Exhibit 3.2
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
THE FOREST BANK, LLC,
a Delaware limited liability company
TABLE OF CONTENTS
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PAGE
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ARTICLE I THE LLC............................................................................ 1
1.1. Organization.................................................................... 1
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1.2. LLC Name........................................................................ 1
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1.3. Purpose......................................................................... 1
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1.4. Powers.......................................................................... 2
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1.5. Principal Place of Business..................................................... 2
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1.6. Term............................................................................ 2
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1.7. Filings; Agent for Service of Process........................................... 2
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1.8. Not for Profit - Manager Duties................................................. 3
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1.9. Reservation of Other Business Opportunities..................................... 3
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ARTICLE II CAPITAL CONTRIBUTIONS; ADDITIONAL FINANCING AND
CONTRIBUTIONS........................................................................ 4
2.1. Initial Capitalization.......................................................... 4
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2.2. Issuance of Preferred Units..................................................... 4
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2.3. Additional Financing............................................................ 4
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2.4. Mandatory Additional Capital Contributions...................................... 4
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2.5. Optional Capital Contributions and Loans........................................ 4
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2.6. Transfer of the Timber Rights................................................... 5
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2.7. Other Matters................................................................... 5
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ARTICLE III ALLOCATIONS...................................................................... 5
3.1. Profits......................................................................... 5
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3.2. Losses.......................................................................... 5
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3.3. Special Allocations............................................................. 6
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3.4. Curative Allocations............................................................ 8
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3.5. Other Allocation Rules.......................................................... 8
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3.6. Tax Allocations: Code Section 704(c)............................................ 9
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ARTICLE IV DISTRIBUTIONS..................................................................... 9
4.1. Distributions of Available Cash Flow............................................ 9
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4.2. Transfer of Timber Rights in Liquidation........................................ 10
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4.3. Withholding..................................................................... 10
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4.4. First-Year Proration............................................................ 10
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ARTICLE V MEMBERSHIP; MEETINGS............................................................... 11
5.1. Classes of Membership........................................................... 11
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5.2. Membership List................................................................. 11
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5.3. Limited Liability............................................................... 11
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5.4. Authority of and Action by Members.............................................. 11
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5.5. Required Vote or Approval of Members............................................ 12
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5.6. Meetings........................................................................ 12
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5.7. Notice of Meeting............................................................... 12
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5.8. Proxies......................................................................... 12
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5.9. Quorum.......................................................................... 13
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5.10. Order of Business.............................................................. 13
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5.11. Telephonic Meeting............................................................. 13
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5.12. Written Consent................................................................ 13
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ARTICLE VI MANAGEMENT........................................................................ 13
6.1. Management...................................................................... 13
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6.2. Designation of Board of Managers................................................ 14
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6.3. Quorum.......................................................................... 14
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6.4. Meetings of Board............................................................... 14
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6.5. Officers........................................................................ 14
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6.6. Term of Office.................................................................. 15
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6.7. Vacancies....................................................................... 15
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6.8. Limitation of Liability of the Managers......................................... 15
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6.9. Indemnification................................................................. 15
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6.10. Compensation................................................................... 16
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ARTICLE VII BOOKS AND RECORDS................................................................ 16
7.1. Books and Records; Financial Statements to Members.............................. 16
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7.2. Tax Matters..................................................................... 16
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7.3. Right of Inspection............................................................. 16
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7.4. Financial Records............................................................... 17
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ARTICLE VIII FISCAL MATTERS.................................................................. 17
8.1. Fiscal Year..................................................................... 17
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8.2. Deposits........................................................................ 17
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8.3. Agreements, Consents, Checks, Etc............................................... 17
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8.4. Accountant...................................................................... 17
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8.5. Legal Counsel................................................................... 17
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ARTICLE IX UNITS............................................................................. 18
9.1. Membership Units................................................................ 18
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9.2. Unit Certificates............................................................... 18
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9.3. Authorization and Issuance of Additional Units. ................................ 18
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9.4. Authorization and Issuance of Additional Units upon a Revaluation............... 19
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ARTICLE X TRANSFER AND REDEMPTION............................................................ 19
10.1. Transfer Generally............................................................. 19
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10.2. Restriction on Transfer........................................................ 19
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10.3. Redemption of Preferred Units.................................................. 20
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ARTICLE XI DISSOLUTION AND WINDING UP........................................................ 23
11.1. Liquidating Events............................................................. 23
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11.2. Winding Up..................................................................... 23
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11.3. Capital Account Deficit Restoration............................................ 24
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11.4. Transfer of Timber Rights in Liquidation....................................... 24
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ARTICLE XII AMENDMENTS....................................................................... 24
12.1. Amendments..................................................................... 24
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12.2. Merger......................................................................... 25
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ARTICLE XIII DEFINITIONS; CONSTRUCTION....................................................... 25
13.1. Definitions.................................................................... 25
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13.2. Construction................................................................... 34
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13.3. Headings....................................................................... 34
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13.4. Variation of Pronouns.......................................................... 34
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13.5. Incorporation by Reference..................................................... 34
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ARTICLE XIV MISCELLANEOUS.................................................................... 35
14.1. Notices........................................................................ 35
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14.2. Binding Effect................................................................. 35
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14.3. Creditors...................................................................... 35
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14.4. Remedies Cumulative............................................................ 35
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14.5. Severability................................................................... 35
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14.6. Further Action................................................................. 35
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14.7. Governing Law.................................................................. 36
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14.8. Waiver of Action for Partition................................................. 36
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14.9. Counterpart Execution.......................................................... 36
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EXHIBIT A-1 FORM OF CLASS A-1 CERTIFICATE
EXHIBIT A-2 FORM OF CLASS A-2 CERTIFICATE
EXHIBIT A-3 FORM OF CLASS A-3 CERTIFICATE
EXHIBIT B FORM OF CLASS M CERTIFICATE
EXHIBIT C FORM OF THE FOREST BANK MANAGEMENT AND CONSERVATION EASEMENT
EXHIBIT D FORM OF THE NATURE CONSERVANCY CONSERVATION EASEMENT
EXHIBIT E FORM OF THE FOREST BANK MANAGEMENT EASEMENT
EXHIBIT F FORM OF THE SUBSCRIPTION AGREEMENT
EXHIBIT G FORM OF THE MANAGEMENT AGREEMENT
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
THE FOREST BANK, LLC
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of The Forest
Bank, LLC is entered into this ___ day of _______, 2001, by and among The Nature
Conservancy, a District of Columbia non-profit corporation ("TNC"), and the
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other Members pursuant to the terms hereof. Capitalized terms used herein shall
have the meanings assigned to them in Article XIII.
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WHEREAS, effective as of January 17, 2001, TNC, as the sole Member of the
LLC, executed a limited liability company agreement for the LLC (the "Original
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Agreement"); and
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WHEREAS, the Members now desire to amend and restate the Original Agreement
in connection with the LLC's issuance of class A membership units.
NOW THEREFORE, in consideration of the mutual covenants, conditions,
agreements, promises and obligations set forth in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Members agree as follows:
ARTICLE I
THE LLC
1.1. Organization. The Members hereby agree to form a limited liability
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company pursuant to the provisions of the Act and upon the terms and conditions
set forth in this Agreement.
1.2. LLC Name. The name of the limited liability company formed hereby
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shall be "The Forest Bank, LLC" and all business of the LLC shall be conducted
in such name or such other name as the Board of Managers shall determine. The
LLC shall hold all of its property in the name of the LLC and not in the name of
any Manager or any Member.
1.3. Purpose. The purpose and business of the LLC shall be:
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(a) to conserve forest land to maintain ecological features and natural
processes;
(b) to manage such lands, forests and associated resources to provide
economic and financial benefits to the Members;
(c) to allow owners of forest land the opportunity to participate in the
purposes set forth in clauses (a) and (b); and
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(d) to do any and all acts and things which may be necessary or
incidental to the foregoing or the promotion or conduct of the business of the
LLC or any of the Property.
It is understood that the foregoing statement of purposes shall not serve as a
limitation on the powers or abilities of the LLC, which shall be permitted to
engage in any and all lawful business activities; provided, however, that if
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there is a conflict among Sections 1.3(a), (b), (c) and/or (d), Section 1.3(a)
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shall control.
1.4. Powers. The LLC shall possess and may exercise all the powers and
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privileges granted by the Act, all other applicable law or by this Agreement,
together with any powers incidental thereto, so far as such powers and
privileges are necessary or convenient to the conduct, promotion and attainment
of the business, purposes or activities of the LLC; provided, however, that the
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LLC shall not transfer or otherwise dispose of the Timber Rights contributed to
it by the Preferred Members other than in connection with the dissolution and
liquidation of the LLC.
1.5. Principal Place of Business. The principal place of business of the
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LLC shall be ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other
location as may be designated by the Manager from time to time.
1.6. Term. The term of the LLC shall be perpetual unless and until the
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LLC is dissolved pursuant to the Act or as set forth herein. The existence of
the LLC as a separate legal entity shall continue until cancellation of the
Formation Certificate in the manner required by the Act.
1.7. Filings; Agent for Service of Process.
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(a) The Formation Certificate has been filed in the office of the
Secretary of State of the State of Delaware on January 17, 2001 in accordance
with the provisions of the Act. The Board shall take any and all other actions
reasonably necessary to perfect and maintain the status of the LLC under the
laws of the State of Delaware. The Board shall cause amendments to the Formation
Certificate to be filed whenever required by the Act. Such amendments shall be
executed by the Board.
(b) The Members hereby ratify and adopt the Formation Certificate filed
with the Secretary of State of the State of Delaware and all actions taken by
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. in connection with the preparation and filing of the
Formation Certificate.
(c) The registered agent for service of process on the LLC in the State of
Delaware, and the address of such agent, shall initially be CT Corporation
System, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Board, in its sole
and absolute discretion, may change the registered agent and appoint successor
registered agents.
(d) Upon the dissolution of the LLC, the Board (or, in the event there are
no members of the Board, the Person responsible for winding up and dissolution
of the LLC pursuant to Article XI hereof), shall promptly execute and cause to
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be filed articles of dissolution in
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accordance with the Act and the laws of any other states or jurisdictions in
which the LLC has registered to transact business or otherwise filed articles.
1.8. Not for Profit - Manager Duties. The LLC shall be operated to advance
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the purpose stated in Section 1.3 without regard to whether such purpose, or the
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activities of the LLC to achieve such purpose, earn a profit for the LLC or its
Members. The initial Class M Member is a not-for-profit corporation. The Members
understand and acknowledge the foregoing and agree that notwithstanding anything
herein (express or implied):
(a) the initial Class M Member (and any successor Class M Member which
may also be a tax-exempt entity pursuant to Code Section 501(c)) and its
designees on the Board shall not be required to manage the LLC or do any other
thing inconsistent with its purposes and its status as a tax-exempt, not-for-
profit organization; and
(b) the rights and property of the LLC, including without limitation
those rights granted to the LLC under the Forest Bank Management and
Conservation Easements and the Forest Bank Management Easements, shall be
operated, administered and employed in a manner consistent with the purposes set
forth in Section 1.3, without regard to whether operation, administration or
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employment in a different manner might yield a greater monetary return to the
LLC or to the Members.
