EXHIBIT 10.19
MEMBER CONTROL AGREEMENT
OF
LAKERIDGE COMMUNITY CENTER, LLC
TABLE OF CONTENTS
Page
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SECTION 1 FORMATION OF LIMITED LIABILITY COMPANY...............................1
SECTION 2 NAME.................................................................1
SECTION 3 DEFINITIONS..........................................................1
SECTION 4 PURPOSE..............................................................4
SECTION 5 CAPITAL CONTRIBUTIONS AND LOANS......................................5
5.1 Initial Capital Contributions; Percentage Interests....................5
5.2 Capital Accounts.......................................................5
5.3 No Right to Return of Contributions....................................6
5.4 No Interest on Capital.................................................6
5.5 Loans Generally........................................................6
5.6 Default by Member......................................................6
5.7 Additional Capital.....................................................7
5.8 Transferee Succeeds to Transferor's Capital Account....................7
SECTION 6 MEMBERS..............................................................7
6.1 Terms of Membership Interests..........................................7
6.2 Voting.................................................................7
6.3 Additional Members.....................................................7
6.4 Other Business Ventures................................................7
6.5 Limitation on Authority................................................8
6.6 Arbitration of Disputes................................................8
6.7 Services to be Provided by AR..........................................8
6.8 Services to be Provided by TIC.........................................9
SECTION 7 BOARD OF GOVERNORS..................................................10
7.1 Authority.............................................................10
7.2 Appointment...........................................................10
7.3 Compensation..........................................................10
7.4 Limitations on Authority..............................................10
7.5 Conflicts of Interest.................................................11
7.6 Other Activities......................................................11
7.7 Indemnification of Governors..........................................11
7.8 Liability Under Other Agreements......................................11
7.9 Deadlocks.............................................................12
SECTION 8 MANAGERS............................................................12
8.3 Rights and Obligations................................................12
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SECTION 9 ALLOCATIONS.........................................................13
9.1 Allocation of Income and Gains........................................13
9.2 Allocation of Losses..................................................13
9.3 Proration of Allocations..............................................13
9.4 Special Allocations...................................................13
9.5 Tax Allocations.......................................................14
9.6 Special Fee Allocation................................................15
9.7 Consent to Allocation.................................................15
SECTION 10 DISTRIBUTIONS......................................................15
10.1 Distributions of Net Cash From Operations............................15
10.2 Other Cash Distributions.............................................15
10.3 Special Land Distributions and Right of First Refusal................16
10.4 Mandatory Lot Purchases..............................................17
10.5 No Distribution by Reason of Withdrawal..............................18
SECTION 11 TAX AND ACCOUNTING MATTERS.........................................18
11.1 Tax Characterization and Returns.....................................18
11.2 Books of Account.....................................................18
11.3 Accounting Practices.................................................18
11.4 Bank Accounts........................................................18
11.5 Report to Members....................................................19
11.6 Tax Matters Partner..................................................19
SECTION 12 TRANSFER OF MEMBERSHIP INTERESTS...................................19
12.1 Generally............................................................19
12.2 Transfer of Governance Rights........................................20
12.3 Transfer of Financial Rights.........................................20
12.4 No Security Interests................................................20
12.5 Documents and Expenses...............................................20
12.6 Restriction on Transfer..............................................21
SECTION 13 DISSOLUTION AND LIQUIDATION........................................21
13.1 Dissolution..........................................................21
13.2 Interest of Terminated Member........................................22
13.3 Distributions on Liquidation.........................................22
SECTION 14 AMENDMENT OF AGREEMENT.............................................23
SECTION 15 MISCELLANEOUS.....................................................23
15.1 Governing Law........................................................23
15.2 Entire Agreement.....................................................23
15.3 Binding Effect.......................................................23
15.4 Severability.........................................................23
15.5 Partition............................................................23
15.6 Multiple Counterparts................................................23
15.7 Additional Documents and Acts........................................24
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15.8 Third Party Beneficiaries............................................24
15.9 Notices..............................................................24
15.10 Headings and Titles.................................................24
15.11 Consent and Waiver..................................................24
15.12 Number and Gender...................................................24
EXHIBITS:
EXHIBIT A - PRELIMINARY PLAT
EXHIBIT B - LEGAL DESCRIPTION
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MEMBER CONTROL AGREEMENT OF
LAKERIDGE COMMUNITY CENTER, LLC
THIS MEMBER CONTROL AGREEMENT is made effective as of the 25th day of
April, 2002, by and between ▇▇▇▇▇▇ INVESTMENT CORPORATION, a Minnesota
corporation ("TIC"), and *, a Minnesota limited liability partnership ("AR").
WHEREAS, the parties hereto constitute all of the members of Lakeridge
Community Center, LLC (the "Company"), a limited liability company organized
under and pursuant to Minnesota Statutes, Chapter 322B (the "Act"); and
WHEREAS, Section 322B.37 of the Act authorizes a member control
agreement; and
WHEREAS, each of the undersigned desires to enter into such an
agreement;
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto and the mutual benefits to be gained by the performance hereof, the
parties hereto agree as follows:
SECTION 1
FORMATION OF LIMITED LIABILITY COMPANY
The Company was formed on April 1, 2002 by the filing of Articles of
Organization in the office of the Minnesota Secretary of State. The business of
the Company shall be conducted to comply with the Act, and the rights and
liabilities of the parties shall be as provided in the Act, except as herein
otherwise expressly provided. The parties agree that they shall promptly execute
and record in the office of the Minnesota Secretary of State any amendments to
the Articles of Organization as may be required by law from time to time.
SECTION 2
NAME
The business of the Company shall be conducted under the name of
"Lakeridge Community Center, LLC" or such other name as the members may
hereafter designate.
SECTION 3
DEFINITIONS
Wherever used in this Agreement, unless another meaning is explicitly
indicated by the context:
3.1 "Act" means the Minnesota Limited Liability Company Act contained
in Minnesota Statutes Chapter 322B.
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3.2 "Additional Member" or "Additional Members" means those persons who
purchase membership interests pursuant to the provisions of Section 6.3 and who
execute this Agreement in accordance with the terms of a Contribution Agreement
executed by each such person and delivered to and accepted on behalf of the
Company by the Managers.
3.3 "Adjusted Capital Contribution" means, with respect to a Member,
the total contribution (in cash or other property) required of such Member
pursuant to Section 5.1 and actually or deemed (pursuant to a revaluation under
Section 704(b) of the Code) contributed by such Member, reduced by any
distribution to such Member pursuant to Section 10.2.b(i).
3.4 "Affiliate" means, when used with reference to a specified Person,
any of the following Persons: (i) any Person that directly or indirectly through
one or more intermediaries controls or is controlled by or is under common
control with the specified Person, (ii) any Person that is an officer, director,
partner, or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, director,
partner, or trustee, or with respect to which the specified Person serves in a
similar capacity, (iii) any Person that directly or indirectly is the beneficial
owner of ten percent (10%) or more of any class of equity securities of, or
otherwise has a substantial beneficial interest in, the specified Person or of
which the specified Person is directly or indirectly the owner of ten percent
(10%) or more of any class of equity securities or in which the specified Person
has a substantial beneficial interest or (iv) any member of the Family or
sibling of the specified Person or member of the sibling's Family.
3.5 "Agreement" means this Member Control Agreement as amended,
modified, or supplemented from time to time.
3.6 "Acquisition Fee" means the fee of one percent (1%) of gross sales
proceeds from each sale of all of a portion of the Project, to be paid to each
TIC and AR from available Net Cash From Sales pursuant to Sections 6.7 and 6.8
hereof.
3.7 "Articles" means the Articles of Organization filed on behalf of
the Company with the Minnesota Secretary of State, as amended from time to time.
3.8 "Board" or "Board of Governors" means the board of governors of the
Company.
3.9 "Bookkeeping Fee" means the fee of $250 per month, to be paid to
TIC from available Net Cash From Operations pursuant to Section 6.8 hereof.
3.10 "Capital Account" has the meaning set forth in Section 5.2.
3.11 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto. Any references in this Agreement to
specific sections of the Code shall be deemed to include a reference to any
corresponding provisions of future law.
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3.12 "Company" means Lakeridge Community Center, LLC, a Minnesota
limited liability company.
