1.704-2(g)(2).
Allocations pursuant to this Paragraph 17.02(a) shall be ]
made in proportion to the amounts required to be allocated
to each Member under this Paragraph 17.02(a). The items
to be so allocated shall be determined in accordance with
Regulations Section 1.704-2(f). This Paragraph 17.02(a)
is intended to comply with the minimum gain chargeback
requirement contained in Regulations Section 1.704-2(f) and
shall be interpreted consistently therewith.
(b) Chargeback of Minimum Gain Attributable to
Member Nonrecourse Debt. If there is a net decrease in Company
Minimum Gain attributable to a Member Nonrecourse Debt, during
any Fiscal Year, each Member who has a share of the Company
Minimum Gain attributable to such Member Nonrecourse Debt,
which share shall be determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such Fiscal Year, and, if
necessary, in subsequent Fiscal Years, in an amount equal to
that portion of such Member's share of the net decrease in
Company Minimum Gain attributable to such Member
Nonrecourse Debt that is allocable to the disposition of
Company property subject to such Member Nonrecourse
Debt, which share of such net decrease shall be determined
in accordance with Regulations Section 1.704-2(i)(5).
Allocations pursuant to this Paragraph 17.02(b) shall be
made in proportion to the amounts required to be allocated
to each Member under this Paragraph 17.02(b). The items to
be so allocated shall be determined in accordance with
Regulations Section 1.704-2(i)(4). This Paragraph 17.02(b)
is intended to comply with the minimum gain chargeback
requirement contained in Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) Nonrecourse Deductions. Any nonrecourse
deductions, as defined in Regulations Section 1.704-2(b)(1),
for any Fiscal Year or other period shall be specially allocated
to the Members in proportion to their Percentage Interests.
(d) Member Nonrecourse Deductions. Those items
of Company loss, deduction, or Code Section 705(a)(2)(B)
expenditures which are attributable to Member Nonrecourse
Debt for any Fiscal Year or other period shall be specially
allocated to the Member who bear the economic risk of loss
with respect to the Member Nonrecourse Debt to which
such items are attributable in accordance with Regulations
Section 1.704-2(i).
(e) Qualified Income Offset. If a Member
unexpectedly receives any adjustments, allocations, or
distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4),(5) or (6), or any other event creates
a deficit balance in such Member's Capital Account in
excess of such Member's share of Company Minimum Gain,
items of Company income and gain shall be specially
allocated to such Member in an amount and manner
sufficient to eliminate such excess deficit balance as
quickly as possible. Any special allocations of items of
income and gain pursuant tot this Paragraph 17.02(e)
shall be taken into account in computing subsequent
allocations of income and gain pursuant to this Article 17
so that the net amount of any item so allocated and the
income, gain, and losses allocated to each Member
pursuant to this Article 17 to the extent possible, shall be
equal to the net amount that would have been allocated to
each such Member pursuant to the provisions of this
Paragraph 17.02(e) if such unexpected adjustments,
allocations, or distributions had not occurred.
17.03 Section 704(c) Allocations. Notwithstanding
any other provision in this Article 17, in accordance with
Code Section 704(c) and the Regulations promulgated
thereunder, 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 on the date of
contribution. Allocations pursuant to this Paragraph 17.03
are solely for purposes of federal, state and local taxes.
As such, they shall not affect or in anyway be taken into
account in computing a Member's Capital Account or
share of profits, losses, or other items of distributions
pursuant to any provisions of this Agreement.
17.04 Allocations of Net Profits and Losses and
Distributions in Respect of a Transferred Interest. If any
Economic Interest is transferred, or is increased or decreased
by reason of the admission of a new Member or otherwise,
during any Fiscal Year of the Company, Net Profit or
Net Loss for such Fiscal Year shall be assigned pro rata to
each day in the particular period of such Fiscal Year to
which such item is attributable (i.e., the day on or during
which it is accrued or otherwise incurred), and the amount
of each such item so assigned to any such day shall be
allocated to the Member or Assignee based upon his or her
respective Economic Interest at the close of such day.