1.9. Reservation of Other Business Opportunities. No business
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opportunities of any Member or Manager shall be deemed the property of the LLC,
and each such Member or Manager may engage in or possess an interest in any
other business venture, independently or with others, of any nature or
description; and neither any other Member nor the LLC shall have any rights by
virtue hereof in and to such other business ventures, or to the income or
profits derived therefrom. Each of the Members acknowledges that the Class M
Member, in and for itself and as general partner of or otherwise pursuant to
other entities, now is and hereafter will be conducting business and otherwise
engaged in activities similar or competitive to the business or activities of
the LLC, and that no such activity shall be a breach or violation of this
agreement or any fiduciary duty of the Class M Member or of the Managers. Each
Member further acknowledges and agrees that the Board and the Class M Member
have no duty or obligation to present any activity or business opportunity to
the LLC and may conduct any activity or business opportunity in its individual
capacity or through any other entity.
ARTICLE II
CAPITAL CONTRIBUTIONS; ADDITIONAL
FINANCING AND CONTRIBUTIONS
2.1. Initial Capitalization. On January 17, 2001 in consideration for a
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cash Capital Contribution of $500,000, the provision of certain management
services pursuant to the Management Agreement attached hereto as Exhibit G, and
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the covenants made by TNC herein and therein, the LLC issued and delivered
1,500,000 Class M Units to TNC. The Members agree that the fair market value of
TNC's initial Capital Contributions shall be $1,250,000.
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2.2. Issuance of Preferred Units. Upon execution and delivery by a Person
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of (a) a Forest Bank Management Easement or a Forest Bank Management and
Conservation Easement (including any and all documents as may be required to
file such documents and give such documents effect), (b) a Subscription
Agreement and (c) this Agreement, the LLC shall (x) issue Preferred Units of the
class and in the number set forth in the Subscription Agreement to such Person,
as evidenced by delivery of an appropriate Certificate to such Person, (y) admit
such Person as a Member and (z) revise the Unit Record hereto to reflect the
admission of such Person as a Member and the issuance of such Preferred Units to
such Member.
2.3. Additional Financing.
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(a) The sums of money required to finance the business and affairs of the
LLC shall be derived from the Capital Contributions made by the Members to the
LLC (and the proceeds from the management thereof), funds generated from the
operation and the business of the LLC, any loans or other indebtedness which the
Class M Member may make pursuant to Section 2.5.
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(b) No Preferred Member shall be required to make additional Capital
Contributions.
(c) No Preferred Member may make additional Capital Contributions except
upon the approval of the Board.
2.4. Mandatory Additional Capital Contributions. If at any time the LLC
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does not have (i) sufficient funds to fulfill its obligation to redeem Units
pursuant to Section 10.3, (ii) Available Cash Flow to fulfill its obligations to
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pay the Preferred Return pursuant to Section 4.1 or (iii) sufficient funds, in
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the judgment of the Board, to conduct its operations, then, within ten days of
receipt of a written request from the Board, the Class M Member shall make
additional Capital Contributions to the LLC; provided, however, that the Class M
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Member's obligation to make additional Capital Contributions pursuant to this
Section 2.4 is limited, in the aggregate, to $250,000.
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2.5. Optional Capital Contributions and Loans. If at any time the LLC does
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not have (i) sufficient funds to fulfill its obligation to redeem Units pursuant
to Section 10.3, (ii) Available Cash Flow to fulfill its obligations to pay the
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Preferred Return pursuant to Section 4.1 or (iii) sufficient funds, in the
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judgment of the Board, to conduct its operations, then the Class M Member has
the option, but is not required, to (i) purchase additional Class M Units for
cash equal to $1.00 per unit; (ii) purchase Class A-1 Units for $1.00 per unit,
or (iii) loan cash to the LLC pursuant to a Promissory Note.
2.6. Transfer of the Timber Rights. The LLC shall not transfer any Timber
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Rights contributed as part of a Capital Contribution to any party other than (a)
the original contributor of such Timber Rights, or (b) in connection with the
dissolution and winding up of the LLC as provided in Article XI hereof.
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2.7. Other Matters. Except as otherwise provided in this Agreement, no
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Member shall demand or receive a return of its Capital Contributions from the
LLC without the consent of the
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Board. Under circumstances requiring a return of any Capital Contributions, no
Member shall have the right to receive property other than cash except as may be
specifically provided herein.
(b) No Member shall receive any interest, salary or drawing with respect
to its Capital Contributions or its Capital Account or for services rendered on
behalf of the LLC or otherwise in its capacity as a Member, except as otherwise
provided in this Agreement or with the consent of the Board.
ARTICLE III
ALLOCATIONS
3.1. Profits. After giving effect to the special allocations set forth in
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Section 3.3 and Section 3.4, Profits for any Allocation Year shall be allocated
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in the following order and priority:
(a) First, to the Members holding Preferred Units, pro rata, in
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proportion to the relative amounts to be allocated under this Section 3.1(a),
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such that each Member holding Preferred Units will have been allocated
cumulative items of Profit through the end of such Allocation Year equal to the
aggregate amounts to be distributed to such Member pursuant to Section 4.1(a);
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and
(b) The balance, if any, to the Members, pro rata, in proportion to the
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relative number of Units held by each such Member.
3.2 Losses. After giving effect to the special allocations set forth in
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Section 3.3 and Section 3.4, Losses for any Allocation Year shall be allocated
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as set forth in Section 3.2(a), subject to the limitation in Section 3.2(b).
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(a) Losses for any Allocation Year shall be allocated in to the Members,
pro rata, in proportion to the relative number of Units held by each such
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Member.
(b) The Losses allocated pursuant to Section 3.2(a) shall not exceed the
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maximum amount of Losses that can be so allocated without causing any Member to
have an Adjusted Capital Account Deficit at the end of any Allocation Year. In
the event some but not all of the Members would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to Section 3.2(a),
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the limitation set forth in this Section 3.2(b) shall be applied on a Member by
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Member basis so as to allocate the maximum permissible Losses to each Member
under Section 1.704-1(b)(2)(ii)(d) of the Regulations. All Losses in excess of
the limitations set forth in this Section 3.2(b) shall be allocated to the Class
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M Member.
3.3. Special Allocations. The following special allocations shall be made
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in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
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1.704-2(f) of the Regulations, notwithstanding any other provision of this
Article III, if there is a net decrease in Member Minimum Gain during any
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Allocation Year, each Member shall be specially allocated items of LLC income
and gain for such Allocation Year (and, if necessary, subsequent
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Allocation Years) in an amount equal to such Person's share of the net decrease
in Member Minimum Gain, determined in accordance with Section 1.704-2(g) of the
Regulations. Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section
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3.3(a) is intended to comply with the minimum gain chargeback requirement in
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Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Article III, if there is a net decrease in Member Nonrecourse Debt Minimum
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Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each
Person who has a share of the Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Section 1.704-
2(i)(5) of the Regulations, shall be specially allocated items of LLC income and
gain for such Allocation Year (and, if necessary, subsequent Allocation Years)
in an amount equal to such Person's share of the net decrease in Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(4) of the Regulations.
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with Sections 1.704-
2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 3.3(b) is intended to
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comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of
the Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
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receives any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section 1.704-
1(b)(2)(ii)(d)(6) of the Regulations, items of LLC income and gain shall be
specially allocated to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 3.3(c) shall be made only if and to the
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extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article III have been tentatively made as
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if this Section 3.3(c) were not in the Agreement.
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(d) Gross Income Allocation. In the event any Member has a deficit
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Capital Account at the end of any Allocation Year that is in excess of the sum
of (i) the amount such Member is obligated to restore pursuant to any provision
of this Agreement, and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations, each such Member shall be specially allocated
items of LLC income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 3.3(d) shall be
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made only if and to the extent that such Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in this
Article III have been made as if Section 3.3(c) and this Section 3.3(d) were not
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in the Agreement.
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(e) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for
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any Allocation Year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(f) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation
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Year shall be specially allocated to the Members, pro rata, in proportion to the
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relative number of Units held by each such Member.
(g) Section 754 Adjustments. To the extent an adjustment to the adjusted
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tax basis of any LLC asset pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Section 1.704-l(b)(2)(iv)(m)(2) or Section
1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in
complete redemption of his Units, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Member in accordance with his
interests in the LLC in the event that Section 1.704-1(b)(2)(iv)(m)(2) of the
Regulations applies, or to the Member to whom such distribution was made in the
event that Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations applies.
(h) Allocations Relating to Taxable Issuance of LLC Units. Any income,
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gain, loss or deduction realized as a direct or indirect result of the issuance
of an interest by the LLC to a Member (the "Issuance Items") shall be allocated
among the Members so that, to the extent possible, the net amount of such
Issuance Items, together with all other allocations under this Agreement to each
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Member, shall be equal to the net amount that would have been allocated to each
such Member if the Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Section 3.2(b),
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Section 3.3(a), Section 3.3(b), Section 3.3(c), Section 3.3(d), Section 3.3(e),
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Section 3.3(f), and Section 3.3(g) (the "Regulatory Allocations") are intended
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to comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of LLC income, gain, loss or deduction pursuant to this Section 3.4.
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Therefore, notwithstanding any other provision of this Article III (other than
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the Regulatory Allocations), the Board shall make such offsetting special
allocations of LLC income, gain, loss or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all LLC items were allocated pursuant to
Section 3.1 and Section 3.2(a). In exercising its discretion under this Section
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3.4, the Board shall take into account future Regulatory Allocations under
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Section 3.3(a) and Section 3.3(b) that, although not yet made, are likely to
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offset other Regulatory Allocations previously made under Section 3.3(e) and
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Section 3.3(f).
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3.5. Other Allocation Rules. Profits, Losses and any other items of
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income, gain, loss or deduction shall be allocated to the Members pursuant to
this Article III as of the last day of
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each Fiscal Year; provided, that Profits, Losses and such other items shall also
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be allocated at such times as the Gross Asset Values of the Property are
adjusted pursuant to subparagraph (ii) of the definition of "Gross Asset Value"
in Section 13.1.
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(a) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Board using
any permissible method under Code Section 706 and the Regulations thereunder.
(b) The Members are aware of the income tax consequences of the
allocations made by this Article III and hereby agree to be bound by the
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provisions of this Article III in reporting their shares of LLC income and loss
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for income tax purposes, except to the extent otherwise required by law.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the LLC within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in LLC profits shall
be the relative number of Units by each Member.
(d) To the extent permitted by Section 1.704-2(h)(3) of the Regulations,
the Board shall endeavor to treat distributions of Available Cash Flow as having
been made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse
Debt only to the extent that such distributions would cause or increase an
Adjusted Capital Account Deficit for any Member.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section
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704(c) and the Regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the LLC 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 LLC for federal
income tax purposes and its initial Gross Asset Value (computed in accordance
with subparagraph (i) of the definition of "Gross Asset Value" in Section 13.1).
