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EXHIBIT 10.6
LIMITED LIABILITY COMPANY AGREEMENT
OF PALM COVE DEVELOPERS. LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "AGREEMENT") of
PALM COVE
DEVELOPERS, LLC (the "Company") is made and entered into
effective as of the
19th day of January, 2005 ("Effective Date"), by and between
ASHTON TAMPA
RESIDENTIAL, LLC, a Nevada limited liability company ("Ashton")
and M/I HOMES OF
TAMPA LLC, a Florida limited liability company ("M/I"). M/I and
Ashton are
sometimes referred to herein collectively as "Members" and
individually as a
"Member."
RECITALS
WHEREAS, Ashton and Pulte Home Corporation entered into that
certain
Agreement for Sale of Land (the "Pulte Contract") for the
purchase and sale of
certain real and other related property subject to the Pulte
Contract (defined
therein as the "Property") (The Pulte Contract is attached
hereto as Exhibit "A"
and incorporated by reference herein) and;
WHEREAS, as contemplated by that certain Letter Agreement
("Letter
Agreement") dated as of December 22, 2004, by and between Ashton
and M/I, Ashton
assigned the Pulte Contract to Company and the Company acquired
the Property
(the "Property Closing"); and
WHEREAS, as further contemplated by the Letter Agreement,
Company, Ashton
and M/I are entering into this Agreement to consummate M/I's
subscription for
one-half (i.e., 50%) of the total equity or membership interests
in and to the
Company and to set forth certain terms and conditions applicable
to the
development of the Property by Company, the distribution of
finished lots to the
Members and other applicable terms and conditions related to the
business
affairs of the Company and the development of the Property;
and
NOW, THEREFORE, the Members, by the execution and delivery of
this
Agreement, set forth the agreement for the Company under the
laws of the State
of Florida upon the terms and subject to the conditions of this
Agreement.
1. DEFINITIONS. All capitalized terms not defined in this
Agreement shall
have the meaning ascribed to them in the Pulte Contract. When
used in this
Agreement, the following terms shall have the meanings set forth
below:
(a) "ACT" shall have the meaning ascribed to it in Section 2.1.
All
references herein to sections of the Act shall include any
corresponding
provisions of succeeding law.
(b) "AFFILIATE" shall mean, when used with reference to a
specified
Person, any Person who controls, is controlled by or is under
common control
with the specified Person.
(c) "AGREEMENT" shall mean this Limited Liability Company
Agreement, as
originally executed and as amended from time to time.
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(d) "APPROVED BUSINESS PLAN" means collectively, after
submission and
approval as described herein, the following: (i) a pro-forma
budget and
development plan for the Property (the "Project") in accordance
with the Pulte
Contract, the Development Agreement (defined in Section 1.(o)
hereof,) and this
Agreement (the "Project Budget and Plan") and (ii) a Member
capital contribution
plan for the capital contributions by the Membere for the
construction of the
Project by the Company (the "Project Contribution Plan"), as
each of the same
may be amended from time to time in accordance with this
Agreement. The
Day-to-Day Manager shall endeavor to prepare and provide for
M/I's approval the
applicable Project Budget and Plan and the Project Contribution
Plan within
fifteen (15) days after the Effective Date. M/I shall endeavor
to approve such
Project Budget and Plan and the Project Contribution Plan
submitted by the
Day-to-Day Manager within fifteen (15) days of M/I's receipt of
the submitted
Project Budget and Plan and Project Contribution Plan; provided,
the parties
intend to work together as reasonably possible in preparing and
reviewing all
matters applicable to the Approved Business Plan (as defined in
the following
sentence). Upon each party's written approval of the Project
Budget and Plan and
Project Contribution Plan, such plans shall be considered and
referred to herein
as the "Approved Project Budget and Plan" and the "Approved
Project Contribution
Plan," and collectively shall be considered and referred to
herein as the
"Approved Business Plan." The Approved Business Plan is intended
to be the
overall plan and budget for the planning, development, and
construction of the
Project, including the distribution of finished lots to the
Members, the
projection and timing of annual Project expenditures, including,
without
limitation, development costs, construction costs, and
maintenance costs, all of
which shall be set forth in detail with each category of expense
listed as a
separate line item and a preliminary cost analysis for the
Project. Such
expenses shall be further separately delineated into two major
categories of
line item expenses as follows: (a) those line item expenses
constituting
"Operating Costs" and (b) those line item expenses constituting
"Development
Costs." The parties acknowledge that the Approved Business Plan
will require
updating or modification during the term of the Project as a
result of changes
to projected and actual costs, permitting conditions, etc. The
Day-to-Day
Manager shall regularly consult with and seek the input of the
other Member in
connection with the Day-to-Day Manager's updating of the
Approved Business Plan.
The Day-to-Day Manager shall use its commercially reasonable
efforts to cause
the Project to be developed, constructed, operated and disposed
of substantially
in accordance with the Approved Business Plan as it is updated
and approved from
time to time, including, without limitation, the line items
contained therein.
Subject to the approval rights set forth in Section 5.2 (a),
below, and the
obligation of the Day-to-Day Manager to maintain the originally
Approved
Business Plan as a comparative measure of how well the Company
actually
performed in comparison to the such originally Approved Business
Plan, the
Day-to-Day Manager shall update the Approved Business Plan as
follows; (1) the
Approved Project Budget and Plan shall be updated on not less
than a semi-annual
basis and the (2) the Approved Project Contribution Plan shall
be updated every
fiscal quarter. No update, modification or amendment of the
Approved Business
Plan (or any component budget item or plan thereof) shall be
effective unless
and until approved by all Members, subject to Section
5.5(c).
(e) "ARTICLES" shall mean the Articles of Organization of the
Company
as filed with the Secretary of State of the State of Florida, as
the same may be
amended from time to time by the approval of the Members.
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(f) "AVAILABLE CASH" shall mean all cash and cash equivalents of
the
Company on hand and in financial institutions or depositories
and cash
equivalents, on the date of any proposed distribution, after
payment or
provision for payment of all debts and liabilities of the
Company then due
(including, without limitation, debts and liabilities to Members
who are
creditors of the Company and payments then due under third-party
loans to the
Company), provision for reasonable working capital reserves and
payment or
provision for payment of operating expenditures, all as
reasonably determined by
the Day-to-Day Manager and approved by the Members, subject to
Section 5.5(c).
Available Cash shall not include Capital Contributions of the
Members.
(g) "BASE RATE" means the commercial loan rate of interest
announced
publicly from time to time by Bank of America, N.A. (or any
successor thereto)
in Tampa, Florida as such bank's "reference rate" or "prime
rate" as from time
to time in effect.
(h) "CAPITAL ACCOUNT" shall mean a capital account established
for each
Member to which such Member's respective Capital Contributions
shall from time
to time be credited, which shall be maintained in accordance
with the provisions
of Section 704(b) of the Code and the Treasury Regulations
promulgated
thereunder.
(i) "CAPITAL CONTRIBUTIONS" shall mean the Initial Contributions
and
any additional contributions contributed to the Company by each
Member in
accordance with Section 3 of this Agreement.
(j) "CODE" shall mean the Internal Revenue Code of 1986, as
amended
from time to time.
(k) "COMPANY" shall mean the limited liability company. Palm
Cove
Developers, LLC, created on December 22,2004 and governed by
this Agreement.
(l) "DATE OF VALUE" shall have the meaning ascribed to it in
Section 12.
(m) "DAY-TO-DAY MANAGER" shall mean Ashton or any other
Person(s) that
succeeds to it in that capacity with the consent of the other
Member.
