SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF CENTENNIAL FOUNDERS, LLC

Exhibit 10.25

SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

CENTENNIAL FOUNDERS, LLC

DATED: JULY 31, 2009

BY AND AMONG

TEJON RANCHCORP,

a California corporation,

STANDARD PACIFIC CORP.,

a Delaware corporation,

STANDARD PACIFIC INVESTMENT CORP.,

a Delaware limited liability company,

LEWIS INVESTMENT COMPANY, LLC,

a California limited liability company,

AND

PARDEE HOMES,

a California corporation

TABLE OF CONTENTS

 

 

(i)

SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT OF

CENTENNIAL FOUNDERS, LLC

THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “ Agreement ”) is made and entered into effective as of this 31st day of July, 2009 (the “ Effective Date ”), by and among TEJON RANCHCORP, a California corporation (“ Tejon ”), STANDARD PACIFIC CORP., a Delaware corporation (“ Standard Pacific ”), STANDARD PACIFIC INVESTMENT CORP., a Delaware limited liability company (“ SPIC ”), LEWIS INVESTMENT COMPANY, LLC, a California limited liability company (“ Lewis ”), and PARDEE HOMES, a California corporation, formerly known as Pardee Construction Company (“ Pardee ”) (collectively, the “ Members ” and each a “ Member ”), for the purposes, among other things, of defining the rights and obligations of the Members with respect to Centennial Founders, LLC, a Delaware limited liability company, formerly known as RM Development Associates, LLC (the “ Company ”).

RECITALS

A. The Company was formed on July 8, 1999, under the name “ RM Development Associates, LLC ” by filing the Certificate with the Delaware Secretary of State. On March 10, 2000, Tejon, Standard Pacific, Lewis, and Pardee (the “ Original Members ”) entered into that certain Limited Liability Company Agreement of RM Development Associates, LLC (the “ Original LLC Agreement ”).

B. The name of the Company was changed on or about August 28, 2002, from RM Development, LLC to Centennial Founders, LLC (by filing the appropriate documentation with the Delaware Secretary of State and the California Secretary of State). Concurrently therewith, the Original Members entered into that certain First Amended and Restated Limited Liability Company Agreement of Centennial Founders, LLC dated as of August 28, 2002 (“ First Amended and Restated LLC Agreement ”). The First Amended and Restated LLC Agreement superseded the Original LLC Agreement in its entirety and the Original LLC Agreement ceased to have any effect.

C. As of June       , 2008, the Original Members agreed to admit SPIC as a Member of the Company and entered into that certain First Amendment to First Amended and Restated Limited Liability Company Agreement of Centennial Founders governing the relationship between SPIC and Standard Pacific as Members of the Company (“ 2008 Amendment ”).

D. The Members hereby desire to amend and restate the First Amended and Restated LLC Agreement, as amended by the 2008 Amendment, in the form of this Agreement. This Agreement supersedes the First Amended and Restated LLC Agreement and the 2008 Amendment in their entirety and the First Amended and Restated LLC Agreement and the 2008 Amendment are of no further force or effect.

 

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AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS AND ORGANIZATION .

1.1 Defined Terms . For convenience, various terms are defined for use in this Agreement. Unless otherwise expressed or provided elsewhere in this Agreement, the following terms shall have the following meanings.

A. Terms Defined in this Agreement .

(1) “ AAA ” shall have the meaning given such term in Section 18.3 hereof.

(2) “ Act ” shall mean the Delaware Limited Liability Company Act, as the same may be amended from time to time. All references herein to sections of the Act shall include any corresponding provisions of succeeding law.

(3) “ Adjacent Property ” shall mean that certain approximately 980 acre property adjacent to the Existing Property and owned by the Company. The Adjacent Property is more particularly described on Exhibit “A” hereto.

(4) “ Adjacent Property Contributions ” shall have the meaning given such term in Section 4.1D hereof.

(5) “ Adjacent Property Purchase Agreement ” shall mean that certain Vacant Land Purchase Contract and Receipt for Deposit, dated as of June 17, 1999, by and between Ashcraft Investment Company, Inc., a California corporation (“ Ashcraft ”), and Pyramid Ranch Company, a Hawaii limited partnership, as amended by those certain Escrow Instructions dated as of July 7, 1999, as further amended by those certain Supplemental Instructions dated as of December 14, 1999, as further amended by those certain Supplemental Instructions, dated as of March 1, 2000, as assigned by Ashcraft to the Company pursuant to that certain Assignment of Vacant Land Purchase Contract and Receipt for Deposit, dated as of April 5, 2000, evidencing the sale of the Adjacent Property to the Company.

(6) “ Affiliate ” shall mean: (1) any other Person directly or indirectly controlling, controlled by, or under common control with the Person or entity to which such term applies; (2) as to any natural person, such person’s spouse, child or grandchild, shall be Affiliates of such person or a trust for the benefit of any such person; (3) as to any corporation, limited liability company or partnership, any person with any of the foregoing relationships described in clause (2) to any person in control of such partnership as general partner or otherwise or in control of such corporation or limited liability company shall be deemed to be an Affiliate of such corporation, limited liability company or partnership; (4) an Affiliate of a Member shall

 

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include any partnership in which such Member or any Affiliate of such Member is a general partner or otherwise has control, as well as any corporation, limited liability company or other entity in which such Member or any Affiliate of such Member has control. “ Control ” as applied to any person or entity means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies and decision-making of such person or entity, whether through the ownership of voting interests or by contract or otherwise. “ Control ” shall also include, without limitation, the possession of direct or indirect equity or beneficial interests in at least fifty percent (50%) of the profits or voting control of any entity.

(7) “ Affiliate Entities ” shall have the meaning given such term in Section 2.3A hereof.

(8) “ Agreement ” shall mean this Second Amended and Restated Limited Liability Company Agreement, as originally executed and as amended from time to time.

(9) “ Alternates ” shall have the meaning given such term in Section 7.1E hereof.

(10) “ Approve, ” “ Approved ” or “ Approval ” mean, as to the subject matter thereof and as the context may require, an express approval: (i) contained in a written statement signed by the approving Person; or (ii) by the requisite number of votes of the Members or of the Executive Committee in the manner specified herein.

(11) “ Approved Existing Exceptions ” shall have the meaning given such term in Section 4.3E(1) hereof.

(12) “ Arbitration ” shall have the meaning given such term in Section 18.3 hereof.

(13) “ Arbitration Initiation Date ” shall have the meaning given such terms in Section 18.3 hereof.

(14) “ Arbitration Tribunal ” shall have the meaning given such term in Section 18.3 hereof.

(15) “ Arbitrator ” shall have the meaning given such term in Section 18.3 hereof.

(16) “ Attorneys’ Fees ” shall have the meaning given such term in Section 18.15A hereof.

(17) “ Available Cash ” shall have the meaning given such term in Section 6.1 hereof.

(18) “ AVEK ” shall have the meaning given such term in Section 7.4 hereof.

 

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(19) “ Balance of the Ranch ” shall mean the property located within the Ranch, which does not include the Master Project.

(20) “ Bond Financing ” shall have the meaning given such term in Section 4.5B hereof.

(21) “ Book Capital Account ” shall have the meaning given such term in Appendix “A” attached hereto.

(22) “ Business Plan ” shall mean, as applicable, the Entitlement Business Plan, the Pre-Development Period Business Plan or the Development Business Plan.

(23) “ Buy/Sell Closing ” shall have the meaning given such term in Section 17.4 hereof.

(24) “ Capital Contribution ” shall mean any money, property, promissory note or other sums contributed to the Company including, without limitation, any such contributions made prior to the Effective Date.

(25) “ CCP ” shall have the meaning given such term in Section 18.3 hereof.

(26) “ Centennial RWA Reimbursements ” shall have the meaning given such term in Section 9.4A hereof.

(27) “ Certificate ” shall mean the Certificate of Formation of the Company as filed with the Secretary of State of the State of Delaware, as the same may be amended from time to time.

(28) “ Certified EIR ” shall mean the environmental impact report to be prepared in connection with the obtaining of the Entitlements that is certified by the applicable governmental agency.

(29) “ Claims ” shall mean all claims, losses, damages, costs, expenses, demands, liabilities, obligations, liens, encumbrances, rights of action and attorneys’ fees and costs.

(30) “ Closing ” shall have the meaning given such term in Section 15.6E(2) hereof.

(31) “ Closing Date ” shall have the meaning given such term in Section 15.6E hereof.

(32) “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time. All references herein to sections of the Code shall include any corresponding provision or provisions of succeeding law hereof.

 

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(33) “ Combined Acreage ” shall have the meaning given in Section 4.3E(5) hereof.

(34) “ Commercial Developer Acceptance ” shall have the meaning given such term in Section 10.4C(4)(a) hereof.

(35) “ Commercial Developers ” shall have the meaning given such term in Section 10.4A hereof.

(36) “ Commercial Parcel Offer Price ” shall have the meaning given such term in Section 10.4B hereof.

(37) “ Commercial Parcel ” shall have the meaning given such term in Section 10.4C hereof.

(38) “ Company ” shall have the meaning given such term in the preamble to this Agreement.

(39) “ Company Offer ” shall have the meaning given such term in Section 10.2 hereof.

(40) “ Conservancy ” shall mean the Tejon Ranch Conservancy, a California nonprofit public benefit corporation.

(41) “ Contributing Member ” shall have the meaning given such term in Section 4.4 hereof.

(42) “ Contribution Date ” shall have the meaning given such term in Section 4.3 hereof.

(43) “ Contribution Percentage ” shall mean with respect to each Member, the percentage set forth opposite such Member’s name under the column labeled “ Contribution Percentage ” on Exhibit “B” attached hereto, which percentage shall not be adjusted as the result of dilution of the Member’s Percentage Interest.

(44) “ Control ” shall have the meaning given such term in Section 1.1 hereof under the definition of “Affiliate.”

(45) “ Counter-Offer ” shall have the meaning given such term in Section 10.3A(4)(a) hereof.

(46) “ CP Company Offer ” shall have the meaning given such term in Section 10.4B hereof.

(47) “ CP Counter-Offer ” shall have the meaning given such term in Section 10.4C(4)(a) hereof.

 

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(48) “ CPA ” shall mean the Company’s independent certified public accounting firm, which initially shall be Ernst & Young, but may be replaced by the Executive Committee from time to time.

(49) “ Date of Value ” shall have the meaning given such term in Section 17.1 hereof.

(50) “ Deemed Withdrawal ” shall have the meaning given such term in Section 13.1A hereof.

(51) “ Default Buy Out Notice ” shall have the meaning given such term in Section 15.6C hereof.

(52) “ Default Date of Value ” shall have the meaning given such term in Section 15.6B hereof.

(53) “ Default Interest Rate ” shall have the meaning given such term in Section 4.4B hereof.

(54) “ Defaulting Member ” shall have the meaning given such term in Section 15.1 hereof.

(55) “ Defaulting Member’s Price ” shall have the meaning given such term in Section 15.6A hereof.

(56) “ Delinquent Contribution ” shall have the meaning given such term in Section 4.4 hereof.

(57) “ Deposit ” shall have the meaning given such term in Section 14.5A(3) hereof.

(58) “ Developer Acceptance ” shall have the meaning given such term in Section 10.3A(4)(a) hereof.

(59) “ Developer Lot ” shall have the meaning given such term in Section 17.1 hereof.

(60) “ Developer Representatives ” shall have the meaning given such term in Section 14.5A(1) hereof.

(61) “ Developers ” shall mean, collectively, Standard Pacific, Lewis and Pardee. Standard Pacific, Lewis and Pardee are sometimes each referred to as a “ Developer .” SPIC shall not be deemed a “Developer” hereunder.

(62) “ Development Budget ” shall have the meaning given such term in Section 2.3B(1) hereof.

 

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(63) “ Development Business Plan ” shall have the meaning given such term in Section 2.3B hereof.

(64) “ Development Financing Plan ” shall have the meaning given such term in Section 2.3B(6) hereof.

(65) “ Development Manager ” shall have the meaning given such term in Section 7.2 hereof.

(66) “ Development Stage ” shall mean the period of time during which the Development Stage Business is conducted pursuant to the terms of this Agreement, which period shall commence upon the satisfaction of the Development Stage Conditions and continue through the date of dissolution of the Company.

(67) “ Development Stage Business ” shall have the meaning given such term in Section 2.3A hereof.

(68) “ Development Stage Conditions ” shall have the meaning given such term in Section 2.3D hereof.

(69) “ Development Stage Contributions ” shall have the meaning given such term in Section 4.3C hereof.

(70) “ Development Stage DM ” shall have the meaning given such term in Section 7.2D hereof.

(71) “ Dilution Percentage ” shall have the meaning given such term in Section 4.4A(1) hereof.

(72) “ Discussion Period ” shall have the meaning given such term in Section 7.5B hereof.

(73) “ Dissolution Notice ” shall have the meaning given such term in Section 13.1C hereof.

(74) “ Effective Capital Contributions ” shall mean the total unrecovered Capital Contributions made by all Members as of any applicable determination date plus the unrecovered amount of the Tejon Existing Property Credit, whether or not Tejon has yet contributed the Existing Property to the Company.

(75) “ Effective Date ” shall have the meaning given such term in the preamble to this Agreement.

(76) “ Electing Member(s) ” shall have the meaning given such term in Section 15.6C hereof.

(77) “ Election Notice ” shall have the meaning given such term in Section 14.5 hereof.

 

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(78) “ Election Period ” shall have the meaning given such term in Section 14.5 hereof.

(79) “ Entitlement Business Plan ” shall have the meaning given such term in Section 2.2A hereof.