However, for the purpose of accounting convenience
and simplicity, the Company shall treat a transfer of, or an
increase or decrease in, an Economic Interest which occurs at
any time during a semimonthly period (commencing with the
semi-monthly period including the date hereof) as having been
consummated on the last day of such semi-monthly period,
regardless of when during such semi-monthly period such
transfer, increase, or decrease actually occurs (i.e., sales and
dispositions made during the first fifteen (15) days of any
month will be deemed to have been made on the fifteenth
(15th) day of the month).
Notwithstanding any provision above to the contrary,
gain or loss of the Company realized in connection with a sale
or other disposition of any of the assets of the Company shall
be allocated solely to the parties owning Economic Interests
as of the date such sale or other disposition occurs.
17.05 Distributions of Distributable Cash by the
Company. Subject to applicable law and any limitations
contained elsewhere in this Agreement, the Manager may
elect from time to time to distribute Distributable Cash to
the Members periodically, but not less frequently than at the
end of each calendar quarter, and after the payment from
gross income of all Approved Costs, which distributions shall
be in the following order of priority:
(a) First, to the Members in proportion to their
unreturned Capital Contributions allocated to the homes sold
or financed;
(b) Second, the payment of the Management Fee to
Member JB Valley Development Corporation equal to one
and one half percent (1.5%) of the selling price of the home sold;
(c) Third, as each home in the Project is sold, payment
of a preferred return equal to seven percent (7%) per annum on
the Capital Contribution allocated to the home sold from the date
the capital was contributed to the date of repayment;
(d) Fourth, to the Members in proportion to their
Percentage Interests as set forth opposite the name of the
Member in Exhibit "A".
All such distributions shall be made only to the Persons who,
according to the books and records of the Company, are the holders
of record of the Economic Interests in respect of which such
distributions are made on the actual date of distribution. Subject to
Paragraph 17.07, neither the Company nor any Manager shall incur
any liability for making distributions in accordance with this
Paragraph 17.05.
17.06 Form of Distribution. A Member, regardless of the
nature of the Member's Capital Contribution, has no right to
demand and receive any distribution from the Company in any
form other than money. Except as provided in the Act, no Member
may be compelled to accept from the Company a distribution of any
asset in kind in lieu of a proportionate distribution of money being
made to other Members and no Member may be compelled to
accept a distribution of any asset in kind.
17.07 Restriction on Distributions
(a) No distribution shall be made if, after giving effect
to the distribution:
(i) The Company would not be able to pay its debts
as they become due in the usual course of business; or
(ii) The Company's total assets would be less than the
sum of its total liabilities plus, unless this Agreement provides
otherwise, the amount that would be needed, if the Company were
to be dissolved at the time of the distribution, to satisfy the
preferential rights of other Members, if any, upon dissolution that
are superior to the rights of the Member receiving the distribution.
(b) The Manager may base a determination that a
distribution is not prohibited on any of the following:
(i) Financial statements prepared on the basis of
accounting practices and principles that are reasonable in the
circumstances;
(ii) A fair valuation; or
(iii) Any other method that is reasonable in the
circumstances.
Except as provided in Corporations Code Section 17254(e),
the effect of a distribution is measured as of the date the distribution
is authorized if the payment occurs within one hundred twenty (120)
days after the date of authorization, or the date payment is made if it
occurs more than one hundred twenty (120) days of the date of
authorization.
(c) A Member or Manager who votes for a distribution in
violation of this Agreement or the Act is personally liable to the
Company for the amount of the distribution that exceeds what could
have been distributed without violating this Agreement or the Act
if it is established that the Member or Manager did not act in
compliance with this Paragraph 17.07 or the Act. Any Member
or Manager who is so liable shall be entitled to compel
contribution from (i) each other Member or Manager who also
is so liable and (ii) each Member for the amount the Member
received with knowledge of facts indicating that the distribution
was made in violation of this Agreement or the Act.
17.08 Return of Distributions. Members and Assignees
who receive distributions made in violation of the Act or this
Agreement shall return such distributions to the Company.
Except for those distributions made in violation of the Act or
this Agreement, no Member or Assignee shall be obligated to
return any distribution to the Company or pay the amount of
any distribution for the account of the Company or
to any creditor of the Company. The amount of any
distribution returned to the Company by a Member or Assignee
or paid by a Member or Assignee for the account of the
Company or to a creditor of the Company shall be added to
the account or accounts from which it was subtracted when
it was distributed to the Member or Assignee.