(n) "ENGINEERING AND PRE-DEVELOPMENT COSTS" shall mean those
pre- and
post-formation engineering and pre-development costs incurred by
or on behalf of
a Member to contract for the Property and conduct the
engineering and
pre-development work for the Project, such as consulting fees
and costs and
filing, investigatory and regulatory fees and costs, plus any
additional similar
costs. To the extent the foregoing are paid by a Member in the
ordinary course
of business on or prior to the Property Closing, they shall be
referred to
herein as the "Paid Engineering and Pre-Development Costs," as
more particularly
set forth on EXHIBIT "B" attached hereto. As provided herein, a
Member shall
receive an initial contribution credit and Capital Account
credit equal to the
amount paid by each respectively of the Paid Engineering and
Pre-Development
Costs. The Company shall then assume and be responsible for
paying
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those Engineering and Pre-Development Costs other than the Paid
Engineering and
Pre-Development Costs.
(o) "FINISHED LOT(s)" shall mean a residential lot developed by
the
Company in accordance with the Pulte Contract, that certain
Development
Agreement by and between Pulte and Company executed as part of
the Property
Closing (the "Development Agreement"), this Agreement and all
applicable
restrictions, governmental requirements and Laws, and that has
(i) a recorded
plat that is acceptable to both Members with a copy of such
recorded plat
delivered to both Members, (ii) public sanitary sewer lines
extended to a
boundary of the lot with taps installed, (iii) public potable
water lines
extended to a boundary of the lot with taps installed, (iv)
installed stormwater
drainage lines and related facilities required by applicable
Laws to serve the
lot, with all stormwater ponds and related facilities serving
such lines and
facilities completed, (v) installed curbs and paved streets
serving the lot that
are within a publicly dedicated right-of-way, (vi) conduits to
accommodate
underground electric lines sufficient to service the lot
extended to a boundary
of the lot with the applicable electric company having extended
service to the
lot, (vii) graded in accordance with lot grading and drainage
plans previously
approved by both Members and graded materially in accordance
with the elevations
required for each lot on such plans, (viii) not been determined
to be within the
"100 Year Flood Plane" and (ix) been compacted to not less than
ninety five
(95%) modified proctor, maximum density (AASHTO T-180) and
otherwise to such
standards as are applicable for the types of construction
contemplated by each
Member and (x) all other work necessary to allow development and
the subsequent
use by homeowners of the intended residential improvements on
the lot completed
in accordance with all Laws (including, but not limited to, the
issuance of the
applicable building permit and certificate of occupancy for such
lot) and any
recorded covenants.
(p) "LAWS" means all federal, state and local laws,
moratoria,
initiatives, referenda, ordinances, rules, regulations,
standards, orders,
judicial decisions, common law and other governmental,
quasi-governmental and
utility company requirements (including those relating to the
environment,
health and safety, or disabled persons).
(q) "LIQUIDATING DISTRIBUTION AMOUNT" shall have the meaning
ascribed
to it in Section 12.
(r) "MAJOR DECISION" shall have the meaning ascribed to it
in
Section 5.
(s) "MEMBER" shall mean each Person who (a) is an initial
signatory to
this Agreement or has been admitted to the Company as a Member
in accordance
with the express provisions set out in this Agreement and (b)
has not resigned,
withdrawn, been expelled or, if other than an individual,
dissolved.
(t) "MEMBER LOAN" shall mean any authorized loan made by a
Member to
the Company during the term hereof.
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(u) "MEMBERSHIP INTEREST" shall mean a Member's entire right,
title and
interest in, to and against the Company, the Project and the
profits, losses,
capital and distributions of the Company, the right to vote on
or participate in
the management and the right to receive information concerning
the business and
affairs, of the Company.
(v) "OFFERING NOTICE" shall have the meaning ascribed to it
in
Section 12.
(w) "PAID ENGINEERING AND PRE-DEVELOPMENT COSTS" shall have the
meaning
provided above in the definition of Engineering and
Pre-Development Costs.
(x) "PERCENTAGE INTEREST" shall mean fifty percent (50.0%) for
M/I and
fifty percent (50.0%) for Ashton, as adjusted pursuant to this
Agreement. Each
Member's Percentage Interest shall equal the ratio of such
Member's Capital
Account relative to the aggregate amount of all Capital
Accounts.
(y) "PERSON" shall mean an individual, general partnership,
limited
partnership, limited liability company, corporation, trust,
estate, real estate
investment trust association or any other entity or combination
of Persons.
(z) "PURCHASE PRICE" shall have the meaning ascribed to it
in
Section 12.
(aa) "REGULAR MEETING" shall have the meaning ascribed to it
in
Section 4. (bb) "RESPONDING MEMBER" shall have the meaning
ascribed to it in
Section 12.
(cc) "SPECIAL MEETING" shall have the meaning ascribed to it
in
Section 4.
(dd) "TRANSFER" shall have the meaning ascribed to it in Section
9.
2. ORGANIZATIONAL MATTERS.
2.1 FORMATION OF COMPANY. The Company has been formed pursuant
to the
provisions of the Florida Limited Liability Company Act, Florida
Statutes
Chapter 608, as the same may be amended from time to time (the
"Act"), and shall
be governed by the terms and conditions contained in this
Agreement. The terms
"Member" and "Members" include the Members and their respective
permitted
successors and assigns as members in the Company.
2.2 NAME. The business of the Company shall be conducted under
the name of
"Palm Cove Developers, LLC" or any name mutually agreed upon by
the Members.
2.3 TERM. The term of the Company commenced on December 22, 2004
(the
"Commencement Date") and shall continue until the Company is
dissolved as
provided herein.
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2.4 CHARACTER OF BUSINESS. The express, limited and only purpose
for which
the Company is formed is, and the business of the Company shall
be, to acquire
the Property and to develop, improve, and distribute the
Finished Lots to the
Company's Members as described herein. The Company shall have
the power to do
and perform all things necessary for, connected with or arising
out of such
activities and shall have the power to take such actions as may
be necessary or
appropriate to accomplish such purposes and conduct such
business. The Company
shall not engage in any other business without the prior written
consent of the
Members. No Member shall have the authority to bind the other
Member in any
capacity other than as a Member the of the Company, and nothing
in this
Agreement shall create a relationship between the Members other
than for the
purposes set forth in this Agreement.
2.5 NAMES AND ADDRESSES OF MEMBERS. The names of the Members are
as shown
above. The addresses of the Members are set forth
hereinafter.
2.6 PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the
Company shall be located at 500 N. Westshore Boulevard, Suite
1020, Tampa,
Florida 33609, and may be relocated with the approval of all the
Members to any
location within Florida.
2.7 REGISTERED OFFICE AND REGISTERED AGENT.
(a) For purposes of the Act, the registered office of the
Company is
500 N. Westshore Boulevard, Suite 1020, Tampa, Florida 33609.
The registered
office of the Company may be changed from time to time with the
approval of the
Members; provided, any replacement of the Day-to-Day Manager
shall automatically
be deemed the approval of a change in the registered office of
the Company to
that of the address of the new Day-to-Day Manager.
(b) For purposes of the Act, the Company's registered agent for
service
of process is Charles H. Carver, Esq., who, in addition to the
Company, shall
provide a copy of each such notice to each Member. The
registered agent of the
Company may be changed from time to time with the approval of
the Members;
provided, any replacement of the Day-to-Day Manager shall
automatically be
deemed the approval of a change in the registered agent of the
Company to that
of the new Day-to-Day Manager.
