OPERATING AGREEMENT
OF
UDC AT POWER RANCH MARKETING L.L.C.
This Operating Agreement (the "Agreement") is entered into as of
December ___, 1997, between SunPower Properties L.L.C., an Arizona limited
liability company ("SunPower"), and UDC Homes, Inc., a Delaware corporation
("UDC"), as Members of the Company.
SECTION 1. DEFINITIONS; THE COMPANY
1.1 Definitions. Capitalized words and phrases used in this Agreement
shall have the meanings set forth in Section 10.14 hereof.
1.2 Formation. The Members hereby form the Company as a limited
liability company pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement and in the Articles of Organization.
1.3 Name. The name of the Company is UDC Power Ranch Marketing L.L.C.
The name of the Company may be changed by the Executive Committee upon written
notice to the Members.
1.4 Purposes. The purposes of the Company and the general character of
its business are to market and sell residential units within an age restricted
residential community on the Property in Gilbert, Arizona.
In furtherance of its business, the Company shall be authorized to:
1.4.1 acquire all or portions of the Property;
1.4.2 own, operate, lease, maintain, manage, alter, expand,
remodel, repair, replace and otherwise deal with any improvements constructed on
the Property;
1.4.3 grant easements or other property rights by documents
that are customarily recorded with respect to all or any part of the Property
and subject all or any part of the Property to covenants, conditions,
restrictions, improvement districts, community facilities districts and similar
arrangements, including, without limitation, age restriction covenants;
1.4.4 hold all or any part of the Property for investment;
1.4.5 borrow money and in connection therewith, mortgage,
encumber, pledge, hypothecate, or subject to a deed of trust all or any part of
the Property;
1.4.6 sell, exchange, transfer, assign or otherwise dispose of
the Property and/or any improvements constructed thereon; and
1.4.7 engage in all activities that are reasonably necessary,
convenient or incidental to the accomplishment of the foregoing business
purposes.
The Company shall be a limited liability company only for the purposes specified
in this Section 1.4 (the "Permitted Activities"). The Company shall not engage
in any activity or business other than the Permitted Activities, and neither
Member shall have any authority to hold itself out as a general agent of the
other Member in any other business or activity.
1.5 Intent. It is the intent of the Members that the Company shall
always be operated in a manner consistent with its treatment as a "partnership"
for federal and state income tax purposes. It also is the intent of the Members
that the Company not be operated or treated as a "partnership" for purposes of
Section 303 of the federal Bankruptcy Code. No Member shall take any action
inconsistent with the express intent of the parties hereto.
1.6 Office. The principal office of the Company shall be maintained at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other location
or locations in Maricopa County, Arizona as the Executive Committee may from
time to time designate by written notice to the Members.
1.7 Agent for Service of Process. The name and address of the agent for
service of legal process on the Company in Arizona are FC Service Corporation,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (Attention: ▇▇▇▇▇
▇▇▇▇▇). The Company's agent for service of legal process may be changed by the
Executive Committee upon written notice to the Members.
1.8 Term. The term of the Company shall commence on the date that the
Articles of Organization are filed with the Arizona Corporation Commission and
shall continue until the Company is dissolved in accordance with this Agreement.
1.9 Articles of Organization. The Members shall cause articles of
organization (the "Articles of Organization") to be filed with the Arizona
Corporation Commission and shall file any amendments to the Articles of
Organization deemed necessary by them to reflect amendments to this Agreement
adopted by the Members in accordance with the terms hereof.
1.10 Independent Activities.
1.10.1 The General Scope of Independent Activities. The
Members hereby expressly agree and acknowledge that each of the Members (either
directly, or through its Affiliates, officers, directors, members, shareholders,
agents and employees) is involved in transactions, investments and business
ventures and undertakings of every nature, which include, without limitation,
activities which are not associated in any manner with real estate as well as
the ownership, construction, development, marketing, sale and operation of real
property and improvements of every type and nature thereon (all such investments
and activities being referred to hereinafter as the "Independent Activities").
1.10.2 Specific Independent Activities. Without limiting the
generality of Section 1.10.1, the Members acknowledge that (a) the Independent
Activities of SunPower and its Affiliates include, without limitation, the
ownership and development of real property adjacent to the Property that may be
deemed to be in competition with the Property for utility and other services,
purchasers and other matters; and (b) the Independent Activities of UDC include,
without
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limitation, the ownership and development of residential real estate projects
throughout Maricopa County, Arizona.
1.10.3 Waiver of Rights with Respect to Independent
Activities. Nothing in this Agreement shall be construed to: (a) prohibit any
Member or its Affiliates from continuing, acquiring, owning or otherwise
participating in any Independent Activity that is not owned or operated by the
Company, even if such Independent Activity is or may be in competition with the
Company; or (b) require any Member to allow the Company or the other Member to
participate in the ownership or profits of any such Independent Activity. To the
extent any Member would have any rights or claims against the other Member as a
result of the Independent Activities of such Member or its Affiliates, whether
arising by statute, common law or in equity, the same are hereby waived with
respect to the operation of the Company and the marketing and sale of the
Project.
1.10.4 Limitation on Company Opportunities. Each Member hereby
represents and warrants to the other Member that it has not been offered, as an
inducement to enter into this Agreement, the opportunity to participate with the
other Member in the ownership or profits of any Independent Activity of any kind
whatsoever of such Member or its Affiliates. The Members expressly acknowledge
that the opportunities of the Company shall be limited to the Permitted
Activities with respect to the Property and shall not extend to any property,
investment or activity other than the Permitted Activities conducted solely on
or with respect to the Property.
1.10.5 Acknowledgment of Reasonableness. The Members hereby
expressly acknowledge, represent and warrant that they are sophisticated
developers and investors, they understand the terms, conditions and waivers set
forth in this Section 1.10 and that the provisions of this Section 1.10 are
reasonable, taking into account the relative sophistication and bargaining
position of the Members.
SECTION 2. MEMBERS; PERCENTAGE INTERESTS; CAPITAL
CONTRIBUTIONS; LOANS
2.1 Members. The name and address of each Member are set forth on the
signature pages to this Agreement.
2.2 Percentage Interests. The Members' initial Percentage Interests in
the Company are as follows:
SunPower 50%
UDC 50%
At each time (if any) that the percentage interests of UDC and SunPower in
UDC/SunPower L.L.C. are adjusted as set forth in Section 2.7 of the Operating
Agreement of UDC/SunPower L.L.C. the Members' Percentage Interests in this
Company shall be adjusted so that at all times, the Members' Percentage
Interests in UDC/SunPower L.L.C. and in this Company are identical.
2.3 Initial Capital Contributions. Upon execution of this Agreement,
UDC shall contribute $5,000 in cash to the Company and SunPower shall contribute
$5,000 in cash to the Company.
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2.4 Additional Capital Contributions.
2.4.1 Intent to Finance Approved Expenses. If, during the term
of the Company, funds available to the Company are insufficient to pay Approved
Expenses when due, the Executive Committee shall use its best efforts to obtain
a loan from a third party lender (or from a Member, if no third party lender is
willing to lend sufficient funds to the Company on terms acceptable to the
Executive Committee) to fund such insufficiency.