(80) “ Entitlement Date ” shall mean the date when the Entitlements have been obtained.

(81) “ Entitlement Stage ” shall mean the period of time during which the Entitlement Stage Business is conducted pursuant to the terms of this Agreement, which period commenced upon the end of the Feasibility Stage and shall continue until the earlier of (i) the date of the commencement of the Development Stage, or (ii) the dissolution of the Company. The Entitlement Stage shall include the Remaining Entitlement Period and the Pre-Development Period.

(82) “ Entitlement Stage Business ” shall have the meaning given such term in Section 2.2 hereof.

(83) “ Entitlement Stage Contributions ” shall have the meaning given such term in Section 4.1C hereof.

(84) “ Entitlements ” shall mean a general plan amendment, specific plan, and vesting tentative tract maps provided for in the Entitlement Business Plan, together with all related CEQA approvals, each having received final approval by the County of Los Angeles with all applicable appeal periods having expired or, in the event of any legal action opposing such final approvals, the entry of final judgment or settlement of such action. The Entitlements shall be consistent with the Entitlement Business Plan.

(85) “ Escrow Holder ” shall have the meaning given such term in Section 14.5 hereof.

(86) “ Event of Default ” shall have the meaning given such term in Section 15.1 hereof.

(87) “ Executive Committee ” shall have the meaning given such term in Section 7.1A hereof.

(88) “ Executive Committee Deadlock ” shall have the meaning given such term in Section 17.1 hereof.

(89) “ Existing Property ” shall mean that certain property of approximately ten thousand seven hundred (10,700) acres located within the Ranch currently owned by Tejon, as more particularly described in Exhibit “A” attached hereto, which tentative legal description shall be revised in accordance with Section 4.3E.

(90) “ Existing Property Contribution ” shall have the meaning given such term in Section 4.3E hereof.

 

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(91) “ Failure Notice ” shall have the meaning given such term in Section 15.1A hereof.

(92) “ Failure to Close ” shall have the meaning given such term in Section 14.5J(1) hereof.

(93) “ Feasibility Analysis ” shall have the meaning given such term in Section 2.1A hereof.

(94) “ Feasibility Business Plan ” shall have the meaning given such term in Section 2.1B hereof.

(95) “ Feasibility Costs ” shall have the meaning given such term in Section 4.1B hereof.

(96) “ Feasibility Stage ” shall mean the period of time during which the Feasibility State Business was conducted pursuant to the terms of the Original Agreement and the First Amended and Restated Agreement, which period ended upon the commencement of the Entitlement Stage.

(97) “ Feasibility Stage Business ” shall have the meaning given such term in Section 2.1A hereof.

(98) “ Final Election Notice ” shall have the meaning given such term in Section 15.6E hereof.

(99) “ First Amended and Restated LLC Agreement ” shall have the meaning given such term in Recital B. hereof.

(100) “ First Commercial Developer ” shall have the meaning given such term in Section 10.4C(1) hereof.

(101) “ First Developer ” shall have the meaning given such term in Section 10.3A(1) hereof.

(102) “ Funding Member(s) ” shall have the meaning given such term in Section 4.2.

(103) “ Improvements ” shall mean those infrastructure improvements benefiting the Master Project, including, without limitation, schools, parks, backbone infrastructure and Regional Improvements.

(104) “ Income Producing Sites ” shall mean the commercial, industrial and for rent multifamily sites which are part of the Master Project.

(105) “ Indemnified Party(ies) ” shall have the meaning given such term in Section 16.2 hereof.

 

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(106) “ Industrial Parcels ” shall have the meaning given such term in Section 10.4A hereof.

(107) “ Initial Capital Contributions ” shall mean with respect to each Developer, any Capital Contributions (excluding any Adjacent Property Contributions, Entitlement Stage Contributions, and Remaining Entitlement Stage Contributions) made by such Developer prior to the Effective Date, as set forth on Exhibit “B” attached hereto.

(108) “ Initiating Entity ” shall have the meaning given such term in Section 17.1 hereof.

(109) “ Interest ” shall mean all of the right, title and interest of a Member in and to capital, distributions, income and losses of and from the Company and all management, approval, voting and other rights of a Member provided herein.

(110) “ Interest Book Value ” shall have the meaning given such term in Section 15.6A hereof.

(111) “ Interest Book Value Method ” shall have the meaning given such term in Section 15.6A hereof.

(112) “ Interest Fair Market Value ” shall have the meaning given such term in Section 15.6A hereof.

(113) “ JAMS ” shall have the meaning given such term in Section 18.3 hereof.

(114) “ LA County Activity ” shall have the meaning given such term in Section 7.4 hereof.

(115) “ LA County Portion ” shall mean the portion of the Balance of the Ranch, which is situated in Los Angeles County.

(116) “ LA County Portion Notice ” shall have the meaning given such term in Section 7.5B hereof.

(117) “ LCCP ” shall have the meaning given such term in Section 18.3 hereof.

(118) “ Lewis ” shall have the meaning given such term in the preamble to this Agreement.

(119) “ Liquidating Distribution Amount ” shall have the meaning given such term in Section 17.1 hereof.

(120) “ Liquidating Member ” shall have the meaning given such term in Section 14.2 hereof.

 

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(121) “ Lot Buyer ” shall have the meaning given such term in Section 10.3B hereof.

(122) “ Lots ” shall have the meaning given such term in Section 10.1.

(123) “ MAI ” shall have the meaning given such term in Section 14.5C hereof.

(124) “ Majority-in-Interest ” means with respect to any relevant group of Members, Members holding greater than fifty percent (50%) of all of the Percentage Interests held by such Members.

(125) “ Master Conceptual Plan ” shall have the meaning given such term in Section 2.1A hereof.

(126) “ Master Project ” shall mean the Existing Property, the Adjacent Property and any Mitigation Land, including access easements, license agreements, leases and any other rights necessary to proceed with the development contemplated by the Development Business Plan conveyed to the Company pursuant to Section 9.1, below.

(127) “ Material Adverse Activity ” shall have the meaning given such term in Section 7.4 hereof.

(128) “ Material Taking ” shall have the meaning given such term in Section 4.3E(5) hereof.

(129) “ Member Loan ” shall have the meaning given such term in Section 4.6A hereof.

(130) “ Member(s) ” shall have the meaning given such term in the preamble to this Agreement.

(131) “ Memorandum of Contribution Agreement ” shall have the meaning given such term in Section 4.3E hereof.

(132) “ Mitigation Land ” shall have the meaning given such term in Section 9.1 hereof.

(133) “ Multi-Family Parcels ” shall have the meaning given such term in Section 10.4A hereof.

(134) “ Negotiation Period ” shall have the meaning given such term in Section 14.5A(1) hereof.

(135) “ New Commercial Parcel ” shall have the meaning given such term in Section 10.4C(3) hereof.

 

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(136) “ New Offered Lot Group ” shall have the meaning given such term in Section 10.3A(3) hereof.

(137) “ Non-Competition Area ” shall have the meaning given such term in Section 7.5D hereof.

(138) “ Non-Contributing Member(s) ” shall have the meaning given such term in Section 4.4 hereof.

(139) “ Non-Contribution Loans ” shall have the meaning given such term in Section 4.4B hereof.

(140) “ Non-Funding Member ” shall have the meaning given such term in Section 4.2 hereof.

(141) “ Non-Withdrawing Developers ” shall have the meaning given such term in Section 7.5B hereof.

(142) “ North and South Mitigation Land ” shall mean that certain property of approximately five thousand one hundred ninety-two (5,192) acres located within the Ranch currently owned by Tejon, as more particularly described in Exhibit “L” attached hereto.

(143) “ Offer Price ” shall have the meaning given such term in Section 10.2 hereof.

(144) “ Offered Lot Group ” shall have the meaning given such term in Section 10.2 hereof.

(145) “ Offering Notice ” shall have the meaning given such term in Section 17.1 hereof.

(146) “ Office Parcels ” shall have the meaning given such term in Section 10.4A hereof.

(147) “ Open Market Lots ” shall have the meaning given such term in Section 10.1 hereof.

(148) “ Open Market Retail Parcels ” shall have the meaning given such term in Section 10.4A hereof.

(149) “ Original LLC Agreement ” shall have the meaning given such term in Recital A. hereof.

(150) “ Original Members ” shall have the meaning given such term in Recital A. hereof.

(151) “ Other Members ” shall have the meaning given such term in Section 15.2 hereof.

 

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(152) “ Pardee ” shall have the meaning given such term in the preamble to this Agreement.

(153) “ Percentage Interest ” shall mean initially, with respect to each Member, the percentage set forth on Exhibit “B” hereto, subject to any adjustment pursuant to this Agreement.

(154) “ Person ” shall mean an individual, partnership, limited liability company, corporation, joint venture, trust, business trust, association or similar entity and the heirs, executors, legal representatives, successors and assigns of such entity where the context requires.

(155) “ Planning Areas ” shall have the meaning given such term in Section 2.1A hereof.

(156) “ Pre-Development Period ” shall mean the period of time commencing immediately after the Entitlement Date through the earlier of (i) the date of the satisfaction of the Development Stage Conditions, or (ii) the dissolution of the Company; provided, however, that if the Development Stage Conditions are satisfied by the Entitlement Date, then there shall be no Pre-Development Period.

(157) “ Pre-Development Period Business Plan ” shall have the meaning given such term in Section 2.2B hereof.

(158) “ Pre-Development Period Contributions ” shall have the meaning given such term in Section 4.3B hereof.

(159) “ Pre-Development Period Preferred Return ” means with respect to each Contributing Member only, a return of six percent (6%), compounded annually, on such Member’s Unreturned Replacement Pre-Development Contributions.

(160) “ Previous Commercial Parcel ” shall have the meaning given such term in Section 10.4C(3) hereof.

(161) “ Previous Offered Lot Group ” shall have the meaning given such term in Section 10.3A(3) hereof.

(162) “ Price Condition ” shall have the meaning given such term in Section 14.5A(3)(b)(ii) hereof.

(163) “ Private Sale Commercial Parcels ” shall have the meaning given such term in Section 10.4A hereof.

(164) “ Private Sale Lots ” shall have the meaning given such term in Section 10.1 hereof.

(165) “ Private Sale Retail Parcels ” shall have the meaning given such term in Section 10.4A hereof.

 

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(166) “ Project Employee(s) ” shall have the meaning given such term in Section 7.3 hereof.

(167) “ Property Fair Market Value ” shall have the meaning given such term in Section 14.5A hereof.

(168) “ Purchase Notice ” shall have the meaning given such term in Section 14.5A(3) hereof.

(169) “ Purchase Notice Deadline ” shall have the meaning given such term in Section 14.5A(3) hereof.

(170) “ Purchase Price ” shall have the meaning given such term in Section 17.1 hereof.

(171) “ Purchasing Entity ” shall have the meaning given such term in Section 17.3 hereof.

(172) “ Purchasing Member(s) ” shall have the meaning given such term in Section 15.6E(2) hereof.

(173) “ Ranch ” shall mean Tejon Ranch, as depicted on Exhibit “A” attached hereto.

(174) “ Ranch-Wide Agreement ” shall mean that certain Tejon Ranch Conservation and Land Use Agreement dated as of June 17, 2008 by and among TRC, Tejon, the Conservancy, Audubon California, the Endangered Habitats League, Natural Resources Defense Council, Planning and Conservation League and Sierra Club with the Company and two other entities affiliated with Tejon joining in for the limited purpose of acknowledging their respective obligations.

(175) “ Real Estate Closing ” shall have the meaning given such term in Section 14.5F hereof.

(176) “ Regional Improvements ” shall refer to those improvements and facilities which are required to service real property which exceeds that of the Master Project in any material manner, including, without limitation, parks and open spaces and sewer treatment plants, etc.

(177) “ Regulations ” shall mean the Treasury Regulations (including temporary or proposed regulations) promulgated under the Code, as amended from time to time, including corresponding provisions of succeeding regulations.

(178) “ Remaining Contribution Date ” shall mean the date upon which the Development Stage Conditions are satisfied.

(179) “ Remaining Developers ” shall mean those Developers other than a Withdrawing Developer.

 

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(180) “ Remaining Entitlement Period ” shall mean the period from May 8, 2009, through the earlier of (i) the Entitlement Date, or (ii) the date the Company is dissolved.

(181) “ Remaining Entitlement Period Contributions ” shall have the meaning given such term in Section 4.3A hereof.

(182) “ Remaining Entitlement Period Preferred Return ” means with respect to each Contributing Member only, a return of six percent (6%), compounded annually, on such Member’s Unreturned Replacement Remaining Entitlement Contributions.

(183) “ Replacement DM ” shall have the meaning given such term in Section 7.2D hereof.

(184) “ Replacement Pre-Development Contribution ” with respect to any particular capital call pursuant to Section 4.3B shall mean an amount equal to the portion of such capital call funded by a Funding Member in excess of the amount equal to such Funding Member’s Contribution Percentage multiplied by the Total Call Amount. For example, if a Funding Member with a Contribution Percentage of fifty percent (50%) funded Eighty Thousand Dollars ($80,000) of a One Hundred Thousand Dollar ($100,000) capital call made under Section 4.3B, then the Replacement Pre-Development Contribution would equal Thirty Thousand Dollars ($30,000) (i.e., ($80,000 - ($100,000 x 50%) = $30,000)).