2.8 TRADE NAME AFFIDAVITS. The Company will file such trade or
fictitious
name affidavits as may be necessary or desirable in connection
with the
formation, existence and operation of the Company (including
those filings
required in any jurisdiction where the Company owns or operates
property).
2.9 QUALIFICATION. The Company will promptly apply for authority
to
transact business in those jurisdictions where it is required or
elects to do
so. The Company will file such other certificates and
instruments as may from
time-to-time be necessary or desirable in connection with its
formation,
existence or operation.
2.10 MANAGER-MANAGED. The Company shall be manager-managed by
the Day-to-
Day Manager.
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3. CAPITAL CONTRIBUTIONS, LOANS AND FUNDING OF PROJECT
COSTS.
3.1 INITIAL CAPITAL CONTRIBUTION BY M/I. On or before the date
that is
one (1) business day following the Members' execution and
delivery of this
Agreement (or such other date as agreed to in writing by the
Members), M/I shall
pay to Ashton in readily available federal funds Five Million
Nine Hundred
Fifteen Thousand Five Hundred Sixty-six and 46/ 100 U.S. Dollars
($5,915,566.46)
(the "M/I Membership Interest Purchase Price") to acquire
one-half (i.e., 50%)
of the total equity and Membership Interests in the Company,
such that M/I's
Percentage Interest shall be 50%, and to reimburse Ashton for
one half (i.e.,
50%) of the aggregate of the Paid Engineering and
Pre-Development Costs, closing
costs, title and escrow fees and premiums and prorations paid by
Ashton on or
before the Effective Date. The M/I Membership Interest Purchase
Price, less the
amount to reimburse Ashton for one half (i.e., 50%) of the
aggregate of the Paid
Engineering and Pre-Development Costs, closing costs, title and
escrow fees and
premiums and prorations paid by Ashton on or before the Property
Closing, is
intended to be 50.0% of the Purchase Price for the Property paid
to Pulte to
acquire the Property. As part of M/I's payment of the M/I
Membership Interest
Purchase Price, the M/I Deposit (as defined in the Letter
Agreement) shall be
paid by the Escrow Agent (as defined in the Letter Agreement) to
Ashton and
credited against the M/I Membership Interest Purchase Price. All
amounts paid
under this Section 3.1 by M/I, including the M/I Membership
Interest Purchase
Price, shall be credited to M/I's Capital Account upon the date
of such payment
and the Members intend that on the date of such payments by M/I,
Ashton's and
M/I's Capital Accounts shall be equal. As part of M/I's
acquisition of its
Membership Interest, Ashton shall execute and deliver to M/I an
assignment of
such Membership Interest in form and substance reasonably
acceptable to Ashton
and M/I.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as otherwise
provided below
in this Section 3.2, no Member shall be obligated to contribute
additional
capital to the Company. Each Member, upon written call therefor
(the "Capital
Call Notice") by the Day-to-Day Manager, shall promptly
contribute to the
Company, in proportion to its respective Percentage Interest,
additional Capital
Contributions (each, an "Additional Capital Contribution") in
the event there
are insufficient funds to pay costs and expenses which are due
and payable and
are in accordance with the Approved Project Budget and Plan.
Capital Call
Notices shall only be made in accordance with the Approved
Business Plan. In
addition to the foregoing, the Day-to-Day Manager shall
reasonably consider and
consult with the non-managing Member on any request by the
non-managing Member
to make a Capital Call Notice. Upon receipt of a Capital Call
Notice delivered
pursuant to this Section 3.2, each Member shall have seven (7)
business days to
make its share of the Additional Capital Contribution required
thereby. If a
Member ("Non-Contributing Member") fails to fund to the Company
its pro rata
share of any Additional Capital Contribution (a "Cash Deficit"),
then the other
Member ("Contributing Member"), provided such Contributing
Member has funded all
amounts required of such Contributing Member, shall have the
right, but not the
obligation, to elect to do the following (which, except as
provided in Section
5.5(c), shall be the sole and exclusive remedies of such
Contributing Member
against such Non-Contributing Member):
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(a) DEFICIT LOAN. Fund the Cash Deficit to the Company, in which
event the
amount so funded shall constitute a loan from the Contributing
Member to the
Non-Contributing Member ("Deficit Loan"). The Non-Contributing
Member shall
receive a credit to its Capital Account in the amount of such
Deficit Loan. Each
Deficit Loan shall be an obligation with recourse and shall bear
interest at the
per annum rate of four hundred (400) basis points over the Base
Rate prevailing
on the date such loan is made, compounded monthly, and shall be
due and payable
no later than upon demand (the "Due Date"). Until such Deficit
Loan is paid in
full, all fees, payments and distributions otherwise payable to
the
Non-Contributing Member shall be deemed to be paid or
distributed to the
Non-Contributing Member for Company tax and accounting purposes,
but such fees,
payments or distributions shall actually be paid or distributed
directly to the
Contributing Member in repayment of such Deficit Loan, with such
funds being
applied first to reduce any interest accrued on such Deficit
Loan and then to
reduce the principal amount of such Deficit Loan. If such
Deficit Loan and all
accrued interest thereon is not paid by the Due Date, the
Contributing Member
may elect to (i) convert the outstanding principal amount of the
Deficit Loan
and the accrued and unpaid interest thereon to capital of the
Contributing
Member, thereby diluting the Non-Contributing Member's
Percentage Interest as
detailed in Section 3.2(b) (the "Dilution Contribution"), (ii)
exercise the
buy/sell provisions of Section 12 pursuant to Section 3.2(c), or
(iii) extend
the Due Date of the Deficit Loan for an additional period of
time.
(b) DILUTION. If a Contributing Member elects to convert the
principal
amount of the Deficit Loan and the accrued interest thereon into
a Dilution
Contribution in accordance with Section 3.2(a), the Capital
Account of the
Members shall be adjusted such that the Non-Contributing
Member's Capital
Account shall be decreased by amount due on the Deficit Loan and
the
Contributing Member's Percentage Interest shall be similarly
increased, with the
Members' Percentage Interests properly adjusted.
(c) BUY/SELL. Rather than make or continue a Deficit Loan as
provided in
Section 3.2(a), a Contributing Member shall have the right to
invoke the
provisions of Section 12, and the Non-Contributing Member shall
be considered,
for purposes of Section 12, to be in default hereunder.
3.3 MEMBER LOANS. Except with the prior consent of all Members,
no Member
shall be obligated or authorized to lend or advance money to the
Company. To the
extent a Member Loan is made by a Member to the Company pursuant
to this
Agreement, it shall be made without personal liability to any of
the Members and
shall be unsecured. The unpaid principal balance of the Member
Loan shall bear
interest at the Base Rate announced at the time of the making of
the Member
Loan, not to exceed the maximum rate permitted by law. The
Company shall pay in
full (i) the accrued interest on any such Member Loan and then
(ii) the
principal amount of any such Member Loan, prior to any cash
distributions
otherwise required or permitted pursuant to this Agreement to
any of the
Members.
3.4 THIRD-PARTY LOANS AND GUARANTEES. It is the intention of the
Members
that the Company will not seek third-party financing for the
development and
improvement of the Project. However, the Day-to-Day Manager and
the non-managing
Member shall, pursuant to
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Section 5.1(c), regularly consult regarding the Approved
Business Plan and the
need for and mutually satisfactory terms, if any, of third-party
financing for
the second phase of the Project. If the Members do not agree on
the need for, or
the terms or conditions of, third-party financing, then no such
third-party
financing shall be obtained. The Members' failure to agree upon
any third-party
financing shall not invoke the provisions of Section
14.10(b).
