EXHIBIT 10.22
OPERATING AGREEMENT OF
WOODVIEW ESTATES, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
In accordance with the ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Limited Liability Company
Act and subject to the Articles of Organization, which were filed on
February 1, 2001 with the Secretary of State of California, the members
of WOODVIEW ESTATES, LLC, listed on the signature page,
make the following agreement on February 15, 2001 regarding the
conduct of the business and affairs of WOODVIEW ESTATES,
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 ▇▇▇▇▇▇▇-▇▇▇▇▇▇ 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) "Articles" means the Articles of Organization for
the Company as originally filed with the Secretary of State and as
amended from time to time.
(d) "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.
(e) "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.
(f) "Capital account" means the individual
accounts established and maintained pursuant to Paragraph 3.04.
(g) "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.
(h) "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.
(i) "Company" means WOODVIEW ESTATES,
LLC, a California limited liability company.
(j) "Company Minimum Gain" shall have the
meaning ascribed to the term "Partnership Minimum Gain" in the
Regulations Section 1.704-2(d).
(k) "Distributable Cash" shall mean the amount
of cash which the Managers deem 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 Managers deem necessary for the Company's
business or to place into reserves for customary and usual claims
with respect to such business.
(l) "Economic Interest" means a Member's right
to share in the income, gains, losses, deductions, credit or similar
items of, and to receive distributions from, the Company,
but does not include any other rights of a Member, including the
right to vote or to participate in management.
(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) "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.
(o) "Manager" means an individual appointed
by consent of all Members and having the authority as set forth
in this Agreement.
(p) "Member" means each person 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.
(q) "Member Nonrecourse Debt" shall have
the meaning ascribed to the term "Partner Nonrecourse Debt"
in Regulations Section 1.704-2(b)(4).
(r) "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.
(s) "Percentage Interests" of a Member
means the percentage of the Member set forth opposite the
name of the Member in Exhibit A attached to this
Agreement, as the percentage may be adjusted from time
to time pursuant to the terms of this Agreement.
(t) "Principal office" means the office
of the agent of this Company as shown in its Articles.
(u) "Pro Rata Part" means the proportion
that a percentage interest of a Member bears to the aggregate
interest in the Company of all Members.
(v) "Share" refers to an interest in the
Company representing a contribution to capital.
Whenever reference is made to "percentage interest,"
a share may be converted into the same by dividing a
Member's number of shares by the total of all shares
outstanding.
(w) "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.
(x) "Tax Matters Member" means the
Member chosen pursuant to Internal Revenue Code
Section 623 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
WOODVIEW ESTATES, LLC. The Company will transact
business under that name. However, the Company
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 specifically to acquire and develop the real estate
located at San Marin Drive and ▇▇▇▇▇▇▇ in Novato, California.
2.04 Term. The Company existence commenced
on the Effective Date and shall continue until dissolved and
liquidated pursuant to the provisions of Article 21.
ARTICLE 3. MEMBERS AND
MEMBERSHIP INTERESTS
3.01 Names, Addresses, and Initial Capital
Contributions of Members. Members, their respective
addresses, their 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 and required subsequent installments
equaling the total capital contribution set out in Exhibit A
as directed by the Manager at its sole discretion.
The Members acknowledge and agree that the
development project ("Project") which is to be the
principal business of the Company is as follows:
Acquisition of certain real estate known as the
"Woodview Property" consisting of approximately
17 acres located in Novato, California
APN #▇▇▇-▇▇-▇▇ (the "Property").
Following the acquisition, the Property will be
further developed with the end result to be the
construction of 20 single family dwellings.
The development of the Property, the financing
and the division of profits and losses will be
conducted as set forth in the letter agreement
between the Members dated June 29, 2000,
attached hereto as Exhibit B.
3.02 Future Contributions. No Member is
required to make any capital contribution to the
Company other than the capital contribution required
to be made under Paragraph 3.01 without the
Member's prior written consent. To the extent
authorized by all of the Members, subsequent
contribution must be in amounts and may be in
the any type of property as is agreed on by the
Managers.
3.03 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, except as set out in
Exhibit "A".
3.04 Capital and Capital Accounts.
(a) The initial Capital Contribution
of each Member is as set forth in Exhibit A. No
interest may be paid on any 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 (2) 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 by the 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 or her Capital Contribution or to demand and receive
property of the Company or any distribution in
return for his or her 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 unless the return of the
contributions to capital is rightfully demanded as provided
in the Act.