2.4.2 Inability to Obtain Financing; Request for Additional
Capital Contributions. If the Executive Committee is unable to secure financing
to pay such Approved Expenses on terms acceptable to the Executive Committee,
then the Executive Committee shall send a written request to the Members and the
Members shall contribute to the Company, in proportion to their Percentage
Interests, as "Additional Capital Contributions," an amount equal to any such
insufficiency. Additional Capital Contributions required under the immediately
preceding sentence shall be due and payable in cash within 15 days following a
written request therefor from the Executive Committee. Additional Capital
Contributions shall be applied by the Company solely to pay Approved Expenses.
2.4.3 Limitation on Additional Capital Contributions. In no
event shall Additional Capital Contributions exceed $5,000 in the aggregate for
UDC or $5,000 in the aggregate for SunPower without the prior written consent of
both Members.
2.4.4 Failure of Executive Committee to Request Additional
Capital Contributions. If the Executive Committee fails to request Additional
Capital Contributions to fund any Approved Expenses after demand to do so is
made upon the Executive Committee in writing by any Member, any Member may
request Additional Capital Contributions pursuant to this Section 2.4.
2.5 Limitations Pertaining to Capital Contributions.
2.5.1 Return of Capital. Except as otherwise provided in this
Agreement, no Member shall withdraw any Capital Contributions or any money or
other property from the Company without the written consent of the other Member.
Under circumstances requiring a return of any Capital Contributions, no Member
shall have the right to receive property other than cash, unless otherwise
specifically agreed in writing by the Members at the time of such distribution.
2.5.2 No Interest or Salary. 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 Company or otherwise
in its capacity as a Member, except as otherwise expressly provided in this
Agreement.
2.5.3 Liability of Members. Except as agreed upon in writings
signed by the Members, no Member shall be liable for the debts, liabilities,
contracts or any other obligations of the Company. Except as agreed upon by the
Members, and except as otherwise provided by Section 29-651 of the Act or by any
other applicable state law, the Members shall be liable only to make their
Capital Contributions to the extent provided in Sections 2.3 and 2.4 hereof and
no
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Member shall be required to make any other Capital Contributions or to loan any
amounts to the Company. No Member shall have any personal liability for the
repayment of the Capital Contributions or loans of the other Member.
2.5.4 No Third Party Rights. Nothing contained in this
Agreement is intended or will be deemed to benefit any creditor of the Company,
and no creditor of the Company will be entitled to require the Executive
Committee or any Member to solicit or demand Additional Capital Contributions.
2.5.5 Withdrawal. Except as provided in Section 8 hereof, no
Member may voluntarily or involuntarily withdraw from the Company or terminate
its interest therein without the prior written consent of the other Member. Any
Member who withdraws from the Company in breach of this Section 2.5.5:
2.5.5.1 shall be treated as an assignee of a
Member's interest, as provided in the Act;
2.5.5.2 shall have no right to participate in the
business and affairs of the Company or to exercise any rights of a Member under
this Agreement or the Act; and
2.5.5.3 shall, subject to Section 8.5 hereof,
continue to share in distributions from the Company, on the same basis as if
such Member had not withdrawn, provided that any damages to the Company as a
result of such withdrawal shall be offset against amounts that would otherwise
be distributed to such Member. The right to share in distributions granted under
this Section 2.5.5 shall be in lieu of any right the withdrawn Member may have
under the Act to receive a distribution or payment of the fair value of the
Member's interest in the Company.
2.6 Failure to Contribute.
2.6.1 Default Notice. If any Member (a Non-Contributing
Member") fails to fund its Additional Capital Contributions when due, any Member
which has funded its Additional Capital Contributions (a "Contributing Member")
may give written notice (the "Contribution Notice") to the Non-Contributing
Member, setting forth the amount of the delinquent Additional Capital
Contribution (the "Deficit Amount"). From and after the Contribution Notice, the
Non-Contributing Member's Representatives shall cease to be members of the
Executive Committee (with the Contributing Member's Representatives, if any,
serving as the sole members of the Executive Committee). The rights suspended
under the immediately preceding sentence shall be reinstated only upon the
Non-Contributing Member's funding of the Deficit Amount or repayment of the
applicable Default Loan.
2.6.2 Default Remedies. If the Non-Contributing Member fails
to contribute the Deficit Amount to the Company within 15 days following the
Contribution Notice, the Nondefaulting Member may elect to:
2.6.2.1 recover from the Company the entire amount
of its Additional Capital Contribution made at the time when the
Non-Contributing Member failed to fund its Additional Capital Contribution; or
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2.6.2.2 fund as a loan (a "Default Loan") to the
Non-Contributing Member, all or part of the Deficit Amount by advancing funds
directly to or for the account of the Company.
The foregoing remedies shall be treated for all purposes as concurrent,
nonexclusive remedies.
2.6.3 Election by Contributing Member to Make Default Loans.
Within 30 days following the Contribution Notice (if the Non-Contributing Member
still has not funded its Deficit Amount), the Contributing Member shall provide
written notice to the Non-Contributing Member stating whether the Contributing
Member desires to make a Default Loan. The Non-Contributing Member may make a
Default Loan at any time within 60 days following the Contribution Notice.
Default Loans shall be payable on the terms and conditions set forth in Section
2.6.4. The failure of a Contributing Member to give a Contribution Notice under
this Section 2.6.3 shall not impair or otherwise affect any other remedy
available to the Contributing Member under Section 2.6.2 hereof.
2.6.4 Terms of Default Loans. Default Loans shall bear simple
(noncompounded) interest at the greater of (a) the Prime Rate plus 1% per annum,
or (b) 15% per annum; provided that any Arizona laws limiting the rate of
interest that may be legally charged with respect to a Default Loan shall be
taken into account and, if applicable, the rate of interest charged on the
Default Loans shall be reduced to the maximum rate of interest permitted by such
laws.
2.6.5 Accounting. The Non-Contributing Member shall be treated
as having made an Additional Capital Contribution in the amount of any Default
Loan made to it by the Contributing Member pursuant to Section 2.6.3 hereof.
2.6.6 Treatment of Distributions. While any Default Loan is
outstanding, all payments and cash distributions to which the Non-Contributing
Member is entitled pursuant to Section 3.1, 5.8 or 9.2 hereof shall be paid to
the Contributing Member, first, in payment of the unpaid interest outstanding on
its Default Loan, and then in payment of the outstanding principal balance on
its Default Loan, until the Default Loan has been paid in full. Amounts paid to
the Contributing Member pursuant to the preceding sentence shall be treated as
payments or distributions to the Non-Contributing Member, as appropriate.
Amounts treated as payments shall reduce the amounts, if any, owed by the
Company to the Non-Contributing Member, and amounts treated as distributions
shall be debited to the Non-Contributing Member's Capital Account, and shall be
treated for all purposes of this Agreement as though all such amounts had been
paid or distributed directly to the Non-Contributing Member under Section 3.1,
5.8 or 9.2, as applicable.