3.5 CAPITAL CONTRIBUTIONS IN GENERAL. Except as otherwise
expressly
provided in this Agreement or as may otherwise be agreed to in
writing by the
Members (a) no part of the Capital Contributions of any Member
may be withdrawn
by such Member, (b) no Member shall be entitled to receive
interest on its
Capital Contributions, (c) no Member shall have the right to
demand or receive
property, other than Finished Lots and except as otherwise
provided herein, in
return for its Capital Contributions and (d) no Capital
Contributions or loan
made by any Member to the Company shall increase its Percentage
Interest.
4. MEMBERS.
4.1 LIMITED LIABILITY. Except as otherwise specifically provided
herein,
no Member shall be personally liable under any judgment of a
court, or in any
other manner, for any debt, obligation, or liability of the
Company, whether
that liability or obligation arises in contract, tort, or
otherwise.
4.2 ADMISSION OF ADDITIONAL MEMBERS. No additional Members shall
be
admitted to the Company unless approved by all of the
Members.
4.3 WITHDRAWALS OR RESIGNATIONS. No Member may withdraw or
resign from the
Company without the prior written approval of all other
Members.
4.4 REMUNERATION TO MEMBERS. Except as otherwise authorized in,
or
pursuant to, this Agreement, no Member is entitled to
remuneration for acting in
the Company business, including, without limitation, the
Day-to-Day Manager of
the Company.
4.5 MEMBERS ARE NOT AGENTS. Pursuant to Section 5.1, the
day-to-day
management of the Company is vested in the Day-to-Day Manager.
Except as
expressly provided in this Agreement, no Member, acting solely
in the capacity
of a Member, is an agent of the Company, nor can any Member in
such capacity
bind, or execute any instrument on behalf of, the Company.
4.6 VOTING RIGHTS. The Members shall have the voting, approval
or consent
rights provided in this Agreement.
4.7 MEETING OF THE MEMBERS.
(a) MEETINGS. Unless otherwise agreed to by the Members,
regular
meetings of the Members shall be held not less often than
monthly at the office
of the Day-to-Day Manager or such other place in Hillsborough or
Pasco County as
the Members shall mutually determine (in each case, the "Regular
Meeting"). Such
Regular Meetings may be held
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telephonically. In addition to any Regular Meetings, any Member
may call a
special meeting ("Special Meeting") by giving at least four (4)
days (if the
meeting is to be held in person) or two (2) days (if the meeting
is held
telephonically) oral or written notice to the other Member. The
notice shall
specify the place, date and hour of the meeting and the general
nature of the
business to be transacted. If the place of any scheduled meeting
is inconvenient
to any Member, such Member may require by at least one (1)
business day's oral
or written notice to the other Member that such meeting be held
telephonically.
(b) PURPOSE AND EFFECT. The Day-to-Day Manager shall endeavor
to
prepare a written agenda for all Regular Meetings and deliver
the same to each
Member prior to such meeting; provided, however, each Member
shall be entitled
to add any matter it elects to such agenda at or before such
meeting. The Member
calling a Special Meeting shall prepare a written agenda for
such meeting and
deliver the same to the other Member prior to such meeting;
provided, however,
each Member shall be entitled to add any matter it elects to
such agenda at or
before such meeting. The Day-to-Day Manager shall be responsible
for having
written minutes taken at each meeting (including each telephone
conference
meeting) of the Members, which shall be sent to each Member
within seven (7)
business days following such meeting. Whenever in this Agreement
the consent or
approval of a Member is required, such consent or approval may
be given without
a meeting if a writing signed by such Member evidences the same.
Furthermore,
the Members may reach decisions regarding any matter which
requires the approval
of all Members without a meeting if the decision is approved in
writing by all
of the Members.
5. MANAGEMENT AND CONTROL OF THE COMPANY.
5.1 MANAGEMENT OF THE COMPANY BY DAY-TO-DAY MANAGER.
(a) Subject to the restrictions set forth in this Agreement,
the
Day-to-Day Manager shall be the manager of the Company and shall
use its
commercially reasonable efforts consistent with customary
practices in the
industry utilized by top-tier residential land developers on
projects which are
similar in type and size to the Project (the "Standard of Care")
to manage and
administer the day-to-day business and affairs of the Company
and to implement
the Approved Business Plan, all on the terms set forth herein.
Ashton shall be
the Day-to-Day Manager of the Company unless and until it is
replaced pursuant
to Section 5.5. The Day-to-Day Manager shall at all times
perform its duties and
responsibilities in compliance with all Laws and this Agreement
(including,
without limitation, the restrictions on Major Decisions set
forth in Section 5.2
below), and in an efficient, thorough, businesslike manner,
devoting such time,
efforts and managerial resources to the business of the Company
as is necessary
for the efficient operation of the day-to-day business and
affairs of the
Company consistent with the Standard of Care. The Day-to-Day
Manager shall not
retire, resign, dissolve, withdraw or cause or suffer any event
which terminates
the continued status of the Day-to-Day Manager as a Member or as
the Day-to-Day
Manager hereunder without the prior written consent of M/I or as
otherwise
expressly permitted by Section 5.5 below. The Day-to-Day Manager
shall
faithfully discharge the duties and obligations set forth in
this Agreement
consistent with the Standard of Care.
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(b) Without limiting the generality of the foregoing, the
Day-to-Day
Manager shall have the following duties with respect to the
development and
improvement of the Project, all to be carried out in accordance
with this
Agreement and the Approved Business Plan:
(i) Obtain and maintain in compliance with all Laws, all
governmental and agency approvals, permits and other
entitlements necessary to
proceed with the development and improvement of the Project;
(ii) Coordinate, control and supervise the preparation of such
maps,
plats, plans and specifications as are necessary for the design,
development and
construction of the Project;
(iii) Negotiate and award contracts with appropriate firms,
persons,
or entities to obtain all materials and services required in
order to complete
the Project in accordance with the Approved Business Plan;
(iv) Retain or employ and coordinate the services of all
employees,
supervisors, architects, engineers, accountants, attorneys, real
estate brokers,
advertising personnel and other persons necessary or appropriate
for the
development of the Project;
(v) Supervise the performance of all work in connection with
the
planning, development, construction, and sale of the
Project;
(vi) Cause the Company to improve the Project in accordance with
the
Pulte Contract, the Development Agreement, the Approved Project
Budget and Plan
and substantially in accordance with the approved plans and
specifications;
(vii) Enforce all of the Company's rights and cause the Company
to
perform all of the Company's obligations arising in connection
with any contract
or agreement entered into in connection with the Project;
(viii) Deliver to the Members copies of any notices or other
written
materials received by the Day-to-Day Manager in connection with
any material
disputes or claims relating to the Project (said disputes and
claims shall be
deemed "material" if they reasonably could be anticipated to
exceed the sum of
$50,000); and
(ix) Otherwise diligently perform those duties and services in
order
to plan, develop and improve the Project in accordance with the
Approved
Business Plan.