(d) Subject to the provisions of subparagraph
(c) of this paragraph, a Member may rightfully demand the return
of his or her or its Capital Contribution (1) on the dissolution of
the Company, or (2) as may otherwise be provided in the Act.
A Member may demand and receive only cash in return for the
Member's Capital Contribution.
3.05 Admission of Additional Capital. Additional capital
may be contributed to the Company, but only on the written consent
of all Members.
3.06 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 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.
3.07 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.
3.08 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 the Company or any other Member of the
Company without the Manager or that Member's express written
consent to so act.
3.09 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.
3.10 Transfer and Assignment of Membership Interests.
No Member may assign, convey, sell, encumber, or in any way
alienate all or any part of his, her or its interest in the
Company as a Member without prior written consent of all other
Members, which consent may be 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 Subparagraph 3.13(b), below.
3.11 Further Restrictions on Membership Transfers.
No Member may assign, convey, sell, encumber, or in any
way 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 termination of the
Company under Section 708 of the Internal Revenue Code
or other adverse effect on the Company's tax or legal
status.
3.12 Substitute Members. A transferee may become
a Substitute Member if (1) the requirements of Subsections
3.10 and 3.11, above, are met; (2) the person executes an
instrument satisfactory to the remaining Members accepting and
adopting the terms and provisions of this Agreement; and (3)
the person pays all reasonable expenses in connection
with his or her admission as a remaining Member.
3.13 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.
3.13 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
(30) 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.
3.14 Right of first Refusal. If the period described in
Section 3.14 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 transferees. 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 the 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 3.14(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, her or its 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 may be 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 3.10, 3.11,
3.12 and 3.13 relating to unanimous consent of Managers who
are 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 MANAGERS
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 Managers.
ARTICLE 6. ELECTION OF MANAGERS
6.01 (a) The initial Managers specified in the Articles
of Organization and Exhibit "A" attached hereto will serve as
Managers for the period specified in the Articles of
Organization or until resignation or removal.
(b) Managers may be elected at a special meeting
called for the purpose of electing Managers. Managers may also
be designated by the unanimous written consent of the Members.
(c) The term of service for the Managers is
perpetual unless removed by the affirmative vote of a majority
in interest of the Members.
ARTICLE 7. REMOVAL OF MANAGERS
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 a majority in interest 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 adopted by all of the Members.
ARTICLE 8. ACTION BY MANAGERS
8.01 The Managers have full authority to act on behalf
of the Company and its Members in its best interest.
ARTICLE 9. COMPENSATION OF MANAGERS
9.01 Members have authority to establish reasonable
compensation of all Managers for services to the Company.
The compensation may include pensions, disability benefits,
and death benefits.
ARTICLE 10. EXECUTION OF DOCUMENTS
10.01 The Managers and Members have the authority
to execute documents and instruments for the acquisition,
mortgage, or disposal of property on behalf of the Company.
ARTICLE 11. MEETINGS OF MEMBERS
11.01 No annual or regular meetings of Members
are required to be held. However, if such meetings are held,
all meetings of Members must take place at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇. The Members are authorized to
designate, from time to time, a place or places other than
that specified above as the place for meetings of the Members.
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.
ARTICLE 12. QUORUM
12.01 At all meetings of the Members, a majority in interest
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. An act of the Members of
record is effective if the majority in interest of Members' votes
adopt the act at a meeting at which a quorum of Members is
present. The voting rights of the Members will be according
to the Member's Percentage Interest in the Company.
13.02 Actions of Tax Matters Member. The Tax Matters
Member of the Company, chosen pursuant to Internal Revenue
Code Section 623 1 (a)(7), is ▇▇▇▇▇ ▇▇▇▇▇, President of
Westco Community Builders, Inc., which 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 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 (I)if such loss allocations
do not also create deficit Capital Account balances to all other
Member(s), and (2) 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 that
other Members are not limited in respect of the allocation of
losses under this Section 17.01 A). Any loss reallocated under
this Section 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 Section 17.01A.
B. Net Profit. Net Profit shall be allocated to
the Members in proportion to their Percentage Interests.
17.02 Special Allocations. Notwithstanding Section 17.01:
A. Minimum Gain Charge back. 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 Section 17.02A shall be made in
proportion to the amounts required to be allocated to each Member
under this Section 17.02A. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(f).
This Section 17.02A is intended to comply with
the minimum gain charge back requirement contained in
Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
B. Charge back 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 Section 17.02B shall be made
in proportion to the amounts required to be allocated
to each Member under this Section 17.02B. The items
to be so allocated shall be determined in accordance with
Regulations Section 1.704-2(i)(4). This Section 17.0213
is intended to comply with the minimum gain
charge back requirement contained in Regulations 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
bears 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 to the Section 17.02E 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 Section
17.02E if such unexpected adjustments, allocations, or
distributions had not occurred.