(185) “ Replacement Remaining Entitlement Contribution ” with respect to any particular capital call pursuant to Section 4.3A shall mean an amount equal to the portion of such capital call funded by a Funding Member in excess of the amount equal to such Funding Member’s Contribution Percentage multiplied by the Total Call Amount. For example, if a Funding Member with a Contribution Percentage of fifty percent (50%) funded One Hundred Thousand Dollars ($100,000) of a One Hundred Thousand Dollar ($100,000) capital call made under Section 4.3A, then the Replacement Remaining Entitlement Contribution would equal Fifty Thousand Dollars ($50,000) (i.e., ($100,000 - ($100,000 x 50%) = $50,000)).

(186) “ Representative(s) ” shall have the meaning given such term in Section 7.1C hereof.

(187) “ Represented Members ” shall have the meaning given such term in Section 7.1C hereof.

(188) “ Responding Commercial Developer ” shall have the meaning given such term in Section 10.4C(4)(a) hereof.

(189) “ Responding Developer ” shall have the meaning given such term in Section 10.3A(4)(a) hereof.

(190) “ Responding Entity ” shall have the meaning given such term in Section 17.1 hereof.

 

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(191) “ Response Notice ” shall have the meaning given such term in Section 17.3 hereof.

(192) “ Retail Parcels ” shall have the meaning given such term in Section 10.4A hereof.

(193) “ Revised Sale Price ” shall have the meaning given such term in Section 14.5A(3)(d) hereof.

(194) “ RWA Advances ” shall have the meaning given such term in Section 9.4A hereof.

(195) “ Sales Employee ” shall have the meaning given such term in Section 7.3 hereof.

(196) “ Second Commercial Developer ” shall have the meaning given such term in Section 10.4C(1) hereof.

(197) “ Second Developer ” shall have the meaning given such term in Section 10.3A(1) hereof.

(198) “ Section 2.3 Advances ” shall have the meaning given such term in Section 9.4A hereof.

(199) “ Section 2.4 Advances ” shall have the meaning given such term in Section 9.4A hereof.

(200) “ Section 2.5 Advances ” shall have the meaning given such term in Section 9.4A hereof.

(201) “ Section 2.6 Repayments ” shall have the meaning given such term in Section 9.4B hereof.

(202) “ Selling Entity ” shall have the meaning given such term in Section 17.3 hereof.

(203) “ Selling Member ” shall have the meaning given such term in Section 15.6E(2) hereof.

(204) “ SP Original Interest ” shall have the meaning given such term in Section 19.1 hereof.

(205) “ SP Transaction ” shall have the meaning given such term in Section 19.3 hereof.

(206) “ SPIC ” shall have the meaning given such term in the preamble to this Agreement.

 

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(207) “ SPIC Preferred Return ” shall have the meaning given such term in Section 19.4 hereof.

(208) “ Standard Pacific ” shall have the meaning given such term in the preamble to this Agreement.

(209) “ Subordinated Debt ” shall have the meaning given such term in Section 13.1A hereof.

(210) “ Tejon ” shall have the meaning given such term in the preamble to this Agreement.

(211) “ Tejon/Developer Lot Deadlock ” shall have the meaning given such term in Section 17.1 hereof.

(212) “ Tejon Existing Property Credit ” shall have the meaning given such term in Section 4.3E hereof.

(213) “ Tejon Feasibility Cost Credit ” shall have the meaning given such term in Section 4.1B hereof.

(214) “ Term ” shall mean the term of this Agreement as described in Section 1.5 hereof.

(215) “ Third Developer ” shall have the meaning given such term in Section 10.3A(1) hereof.

(216) “ Third-Party Buyer ” shall have the meaning given such term in Section 14.5A(3)(b) hereof.

(217) “ Third Party Financing ” shall have the meaning given such term in Section 4.5 hereof.

(218) “ Third-Party Purchase Agreement ” shall have the meaning given such term in Section 14.5A(3)(b)(i) hereof.

(219) “ Thirty Day Good Faith Negotiation Period ” shall have the meaning given such term in Section 17.1 hereof.

(220) “ Timing Condition ” shall have the meaning given such term in Section 14.5A(3)(b)(i) hereof.

(221) “ TMP ” shall have the meaning given such term in Section 11.4 hereof.

(222) “ TMV ” shall have the meaning given such term in Section 9.4B hereof.

 

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(223) “ TMV RWA Reimbursements ” shall have the meaning given such term in Section 9.4B(2) hereof.

(224) “ Total Call Amount ” shall have the meaning given such term in Section 4.3 hereof.

(225) “ Transfer ” shall have the meaning given such term in Section 12.1A hereof.

(226) “ TRC ” shall mean Tejon Ranch Co., a Delaware corporation.

(227) “ Unreturned Replacement Pre-Development Contributions ” with respect to a Member shall mean such Member’s total unreturned Pre-Development Period Contributions multiplied by the ratio of such Member’s Replacement Pre-Development Contributions to its total Pre-Development Period Contributions. For example, if (a) a Funding Member has funded Eighty Thousand Dollars ($80,000) of Pre-Development Period Contributions, and (b) Thirty Thousand Dollars ($30,000) of such Eighty Thousand Dollars ($80,000) constituted Replacement Pre-Development Contributions, and (c) such Member received Forty Thousand Dollars ($40,000) pursuant to Section 6.1D, then such Member’s Unreturned Replacement Pre-Development Contributions equal Fifteen Thousand Dollars ($15,000) (i.e., ($80,000 - $40,000 (unreturned Pre-Development Period Contributions) * ($30,000 / $80,000)).

(228) “ Unreturned Replacement Remaining Entitlement Contributions ” with respect to a Member shall mean such Member’s total unreturned Remaining Entitlement Period Contributions multiplied by the ratio of such Member’s Replacement Remaining Entitlement Contributions to its total Remaining Entitlement Period Contributions. For example, if (a) a Funding Member has funded One Hundred Thousand Dollars ($100,000) of Remaining Entitlement Period Contributions, and (b) Thirty Thousand Dollars ($30,000) of such One Hundred Thousand Dollars ($100,000) constituted Replacement Remaining Entitlement Contributions, and (c) such Member received Forty Thousand Dollars ($40,000) pursuant to Section 6.1C, then such Member’s Unreturned Replacement Remaining Entitlement Contribution equals Eighteen Thousand Dollars ($18,000) (i.e., ($100,000 - $40,000 (unreturned Remaining Entitlement Period Contributions) * ($30,000 / $100,000)).

(229) “ Voting Interest ” shall have the meaning given such term in Section 7.1C hereof.

(230) “ Withdrawal Notice ” shall have the meaning given such term in Section 13.1A hereof. Except as otherwise provided in this Agreement, a Withdrawing Developer shall have no further rights or obligations with respect to the Company or the Master Project upon the effective date of a Withdrawal Notice or deemed withdrawal in accordance with Section 13.1A.

(231) “ Withdrawing Developer ” shall mean a Developer that has delivered a Withdrawal Notice or is otherwise deemed to have elected to withdraw pursuant to Section 13.1A hereof.

 

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(232) “ 2008 Amendment ” shall have the meaning given such term in Recital C. hereof.

B. Terms Defined in the Act . Terms defined in the Act and used herein without definition shall have the definitions given them under the Act.

1.2 Formation of Limited Liability Company . The Company was formed by the filing of the Certificate pursuant to the Act.

1.3 Principal Place of Business . The principal place of business of the Company within the State of California shall be at 4436 Lebec Road, Lebec, California 93243. The Company may change and locate its place of business and registered office at any other place or places as the Executive Committee may from time to time deem advisable.

1.4 Registered Office and Registered Agent . For purposes of Section 18-104(a)(1) of the Act, the registered office of the Company is c/o Paracorp Incorporated, 15 North East Street, Dover, Delaware 19901, and the name of its initial registered agent at such address shall be Paracorp Incorporated. The registered office and registered agent may be changed by the Executive Committee from time to time by filing the address of the new registered office and/or the name of the new registered agent with the Delaware Secretary of State pursuant to the Act.

1.5 Term . The Term of the Company commenced on March 10, 2000, and shall continue indefinitely, until the Company is dissolved in accordance with Article 14.

1.6 Admission of SPIC . Pursuant to the 2008 Amendment, SPIC was admitted as a substitute member of the Company. Tejon, Pardee and Lewis approved the admission of SPIC as an accommodation to Standard Pacific with the understanding that such admission would not (i) reduce, diminish or otherwise modify the rights, remedies and benefits of each of Tejon, Pardee and Lewis under the First Amended and Restated LLC Agreement, or (ii) increase the rights, remedies or benefits available to Standard Pacific and/or SPIC under the First Amended and Restated LLC Agreement (in excess of the rights, remedies and benefits available to Standard Pacific under the First Amended and Restated LLC Agreement). Section 19 sets forth the relative rights and duties of Standard Pacific and SPIC, as between themselves. The provisions of this Agreement as they relate to Standard Pacific and SPIC are modified and superseded by the provisions of Section 19.

2. PERMITTED BUSINESSES .

2.1 Feasibility Stage Business .

A. Initially, the business of the Company was to (i) conduct a feasibility analysis in order to assess the feasibility of the Master Project (the “ Feasibility Analysis ”), (ii) use diligent efforts to develop and achieve unanimous written agreement of the Members upon the “ Master Conceptual Plan ” for the financing, development, marketing and disposition of the Master Project and the individual components thereof, including a tentative allocation of the development of the Master Project among various planning areas (“ Planning Areas ”) as a master planned residential community with ancillary commercial, industrial and multifamily uses and preparation of a Master Project proforma cash flow analysis, (iii) use diligent efforts to

 

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develop and achieve unanimous written agreement of the Members on the initial Entitlement Business Plan based upon the Master Conceptual Plan Approved by the Members, and (iv) carry on all other activities incidental to, or necessary or convenient in furtherance of, the foregoing, as Approved by the Executive Committee (collectively, the “ Feasibility Stage Business ”).

B. During the Feasibility Stage, the Feasibility Stage Business was conducted in accordance with that certain business plan (the “ Feasibility Business Plan ”), which was Approved prior to the Effective Date in accordance with the Original LLC Agreement and was replaced and superseded in its entirety by the Entitlement Business Plan.

C. The Members hereby acknowledge that the Feasibility Analysis has been completed, the Master Conceptual Plan has been unanimously Approved by the Members, the Members have Approved the initial Entitlement Business Plan, as subsequently amended, and the Company is currently engaged in the Entitlement Stage Business.

2.2 Entitlement Stage Business . The business of the Company during the Entitlement Stage includes (i) pursuing Entitlements for the Master Project, (ii) updating the Master Conceptual Plan as necessary to reflect current market conditions, (iii) developing and seeking Approval of the initial Development Business Plan, and (iv) carrying on all other activities incidental to, or necessary or convenient in furtherance of, the foregoing, as Approved by the Executive Committee (collectively, the “ Entitlement Stage Business ”). Further:

A. During the Remaining Entitlement Period of the Entitlement Stage, the scope of the Entitlement Stage Business shall include the matters contemplated in that certain business plan currently in effect (as amended from time to time in accordance with this Agreement, the “ Entitlement Business Plan ”) which was Approved prior to the Effective Date in accordance with the First Amended and Restated LLC Agreement.

B. During the Pre-Development Period of the Entitlement Stage, if applicable, the scope of the Entitlement Stage Business shall include the matters contemplated in a business plan (the “ Pre-Development Period Business Plan ”) which shall be Approved by the Executive Committee prior to the commencement of the Pre-Development Period and may be amended from time to time in accordance with this Agreement. The Pre-Development Period Business Plan shall include:

(1) An annual budget for the initial year of the Pre-Development Period and a projected budget for the expected Pre-Development Period;

(2) A narrative business plan stating the general goals and objectives for the Master Project during the Pre-Development Period; and

(3) Such other elements as are determined by the Executive Committee.

C. Prior to the end of the Entitlement Stage, each of Tejon and the Developers shall use its diligent and good faith efforts to prepare and agree upon the initial Development Business Plan.

 

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2.3 Development Stage Business .

A. Subject to Section 2.3E below, upon satisfaction of the Development Stage Conditions, without further action of the Members, the business of the Company shall be further expanded to include (i) acquisition by the Company of the Existing Property from Tejon, (ii) financing, developing and improving the respective Planning Areas, (iii) marketing and disposing of completed residential lots to merchant builders (such merchant builders may include individual Members and/or their Affiliates), (iv) disposing of or improving, operating and holding for investment, the Income Producing Sites; provided that the Executive Committee, subject to the terms of Section 10.4 hereof, (a) may Approve and cause the contribution of portions of the Master Project, such as the Income Producing Sites, to separate entities (“ Affiliate Entities ”) that would be wholly-owned by the Company or “sister” companies owned by the Members under substantially the same terms and conditions set forth herein, and (b) will Approve the disposition of the Private Sale Commercial Parcels to the Commercial Developers and/or their Affiliates pursuant to this Agreement, (v) admitting new member(s) or contributing the assets of the Company to a new venture to finance the Development Stage Business, and (vi) carrying on all other activities incidental to, or necessary or convenient in furtherance of, the foregoing, as reasonably Approved by the Executive Committee (collectively, the “ Development Stage Business ”). The Development Stage Business shall be conducted in accordance with the Development Business Plan.