(c) The parties acknowledge that the Approved Business Plan
will
require updating during the term of the Project. The Day-to-Day
Manager shall
use good faith and diligent efforts to regularly consult with
and update the
non-managing Member and shall seek the input of the non-managing
Member in
connection with any material updating of the Approved Business
Plan. The
Day-to-Day Manager shall use its commercially reasonable efforts
to cause the
Project to be developed substantially in accordance with the
Approved Business
Plan as it is
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updated and approved from time to time, including, without
limitation, the line
items contained therein. Subject to the approval rights set
forth in Section
5.2, the Day-to-Day Manager shall update the Approved Business
Plan as set forth
below. Without limiting the generality of Sections 5.1(a) and
5.1(b), the
Day-to-Day Manager shall have the following additional rights
and duties with
respect to the overall operation of the Company and ownership of
the Project,
all to be carried out in accordance with this Agreement and the
Approved
Business Plan:
(i) Update the Approved Project Budget and Plan on a not less
often
than a semi-annual basis. In connection therewith, the
Day-to-Day Manager shall
deliver on or before May 1 and November 1 of each year a draft
of an updated
Approved Project Budget and Plan for approval by M/I, which
approval shall not
be unreasonably withheld, delayed or denied. Unless and until
approved by M/I,
the existing Approved Project Budget and Plan shall remain in
effect subject to
modifications required by any increases in "Non-Discretionary
Expenditures"
(defined below) in order to avoid a material adverse change to
the financial
condition or assets of the Company. As used herein,
"Non-Discretionary
Expenditures" shall mean expenditures which the Company is
required to pay by
law or pursuant to existing contracts between the Company and
any third party in
accordance with the Approved Business Plan and shall include
unforeseen material
cost increases; change orders to the contractor contract
required by the project
engineer, the soils engineer, the county, or because of
unforeseen site
conditions confirmed by the appropriate engineer; repair costs
necessary because
of engineer errors and omissions, repair costs beyond
contractual obligation of
contractor; losses and replacements; costs of addressing
emergencies; and costs
associated with weather or other matters of force majeure. At
such time as the
draft updated Approved Project Budget and Plan has been approved
by M/I, it
shall become the Approved Project Budget and Plan in effect
until the same has
been updated and such update has been approved by M/I in
accordance herewith. If
M/I has not approved a draft updated Approved Project Budget and
Plan within
thirty (30) days following receipt thereof, it shall be deemed
disapproved by
M/I; and
(ii) Update the Approved Project Contribution Plan (subject to
the
limitations contained herein) on a not less than a quarterly
basis. In
connection therewith, the Day-to-Day Manager shall deliver on or
before February
1, May 1, August 1 and November 1 of each year a draft of the
updated Project
Contribution Plan for approval by M/I, which approval shall not
be unreasonably
withheld, delayed or denied. Unless and until approved by M/I
and the Day-to-Day
Manager, the existing Approved Project Contribution Plan shall
remain in effect;
provided, however, that if such existing Approved Project
Contribution Plan is
insufficient to pay the costs and expenses of the Company in
accordance with the
Approved Project Budget and Plan, then the Members shall fund
such costs and
expenses through additional Capital Contributions pursuant to
Section 3.2 above.
At such time as the draft updated Approved Project Contribution
Plan has been
approved by M/I and the Day-to-Day Manager, it shall become the
Approved Project
Contribution Plan in effect until the same has been updated and
such update has
been approved by M/I and the Day-to-Day Manager in accordance
herewith. If M/I
or the Day-to-Day Manager has not approved a draft updated
Approved Project
Contribution Plan within thirty (30) days following receipt
thereof, it shall be
deemed disapproved by M/I or the Day-to-Day Manager, as
applicable.
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<PAGE>
(d) Notify the Members (i) in advance of public hearings and
other
proceedings relating to entitlements and permits for the Project
and (ii) of any
matter giving rise to a Major Decision pursuant to Section 5.2
below.
5.2 MAJOR DECISIONS. Except for actions taken by the Day-to-Day
Manager
with respect to an Emergency Situation in accordance with
Section 5.9 below, the
Day-to-Day Manager shall not take any of the following actions
on behalf of the
Company (in each case the taking of which shall be hereinafter
referred to as a
"Major Decision") without the prior written consent of each
Member. Major
Decisions shall bind the Company and all Members upon such
written consent.
(a) Update (or otherwise amend or modify) any component of the
Approved
Business Plan in any manner;
(b) Sell, convey, exchange, lease, hypothecate, pledge, encumber
or
otherwise transfer any portion of or any interest in the Project
or the Company,
other than contemplated in the Approved Project Business Plan
and this
Agreement;
(c) Sell, convey, exchange or otherwise transfer any portion of
the
Property in either (i) a bulk sale, or (ii) any other
transaction inconsistent
with this Agreement;
(d) Expend funds or enter into an obligation on behalf of the
Company
if the amount of such expenditure or obligation would either (i)
exceed 112% of
any line item of the Development Costs component of the Approved
Project Budget
and Plan; (ii) exceed 110% of any line item of the Operating
Costs component of
the Approved Project Budget and Plan, (iii) increase the cost
per Finished Lot
by more than $500 in the aggregate or (iv) result in an increase
in the Capital
Contributions previously approved by or required from any Member
beyond the
amounts required or permitted by Section 3 of this
Agreement;
(e) Incur any indebtedness on behalf of the Company, make or
deliver on
behalf of the Company any indemnity bond or surety bond, lend
funds belonging to
the Company to any Member or its Affiliate or to any third
party, or extend
credit on behalf of the Company to any person, or obligate the
Company or
another Member as a surety, guarantor, or accommodation party to
any obligation,
or grant any lien or encumbrance on the Property, including,
without limitation,
any modification of any of the foregoing, unless in accordance
with the Approved
Business Plan;
(f) Submit proposals to, or enter into agreements with,
government
officials relating to mapping, development, zoning, subdivision,
environmental
or other land use or entitlement matters, unless in accordance
with the Approved
Business Plan (provided, however, the foregoing only applies to
governmental
approvals or agreements that are discretionary and not
ministerial in nature,
such ministerial acts by themselves not being deemed to be a
Major Decision so
long as such ministerial action is consistent with the Approved
Business Plan
and current entitlements for the Property). Without limiting the
above, the
Day-to-Day Manager shall
13
<PAGE>
not cause any entitlements existing as of the Commencement Date
to be modified
without the consent of M/I;
(g) The delegation by the Day-to-Day Manager of any of its
duties set
forth herein (other than to its manager, directors, officers,
employees and any
contractors, agents or consultants engaged by the Company in
accordance with the
Approved Project Budget and Plan, including the site development
contractor
approved by the Members); provided, however, that the Day-to-Day
Manager shall
only delegate its duties to such individuals and entities with
the appropriate
level of experience and seniority to perform such duties in
accordance with this
Agreement and, provided further, the selection of a site
development contractor,
and its contract with the Company, shall be a Major
Decision;
(h) Except as otherwise expressly authorized by this Agreement,
enter
into any transaction on behalf of the Company with a Member or
an Affiliate or
related party of any Member;
(i) Take any other action or make any other decision that
this
Agreement provides must be approved or consented to by each
Member;
(j) Possess, assign, or use funds or other property of the
Company for
other than a Company purpose;
(k) Make, execute or deliver on behalf of the Company an
assignment for
the benefit of creditors; cause the Company, a Member's
Membership Interest or
the Project or any part thereof or interest therein to be
subject to the
authority of any trustee, custodian or receiver or to be subject
to any
proceeding for bankruptcy, insolvency, reorganization,
arrangement, readjustment
of debt, relief of debtors, dissolution or liquidation or
similar proceedings;
(l) Partition all or any portion of the assets of the Company,
or file
any complaint or institute any proceeding at law or in equity
seeking such
partition;
(m) Confess a judgment against the Company; settle or adjust any
claims
against the Company; or commence, negotiate or settle any legal
actions or
proceedings brought by the Company against unaffiliated third
parties in excess
of $25,000;
(n) Except as provided in this Agreement, dissolve, terminate
or
liquidate the Company prior to the expiration of its term;
(o) Effectuate the recapitalization, equity splitting or any
similar
transaction of or with respect to the Company, or the issuance
of any equity
interest, debentures or other securities of or in the Company or
the issuance of
any options, warrants or rights to purchase or acquire or
effectuate any of the
foregoing; or
(p) Do any act that would make it impossible to carry on the
business
of the Company.