3.13 "Company Property" means all real and personal property acquired
and held from time to time by the Company and any improvements thereto, and
shall include both tangible and intangible property.
3.14 "Contribution Agreement" means an agreement in writing to make a
contribution to the Company, signed by a Manager and a person desiring to become
a Member, setting forth the terms of such Person's admission as a Member,
including, but not limited to, the agreed value of the contribution that shall
be made by such Person to the capital of the Company and the Percentage Interest
to be issued by the Company to such Person.
3.15 "Development Fee" means the fee of five percent (5%) of the gross
sales proceeds for each sale of any portion of the Project, to be paid to AR
from available Net Cash From Sales pursuant to Section 6.7 hereof.
3.16 "Family" means an individual, the individual's spouse (but only if
they are not legally separated), the individual's direct lineal descendants and
their direct ancestors. For purposes hereof, "direct lineal descendants" means
natural or adopted children, grandchildren, great grandchildren, and so on; and
"direct ancestors" means parents, grandparents, great grandparents, and so on.
3.17 "Financial Rights" means a Member's rights to share in Company
profits and losses and the right to transfer such rights according to the terms
of this Agreement.
3.18 "Governance Rights" means all of a Member's rights as a Member
other than the Financial Rights and the right to transfer Financial Rights.
3.19 "Governor" means a natural person serving on the Board of
Governors.
3.20 "Managers" means those persons designated in Section 8 and any
other Members who shall hereafter be designated as Managers by the written
consent of all Members.
3.21 "Marketing Fee" means the fees payable to TIC and AR from the
gross proceeds of the sale of the portion of the Project, to be paid from
available Net Cash From Sales pursuant to Section 6.8 hereof.
3.22 "Member" or "Members" means each of the Persons signing this
Agreement as a Member and each other Person, if any, who shall hereafter be
admitted to the Company as a Member.
3.23 "Membership Interest" or "Interest" means the Percentage Interest
of a Member in the Company and the appurtenant rights, powers, and privileges,
including both the Financial and Governance Rights of such Member.
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3.24 "Net Cash From Operations" means the gross cash proceeds from
Company operations, less the portion thereof used to pay any accrued Development
Fees, Marketing Fees and Bookkeeping Fees to pay or establish reserves for all
Company expenses, debt payments, capital improvements, replacement and
contingencies, all as determined by the Board of Governors. "Net Cash From
Operations" shall not be reduced by depreciation, amortization, cost recovery
deductions, or similar allowances, but shall be increased by any reduction of
reserves previously established.
3.25 "Net Cash From Sales or Refinancings" means the net cash proceeds
from all sales, refinancings of the Project and other dispositions (other than
(i) a sale of all or substantially all the assets of the Company and (ii) sales
and other dispositions in the ordinary course of business) and all refinancings
of Company Property, less any portion thereof used to establish reserves, all as
determined by the Board of Governors.
3.26 "Person" means any individual, partnership, corporation, trust or
other entity.
3.27 "Percentage Interest" as to any Member means the Financial
Interest of such Member in the Company, represented by the percentage the
Membership Interest held by such Member bears to the total Membership Interests
outstanding as set forth in Section 5.1 and, as may be adjusted in accordance
with Section 5.6.
3.28 "Preliminary Plat" means the plat of the Project attached hereto
as Exhibit A.
3.29 "Project" means the land consisting of approximately 81.6 acres
located in the City of Sauk Centre, ▇▇▇▇▇▇▇ County, Minnesota legally described
on the attached Exhibit B, to be developed into and improved as residential
lots, in three phases, with all necessary roadways, utility installations and
related amenities, which lots are depicted on the Preliminary Plat. Phase I of
the Project shall consist of approximately 28 lake lots, 12 non-riparian lots
(sometimes referred to herein as "Back Lots") and one outlot; such outlot will
be developed into approximately 39 lots, which development shall constitute
Phase II of the Project; Phase III of the Project will be developed into
approximately 9 golf course lots.
3.30 "Voting Interest" as to any Member means the voting interest of
such Member in matters of governance of the Company. The Voting Interest of each
Member shall be as set forth in Section 6.2 of this Agreement.
SECTION 4
PURPOSE
The purpose of the Company is to acquire, invest in, finance, hold, and
operate the Project, and to conduct such other business and affairs necessary or
appropriate in connection therewith.
The Company may not engage in any other business incompatible with the
foregoing, without the consent of all Members.
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SECTION 5
CAPITAL CONTRIBUTIONS AND LOANS
The capital of the Company has been or will be contributed by the
Members to the Company as follows:
5.1 Initial Capital Contributions; Percentage Interests. Each Member
has contributed to the capital of the Company the amounts specified below as the
Member's initial capital contribution, and shall be credited with the following
Percentage Interests and other rights:
a. TIC has contributed $801,333.00 in cash. TIC shall be
credited with a Percentage Interest of 66.67%.
b. AR has contributed $400,667.00 in cash. AR shall be
credited with a Percentage Interest of 33.33%.
5.2 Capital Accounts. A separate Capital Account shall be maintained
for each Member in accordance with the provisions of Section 704(b) of the Code
and the Treasury Regulations issued pursuant thereto (or corresponding
provisions of future law). The initial balances in the Capital Accounts shall
be, for each Member, the initial capital contribution made by the Member set
forth in Section 5.1. Without limiting the generality of the first sentence of
this Section 5.2, the Capital Account of each Member shall be increased by (i)
the amount of any additional cash contribution such Member makes to the capital
of the Company pursuant to Section 5.7; (ii) the fair market value of any
additional property contributed by such Member to the Company pursuant to
Section 5.7, net of liabilities which the Company assumes or to which the
property is subject; (iii) the share of Company income and gains (including
income and gains exempt from tax) allocated to such Member under the provisions
of Section 9; and shall be decreased by (iv) any distribution made by the
Company to such Member pursuant to the provisions of Section 10; (v) the fair
market value of any property distributed to such Member by the Company, net of
liabilities attached to such property which the Member assumes or to which the
property is subject; and (vi) the share of Company losses and deductions
(including any expenditures of the Company described in Section 705(a)(2)(B) of
the Code or treated as such expenditures pursuant to Treasury Regulation ss.
1.704-1(b)(2)(iv)(i)) allocated to such Member under the provisions of Section
9. Increases or decreases in the Capital Accounts of the Members shall not
affect their respective Percentage Interests.
Upon the occurrence of a contribution to or distribution from the
Company described in Treasury Regulations ss. 1.704-1(b)(2)(iv)(f)(5) or as
otherwise permitted, the Board of Governors in its sole discretion may, and at
the written request of Members representing at least 66.67% of the Voting
Interests shall, increase or decrease the Capital Accounts of the Members to
reflect a revaluation of Company Property on the Company's books, and, in that
event, allocations of Company income, gain, loss and deduction (and items
thereof) shall, for all purposes of this Section 5.2 be determined in the manner
provided in Section 704(b) or Section 704(c) of the Code, as the case may be,
and the Treasury Regulations thereunder. The provisions of this paragraph shall
replace and supersede any provision of the Act which requires the Company to
restate the value of previous contributions or adjust in any manner the capital
accounts of the
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Members or other holders of Financial Rights upon the occurrence of a
contribution to or distribution from the Company.
This Section 5.2 and the other provisions of this Agreement relating to
the maintenance of Capital Accounts shall be interpreted and applied in a manner
consistent with Section 704(b) of the Code and the Treasury Regulations
thereunder (or corresponding provisions of future law) and the economic sharing
of profits and losses of the Company contemplated hereunder by the Members. In
the event the Managers shall determine that it is prudent to modify the manner
in which the Capital Accounts or any increase or decrease thereto are computed
in order to comply with Section 704(b) and the Treasury Regulations thereunder,
the Board may make such modifications, provided that such modifications are not
likely to have a material effect on the amount distributable to any Member
pursuant to Section 13.3 hereof upon liquidation of the Company.
5.3 No Right to Return of Contributions. The Members shall have no
right to the withdrawal or the return of their respective contributions to the
capital of the Company except to the extent set forth in Section 13.3 upon
liquidation of the Company. The Company shall not be liable to the Members for
repayment of their contributions.