SECTION 3. DISTRIBUTIONS
3.1 Distributions. Except as provided in Section 9 hereof,
distributions of Net Cash Flow, if available, shall be made to the Members on a
quarterly basis in proportion to their Percentage Interests.
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SECTION 4. TAX ALLOCATIONS
4.1 General Allocation Rules.
4.1.1 General Allocation Rule. For each taxable year of the
Company, after the application of Section 4.2 hereof, Profits and/or Losses
shall be allocated to the Members in a manner which causes each Member's
Adjusted Capital Account Balance to equal the amount that would be distributed
to such Member pursuant to Section 9.2.3.2 hereof upon a hypothetical
liquidation of the Company in accordance with Section 4.1.2 below.
4.1.2 Hypothetical Liquidation Defined. In determining the
amounts distributable to the Members under Section 9.2.3.2 upon a hypothetical
liquidation, it shall be presumed that (a) all of the Company's assets are sold
at their respective values reflected on the books of account of the Company,
determined in accordance with Code Section 704(b) and Regulations thereunder
("Book Value"), without further adjustment, (b) payments to any holder of a
nonrecourse debt are limited to the Book Value of the assets securing repayment
of such debt, and (c) the proceeds of such hypothetical sale are applied and
distributed in accordance with Section 9.2 hereof.
4.1.3 Special Loss Allocation. If the Company incurs Losses at
any time when the Members' Adjusted Capital Account Balances have been reduced
to or below zero, such Losses shall be allocated to the Members in proportion to
their Percentage Interests.
4.1.4 Special Profits Allocation. If the Company incurs
Profits at any time when the Members' Adjusted Capital Account Balances are less
than zero and the hypothetical liquidation described in Section 4.1.2 would not
result in any distributions to the Members, Profits shall be allocated to the
Members in proportion to their negative Adjusted Capital Account Balances, until
such negative balances have been eliminated.
4.1.5 Item Allocations. To the extent the Executive Committee,
upon consultation with the Company's accountants, determines that allocations of
Profits and/or Losses over the term of the Company are not likely to produce the
Adjusted Capital Account Balances intended under this Section 4.1, then special
allocations of income, gain, loss and/or deduction shall be made as deemed
necessary by the Executive Committee to achieve the intended Adjusted Capital
Account Balances.
4.2 Regulatory and Curative Allocations. The allocations set forth in
Section 4.1 are intended to comply with the requirements of Regulations Sections
1.704-1(b) and 1.704-2. If the Company incurs "nonrecourse deductions" or
"partner nonrecourse deductions," or if there is any change in the Company's
"minimum gain" or "partner nonrecourse debt minimum gain," as defined in such
Regulations, or if the Executive Committee determines that the foregoing
allocations fail for any reason to comply with the Regulations, the allocation
of Profits, Losses and items thereof to the Members shall be modified in a
reasonable manner deemed necessary or advisable by the Executive Committee to
comply with the Regulations; provided that to the extent permitted by the
Regulations, all "nonrecourse deductions" shall be allocated to the Members in
proportion to their Percentage Interests.
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4.3 Capital Account. A Capital Account shall be maintained for each
Member in accordance with the Regulations, under uniform policies and procedures
established by the Executive Committee.
SECTION 5. MANAGEMENT
5.1 Management of Company.
5.1.1 General. Except as specifically provided in Section 5.5,
the right to manage, control and conduct the business and affairs of the Company
shall be vested solely in the Executive Committee.
5.1.1.1 Executive Committee. The Members shall
establish a committee (the "Executive Committee"), which (subject to the
provisions of Section 2.6.1) shall consist of four representatives
(individually, a "Representative" and collectively the "Representatives") to act
on behalf of the Members on all matters relating to the Company. SunPower shall
designate two Representatives (with its initial Representatives being ▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇) and UDC shall designate two Representatives (with
its initial Representatives being ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇).
Representatives may be changed upon written notice from the Member which
appointed the Representative who is being changed to the other Member, provided
that all successor Representatives of a Member shall be reasonably acceptable to
the other Member. Each of SunPower and UDC may appoint one or more alternates
for the Representative(s) appointed by it, which alternate(s) shall be
reasonably acceptable to the other Member and shall have all the powers of the
initially designated Representative(s) in his (their) absence or inability to
serve.
5.1.1.2 Meetings. A meeting of the Executive
Committee may be called by any Member or its Representatives upon written notice
delivered not less than five business days before the meeting, setting forth the
time and general purpose of the meeting. Unless the Representatives collectively
agree otherwise (which agreement may include an arrangement to hold meetings by
telephone conference), all meetings shall be held in the offices of the Company.
Representatives may bring to any meeting such employees, agents, professionals
and advisors as they deem necessary or appropriate to assist them at such
meeting.
5.1.1.3 Decisions. All decisions of the Executive
Committee shall require unanimous agreement of the Representatives, which may be
stated in person or given by proxy or pursuant to written agreements signed by
the Representatives (with or without holding a meeting). Subject to the
provisions of Section 5.5, any Dispute (as defined in Section 5.3) with respect
to decisions by the Executive Committee shall be subject to resolution in
accordance with Section 5.4.
5.1.1.4 Required Effort. The Representatives shall
devote such time to the Company and its business as is appropriate to conduct
the business of the Executive Committee in an effective manner, but shall not be
required to devote their full time efforts to the Executive Committee or the
Company.
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5.1.1.5 Indemnity; Insurance. The liability of the
Representatives shall be limited, and the Representatives shall be indemnified
for their acts to the extent provided in Section 5.7 hereof. Either Member may
procure (at its sole expense) errors and omissions insurance coverage for its
Representatives, for policy limits and risks reasonably acceptable to such
Member.
5.1.2 Assignment and Delegation of Duties. The Executive
Committee shall apportion responsibility for the management and operation of the
Company between the Members on a reasonable basis, such that the
responsibilities and duties allocated to the Members are commensurate with their
respective ownership interests in the Company. The responsibilities allocated to
each Member shall include specific duties, privileges, powers and authority as
deemed necessary by the Executive Committee to further the business and
operations of the Company.
5.1.3 Duties and Authority of Members.
5.1.3.1 Right and Duty to Complete Allocated
Responsibilities. Subject to the Approved Budgets, and to any additional
limitations that may be imposed from time to time by the Executive Committee,
each Member shall have the right and the duty to exert reasonable efforts in a
prompt and businesslike manner to do, accomplish and complete, in accordance
with this Agreement, all responsibilities and duties allocated to it by the
Executive Committee.
5.1.3.2 Standard of Performance. Each Member shall
exercise such skill and care in fulfilling its responsibilities and duties as a
prudent developer with experience in developing projects like the Project would
exercise in dealing with its own property.
5.1.3.3 Effort. The Members shall devote such time
to the Company as is appropriate to supervise and complete in an effective
manner the tasks and activities assigned to them, but shall not be required to
devote their full time efforts to the Company.