B. The plan for the business of the Company during the Development Stage (the “ Development Business Plan ”) shall, at a minimum cover the following topics:

(1) An annual budget for the current year and a projected budget for the next five (5) years (the “ Development Budget ”);

(2) A Master Project proforma cash flow analysis;

(3) A development schedule;

(4) Specific procedures for constructing joint and Regional Improvements and advancing the cost thereof and the calculation of any reimbursable costs relating thereto. In connection therewith, the Company shall seek reimbursement rights for joint and Regional Improvements to the extent the same benefit property other than the Master Project (i.e. property owned by Tejon or other parties). Such reimbursement obligation shall be funded upon the sale of such benefited property. Pursuant to any reimbursement agreements agreed to in connection with the foregoing, the Company (or Tejon, in the case of Regional Improvements) shall be entitled to a construction supervision and overhead fee in an amount to be Approved by the Executive Committee;

(5) A plan for (i) the appropriate sharing of any land set-aside for public or regional purposes, (ii) the formation of a school district and the construction of schools, and (iii) other regional or public facilities to be constructed as part of the Master Project;

(6) A finance plan (the “ Development Financing Plan ”) setting forth the projected financing required to fund the costs of development set forth in the Development Budget and the terms of such financing;

 

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(7) A narrative business plan stating the general goals and objectives for the development of the Master Project;

(8) A sales and marketing plan for the sale of the various Planning Areas (or portions thereof) to merchant builders, including, without limitation, projected takedown schedules and pricing schedules, a summary of other material terms and conditions for such sales and form master builder/merchant builder purchase and sale documents; and

(9) Any other matters provided for herein which are applicable and pertaining to the Development Business Plan, as the same may be amended from time to time in accordance with this Agreement.

C. The initial Development Business Plan shall be Approved in writing by the requisite Members in accordance with this Agreement prior to commencement of the Development Stage and shall replace the Entitlement Business Plan.

D. As used herein, the “ Development Stage Conditions ” shall mean the following:

(1) The Company shall have obtained the Entitlements in accordance with the Entitlement Business Plan within the time period specified in the entitlement schedule set forth in the Entitlement Business Plan;

(2) Tejon and at least two (2) of the Developers shall have Approved the initial Development Business Plan in writing; and any Developer that has disapproved (or is deemed pursuant to Section 7.1B to have disapproved) any Development Business Plan that is Approved pursuant to this Section 2.3D(2) shall be deemed to be a Withdrawing Developer under Section 13.1A;

(3) The Company shall have obtained a binding commitment for financing for the Development Stage in accordance with the Development Financing Plan Approved as part of the Development Business Plan; and

(4) The conditions for commencing the Development Stage set forth in the last paragraph of Section 13.1B shall have been satisfied.

E. If the Entitlements are not obtained on or before the fifth anniversary of the Effective Date or all of the Development Stage Conditions are not satisfied or the Development Stage Business has not commenced on or before the tenth anniversary date of the Effective Date, then the Company may be dissolved in accordance with Section 14.1.

2.4 Adjacent Property . The Company has purchased the Adjacent Property pursuant to the Adjacent Property Purchase Agreement with the proceeds of Capital Contributions made by the Members prior to the Effective Date. The Company shall own, entitle, finance, develop, improve, market and sell (or hold for investment) the Adjacent Property as appropriate in accordance with the applicable Business Plan.

 

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3. MEMBERS, MEMBERSHIP INTERESTS AND LIMITED LIABILITY .

3.1 Addresses and Interests of Members . The Members’ respective names, addresses and Percentage Interests in the Company are set forth on Exhibit “B ” attached hereto and incorporated herein.

3.2 Limited Liability . Except as required under the Act or as expressly set forth in this Agreement, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, will be solely the debts, obligations and liabilities of the Company, and no Member will be obligated personally for any debt, obligation or liability of the Company solely by reason of being a member of the Company.

4. CAPITAL CONTRIBUTIONS, BOOK CAPITAL ACCOUNTS, FINANCING AND LOANS .

4.1 Capital Contributions Prior to the Effective Date .

A. Initial Capital Contributions . Prior to the Effective Date, each of the Developers has funded Initial Capital Contributions to the Company in the aggregate amount set forth opposite such Member’s name in the column labeled “ Initial Capital Contributions ” on Exhibit “B ” attached hereto, which were credited to each such Member’s Book Capital Account.

B. Tejon Feasibility Contributions . Prior to the Effective Date, Tejon represents and warrants that it paid various expenses for feasibility studies and related costs that directly benefited the Existing Property in an aggregate amount equal to Two Hundred Forty-One Thousand Seven Hundred Four and 45/100 Dollars ($241,704.45) (collectively, the “ Feasibility Costs ”), as set forth more fully on Exhibit “C ” attached hereto. Tejon was deemed to have made a Capital Contribution and received credit to its Book Capital Account as of the date each such cost was paid in an aggregate amount equal to the Feasibility Costs (the “ Tejon Feasibility Cost Credit ”).

C. Entitlement Stage Contributions . Prior to the Effective Date, each of the Developers funded Capital Contributions during the Entitlement Stage (“ Entitlement Stage Contributions ”) in the aggregate amount set forth opposite such Developer’s name in the column labeled “ Entitlement Stage Contributions ” on Exhibit “B ” attached hereto, which were credited to each such Developer’s Book Capital Account in the amount and at the time that its Entitlement Stage Contributions were made.

D. Adjacent Property Contributions . Prior to the Effective Date, each of the Members (other than SPIC) funded Capital Contributions to acquire the Adjacent Property and to pay the costs and expenses arising out of such property including, without limitation, property taxes and assessments, insurance, and costs of maintaining such property in the aggregate amount set forth opposite such Member’s name in the column labeled “ Adjacent Property Contributions ” on Exhibit “B ” attached hereto (the “ Adjacent Property Contributions ”), which were credited to each such Member’s Book Capital Account in the amount and at the time that such Capital Contributions were made.

 

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4.2 Non-Funding Election . As of the Effective Date, the Developers have elected not to make any Remaining Entitlement Period Contributions or Pre-Development Period Contributions (which election has been Approved by Tejon). Each Developer shall have the right, but not the obligation, to rescind such election on a prospective basis by delivering written notice to the Executive Committee. Any such rescission to be effective must be Approved by the Executive Committee, which approval shall not be unreasonably withheld, delayed or conditioned. If the Executive Committee fails to disapprove any such rescission within ten (10) business days after receiving such written notice, then it shall be deemed to have Approved the applicable Developer’s rescission. If the Executive Committee Approves (or is deemed to have Approved) any such rescission, then the applicable Developer shall thereafter be required to fund its Percentage Interest of any Remaining Entitlement Period Contributions or Pre-Development Period Contributions required to be made after the date of such Approval. Tejon and any Developer whose rescission of its non-funding status has been Approved (or deemed Approved) by the Executive Committee is referred to as a “ Funding Member .” Any Developer who has not successfully rescinded its non-funding status prior to the date that the Development Stage commences shall automatically become a Funding Member on such date. Any Developer that is not a Funding Member is referred to as a “ Non-Funding Member .”

4.3 Additional Capital Contributions . If the Executive Committee determines in its sole and absolute discretion that a capital call is required, then the Executive Committee shall give written notice of such cash deficit to the Members, which notice shall summarize, with reasonable particularity, the Company’s actual and projected cash obligations, cash on hand, projected sources and amounts of future cash flow, the total Capital Contribution requested (the “ Total Call Amount ”) and a contribution date (“ Contribution Date ”) (which shall not be less than ten (10) business days following the effective date of such notice) upon which each Member shall have the obligation to contribute the requested Capital Contributions to the extent provided below in this Section 4.3:

A. Remaining Entitlement Period Contributions . If the Executive Committee calls for any additional Capital Contribution during the Entitlement Stage (i) to further the purposes of the Entitlement Stage Business, (ii) to make Centennial RWA Reimbursements, or (iii) to implement the Entitlement Business Plan (collectively, the “ Remaining Entitlement Period Contributions ”), then each Funding Member shall be required to contribute such Member’s then Percentage Interest of the applicable Total Call Amount. Any Capital Contribution made by a Funding Member pursuant to this Section 4.3A shall be treated as a Remaining Entitlement Period Contribution and credited to such Funding Member’s Book Capital Account as and when any such contribution is made. The Members expressly acknowledge and agree that the Non-Funding Members shall not be required to make any Remaining Entitlement Period Contributions pursuant to this Section 4.3A. Prior to the date of this Agreement, the Executive Committee called for Capital Contributions in the amount of $2,024,666. Effective as of the execution of this Agreement, as the only Funding Member as of the Effective Date, Tejon made a Capital Contribution to the Company in the entire amount of such capital call as reflected in Exhibit “B ” and more particularly described in Section 4.4A(1).

B. Pre-Development Period Contributions . If the Executive Committee calls for any additional Capital Contribution during the Pre-Development Period to fund the Company’s operations or to make Centennial RWA Reimbursements (collectively, the

 

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“ Pre-Development Period Contributions ”), then each Funding Member shall be required to contribute such Member’s then Percentage Interest of the applicable Total Call Amount. Any Capital Contributions made by a Funding Member pursuant to this Section 4.3B shall be treated as a Pre-Development Period Contribution and credited to such Funding Member’s Book Capital Account as and when any such contribution is made. The Members expressly acknowledge and agree that the Non-Funding Members shall not be required to make any Pre-Development Period Contributions pursuant to this Section 4.3B.

C. Development Stage Contributions . If the Executive Committee calls for any additional Capital Contribution during the Development Stage to fund the development and construction of the Master Project or the Company’s operations including, without limitation, to fund the costs of carrying the Master Project and/or to make Centennial RWA Reimbursements (collectively, the “ Development Stage Contributions ”), then each Member (including each Member previously characterized as a Non-Funding Member) shall be required to contribute such Member’s then Percentage Interest of such Capital Contribution. Any Capital Contributions made by a Member pursuant to this Section 4.3C shall be treated as a Development Stage Contribution and credited to such Member’s Book Capital Account as and when any such contribution is made.

D. Adjacent Property Contributions . Any additional capital required to pay for any costs and expenses relating to the Adjacent Property shall be funded in accordance with Sections 4.3A, B and C, as applicable depending on the period during which the Capital Contributions are required to be made.

E. Existing Property Contribution . Within three (3) business days after the later of the Remaining Contribution Date or the date that the Existing Property may reasonably (independent of any other real property) be conveyed to the Company as one (1) or more legal parcels in accordance with the California Subdivision Map Act, Tejon shall be required to contribute and convey by grant deed the Existing Property to the Company. In addition, Tejon shall, to the extent assignable and subject to the retention by Tejon of any rights necessary for Tejon’s development of the Balance of the Ranch, be required to contribute any and all of its right, title and interest in and to, and the Company shall assume any obligations under, (i) all documents, contracts and agreements relating to the Existing Property, including, without limitation, the Ranch-Wide Agreement, (ii) all prior rights and agreements with governmental authorities relating to the acquisition, design, development, construction and operation of the Existing Property, (iii) all entitlements obtained to date and all applications for entitlements submitted to date, including all fees, deposits and other matters relating to the Existing Property, (iv) all agreements and will-serve letters to provide utility services to the Existing Property, (v) all representations, warranties, guaranties, covenants and similar matters from third parties to which Tejon and/or any Affiliate thereof are entitled relating to the Existing Property, and (vi) all other rights relating to the Existing Property. Notwithstanding the foregoing, to the extent any of the foregoing relates to property owned by Tejon and/or any of its Affiliates (other than the Existing Property), the foregoing contribution and assignment to the Company shall be on a non-exclusive basis and Tejon shall retain non-exclusive rights in connection with the same and the Company shall not assume any obligations to the extent such obligations relate to any property owned by Tejon and/or any of its Affiliates (other than the Existing Property).

 

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Notwithstanding the foregoing provisions of this Section 4.3E, the Members agree that the assignment of the Ranch-Wide Agreement by Tejon to the Company (a) shall be limited to the extent described in the immediately preceding paragraph, (b) shall be limited to the rights under the Ranch-Wide Agreement as they relate to the Master Project and the Company, and (c) shall exclude all rights of Tejon to receive reimbursements for advances made in connection with the Master Project and the Balance of the Ranch pursuant thereto, which reimbursements shall be received and administered by Tejon and, to the extent applicable, distributed to the Company by Tejon as set forth in Section 9.4 below.

Within thirty (30) days after the execution hereof, a memorandum of this Agreement in the form attached hereto as Exhibit “D ” (the “ Memorandum of Contribution Agreement ”) shall be recorded in the County of Los Angeles solely for the purpose of notifying third parties of the existence of this Agreement. The legal description for the Existing Property is attached as Exhibit “A ” to the Memorandum. Notwithstanding the foregoing, with respect to the Company and as between the Members, the legal description of the Existing Property shall be described as the legal parcel or parcels comprising the Existing Property to be created in accordance with the terms of this Agreement. As the legal description of the Existing Property is revised and clarified throughout the development process contemplated by this Agreement, the legal description attached to the Memorandum of Contribution Agreement shall be updated and revised to reflect such updated legal description. Tejon shall reasonably cooperate with the Company, at the sole cost and expense of the Company, to cause the Existing Property to be subdivided into one (1) or more legal parcels under the California Subdivision Map Act. The Members hereby authorize the Liquidating Member to record a quitclaim of the Memorandum of Contribution Agreement upon a dissolution of the Company in accordance with this Agreement. »

Upon the contribution of the Existing Property to the Company (the “ Existing Property Contribution ”), Tejon shall be deemed to have made a Capital Contribution, and shall receive a credit to its Book Capital Account in the amount of Thirty Three Million Dollars ($33,000,000.00) (the “ Tejon Existing Property Credit ”), subject to any adjustments made pursuant to this Section 4.3E. As of the Effective Date, the Members anticipate that the Existing Property is comprised of approximately Ten Thousand Seven Hundred (10,700) acres. However, if the Members agree that the number of acres comprising the Existing Property is less than Ten Thousand Six Hundred (10,600) acres or more than Eleven Thousand One Hundred (11,100) acres as a result of a modification of the Existing Property’s boundaries in connection with the processing and procurement of the Entitlements, then the Tejon Existing Property Credit of Thirty-Three Million Dollars ($33,000,000.00) shall be (i) decreased by Three Thousand Eighty-Five Dollars ($3,085.00) for each acre that the number of acres comprising the Existing Property is less than Ten Thousand Six Hundred (10,600) acres, and (ii) shall be increased by Three Thousand Eighty-Five Dollars ($3,085.00) for each acre that the number of acres comprising the Existing Property is more than Eleven Thousand One Hundred (11,100) acres. The credit to Tejon’s Book Capital Account shall not be adjusted if the number of acres comprising the Existing Property is between Ten Thousand Six Hundred (10,600) acres and Eleven Thousand One Hundred (11,100) acres. By way of example, if at the time of Tejon’s contribution of the Existing Property such property is comprised of Ten Thousand Five Hundred (10,500) acres, then the Tejon Existing Property Credit shall equal Thirty Two Million Six Hundred Ninety-One Thousand Five Hundred Dollars ($32,691,500.00) (i.e., $33,000,000.00 – ((10,600-10,500) ´ $3,085.00)).