17.03 Code 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 Section 17 are solely for
purposes of federal, state and local taxes. As such,
they shall not affect or in any way be taken into
account in computing a Member's Capital Account
or share of profits, losses, or other items of
distributions pursuant to any provision of this
Agreement.
17.04 Allocation 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 items 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 semi-monthly 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 15' 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 Managers may
elect from time to time to distribute Distributable Cash to
the Members, which distributions shall be in the following
order of priority:
(i) To the Members in proportion to their
unreturned Capital Contributions until each Member has
recovered its Capital Contribution plus preferred
returns and fees as follows (and as described in paragraph 7
of Exhibit B):
(a) As each home in the Project is sold, an
allocation will be made by the Members of the Capital
Contributions related to such home and such Contributions
will be first repaid.
(b) As each home in the Project is sold, a
payment to Member Westco Community Builders, Inc. for
a management fee equal to 3% of the selling price of
the home sold.
(c) As each home in the Project is sold,
payment of a preferred return equal to 12% per annum
on the Capital Contribution allocated to the home sold
from the date the capital was contributed to the date of
repayment.
(ii) To the Members in proportion to their
Percentage Interests (50% each assuming no new Members
are admitted).
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 Section 17.07, neither the
Company nor any Manager shall incur any liability for
making distributions in accordance with this Section 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 this distribution.
B. The Managers 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 120 days after the date of authorization, or the date
payment is made if it occurs more than 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 Section 17.07 or those sections of the
Act relating to dissolution. 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 Actor 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 Approved Project and Budgeted Costs.
The Project to be developed is asset forth in Section 3.01
herein above. The approximate costs for the Project are
set forth in that certain letter agreement between the
Members dated June 29,2000 attached hereto as
Exhibit B; the approximate costs set forth in Exhibit B
shall be deemed Approved Costs of the Project and paid
by the Company under this Agreement. The Members
understand and agree that Exhibit B is preliminary in
nature and may be revised throughout the development.
All consultants, design and other professionals and
contractors shall be selected by Member Westco
Community Builders, Inc. or its assignee.
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 MANAGERS
AND MANAGERS' FIDUCIARY DUTIES
19.01. The Company shall indemnify Managers for any
act taken in the capacity of a Manager, other than acts that involve
a breach of fiduciary 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, her or its 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 Members
must use their 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 Members
must also use their 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) A determination by Members owning more
than fifty percent (50%) of the weighted Percentage Interests
in the Company that the Company should be dissolved.
(b) The expiration of the Company term as stated
in the Articles.
(c) On the death, insanity, bankruptcy, retirement,
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 is capable of evaluating the risks
and merits of an investment in the Company and of protecting
its own interest in connection with
this investment. This representation and warranty (along with
those contained in sub-articles 22.02-22.12 below) also runs to
the following individuals who have signed for the Members:
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
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
Membership Interest.
22.03. He, she or it is acquiring the Membership
Interest for investment purposes for 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 direct or 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 Membership,
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 193 3, 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 Act or under any state securities law,
or to assist 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 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 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 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, her or it 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. CONSEQUENCES OF DISSOLUTION
EVENTS ON TERMINATION
OF MEMBER'S INTEREST
23.01 Dissolution Event. Upon the occurrence of the
events specified in Paragraph 2 1.01 (c) and the remaining
Members' consent to continue the Company as specified, the
Company and/or remaining Members ("Remaining Members")
shall have the right to purchase, and if such right is exercised,
the Member whose actions or conduct resulted in the dissolution
event ("Former Member") shall sell, the Former Member's
Membership Interest ("Former Member's Interest") as
provided in this Article 23.
23.02 Withdrawal. Upon the withdrawal by a
Member in the absence of the consent of all Remaining
Members, such Member shall be treated as a Former
Member, and, unless the Company dissolves as a result
of such withdrawal, the Company and/or the Remaining
Members shall have the right to purchase, and if such
right is exercised, the Former Member shall sell, the
Former Member's Interest as provided in this
Article 23.
23.03 Purchase Price. The purchase price for
the Former Member's Interest shall be the fair market
value of the Former Member's Interest as determined
by an independent appraiser jointly selected by the
Former Member and by Remaining Members holding
a majority of the remaining Membership Interests.
The Company and the Former Member shall each
pay one-half of the cost of the appraisal.