5.1.3.4 Means of Performance. Each Member is
hereby authorized to take all actions reasonably deemed necessary by it to carry
out its rights and duties under this Agreement. Subject to the Approved Budget,
and to any additional limitations that may be imposed from time to time by the
Executive Committee, each Member may engage independent contractors at the
expense of the Company to assist such Member in performing its duties under this
Agreement and to render services to the Company in connection with the marketing
and sale of the Project.
5.1.4 Signature Power of Members. Either Member, acting alone
and without the joinder of the other Member, shall have the power to execute and
deliver documents and instruments of every type and nature on behalf of the
Company, which shall be binding on the Company; provided, however, that the
signature of both Members shall be required for documents evidencing Major
Decisions. Any Person dealing with the Company may rely, without further
inquiry, on a certificate signed by any Member as to the existence or
nonexistence of any fact or facts which constitute a condition precedent to acts
by the Member or which are in any other manner germane to the affairs of the
Company. The Members' respective Representatives shall be their designated
agents to execute documents on behalf of each such Member and, in addition, each
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Member may provide to the other Member from time to time written notice of any
other agents designated by the Member to execute documents on its behalf.
5.2 Approval of Budgets.
5.2.1 Types of Budgets. From time to time during the marketing
of the Project, the Representatives shall prepare and present for the approval
of the Executive Committee in accordance with Section 5.3 the following budgets
(each, a "Budget"): (a) a separate, general budget for each phase of the Project
setting forth in general terms the budget needs for such phase over its
anticipated marketing term, (b) a separate annual budget for each phase of the
Project currently being marketed, setting forth in specific terms and specific
detail all costs expected to be incurred under the relevant marketing plan, and
(c) a separate annual operating budget for the Company, setting forth in detail
all anticipated Company expenses which are not addressed in other more specific
budgets. Any Representative may from time to time submit revisions or
modifications to Budgets to the Executive Committee for approval; provided that
no revisions or modifications shall be implemented unless approved in accordance
with Section 5.3 hereof.
5.2.2 Annual Operating Budgets. Not later than 90 days
following the execution of this Agreement, the Executive Committee shall
approve, in accordance with the provisions of Section 5.3, an initial operating
budget for the 1998 calendar year (the "Initial Operating Budget"). The
Representatives shall present a revised annual operating budget for approval by
the Executive Committee not later than November 1 of each year preceding the
year covered by the proposed budget. The Executive Committee shall approve the
annual operating budget by December 1 of each year in accordance with the
provisions of Section 5.3.
5.2.3 Limitation on Expenditures; Use of Reserves. Budgets
shall include a reasonable contingency reserve for unanticipated costs
associated with the matters covered thereby. Specific expenditures to market the
Project may be made only pursuant to an Approved Budget; provided that the
Members shall have discretion to use contingency reserves included in any
Approved Budget in any reasonable manner and shall be permitted to make
reasonable adjustments between line items reflected on an Approved Budget if the
expenses intended to be paid pursuant to the line item from which funds are
transferred are in fact incurred and paid (at a total cost less than budgeted)
and the items on which the transferred funds are expended were included among
the items set forth in the Approved Budget (and were incurred at a cost greater
than budgeted). Notwithstanding the foregoing, any increase in excess of 25% in
any individual line item in an Approved Budget that exceeds $25,000 shall
require the approval of the Executive Committee.
5.2.4 Definitions Relating to Budgets. The Initial Operating
Budget and each other Budget, including any revisions thereto, which is approved
in accordance with Section 5.3 hereof, shall be termed an "Approved Budget." All
expense items identified in the Company's Approved Budgets from time to time
shall constitute "Approved Expenses" of the Company.
5.3 Mechanism for Obtaining Consents. The Representatives may propose
approval of Budgets and amendments thereto and any marketing plans with respect
to the Project by the Executive Committee by giving notice thereof to each
Representative (which notice may include alternative recommendations or
proposals by the Representatives). The Representatives shall cooperate in good
faith to reach unanimous agreement on all matters submitted for the approval of
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the Executive Committee (including, without limitation, the matters set forth in
Section 5.5 hereof, any Budgets, marketing plans and modifications thereto
proposed by a Representative and any other matters proposed by the
Representatives) within 30 days of their submission to the Executive Committee.
If agreement by a unanimous vote of the Representatives cannot be achieved with
respect to a particular issue (the absence of agreement on that issue being
referred to herein as a "Dispute") within such 30-day period, the parties wish
to provide for an efficient and prompt resolution thereof through the dispute
resolution mechanism of Section 5.4, rather than through litigation.
Accordingly, the Members hereby waive their rights to institute litigation with
respect to any Dispute arising under this Agreement, and consent instead to be
bound by the results of the dispute resolution mechanism of Section 5.4.
Notwithstanding the foregoing, disagreements with respect to matters described
in Section 5.5 shall not be "Disputes" nor be subject to resolution pursuant to
Section 5.4, provided that a disagreement regarding whether any act is outside
the scope of the Company's Permitted Activities shall constitute a Dispute and
shall be subject to resolution pursuant to Section 5.4.
5.4 Dispute Resolution.
5.4.1 Initial Designation of Arbitrators. The Company shall
maintain a list of five or more individuals whom the Members have mutually
agreed are qualified to serve as arbitrators to resolve Disputes. The initial
arbitrator list shall be agreed upon by the Members and attached to this
Agreement not later than January 15, 1998.
5.4.2 Disclosure of Business Relationships; Replacement of
Arbitrator. The Members shall disclose to each other in writing all material
business relationships they have had in the past five years with any arbitrator
before an arbitrator is added to the arbitrator list. The Members shall also
disclose to each other in writing all material business relationships they
develop with an arbitrator once the arbitrator has been added to the arbitrator
list. An individual shall remain on the arbitrator list until removed by the
mutual consent of the Members; provided that if any Person designated on the
arbitrator list dies, refuses to serve or for any other reason is unable to
serve, the Members shall designate an additional Person to fill the vacancy on
the arbitrator list. An individual shall be added to the arbitrator list only
upon the unanimous consent of the Members; provided that if a vacancy on the
arbitrator list is not filled within 30 days of the event that caused such
vacancy, the remaining Persons on the arbitrator list shall promptly choose a
new arbitrator to fill the vacancy.
5.4.3 Dispute Notice. If both Representatives of a Member
believe that a Dispute exists, the Member shall notify the other Member thereof,
which notice (a "Dispute Notice") shall identify the Dispute and set forth
briefly the notifying Member's position with respect to the Dispute. As promptly
as practicable, and in any event within one week of the giving of the Dispute
Notice, the Members shall meet in an attempt to resolve the Dispute. If the
Dispute cannot be resolved at that meeting, either Member may institute the
arbitration process on the terms set forth in Section 5.4.4.