5.4 No Interest on Capital. No interest shall be paid by the Company on
the initial or any subsequent contribution to the capital of the Company, nor on
balances in Members' Capital Accounts.
5.5 Loans Generally. Any loan made by a Member to the Company, if
authorized by the Board, shall not be treated as a contribution to the Capital
of the Company for any purpose and shall not entitle such Member to any increase
in his or her share of the income, gain, losses, deductions, credits, or
distributions of the Company. The Company shall be obligated to such Member for
the amount of any such loan at such rate as may be agreed upon by such Member
and the Board.
5.6 Default by Member. In the event that a Member fails to make any
payment, or any installment thereof, when due, of any contribution or other
obligation hereunder or under a Contribution Agreement, the Company may enforce
such obligation in such manner as may be permitted by law. Without limiting the
generality of the foregoing, the Company may, in the sole discretion of the
Board of Governors, (i) bring an action at law or in equity to enforce such
obligation; (ii) assess interest on the unpaid amount at the highest rate of
interest then being charged to the Company by any lender; and (iii) require the
defaulting Member, provided such default shall not theretofore have been cured,
unconditionally and irrevocably to assign to one or more of the remaining
Members (determined in accordance with the next succeeding sentence hereof) that
portion of the defaulting Member's Interest which bears the same ratio to all of
such defaulting Member's Interest as the remaining amount of unpaid
contributions, whether due or not yet due, of such defaulting Member bears to
the total amount of contributions, paid and unpaid, required to be made by such
defaulting Member. If the Board requires assignment of all or a portion of a
defaulting Member's Interest pursuant to subparagraph (iii) above, each
remaining Member shall have the right to acquire such Interest, determined as
aforesaid, in the
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proportion which his or her Interest bears to the aggregate Interests of the
remaining Members who desire to participate in such purchase.
5.7 Additional Capital. The Members shall not be obligated to make any
additional contributions to the capital of the Company, other than the
contribution required under Section 5.1, or to make any loan or pay any
assessment to the Company. If the Board, at any time or from time to time,
determines that the Company requires capital in addition to that already
contributed and loaned by the Members, the Board may obtain such additional
capital by borrowing in accordance with the provisions of Section 7 or by
accepting additional contributions of cash or property from any Member or
Members, so long as the Percentage Interests of the Members are not affected
thereby.
5.8 Transferee Succeeds to Transferor's Capital Account. If any Member
transfers all or a part of such Member's Financial Rights in the Company, the
transferee Member shall succeed to the Capital Account of the transferor Member
to the extent of the Interest transferred, in accordance with Treasury
Regulation ss. 1.704-1(b)(2)(iv)(l).
SECTION 6
MEMBERS
6.1 Terms of Membership Interests. All Membership Interests are
ordinary membership interests of one class, without series, and shall have the
rights provided by law, subject to any statement in this Agreement of the
specific rights or terms of such Membership Interests.
6.2 Voting. Notwithstanding the respective Percentage Interests of
members, or any changes in such Percentage Interests, as provided in Section
5.1(d), the respective Voting Interests of the Members shall be as follows:
TIC 66.67%
AR 33.33%
6.3 Additional Members. Additional Members may be admitted to the
Company only upon terms and conditions as may be established by written consent
of all Members. Upon such consent and the issuance of additional Membership
Interests, the Percentage Interests and the Voting Interests of the Members
shall be adjusted accordingly. Nothing in this Section 6.3 shall be construed to
limit the effect of Section 12 with respect to the assignment or other transfer
of Interests by Members.
6.4 Other Business Ventures. The Members and their Affiliates may
engage in or possess an interest in other business ventures of every nature and
description, independently or with others, whether such ventures are competitive
with the Company or otherwise; and neither the Company nor the Members shall
have any right by virtue of this Agreement in or to such independent ventures or
to the income or profits derived therefrom and no Member shall have the
obligation to bring any business opportunity to the Company or to any other
Member; provided, however, that the foregoing shall be limited as provided in
Sections 322B.663,
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322B.666 and 322B.69 of the Act, as may be applicable with respect to any Member
who is also a Governor or a Manager.
6.5 Limitation on Authority. No Member in such capacity shall have any
authority to incur any obligation or liability on behalf of the Company.
6.6 Arbitration of Disputes. Any dispute between the Members regarding
the meaning or interpretation of this Agreement or any other matters relating to
the Company or the Project, of whatever nature, shall be finally and
conclusively resolved by binding arbitration before a panel of three arbitrators
who reside in the Minneapolis/St. ▇▇▇▇ Metropolitan Area and who have at least
ten (10) years experience in commercial real estate development, whether as
brokers, lawyers, developers, appraisers or otherwise, one selected by each
Member and the third selected jointly by the arbitrators if the Members cannot
agree. Any judgment upon any award rendered by the arbitrators may be entered in
any Court having jurisdiction. All questions as to the meaning of this Section
6.6 or as to the arbitrability of any dispute under this Section shall be
resolved by the arbitrators and their decision shall be final and binding and
not subject to judicial review. All arbitration proceedings shall be conducted
in Hennepin County, Minnesota. The cost of any arbitration proceeding, including
without limitation the arbitrator's compensation and expenses, and reasonable
attorneys fees, shall be borne by the Member whom the arbitrators determine has
not prevailed in such proceeding, or borne equally by the Members if the
arbitrators determine that no Member has prevailed.
6.7 Services to be Provided by AR. A/R, at its sole cost and expense
(unless otherwise agreed to by the Board of Governors and except for the
compensation specifically set forth below), shall:
a. Be responsible for and shall provide all management
services necessary to acquire the Project, to design and develop the
Project as residential and commercial lots, to obtain all necessary
governmental approvals for the Project, including but not limited to
finalizing the annexation of all or a portion of the Project property
into the City of Sauk Centre, platting of the Project, improving of the
Project with roads and utility service and otherwise preparing the
Project for sale as residential and commercial lots for which building
permits can be obtained, and constructing entrance signage and
improvements for the Project. All expenses associated with such
development payable to third parties, including but not limited to the
terms of any financing arrangements, surveying, engineering and design
costs and any and all construction costs, shall be paid for by the
Company; provided, however, that AR shall obtain written bids or
estimates from at least three (3) vendors of any services that are
reasonably estimated to exceed $50,000.00 and present the same to the
Board for review and find vendor selection before any contracts for
such services, whether oral or written, are entered into. For such
services, but subject to the provisions of Section 10.3 hereof, AR
shall receive a "Development Fee" equal to five percent (5%) of the
gross sales proceeds from the sale of all or a portion of the Project
(but not with respect to AR's acquisition of Unsold Back Lots, pursuant
to Section 10.4 hereof), to be paid pursuant to the provisions of
Section 10.2 hereof.
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b. Cooperate with TIC in all efforts necessary to acquire and
finance the Project, and for such services, but subject to the
provisions of Section 10.3 hereof, AR shall receive an "Acquisition
Fee" equal to one percent (1%) of the gross sales proceeds from the
sale of all or a portion of the Project (but not with respect to AR's
acquisition of Unsold Back Lots pursuant to Section 10.4 hereof), to be
paid in accordance with the provisions of Section 10.2 hereof.