 

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(1) Prior to the Effective Date, the Executive Committee approved certain existing exceptions to title of the Existing Property (the “ Approved Existing Exceptions ”), which exceptions are set forth on Exhibit “E” attached hereto. Tejon’s contribution of the Existing Property shall be subject only to the Approved Existing Exceptions and all other matters impacting title to the Existing Property whether or not of record either (i) not caused by Tejon or its Affiliates, or if caused by Tejon or its Affiliates, that do not materially and adversely impact the Company’s intended development of the Existing Property, (ii) which would be disclosed on a survey or by inspection of the Property but which were not specifically identified on the preliminary title report attached hereto as Exhibit “E,” (iii) which have been reasonably Approved by the Executive Committee, (iv) which otherwise arise out of the entitlement and development activities of the Company, or (v) which constitute non-delinquent taxes and assessments. The foregoing shall be evidenced by an ALTA standard coverage policy of title insurance (or, at the election of the Executive Committee, an ALTA extended coverage policy of title insurance) covering the Existing Property, issued on the date of the contribution of the Existing Property by Tejon by a title company selected by the Executive Committee, with policy limits equal to the amount of the Tejon Existing Property Credit and insuring title to the Existing Property vested in the Company in the condition described above.

(2) With respect to monetary liens recorded against the Existing Property (other than Approved Existing Exceptions and monetary liens reasonably approved by the Executive Committee or otherwise caused by a Developer), Tejon shall, at its election, either remove such liens, if any, on or before the contribution of the Existing Property, or offset the aggregate amount of such monetary liens against and thereby reduce the Tejon Existing Property Credit that Tejon would have otherwise received upon its contribution of the Existing Property pursuant to this Section 4.3E had Tejon removed such monetary liens.

(3) From and after the date hereof until the earlier of (i) the dissolution of the Company, or (ii) Tejon’s contribution of the Existing Property, Tejon shall not utilize or encumber the Existing Property (including without limitation the recordation of monetary liens against the Existing Property) in any material manner, without the reasonable Approval of the Executive Committee, which Approval shall be withheld if such action would materially adversely affect the Company’s future ownership and development of the Master Project as contemplated by this Agreement and the Business Plan then in effect. Notwithstanding the foregoing, prior to the contribution of the Existing Property to the Company, Tejon may, without the Approval of the Executive Committee or the Developers, enter into agreements for or otherwise permit hunting and the grazing of livestock on the Existing Property and engage in or otherwise allow any other party to engage in any activity specifically permitted pursuant to the Approved Existing Exceptions.

(4) All closing costs and expenses shall be allocated between Tejon and the Company in accordance with the closing customs in Los Angeles County. Notwithstanding the foregoing, all real estate taxes and assessments payable with respect to the Existing Property shall be apportioned between Tejon and the Company as of Tejon’s conveyance of the Existing Property to the Company and Tejon shall be responsible for the cost of the ALTA standard coverage title policy covering the Existing Property. Any additional premium for ALTA extended coverage, surveys or endorsements shall be paid by the Company.

 

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(5) If Tejon receives a condemnation award with respect to the Existing Property prior to Tejon’s contribution of the Existing Property to the Company, then any condemnation proceeds received by Tejon shall be set aside in one (1) or more bank accounts. If and when Tejon is required to contribute the Existing Property, Tejon shall also contribute such condemnation proceeds and any interest accrued thereon earned in such bank accounts. Such Existing Property, condemnation proceeds and accrued interest thereon shall be credited to Tejon’s Book Capital Account in an aggregate amount equal to the Tejon Existing Property Contribution; provided, however, if the total combined acreage (the “ Combined Acreage ”) that is contributed by Tejon to the capital of the Company and condemned is less than Ten Thousand Six Hundred (10,600) acres or more than Eleven Thousand One Hundred (11,100) acres, then the Tejon Existing Property Credit of Thirty-Three Million Dollars ($33,000,000.00) shall be (a) decreased by Three Thousand Eighty-Five Dollars ($3,085.00) for each acre that the Combined Acreage is less than ten thousand six hundred (10,600) acres, and (b) increased by Three Thousand Eighty-Five Dollars ($3,085.00) for each acre that the Combined Acreage is more than Eleven Thousand One Hundred (11,100) acres. If the Existing Property is subject to condemnation, and such condemnation results in the taking of enough of the Existing Property so as to cause the Executive Committee to reasonably determine that it would not be feasible to develop the Existing Property (a “ Material Taking ”), then such determination shall be deemed an election by the Executive Committee to dissolve the Company and all condemnation proceeds up to Three Thousand Eighty-Five Dollars ($3,085.00) per acre of such condemned Existing Property shall be retained by Tejon and all condemnation proceeds in excess of such amount for such condemned Existing Property shall be contributed by Tejon to the Company (which shall not be treated as a Capital Contribution or otherwise credited to Tejon’s Book Capital Account) and shall be distributed to the Members in accordance with Section 6.1 hereof.

F. Contributions to Fund Consultant Invoices . If during the Entitlement Stage the Executive Committee has not caused to be paid, or has not made a capital call to procure funds to pay, a binding obligation to pay a consultant hired by the Company, then any two Developers acting jointly may provide written notice to the Executive Committee to make a capital call pursuant to this Section 4.3 for purposes of paying such obligation. The Executive Committee shall have the opportunity to respond within seven (7) days of receipt of such notice identifying the reason for non-payment and any additional information relating thereto. If within fourteen (14) days of receipt of the Developers’ original notice, the Executive Committee has not made a capital call with respect to such obligation or otherwise caused such obligation to be paid whether because the Developers have retracted their demand for a capital call or otherwise, then any Developer shall have the right, but not the obligation, to fund payment of such obligation. The funds so advanced by the Developer shall be treated as a Member Loan by such Developer to the Company, which shall accrue interest at the rate of eight percent (8%) per annum, compounded annually, and shall be paid pursuant to Section 6.1B. If more than one Developer funds such obligation, then any Member Loan shall be deemed to have been made by such Developers to the Company in proportion to the respective portion of the obligation funded by each Developer. Under no circumstances, however, shall Tejon be deemed to be in default under this Agreement as a result of the Executive Committee’s election not to pay the obligation or as a result of the making of the Member Loan described in this paragraph. The provisions of this Section 4.3F provide the sole and exclusive remedy for any Developer with respect to a dispute over whether the Executive Committee should fund or make a capital call for an alleged obligation of the Company.

 

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4.4 Remedies for Failure to Make Capital Contributions . If any Funding Member (“ Contributing Member ”) has timely contributed to the capital of the Company all of the capital, if any, required to be contributed by such Member (with respect to the particular capital call), then such Member may elect the applicable remedy(ies) set forth below against each Non-Funding Member and/or any Funding Member (the “ Non-Contributing Member(s) ”) that fails to contribute timely its share of any Capital Contribution described in Section 4.3 (the “ Delinquent Contribution ”). For the sole purpose of applying the remedies set forth below in this Section 4.4, each Non-Funding Member shall be treated as a Non-Contributing Member with respect to any Capital Contribution requested under Sections 4.3A and 4.3B (even though such Non-Funding Member has no obligation to make any such Capital Contribution). The Delinquent Contribution pertaining to each Non-Funding Member shall equal such Member’s then Percentage Interest of any such required Capital Contribution.

A. Failure to Contribute Remaining Entitlement Period Contributions and Pre-Development Period Contributions . If the Delinquent Contribution was required to be made pursuant to Section 4.3A or 4.3B (i.e., a Remaining Entitlement Period Contribution or a Pre-Development Period Contribution), then the Contributing Member(s) may elect, with respect to a Delinquent Contribution for a particular capital call, to pursue either (but not both) of the following two (2) remedies:

(1) Dilution . The Contributing Member(s) may contribute to the capital of the Company, in cash, within ten (10) days following the Contribution Date and in proportion to their respective Percentage Interests (or in such different proportion as such Contributing Member(s) may otherwise determine), up to an amount equal to the Delinquent Contribution. Any contribution made by any Contributing Member pursuant to this Section 4.4A(1) shall be treated as a Remaining Entitlement Period Contribution if the Delinquent Contribution arises under Section 4.3A or a Pre-Development Period Contribution if the Delinquent Contribution arises under Section 4.3B. Any Capital Contribution made by any Contributing Member pursuant to this Section 4.4A(1) shall be credited to such Member’s Book Capital Account as and when any such contribution is made. If there is more than one (1) Non-Contributing Member, then any Capital Contribution made by any Contributing Member pursuant to this Section 4.4A(1) shall be deemed to have been advanced to Company by the Contributing Member(s) in the place of the Non-Contributing Members in proportion to the Non-Contributing Members’ respective Delinquent Contributions relating to the applicable capital call.

Concurrently with the funding of any Capital Contribution pursuant to this Section 4.4A(1), each Non-Contributing Member’s Percentage Interest shall be decreased by the amount (the “ Dilution Percentage ”) expressed in percentage points calculated based upon the following formula:

 

 

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The Percentage Interest(s) of the Contributing Member(s) shall be increased by a like amount of percentage points in proportion to the portion of the Delinquent Contribution contributed by each such Contributing Member. Exhibit “F” sets forth an example illustrating the operation of this Section 4.4A(1). The Members acknowledge and agree that the foregoing remedy may be exercised against any Non-Funding Member even though such Member is not obligated to make any Capital Contribution under Section 4.3A or 4.3B.

Immediately prior to entering into this Agreement, the respective Percentage Interests of the Members were as follows: Tejon, 50%; Standard Pacific, 16.666%; Pardee, 16.667%; and Lewis 16.667%. In connection with this Agreement, the Executive Committee called for Capital Contributions in the amount of $2,024,666. Tejon has funded as a Remaining Entitlement Period Contribution as of the Effective Date (i) its fifty percent (50%) share of the above Total Call Amount as well as (ii) the above-described shares of the Total Call Amount of the other Members. As a result of such Capital Contributions by Tejon, in accordance with the terms set forth in this Section 4.4A(1), the Percentage Interests of the Non-Funding Members have been diluted to the Percentage Interests as of the Effective Date shown on Exhibit “B” , as illustrated on Exhibit “F” .

(2) Member Loan Alternative . As an alternative to the remedy set forth in Section 4.4A(1), if elected by Tejon, the Contributing Member(s) may advance directly to the Company in cash, within ten (10) days following the Contribution Date and in proportion to their respective Percentage Interests (or in such different proportion as such Contributing Member(s) may otherwise determine), up to an amount equal to the Delinquent Contribution, and such amount together with the other amounts funded by the Contributing Members in response to such capital call shall be deemed a Member Loan payable by the Company to the Contributing Members prorata in proportion to the amounts of such Member Loan funded by each of them. Each such Member Loan shall bear interest at the rate of twelve percent (12%) per annum, compounded monthly. The Members acknowledge and agree that such rate is a default rate of interest. Accordingly, to the extent such rate exceeds that which would otherwise be permitted by law, such excess interest is intended to reflect a liquidated damages amount and not a penalty. Instead, such excess interest constitutes a good faith estimate by the Members of the actual damages resulting from the Non-Contributing Member’s failure to contribute its pro rata share of any Remaining Entitlement Period Contribution or Pre-Development Period Contribution. The Members agree that such estimate is reasonable. The Members further agree that a capital call may not be made to enable the Company to repay any Member Loan and that the remedy of dilution under Section 4.3A(1) shall not be available with respect to any Member Loan made under this Agreement.

B. Failure to Contribute Development Stage Contributions . If the Delinquent Contribution was required to be made pursuant to Section 4.3C (i.e., a Development Stage Contribution), then the Contributing Member(s) may contribute to the capital of the Company, in cash, within ten (10) days following the Contribution Date and in proportion to their respective Percentage Interests (or in such different proportion as such Contributing Member(s) may otherwise determine), up to an amount equal to the Delinquent Contribution. Any contribution made by any Contributing Member pursuant to this Section 4.4B shall be treated as a non-recourse loan (“ Non-Contribution Loan ”) to the Non-Contributing Member. If there is more than one (1) Non-Contributing Member, then any Non-Contribution Loan made by any Contributing Member pursuant to this Section 4.4B shall be deemed to have been made by the Contributing Member(s) to the Non-Contributing Members in proportion to their respective Delinquent Contributions.