5.4.4 Arbitration. The arbitration process shall be conducted
by an arbitrator selected by random means from the arbitrator list described
above. In general, the arbitrator shall follow the rules of the American
Arbitration Association, but shall have discretion to vary from those guidelines
in light of the nature or circumstances of any particular Dispute. In all
events,
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unless waived by the Members, the arbitrator will conduct an arbitration hearing
at which the Members and their counsel shall be present and have the opportunity
to present evidence and examine the evidence presented by the other Member. The
proceedings at the arbitration hearing shall, unless waived by the Members, be
conducted under oath and before a court reporter. Upon the conclusion of the
arbitration hearing, the arbitrator shall and must select the position offered
by one of the Members with respect to each individual Dispute (i.e., each issue
presented for resolution), without variation. The parties shall cooperate in
good faith to permit a conclusion of the arbitration hearing within 90 days
following the meeting described in Section 5.4.3, and shall endeavor to submit a
joint statement setting forth each Dispute to be resolved, including a summary
of each Member's position on each Dispute. The decision of the arbitrator with
respect to any Dispute shall be final and binding on the Members and shall be
treated as an approval of the matter subject to the Dispute by the Members
pursuant to Section 5.3.
5.4.5 Standards of Conduct. The Members agree that with
respect to all aspects of the dispute resolution process contained herein they
will conduct themselves in a manner intended to assure the integrity and
fairness of that process. To that end, if a Dispute is submitted to arbitration,
the Members agree that they will not contact or communicate with the arbitrator
with respect to any Dispute either ex parte or outside of the contacts and
communications contemplated by this Section 5.4, and the Members further agree
that they will cooperate in good faith in the production of documentary and
testimonial evidence in a prompt and efficient manner to permit the review and
evaluation thereof by the other Member.
5.4.6 Costs. The cost of resolving any Dispute by arbitration
shall be borne by the Company (and shall be treated as an Approved Expense for
all purposes of this Agreement).
5.5 Major Decisions. Notwithstanding any provision of this Agreement to
the contrary, the following matters (each, a "Major Decision") shall require the
consent of both Members, which may be withheld in the sole and absolute
discretion of each Member (and which shall not be subject to resolution pursuant
to Section 5.4 hereof):
5.5.1 Any amendment to this Agreement;
5.5.2 An act which is outside the scope of the Company's
Permitted Activities;
5.5.3 The dissolution of the Company pursuant to Section 9.1
hereof;
5.5.4 Admission of any new Member to the Company;
5.5.5 Filing, consenting to or acquiescing in any act or event
that would constitute an event of bankruptcy with respect to the Company;
5.5.6 Acquiring by lease, purchase or otherwise additional
real property;
5.5.7 Any call for Additional Capital Contributions in excess
of the aggregate cap on Additional Capital Contributions set forth in Section
2.4;
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5.5.8 Incurring any material cost or expense that is not
authorized in an Approved Budget or undertaking any activity that is
inconsistent with any approved marketing plan;
5.5.9 Determining the amount of reserves to be maintained by
the Company;
5.5.10 Borrowing or incurring an obligation for borrowed funds
in any amount, unless such borrowing is specifically contemplated in an Approved
Budget or is accomplished pursuant to a Default Loan as provided in Section 2.6
hereof;
5.5.11 Entering into or making bulk sales or long term leases
of substantial portions of the Property; or
5.5.12 Entering into any contract or arrangement which
requires any payments to any Affiliate of a Member, except as expressly
authorized by this Agreement.
. The provisions of this Section 5.6 are intended to serve as guidelines to the
Executive Committee in attempting to agree on any approved marketing plan, and
the Approved Budgets and other matters contemplated by this Agreement (and to
serve as a basis or standard to be applied by an arbitrator pursuant to Section
5.4 hereof, if necessary).
5.6.1 Agreement to Optimize Returns. It is the intent of the
Company to market the Project as soon as market and other circumstances
reasonably permit. Any marketing plan shall be prepared in a manner which
optimizes the Members' returns from the Project over its contemplated
development cycle, consistent with good land planning principles, prudent
business practices and market conditions.
5.6.2 Consideration of Parties' Varying Interests. Any
marketing plan and each Budget shall take into consideration all of the facts
relating to the Members and the Property, including the Members' respective
capital investments and interests in the Company, the economic sharing
arrangements contemplated by this Agreement and the need for marketing and sale
of the Property in an orderly manner that protects the interests of all Members.
13
5.7 Limitations on Liability; Indemnity. No Member, its Representatives
or its or their Affiliates (an "Actor") shall be liable to the Company or the
other Members for actions taken in good faith by the Actor in connection with
the Company or its business; provided that the Actor shall in all instances
remain liable for acts in breach of this Agreement or which constitute bad
faith, fraud, willful misconduct or gross negligence (except to the extent the
Company is compensated for the same by insurance coverage maintained in
accordance with this Agreement). The Company, its receiver or trustee shall
indemnify, defend and hold harmless each Actor, to the extent of the Company's
assets (without any obligation of any Member to make contributions to the
Company to fulfill such indemnity), from and against any liability, damage,
cost, expense, loss, claim or judgment incurred by the Actor arising out of any
claim based upon acts performed or omitted to be performed by the Actor in
connection with the business of the Company, including without limitation
attorneys' fees and costs incurred by the Actor in the settlement or defense of
such claim; provided that no Actor shall be indemnified for claims based upon
acts performed or omitted in breach of this Agreement or which constitute bad
faith, fraud, willful misconduct or gross negligence.
5.8 Compensation and Expenses of the Members. The Members shall be
entitled to reimbursement from the Company for costs incurred by them and their
Representatives in connection with the performance of their respective duties
hereunder in the manner and to the extent set forth on Exhibit A. The
reimbursements set forth on Exhibit A are intended to fully compensate each
Member for any direct expenses incurred by the Members or the Representatives
for legal, accounting, auditing and other services provided for the benefit of
the Company (whether rendered by Affiliates of a Member or Representative or
otherwise) and for any facilities (such as office space) and supplies provided
to the Company and, except as set forth on Exhibit A, the Members, their
Affiliates and their Representatives shall not receive any reimbursement for the
foregoing items or matters, nor shall they receive any fees or other
compensation from the Company, unless unanimously agreed from time to time by
the Members.
SECTION 6. BOOKS AND RECORDS
6.1 Books and Records. UDC shall keep adequate books and records at the
Company's place of business, setting forth a true and accurate account of all
business transactions arising out of and in connection with the conduct of the
Company. The costs and expenses (including employee costs) incurred by UDC in
maintaining such books and records shall be paid or reimbursed to it by the
Company to the extent provided in Section 5.8. Any Member or its designated
representative shall have the right, at any reasonable time, to have access to
and inspect, copy and audit the contents of such books or records. Unless the
Executive Committee determines otherwise, the Company's financial books and
records shall be audited annually at the expense of the Company, by a firm of
independent certified accountants selected by the Executive Committee, and the
costs of the audit shall be treated as an Approved Expense for purposes of this
Agreement.
6.2 Reports. Within 45 days following the end of each calendar quarter,
UDC shall furnish each Member with: (a) cash basis financial statements
consisting of a balance sheet and income statement for the quarter then ended,
and, in the case of the report for the last quarter of each year, the same
financial statements for the year then ended; and (b) a marketing status report.