6.8 Services to be Provided by TIC. TIC, at its sole cost and expense
(unless otherwise agreed to by the Board of Governors and except for the
compensation specifically set forth below), shall:
a. Be responsible for and shall provide all management
services necessary to obtain financing for the Project, market the
Project for sale to prospective purchasers thereof, including but not
limited to the pricing of lots within the Project, developing a
marketing plan, advertising and promotional materials for the Project,
which services TIC may arrange to have provided by one or more of its
affiliates. All out of pocket expenses associated with developing the
marketing materials, not to exceed $5,000.00, shall be paid by the
Company. For such services, but subject to the provisions of Section
10.3 hereof, TIC shall receive a "Marketing Fee" equal to twenty
percent (20%) of the gross sales proceeds from the sale of all or a
portion of the Project, to be paid pursuant to the provisions of
Section 10.2 hereof (but not with respect to AR's acquisition of Unsold
Back Lots pursuant to Section 10.4 hereof), provided, however, that if
a buyer with respect to any sale has been identified in writing by AR
to TIC in advance of TIC procuring a written purchase agreement with
such buyer, then , the Marketing Fee for such sale shall be split
between TIC and AR such that TIC receives fifteen percent (15%) and AR
received five percent (5%) of the gross sales proceeds from such sale,
to be paid pursuant to the provisions of Section 10.2 hereof.
b. Provide bookkeeping and disbursing services related to
development of the Project, including but not limited to collecting
workers' compensation insurance certificates, reviewing and confirming
the accuracy of invoices and requests for payment received from vendors
providing services with respect to development of the Project and
collecting lien waivers therefor, processing draw requests to the
lender providing financing for the Project and similar project
bookkeeping, disbursing and record management services related to
development of the project. For such services, TIC shall receive a
"Bookkeeping Fee" equal to $250 per month during each month that the
Project is under development.
c. Cooperate with AR in all efforts necessary to acquire and
finance the Project, and for such services, but subject to the
provisions of Section 10.3 hereof, TIC shall receive an "Acquisition
Fee" equal to one percent (1%) of the gross sales proceeds from the
sale of all or a portion of the Project (but not with respect to AR's
acquisition of Unsold Back Lots pursuant to Section 10.4 hereof), to be
paid in accordance with the provisions of Section 10.2 hereof.
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SECTION 7
BOARD OF GOVERNORS
7.1 Authority. Except as otherwise provided in this Agreement, the
business and affairs of the Company shall be managed by or under the direction
of the Board of Governors, in accordance with the Act and the Operating
Agreement of the Company.
7.2 Appointment. There shall be a total of four (4) Governors, two of
which shall be appointed by TIC and two of which shall be appointed by AR. The
Members hereby appoint the following individuals as the initial Board of
Governors:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇
*
*
In the event either ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇ ▇. ▇▇▇▇ (or any other successor
Governor appointed by TIC) is unable or unwilling to continue as a Governor at
any time, his successor shall be appointed by TIC. In the event either * or *
(or any other successor Governor appointed by AR) is unable or unwilling to
continue as a Governor at any time, his successor shall be appointed by AR.
7.3 Compensation. Unless otherwise agreed by all Members, the Governors
shall serve without compensation and without a right of reimbursement from the
Company for expenses incurred by them in performing services as Governors.
7.4 Limitations on Authority. The Company, upon resolution of the
Board, has express authority to establish one or more subsidiary corporations,
to become a general partner or limited partner in one or more limited
partnerships, to become a member in other limited liability companies, to borrow
funds directly or through one or more subsidiaries or entities in which the
Company is an investor, to guaranty debts and obligations of other entities, to
incur and pay such fees and expenses as it deems appropriate, and to enter into
such development agreements, management agreements, consulting agreements,
contracts, loans, leases, and other agreements and undertakings, directly or
through one or more subsidiaries, all as the Board shall determine are necessary
and appropriate in connection with the Project.
Notwithstanding the foregoing, the Board of Governors shall not have
authority to act on behalf of the Company with respect to any of the following
without the prior written consent of all Members:
a. Borrowing or lending money on behalf of the Company,
committing the Company to make loans or advances, or guarantying the
debts or obligations of another entity;
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b. Mortgaging or granting security interests or other liens,
pledges, or encumbrances on any Company Property, other than as
security for borrowing authorized above in this Section 7.4;
c. Entering into any agreements or undertakings for additional
real estate transactions or other transactions beyond the Project,
other than preliminary understandings expressly subject to Member
approval;
d. Selling, exchanging, or otherwise disposing of all or
substantially all of the Company's assets, or merging or combining the
Company with another company or legal entity;
e. Engaging in any business or endeavor incompatible with the
purposes of the Company set forth in Section 4, or taking any action
contrary to the interests of the Members as expressed in this
Agreement;
f. Entering into any agreements with the City of Sauk Centre,
including but not limited to development, public improvements,
conservation or easement agreements.
7.5 Conflicts of Interest. The Governors and their Affiliates may deal
with, perform other services, and sell goods or services to the Company without
limitation; provided, however, that any compensation for such services or goods
shall be limited to amounts and rates customary in the industry in the area in
which the Project is located.
7.6 Other Activities. The Governors and their Affiliates may engage in
or possess an interest in other business ventures of every nature and
description, independently or with others, whether such ventures are competitive
with the Company or otherwise; and neither the Company nor the Members shall
have any right by virtue of this Agreement in or to such independent ventures or
to the income or profits derived therefrom and no Member shall have the
obligation to bring any business opportunity to the Company or to any other
Member; provided, however, that the foregoing shall be limited as provided in
Sections 322B.663, 322B.666 and 322B.69 of the Act, as may be applicable.
7.7 Indemnification of Governors. The Company shall indemnify the
Governors against any loss, claim, or liability incurred by the Governors in
connection with the business of the Company, provided the Governors acted in
good faith and were not negligent or guilty of willful misconduct. Any amount
paid to indemnify the Governors, however, shall be paid out of Company assets
only, and Members shall not be liable for such amounts to be paid to the
Governors except to the extent of any amount of the capital contribution of a
Member that is due and owing to the Company and remains unpaid. Neither the
Company nor any Member shall have any claim against the Governors based upon or
arising out of any act or omission of the Governors, provided that the Governors
acted in good faith and were not grossly negligent or guilty of willful
misconduct.
7.8 Liability Under Other Agreements. The obligations of the Governors
or their Affiliates pursuant to any agreement or contract with the Company
(whether or not such
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agreements are referred to herein) shall be separate and distinct from their
obligations hereunder and any default or failure of performance with respect to
such separate agreements or contracts, unless otherwise specified in this
Agreement, shall have the consequences provided for in such separate agreements
or contracts or by applicable law and shall not constitute a breach hereunder.
7.9 Deadlocks. If at any time the Board or Governors cannot make a
decision on any matter due to a deadlock in voting, and if such matter is
necessary for the continued operation of the Company or the Project, the dispute
shall be finally and conclusively resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The Board
shall promptly implement the decision of the arbitrators and, if necessary, such
decision may be entered and enforced in any court having jurisdiction. Any
dispute as to whether the matter in question is necessary for the continued
operation of the Company or the Project, or as to the arbitrability of any
dispute under this Section 7.9, shall be resolved by the arbitrators, and their
decision shall be final and binding and not subject to judicial review. All
arbitration proceedings shall be conducted in Hennepin County, Minnesota.
SECTION 8
MANAGERS
8.1 Designation. The Managers of the Company shall be a Chief Manager,
a Treasurer and a Development Manager, together with such other managers, if
any, as the Board may appoint from time to time. The Chief Manager shall have
the duties and authority of Chief Manager set forth in the Act and the Operating
Agreement of the Company, subject to the provisions of this Agreement. The
Treasurer shall have the duties and authority set forth in the Act and the
Operating Agreement of the Company, subject to the provisions of this Agreement.
The Development Manager shall have the duties and authority set forth in the
Operating Agreement of the Company, subject to the provisions of this Agreement.
Any other Managers shall have such duties and authority as determined by the
Board of Governors, subject to the provisions of this Agreement.
8.2 Election of Managers. The Members hereby agree that the following
persons shall be elected as the Managers of the Company during the term of this
Agreement:
Chief Manager: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Treasurer: ▇▇▇▇ ▇. ▇▇▇▇
Development Manager: *
8.3 Rights and Obligations. Managers shall have the same rights and be
subject to the same obligations and limitations as set forth with respect to
Governors and their Affiliates under Sections 7.5, 7.6, 7.7, and 7.8. Managers
shall be subject to the same limitations on their authority as set forth for
Governors in Section 7.4. Unless otherwise agreed by all Members, the Managers
shall serve without compensation. Managers shall be entitled to reimbursement
from the Company for their reasonable out-of-pocket expenses incurred in
performing services as
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Managers, but not if such services relate to the obligations of AR and TIC as
set forth in Sections 6.7 and 6.8 hereof.