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In the event the Gross Asset Value of any LLC asset is adjusted pursuant to
subparagraph (ii) of the definition of "Gross Asset Value" in Section 13.1,
------------
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder. Any
elections or other decisions relating to such allocations shall be made by the
Board in any manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Section 3.6 are solely for purposes of
-----------
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Person's Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provision of this
Agreement. Except as otherwise provided in this Agreement, all items of LLC
income, gain, loss, deduction, and any other allocations not otherwise provided
for shall be divided among the Members in the same proportions as they share
Profits or Losses, as the case may be, for the Allocation Year.
8
ARTICLE IV
DISTRIBUTIONS
4.1. Distributions of Available Cash Flow. Except as otherwise provided
------------------------------------
in Article XI, to the extent the LLC has Available Cash Flow at the end of each
fiscal year, the Board will distribute Available Cash Flow within 60 days of the
end of such fiscal year as follows:
(a) first, to the Members holding Preferred Units, pro rata, in
-----
proportion to the relative amounts to be distributed under this clause (a), such
that each Member holding Preferred Units will have been distributed cumulative
Available Cash Flow in respect of his or her Preferred Units through the end of
such quarter equal to the applicable Preferred Return calculated for such
Preferred Units;
(b) second, to the Members who requested a Built-In Gain Redemption, pro
------ ---
rata, in proportion to the relative amounts to be distributed under this clause
----
(b), such that each Member requesting a Built-In Gain Redemption will have been
distributed cumulative Available Cash Flow in respect of his or her Preferred
Units redeemed pursuant to a Built-In Gain Redemption through the end of such
quarter equal to the aggregate applicable Redemption Price for such Preferred
Units;
(c) third, to the Members who requested a redemption pursuant to Section
----- -------
10.3 hereof other than a Built-In Gain Redemption, pro rata, in proportion to
---- --- ----
the relative amounts to be distributed under this clause (c), such that each
such redeeming Member will have been distributed cumulative Available Cash Flow
in respect of his or her Preferred Units redeemed through the end of such
quarter equal to the aggregate applicable Redemption Price for such Preferred
Units; and
(d) fourth, in the sole discretion of the Board, an additional amount to
------
the Members, pro rata, in proportion to the relative number of Units held by
--- ----
each such Member.
4.2. Transfer of Timber Rights in Liquidation. The Preferred Return for
----------------------------------------
each class of Preferred Units shall be as follows:
Class of Preferred Units Preferred Return
------------------------ ----------------
Class A-1 Units $0.04 per Unit per annum
Class A-2 Units $0.045 per Unit per annum
Class A-3 Units $0.045 per Unit per annum
4.3. Withholding. All amounts withheld or required to be withheld
-----------
pursuant to the Code or any provision of any state, local or foreign tax law
with respect to any payment, distribution or allocation to the LLC or the
Members and treated by the Code (whether or not withheld pursuant to the Code)
or any such tax law as amounts payable by or in respect of any Member or any
Person owning an interest, directly or indirectly, in such Member shall be
treated as amounts distributed to the Member with respect to which such amount
was withheld pursuant
9
to this Section 4.3 for all purposes of this Agreement. The Board is authorized
-----------
to withhold from distributions, or with respect to allocations, to the Members
and to pay over to any federal, state, local or foreign government any amounts
required to be so withheld pursuant to the Code or any provisions of any other
federal, state, local or foreign law and shall allocate any such amounts to the
Members with respect to which such amount was withheld.
4.4. First-Year Proration. If a new or existing Member acquires additional
--------------------
Units in exchange for a Capital Contribution on any date other than a record
date for the distribution of Available Cash Flow, the Available Cash Flow
attributable to such additional Units relating to the record date next following
the issuance of such additional Units shall be reduced in the proportion to (i)
the number of days that such additional Units are held by such Member bears to
(ii) the number of days between such record date and the immediately preceding
record date.
ARTICLE V
MEMBERSHIP; MEETINGS
5.1. Classes of Membership. The LLC shall have four classes of Units:
---------------------
Class A-1 Units, Class A-2 Units, Class A-3 Units and Class M Units. Each such
class shall have the rights and obligations set forth for such class herein.
Except as otherwise provided herein, any Member may own Class A-1 Units, Class
A-2 Units, Class A-3 Units, and Class M Units or any combination thereof.
5.2. Membership List. The Board shall maintain a list of the Members of
---------------
the LLC setting forth each Member's name, address, class of membership and the
Member's Capital Contribution (the "Unit Record"). The Board shall from time to
-----------
time cause the Unit Record to be revised to reflect any additions or deletions
to the list of Members or changes to any information reflected thereon.
5.3. Limited Liability. Except as otherwise provided by the Act or in this
-----------------
Agreement, the debts, obligations and liabilities of the LLC, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the LLC, and none of the Managers or the Members shall be
obligated personally for any such debt, obligation or liability of the LLC
solely by reason of being a Manager or member of the LLC.
(a) To the extent that at law or in equity, a party shall have duties
(including fiduciary duties) and liabilities to the LLC or the Members, such
duties and liabilities may be restricted by provisions of this Agreement. None
of the Managers or the Members shall be liable to the LLC for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Manager or Member in good faith on behalf of the LLC and in a manner reasonably
believed to be within the scope of authority conferred on such Manager or Member
by this Agreement.
(b) The Managers shall be fully protected in relying in good faith upon
the records of the LLC and upon such information, opinions, reports or
statements presented to the LLC by any person as to the matters such Manager
reasonably believes are within such other person's
10
professional or expert competence and who has been selected with reasonable care
by or on behalf of the LLC, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses or net cash flow or any other facts pertinent to the existence and amount
of assets from which distributions to the Member might properly be paid.
5.4. Authority of and Action by Members. Except for a Person who is a
----------------------------------
Preferred Member and also a Manager or an Officer, no Preferred Member shall be
entitled to participate in or vote in matters involving the management or the
business of the LLC other than those expressly set forth in Section 5.4(b), all
--------------
other such authority being vested in the Board of Managers. The Members shall be
entitled only to exercise rights specifically granted to them in this Agreement
or on such other matters as may be submitted to them by the Board of Managers in
its sole and absolute discretion. Such Preferred Members who are not a Manager
or an Officer shall have no authority, either express or implied, to bind the
LLC.
(a) Notwithstanding anything else herein, approval of the Class M Member
and holders of two-thirds of the Preferred Units, each voting as a separate
class and in accordance with Section 5.5 below, shall be required to sell,
-----------
merge, or consolidate the LLC to or with any other Person.
5.5. Required Vote or Approval of Members. Approval by or authorization
------------------------------------
of any action by or on behalf of the LLC that requires or is submitted to the
Members for approval (a) pursuant to Section 5.4(b) shall require the consent of
--------------
(1) the Class M Member and (2) the Preferred Members holding at least two-thirds
of the Preferred Units and (b) pursuant to Section 5.4(c) shall require the
--------------
consent of the Preferred Members holding at least two-thirds of the Preferred
Units. Such vote may be taken at an annual or special meeting of the Members in
accordance with the provisions of this Article V or by written consent in
---------
accordance with the provisions of Section 5.12.
------------
5.6. Meetings. Meetings of the Members, for any purposes described in a
--------
meeting notice, may be called by the Board of Managers.
5.7. Notice of Meeting. Written or telephonic notice stating the place,
-----------------
day and hour of the meeting and, in case of a special meeting, the purposes for
which the meeting is called, shall be delivered not less than 10 days before the
date of the meeting, either personally, by mail, or by facsimile transmission,
by or at the direction of the Board, to each Member of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the Member at his address as
it appears on the Unit Record, with postage thereon prepaid. When all the
Members of the LLC are present at any meeting, or if those not present sign in
writing a waiver of notice of such meeting, or subsequently ratify all the
proceedings thereof, the transactions of such meeting are as valid as if a
meeting were formally called and all requisite notice had been given.
5.8. Proxies. At all meetings of Members, a Member may vote by proxy
-------
executed in writing by the Member or by his duly authorized attorney-in-fact.
Such proxy shall be filed with the Board (or such other individual as the Board
shall designate to be the chairman of the
11
meeting) before or at the time of the meeting. No proxy shall be valid after
three months from date of execution, unless otherwise provided in the proxy.
5.9. Quorum. Members holding at least 50% of the outstanding Units,
------
represented in person or by proxy, shall constitute a quorum at a meeting of
Members. If a quorum cannot be achieved, Members holding at least 50% of the
Units so represented may adjourn the meeting from time to time without further
notice.
5.10. Order of Business. The order of business at all meetings of the
-----------------
Members shall be as follows:
(i) Roll Call.
(ii) Proof of notice of meeting or waiver of notice.
(iii) Reading of minutes of preceding meeting.
(iv) Report of the Board of Managers.
(v) Unfinished Business.
(vi) New Business.
5.11. Telephonic Meeting. Members of the LLC may participate in any
------------------
meeting of the Members by means of conference telephone or similar
communications equipment if all Persons participating in such meeting can hear
one another for the entire discussion of the matter(s) to be voted upon.
Participation in a meeting pursuant to this Section 5.11 shall constitute
------------
presence in person at such meeting.
5.12. Written Consent. Any action requiring the vote, consent, approval or
---------------
action of or an election by the Members or required to be taken at a meeting of
the Members may be taken without a meeting if a consent in writing, setting
forth the action so taken, will be signed by Members holding at least the
percentage of the outstanding Units required for such approval, consent or
action.
ARTICLE VI
MANAGEMENT
6.1. Management. The business and affairs of the LLC shall be managed
----------
under the direction of the Board of Managers. The Board shall have all power and
authority to manage, to direct the management, business and affairs of and to
make all decisions to be made by or on behalf of the LLC. The powers of the
Board shall include all powers, statutory or otherwise, possessed by or
permitted to managers of a limited liability company under the laws of the State
of Delaware. The Board shall have full power and authority to do all things
deemed necessary or desirable to conduct the business of the LLC. Approval by,
consent of or action taken by the
12
Board in accordance with authority granted by or under this Agreement shall
constitute approval or action by the LLC and shall be binding on the LLC.
6.2. Designation of Board of Managers. (a) Except as provided in Section
-------------------------------- -------
6.2(d) below, the Members hereby agree that the Class M Member shall have the
------
sole and exclusive right to designate all members of the Board of Managers and
that the Board shall have as many members as the Class M Member, in its sole
discretion, deems advisable.
(b) The Managers comprising the Board of Managers initially designated by
the Class M Member are as follows: ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and W. ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(c) The LLC shall notify the Members of the persons designated by the
Class M Member and Members of the Board upon the appointment to the Board.
(d) Notwithstanding anything else herein, if the Preferred Return is not
paid in full for two consecutive calendar years, the Managers shall be elected,
removed or replaced by a vote of holders of a majority of the outstanding
Preferred Units.
6.3. Quorum. A majority of the Managers shall constitute a quorum for the
------
transaction of business. The act of a majority of Managers present at a meeting
at which a quorum is present or action taken by written consent of a majority of
all Managers shall be the act of the Board. Less than a quorum may adjourn any
meeting.