Notwithstanding the foregoing, if the Dissolution
Event results from a breach of this Agreement by
the Former Member, the purchase price shall be
reduced by an amount equal to the damages suffered
by the Company or the Remaining Members as a
result of such breach.
23.04 Notice of Intent to Purchase. Within
thirty (30) days after the fair market value of the
Former Member's Interest has been determined in
accordance with Section 23.03, each Remaining
Member shall notify the Members in writing of his,
her or its desire to purchase a portion of the Former
Member's Interest. The failure of any Remaining
Member to submit a notice within the applicable
period shall constitute an election on the part of the
Member not to purchase any of the Former Member's
Interest. Each Remaining Member so electing to
purchase shall be entitled to purchase a portion of
the Former Member's Interest in the same
proportion that the Membership Interest of the
Remaining Member bears to the aggregate of
the Membership Interests of all of the Remaining
Members electing to purchase the Former
Member's Interest.
23.05 Election to Purchase Less Than
All of the Former Member's Interest. If any
Remaining Member elects to purchased none or
less than all or his, her or its pro rata share
of the ▇▇▇▇▇▇▇ Member's Interest, then the
Remaining Members can elect to purchase more
than their pro rata share. If the Remaining
Members fail to purchase the entire interest of
the Former Member, the Company may
purchase any remaining share of the Former
Member's Interest.
23.06 Payment of Purchase Price.
The Company or the Remaining Members,
as the case may be, shall pay at the closing
one-fifth (1/5) of the purchase price and the
balance of the purchase price shall be paid in
four equal annual principal installments, plus
accrued interest, and be payable each year on
the anniversary date of the closing. The unpaid
principal balance shall accrue interest at the
current applicable federal rate as provided in the
Code for the month in which the initial payment
is made, but the Company and the Remaining
Members shall have the right to prepay in full or
in part at any time without penalty. The
obligation of each purchasing Remaining Member,
and the Company, as applicable, to pay its portion
of the balance due shall be evidenced by a separate
promissory note executed by the respective
purchasing Remaining Member or the Company, as
applicable. Each such promissory note shall be in
an original principal amount equal to the portion
owed by the respective purchasing Remaining
Member or the Company, as applicable. The
promissory note executed by each purchasing
Remaining Member shall be secured by a pledge
of that portion of the Former Member's Interest
purchased by such Remaining Member.
23.07 Closing of Former Member's Interest.
The closing for the sale of a Former Member's
Interest pursuant to this Article 23 shall be held at
10:00 a.m. at the principal office of Company no
later than sixty (60) days after the determination of
the purchase price, except that if the closing date
falls on a Saturday, Sunday or California legal holiday,
then the closing shall be held on the next succeeding
business day. At the closing, the Former Member shall
deliver to the Company or the Remaining Members an
instrument of transfer (containing warranties of title
and no encumbrances) conveying the Former Member's
Interest. The Former Member, the Company and the
Remaining Members shall do all things and execute
and deliver all papers as may be reasonably necessary
fully to consummate such sale and purchase in
accordance with the terms and provisions of
this Agreement.
ARTICLE 24. MISCELLANEOUS PROVISIONS
24.01. 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.
24.02. 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.
24.03. 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.
24.04. 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.
24.05. Multiple Counterparts. This Agreement
may be 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.
24.06. 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.
24.07. 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.
24.08. 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.
24.09. 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 (3 0) days before the date of delivery of
the notice.
24.10. Amendments. All Amendments to
this Agreement must be in writing and signed by all
of the Members.
24.11. Title to Company Property. Legal
title to all property of the Company must be held
and conveyed in the name of the Company.
24.12. Reliance on Authority of Person
Signing Agreement. In the event that a Members 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:
WESTCO COMMUNITY BUILDERS, INC.,
a California corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
Its: CEO
DOVER INVESTMENTS CORPORATION
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: President
EXHIBIT A
CAPITAL CONTRIBUTION OF MEMBERS AND
ADDRESSES OF MEMBERS AND
MANAGER AS OF FEBRUARY 15, 2001
Member's Name:
Westco Community Builders, Inc.,
A California corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Member's Capital Contribution: $100
Member's Percentage Interest: 50%
Member's Name:
Dover Investments Corporation
A Delaware corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Member's Capital Contribution:
To be determined, but estimated to be
between $2 million and $3 million.
Member's Percentage Interest: 50%
Manager's Name:
Westco Community Builders, Inc.
Member's Address:
c/o ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Manager's Name:
Dover Investments Corporation
c/o ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