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<PAGE>
5.3 EXECUTION OF COMPANY DOCUMENTS. The Day-to-Day Manager,
acting alone,
shall have the authority to execute and deliver, on behalf of
the Company,
agreements, instruments or other documents to which the Company
will be a party
or be bound, so long as such agreements, instruments or other
documents are
consistent with this Agreement and the Approved Business
Plan.
5.4 INSURANCE.
(a) COMPANY POLICIES. In accordance with the Approved Business
Plan,
the Day-to-Day Manager shall purchase and maintain, or shall
cause to be
purchased and maintained, or shall retain existing coverage and
maintain, for
and at the expense of the Company, policies of insurance
standard for businesses
such as the Company (i) for the Company's operations, (ii) for
the protection of
the Company's assets, and (iii) as may be reasonably required to
comply with
third-party requirements, and shall provide the Members with the
certificates or
other evidence of insurance coverage as provided therein.
(b) CONTRACTORS' INSURANCE OBLIGATIONS. The Day-to-Day Manager
shall
require the Project's general contractors and all subcontractors
to at all times
obtain and comply with the insurance requirements set forth on
EXHIBIT "C"
attached and incorporated herein by reference.
(c) FUTURE COOPERATION. The Members recognize that the
commercial
availability of insurance to cover the Company's and its
contractors' and
agents' operations is subject to changing market conditions. In
connection
therewith, the Members agree to cooperate and work together in
good faith to
find alternative risk management strategies in the event that
any of the
insurance required by this Agreement becomes commercially
unavailable or is
financially prohibitive in cost.
5.5 ELECTION, RESIGNATION, REMOVAL OF DAY-TO-DAY MANAGER.
(a) NUMBER, TERM, AND QUALIFICATIONS. The Company shall have one
Day-
to-Day Manager. Unless it is removed or resigns with the consent
of the
non-managing Member, the Day-to-Day Manager shall hold office
until a successor
shall have been elected and qualified. Unless the Day-to-Day
Manager is removed
pursuant to Section 5.5(c), a new Day-to-Day Manager may not be
appointed
without the unanimous affirmative vote of all Members. The
Day-to-Day Manager
shall be a Member, but need not be an individual, a resident of
the State of
Florida or a citizen of the United States.
(b) RESIGNATION. The Day-to-Day Manager may not resign without
the
prior written approval of all the Members. The approved
resignation of the
Day-to-Day Manager shall not affect the Day-to-Day Manager's
rights as a Member,
and shall not constitute a withdrawal of the Day-to-Day Manager
as a Member.
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<PAGE>
(c) REMOVAL. Ashton shall cease to be the Day-to-Day Manager if
Ashton
(or its authorized successor) ceases to be a Member of the
Company or ceases to
beneficially own its Membership Interest, and, in such event,
M/I shall have the
sole right to remove Ashton and appoint a new Day-to-Day
Manager. Otherwise, the
Day-to-Day Manager may be removed only for "cause." For purposes
of this Section
5.5(c), "cause" shall mean (i) the fraud, gross negligence,
willful misconduct,
embezzlement or bankruptcy of the Day-to-Day Manager or (ii) a
breach of the
Day-to-Day Manager's obligations as (A) a Member or (B)
Day-to-Day Manager.
Unless waived in writing by the non-managing Member, the
Day-to-Day Manager
shall be removed immediately upon the occurrence of such for
"cause" event;
provided, however, with respect to the for "cause" events under
clause (ii)
above such removal shall only be effective where the Day-to-Day
Manager has
failed to cure such breach within thirty (30) days following its
receipt of
notice from the non-managing Member of such for "cause" event,
except for
monetary breaches which must be cured within fifteen (15) days
from receipt of
such notice.
Except as set forth above in this Section 5.5(c), the
Day-to-Day
Manager may only be removed upon the decision of all Members, in
which event the
Members shall, as a Major Decision, mutually agree upon a new
Day-to-Day Manager
within thirty (30) days of the removal of the previous
Day-to-Day Manager and,
if unable to do so, either party, as its sole remaining remedy,
may exercise the
buy-sell provisions of Section 12 hereof. Upon the removal of
the Day-to-Day
Manager, the Members shall account to each other with respect to
all uncompleted
business, and shall otherwise cooperate in good faith to effect
an orderly
transition of the management of the affairs of the Company. The
party or parties
appointing the new Day-to-Day Manager may enter into a contract
on behalf of the
Company with such new Day-to-Day Manager on such terms and
conditions
(including, without limitation, compensation) as are determined
in the
reasonable business judgment of the appointing party or parties.
Upon its
removal, any former Day-to-Day Manager shall deliver to the
Company all books,
records and other instruments in its possession or under its
control relating to
the Project. The removal of Ashton (or its authorized successor)
as the
Day-to-Day Manager shall not affect Ashton's (or such
successor's) rights as a
Member, and shall not constitute a withdrawal of Ashton (or such
successor) as a
Member; however, (a) such removed Day-to-Day Manager shall not
receive any
further payments of the fee set forth in Section 6.2 below and
(b) upon any such
removal, (i) M/I may appoint a new Day-to-Day Manager, and (ii)
notwithstanding
anything herein to the contrary, neither Ashton nor its
authorized successor
shall thereafter have any right to vote on Major Decisions or
otherwise manage
or participate in the business, affairs or management of the
Company if Ashton
is removed solely as a result of Ashton's fraud, willful
misconduct,
embezzlement or bankruptcy.
5.6 MEMBERS HAVE NO DAY-TO-DAY MANAGERIAL AUTHORITY. The Members
shall
have no power to participate in the management of the Company
except as
expressly authorized by this Agreement.
5.7 COMPETING ACTIVITIES. The Members and their respective
Affiliates may
engage or invest in, independently or with others, any business
activity of any
type or description, including, without limitation, those that
might be the same
as or similar to the Company's business and that might be in
direct or indirect
competition with the Company. Neither the
16
<PAGE>
Company nor any Member shall have any right in or to such other
ventures or
activities or to the income or proceeds derived therefrom, and
the fiduciary
duties of the Members to each other and the Company shall be
limited solely to
those arising from the purposes of the Company described in
Section 2.4 above.
The Members shall not be obligated to present any investment
opportunity or
prospective economic advantage to the Company, even if the
opportunity is of the
character that, if presented to the Company, could be taken by
the Company. The
Members shall have the right to hold any investment opportunity
or prospective
economic advantage for their own account or to recommend such
opportunity to
persons other than the Company.
5.8 THIRD PARTY RELIANCE. Any person not a party to this
Agreement who
shall deal with the Company shall be entitled to rely
conclusively upon the
power and authority of the Day-to-Day Manager as set forth
herein.
5.9 EMERGENCY SITUATIONS. Notwithstanding anything herein to the
contrary,
if the Day-to-Day Manager, in its reasonable business judgment,
concludes that
emergency repairs, replacements or other actions (including by
way of example
and not limitation, the signing of documents) are immediately
necessary for the
preservation or safety of persons or any portion of the Project
(individually or
collectively, an "Emergency Situation") and the Day-to-Day
Manager, after using
reasonably diligent efforts, is unable to consult with the
non-managing Member
prior to taking any action in such Emergency Situation, then the
Day-to-Day
Manager may take said action without the prior approval of the
non-managing
Member. If the Day-to-Day Manager takes such action by reason of
an Emergency
Situation, the Day-to-Day Manager shall notify the non-managing
Member in
writing as quickly as possible after the taking of such action,
the reasons
therefore and the cost thereof. The Members agree to cooperate
to establish
appropriate emergency notification procedures under this
Agreement.