6.4. Meetings of Board. The Board shall have an annual meeting and any
-----------------
other meetings at such place as the Board may designate. Meetings of the Board
shall be at times fixed by resolution of the Board, or upon the call of the
chairman of the Board, the President, or any two Managers. The Secretary or
officer performing the Secretary's duties shall give not less than 24 hours'
notice by letter, telegraph, telephone or facsimile (or in person) of all
meetings of the Board, provided that notice need not be given of the annual
meeting or of regular meetings held at times and places fixed by resolution of
the Board. Meeting may be held at any time without notice if all of the Managers
are present, or if those not present waive notice in writing either before or
after the meeting. The notice of the Managers need not state the purpose of the
meeting.
6.5. Officers. The Board may from time to time designate specific
--------
individuals as officers, with such title, power and authority and for such time
as the Board may from time to time determine. The Board may remove any Officer
at any time with or without cause. The Board shall appoint a President who shall
be the chief executive officer of the LLC and shall be primarily responsible for
the implementation of the policies of the Board. The Board shall also appoint a
Secretary who shall act as secretary of all meetings of the Board and of the
Members of the LLC.
6.6. Term of Office. A Manager shall hold office until a successor shall
--------------
have been duly elected or appointed by the Class M Member or by a vote of the
Preferred Members, as the case may be.
13
6.7. Vacancies. The Class M Member may, upon the resignation of a Manager,
---------
designate a successor, which successor shall serve as Manager from and after the
effectiveness of the resignation. Any successor Managers shall operate the LLC
in accordance with the purposes set forth in Section 1.3.
-----------
6.8. Limitation of Liability of the Managers. To the fullest extent
---------------------------------------
permitted under the Act, the Delaware General Corporation Law or any other
applicable law as currently or hereafter in effect, none of the Managers, any
Affiliate of the Managers or any Officer shall be personally liable, responsible
or accountable in damages or otherwise to the LLC or any of its Members for or
with respect to any action taken or failure to act on behalf of the LLC within
the scope of the authority conferred on the Managers by this Agreement or by
law. In addition to, and not by way of limitation of, the preceding sentence,
the Managers shall not be liable to the LLC or its Members for monetary damages
for any breach of any fiduciary duty as a Manager, except for liability for acts
or omissions not in good faith or which involve gross negligence, intentional
misconduct or a knowing violation of law. Any repeal or modification of this
Section 6.8 shall not adversely affect any right or protection of a Manager
-----------
existing prior to such repeal or modification.
6.9. Indemnification. The LLC shall indemnify and hold harmless the
---------------
Managers, each of their Affiliates and each Officer (the "Indemnified Parties,"
-------------------
and each an "Indemnified Party") from and against any loss, expense, damage or
-----------------
injury suffered or sustained by the Indemnified Parties (or any of them) by
reason of any acts, omissions or alleged acts or omissions arising out of its or
their activities on behalf of the LLC or in furtherance of the interests of the
LLC, including, but not limited to, any judgment, award, settlement, reasonable
attorney's fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim; provided that
--------
the acts, omissions or alleged acts or omissions upon which such actual or
threatened action, proceeding or claim is based were not performed or omitted
fraudulently or in bad faith or as a result of gross negligence or willful
misconduct by any such Indemnified Party; and provided further that such
----------------
Indemnified Party reasonably believed that the acts, omissions, or alleged acts
or omissions upon which such actual or threatened action, proceeding or claim is
based were in the best interests of the LLC. Such indemnification shall be made
only to the extent of the assets of the LLC.
6.10. Compensation. The Managers and each of the Officers may be
------------
compensated by the LLC for the performance of their duties hereunder as provided
for in the Management Agreement attached hereto as Exhibit G, as amended from
---------
time to time.
ARTICLE VII
BOOKS AND RECORDS
7.1. Books and Records; Financial Statements to Members. The Board shall
--------------------------------------------------
keep proper and usual books and records pertaining to the business of the LLC.
The books and records of the LLC shall be kept at the principal office of the
LLC or at such other places, within or without the State of Delaware, as the
Board shall from time to time determine.
14
7.2. Tax Matters. (a) All elections and decisions required or permitted to
-----------
be made by the LLC under any applicable tax law shall be made by the Board. If
requested by a Transferee, the Board shall file an election on behalf of the LLC
pursuant to Code Section 754 (and applicable state law) to adjust the basis of
the Property in the case of a Transfer of Units made in accordance with the
provisions of this Agreement. The Board shall cause to be prepared and filed all
income tax returns on a timely basis. Any balance sheet and Capital Account
included in the preparation of the LLC's federal income tax return (and to the
extent applicable, any state income tax return) will be based upon the LLC's
method of accounting and principles under federal income tax law, rather than
GAAP or other principles.
(b) The Class M Member is hereby designated as the initial tax matters
partner for the LLC within the meaning of Section 6231(a)(7) of the Code (the
"Tax Matters Partner").
-------------------
(c) Each Member acknowledges that this Agreement creates a partnership
for federal and state income tax purposes, and hereby agrees not to elect under
Code Section 761 or applicable state law to be excluded from the application of
Subchapter K of Chapter 1 of Subtitle A of the Code or any similar state statute
of the LLC.
(d) No Manager, Member, officer, agent or employee of the LLC may file
Internal Revenue Service Form 8832 (or such alternative or successor form) to
elect to be classified as a corporation for federal income tax purposes, in
accordance with Regulations Section 301.7701-3.
7.3. Right of Inspection. Any Member of record shall have the right to
-------------------
examine, at any reasonable time or times for all purposes, the books and records
of account, minutes and records of the LLC and to make copies thereof. Such
inspection may be made by any agent or attorney of the Member. Upon the written
request of any Member, the Board shall cause to be mailed to such Member the
LLC's most recent financial statements, showing in reasonable detail the LLC's
assets and liabilities and the results of its operations, and a copy of its
federal, state and local income tax returns.
7.4. Financial Records. All financial records shall be maintained and
-----------------
reported using GAAP, except as set forth in Section 7.2(a).
--------------
ARTICLE VIII
FISCAL MATTERS
8.1. Fiscal Year. The fiscal year of the LLC shall begin on the first day
-----------
of January and end on the last day of December each year, unless otherwise
determined by the Board (the "Fiscal Year").
-----------
8.2. Deposits. All funds of the LLC shall be deposited in an account or
--------
accounts in such banks, trust companies or other depositories as the Board may
select.
8.3. Agreements, Consents, Checks, Etc. All agreements, consents, checks,
---------------------------------
drafts or other orders for the payment of money, and all notes or other
evidences of indebtedness issued in
15
the name of the LLC shall be signed by (i) the Board or (ii) those Persons
specifically authorized from time to time by the Board.
8.4. Accountant. An accountant(s) may be selected from time to time by the
----------
Board to perform such tax and accounting services as may from time to time be
required. The accountant may be removed by the Board without assigning any
cause.
8.5. Legal Counsel. One or more attorney(s) at law may be selected from
-------------
time to time by the Board to review the legal affairs of the LLC and to perform
such other services as may be required and to report to the Board with respect
thereto. The legal counsel may be removed by the Board without assigning any
cause.
ARTICLE IX
UNITS
9.1. Membership Units. All interests in the LLC shall be denominated in
----------------
Units, consisting initially of Class A-1 Units, Class A-2 Units, Class A-3 Units
and Class M Units. No Units shall be registered upon any national securities
exchange, foreign securities exchange, regional or local exchange or interdealer
quotation system that regularly disseminates firm buy or sell quotations by
identified brokers or dealers.
9.2. Unit Certificates. Units shall be represented by certificates
-----------------
substantially in the form attached hereto as Exhibit A-1 through B, as follows
----------- -
(each a "Certificate"). Certificates representing Class A-1 Units shall be
-----------
substantially in the form attached hereto as Exhibit A-1; Certificates
-----------
representing Class A-2 Units shall be substantially in the form attached hereto
as Exhibit A-2; Certificates representing Class A-3 Units shall be substantially
-----------
in the form attached hereto as Exhibit A-3; and Certificates representing Class
-----------
M Units shall be substantially in the form attached hereto as Exhibit B. Such
---------
Certificates shall be signed by such Officers as the Board may designate from
time to time. All Certificates shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the Units represented by
each Certificate are issued, with the number of Units, the class of membership
represented by the Units and the date of issue, shall be entered on the Unit
transfer book of the LLC. All Certificates surrendered to the LLC for transfer
shall be canceled and no new Certificate shall be issued until the former
Certificate for a like number of Units shall have been surrendered and canceled,
except that in case of a lost, destroyed or mutilated Certificate, a new one may
be issued therefor upon such terms and indemnity to the LLC as the Board (or an
Officer or Officers designated by the Board for such purpose) may prescribe.
9.3. Authorization and Issuance of Additional Units. The Board is hereby
----------------------------------------------
authorized to cause the LLC to issue such additional Units for any LLC purpose
at any time or from time to time, to the Members or to other Persons for such
consideration and on such terms and conditions as shall be established by the
Board in its sole and absolute discretion, all without the approval of any
Members. Any additional Units issued thereby may be issued in one or more
classes, or one or more series of any of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including rights,
16
powers and duties senior to Class A-1 Units, Class A-2 Units, Class A-3 Units or
Class M Units, all as shall be determined by the Board in its sole and absolute
discretion and without the approval of any Member, subject to Delaware law,
including, without limitation, (i) the allocations of items of LLC income, gain,
loss, deduction and credit to each such class or series of Units; (ii) the right
of each such class or series of Units to share in LLC distributions; and (iii)
the rights of each such class or series of Units upon dissolution and
liquidation of the LLC. Without limiting the foregoing, the Board is expressly
authorized to cause the LLC to issue Units for less than fair market value, so
long as the Board concludes in good faith that such issuance is in the best
interests of the LLC. No Member shall have any right to purchase a portion of
any newly authorized and issued Units or shall have any rights whatsoever
arising from any resulting dilution.
9.4. Authorization and Issuance of Additional Units upon a Revaluation.
-----------------------------------------------------------------
Upon each tenth anniversary of the Original Issue Date, the Board shall
ascertain the fair market value of the Timber Rights contributed by such
Preferred Member (the "Revalued Fair Market Value"). If the Revalued Fair Market
--------------------------
Value of the Timber Rights contributed by a Preferred Member exceeds the initial
Gross Assets Value of such Timber Rights plus the Revaluation Threshold, then
the Preferred Member will be issued additional Preferred Units, valued a $1.00
per Unit, in an amount equal to the excess of the Revalued Fair Market Value
over the initial Gross Asset Value and the Revaluation Threshold; provided,
--------
however, that the amount of Preferred Units issued to the Preferred Member shall
-------
be reduced proportionally to account for any of the Preferred Member's Preferred
Units that were redeemed by the LLC since the Original Issue Date.
ARTICLE X
TRANSFER AND REDEMPTION
10.1. Transfer Generally. (a) Any Member other than the Class M Member may
------------------
Transfer all or 10,000 or more of his or her Preferred Units to any Person
subject to the restrictions in Section 10.2.
------------
(b) The Class M Member or any permitted Transferee of the Class M Member
pursuant to this clause (b) may Transfer all, but not less than all, of its
Units to a corporation, partnership or other entity controlled by the Class M
Member, provided that the Class M Member guarantees that such transferee will
perform its obligations under Section 2.4 and Section 2.5.