SECTION 9
ALLOCATIONS
9.1 Allocation of Income and Gains. After giving effect to the special
allocations set forth in Section 9.4, the income or gains of the Company for
each fiscal year for book purposes, whether taxable or nontaxable, shall be
allocated to the Members as follows and the Capital Accounts increased in
accordance with Section 5.2:
a. First, if losses have been allocated to the Members
pursuant to Section 9.2.b. for any prior year in an aggregate amount
equal to the cumulative losses allocated according to Section 9.2.b.
for all prior periods not previously offset by allocations under this
Section 9.1.a. or by a Minimum Gain Chargeback under Section 9.4.a.,
ratably in proportion to the Members' respective shares of such losses;
b. Thereafter, to the Members, ratably in proportion to their
respective Percentage Interests, as then existing.
9.2 Allocation of Losses. After giving effect to the special
allocations set forth in Section 9.4, the losses, deductions and credits of the
Company for each fiscal year for book purposes, whether taxable or nontaxable,
shall be allocated to the Members as follows and the Capital Accounts reduced in
accordance with Section 5.2:
a. First, if income or gains have been allocated pursuant to
Section 9.1.b. for any prior year, losses shall be allocated first to
offset any income or gains allocated pursuant to Section 9.1.b.,
ratably among the Members in proportion to their respective shares of
the income or gains being offset; provided, however, that to the extent
any prior allocation is offset pursuant to this Section 9.2.a., such
allocation shall be disregarded for purposes of determining subsequent
allocations pursuant to this Section 9; and
b. Thereafter, to the Members, ratably in proportion to their
respective Percentage Interests, as then existing.
9.3 Proration of Allocations. All income, gains, losses, deductions,
and credits for a fiscal year allocable with respect to any Member whose
Interest may have been transferred, forfeited, reduced or changed during such
year shall be allocated based upon the varying interests of the Members
throughout the year. The precise manner in which such allocation shall be made
shall be determined by the Board and shall be a manner of allocation permitted
to be used for federal income tax purposes.
9.4 Special Allocations. Anything elsewhere contained in this Section 9
to the contrary notwithstanding:
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a. Minimum Gain Chargeback. "Partnership Minimum Gain" within
the meaning of Treasury Regulationss. 1.704-2(b)(2) means an amount of
gain that would be realized by the Company on the disposition of
Company Property subject to nonrecourse indebtedness (within the
meaning of Treasury Regulationss. 1.704-2(b)(3)), equal to the amount
by which such nonrecourse indebtedness exceeds the adjusted tax basis
(or book value, if the property has been properly entered on the books
of the Company at a value different from its then adjusted tax basis)
of such property. If for any Company fiscal year, there is a net
decrease in Partnership Minimum Gain, each Member shall be allocated
items of Company income and gain in accordance with Treasury
Regulationss.1.704-2(f)(1) (a "Minimum Gain Chargeback") for such year
(and, if necessary, for subsequent years) in an amount equal to such
Member's share of such net decrease of Partnership Minimum Gain. For
this purpose, a Member's share of the net decrease in Partnership
Minimum Gain shall be determined under Treasury Regulationsss.
1.704-2(g)(2). This Section 9.4.a. is intended to comply with Treasury
Regulationss. 1.704-2(f)(1) and shall be interpreted consistently
therewith.
b. Qualified Income Offset. If any Member at any time
unexpectedly receives any adjustment, allocation, or distribution
described in Treasury Regulationss.ss.1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), and if such
adjustment, allocation, or distribution results in a negative balance
in such Member's Capital Account in excess of the sum of (i) the amount
such Member is obligated to restore to the Company under this Agreement
and (ii) the amount such Member is deemed to be obligated to restore to
the Company pursuant to the penultimate sentences of Treasury
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇. 1.704-2(g)(1)(ii) and 1.704-2(i)(5), then items of
Company income and gain shall be specially allocated to such Member so
as to eliminate, to the extent required by Treasury Regulationss.
1.704-1(b)(2)(ii)(d), such negative balance in such Member's Capital
Account as quickly as possible.
▇. ▇▇▇▇▇ Income Allocation. If any Member would have a
negative balance in such Member's Capital Account at the end of any
Company taxable year in excess of the sum of (i) the amount such Member
is obligated to restore to the Company under this Agreement and (ii)
the amount such Member is deemed to be obligated to restore to the
Company pursuant to the penultimate sentences of Treasury Regulation
▇▇.▇▇. 1.704-2(g)(1)(ii) and 1.704-2(i)(5), then such Member shall be
specially allocated items of Company income (including gross income) in
the amount of such excess as quickly as possible.
d. Curative Allocations. Any allocation to a Member under
subsections a. through c. of this Section 9.4 (a "Regulatory
Allocation") shall be taken into account in determining subsequent
allocations, so that the net amount of Regulatory Allocations and all
other items allocated under the provisions of this Section 9 shall, to
the extent possible, be equal to the net amount that would have been
allocated to such Member under the provisions of this Section 9 if no
Regulatory Allocation had been made.
9.5 Tax Allocations. In accordance with Section 704(c) of the Code and
the Treasury Regulations thereunder, income, gain, loss, and deduction with
respect to any property
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contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its fair market value as of the date of contribution.
In the event any Company asset is adjusted as a result of a revaluation
pursuant to Section 5.2 hereof, subsequent allocations of income, gain, loss and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes and its fair
market value as of the date of such revaluation in the same manner as under
Section 704(c) of the Code and the Treasury Regulations thereunder. Any election
or other decision relating to such allocations shall be made by the Board in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 9.5 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of income,
profits, gains, losses, expenses, deductions, credits or other items or
distributions pursuant to any provision of this Agreement.
9.6 Special Fee Allocation. If any fee or other amount payable to a
Member is determined for tax purposes to be a payment to such Member of a
distributive share of Company income or gain (rather than being a fee or
expenditure in the nature of an amount payable to a Person who is not a Member
or other than in such Person's capacity as a Member), then such amount shall be
treated (for tax purposes and for purposes of determining Capital Accounts) as
an allocation of gross income to such Member in the year such amount is accrued,
and a distribution in the year such amount is paid. However, the priority of
payment of any such item shall be unaffected by such treatment.
9.7 Consent to Allocation. Each Member expressly consents to the
methods provided herein for the allocation of Company profits and losses.
SECTION 10
DISTRIBUTIONS
10.1 Distributions of Net Cash From Operations. Any distributions of
Net Cash From Operations in any fiscal year, when possible, shall be made to the
Members, on a monthly basis, ratably in proportion to their Percentage
Interests, as then existing. The foregoing payments shall be made from time to
time to the extent Net Cash From Operations is available.
10.2 Other Cash Distributions.
a. Liquidating distributions of any net proceeds upon the
sale, exchange or other disposition of all or substantially all of the
assets of the Company shall be made in accordance with Section 13.3.
b. Distributions of Net Cash From Sales or Refinancings shall
be made to the Members as follows:
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(i) First, to all accrued and unpaid Acquisition
Fees, such distribution to be made equally to TIC and AR;
(ii) Second, to all accrued and unpaid Development
Fees and Marketing Fees, ratably in proportion to the amounts
thereof then accrued;
(iii) Third, to the Members, ratably in proportion to
their respective Adjusted Capital Contributions, in an amount
equal to the aggregate amount of all Adjusted Capital
Contributions;
(iv) Thereafter all other Net Cash From Sales or
Refinancings shall be allocated and distributed to the Members
ratably in proportion to their Percentage Interests, as then
existing.