6. COMPENSATION AND REIMBURSEMENTS TO MEMBERS.
6.1 NO RIGHT TO COMPENSATION FOR SERVICES. Except as provided in
this
Agreement, no Member shall receive compensation for services
rendered to the
Company or for overhead expenses of any kind whatsoever. The
fees to the
Day-to-Day Manager set forth in this Section 6 are fees and not
distributions
for the purposes of this Agreement.
6.2 MANAGER FEE. In consideration for the services to be
performed
hereunder by the Day-to-Day Manager in connection with its
obligations set out
in this Agreement, M/I shall pay the Day-to-Day Manager a fee
(the "Manager
Fee") equal to Three Hundred Dollars ($300.00) per Finished Lot
distributed to
M/I pursuant to this Agreement as and when such a Finished Lot
is delivered. The
Company anticipates having approximately 364 Finished Lots.
6.3 EXPENSES. The Day-to-Day Manager shall be entitled to
receive
reimbursement from the Company for only those reasonable
third-party costs and
expenses actually incurred by the Day-to-Day Manager on behalf
of the Company in
accordance with the Approved Project Budget and Plan; provided,
however, the
Day-to-Day Manager shall not be entitled to any reimbursement or
credit of any
kind whatsoever for the costs and expenses incurred by the
Day-
17
<PAGE>
to-Day Manager or any Affiliate of the Day-to-Day Manager in the
performance of
its obligations hereunder which are covered by the Manager
Fee.
6.4 COMMISSIONS, BROKER'S FEES, ETC. M/I and Ashton hereby
represent
and warrant to the other that such Member has employed no broker
or finder in
connection with the formation of the Company or acquisition of
the Property. M/I
and Ashton each agree to indemnify and hold the other harmless
from and against
any and all claims, liabilities, damages, losses and expenses
(including,
without limitation, attorneys' fees) arising from or in
connection with such
party's breach of the representation set forth in this Section
6.4.
7. ALLOCATIONS OF NET PROFITS AND NET LOSSES AND
DISTRIBUTIONS.
7.1 TAX AND ACCOUNTING. The Members intend that the Company
shall be
treated as a "partnership" for Federal, state and local income
and franchise tax
purposes. In furtherance of the foregoing intention, the Company
and (at the
request of and at the direction of the Company) the Members
shall take such
actions as may be required in order to give affect to such
intent. Under no
circumstance shall the Company or any Member take any action
that is
inconsistent with the foregoing intention.
7.2 ALLOCATIONS OF LOSSES. Except to the extent provided in
Section
7.4, if there shall be taxable losses of the Company for a
fiscal year of the
Company, such taxable losses shall be allocated between the
Members in the
following order:
(i) first, to the Members (in proportion to the amounts of
losses to
be allocated in accordance with this Section 7.2(i)) until there
have been
allocated to each Member losses equal to the excess, if any, of
(X) the
cumulative amount of income allocated to such Member pursuant to
Section
7.3(iii) hereof through and including such fiscal year; and (Y)
the cumulative
amount of losses allocated to such Member pursuant to this
Section 7.2(i)
through and including such fiscal year;
(ii) next, to the Members to cause, to the extent possible,
their
respective Capital Account balances to be in proportion to their
then respective
Percentage Interests; and
(iii) next, to the Members, in accordance with their then
respective
Percentage Interests.
7.3 ALLOCATIONS OF INCOME. Except to the extent provided in
Section
7.4, if there shall be taxable income of the Company for a
fiscal year of the
Company, such taxable income shall be allocated between the
Members in the
following order:
(i) first, to the Members (in proportion to the amounts of
income to
be allocated in accordance with this Section 7.3(i)) until there
shall have been
allocated to each Member income equal to the excess, if any, of
(X) the
cumulative amount of losses allocated to such Member pursuant to
Section
7.2(iii) hereof through and including such fiscal year; and
(Y)
18
<PAGE>
the cumulative amount of income allocated to such Member
pursuant to this
Section 7.3(i) through and including such fiscal year;
(ii) next, to the Members to cause, to the extent possible,
their
respective Capital Account balances to be in proportion to their
then respective
Percentage Interests; and
(iii) next, to the Members, in accordance with their then
respective
Percentage Interests.
7.4 SPECIAL ALLOCATIONS.
(a) QUALIFIED INCOME OFFSET. If any Member unexpectedly receives
an
adjustment, allocation or distribution described in Regulations
Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) in any fiscal year or other
period which
would cause such Member to have a deficit Capital Account
balance as of the end
of such fiscal year or other period, items of Company income and
gain
(consisting of a pro rata portion of each item of Company
income, including
gross income and gain) shall be specially allocated to such
Member in an amount
and manner sufficient to eliminate, to the extent required by
the Regulations,
the deficit Capital Account balance of such Member as quickly as
possible. This
Section 7.4(a) is intended to comply with the qualified income
offset provision
in Regulations Section 1.704-1(b)(2)(ii)(d), and shall be
interpreted
consistently therewith.
(b) COMPANY MINIMUM GAIN CHARGEBACK. If there is a net decrease
in
"Partnership Minimum Gain" (as determined in accordance with the
principles of
Regulation Section 1.704-2(d)) during a Company fiscal year or
other period,
each Member shall be allocated items of Company income and gain
for such fiscal
year or other period (and, if necessary, for subsequent fiscal
years or periods)
in proportion to, and to the extent of, such Member's share of
such net
decrease, except to the extent such allocation would not be
required by
Regulations Section 1.704-2(f). The amounts referred to in this
Section 7.4(b)
and the items to be so allocated shall be determined in
accordance with
Regulations Section 1.704-2. This Section 7.4(b) is intended to
constitute a
"minimum gain chargeback" provision as described in Regulations
Section
1.704-2(f), and shall be interpreted consistently therewith and
with Regulation
Section 1.704(e)(3).
(c) MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. If there is
a
net decrease in "Partner Nonrecourse Debt Minimum Gain" (as
defined in
Regulation Section 1.704-2(i)(2)) during a Company fiscal year
or other period,
each Member shall be allocated items of Company income and gain
for such fiscal
year or other period (and, if necessary, for subsequent fiscal
years or periods)
equal to such Member's share of such net decrease, except to the
extent such
allocation would not be required by Regulations Section
1.704-2(i)(4). The
amounts referred to in this Section 7.4(c) and the items to be
so allocated
shall be determined in accordance with Regulations Section
1.704-2. This Section
7.4(c) is intended to comply with the minimum gain chargeback
requirement
contained in Regulations Section 1.704-2(i)(4), and shall be
interpreted
consistently therewith.
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<PAGE>
(d) MEMBER NONRECOURSE DEDUCTIONS. "Partner Nonrecourse
Deductions"
(as defined in Regulation Section 1.704-2(b)(1)) for any fiscal
year or other
period shall be specially allocated to the Members who bear the
economic risk of
loss for the Partner Nonrecourse Debt (as defined in Regulations
Section
1.704-2(b)(4)) to which such Member Nonrecourse Deductions are
attributable, as
provided in Regulations Section 1.704-2(i)(1).
(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any
fiscal
year shall be allocated to the Members in accordance with their
respective
Percentage Interests.