 

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Each Non-Contribution Loan shall be due and payable six (6) months from the date advanced and shall bear interest at a default interest rate (the “ Default Interest Rate ”) equal to the greater of the following: (i) twenty percent (20%) per annum, or (ii) the reference rate of Bank of America NT&SA, plus six percent (6%) per annum, in either case, compounded monthly. The Members acknowledge and agree that the foregoing Default Interest Rate is a default rate of interest. Accordingly, to the extent the Default Interest Rate exceeds that which would otherwise be permitted by law, such excess interest is intended to reflect a liquidated damages amount for the default of the Non-Contributing Member and not a penalty. Instead, such excess interest constitutes a good faith estimate by the Members of the actual damages resulting from the Non-Contributing Member’s default. The Members agree that such estimate is reasonable.

Each Contributing Member so electing shall advance the Non-Contribution Loan directly to the Company on behalf of each Non-Contributing Member, which advance shall be deemed to be a Development Stage Contribution by the Non-Contributing Member. Each Non-Contributing Member’s Book Capital Account shall be credited by the amount of the Non-Contribution Loan made to such Member as and when any such loan is made.

Notwithstanding anything herein to the contrary, all distributions which would otherwise be made to the Non-Contributing Member under Sections 6.1, 6.2 and 14.3, below shall be paid to the Contributing Members, in proportion to the outstanding balance(s) of the Non-Contribution Loan(s) made by the Contributing Members to such Non-Contributing Member, until such Non-Contribution Loans, including all interest accrued thereon, are repaid in full. Any such amounts shall be deemed to have been distributed to the Non-Contributing Member (including, without limitation, for purposes of calculating such Member’s internal rate of return under Section 13.1A) and applied by the Non-Contributing Member to repay the Non-Contribution Loan(s).

Each Non-Contributing Member’s Interest shall be pledged to the Contributing Member as security for repayment of its Non-Contribution Loan. Each Non-Contributing Member shall execute and deliver to each Contributing Member such agreements and instruments requested by any Contributing Member to evidence and perfect such Contributing Member’s security interest in such Non-Contributing Member’s Interest to secure such Non-Contribution Loan, including, without limitation, a pledge agreement. The security interest granted by each Non-Contributing Member pursuant to its pledge agreement may be foreclosed upon if the applicable Non-Contribution Loan is not repaid on or before its maturity date.

C. Failure to Contribute Existing Property Contribution . If Tejon fails to make the Existing Property Contribution in accordance with Section 4.3E, then, notwithstanding anything in this Agreement to the contrary, for so long as Tejon fails to cure such failure to make the Existing Property Contribution, the Developers may select one (but not both) of the following remedies: either (i) a Majority-in-Interest of the Developers may elect (without the Approval of Tejon or the Executive Committee), to seek an action for specific performance on behalf of all of the Developers and/or the Company requiring Tejon to make the Existing

 

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Property Contribution; or, in the alternative, (ii) a Majority-in-Interest of the Developers may elect to dissolve the Company. If the remedy described in clause (ii) is elected, then Tejon shall be obligated to pay to each Developer an amount equal to the excess, if any, of (a) such Developer’s total outstanding Adjacent Property Contributions (including any Adjacent Property Contributions that have been converted into the Subordinate Debt) plus a yield thereon of eighteen percent (18%) per annum through the date such amount is recovered from Tejon, compounded annually, less (b) any amounts received by such Developer from the Company as liquidating distributions pursuant to Section 14.3 of this Agreement. Tejon shall not be entitled to receive credit to its Book Capital Account or any reimbursement from the Partnership for any amounts paid by Tejon to any Developer pursuant to the preceding sentence.

No Member may seek either of the foregoing remedies provided in this Section 4.4C without the Approval of at least a Majority-in-Interest of the Developers and upon such Approval, all Developers and SPIC shall be bound by such selection of remedies; provided, however, that if, within ninety (90) days from the date upon which Tejon was to make the Existing Property Contribution, a Majority-in-Interest of the Developers are unable to agree upon which remedy to pursue, then all of the Developers shall be deemed to have Approved the remedy set forth in subsection (ii), above. If, after such election or deemed election by the Developers, a court nonetheless disallows either such remedy, then the other remedy shall, in all events, be available to the Developers. By entering into this Agreement, each Member waives and relinquishes all other remedies (including remedies provided in Sections 15.2A, 15.2B and 15.2D) against Tejon (whether at law or equity), including, without limitation, all Claims for consequential or incidental damages and lost profits, arising by reason of Tejon’s failure to make the Existing Property Contribution. Notwithstanding the foregoing, on and subject to the terms of Section 18.15A below, the Members shall also have the right to recover attorneys’ fees in any action permitted by this Section 4.4C if, on the merits of such action, they are the prevailing parties in such action. The parties agree that the sole recourse for the failure of Tejon to make the Existing Property Contribution shall be through the Developers’ actions in accordance with this Section 4.4C. In addition, notwithstanding anything in this Agreement to the contrary, if Tejon contributes the Existing Property pursuant to the specific performance remedy described above or otherwise cures its initial failure to contribute the Existing Property by subsequently making such contribution, then, from and after the date of such cure, Tejon shall not be treated as having committed an Event of Default under this Agreement for any purpose.

D. Implementation of Default Provisions . If the Delinquent Contribution was required to be made by (i) a Funding Member pursuant to Section 4.3A or 4.3B (i.e., Remaining Entitlement Period Contributions and Pre-Development Period Contributions), or (ii) any Member pursuant to Section 4.3C (i.e., a Development Stage Contribution), then the remedies contained in Sections 15.2A, 15.2B, 15.2C, 15.2D and 15.2E may be exercised against such Non-Contributing Member in accordance with the provisions thereof. If the Delinquent Contribution was required under Section 4.3E (i.e., the Existing Property Contribution), then only the remedies set forth in Section 4.4C may be exercised against Tejon as a result of its failure to contribute the Existing Property pursuant to Section 4.3E.

E. Exercise of Remedies . The remedies set forth in Sections 4.4A and 4.4D are in addition to any and all rights and remedies that may be exercised at law and/or in equity against any Funding Member that fails to make a Capital Contribution under Section 4.3A or

 

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4.3B (i.e., Remaining Entitlement Period Contributions and Pre-Development Period Contributions). The remedies set forth in Section 4.4A are the sole and exclusive remedies that may be exercised against any Non-Funding Member with respect to any Delinquent Contribution resulting from any Capital Contribution required under Section 4.3A or 4.3B (i.e., Remaining Entitlement Period Contributions and Pre-Development Period Contributions). In no event shall a Non-Funding Member be in default or breach of this Agreement as a result of not making a Capital Contribution under Section 4.3A or 4.3B (provided a Member that has rescinded its non-funding election shall be in default of this Agreement if such Member thereafter fails to make any Capital Contribution required to be made by such Member under Section 4.3). The remedies described in Section 4.4C are the sole and exclusive remedies that may be exercised against Tejon as a result of its failure to contribute timely the Existing Property pursuant to Section 4.3E.

4.5 Financing of the Master Project . Upon approval of the Development Business Plan, the Members anticipate that third party equity and/or debt financing (the “ Third Party Financing ”) will be necessary to pay the balance of the cost of development of the Master Project and the Improvements. Any Third Party Financing must either conform to the Development Business Plan (or otherwise be approved by the Executive Committee following the commencement of the Development Stage). Such Third Party Financing may include debt with participation or equity conversion features or such other terms as are reasonably approved by the Executive Committee. It may also involve the contribution or other conveyance of the assets of the Company to a venture or series of ventures.

A. The Members will use reasonable efforts to structure any guarantees or other credit enhancement required for the Third Party Financing as several, but not joint, obligations to attempt to avoid any one Member being liable for more than its Percentage Interest of the obligation for which the guaranty or credit enhancement is provided. In no event shall it constitute a breach of this Agreement or a breach of fiduciary duty by any Member to fail to provide a guaranty or credit enhancement in connection with the obligations of the Company, unless such Member fails to provide such guaranty or credit enhancement in the form approved by such Member either through its written approval of the then-applicable Business Plan or in a separate written consent.

B. To the extent such Third Party Financing contemplates an equity investment in the Company or a participating or convertible debt component, the Interests of the Members may be diluted or modified so long as such dilution or modification affects each Member similarly on a non-discriminatory basis. The Executive Committee shall have the authority to effect an amendment to this Agreement to evidence such an admission of a new Member.

C. To the extent such Third Party Financing contemplates the issuance of such public finance vehicles as Mello Roos, assessments or tax increment financing (“ Bond Financing ”), then the amount of Bond Financing encumbering the for sale residential portion of the Master Project shall not exceed an amount which would cause the annual payments for real estate taxes and all other assessments on such residential property (including, without limitation, lighting and landscaping district assessments, master homeowner association dues, and other similar assessments) to exceed two percent (2%) of the base sales price of each home projected in the Development Business Plan. The lien established by the Bond Financing shall be spread among the Planning Areas (including the Income Producing Sites) on a fair and equitable basis as reasonably determined by the Executive Committee.

 

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4.6 Member Loans and Contributions .

A. Except for any loan expressly authorized or required by this Agreement, no Member shall be obligated or authorized to lend or contribute money to the Company. If a loan or contribution not otherwise provided for herein is made to the Company by a Member, then no such loan or contribution shall entitle the lending or contributing Member to any increase in its interest in Company profits, losses or distributions or to the recoupment or repayment of such loans or contributions or the payment of any interest charge or other consideration for the use of such funds. Except as otherwise provided in this Agreement, only by the Approval of the Executive Committee at the time that a loan or contribution is made to the Company shall any such loan or contribution be made a debt due or capital contribution recoverable from the Company to such lending or advancing Member repayable out of the Company’s assets upon such terms and conditions as shall be approved by all Members. Any such Approved loan shall be referred to herein as a “ Member Loan .”

B. Any Member Loan made pursuant to this Agreement shall be a non-recourse obligation of the Company to the lending Member and shall be repayable solely out of Available Cash as provided in Section 6.1B, below. All Member Loans shall be payable pro rata based on the relative outstanding balances of such loans.

5. PROFITS AND LOSSES . The agreement of the Members concerning the maintenance of Book Capital Accounts, allocation of income and loss, deficit restoration and other related income tax matters is set forth in Appendix “A” attached hereto.

6. DISTRIBUTIONS OF AVAILABLE CASH .

6.1 Definitions and Distributions . As used in this Agreement, the term “ Available Cash ” means the gross receipts of the Company over and above such payments and reserves as are reasonably calculated by the Executive Committee to enable the Company to meet its financial obligations in a timely manner and after payment of all costs and expenses of the Company as the same come due (other than payments made pursuant to Section 6.1A and payments made in respect of Member Loans). Reserves shall include an amount for expenses and liabilities reasonably expected to be incurred by the Company in connection with the Company’s business and affairs. The minimum amount of reserve shall be established in the Business Plan. Subject to Sections 6.2 and 19.4, Available Cash shall be distributed as follows no less often than quarterly:

A. First Level . To any of the Members (or any Affiliate thereof) who, at the written request of the Executive Committee, are performing duties related to the development of the Master Project, pro rata to the outstanding fees owing to each such Member (or Affiliate) as provided for in the Business Plan;

B. Second Level . To the payment of any Member Loans (including any interest accrued thereon);

 

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C. Third Level . To the Members who have made Remaining Entitlement Period Contributions in proportion to their respective unreturned Remaining Entitlement Period Contributions until their respective unreturned Remaining Entitlement Contributions are repaid in full;

D. Fourth Level . To the Members who have made Pre-Development Period Contributions in proportion to their respective unreturned Pre-Development Period Contributions until their respective unreturned Pre-Development Period Contributions are repaid in full;

E. Fifth Level . To the Members in proportion to their respective unreturned Development Stage Contributions until their respective unreturned Development Stage Contributions are repaid in full;

F. Sixth Level . To the Members in proportion to their respective Capital Contributions not returned pursuant to Sections 6.1C, 6.1D, or 6.1E or this Section 6.1F until their respective unreturned Capital Contributions are repaid in full (which shall include all Capital Contributions made prior to the Effective Date); and

G. Seventh Level . To the Members, pro rata in accordance with their respective Percentage Interests.

6.2 Overriding Distributions for Preferred Returns . The Members acknowledge and agree that the Remaining Entitlement Period Preferred Returns and the Pre-Development Period Preferred Returns of the Members only accrue on Delinquent Contributions made by a Contributing Member on behalf of any Non-Contributing Member and shall be paid only from (and reduce dollar for dollar) the distributions of Available Cash that would otherwise be made to such Non-Contributing Member. Notwithstanding the terms of Section 6.1, any distributions that would otherwise be made to a Non-Contributing Member shall be applied and distributed to the Contributing Members in the following order of priority:

A. Remaining Entitlement Period Preferred Returns . To the Contributing Members, in proportion to, and to the extent of, their respective unpaid Remaining Entitlement Period Preferred Returns that have accrued on such Member’s Replacement Remaining Entitlement Contributions made with respect to such Non-Contributing Member; and

B. Pre-Development Period Preferred Returns . To the Contributing Members, in proportion to, and to the extent of, their respective unpaid Pre-Development Period Preferred Returns that have accrued on any such Members’ Replacement Pre-Development Contributions made with respect to such Non-Contributing Member.

For purposes of determining the preferred returns that have accrued on the Replacement Remaining Entitlement Contributions and/or Replacement Pre-Development Contributions made with respect to any Non-Contributing Member, (i) any distributions of Available Cash received by any Contributing Member pursuant to Section 6.1C shall be deemed to reduce proportionately the unreturned Remaining Entitlement Period Contributions made by such Contributing Member on its own behalf and the Unreturned Replacement Remaining Entitlement Contributions made by such Contributing Member on behalf of each Non-Contributing Member, and (ii) any distributions of Available Cash received by any Contributing Member pursuant to Section 6.1D

 

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shall be deemed to reduce proportionately the unreturned Pre-Development Period Contributions made by such Contributing Member on its own behalf and the Unreturned Replacement Pre-Development Contributions made by such Contributing Member on behalf of each Non-Contributing Member.