UDC shall also provide monthly statements to the Members comparing actual
Company expenses with those projected on the then current Approved Budget.
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6.3 Tax Matters. UDC shall cause necessary tax information to be
delivered to each Member as soon as reasonably practicable after the end of each
fiscal year of the Company. UDC shall be the "Tax Matters Partner" pursuant to
the Code and shall coordinate with the Company's accountants the preparation of
tax information and tax returns relating to the Company, subject to the approval
of the Executive Committee.
6.4 Bank Accounts. UDC shall open and maintain in the Company's name
one or more bank accounts, into which shall be deposited all Company funds and
only Company funds. The funds in the Company's bank accounts may be withdrawn
solely to pay Approved Expenses. Withdrawals from any Company bank account may
be made by checks or other withdrawal forms signed by UDC.
SECTION 7. AMENDMENTS
7.1 Amendments. This Agreement may not be amended, except by a written
instrument signed by the Members.
SECTION 8. TRANSFER OF COMPANY INTERESTS; NEW MEMBERS
8.1 General. No Member shall sell, assign, pledge, hypothecate,
encumber or otherwise voluntarily transfer by any means whatever ("Transfer")
all or any portion of its interest in the Company (or permit any Person directly
or indirectly holding any interest in such Member directly or indirectly to
Transfer any part of such interest), except for Transfers (a) approved in
writing by all Members, or (b) permitted under Section 8.2 hereof. A transferee
of a Member's interest in the Company will be admitted as a Substituted Member
only pursuant to Section 8.4 hereof. Any purported Transfer which does not
comply with the provisions of this Section 8 shall be void and of no force or
effect.
8.2 Permitted Transfers. Notwithstanding Section 8.1 hereof, a Member
may permit direct and indirect Transfers of interests in such Member so long as
such Transfers do not result in a Change in Control of such Member.
8.3 Assignee of Member's Interest. If, pursuant to a Transfer of an
interest in the Company by operation of law and without violation of Section 8.1
hereof (or pursuant to a Transfer that the Company is required to recognize
notwithstanding any contrary provisions of this Agreement), a Person acquires an
interest in the Company, but is not admitted as a Substituted Member pursuant to
Section 8.4 hereof, then, subject to Section 8.5 hereof, such Person:
8.3.1 shall be treated as an assignee of a Member's interest,
as provided in the Act;
8.3.2 shall have no right to participate in the business and
affairs of the Company or to exercise any rights of a Member under this
Agreement or the Act; and
8.3.3 shall share in distributions from the Company with
respect to the transferred interest, on the same basis as the transferring
Member.
15
8.4 Substituted Members. No Person taking or acquiring, by whatever
means, the interest of any Member in the Company shall be admitted as a
substituted Member in the Company (a "Substituted Member") without the written
consent of all Members, which consent may be withheld or granted in the sole and
absolute discretion of each Member.
8.5 Option to Purchase.
8.5.1 General. Upon any Transfer of an interest in the Company
in violation of this Section 8 or upon a Transfer of any interest in a Member
that is prohibited by this Agreement (a "Triggering Event"), the Member to whom
a Triggering Event has not occurred (the "Option Member") shall have the right,
but not the obligation, to purchase the entire interest in the Company (the
"Option Interest") of the Member to whom the Triggering Event occurred (the
"Selling Member"), on the terms and conditions set forth in this Section 8.5.
8.5.2 Election. An Option Member may invoke the valuation
procedure of Section 8.5.3 by giving written notice (the "Valuation Notice") to
the Selling Member (or, if applicable, its representatives, successors, or
assigns) and to each other Option Member, if any, at any time within six months
following the Option Member's actual knowledge of the Triggering Event.
8.5.3 Valuation Procedure. For a period of 60 days following
the Valuation Notice, the Option Member and the Selling Member (or, if
applicable, the representatives, successors or assigns of the Selling Member)
shall negotiate in good faith to determine the fair market value of all of the
Company's assets, taken as a whole, exclusive of any goodwill or other
intangible asset that does not have a book value for accounting purposes (the
"Assets"). If the parties are unable to agree on the fair market value of the
Assets within the prescribed 60-day period, the parties shall, within 15 days
following the end of such 60-day period, unanimously select an appraiser or
appraisers to determine the fair market value of the Assets. If the parties are
unable to agree on an appraiser or appraisers within the foregoing 15-day
period, then at the election of any party, the selection of an appraiser or
appraisers shall be submitted to dispute resolution in accordance with Section
5.4 hereof. Following his or their selection, the appraiser(s) shall determine
as soon as practicable the fair market value of the Assets assuming, for
purposes of determining such value, that the Assets are liquidated in an orderly
manner over a period of six months. The parties' agreement as to value, or if
applicable, the appraiser's (appraisers') determination of value shall be
binding on all parties for purposes of this Agreement. The date of the parties'
agreement on the value of the Assets, or, if applicable, the date of the final
appraisal report(s), is referred to hereinafter as the "Valuation Date." All
appraisal costs and costs under Section 5.4 shall be borne by the Selling
Member.
8.5.4 Purchase Price. The purchase price of the Option
Interest shall equal 95% of the amount the Selling Member would receive pursuant
to Section 9.2.3 if the Assets were sold for cash at their fair market value
(determined in accordance with Section 8.5.3), the Company immediately
dissolved, and its assets were applied and distributed (without retention of any
reserves) in liquidation pursuant to Section 9.2 hereof.
16
8.5.5 Exercise of Right. Within 60 days following the
Valuation Date, the Option Member shall give written notice to the Selling
Member stating whether such Option Member desires to purchase the Option
Interest. The Option Member shall thereafter be entitled to purchase the Option
Interest by delivering to the Selling Member (or, if applicable, to the
representatives, successors or assigns of the Selling Member) the Option
Member's negotiable promissory note (the "Note") in a principal amount equal to
the purchase price determined under Section 8.5.4, payable in equal annual
installments of principal together with annual payments of interest at the Prime
Rate, over a period not to exceed five years, with the first installment due and
payable one year from the date of sale. The Note shall be secured by a
collateral assignment of the Option Interest acquired by the Option Member, in a
commercially reasonable form determined by the Option Member. The Note shall be
due and payable in full at such time as the net fair market value of the
Company's remaining assets (as reasonably determined by the Option Member) is
less than 200% of the then outstanding balance of the Note.
8.5.6 Deliveries by Selling Member. Upon receipt of an Option
Member's Note, the Selling Member (or, if applicable, its representatives,
successors or assigns) shall deliver to the Option Member an executed assignment
of the Option Interest to be acquired by the Option Member, sufficient to convey
such interest to the Option Member free and clear of any liabilities, liens,
claims or encumbrances, except those taken subject to by the Option Member, as
provided below.
8.5.7 Assumption and Release. In connection with the purchase
of any portion of the Option Interest hereunder, the Option Member shall release
the Selling Member from and assume, as appropriate, such Company-related
obligations and guarantees as shall relate to the transferred portion of the
Option Interest and agree to indemnify and hold harmless the Selling Member with
respect to all such obligations and guarantees.