10.3 Special Land Distributions and Right of First Refusal.
Notwithstanding anything herein to the contrary:
a. The Company shall convey to AR, by quit claim deed, ▇▇▇ ▇▇,
▇▇▇▇▇ ▇, as such lot is designated on the Preliminary Plat, which lot
designation and the boundaries thereof may change in the course of
finalizing the plat of the Project (such lots are herein referred to as
the "AR Lot"). The AR Lot shall be conveyed by the Company immediately
prior to the date that the AR Lot is to be sold to a third party. On
the date of sale of the AR Lot to the third party purchaser, TIC and AR
shall each receive a 10% Marketing Fee therefor, AR shall receive a 5%
Development Fee therefor, and TIC and AR shall each receive a 1%
Acquisition Fee therefor.
b. The Company shall convey to TIC, by quit claim deed, ▇▇▇
▇▇, ▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇ 1, as such lots are designated on the
Preliminary Plat and which lot designations and the boundaries thereof
may change in the course of finalizing the plat of the Project (such
lots are herein referred to as the "TIC Lots"). Each TIC Lot shall be
conveyed by the Company to TIC immediately prior to the date that such
TIC Lot is to be sold to a third party. On the date of sale of each TIC
Lot to the third party purchaser, TIC shall receive a 20% Marketing Fee
therefor, AR shall receive a 5% Development Fee therefor, and TIC and
AR shall each receive a 1% Acquisition Fee therefor.
c. At such time as AR requests, the Company shall convey to
AR, by quit claim deed ▇▇▇ ▇▇, ▇▇▇▇▇ ▇, as such lot is designated on
the Preliminary Plat and which lot designation and the boundary thereof
may change in the course of financing the plat for the Project and,
notwithstanding anything herein to the contrary, no Marketing Fee, no
Development Fee and no Acquisition Fee shall be payable to either TIC
or AR with respect to such conveyance.
d. AR and TIC acknowledge that the Company has entered into a
purchase agreement to sell ▇▇▇ ▇, ▇▇▇▇▇ ▇, as such lot is designated on
the Preliminary Plat and which lot designation and the boundaries
thereof may change in the course of finalizing
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the plat of the Project, to ▇▇▇▇▇ ▇▇▇▇▇. Upon the closing of such sale
to ▇▇▇▇▇ ▇▇▇▇▇, and notwithstanding anything herein to the contrary,
TIC and AR shall each receive a Marketing Fee of 10% therefor, AR shall
receive a 5% Development Fee therefor and TIC and AR shall each receive
a 1% Acquisition Fee therefor.
e. AR and TIC acknowledge that the Company has entered into a
purchase agreement to sell ▇▇▇ ▇, ▇▇▇▇▇ ▇, as such lot is designated on
the Preliminary Plat and which lot designation and the boundaries
thereof may change in the course of finalizing the plat of the Project,
to ▇▇▇▇▇ ▇▇▇▇▇. Upon the closing of such sale to ▇▇▇▇▇ ▇▇▇▇▇, TIC will
receive $10,000 of net proceeds of such sale. Notwithstanding anything
herein to the contrary, neither TIC nor AR shall receive any Marketing
Fee, Development Fee or Acquisition Fee with respect to such sale.
f. AR and TIC acknowledge that the Company has granted a right
of first refusal to ▇▇▇▇ ▇▇▇▇▇▇ until July 1, 2002 with respect to ▇▇▇
▇, ▇▇▇▇▇ ▇, as such lot is designated on the Preliminary Plat and which
lot designation and the boundaries thereof may change in the course of
finalizing the plat of the Project. If ▇▇▇▇ ▇▇▇▇▇▇ exercises such right
and closes on his acquisition of such lot, then, notwithstanding
anything to the contrary, TIC shall receive a 20% Marketing Fee
therefor, and no other fees shall be payable to either TIC and AC with
respect thereto.
10.4 Mandatory Lot Purchases. After December 1, 2002, TIC shall have
the option (the "Put Option") to require AR to purchase from the Company, upon
the terms and conditions set forth below, any of the non-riparian lots (being
lots that do not have lake frontage) that have not, at the time of the exercise
of the Put Option, been sold to third-party buyers (such unsold Lots being
referred to herein as the "Unsold Back Lots").
The Put Option may be exercised by TIC with respect to the Unsold Back
Lots existing at the time of such exercise by TIC's delivery of written notice
of exercise of the Put Option to AR specifying which Unsold Back Lots are the
subject of TIC's exercise of the Put Option.
In the event of exercise of the Put Option, AR shall purchase the
Unsold Back Lots designated in TIC's exercise notice from the Company within
ninety (90) days of delivery of the option exercise notice to AR for a cash
purchase price (the "Purchase Price") to be calculated as follows: (a) for each
Unsold Back Lot that consists primarily of field (non-wooded) area, for which
the Put Option has been exercised, the Purchase Price for each such lot shall be
$7,000.00; (b) for each Unsold Back Lot that contains wooded area, for which the
Put Option has been exercised, the Purchase Price for each such lot shall be
$10,000.00; and (c) for each Unsold Back Lot that borders on the neighboring
golf course, for which the Put Option has been exercised, the Purchase Price for
each such lot shall be $12,000.00.
The sale of the Unsold Back Lots to AR shall be on an as-is/where-as
basis, with no representation or warranty made by the Company with respect to
the Unsold Back Lots. At the closing of the sale of the Unsold Back Lots, the
Purchase Price shall be paid in cash to the Company, all costs of obtaining
title insurance or financing related to AR's acquisition of the Unsold Back Lots
shall be paid AR, real estate taxes and installments of special assessments
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payable therewith with respect to the Unsold Back Lots shall be prorated between
AR and the Company as of the date of closing on a calendar year basis using the
most current tax information available, AR shall assume the balance of any
special assessments pending or levied against the Unsold Back Lots, the state
deed tax payable with respect to the sale shall be paid by the Company, and all
recording costs and other expenses of sale and the title company's cost to close
the sale shall be paid for by AR.
10.5 No Distribution by Reason of Withdrawal. Withdrawal from the
Company or assignment of a holder's Financial Rights shall not entitle any
holder of Financial Rights to receive any Distribution from the Company, except
as Distributions to all holders of Financial Rights are subsequently made
pursuant to this Section 10.
SECTION 11
TAX AND ACCOUNTING MATTERS
11.1 Tax Characterization and Returns. The Members acknowledge that the
Company will be treated as a "partnership" for tax purposes. Within 60 days
after the end of each fiscal year, the Chief Manager will cause to be delivered
to each Person who was a Member at any time during such fiscal year a Form K-1
and such other information, if any, with respect to the Company as may be
necessary for the preparation of such Member's federal or state income tax (or
information) returns, including a statement showing each Member's share of
income, gain or loss, and credits for such fiscal year for federal or state
income tax purposes.
11.2 Books of Account. The Managers shall keep complete and accurate
accounts of all transactions of the Company in proper books of account and shall
enter or cause to be entered therein a full and accurate account of each and
every Company transaction in accordance with accounting principles as determined
by the Managers and approved by the Board based upon the advice of the Company's
accountants. The books and records of the Company shall be closed and balanced
as of the end of each fiscal year. The books of account and other records of the
Company shall at all times be kept at the place of business of the Company and
each of the Members and their authorized representatives shall have access to
and may inspect and copy any of such books and records at all reasonable times.
11.3 Accounting Practices. The books of account of the Company shall be
kept on a tax accrual basis, consistently applied, and its federal tax returns
filed on such basis. The fiscal year and tax year of the Company shall end on
the last day of December of each year. The Board of Governors shall have the
authority to designate and retain a firm of independent certified public
accountants to assist in the maintenance and preparation of such books, records,
and reports as the Board deems appropriate, provided that ▇▇▇ ▇▇▇▇▇ is hereby
approved as the initial accountant for the Company. All other decisions as to
accounting matters shall be made by the Board in its sole discretion. The
Company, at the sole discretion of the Board, also may make or revoke such
elections as may be allowed pursuant to the Code, including the election
referred to in Section 754 of the Code to adjust the basis of Company Property.
11.4 Bank Accounts. The Company shall maintain bank accounts in such
bank or banks as may be determined by resolution of the Board. All withdrawals
from such bank
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accounts shall be made by check or other instrument and signed by such Person or
Persons as the Board may designate.
11.5 Report to Members. Not later than thirty (30) days after the end
of each calendar month, and thirty (30) days after the end of each calendar
quarter, and sixty (60) days after the end of each fiscal year of the Company,
each Member shall be furnished with a report of the business and operations of
the Company during such period, and such annual report shall constitute the
accounting of the Board for such fiscal year. The reports shall contain
financial statements, including statements of assets and liabilities, of income
and expenses, of Members' equity and changes in financial position, of cash
flow, and of the amount and nature of any compensation paid to Governors,
mangers or their Affiliates during the period, including a description of the
services performed in relation thereto, and shall otherwise be in such form and
have such content as the Board deems proper. Such report shall state income from
every source, including net gains from disposition or sale of Company assets.