The Profits and Losses to be allocated to the Members shall take into account (i) the additional distributions that any Member is entitled to receive under this Section 6.2, and (ii) the reduced distributions any Member is entitled to receive by virtue of the operation of the provisions of this Section 6.2.

7. MANAGEMENT .

7.1 Executive Committee Generally .

A. In General . The overall management and control of the business and affairs of the Company shall be overseen by a committee (the “ Executive Committee ”), in the form and manner described below; provided, however, that the Development Manager shall have the rights and responsibilities set forth herein; provided, further, that such rights and responsibilities shall be subject to the oversight, review and approval of the Executive Committee. Except as otherwise provided in this Agreement, the Executive Committee shall have the exclusive power and authority to take such action for and on behalf of the Company as the Executive Committee shall from time to time deem necessary or appropriate to carry on the Company business and to carry out the purposes for which the Company was organized. Notwithstanding the foregoing, the Executive Committee’s authority shall be limited to matters directly pertaining to the business purpose of the Company.

Notwithstanding anything to the contrary in this Agreement, the Executive Committee shall have the right, in its sole and absolute discretion, to suspend, discontinue or terminate entirely some or all of the activities of the Company for a specified or indefinite period of time from time to time for any reason whatsoever, including but in no way limited to, the process of obtaining Entitlements taking longer and being more costly than anticipated, the feasibility of obtaining the Entitlements being uncertain or that the then current or anticipated future economic climate is not conducive to the development of the Master Project. Tejon is willing to enter into this Agreement and agree to the Developers becoming Non-Funding Members only on the condition that the Executive Committee has the right in its sole and absolute discretion to determine whether or not it is feasible to continue to pursue the Entitlements and/or the development of the Master Project. The Members agree that the decision of the Executive Committee, or any Representative to elect to discontinue, terminate or suspend the pursuit of the Entitlements or the development of the Master Project, (or any portion thereof) prior to the commencement of the Development Stage, or to cease making capital calls (subject to Section 4.3F above) prior to the commencement of the Development Stage, shall not constitute a breach of this Agreement or a breach of fiduciary duty by the Executive Committee, any Representative or any Member. The preceding sentence shall not be construed to imply that such actions taken during the Development Stage constitute a breach of the Agreement or breach of fiduciary duty.

B. Approval of Business Plan . Each Business Plan and any modification thereto must be Approved by the Executive Committee. Notwithstanding the foregoing, Approval of the initial Development Business Plan (and any amendment or modification thereof

 

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prior to the commencement of the Development Stage) shall require the Approval of Tejon and at least two (2) of the Developers. Subject to the prior sentence, any modifications to a Business Plan shall require the Approval of the Executive Committee pursuant to Section 7.1C(2). If one (1) or more of the Developers or Tejon disapproves of the initial Development Business Plan (or any amendment or modification thereof prior to the commencement of the Development Stage), then either (i) Section 13.1 shall apply if only one (1) Developer has disapproved of the Development Business Plan (provided, however, that Section 13.1 shall only so apply prior to the commencement of the Development Stage), or (ii) subject to the rights of Tejon to dissolve the Company set forth in Section 14.1C below, if applicable, the Members shall meet and cooperate in good faith until the Members Approve such Development Business Plan or modification thereto. A Developer shall be deemed to have disapproved a Development Business Plan proposed by the Executive Committee if such Developer has not Approved the Development Business Plan within thirty (30) days of delivery of such Business Plan in Writing to the Developer.

C. Composition of Executive Committee and Voting Interests . The Executive Committee shall be comprised of individuals appointed by the Members. Such individuals shall be referred to herein collectively as “ Representatives ” and each individually as a “ Representative ,” and the Members shall be referred to herein as the “ Represented Members .” The Representatives shall vote on the Executive Committee based on the Percentage Interest of the Member which they represent. Such voting rights shall be referred to herein as a “ Voting Interest .” Each Developer shall have the right to appoint one (1) Representative. Tejon shall appoint two (2) Representatives. Each such Tejon Representative shall be authorized to vote Tejon’s entire Voting Interest, but in no event shall the combined vote of Tejon’s Representatives on any matter exceed Tejon’s Voting Interest.

(1) The Representatives of the Represented Members are as follows:

 

(2) Except as otherwise set forth in Sections 7.1B, 7.1C(3) and (4) and subject to Sections 7.1D and 15.2A, during the Remaining Entitlement Period and Pre-Development Period any actions which require Approval of the Executive Committee shall be deemed Approved only if Representatives with a Voting Interest representing a Majority-in-Interest of the Members vote in favor of such action. Except as otherwise set forth in Sections 7.1B, 7.1C(3) and (4) and subject to Section 15.2A and to any rights of third parties providing financing to the Company, during the Development Stage any actions which require Approval of the Executive Committee shall be deemed Approved only if (a) Representatives with a Voting Interest representing a Majority-in-Interest of the Members vote in favor of such action, and (b) the Representative of at least one (1) Developer whose Percentage Interest equals or exceeds seven and one-half percent (7.5%) votes in favor of such action (provided, however, that such Approval by a Developer’s Representative shall not be required if no Developer meets such requirements):

 

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(3) Notwithstanding Section 7.1C(2), but subject to Section 15.2A, throughout the term of this Agreement the Approval of any of the following decisions shall require the Approval of (a) the Representatives of Tejon, and (b) the Representative of at least one (1) Developer whose Percentage Interest equals or exceeds seven and one-half percent (7.5%) (provided, however, that such Approval by a Developer’s Representative shall not be required if no Developer meets such requirements):

(a) Make any change to the general purpose of the Company, which is to entitle and develop a residential community within the Master Project together with ancillary retail and industrial uses; and

(b) At any time following the commencement of the Development Stage, institute proceedings to adjudicate the Company bankrupt or consent to a filing of a bankruptcy proceeding against the Company or file a petition or answer or consent seeking reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable federal or state law, or consent to the filing of any such petition against the Company, or consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company, or of their property, or make an assignment for the benefit of creditors of the Company, or admit the Company’s, inability to pay its debts generally as they become due.

(4) Notwithstanding Section 7.1C(2) above, but subject to Section 15.2A, throughout the term of this Agreement the Approval of any of the following decisions shall require the unanimous Approval of the Executive Committee, i.e. all five (5) Representatives, or such lesser number of Representatives to the extent that any Developers have withdrawn from the Company:

(a) Cause or permit the Company to engage in any activity that is entirely unrelated to and does not further in any way the general business purpose of the Company as set forth in Section 7.1C(3)(a) above;

(b) Knowingly do any act which would make it impossible to carry on the business of the Company, except as otherwise provided in the Agreement;

(c) Dissolve, terminate, or liquidate the Company other than in accordance with this Agreement; and

(d) Make any amendments to this Agreement.

D. Voting of Non-Funding Members . Notwithstanding anything to the contrary herein (other than Section 7.1C(4) above), for any period that a Member is a Non-Funding Member, its Voting Interest shall only be advisory in nature and shall not be counted in determining the Approval of the Executive Committee of any action. In such event, any actions which require the Approval of the Executive Committee shall be deemed Approved only if Representatives with a Voting Interest representing a Majority-in-Interest of the Funding Members vote in favor of such action. A Member’s Voting Interest shall be restored on the earlier of the date such Member successfully rescinds its non-funding status in accordance with Section 4.2 above or the commencement of the Development Stage; provided, however, its Voting Interest shall reflect its adjusted Percentage Interest calculated as of the date immediately preceding the Executive Committee’s Approval of the rescission of its non-funding status.

 

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E. Alternates . Each Represented Member shall appoint two (2) alternate Representatives (“ Alternates ”). Each Alternate shall have all of the rights and obligations of a Representative hereunder. Each Represented Member may substitute its Alternate(s) for its Representative(s) at any time from time to time on a temporary or permanent basis at such Member’s sole and absolute discretion; provided, however, that, with respect to the Developers, only one (1) Alternate may represent each Voting Interest at one time. Notwithstanding the foregoing, Tejon may appoint one (1) Alternate to substitute for either or both of Tejon’s Representative(s). The Alternates of the Represented Members are as follows:

 

F. Regular Meetings of the Executive Committee . The Executive Committee shall meet not less frequently than once every other month (for a total of at least six (6) meetings each year), and more often if necessary, at such times and at such place as may be determined by the Executive Committee, provided that the Represented Members shall be given not fewer than ten (10) business days’ prior written notice of such meetings. Notwithstanding the foregoing, each Represented Member shall be entitled to call special meetings of the Executive Committee, provided that the Represented Members’ Representatives shall be given not fewer than ten (10) business days’ prior written notice of such meetings. Each Represented Member shall use its best efforts to cause its Representatives to attend such meetings, either in person or by telephone. Each Representative shall have the right to grant another Representative its written proxy to vote its Voting Interest.

G. Other Provisions Relating to the Executive Committee .

(1) All Represented Members shall be entitled to be reimbursed by the Company for their Representatives’ reasonable out-of-pocket costs incurred in connection with their duties and responsibilities as Representatives to the extent provided for in the Business Plan. Except as otherwise provided in this Agreement, no Member or Representative, or any Affiliate of either such Person, shall receive any salary or other remuneration for its services rendered pursuant to this Agreement.

(2) The Members and their Representatives shall devote such time to the Company business as they deem to be necessary or desirable in connection with their respective duties and responsibilities hereunder.

 

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(3) The Executive Committee may appoint subcommittees from time to time, which shall operate at the direction and with the oversight of the Executive Committee. In no event shall the authority of the subcommittees exceed that of the Executive Committee as provided herein.

(4) Each Member may change its Representatives and Alternates upon ten (10) days prior written notice to the Executive Committee.

7.2 Development Manager . The Executive Committee shall either appoint or hire a manager of the development team who shall report to the Executive Committee. Such manager shall be referred to herein as the “ Development Manager .” The term “ Development Manager ” is separate and distinct from the term “ Developer ” as defined in Section 1.1A and used in this Agreement. The Development Manager need not be a Developer.

A. The Development Manager’s authority shall be limited to matters directly pertaining to the Master Project. Subject to the Approval and oversight of the Executive Committee, the Development Manager shall manage the day-to-day operations of the Company in accordance with the Business Plan.

B. The Development Manager shall be paid a monthly fee as provided in the Business Plan for its supervision of the day-to-day operations of Company.

C. As of May 1, 2009, Pardee resigned as Development Manager of the Company (which resignation was accepted by the Executive Committee and all of the Members). Effective as of May 1, 2009, Tejon was appointed by the Executive Committee as Development Manager of the Company.

D. Upon ninety (90) days’ written notice to the Development Manager, the Executive Committee shall have the right to remove the then Development Manager. In addition, Development Manager shall have the right to resign from its position as Development Manager upon ninety (90) days’ written notice to the Executive Committee. Notwithstanding the foregoing, Development Manager agrees that promptly following its resignation from its position as Development Manager, it shall (i) turn over all books, records and files pertaining to the Master Project in its possession, and (ii) be available to cooperate with the Members, the Executive Committee, and whomever shall replace the Development Manager (the “ Replacement DM ”), by devoting sufficient time and personnel as is deemed reasonably necessary by the Executive Committee to familiarize the Replacement DM with the responsibilities of the Development Manager hereunder, the Business Plan and the Master Project as a whole in order to facilitate an orderly transition of the day-to-day management responsibilities to the Replacement DM. Notwithstanding the foregoing, the Members intend that not later than the commencement of the Development Stage, the Company shall engage a development management team to replace the Development Manager (the “ Development Stage DM ”). The Development Stage DM shall be responsible for, among other things, preparing sales packages to solicit, and analyzing and preparing recommendations to the Executive Committee regarding, offers to purchase Planning Areas from merchant builders. Any Replacement DM and Development Stage DM shall be treated as a “Development Manager” under this Agreement.

 

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7.3 Project Employees . The Executive Committee may Approve the hiring of one (1) or more employees of the Company to assist the Company in carrying out its Business Plan (the “ Project Employee(s) ”). The Project Employees shall report to the Executive Committee, but shall be supervised by the Development Manager (unless otherwise reasonably determined by the Executive Committee). Following the Approval of the initial Development Business Plan, one (1) or more additional Project Employees shall be appointed by the Executive Committee to coordinate the sale of the Master Project to merchant builders and/or apartment or commercial developers as appropriate (the “ Sales Employee ”). The Sales Employee shall be responsible for, among other things, preparing sales packages to solicit, and analyzing and preparing recommendations to the Executive Committee regarding, offers to purchase Planning Areas from merchant builders.