----------- -----------
(c) Until any permitted Transferee has executed documentation reasonably
satisfactory to the Board (or an Officer designated by the Board for such
purpose) evidencing the Transfer to such Transferees of Units, such Transferee
will not be admitted to the LLC or otherwise be recognized by the LLC as having
any rights as a Member, including any right to receive distributions from the
LLC (directly or indirectly) or to have Units redeemed. No Member may Transfer
all or any portion of his rights or interests in the LLC or resign from the LLC
other than in accordance with this Section 10.1 without the prior written
------------
consent of the Board (or an Officer designated by the Board for such purpose).
17
10.2. Restriction on Transfer. Notwithstanding Section 10.1, no Transfer by
----------------------- ------------
a Member will be permitted if, as determined by the Board, such Transfer will
(a) adversely affect the LLC's classification as a partnership for federal
income tax purposes (including as a "publicly traded partnership" for purposes
of Code Section 7704) or (b) materially adversely affect the LLC, the other
Members or the value of other Members' Units. Further, no Transfer (including a
Transfer pursuant to Section 10.1) will be permitted until the Transferee (x)
------------
delivers to the LLC a written instrument evidencing such Transfer in form and
substance satisfactory to the Board; (y) executes a copy of this Agreement
accepting and agreeing to all of the terms, conditions and provisions of this
Agreement; and (z) pays to the LLC its reasonable out-of-pocket costs and
expenses incurred in connection with such Transfer and the admission of the
Transferee as a Member.
10.3. Redemption of Preferred Units. (a) Generally. As provided in this
----------------------------- ---------
Section 10.3, a Preferred Member may redeem all or a portion of such Member's
------------
Preferred Units upon delivery to the LLC of the Certificate representing such
redeemed Preferred Units with the properly completed Notice of Redemption on the
reverse side thereof (the "Redemption Notice") and the mailing of notification
-----------------
from the LLC that such Units have been redeemed. No Preferred Member may deliver
a Redemption Notice requesting a Redemption with respect to any Units, and the
LLC shall have no obligation to redeem any Preferred Units, prior to the second
anniversary of the Original Issue Date with respect to such Units.
(b) Class A-1 Units. At any time after the second anniversary of the
---------------
Original Issue Date with respect to Class A-1 Units, a Class A-1 Member shall be
entitled to redeem any number of such Class A-1 Units at the Redemption Price
set forth on the following table:
Year Following the
Original Issue Date Redemption Price per Class A-1 Unit
------------------- -----------------------------------
Third $ .80
Fourth $ .85
Fifth $ .90
Sixth $ .95
After the sixth anniversary of the
Original Issue Date $1.00
(c) Class A-2 Units. At any time after the third anniversary of the
---------------
Original Issue Date with respect to Class A-2 Units, a Class A-2 Member shall be
entitled to redeem any number of such Class A-2 Units at the Redemption Price
set forth on the following table:
18
Year Following the
Original Issue Date Redemption Price per Class A-2 Unit
------------------- -----------------------------------
Fourth, Fifth and Sixth $ .20
Seventh, Eighth and Ninth $ .40
Tenth, Eleventh and Twelfth $ .60
Thirteenth, Fourteenth and Fifteenth $ .80
After the fifteenth anniversary of the $1.00
Original Issue Date
(d) Class A-3 Units. At any time after the second anniversary of the
---------------
Original Issue Date with respect to Class A-3 Units, a Class A-3 Member shall be
entitled to redeem the following percentage of such Class A-3 Units at the
following Redemption Price:
Year Following the Maximum Number of Units Redemption Price per
Original Issue Date That May be Redeemed Class A-3 Unit
------------------- -------------------- --------------
Second 5%
Third 10% $1.00
Fourth 15% $1.00
Fifth 20% $1.00
Sixth 25% $1.00
Seventh 30% $1.00
Eighth 35% $1.00
Ninth 40% $1.00
Tenth 45% $1.00
Eleventh 50% $1.00
Twelfth 55% $1.00
Thirteenth 60% $1.00
Fourteenth 65% $1.00
Fifteenth 70% $1.00
Sixteenth 75% $1.00
Seventeenth 80% $1.00
Eighteenth 85% $1.00
Nineteenth 90% $1.00
Twentieth 95% $1.00
After the twentieth 100% $1.00
anniversary of the
Original Issue Date
(e) Built-In Gain Redemption. At any time a Preferred Member is allocated
------------------------
income or gain pursuant to Code Section 704(c), such Preferred Member shall
receive a notice of such allocation (a "Built-In Gain Notice") within 30 days
--------------------
after the end of the Allocation Year to which the income or gain allocation
relates. Upon receipt of a Built-In Gain Notice, a Preferred Member may request
the LLC to redeem an amount of Preferred Units that, when combined with
19
the amount of Available Cash Flow distributed to such Preferred Member pursuant
to Section 4.1(a) for the Fiscal Year in which such allocation was made, equals
--------------
the product of the aggregate profit allocated to such Preferred Member
(including any income or gain allocated pursuant to Code Section 704(c)) for
such Fiscal Year and the Member's Assumed Tax Rate (a "Built-In Gain
-------------
Redemption"). Pursuant to a Built-In Gain Redemption, the Preferred Member shall
----------
withdraw from the LLC with respect to that portion of such Member's interest in
the LLC represented by such Preferred Units upon delivery to the LLC of the
Certificate representing such Preferred Member's Preferred Units with the
properly completed Redemption Notice and the mailing of notification from the
LLC that such Preferred Units have been redeemed.
(f) Foreclosure Redemption. At any time a Bona Fide Lender forecloses on
----------------------
Preferred Units pledged by a Preferred Member as security for any indebtedness,
the Bona Fide Lender may request the LLC to redeem all or part of such Preferred
Member's Units (a "Foreclosure Redemption"). Pursuant to a Foreclosure
----------------------
Redemption, the Preferred Member or a Bona Fide Lender, as the case may be,
shall be withdrawn from the LLC with respect to that portion of such Preferred
Member's interest in the LLC represented by such Preferred Units upon the
delivery to the LLC by the Bona Fide Lender of the Certificate representing such
Preferred Units with the properly completed Redemption Notice and the mailing of
notification from the LLC that such Preferred Units have been redeemed.
(g) Emergency Redemption. At any time after the second anniversary of the
--------------------
Original Issue Date, a Preferred Member may request the LLC to redeem 25% or
more of such Preferred Member's Preferred Units (an "Emergency Redemption").
--------------------
Pursuant to an Emergency Redemption, the Preferred Member shall withdraw from
the LLC with respect to that portion of such Member's interest in the LLC
represented by such Preferred Units upon delivery to the LLC of the Certificate
representing such Preferred Member's Preferred Units with the properly completed
Redemption Notice and the mailing of notification from the LLC that such
Preferred Units have been redeemed.
(h) Forced Redemption. At any time that a Preferred Member's holds less
-----------------
than 25% of the Units issued to the Preferred Member on the Original Issue Date,
the LLC has the option of redeeming all of the Preferred Member's outstanding
Units (an "LLC Redemption").
--------------
(i) Mechanics of Redemption. Upon the receipt of a properly completed
-----------------------
Redemption Notice, the LLC shall calculate the amount to be paid by the LLC to
redeem the Units by multiplying (x) the number of Units submitted for redemption
by (y) the Redemption Price of such Units. Unless otherwise provided herein, the
Redemption Price per Preferred Unit shall be $1.00. On the last day of each
calendar quarter, the Board (or an Officer designated by the Board for such
purposes) shall pay such amounts to the Members or Bona Fide Lenders who
delivered the properly completed Redemption Notice at least 30 days prior to the
applicable redemption date. The Board or its designee shall pay such amounts at
the Member's address as its appear on the Unit Record or a different address
specified in the Redemption Notice.
(j) Rights; Records. Upon any redemption of Units pursuant to this Section
--------------- -------
10.3, the holder of the redeemed Preferred Units shall have no rights under this
----
Agreement with respect to
20
the redeemed Preferred Units other than the right to receive payment of the
amount due upon such redemption, and the Board (or an Officer designated by the
Board for such purpose) shall revise the Unit Record to reflect the redemption
of such Units, including if applicable the removal of the Person as a Member.
ARTICLE XI
DISSOLUTION AND WINDING UP
11.1. Liquidating Events. The LLC shall dissolve and commence winding up
------------------
and liquidating only upon the first to occur of any of the following
("Liquidating Events"):
------------------
(a) The bankruptcy or dissolution of the Class M Member;
(b) The agreement the Class M Member and holders of two-thirds of the
Preferred Units;
(c) The happening of any other event that makes it unlawful, impossible
or impractical to carry on the business of the LLC;
(d) Any time there are no Members, unless the personal representative of
the last remaining Member, or any designee or nominee of the personal
representative of the last remaining Member, agrees in writing to continue the
business of the LLC, at which time such personal representative or such designee
or nominee of the personal representative, as the case may be, shall be admitted
as a Member hereunder, notwithstanding any provision of Article X; and
---------
(e) The entry of a decree of judicial dissolution under the Act or any
other event or circumstance requiring dissolution under the Act, subject however
to any cure for such event or circumstance as may be set forth in the Act.
No Member or group of Members shall have any right or obligation to continue the
business of the LLC upon the occurrence of a Liquidating Event. The Members
hereby agree that, notwithstanding any provision of the Act, the LLC shall not
dissolve prior to the occurrence of a Liquidating Event. The Members further
agree that in the event the LLC is dissolved prior to a Liquidating Event, the
LLC may be continued upon the election of the Board of Managers at such time to
so continue the LLC; provided such election occurs within 30 days of the event
--------
triggering such dissolution.
11.2. Winding Up. Upon the occurrence of a Liquidating Event, the LLC shall
----------
continue solely for the purpose of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its creditors and Members.
Neither the Managers nor any Member shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the LLC's
business and affairs. If the Board remains after the occurrence of a Liquidating
Event, it shall continue to have the same duties and authority as existed prior
to the occurrence of a Liquidating Event, subject to the requirements of the
previous sentence. The Board (or, in the
21
event there are no Managers remaining, any Person selected by the Class M Member
or, if there is no Class M Member, the remaining Members holding a majority of
the outstanding Units) shall be responsible for overseeing the winding up and
dissolution of the LLC and shall take full account of the LLC's liabilities and
the Property of the LLC shall be liquidated as promptly as is consistent with
obtaining the fair value thereof but in any case by the later of (x) the end of
the Fiscal Year in which such Liquidating Event occurred or (y) the date ninety
(90) days after such Liquidating Event occurred, and the proceeds therefrom, to
the extent sufficient, shall be applied and distributed, subject to any
reasonable reserves maintained for contingent or other obligations of the LLC,
in the following order:
(a) first, to the satisfaction (whether by payment or the making of
-----
reasonable provision for payment thereof) of all of the LLC's debts and
liabilities to creditors other than Members;
(b) second, to the satisfaction (whether by payment or the making of
------
reasonable provision for payment thereof) of all of the LLC's debts and
liabilities to Members, including satisfaction of the Preferred Members' accrued
applicable Preferred Return; and
(c) the balance, if any, to the Members in accordance with their
-----------
respective Capital Accounts, after giving effect to all contributions,
distributions and allocations for all periods.