11.6 Tax Matters Partner. The Chief Manager is hereby designated to act
on behalf of the Company as the "tax matters partner" for federal income tax
purposes. If, on advice of counsel, the Tax Matters Partner determines that it
is in the best interest of the Members that the final results of any
administrative proceeding be appealed by the institution of legal proceedings,
and if such appeal is approved by the Board of Governors, the Tax Matters
Partner shall commence such legal proceedings in such forum as he or she, on
advice of counsel, determines to be appropriate. In the event the Tax Matters
Partner selects a forum for appeal in which he or she is required to deposit a
proportionate share of any disputed tax before making such appeal, he or she
must obtain the consent of all the Governors and a majority of the Membership
Interests. If such consent is obtained, each of the Members will be required to
deposit and pay a proportionate share of such disputed tax before participating
in such appeal. The Members acknowledge that such deposit under current law does
not earn interest and that the failure so to deposit may preclude a Member from
pursuing any other sort of appeal by court action. The Tax Matters Partner shall
not be liable to any other Member for any action taken with respect to any such
administrative proceeding or appeal so long as the Tax Matters Partner is not
negligent or guilty of willful misconduct. Any costs paid or incurred by the Tax
Matters Partner in connection with his or her activities in such capacity shall
be reimbursed by the Company. Each Member acknowledges that any cost a Member
may incur in connection with an audit of a Member's income tax return, including
an audit of a Member's investment in the Company, is such Member's sole
responsibility and obligation; and neither the Company, the Board of Governors,
nor the Tax Matters Partner shall be liable to any Member for reimbursement or
sharing of any such costs.
SECTION 12
TRANSFER OF MEMBERSHIP INTERESTS
12.1 Generally. No Member may transfer all or part of such Member's
Interest except as permitted under this Section 12. A Member may assign the
Member's full Membership Interest only by assigning all of the Member's
Governance Rights coupled with a simultaneous assignment to the same assignee of
all of the Member's Financial Rights, and only if the transfer of both are
permitted under this Section 12.
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12.2 Transfer of Governance Rights. A Member's Governance Rights may be
assigned, in whole or in part, only as provided in Section 322B.313 of the Act
and any statutory provisions amending or supplementing such provision, and any
written consent required thereunder may be withheld for any reason. A Member's
Governance Rights may be assigned, without the consent of any other Member, in
whole or in part, to another Person already a Member at the time of the
assignment. Any other assignment of any Governance Rights is effective only if
(i) all the Members, other than the Member seeking to make the assignment,
approve the assignment by unanimous written consent, which consent may be
granted or withheld, as the remaining Members may determine in their sole
discretion, and (ii) the assignee executes this Agreement, as amended, to
reflect such assignee's interest in the Company and any other instrument or
instruments that the Board may deem necessary or desirable to effect such
assignment. When an assignment of Governance Rights is effective under this
Section 12.2, and if the assignor does not retain any Governance Rights, the
assignor ceases to be a Member and the written consent required under this
Section shall also constitute the dissolution avoidance consent necessary to
avoid dissolution that would otherwise occur under Section 13.
12.3 Transfer of Financial Rights. A Member's Financial Rights may be
transferred, in whole or in part, to any Person, whether or not already a Member
at the time of the transfer, only if the selling Member first offers to sell
such Financial Rights to the existing Members of the Company, in proportion to
their Percentage Interests, at the same price and terms offered in a bona fide
written agreement with the proposed purchaser. Such offer shall be made in
writing and allow each Member thirty (30) days to make an election to purchase
or not purchase such Financial Rights. If one or more of the Members elects to
purchase such Financial Rights and one or more of the Members does not, the
electing Member or Members shall have the right to purchase, in proportion to
the Percentage Interests of the electing Members, that portion of the Financial
Rights offered not taken by other Members. If no Members elect to purchase the
offered Financial Rights, or if some portion of the offered Financial Rights are
not so purchased by Members, the selling Member shall have the right to transfer
and assign the unsold Financial Rights to a third party at the price and terms
offered and the remaining Members shall be deemed to have consented to such
assignment. The restriction and rights of first refusal contained in this
Section 12.3 shall be conspicuously noted in the required records of the
Company.
12.4 No Security Interests. No Member shall grant a pledge, security
interest, or other encumbrance in the Member's full Membership Interests or in
either the Governance Rights or Financial Rights of such Member, without the
written consent of all other Members.
12.5 Documents and Expenses. As a condition to admission as a Member,
an assignee of all or part of the Interest of any Member, or the legatee or
distributee of all or any part of the Interest of any Member, shall execute and
acknowledge such instruments, in form and substance satisfactory to the Board,
as the Board shall deem necessary or advisable to effect such admission and to
confirm the undertaking of the person being admitted as a Member to be bound by
all the terms and provisions of this Agreement. Such assignee, legatee or
distributee shall pay all reasonable expenses in connection with such admission
as a Member, including, but not limited to, legal fees and costs of the
preparation of any amendment to this Member Control Agreement, if necessary or
desirable in connection therewith.
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12.6 Restriction on Transfer. Notwithstanding the foregoing provisions
of this Section 12, no assignment or other transfer of a Membership Interest or
any portion thereof may be made if the Interest sought to be transferred, when
added to the total of all other Membership Interests transferred within the
period of twelve (12) consecutive months prior thereto, would result in the
termination of the Company under Section 708 of the Internal Revenue Code. This
restriction shall be conspicuously noted in the required records of the Company.
SECTION 13
DISSOLUTION AND LIQUIDATION
13.1 Dissolution.
a. The Company shall be dissolved upon the occurrence of any
of the following events:
(i) when the term for duration of the Company fixed
in the Articles shall expire;
(ii) upon order of a court pursuant to the Act;
(iii) by unanimous written agreement of the Members;
or
(iv) upon the death, retirement, resignation,
redemption, expulsion, bankruptcy, dissolution of a Member, or
occurrence of any other event under Minnesota Statutes Section
322B.80, subdivision 1 (5), but only if the membership of the
last or sole Member terminates and the legal representative of
that last or sole Member does not cause the limited liability
company to admit at least one Member within 180 days after the
termination.
b. As soon as possible following the occurrence of any of the
events specified in this Section 13.1 effecting the dissolution of the
Company, the Chief Manager shall execute a notice of dissolution in
such form as shall be prescribed by the Minnesota Secretary of State,
setting forth the information required under Minnesota Statutes Section
322B.81, subdivision 1, and shall file the same with the Secretary of
State.
c. Upon filing with the Minnesota Secretary of State of a
notice of dissolution, the Company shall cease to carry on its
business, except insofar as may be necessary for the winding up of its
business, but its separate existence shall continue until a certificate
of termination has been issued by the Minnesota Secretary of State or
until a decree terminating the Company has been entered by a court of
competent jurisdiction.
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13.2 Interest of Terminated Member.
a. If dissolution is avoided pursuant to Section 13.1(a)(iii)
then the Member whose interest has terminated shall lose all Governance
Rights and will be considered merely an assignee of the Financial
Rights owned before the termination of Membership.
b. If dissolution is avoided pursuant to Section 13.1(a)(iii),
neither the Company nor the remaining Members shall be obligated to
purchase the interest of the Member whose interest was terminated.
13.3 Distributions on Liquidation. Upon dissolution of the Company, the
business of the Company shall be wound up, the Board shall take full account of
the Company assets and liabilities, and all assets shall be liquidated as
promptly as is consistent with obtaining the fair value thereof. If any assets
are not sold, gain or loss shall be allocated to the Members in accordance with
Section 9, as if such assets had been sold at their fair market value at the
time of the liquidation. If any assets are distributed to a Member, rather than
sold, the distribution shall be treated as a distribution equal to the fair
market value of the assets at the time of the liquidation. Upon liquidation, the
assets of the Company shall be applied and distributed in the following order of
priority:
a. To the payment of all debts and liabilities of the Company,
including any loans or advances that may have been made by the Members
to the Company, in the order of priority as provided by law;
b. To the establishment of any reserves deemed necessary by
the Board or the Person winding up the affairs of the Company for any
contingent liabilities or obligations of the Company;
c. To the Members as provided in Section 10.2.b.(iii);
d. To the Members, ratably in proportion to the credit
balances in their respective Capital Accounts, in an amount equal to
the aggregate credit balances in the Capital Accounts after and
including all allocations to the Members under Section 9, including the
allocation of any income, gain or loss from the sale, exchange or other
disposition (including a deemed sale pursuant to this Section 13.3) of
the Company's assets;
e. To the Members in proportion to their Percentage Interests;
f. Notwithstanding anything contained herein to the contrary,
any Member with a negative balance in its Capital Account shall have no
obligation to pay to the Company any funds to eliminate the negative
balance in its Capital Account.