17.09 Obligations of Members to Report Allocations.
The Members are aware of the income tax consequences of the
allocations made by this Article 17 and hereby agree to be
bound by the provisions of this Article 17 in reporting their
shares of Company income and loss for income tax purposes.
17.10 Compliance. . The provisions of this Agreement
are intended to comply with and in some cases are required by
Sections 704(b) and 704(c) of the code and Regulations thereunder.
Some of the language in this Agreement is taken directly from such
Regulations. This Agreement is intended to be interpreted in such
manner as to comply with the Regulations. The Manager may make
modifications deemed appropriate to comply with such Regulations
if events otherwise cause this Agreement not to comply.
ARTICLE 18. INDEMNIFICATION OF MEMBERS
AND MEMBERS' FIDUCIARY DUTIES
18.01 The Company will indemnify Members for any act
taken in the capacity of a Member, other than acts that involve a breach
of fiduciary duty. The standard of the fiduciary duty a Member owes
to the Company and to its members are those of a partner to a partnership
and to the partners of the partnership. A Member's standard of conduct
owed to the Company and other Members is to act in the highest
good faith to the Members, and a Member may not seek to obtain an
advantage in the Company affairs by the slightest misconduct,
misrepresentation, concealment, threat, or adverse pressure of any kind.
ARTICLE 19. INDEMNIFICATION OF MANAGER
AND MANAGER'S FIDUCIARY DUTIES
19.01. The Company shall indemnify Manager for any act
taken in the capacity of a Manager, other than acts that involve a breach
of fiduciaty duty. The standard of the fiduciary duties a Manager owes to
the Company and to its Members are those of a partner to a partnership
and to the partners of the partnership. A Manager's standard of conduct
owed to the Company and other Members is to act in the highest good
faith to the Members, and a Manager may not seek to obtain an
advantage in the Company affairs by the slightest misconduct
misrepresentation, concealment, threat, or adverse pressure of any kind.
ARTICLE 20. COMPANY RECORDS AND REPORTS
20.01. Records and Accounting, Fiscal Year. The books and
records of the Company must be kept, and the financial position and
the results of its operations recorded, in accordance with the accounting
methods elected to be followed by the Company for federal and state
income tax purposes. The books and records of the Company must
reflect all Company transactions and must be appropriate and adequate
for the Company's business. The fiscal year of the Company for
financial reporting and for federal income tax purposes is the
calendar year.
20.02. Access to Accounting Records. All books and records
of the Company must be maintained at any office of the Company or at
the Company's principal place of business, and each Member, and his
or her duly authorized representative, must have access to them at the
office of the Company and the right to inspect and copy them at
reasonable times.
20.03. Annual and Tax Information. The Manager must use
its best efforts to cause the Company to deliver to each Member,
within forty-five (45) days after the end of each fiscal year, all
information necessary for the preparation of each Member's
federal income tax return. The manager must also use his or her
best efforts to cause the Company to prepare, within forty-five
(45) days after the end of each fiscal year, a financial report of
the Company for the fiscal year, which must contain a balance
sheet as of the last day of the year then ended, an income statement
for the year then ended, a statement of sources and application of
funds, and a statement of sources and applications of funds, and a
statement of reconciliation of the capital accounts of the Members.
ARTICLE 21. DISSOLUTION OF COMPANY
21.01. The Company shall be dissolved, its assets shall be
disposed of, and its affairs shall be wound up on the first to occur of
the following events:
(a) Unanimous determination by all of the Members that
the Company should be dissolved.
(b) The expiration of the Company term as stated in the
Articles, if any.
(c) On the dissolution, bankruptcy, resignation, or expulsion
of any Member unless at least fifty percent (50%) of the remaining
Members consent to continue the Company within ninety (90) days of
the dissolution event.
(d) At any earlier time as may be provided by applicable law.