11.3. Capital Account Deficit Restoration. No Member will be obligated to
-----------------------------------
restore after a Liquidating Event any deficit in its Capital Account, and no
creditor of the LLC will have any right to enforce any obligation to restore any
deficit Capital Account of any Member.
11.4. Transfer of Timber Rights in Liquidation. The LLC, the Class M
----------------------------------------
Member and the Board of Managers shall use their reasonable best efforts to
provide that, in a dissolution, liquidation or winding up of the LLC, (a) Timber
Rights shall be transferred to the Preferred Member who owns the Preferred Units
originally issued in exchange for such Timber Rights in full redemption of the
Preferred Units originally issued in exchange for such Timber Rights, or (b) the
Timber Rights shall be transferred to the Class M Member in exchange for a cash
payment and such cash shall be used to redeem the Preferred Units originally
issued by the LLC in exchange for such Timber Rights.
ARTICLE XII
AMENDMENTS
12.1. Amendments. This Agreement may be altered, amended or repealed, or a
----------
new Agreement may be adopted, upon the prior written consent of the Class M
Member or the Board; provided, however, that distributions payable to a Member
-------- -------
pursuant to Section 4.1(a) and amounts payable to a Member to redeem Units
--------------
pursuant to Section 10.3 shall not be reduced without the prior written consent
------------
of each Member affected by such reduction.
12.2. Merger. Subject to Section 5.4, the LLC may merge or consolidate,
------ -----------
regardless of whether the LLC is the survivor of such merger or consolidation.
22
ARTICLE XIII
DEFINITIONS; CONSTRUCTION
13.1. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the meanings set forth in this Article XIII (such meanings to be
------------
equally applicable in both the singular and plural forms of the term defined).
"Act" means the Delaware Limited Liability Company Act (6 Del.C. (S).18-
---
101, et seq.), as amended from time to time (or any corresponding provisions of
succeeding law).
"Adjusted Capital Account Deficit" means, with respect to any Member, the
--------------------------------
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Allocation Year after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is deemed to
be obligated to restore pursuant to the penultimate sentences of Sections 1.704-
2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(ii) Debit to such Capital Account the items described in Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Affiliate" means any (i) corporation, partnership, trust, limited
---------
liability company or other entity controlled by or under common control with any
Member or in which a Member is or may be an officer, director, shareholder,
partner (general or limited), trustee, member, manager, owner or employee; (ii)
officer, director, shareholder, partner (general or limited), trustee, member,
manager, owner or employee of any corporation, partnerships, trust, limited
liability company or other entity controlled by or under common control with a
Member; and (iii) corporation, partnership, trust, limited liability company or
other entity or business in which a Member has any interest whatsoever.
"Agreement" means this First Amended and Restated Limited Liability Company
---------
Agreement, as amended, restated, supplemented or otherwise modified from time to
time. Words such as "herein," "hereinafter," "hereof," and "hereunder" refer to
this Agreement as a whole, unless the context otherwise requires.
"Allocation Year" means (i) the period commencing on the Effective Date and
---------------
ending on December 31, 2001, (ii) any subsequent period commencing on January 1
and ending on the following December, or (iii) any portion of the period
described in clause (ii) for which the LLC is required to allocate Profits,
Losses and other items of LLC income, gain, loss or deduction pursuant to
Article III.
-----------
23
"Assumed Tax Rate" means the maximum federal income tax rate on long-term
----------------
capital gains plus 5%.
"Available Cash Flow" means, with respect to the applicable period of
-------------------
measurement (i.e., any period beginning on the first day of the LLC Fiscal Year
or other period commencing immediately after the last day of the prior
calculation of Available Cash Flow, and ending on the last day of the month,
quarter or other applicable period immediately preceding the date of
calculation), the excess, if any, of the gross cash receipts of the LLC for such
period from all sources whatsoever, including, without limitation, the
following:
(a) (i) all rents, revenues, income and proceeds derived by the LLC from
its operations, including, without limitation, distributions received by the LLC
from any entity in which the LLC has an interest, any payments of principal,
interest, costs, fees, penalties or otherwise on account of any loans made by
the LLC and any financings or refinancings of any Property; (ii) the amount of
any insurance proceeds and condemnation awards of Property; (iii) any cash
Capital Contributions received by the LLC from its Members (including
contributions described in Section 2.5); (iv) all cash amounts previously
-----------
reserved by the LLC, if the specific purposes for which such amounts were
reserved are no longer applicable; and (v) the proceeds of liquidation of
Property in accordance with this Agreement,
over the sum of:
(b) (i) all operating costs and expenses of the LLC and capital
expenditures made during such period (without deduction, however, for any
capital expenditures, charges for depreciation or other expenses not paid in
cash or expenditures from reserves described in (vii) below); (ii) all costs and
expenses expended or payable during such period in connection with the sale or
other disposition or financing or refinancing, of Property or the recovery of
insurance or condemnation proceeds; (iii) all fees provided for under this
Agreement; (iv) all debt service, including principal and interest, paid during
such period on all indebtedness of the LLC; (v) all Capital Contributions,
advances, reimbursements or similar payments made to any Person (whether a
partnership, corporation, trust, limited liability company or other entity) in
which the LLC has an interest; (vi) all loans made by the LLC to any Person in
which the LLC has an interest (whether a partnership, corporation, trust,
limited liability company or other entity); and (vii) any reserves reasonably
determined by the Board for working capital, capital improvements, payments of
periodic expenditures, debt service or other purposes.
"Board" or "Board of Managers" means the managing body of the LLC, as
----- -----------------
provided for in Section 6.1.
-----------
"Bona Fide Lender" means any person who has lent money to a Member and who
----------------
is not related to or affiliated with such Member or the Class M Member and whose
loan is secured by a perfected security interest in such Member's property and
such Member's Preferred Units.
"Built-In Gain Notice" has the meaning set forth in Section 10.3(e).
-------------------- --------------
"Built-In Gain Redemption" has the meaning set forth in Section 10.3(e).
------------------------ ---------------
24
"Capital Account" means, with respect to any Member, the Capital Account
---------------
maintained for such Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited such
Person's Capital Contributions, such Person's distributive share of Profits and
any items in the nature of income or gain which are specially allocated pursuant
to Section 3.3 or Section 3.4, and the amount of any LLC liabilities assumed by
----------- -----------
such Person or which are secured by any Property distributed to such Person.
(ii) To each Person's Capital Account there shall be debited the amount of
cash and the Gross Asset Value of any Property distributed to such Person
pursuant to any provision of this Agreement, such Person's distributive share of
Losses and any items in the nature of expenses or losses which are specially
allocated pursuant to Section 3.3 or Section 3.4, and the amount of any
----------- -----------
liabilities of such Person assumed by the LLC or which are secured by any
property contributed by such Person to the LLC.
(iii) In the event all or a portion of an interest in the LLC is
transferred in accordance with the terms of this Agreement, the Transferee shall
succeed to the Capital Account of the Transferor to the extent it relates to the
transferred interest.
(iv) In determining the amount of any liability for purposes of
subparagraphs (i) and (ii), there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
In the event all or a portion of an Interest is Transferred in accordance with
the terms of this Agreement to a Transferee who becomes a Member, such
Transferee shall succeed to the Capital Account of the Transferor to the extent
that it relates to the transferred Interest. The foregoing provisions and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b), and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the Board Managing Member shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributions or distributed property or which are assumed by the
LLC or the Members, Managing Member, or a Preferred Member), are computed in
order to comply with such Regulations, the Board may make such modification,
provided that it is not likely to have a material adverse effect on the amounts
distributed to any Person pursuant to Article XI upon the dissolution of the
----------
LLC. The Board also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Members and
the amount of LLC capital reflected on the LLC's balance sheet, as computed for
book purposes, in accordance with Section 1.704-1(b)(2)(iv)(q) of the
Regulations, and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Section 1.704-1(b) of the Regulations, provided that, to the extent that any
such adjustment is inconsistent with other provisions of this Agreement and
would have a material adverse effect on any Preferred Member, such adjustment
shall require the consent of such Preferred Member.
25
"Capital Contributions" means, with respect to any Member, the amount
---------------------
of money and the initial Gross Asset Value of any property (other than money)
contributed to the LLC by such Person (or its predecessors in interest) with
respect to the interest in the LLC held by such Person. The principal amount of
a promissory note that is not readily traded on an established securities market
and that is contributed to the LLC by the maker of the note (or a Person related
to the maker of the note within the meaning of Section 1.704-1(b)(2)(ii)(c) of
the Regulations) shall not be included in the Capital Account of any Person
until the LLC makes a taxable disposition of the note or until (and to the
extent) principal payments are made on the note, all in accordance with
Regulations Section 1.704-1(b)(2)(iv)(d)(2) of the Regulations.
"Certificate" has the meaning set forth in Section 9.2.
----------- -----------
"Class A-1 Member" means at any time, any Member with Class A-1 Units
----------------
in the LLC, as specified in the Interest Record; collectively, the "Class A-1
---------
Members."
-------
"Class A-1 Units" are those Units of ownership interest in the LLC
---------------
designated as Class A-1 Units pursuant to Section 5.1, which Units entail the
-----------
specific rights, privileges and obligations of Class A-1 Units set forth herein.
"Class A-2 Member" means at any time, any Member with Class A-2 Units
----------------
in the LLC, as specified in the Unit Record; collectively, the "Class A-2
---------
Members."
-------
"Class A-2 Units" are those Units of ownership interest in the LLC
---------------
designated as Class A-2 Units pursuant to Section 5.1, which Units entail the
-----------
specific rights, privileges and obligations of Class A-2 Units set forth herein.
"Class A-3 Member" means at any time, any Member with Class A-3 Units
----------------
in the LLC, as specified in the Unit Record; collectively, the "Class A-3
---------
Members."
-------
"Class A-3 Units" are those Units of ownership interest in the LLC
---------------
designated as Class A-3 Units pursuant to Section 5.1, which Units entail the
-----------
specific rights, privileges and obligations of Class A-3 Units set forth herein.
"Class M Member" means at any time, the Member with Class M Units in
--------------
the LLC, as specified in the Unit Record.
"Class M Units" are those Units of ownership interest in the LLC
-------------
designated as Class M Units pursuant to Section 5.1, which Units entail the
-----------
specific rights, privileges and obligations of Class M Units set forth herein.
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time (or any corresponding provisions of succeeding law).
"Depreciation" means, for each LLC taxable year, an amount equal to the
------------
depreciation, amortization, or other cost recovery deduction allowable for
federal income tax purposes with respect to an asset for such Allocation Year,
except that if the Gross Asset Value of an asset differs from its adjusted basis
for federal income tax purposes at the beginning of such
26
Allocation Year, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such LLC taxable year bears
to such beginning adjusted tax basis; provided, however, that if the adjusted
basis for federal income tax purposes of an asset at the beginning of such LLC
taxable year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Board.
"Effective Date" means the date that this Agreement is executed.
--------------
"Emergency Redemption" has the meaning set forth in Section 10.3(g).