8.5.8 Closing Adjustments. If the Option Interest is subject
to any liability, lien, claim or encumbrance (including, without limitation, any
Default Loan), the Option Member may elect (a) to cause the purchase price (or a
portion thereof) to be applied to discharge such liability, lien, claim or
encumbrance, or (b) to take the relevant portion of the Option Interest subject
to such liability, lien, claim or encumbrance and to reduce the purchase price
otherwise payable by the Option Member to the Selling Member by the amount of
such liability, lien, claim or encumbrance.
8.5.9 Use of Nominee. At the election of a Option Member, the
purchase of all or part of the Option Interest pursuant to this Section 8.5 may
be completed by a nominee of the Option Member, in which case, the obligations
of the Option Member under this Section 8.5 shall be performed by the nominee
rather than the Option Member.
8.6 Distributions in Respect of Transferred Interests. If any interest
in the Company is transferred during any accounting period in compliance with
the provisions of this Section 8, all distributions on or before the date of
such Transfer shall be made to the transferor, and all distributions thereafter
shall be made to the transferee.
SECTION 9. DISSOLUTION AND TERMINATION
17
9.1 Dissolution. The Company shall dissolve upon the first to occur of
any of the following events:
9.1.1 December 31, 2075;
9.1.2 The sale of all or substantially all of the Property and
the collection of the proceeds of such sale;
9.1.3 The unanimous election by the Members to dissolve the
Company;
9.1.4 Upon the entry of a decree of dissolution under Section
29-785 of the Act; or
9.1.5 Upon any other Withdrawal Event, unless the business of
the Company is continued by the specific written consent of the remaining
Member(s) given within 90 days after it acquires actual knowledge of such event.
9.2 Winding Up.
9.2.1 Notice of Winding Up. Following the dissolution of the
Company, as provided in Section 9.1 hereof, the Executive Committee may execute
and file a notice of winding up with the Arizona Corporation Commission.
9.2.2 Effect of Filing. After the dissolution of the Company,
the Company shall cease to carry on its business, except insofar as may be
necessary for the winding up of its business, but the Company's separate
existence shall continue until articles of termination have been filed with the
Arizona Corporation Commission or until a decree dissolving the Company has been
entered by a court of competent jurisdiction.
9.2.3 Liquidation and Distribution of Assets. Upon the
dissolution of the Company, the remaining Member(s), or a court-appointed
trustee, if there is no remaining Member, shall take full account of the
Company's liabilities and assets, and such assets shall be liquidated as
promptly as is consistent with obtaining the fair value thereof. During the
period of liquidation, the business and affairs of the Company shall continue to
be governed by the provisions of this Agreement, with the management of the
Company continuing as provided in Section 5 hereof. The proceeds from
liquidation of the Company's property, to the extent sufficient therefor, shall
be applied and distributed in the following order:
9.2.3.1 To the payment and discharge of all of the
Company's debts and liabilities, including those to Members who are creditors
(to the extent permitted by law), and to the establishment of any necessary
reserves; and
9.2.3.2 To the Members and in accordance with
Section 3.1 hereof.
9.3 Articles of Termination. When all debts, liabilities and
obligations of the Company have been paid and discharged or adequate provisions
have been made therefor and all of the
18
remaining property and assets of the Company have been distributed to the
Members, articles of termination shall be executed and filed by the Members with
the Arizona Corporation Commission.
SECTION 10. MISCELLANEOUS
10.1 Notices. Any notice, payment, demand or communication required or
permitted to be given by any provision of this Agreement shall be in writing and
shall be delivered personally to the Person to whom the same is directed, sent
by registered or certified mail, return receipt requested, addressed to the
Member at the address appearing below such Person's name on the signature pages
to this Agreement, or by facsimile transmission to the "FAX" number set below
such Person's name on the signature pages to this Agreement, or if to the
Company, by notice to each Member as herein provided, or to such other address
as the parties may from time to time specify by notice in accordance with this
Section 10.1. Any such notice shall be deemed to be delivered, given and
received for all purposes as of the date so delivered, if delivered personally
or if sent by facsimile transmission, or, if sent by certified or registered
mail, three days following the date on which the same was deposited in a
regularly maintained receptacle for the deposit of United States mail, postage
and charges prepaid.
10.2 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.
10.3 Construction. Every covenant, term and provision of this Agreement
shall be construed simply according to its fair meaning and not strictly for or
against any Member.
10.4 Time. Time is of the essence with respect to this Agreement.
10.5 Headings. Section and other 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.
10.6 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.
10.7 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.
10.8 Additional Documents. Each Member, upon the request of the other
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.
10.9 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.
19
10.10 Arizona Law. The laws of the State of Arizona shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Members.
10.11 Waiver of Action for Partition. Each Member irrevocably waives
any right that such Member may have to maintain any action for partition with
respect to any of the Company's property.
10.12 Counterpart Execution; Facsimile Signatures. This Agreement may
be executed in any number of counterparts pursuant to original or facsimile
copies of signatures with the same effect as if both of the Members had signed
the same document pursuant to original signatures. All counterparts shall be
construed together and shall constitute one agreement.
10.13 Representations and Warranties. Each Member represents and
warrants to the Company and to the other Member that:
10.13.1 It has acquired its interest in the Company for its
own account, for investment, and not with a view to or for the resale,
distribution, subdivision or fractionalization thereof;
10.13.2 It has no contract, undertaking, understanding,
agreement or arrangement, formal or informal, with any Person to sell, transfer
or pledge all or any portion of its interest in the Company and has no current
plans to enter into any such contract, undertaking, understanding, agreement or
arrangement;
10.13.3 It has such business and financial experience alone,
or together with its professional advisers, that it has the capacity to protect
its own interests in connection with its acquisition of an interest in the
Company;
10.13.4 It has sufficient financial strength to hold the
interest in the Company as an investment and bear the economic risks of that
investment (including possible complete loss of such investment) for an
indefinite period of time;
10.13.5 It has been afforded the same access to the books,
financial statements, records, contracts, documents and other information
concerning the Company and the prospective business of the Company as has been
afforded the other Member and has been afforded an opportunity to ask such
questions as it has deemed necessary or desirable in order to evaluate the
merits and risks of the investment contemplated herein;
10.13.6 It acknowledges that it has performed its own due
diligence with respect to its interest in the Company and is relying on that due
diligence in making this investment and that it is not relying on the other
Member or its Affiliates with respect to tax, suitability or other economic
considerations;
10.13.7 This Agreement constitutes a legal, valid and binding
obligation of the Member enforceable against the Member in accordance with its
terms;
20
10.13.8 To the Member's knowledge, the execution, delivery and
performance of this Agreement by the Member does not and will not violate,
conflict with or contravene any judgment, order, decree, writ or injunction, or
any law, rule, regulation, contract or agreement to which the Member is subject;
and
10.13.9 It has no knowledge of any existing facts or
circumstances that would serve as a major impediment to the development of the
Project as currently conceived by the Members.