7.4 Control by Tejon . Any decisions and actions pertaining to the ownership, operation, financing, construction or development of the Balance of the Ranch shall be exclusively controlled by Tejon. Tejon shall control, without limitation, (i) the construction and development of Regional Improvements on the Balance of the Ranch, and (ii) the selection, engagement and supervision of engineers, architects, underwriters, attorneys, and any other consultants which Tejon, in its sole and absolute discretion, desires to employ in connection with the Balance of the Ranch; provided, however, that Tejon will not cause any activity within the LA County Portion of the Ranch (“ LA County Activity ”) which will have a materially adverse impact on the Master Project (“ Material Adverse Activity ”). Tejon shall give the Developers sixty (60) days prior written notice of its intent to proceed with any LA County Activity. If Tejon proceeds with an LA County Activity and the Developers unanimously disagree with Tejon’s determination that such activity will not constitute a Material Adverse Activity, then with the unanimous Approval of the Developers such matter shall be referred to arbitration in accordance with Section 18.3 hereof. Notwithstanding anything herein to the contrary, any LA County Activity which meets any one (1) of the following criteria shall not be a Material Adverse Activity: (i) an LA County Activity which was a pre-existing activity as of the date of the First Amended and Restated LLC Agreement, (ii) an LA County Activity which is otherwise contemplated by this Agreement or the Business Plan, (iii) an LA County Activity which is otherwise Approved by one (1) of the Developers, (iv) Tejon’s involvement with the Tejon Ranch Company Antelope Valley Water Bank and Antelope Valley East Kern Water Agency (“ AVEK ”) on the Balance of the Ranch, or (v) any conveyance of any of the LA County Portion for the purposes of establishing conservation easements or wildlife habitats, similar environmental preservation or mitigation transactions or to otherwise settle an environmental claim.

7.5 Duty to the Company and Other Opportunities .

A. Other Activities; Opportunities . Unless otherwise agreed in writing between the Company and any Member, no Member shall be required to manage the Company as his or her sole and exclusive function, and any Member may have other business interests and may engage in other activities in addition to those relating to the Company whether or not in conflict or in competition with the Company subject to the specific limitations of this Section 7.5. Except as specifically set forth in this Section 7.5, in furtherance thereof, any such Member may pursue any activity for such Person’s own benefit and account without any participation, right or claim of any other Member or the Company.

 

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B. LA County Portion . Tejon intends to develop the LA County Portion either itself or in a joint venture with one (1) or more other developers. Before entering into a binding agreement with any developer other than the Developers for a joint venture to develop some or all of the LA County Portion, Tejon shall notify (the “ LA County Portion Notice ”) in writing each of the Developers who has not withdrawn from the Company (the “ Non-Withdrawing Developers ”). For a period of twenty (20) days from the date of delivery of the LA County Portion Notice (the “ Discussion Period ”), Tejon shall make its Representatives reasonably available to the Representatives of the Non-Withdrawing Developers to discuss, in good faith, any proposals by the Non-Withdrawing Developers to joint venture the development of some or all of the LA County Portion. Thereafter, should Tejon decide to proceed forward with a joint venture to develop some or all of the LA County Portion, it shall be free to do so either with the Non-Withdrawing Developers, with any other party or with any combination of the foregoing, in each case, on terms and conditions acceptable to Tejon in its sole and absolute discretion and whether or not such terms and conditions are the same as or more or less favorable than those offered by the Non-Withdrawing Developers during the Discussion Period. If Tejon fails to present any Non-Withdrawing Developer with an LA County Portion Notice, then such Non-Withdrawing Developer (and the Affiliates Controlled by such Non-Withdrawing Developer) shall not be subject to Section 7.5D, below, as of the date such Non-Withdrawing Developer was to have received such notice. If, however, Tejon delivers such LA County Portion Notice to a Non-Withdrawing Developer, then Section 7.5D shall remain in effect with respect to such Non-Withdrawing Developer (and the Affiliates Controlled by such Non-Withdrawing Developer), unless Tejon and such Non-Withdrawing Developer are unable to reach agreement during the Discussion Period on the terms of the joint venture to develop some or all of the LA County Portion. If a Non-Withdrawing Developer and Tejon are unable to reach such an agreement during the Discussion Period, then such Non-Withdrawing Developer (and the Affiliates Controlled by such Non-Withdrawing Developer) shall no longer be subject to Section 7.5D below on the date that is one (1) year following the expiration of the Discussion Period.

C. Ranch . The Developers and the Company acknowledge that they do not have any right, title or interest in or to the Existing Property or any other portion of the Ranch, except as specifically and expressly provided in this Agreement.

D. Non-Competition . Subject to Section 7.5B above, each of the Members (other than Tejon) agrees for itself and for its Affiliates Controlled by such Member that during the Term it shall not participate in any manner in the purchase or development of any real property within the area designated as the “ Non-Competition Area ” on the map attached as Exhibit “H” hereto until the Company has disposed of (i.e. sold and closed) at least seventy-five percent (75%) of the developable residential acreage (i.e., exclusive of open spaces, common area lots, public or private streets, etc.) located within the Master Project to merchant builders (including the Developers and their Affiliates, if applicable) as contemplated by this Agreement. Notwithstanding the foregoing, if a Member withdraws from the Company in accordance with this Agreement, then on the date which is one (1) year following the effective date of such Member’s withdrawal, such Member shall no longer be subject to this Section 7.5D. Each Non-Funding Member shall continue to be subject to the foregoing provisions of this Section 7.5D.

 

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E. Utilities . Subjection to Section 7.5F below, at the election of the Executive Committee, the Company may develop, control, own, operate, and/or sell the generation, transmission, distribution, metering, billing and maintenance of utilities (including, without limitation, electrical and gas) and sanitary sewer, wastewater collection and treatment, garbage and refuse, cable services, and video, voice, and data communication services for the Master Project, whether delivered by cable or by other means. The Members agree that such activities shall constitute a Company opportunity and that each Member shall be precluded from pursuing any such opportunity other than for the benefit of the Company. Notwithstanding anything contained herein to the contrary, Tejon shall not be restricted in any way from pursuing any of the foregoing for the benefit of any property located outside of the LA County Portion for its own account to the exclusion of the Company and the other Members.

F. Water . The Members agree that the Company shall enter into an agreement for the water supply and service of the Master Project with Tejon.

G. Reliance on Information . In discharging their duties, the Representatives and the Development Manager are fully protected in relying in good faith upon such information, opinions, reports or statements by the Members or their agents, or by any other Person, as to matters that are reasonably believed to be within such other Person’s professional or expert competence, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits or losses of the Company or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid. The fact that a Member is directly or indirectly affiliated or connected with any Person shall not prohibit the Members, Representatives or Development Manager from dealing with that Person.

7.6 Officers . Subject to the terms and provisions of this Agreement and any written employment agreement, the Executive Committee shall be entitled to appoint such officers, with such titles and authority as the Executive Committee shall from time to time determine. Any officers so appointed shall hold office at the pleasure of the Executive Committee, subject, however, to the terms and conditions of any employment contract with an officer, and shall be entitled to exercise such powers as shall be delegated to them by the Executive Committee and not inconsistent with this Agreement. Individual Affiliates of Members may be appointed as officers as aforesaid, but officers need not be individual Affiliates of Members.

7.7 Member Compensation . No compensation for services rendered shall be paid by the Company to any Member or officer except as reasonably Approved by the Executive Committee or otherwise reasonably provided herein or in the Business Plan. Any compensation, fees or other amounts paid to any Person shall be commensurate to the fees paid to independent service providers providing similar services in the geographical location of the Master Project. This Section shall not prohibit the payment of sums otherwise due to a Person as reimbursement for expenses incurred on behalf of the Company as otherwise provided in this Agreement, as indemnification in accordance with this Agreement, or as a distribution or other payment to a Member relating to that Member’s Interest in the Company.

7.8 Payment of Consultant Fees . The Members acknowledge that, pursuant to the Business Plan, the Company will be paying fees to certain consultants which fees may benefit the Balance of the Ranch.

 

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8. ADDITIONAL COVENANTS BY MEMBERS .

8.1 Cost Sharing . The Members shall use their diligent and good faith efforts to agree upon cost sharing arrangements involving the Company and the Balance of the Ranch for the construction of the Improvements as shall be more fully set forth in the Entitlement Business Plan and the Development Business Plan.

8.2 Cooperation . Each Developer and the Company covenants to reasonably cooperate with Tejon and one another in the development of each Planning Area, the Master Project and the Balance of the Ranch. Such cooperation shall include, without limitation:

A. Dedications of rights-of-way and granting of easements, licenses, and other documents reasonably necessary to develop any real property owned by the Company, Tejon or any of the Developers within the Ranch, if any.

B. The participation in a Master Project Merchant Builder and Marketing Program.

C. The recordation of appropriate Master Project development declarations, conditions, covenants, and restrictions to establish a coherent master planned development scheme for the Master Project.

9. MITIGATION LAND AND RANCH-WIDE AGREEMENT .

9.1 Mitigation Land . To the extent provided in the Development Business Plan and consented to by Tejon during the Remaining Entitlement Period (which consent may be withheld in its sole and absolute discretion), after the Remaining Contribution Date, Tejon shall grant a non-exclusive access easement covering additional land owned by Tejon (or if required by the applicable governing agencies, convey in fee by grant deed additional land owned by Tejon), in the event the Company is required to dedicate such land for mitigation purposes to comply with its obligations or conditions of approval for the Entitlements (including conditions of approval imposed to settle any litigation challenging the Entitlements if such settlement has been approved by Tejon and the Executive Committee, in their respective sole and absolute discretion) (the “ Mitigation Land ”). Tejon hereby agrees to grant a non-exclusive access easement covering (or if required by the applicable governing agencies, convey in fee by grant deed to the Company as Mitigation Land) the North and South Mitigation Land at such time required by the applicable governing agencies but no sooner than the Remaining Contribution Date. Tejon shall not receive any credit to its Book Capital Account (or otherwise receive any reimbursement, compensation, or other amounts) as a result of conveying or otherwise granting any rights to any Mitigation Land pursuant to this Section 9.1.

9.2 Mitigation Land Parameters . Notwithstanding anything herein to the contrary, the Members agree that the land which Tejon shall make available as Mitigation Land (other than the North and South Mitigation Land) shall meet the following parameters:

A. The Mitigation Land shall be undevelopable land, which is impacted in some materially detrimental manner to make it infeasible for development due to adverse conditions including, without limitation, slopes and drainage problems, endangered species or habitat, and wetlands; and

 

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B. The Members intend that the Mitigation Land shall be a portion of the LA County Portion. The Developers are not precluded from requesting that Tejon convey land in addition to or in lieu of such Mitigation Land; provided, however, that although Tejon shall, in good faith, consider such request, Tejon shall determine whether or not to contribute such land in its sole and absolute discretion.

9.3 Non-Exclusive Access . The Company and Tejon, as appropriate, shall provide non-exclusive access to the Mitigation Land through the Master Project and the Balance of the Ranch, respectively, if such access is required by the appropriate governmental agency; provided, however, that such non-exclusive access shall not in any way materially interfere with or affect the Company’s or Tejon’s ownership, operation, construction or development of the Master Project or the Balance of the Ranch. It is the Members’ intent that such access shall be provided through existing rights-of-way and that the Company and Tejon shall have no obligation to construct any improvements in connection with such access, to provide the public with rights of access to the Balance of the Ranch, or to otherwise incur any cost or expense in connection with providing such access. Further, the Members acknowledge that the Mitigation Land shall be conveyed subject to a conservation easement in favor of the Conservancy in accordance with the Ranch-Wide Agreement, which conservation easement provides for public access rights.

9.4 Conservancy Funding Obligations under the Ranch-Wide Agreement . The Company has agreed to share in the funding of certain obligations of TRC under the Ranch-Wide Agreement, which the Members of the Company have reviewed or have had the opportunity to review. The funding and reimbursement of payments by TRC pursuant to the Ranch-Wide Agreement shall be administered as follows:

A. TRC is obligated to make advances to the Conservancy pursuant to Section 2.3 (“ Section 2.3 Advances ”), Section 2.4 (“ Section 2.4 Advances ”) and Section 2.5 (“ Section 2.5 Advances ”) of the Ranch-Wide Agreement, in the amounts and at the times as summarized on Exhibit “I” attached hereto. The Company shall reimburse TRC for fifty percent (50%) any Section 2.3 Advances and any Section 2.5 Advances made by TRC within fifteen (15) days of being billed by TRC. The Company shall reimburse TRC for any Section 2.4 Advances allocable to the Master Project within fifteen (15) days of being billed by TRC. All payments made by the Company pursuant to this Section shall be referred to herein as “ Centennial RWA Reimbursements .” Section 2.3 Advances, Section 2.4 Advances and Section 2.5 Advances shall collectively be referred to herein as “ RWA Advances .”

B. Pursuant to Section 2.6 of the Ranch-Wide Agreement, the Conservancy is required to repay TRC for all of the RWA Advances from the proceeds of conservation fees generated from the Master Project, Tejon Mountain Village and Grapevine (“ Section 2.6 Repayments ”). Notwithstanding reimbursement of TRC by the Company pursuant to Section 9.4A above, and by other parties for the RWA Advances, TRC shall be entitled to collect the Section 2.6 Repayments and administer distribution to the applicable parties as described in

 

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this Section with the intent that all Centennial RWA Reimbursements will be fully repaid to the Company from the Section 2.6 Repayments to the extent sufficient funds are received by TRC from the Conservancy. Tejon shall cause TRC, upon receipt of Section 2.6 Repayments from the Conservancy, to allocate such funds to the Company and Tejon Mountain Village, LLC (“ TMV ”) as follows and as illustrated in Exhibit “J” :

(1) TRC shall forward to the Company any Section 2.6 Repayments generated from conservation fees derived from the Master Project, until all Centennial RWA Reimbursements have been repaid to the Company.

(2) TRC shall forward to TMV any Section 2.6 Repayments received from the Conservancy and generated from conservation fees derived from Tejon Mountain Village, until all reimbursements made by TMV to TRC with respect to the Ranch-Wide Agreement (“ TMV RWA Reimbursements ”) have been repaid.

(3) If, after all of the Centennial RWA Reimbursements have been repaid to the Company, TMV has not yet been repaid the full amount of the TMV RWA Reimbursements, then any Section 2.6 Repayments generated from conservation