-------------------- ---------------
"Fiscal Year" has the meaning provided for in Section 8.1.
----------- -----------
"Foreclosure Redemption" has the meaning set forth in Section 10.3(f).
---------------------- ---------------
"Forest Bank Management Easement" means an easement substantially in
-------------------------------
the form attached hereto as Exhibit E, with such amendments and modifications as
---------
the Class M Member may deem necessary or appropriate.
"Forest Bank Management and Conservation Easement" means an easement
------------------------------------------------
substantially in the form attached hereto as Exhibit C, with such amendments and
---------
modifications as the Board may deem necessary or appropriate.
"Formation Certificate" means the Certificate of Formation of the LLC
---------------------
filed with the Secretary of State of the State of Delaware in accordance with
the Act, as such Certificate of Formation may be amended from time to time in
accordance with the Act.
"GAAP" means United States generally accepted accounting principles,
----
consistently applied.
"Gross Asset Value" means, with respect to any asset, the asset's
-----------------
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Member to the LLC shall be the gross fair market value of such asset, as
determined by an appraisal conducted by the Class M Member or any third party;
(ii) The Gross Asset Values of all LLC assets shall be adjusted to
equal their respective gross fair market values, as determined by the Board, as
of the following times: (A) the acquisition of an additional interest in the LLC
by any new or existing Member in exchange for more than a de minimis Capital
Contribution; (B) the distribution by the LLC to a Member of more than a de
minimis amount of Property as consideration for an interest in the LLC; and (C)
the liquidation of the LLC within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Regulations; provided, however, that adjustments pursuant to clauses (A) and
-------- -------
(B) above shall be made only if the Board reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the LLC;
27
(iii) The Gross Asset Value of any LLC asset distributed to any Member
shall be adjusted to equal the gross fair market value of such asset on the date
of distribution as determined by the Board; and
(iv) The Gross Asset Values of LLC assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations and subparagraph
(vi) of the definition of "Profits" and "Losses" in this Section 13.1; provided,
------------
however, that Gross Asset Values shall not be adjusted pursuant to this
subparagraph (iv) to the extent the Board determines that an adjustment pursuant
to subparagraph (ii) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraphs (i), (ii), or (iv), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"Indemnified Party" has the meaning given such term in Section 6.9.
----------------- -----------
"Issuance Items" has the meaning given such term in Section 3.3(h).
-------------- --------------
"LLC" means the company formed pursuant to this Agreement and the
---
company continuing the business of this company in the event of dissolution as
herein provided.
"LLC Minimum Gain" shall have the same meaning given the term
----------------
"partnership minimum gain" in Section 1.704-2(b)(2) of the Regulations, and will
be computed as provided in Section 1.704-2(d) in the Regulations.
"LLC Redemption" has the meaning provided for in Section 10.3(h).
-------------- ---------------
"Liquidating Event" has the meaning given such term in Section 11.1.
----------------- ------------
"Losses" has the meaning set forth in the definition of "Profits" and
------
"Losses" in this Section 13.1.
------------
"Management Agreement" means the Management Agreement entered into
--------------------
between TNC and the LLC and attached hereto as Exhibit G, as amended from time
---------
to time.
"Manager" or "Managers" means any member of the Board of Managers.
------- --------
"Member" means any Person who is a record owner of a Unit;
------
collectively, the "Members."
-------
"Member Nonrecourse Debt" has the same meaning given the term "partner
-----------------------
nonrecourse debt" in Regulations Section 1.704-2(b)(4) of the Regulations.
28
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect to
------------------------------------
each Member Nonrecourse Debt, equal to the LLC Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined
in accordance with Section 1.704-2(i)(3) of the Regulations.
"Member Nonrecourse Deductions" has the same meaning given the term
-----------------------------
"partner nonrecourse deductions" in Section 1.704-2(i) of the Regulations.
"Nature Conservancy Conservation Easement" means an easement
----------------------------------------
substantially in the form attached hereto as Exhibit D, with such amendments and
---------
modifications as the Board may deem necessary or appropriate.
"Nonrecourse Deductions" has the same meaning as set forth in Section
----------------------
1.704-2(b)(1) and Section 1.704-2(c) of the Regulations.
"Nonrecourse Liability" has the same meaning given such term in Section
---------------------
1.704-2(b)(3) of the Regulations.
"Officer" means any individual appointed by the Board pursuant to
-------
Section 6.5, unless such individual has subsequently resigned, died or been
-----------
removed.
"Original Agreement" has the meaning given such term in the preamble.
------------------
"Original Issue Date" means the date of the original issuance of a
-------------------
Preferred Member's Preferred Units.
"Person" means any individual, general partnership, limited
------
partnership, corporation, trust, limited liability company or other association
or entity.
"Preferred Member" means at any time, any Member holding Class A-1
----------------
Units, Class A-2 Units or Class A-3 Units.
"Preferred Return" for any class of Preferred Units means the annual
----------------
preferred return per Unit of such class of Preferred Units as specified in
Section 4.2 hereof.
-----------
"Preferred Units" are Class A-1 Units, Class A-2 Units and Class A-3
---------------
Units, collectively.
"President" means the chief executive officer of the LLC appointed by
---------
the Board pursuant to Section 6.5, unless such individual has subsequently
-----------
resigned, died or been removed.
"Profits" and "Losses" means, for each Allocation Year, an amount equal
------- ------
to the LLC's taxable income or loss for such Allocation Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
29
(i) Any income of the LLC that is exempt from federal income tax and
not otherwise taken into account in computing Profits or Losses pursuant to this
definition of "Profits" and "Losses" shall be added to such taxable income or
loss;
(ii) Any expenditures of the LLC described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise taken into
account in computing Profits or Losses pursuant to this definition of "Profits"
and "Losses" shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any LLC asset is adjusted
pursuant to subparagraphs (ii) or (iii) of the definition of "Gross Asset
Value," the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Profits or
Losses;
(iv) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Allocation Year,
computed in accordance with the definition of "Depreciation;"
(vi) To the extent an adjustment to the adjusted tax basis of any LLC
asset pursuant to Code Section 734(b) or Code Section 743(b) is required
pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations to be taken into
account in determining Capital Accounts as a result of a distribution other than
in complete redemption of a Member's Units, the amount of such adjustment shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Profits or Losses; and
(vii) Any items which are specially allocated pursuant to Section 3.3
-----------
or Section 3.4 shall not be taken into account in computing Profits or Losses.
-----------
The amounts of the items of LLC income, gain, loss or deduction available to be
specially allocated pursuant to Section 3.3 and Section 3.4 shall be determined
----------- -----------
by applying rules analogous to those set forth in subparagraphs (i) through (vi)
above.
"Promissory Note" means a note issued by the LLC to the Class M Member
---------------
pursuant to Section 2.5, which shall be a two year note with interest payable
-----------
quarterly and principal due on maturity and which shall be on terms no more
favorable to the Class M Member than terms that the LLC could obtain from a
disinterested third party lender at the time of the loan.
"Property" means all real and personal property acquired and held by
--------
the LLC and any improvements thereto and shall include Timber Rights and both
tangible and intangible property.
30
"Redemption Notice" has the meaning set forth in Section 10.3(a).
----------------- ---------------
"Redemption Price" means the amount payable per Unit upon redemption of
----------------
such Unit as permitted hereunder, which amount is set forth in Section 10.3
------------
hereof. Unless otherwise specified in Section 10.3 hereof, the Redemption Price
shall be $1.00 per Preferred Unit.
"Regulations" means the final or temporary regulations promulgated
-----------
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 3.4.
---------------------- -----------
"Revaluation Threshold" for a Preferred Member's Timber Rights is the
---------------------
initial Gross Asset Value of such Timber Rights on the Original Issue Date
increased by 9.5% per annum (compounded annually) from the Original Issue Date
with respect to the Preferred Units associated with such Timber Rights.
"Revalued Fair Market Value" has the meaning provided for in Section
-------------------------- -------
9.4.
---
"Secretary" means the officer appointed by the Board to serve as
---------
secretary for all meetings of the Board and the Members pursuant to Section 6.5,
-----------
unless such individual has subsequently resigned, died or been removed.
"Service" means the Internal Revenue Service of the United States of
-------
America or any successor federal government agency or agencies with similar
regulatory and enforcement authority.
"Subscription Agreement" means an agreement between a new Member and
----------------------
the LLC in the form attached hereto as Exhibit F and in form and substance
---------
reasonably satisfactory to the Class M Member.
"Tax Matters Partner" has the meaning given such term in Section
------------------- -------
7.2(b).
------
"Timber Rights" means the rights evidenced by the Forest Bank
-------------
Management and Conservation Easements and the Forest Bank Management Easements
contributed by Members to the LLC.
"TNC" has the meaning given such term in the preamble.
---
"Transfer" means, as a noun, any voluntary or involuntary transfer,
--------
sale, pledge, hypothecation or other disposition or encumbrance and, as a verb,
voluntarily or involuntarily to transfer, sell, pledge, hypothecate or otherwise
dispose of or encumber.
"Transferee" means any Person who has acquired a beneficial interest in
----------
the Units of a Member of the LLC.
31
"Transferor" means any Member who has Transferred or who is Transferring
----------
all or any part or interest in its Units.
"Unit" means a portion of the ownership interest in the LLC (including
----
Class A-1 Units, Class A-2 Units, Class A-3 Units and Class M Units), including
any and all benefits to which the holder of such Unit may be entitled as
provided in this Agreement, together with all obligations of such Member to
comply with the terms and provisions of this Agreement.
"Unit Record" has the meaning given such term in Section 5.2.
----------- ------------
13.2. Construction. Every covenant, term and provision of this Agreement
------------
shall be construed according to its fair meaning and not for or against any
Member. For the purpose of this Agreement, any definition incorporating, by
reference to the Code or the Regulations, the term "partner" or "partnership"
shall mean "Member" or "LLC," respectively. Words such as "herein,"
"hereinafter," "hereof," and "hereunder" refer to this Agreement as a whole,
unless the context otherwise requires.
13.3. Headings. Article and Section headings contained in this Agreement
--------
are for reference purposes only and are not intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any provision
hereof.
13.4. Variation of Pronouns. All pronouns and any variations thereof shall
---------------------
be deemed to refer to masculine, feminine or neuter, singular or plural, as the
identity of the Person or Persons may require.
13.5. Incorporation by Reference. Every exhibit, schedule and other
--------------------------
appendix attached to this Agreement and referred to herein is hereby
incorporated in this Agreement by reference.
ARTICLE XIV
MISCELLANEOUS
14.1. Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given on the
date of service if served personally; 3 business days after the date of mailing,
if mailed, by first class mail, registered or certified, postage prepaid; 1
business day after delivery to the courier if sent by private receipt courier
guaranteeing next day delivery, delivery charges prepaid, and in each case,
addressed to such Member at the address shown for such Member in the Unit Record
or at such other place as the respective Member may, from time to time,
designate in a written notice to the other Members. All communications among
Members in the normal course of the business of the LLC shall be deemed
sufficiently given if sent by regular mail, postage prepaid.