ARTICLE 22. REPRESENTATIONS
Each Member hereby represents and warrants to, and agrees with,
the Members and Company as follows:
22.01. He, she or it has a preexisting personal or business
relationship with the Company or one or more of its officers or controlling
persons, or by reason of his, her or its business or financial experience,
or by reason of the business or financial experience of his, her or its
financial advisor who is unaffiliated with and who is not compensated,
directly or indirectly, by the Company or any affiliate or selling agent of
the Company; he, she or it is capable of evaluating the risks and merits
of an investment in the Company and of protecting his, her or its own
interests in connection with this investment.
22.02. He, she or it has not seen, received, been presented with,
or been solicited by any leaflet, public promotional meeting, article
or any other form of advertising or general solicitation with respect to
the sale of the Interest in the Company.
22.03. He, she or it is acquiring the Membership Interest for
investment purposes for his, her or its own account and not with a
view to or for sale in connection with any distribution of all or any
part of the Membership Interest. No other person will have any
director indirect beneficial interest in or right to the Membership
Interest.
22.04. He, she or it is financially able to bear the economic
risk of an investment in the Company, including the total loss thereof.
22.05. He, she or it acknowledges that the Membership Interest
has not been registered under the Securities Act of 1933, as amended
(the "Securities Act" '),or qualified under any blue sky laws in reliance,
in part, on his, her or its representations, warranties and agreements
herein.
22.06. He, she or it represents, warrants and agrees that the
Company is under no obligations to register or qualify the
Membership Interest under the Securities Actor under any state
securities law, or to assist him, her or it in complying with any
exemption from registration and qualification.
22.07. Without limiting the representations set forth above,
he, she or it will not make any disposition of all or any part of the
Membership Interest which will result in the violation by him, her
or it, or by the Company of the Securities Act or any other applicable
securities laws.
22.08. He, she or it understands that the certificates (if any)
evidencing the Membership Interest may bear any legend required
by applicable securities laws.
22.09. He, she or it acknowledges that the Membership
Interest is a speculative investment which involves a substantial
degree of risk of loss by him, her or it of his, her or its entire
investment in the Company, that he, she or it understands and
takes full cognizance of the risk factors related to the purchase
of the Membership Interest, and that the Company is newly
organized and has no financial or operating history.
22.10. He, she or it acknowledges that there are substantial
restrictions on the transferability of the Membership Interest pursuant
to this Agreement, that there is no public market for the Membership
Interest and none is expected to develop, and that, accordingly, it may
not be possible for him, her or it to liquidate his, her or its investment
in the Company.
22.11. Neither the Members, any agent or employee of the
Company or of the Members, nor any other person has at any time
guaranteed or warranted to him or her that he, she or it may freely
transfer the Membership Interest, that a percentage of profit and/or
amount or type of consideration will be realized as a result of an
investment in the Membership Interest, that past performance or
experience on the part of any Member or any other person in any
way indicates the predictable results of the ownership of the
Membership Interest or of the overall Company business, that any
cash distributions from Company operations or otherwise will be
made to the Members by any specific date or will be made at all
or that any specific tax benefits will accrue as a result of an
investment in the Company.
22.12. He, she or it acknowledges that the tax consequences
to him, her or it of investing in the Company will depend on his, her
or its particular circumstances, and neither the Company, the Members,
nor any other person will be responsible or liable for the tax consequences
to him, her or it of an investment in the Company. He, she or it will look
solely to, and rely upon, his, her or its own advisers with respect to the
tax consequences of this investment.
ARTICLE 23. MISCELLANEOUS PROVISIONS
23.01. Complete Agreement. This Agreement and the Articles of
this Company constitute the complete and exclusive statement of agreement
among the Members with respect to the subject matter described. This
Agreement and the Articles replace and supersede all prior agreements by
and among any of the Members. This Agreement and the Articles supersede
all prior written and oral statements; no representation, statement, or
condition or warranty not contained in this Agreement or the Articles is
binding on the Members or has any force or effect.
23.02. Governing Law. This Agreement and the rights of the parties
under this Agreement will be governed by, interpreted, and enforced in
accordance with the laws of the State of California.
23.03. Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement is binding on and inures to the
benefit of the Members, and their respective distributees, successors,
and assigns.