(f) EXCESS NONRECOURSE LIABILITIES. Nonrecourse Debts of the
Company
which constitute "Excess Nonrecourse Liabilities" (as defined in
Regulations
Section 1.704-2(b)(3)) shall be allocated among the Members in
accordance with
their respective Percentage Interests.
(g) ORDERING RULES. Anything contained in this Agreement to
the
contrary notwithstanding, allocations for any fiscal year or
other period of
Nonrecourse Deductions or Member Nonrecourse Deductions, or of
items required to
be allocated pursuant to the minimum gain chargeback
requirements contained in
Section 7.4(b) and Section 7.4(c) hereof, shall be made before
any other
allocations hereunder.
(h) SECTION 704(C) ALLOCATIONS. Notwithstanding Section 7.2 and
7.3,
the gain or loss for federal income tax purposes from the sale
or other
disposition of Finished Lots and parcels at the Project shall be
allocated to
the Members in accordance with the requirements of Section
704(c) of the Code
and the Treasury Regulations promulgated thereunder, using the
traditional
method of allocations contained in Section 1.704-3(b) of the
Treasury
Regulations and based upon the fair market values set forth in
Section 3.1. Any
gain or loss in excess of the amount allocated pursuant to the
preceding
sentence shall be allocated between the Members as provided in
Section 7.2 or
Section 7.3, as the case may be.
7.5 NO NEGATIVE CAPITAL ACCOUNT MAKEUP. No Member shall have
any
obligation to contribute funds to bring any negative balance in
its Capital
Account to zero.
7.6 ORDER OF DISTRIBUTION OF AVAILABLE CASH. Available Cash may
be
distributed to the Members pro rata in accordance with their
respective
Percentage Interests at such times, and in such amounts as
reasonably determined
by the Day to Day Manager; provided, however, that Available
Cash shall not be
distributed without the consent of the non-Managing Members),
which consent
shall not be unreasonably withheld or delayed.
7.7 FORM OF DISTRIBUTION. A Member has no right to demand and
receive
any distribution from the Company in any form other than the
Finished Lots
except as otherwise provided herein.
7.8 RETURN OF DISTRIBUTIONS. Except for distributions made in
violation
of the Act or this Agreement, no Member shall be obligated to
return any
distribution to the Company or pay the amount of any
distribution for the
account of the Company or to any creditor of the Company.
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The amount of any distribution returned to the Company by a
Member or paid by a
Member for the account of the Company or to a creditor of the
Company pursuant
to the previous sentence shall be added to the account or
accounts from which it
was subtracted when it was distributed to the Member.
8. DISSOLUTION AND WINDING UP.
8.1 DISSOLUTION. The Company shall be dissolved, its assets
shall be
disposed of, and its affairs wound up on the first to occur of
the following:
(a) upon the sale or distribution of all or substantially all of
the
assets of the Company including the distribution of all Finished
Lots to the
Members and conveyance of any common areas to the homeowners
association, and
the collection by the Company of any and all cash and other
assets derived
therefrom; or
(b) an election to dissolve the Company made in writing by all
the
Members.
8.2 WINDING UP. Upon the occurrence of any event specified in
Section
8.1, the Members shall determine the manner in which the affairs
of the Company
shall be wound up (which may include the sale of any remaining
portion of the
Property). The Company shall engage in no further business
thereafter other than
that necessary to wind up the business and distribute the
assets. The Company
shall continue to allocate profits and losses during the winding
up period in
the same manner as such amounts were divided before
dissolution.
8.3 ORDER OF PAYMENT OF LIABILITIES UPON DISSOLUTION. After
determining
that all debts and liabilities of the Company in the process of
winding-up,
debts and liabilities to Members and other parties who are
creditors of the
Company, and the repayment of construction or other loans to the
Company have
been paid or adequately provided for, the remaining assets shall
be distributed
to the Members in accordance with Section 7.6 above.
8.4 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Each Member
shall only
be entitled to look solely to the assets of the Company for the
return of its
positive Capital Contribution, and shall have no recourse for
the return of its
Capital Contribution and/or share of net profits (upon
dissolution or otherwise)
against the Day-to-Day Manager or any Member.
9. TRANSFER OF INTEREST.
9.1 TRANSFER AND ASSIGNMENT OF INTERESTS. A Member shall not
transfer,
assign, convey, sell, encumber or in any way alienate
(collectively, "Transfer")
all or any part of its Membership Interest without the prior
written consent of
the other Member(s), except as otherwise provided herein.
Transfers in violation
of this Section 9.1 shall be null and void ab initio. After the
consummation of
any Transfer of any part of a Membership Interest, the
Membership Interest so
transferred shall continue to be subject to the terms and
provisions of this
Agreement and any further Transfers shall be required to comply
with all the
terms and provisions of this Agreement.
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9.2 FURTHER RESTRICTIONS ON TRANSFER OF INTERESTS. In addition
to other
restrictions found in this Agreement, no Member shall Transfer
all or any part
of such Member's Membership Interest without compliance with all
applicable
federal and state securities law.
9.3 SUBSTITUTION OF MEMBERS. An assignee of a Membership
Interest shall
have the right to become a substitute Member only if (i) the
requirements of
this Section 9 are satisfied, (ii) the assignee executes an
instrument
satisfactory to all of the Members accepting and adopting the
terms and
provisions of this Agreement, (iii) the Assignee pays any
reasonable expenses
incurred by the Company in connection with its admission as a
new Member, and
(iv) the other Member consents in writing to the substitution in
its sole and
absolute discretion.
9.4 PERMITTED TRANSFERS. Notwithstanding the restrictions set
forth in
Sections 9.1 or 9.3, a Member shall have the right without the
consent of the
other Member to Transfer all or a portion of its Membership
Interest to an
Affiliate; provided, however, that for so long as Ashton is the
Day-to-Day
Manager, any such Transfer by Ashton must be to an Affiliate
approved by M/I in
writing, which approval shall not be unreasonably withheld,
delayed or denied.
The admission of a Member's Affiliate as a substitute Member in
place of such
Member shall not result in the release of the Member who
assigned the Membership
Interest from any liability or obligations that such Member may
have to the
Company.
9.5 RIGHT OF FIRST REFUSAL. Notwithstanding the restrictions set
forth
in Sections 9.1 or 9.3, M/I grants to Ashton and Ashton grants
to M/I the right
of first refusal to purchase the other party's Membership
Interest in the
Company on the following terms and conditions:
(a) Each party's right of first refusal shall be exclusive
and
neither party shall grant similar or the same right to any
other;
(b) If M/I or Ashton, directly or indirectly, enter into a
bona
fide, arms length and binding agreement to sell its Membership
Interest in the
Company (the "Notifying Party's Agreement"), such party shall
notify ("Notifying
Party") the other party (the "Receiving Party") that the
Notifying Party entered
into such Notifying Party's Agreement, which notice to be valid
must include a
complete and legible copy of the Notifying Party's Agreement,
including all
exhibits and any other terms and conditions applicable to the
Notifying Party's
Agreement;
(c) The Receiving Party shall have thirty (30) days following
the
Receiving Party's receipt of the Notifying Party's notice (which
notice shall
not be deemed sufficient unless it complies with the terms and
conditions of
this Agreement) to elect to accept the terms and conditions of
the Notifying
Party's Agreement, except as set forth below, by delivering
written notice
thereof to the Notifying Party on or before the end of such
thirty (30) days;
notwithstanding the foregoing, however, if the Receiving Party
elects to accept
the terms and conditions of the Notifying Party's Agreement, the
Receivi
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