14.2. Binding Effect. Except as otherwise provided in this Agreement, every
--------------
covenant, term and provision of this Agreement shall be binding upon and inure
to the benefit of the Members and their respective heirs, legatees, legal
representatives, successors, transferees and assigns.
32
14.3. Creditors. None of the provisions of this Agreement shall be for
---------
the benefit of or enforced by any creditor of the LLC or any Member.
14.4. Remedies Cumulative. No remedy herein conferred upon any party is
-------------------
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
14.5. Severability. Every provision of this Agreement is intended to be
------------
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement.
14.6. Further Action. Each Member agrees to perform all further acts and
--------------
execute, acknowledge and deliver any documents which may be reasonably
necessary, appropriate or desirable to carry out the provisions of this
Agreement.
14.7. Governing Law. The laws of the State of Delaware shall govern the
-------------
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Members, without regard to the
principles of conflicts of laws.
14.8. Waiver of Action for Partition. Each of the Members irrevocably
------------------------------
waives any right that it may have to maintain any action for partition with
respect to any of the Property of the LLC.
14.9. Counterpart Execution. This Agreement may be executed in any number
---------------------
of counterparts with the same effect as if all of the Members had signed the
same document. All counterparts shall be construed together and shall constitute
one agreement.
33
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
day first above set forth.
CLASS M MEMBER: THE NATURE CONSERVANCY
By:________________________
Name:
Title:
SIGNATURE PAGE FOR
CLASS A MEMBERS
OF
THE FOREST BANK, LLC
The undersigned, as a Class A Member of The Forest Bank, LLC, ("Forest
Bank") a Delaware limited liability company, hereby agrees to all of the terms
of the Amended and Restated Limiting Liability Company Agreement for Forest
Bank, dated as of May __, 2001, and agrees to be bound by the terms and
provisions thereof.
__________________________________
Print Name:_______________________
Date:_____________________________
EXHIBIT A-1
Certificate Number ________________ __________________ Class A-1 Units
CERTIFICATE OF CLASS A-1 MEMBERSHIP IN
THE FOREST BANK, LLC
a limited liability company organized under the laws of the State of Delaware
THIS CERTIFIES THAT ____________________________________________ is the owner of
(_______) fully paid and non-assessable
CLASS A-1 UNITS (stated value $1.00
each) of membership of THE FOREST BANK,
LLC, a limited liability company
organized under the laws of the State of
Delaware (the "LLC"), on the books of
the LLC. Terms and conditions of
distribution payments, as well as the
rights of any holder of the CLASS A-1
UNITS represented hereby to require the
LLC to redeem these CLASS A-1 UNITS
(using the Notice of Redemption set
forth on the reverse side hereof) and
other rights of such holder, are subject
to and set forth more fully in that
certain Amended and Restated Limited
Liability Company Agreement of the LLC
dated as of _____, 2001, as the same may
be amended or modified from time to time
in accordance therewith (the "LLC
Agreement").
In Witness whereof, the LLC has caused this Certificate to be signed by its
duly authorized manager or officer on this ___ day of ________, _________.
Original Issue Date: _____________ _________________
PRESIDENT
[Reverse side of EXHIBIT A-1]
Notice Of Redemption
--------------------
If you want to cause the LLC to redeem all or a part of the Units represented by
this Certificate check the box: [_]
Please indicate the type of redemption you are requesting:
[_] Built-In Gain Redemption; [_] Emergency Redemption; [_] Foreclosure
Redemption; [_] Other Redemption;
If you want to cause the LLC to redeem less than all of the Units represented by
this Certificate please state the number of Units that you are requesting that
the LLC redeem: _________________________. Note that if you are requesting an
Emergency Redemption you must request a redemption of no less than 25% of the
Units represented by this Certificate.
The Redemption Price for the Units to be redeemed shall be the amount set forth
in Section 10.3 of the Amended and Restated Limited Liability Company Agreement
of the LLC.
If you are a Member requesting a Regular Redemption, a Built-In Gain Redemption,
or an Emergency Redemption, please provide the following information and sign
below.
Your signature:__________________________________ Date:_______________
(Sign exactly as your name appears on the other side of this Certificate)
Address for Payment (If different from the Address on the Unit Record of the
LLC):
________________________________
________________________________
________________________________
If you are a Bona Fide Lender requesting a Foreclosure Redemption, please
provide the following information and sign below.
Date: ________________________
Name of Lender: ________________________
Address: ________________________
________________________
________________________
Phone Number: ________________________
Officer's Signature: ________________________
Title: ________________________
Please attach a copy of the security agreement to which this Certificate is
subject.
EXHIBIT A-2
-----------
Certificate Number _______________________ ___________________ Class A-2 Units
CERTIFICATE OF CLASS A-2 MEMBERSHIP IN
THE FOREST BANK, LLC
a limited liability company organized under the laws of the State of Delaware
THIS CERTIFIES THAT _______________________________________ is the owner of
(__________) fully paid and non-assessable
CLASS A-2 UNITS (stated value $1.00 each) of
membership of THE FOREST BANK, LLC, a limited
liability company organized under the laws of
the State of Delaware (the "LLC"), on the
books of the LLC. Terms and conditions of
distribution payments, as well as the rights
of any holder of the CLASS A-2 UNITS
represented hereby to require the LLC to
redeem these CLASS A-2 UNITS (using the
Notice of Redemption set forth on the reverse
side hereof) and other rights of such holder,
are subject to and set forth more fully in
that certain Amended and Restated Limited
Liability Company Agreement of the LLC dated
as of _____, 2001, as the same may be amended
or modified from time to time in accordance
therewith (the "LLC Agreement").
In Witness whereof, the LLC has caused this Certificate to be signed by its duly
authorized manager or officer on this ____ day of ______________, _____________.
Original Issue Date:_____________ _____________________________________________
PRESIDENT
[Reverse side of EXHIBIT A-2]
Notice Of Redemption
--------------------
If you want to cause the LLC to redeem all or a part of the Units represented by
this Certificate check the box: [_]
Please indicate the type of redemption you are requesting:
[_] Built-In Gain Redemption; [_] Emergency Redemption; [_] Foreclosure Redemption; [_] Other Redemption;
If you want to cause the LLC to redeem less than all of the Units represented by
this Certificate please state the number of Units that you are requesting that
the LLC redeem: _________________________. Note that if you are requesting an
Emergency Redemption you must request a redemption of no less than 25% of the
Units represented by this Certificate.
The Redemption Price for the Units to be redeemed shall be the amount set forth
in Section 10.3 of the Amended and Restated Limited Liability Company Agreement
------------
of the LLC.
If you are a Member requesting a Regular Redemption, a Built-In Gain Redemption,
or an Emergency Redemption, please provide the following information and sign
below.
Your signature:_____________________________________ Date:__________________
(Sign exactly as your name appears on the other side
of this Certificate)
Address for Payment (If different from the Address on the Unit Record of the
LLC):
________________________________________
________________________________________
________________________________________
If you are a Bona Fide Lender requesting a Foreclosure Redemption, please
provide the following information and sign below.
Date: _________________________
Name of Lender: _________________________
Address: _________________________
_________________________
_________________________
_________________________
Phone Number: _________________________
Officer's Signature: _________________________
Title: _________________________
Please attach a copy of the security agreement to which this Certificate is
subject.
EXHIBIT A-3
-----------
Certificate Number _____________________ _________________ Class A-3 Units
CERTIFICATE OF CLASS A-3 MEMBERSHIP IN
THE FOREST BANK, LLC
a limited liability company organized under the laws of the State of Delaware
THIS CERTIFIES THAT _______________________________________ is the owner of
(________) fully paid and non-assessable
CLASS A-3 UNITS (stated value $1.00 each) of
membership of THE FOREST BANK, LLC, a limited
liability company organized under the laws of
the State of Delaware (the "LLC"), on the
books of the LLC. Terms and conditions of
quarterly distribution payments end at such
required annual redemption, as well as the
rights of any holder of the CLASS A-3 UNITS
represented hereby to require the LLC to
redeem these CLASS A-3 UNITS (using the
Notice of Redemption set forth on the reverse
side hereof) and other rights of such holder,
are subject to and set forth more fully in
that certain Amended and Restated Limited
Liability Company Agreement of the LLC dated
as of _____, 2001, as the same may be amended
or modified from time to time in accordance
therewith (the "LLC Agreement").
In Witness whereof, the LLC has caused this Certificate to be signed by its duly
authorized manager or officer on this ____ day of _____________, _____________.
Original Issue Date: ___________ _____________________________________________
PRESIDENT
[Reverse side of EXHIBIT A-3]
Notice Of Redemption
--------------------
If you want to cause the LLC to redeem all or a part of the Units represented by
this Certificate check the box: [_]
Please indicate the type of redemption you are requesting:
[_] Built-In Gain Redemption; [_] Emergency Redemption; [_] Foreclosure Redemption; [_] Other Redemption;
If you want to cause the LLC to redeem less than all of the Units represented by
this Certificate please state the number of Units that you are requesting that
the LLC redeem: _________________________. Note that if you are requesting an
Emergency Redemption you must request a redemption of no less than 25% of the
Units represented by this Certificate.
The Redemption Price for the Units to be redeemed shall be the amount set forth
in Section 10.3 of the Amended and Restated Limited Liability Company Agreement
------------
of the LLC.
If you are a Member requesting a Regular Redemption, a Built-In Gain Redemption,
or an Emergency Redemption, please provide the following information and sign
below.
Your signature:_____________________________________ Date:____________________
(Sign exactly as your name appears on the other side
of this Certificate)
Address for Payment (If different from the Address on the Unit Record of the
LLC):
________________________
________________________
________________________
If you are a Bona Fide Lender requesting a Foreclosure Redemption, please
provide the following information and sign below.
Date: _______________________
Name of Lender: _______________________
Address: _______________________
_______________________
_______________________
_______________________
_______________________
Phone Number: _______________________
Officer's Signature: _______________________
Title: _______________________
Please attach a copy of the security agreement to which this Certificate is
subject.
EXHIBIT B
---------
Certificate Number ______________________ ___________________ Class M Units
CERTIFICATE OF CLASS M MEMBERSHIP IN
THE FOREST BANK, LLC
a limited liability company organized under the laws of the State of Delaware
THIS CERTIFIES THAT _______________________________________ is the owner of
(________) fully paid and non-assessable
CLASS M UNITS (stated value $1.00 each) of
membership of THE FOREST BANK, LLC, a limited
liability company organized under the laws of
the State of Delaware (the "LLC"), on the
books of the LLC. The rights of any holder of
the CLASS M UNITS represented hereby, are
subject to and set forth more fully in that
certain Limited Liability Company Agreement
of the LLC, as the same may be amended or
modified from time to time in accordance
therewith.
In Witness whereof, the LLC has caused this Certificate to be signed by its duly
authorized manager or officers on this ____ day of _______________, ___________.
Original Issue Date: ___________ _____________________________________________
PRESIDENT
EXHIBIT C
---------
Form of the Forest Bank Management and Conservation Easement
EXHIBIT D
---------
Form of the Nature Conservancy Conservation Easement
EXHIBIT E
---------
Form of the Forest Bank Management Easement
EXHIBIT G
---------
Management Agreement