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SECTION 14
AMENDMENT OF AGREEMENT
No amendment, modification, or termination of this Agreement shall be
valid or binding unless such amendment is in writing and signed by all Members.
When circumstances occur requiring technical amendments to this Agreement to
comply with applicable law or regulation, the Members agree to consent to such
amendments unless such amendments would reduce the Interest of a Member in the
Company, change the distributions or fees payable to a Member or increase the
obligations of a Member. No amendment may be made that would have the effect of
reducing to a percentage less than that required by law to consent to avoid
dissolution.
SECTION 15
MISCELLANEOUS
15.1 Governing Law. This Agreement and the rights of the Members
hereunder will be governed by, interpreted, and enforced in accordance with the
laws of the State of Minnesota, without giving effect to choice of law
principles thereof.
15.2 Entire Agreement. This Agreement constitutes the entire agreement
among the parties and supersedes any prior agreement or understanding among
them, written or oral with respect to the subject matter hereof. This Agreement
may not be modified or amended in any manner other than as set forth herein. Any
warranties, representations and covenants contained in transfer documents or
closing certifications with respect to the Project, however, shall survive the
transfer of the Project and shall not be superseded or modified by this
Agreement.
15.3 Binding Effect. This Agreement will be binding upon and inure to
the benefit of the Members, and their respective heirs, representatives,
successors and permitted assigns.
15.4 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under the present or future laws effective
during the term of this Agreement, such provision will be fully severable; this
Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid, or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision, there will be added automatically as a part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
15.5 Partition. The Members agree that Company Property is not and will
not be suitable for partition. Accordingly, each of the Members hereby
irrevocably waives any and all rights to maintain any action for partition of
any Company Property.
15.6 Multiple Counterparts. This Agreement may be executed in several
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument. However, in making proof hereof it will
be necessary to produce only one copy hereof signed by the party to be charged.
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15.7 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions, and conditions of this Agreement and the transactions
contemplated hereby.
15.8 Third Party Beneficiaries. This Agreement is made solely and
specifically among and for the benefit of the parties hereto, the Company, and
their respective successors and assigns. As the context may indicate, the
Company shall be a third party beneficiary of this Agreement, but no other
person will have any rights, interest, or claims hereunder or be entitled to any
benefits under or on account of this Agreement as a third party beneficiary or
otherwise.
15.9 Notices. Any notice to be given or to be served upon the Company
or any party hereto in connection with this Agreement must be in writing and
will be deemed to have been given and received when delivered to the address
specified in the Company's required records. Any Member or the Company may, at
any time by giving five (5) days' prior written notice to the other Members and
the Company, designate any other address in substitution of the foregoing
address to which such notice will be given.
15.10 Headings and Titles. Section headings and titles are for
descriptive purposes and convenience of reference only and shall not control or
alter the meaning of this Agreement as set forth in the text.
15.11 Consent and Waiver. No consent under and no waiver of any
provision of this Agreement on any one occasion shall constitute a consent under
or waiver of any other provision on such occasion or on any other occasion, nor
shall it constitute a consent under or waiver of the consented to or waived
provision on any other occasion. No consent or wavier shall be enforceable
unless it is in writing and signed by the party against whom such consent or
wavier is sought to be enforced.
15.12 Number and Gender. Wherever from the content is appears
appropriate, each term stated in either the singular or the plural shall include
the singular and the plural and pronouns stated in either the masculine, the
feminine or the neuter gender shall include the masculine, feminine and neuter.
IN WITNESS WHEREOF, the undersigned have executed this Member Control
Agreement, in person or by their duly authorized representatives, as of the day
and year first above written.
▇▇▇▇▇▇ INVESTMENT CORPORATION,
a Minnesota corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President
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*,
a Minnesota limited liability partnership
By:
-------------------------------------
*
Its:
And
By:
-------------------------------------
*
Its:
-----------------------------
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EXHIBIT A
PRELIMINARY PLAT
EXHIBIT B
LEGAL DESCRIPTION
That part of Section ▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, described as follows:
Commencing at the "X" in the concrete driveway which marks the location of the
Southwest corner of said Section 3 thence North 89 degrees 44 minutes 39 seconds
East a distance of 523.94 feet along the South line of the Southwest Quarter of
said Section 3 to its intersection with the East line of Main Street extended
Southerly; thence North 00 degrees 59 minutes 50 seconds West along said
Southerly extension of the East line of Main Street and the East line of Main
Street 2291.36 feet to the point of beginning of the tract to be herein
described; thence North 88 degrees 07 minutes 17 seconds East 210.02 feet;
thence North 01 degree 08 minutes 50 seconds West 800.07 feet; thence North 88
degrees 07 minutes 17 seconds East 278.13 feet; thence North 00 degrees 59
minutes 50 seconds West 42.63 feet; thence North 74 degrees 41 minutes 17
seconds East 716.87 feet; thence North 82 degrees 16 minutes 42 seconds East
135.64 feet; thence North 15 degrees 09 minutes 13 seconds West 173.28 feet;
thence North 74 degrees 50 minutes 47 seconds East 66.00 feet; thence South 15
degrees 09 minutes 13 seconds East 181.89 feet; thence North 82 degrees 16
minutes 42 seconds East 276.16 feet; thence North 68 degrees 11 minutes 30
seconds East 285.88 feet; thence south 85 degrees 01 minute 54 sections East
316.73 feet, more or less, to the Westerly line of the Southwest Quarter of the
Northeast Quarter of said Section 3; thence South 00 degrees 10 minutes 36
seconds West along said Westerly line 836.34 feet, more or less, to the
Southwest corner of said Southwest Quarter of the Northeast Quarter; thence
North 89 degrees 40 minutes 04 seconds East along the Southlerly line of said
Southwest Quarter of the Northeast; Quarter 1244.82 feet to the intersection
with the Westerly right-of-way line of State Trunk Highway Number 71, as defined
From found monuments; thence North 00 degrees 11 minutes 25 seconds East along
said right-of-way line a distance of 533.06 feet; thence North 89 degrees 48
minutes 35 seconds West along said right-of-way line a distance of 20.00 feet;
thence North 00 degrees 11 minutes 25 seconds East along said right-of-way line
a distance of 530.00 feet; thence South 89 degrees 48 minutes 35 seconds East
along said right-of-way line a distance of 20.00 feet; thence North 00 degrees
11 minutes 25 seconds East along said right-of-way line a distance of 88.78
feet; thence North 00 degrees 02 minutes 00 seconds East a distance of 78.28
feet; thence North 89 degrees 36 minutes 38 seconds East along said right-of-way
line a distance of 20.00 feet; thence North 01 degree 21 minutes 24 seconds West
a distance of 114.70 feet; thence along said right-of-way line on a curve
concave to the West having a radius of 1782.60 feet, delta angle 11 degrees 22
minutes 40 seconds, chord of 353.41 feet, chord bearing of North 08 degrees 29
minutes 56 seconds West, for a distance of 353.99 feet; thence North 75 degrees
48 minutes 50 seconds East along said right-of-way line a distance of 40.00
feet; thence along said right-of-way line on a curve concave to the Southwest
having a radius of 1822.60 feet, delta angle 07 degrees 28 minutes 44 seconds,
chord of 237.74 feet, chord bearing of North 17 degrees 55 minutes 37 seconds
West, for a distance of 237.90 feet; thence North 42 degrees 31 minutes 42
seconds West along said right-of-way line a distance of 303 feet, more or less,
to the shoreline of Sauk Lake; thence Southwesterly along said shoreline of Sauk
Lake a distance of 3540 feet, more or less, to the Easterly line of said Main
Street; thence South 00 degrees 59 minutes 50 seconds
East along said Easterly line a distance of 213 feet, more or less to a found
iron pipe monument on said Easterly line of Main Street; thence continuing South
00 degrees 59 minutes 50 seconds East along said Easterly line of Main Street a
distance of 1054.61 feet to the point of beginning.
Subject to easements, restrictions, and reservations of record.