23.04. Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under the present or future laws
effective during the term of this Agreement, the provision is fully
severable; this Agreement is construed and enforced as if the
illegal, invalid, or unenforceable provision had never comprised
a part of this Agreement; and the remaining provisions of this
Agreement will remain in full force and effect and will not be
affected by the illegal, invalid, or unenforceable provision; and
there will be added automatically as a part of this Agreement a
provision as similar in terms to the illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
23.05. Multiple Counterparts. This Agreement maybe
executed in several counterparts, each of which is deemed an
original but all of which constitute one and the same instrument.
However, in making proof only one copy signed by the party to
be charged is required.
23.06. Additional Documents and Acts. Each Member
agrees to execute and deliver additional documents and
instruments and to perform all additional acts necessary or
appropriate to effectuate, carry out, and perform all of the terms,
provisions, and conditions of this Agreement and the transactions
contemplated by it.
23.07. No Third Party Beneficiary. This Agreement is made
solely and specifically among and for the benefit of the parties to it,
and their respective successors and assigns, subject to the express
provisions of the Agreement relating to successors and assigns,
and no other person has or will have any rights, interest, or claims
under this Agreement as a third-party beneficiary or otherwise.
23.08. Tax Consequences. Members acknowledge that the
tax consequence of each Member's investment in the Company is
dependent on each Member's particular financial circumstances.
Each Member will rely solely on the Member's financial advisors
and not the Company. The Company makes no warranties as to
the tax benefits that the Members receive or will receive as a result
of the Member's investment in the Company.
23.09. Notices. Any notice to be given or to be served on
the Company or any party to this Agreement in connection with this
Agreement must be in writing and is deemed to have been given and
received when delivered to the address specified by the party to
receive the notice. Notices must be given to each Member at the
address specified in Exhibit "A". Any Member or the Company may,
at any time, designate any other address in substitution of the foregoing
address to which notice will be given by giving written notice to the
other Members and the Company thirty (30) days before the date of
delivery of the notice.
23.10. Amendments. All Amendments to this Agreement must
be in writing and signed by all of the Members.
23.11. Title to Company Property. Legal title to all property of
the Company must be held and conveyed in the name of the Company.
23.12. Reliance on Authority of Person Signing Agreement.
In the event that a Member is, not a natural person, neither the Company
nor any Member will (1) be required to determine the authority of the
individual signing this Agreement to make any commitment or
undertaking on behalf of the entity or to determine any fact or
circumstance bearing on the existence of the authority
of the individual, or (2) be required to see to the application or
distribution of proceeds paid or credited to individuals signing this
Agreement on behalf of the entity.
IN WITNESS THEREOF, the undersigned have executed
this Agreement, to be effective as of the date that the Articles of
Organization of the Company are accepted for filing by the
Secretary of State.
MEMBER:
JB Valley Development Corporation,
a California corporation
By: /s/ Xxxx Xxxxxxx Xxxxx, Xx.
Its: Chief Executive Officer
By: /s/ Xxxxx X. Xxxxx
Its: President
MEMBER:
Dover Investments Corporation,
a Delaware corporation
By: /s/ Xxxxxxxxx X. Xxxxxxxxx
Its: CEO
EXHIBIT A
CAPITAL CONTRIBUTION OF MEMBERS AND ADDRESSES
OF MEMBERS AND MANAGER OF
GLENBROOK HOMES, LLC
Members Members
Members Members Capital Percentage
Name Address Contribution Interest
JB Valley 2406 Merced $ 0 50%
Development Street
Corporation, a Xxx Xxxxxxx,
Xxxxxxxxxx XX 00000
corporation
Dover 100 Spear $2,000,00 50%
Investments Street, #520
Corporation, a Xxx Xxxxxxxxx,
Xxxxxxxx XX, 00000
corporation
TOTAL $2,000,000 100%
Manager's Name
JB Valley Development Corporation,
a California corporation
0000 Xxxxxx Xxxxxx,
Xxx Xxxxxxx, XX 00000
Manager's Address
0000 Xxxxxx Xxxxxx,
Xxx Xxxxxxx, XX 00000
EXHIBIT B
LEGAL DESCRIPTION OF THE PROJECT
OPERATING AGREEMENT OF
GLENBROOK HOMES, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
26.