10.14 Glossary. For purposes of this Agreement, the following terms
shall have the meanings specified in this Section 10.14:
"Act" means the Arizona Limited Liability Company Act, as set forth in
A.R.S. ss. 29-601 et seq., as amended from time to time (or any corresponding
provisions of succeeding law).
"Actor" has the meaning given that term in Section 5.7 hereof.
"Additional Capital Contributions" has the meaning given that term in
Section 2.4.2 hereof.
"Adjusted Capital Account Balance" means an amount with respect to any
Member equal to the balance in such Member's Capital Account at the end of the
relevant fiscal year, after increasing the balance in such Member's Capital
Account by any amount which such Member is deemed to be obligated to restore
pursuant to Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5).
"Affiliate" means, with respect to any Person: (a) any Person directly
or indirectly controlling, controlled by or under common control with such
Person; (b) any Person owning or controlling 10% or more of the outstanding
voting interests of such Person; (c) any officer, director, or general partner
of such Person; or (d) any Person who is an officer, director, general partner,
trustee or holder of 10% or more of the voting interests of any Person described
in clauses (a) through (c) of this definition.
"Agreement" means this Operating Agreement, as amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder,"
refer to this Agreement as a whole, unless the context otherwise requires.
"Approved Budget" has the meaning given that term in Section 5.2.4
hereof.
"Approved Expenses" has the meaning given that term in Section 5.2.4
hereof.
"Articles of Organization" has the meaning given that term in Section
1.9 hereof.
"Assets" has the meaning given that term in Section 8.5.3.
"Book Value" has the meaning given that term in Section 4.1.2 hereof.
"Budget" has the meaning given that term in Section 5.2.1 hereof.
21
"Capital Account" means the capital account maintained for each Member
in accordance with Section 4.3 hereof.
"Capital Contribution" means, with respect to any Member, the amount of
money and the net fair market value of any property (other than money)
contributed to the Company by such Member pursuant to any provision of this
Agreement.
"Change of Control" means a change in ownership or control of a Member
effected through a consolidation or merger with or into any other entity or any
direct or indirect sale, assignment, transfer, lease or other disposition of all
or substantially all of a Member's assets to another Person, unless (i) the
surviving or successor entity in the event of a merger or consolidation, or the
Person to which a sale, assignment, transfer or lease is made (the "Surviving
Entity") (a) is an entity organized and existing under the laws of the United
States, any state thereof or the District of Columbia and (b) expressly assumes
all the obligations of the Member under this Agreement; (ii) immediately after
giving effect to such transaction, no event of default and no event which, after
notice or lapse of time, or both, would become an event of default, would exist;
and (iii) the tangible net worth of the Member or the Surviving Entity, as the
case may be, on a pro forma basis after giving effect to such consolidation,
merger or sale, lease or conveyance of assets would be at least equal to the
tangible net worth of the Member immediately prior to the date of such
transaction. Notwithstanding the foregoing, clause (iii) shall not prohibit a
transaction, the principal purpose of which is (as determined in good faith by
the Member) to change the state of organization of the Member, and such
transaction does not have as one of its purposes the evasion of the restrictions
of this provision.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time (or any corresponding provisions of succeeding law).
"Company" means the limited liability company formed pursuant to this
Agreement and any limited liability company continuing the business of this
Company in the event of dissolution as herein provided.
"Contributing Member" has the meaning given that term in Section 2.6.1
hereof.
"Contribution Notice" has the meaning given that term in Section 2.6.1
hereof.
"Default Loan" has the meaning given that term in Section 2.6.2.2
hereof.
"Deficit Amount" has the meaning given that term in Section 2.6.1
hereof.
"Dispute" has the meaning given that term in Section 5.3 hereof.
"Dispute Notice" has the meaning given that term in Section 5.4.3
hereof.
"Executive Committee" has the meaning given that term in Section
5.1.1.1 hereof.
"Independent Activities" has the meaning given that term in Section
1.10.1 hereof.
22
"Initial Operating Budget" has the meaning given that term in Section
5.2.2 hereof.
"Major Decision" has the meaning given that term in Section 5.5 hereof.
"Member" means any Person identified as a Member in the introductory
paragraph to this Agreement. If any Person is admitted as Substituted Member
pursuant to the terms of this Agreement, "Member" shall be deemed to refer also
to such Person. "Members" refers collectively to all Persons who are designated
as a "Member" pursuant to this definition.
"Net Cash Flow" means the gross cash proceeds from Company operations
(including from sales, dispositions or refinancings of Company property), less
the portion thereof used to pay or establish reserves for Company expenses, debt
payments, capital improvements, replacements and contingencies, all as
reasonably determined by the Executive Committee, consistent with any Approved
Budget then in effect.
"Non-Contributing Member" has the meaning given that term in Section
2.6.1 hereof.
"Option Interest" has the meaning given that term in Section 8.5.1
hereof.
"Option Member" has the meaning given that term in Section 8.5.1
hereof.
"Percentage Interest" means, with respect to each Member, the
percentage identified in Section 2.1 hereof as that Member's "Percentage
Interest" in the Company, subject to the adjustments provided under Section 2.1.
"Permitted Activities" has the meaning given that term in Section 1.4
hereof.
"Person" means any individual, partnership, corporation, trust, limited
liability company or other entity.
"Prime Rate" means the prime rate of interest announced from time to
time by Bank One, Arizona NA, or its successor.
"Profits" and "Losses" mean, for each fiscal year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a), reduced by any items of
income or gain subject to special allocation pursuant to Section 4.2 hereof, and
otherwise adjusted by the Executive Committee to comply with Regulation Sections
1.704-1(b) and 1.704-2(b).
"Project" means the age-restricted residential community to be
developed on the Property.
"Property" means approximately 670 acres of unimproved real property
located in Gilbert, Arizona.
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"Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Representative" has the meaning given that term in Section 5.1.1.1
hereof.
"Selling Member" has the meaning given that term in Section 8.5.1
hereof.
"Substituted Member" has the meaning given that term in Section 8.4
hereof.
"SunPower" means SunPower Properties L.L.C., an Arizona limited
liability company.
"Transfer" has the meaning given that term in Section 8.1 hereof.
"Triggering Event" has the meaning given that term in Section 8.5.1
hereof.
"UDC" means UDC Homes, Inc., a Delaware corporation.
"Valuation Date" has the meaning given that term in Section 8.5.3
hereof.
"Valuation Notice" has the meaning given that term in Section 8.5.2
hereof.
"Withdrawal Event" means those events and circumstances listed in
Section 29-733 of the Act.
[Signatures follow on next page]
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first above written.
SunPower Properties L.L.C., an Arizona
limited liability company
By: Sunbelt/Acacia L.L.C., an Arizona
limited liability company, Manager
By: Sunbelt Holdings II L.L.C.,
an Arizona limited liability
company, Manager
By: Sunbelt Holdings Management, Inc.,
an Arizona corporation, Manager
By:
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Its:
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UDC Homes, Inc., a Delaware
corporation
By:
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Exhibit A
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(Reimbursement of Member Expenses and Overhead)