U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8631
DOVER INVESTMENTS CORPORATION
(Name of registrant as specified in its charter)
DELAWARE 94-1712121
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Spear Street, Suite 520, San Francisco, California 94105
(Address of Principal Executive Offices) (Zip Code)
(415) 777-0414
(Registrant's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, $.01 par value per share
(Title of class)
Class B Common Stock, $.01 par value per share
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]
Registrant's revenues for its most recent fiscal year: $68,481,000.
The aggregate market value of the common stock held by non-affiliates of the
registrant, computed by reference to the average bid and asked prices of the
Class A Common Stock and Class B Common Stock as of March 1, 2000,
was $12,596,833.
The number of shares outstanding of each of the registrant's classes of
Common Stock as of March 1, 2000, were as follows:
Title Shares Outstanding
Class A Common Stock .......................... 827,180
Class B Common Stock .......................... 315,360
Transitional Small Business Disclosure Format
Yes No x
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Proxy Statement relating to the registrant's 2000
Annual Meeting of Stockholders are incorporated by reference into Part III
of this Report on Form 10-KSB.
TABLE OF CONTENTS
Page No.
PART I
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . .1
ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . 4
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . 4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . 10
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. .11
ITEM 10. EXECUTIVE COMPENSATION .. . . . . . . . . . . . . . . . . . 11
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . .11
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . 11
ITEM 14. EXHIBITS, LISTS AND REPORTS ON FORM 8-K . . . . . . . . . 11
APPENDIX A. CONSOLIDATED FINANCIAL STATEMENTS OF DOVER INVESTMENTS
CORPORATION AND SUBSIDIARIES, AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS,
DECEMBER 31, 1999, 1998 AND 1997
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Dover Investments Corporation (the "Company") engages primarily in
residential real estate development. Westco Community Builders, Inc.,
a California corporation ("WCB"), is primarily responsible for the
construction and the development of the real estate.
The Company and WCB have formed one California general partnership,
Glenbriar Joint Venture, and three California limited liability companies,
Glenbriar Venture #2, LLC, Tracy Residential Venture Partners, LLC and
Meadowbrook Ventures, LLC (collectively, the "Developers"), for development
of the Glenbriar Estates project described below, and another limited
liability company, South Tracy Industrial Park, LLC ("STIP"), for development
of the South Tracy Industrial Park project described below. For each of the
above entities the Company contributes the majority of the capital, ranging
from 75% to 100%. WCB is paid a fee for managing the construction and
development of the real estate. An annual distribution is made to the
Company and WCB based upon capital contributed in the range of 10% to 12%.
Remaining profits in each entity are split in the range of 50% to75% to the
Company and the remainder to WCB, according to the governing agreements.
The Company has also, together with three other parties, formed a
New York limited liability company, SPM, LLC ("SPM"), for development of the
Coram Plaza Shopping Center project described below. Capital contributions
of 25% are to be made by each member. Distributions to the members will be
made according to membership interest.
In March 2000, the Company's Board of Directors voted to take no
action with respect to an unsolicited proposal, set forth in a February 18,
2000 letter from Leeward Investments, LLC, the general partner of Leeward
Capital, L.P., a stockholder of the Company, to enter into discussions with
the Company regarding a possible acquisition of the outstanding shares of
the Company's stock. The Board concluded that any such discussions with
Leeward Investments, LLC would be futile and a waste of corporate resources,
since Mr. Lawrence Weissberg, as the Company's majority stockholder, had
informed the Board that he has no interest in selling his shares of the
Company's stock.
Real Estate Development
Below is a summary of the Company's major real estate development
activities during 1999.
MARINA VISTA.
During 1999, the Company nearly completed development of its Marina
Vista project in San Leandro, California. On February 8, 2000, the sale of
the last home at Marina Vista closed.
GLENBRIAR ESTATES.
The Company, through the Developers, continued to develop the
Glenbriar Estates project in Tracy, California. The Developers closed the
sale of 121 homes and the sale of 121 lots during 1999.
All of the land owned by the Developers is covered by either
vesting tentative subdivision maps or final subdivision maps. The Developers
are currently building two product types of homes at Glenbriar Estates, the
Glenbrook Subdivision and the Meadowbrook Subdivision. The market for homes
built by the Developers was very strong during 1999. Future development in
Tracy is subject to the availability of residential growth allocations issued
by the City of Tracy, which could be negatively affected by the passage of a
citizens initiative during the year 2000, reduced availability of water or
waste water capacity, and the state of the economy generally in the Bay Area.
HIGHER PRICED HOMES.
During 1997 and 1998, the Company entered into joint ventures with
WCB to develop three higher priced homes, that is, homes with a selling price
of over two million dollars. Construction of the three homes was completed,
and the homes were sold, during 1999.
In September of 1999, the Company entered into a joint venture to
develop a fourth higher priced home with WCB. The property is located in
Atherton, California, and construction is scheduled for completion in
approximately January 2001.
SOUTH TRACY INDUSTRIAL PARK
In 1999 the Company, through STIP, entered into an agreement to
purchase and develop for industrial use approximately fifty acres of
industrial property in the southern part of the City of Tracy. The South
Tracy property currently is zoned industrial. A tentative subdivision map
has been approved by the City of Tracy, and approval of a final subdivision
map is pending. The Company expects that site improvements will commence in
the spring of 2000 and that development will continue for several years.
CORAM PLAZA SHOPPING CENTER, CORAM, NEW YORK
SPM has entered into an agreement to purchase property, with
buildings and improvements, located in the Coram Plaza Shopping Center,
in Coram, New York and intends to develop the property for commercial use.
Competitive Position of the Company
The development and sale of residential properties is highly
competitive, and the Company competes with numerous national, regional and
local builders primarily on the basis of price, location, design, reputation,
quality and amenities. In addition, the Company competes with other housing
alternatives including existing homes and rental housing. Although the
Company believes that it competes effectively with respect to each of these
factors, there can be no assurance that the Company will maintain its
competitive position against current and potential competitors.
Homebuilding Industry
The homebuilding industry is cyclical and is affected by changes
in general and local economic and other conditions including employment levels,
demographic considerations, availability of financing, interest rate levels,
federal income tax provisions, consumer confidence and housing demand. In
addition, homebuilders are subject to various risks, many of them
outside of the control of the homebuilder, including availability and cost of
land, availability and cost of materials and labor, weather conditions, delays
in construction schedules, cost overruns, changes in government regulations
and increases in property taxes and other local government fees. Net orders
often vary on a seasonal basis, with the lowest order activity typically
occurring in the winter months.
Government Regulation and Environmental Matters
The homebuilding industry is subject to various federal, state and
local laws, ordinances, rules and regulations concerning zoning, building
design, construction and similar matters. The operations of the Company are
also affected by environmental laws and regulations, including regulations
pertaining to availability of water, municipal sewage treatment capacity,
land use, protection of endangered species and population density. Compliance
with these laws and regulations may result in delays and may cause the Company
to incur substantial costs.
Various permits and approvals are required to complete the Company's
real estate developments. The ability of the Company to obtain such permits
and approvals is often beyond the Company's control. The length of time
necessary to obtain permits and approvals increases the carrying costs of
unimproved property acquired for the purpose of development and can delay
the timing of the closing of its sales. In addition, the continued
effectiveness of permits already granted is subject to changes in policies,
rules and regulations and their interpretation and application.
Backlog
The Company has a backlog of homes and lots for which it has
entered into sales contracts but which it has not yet delivered. The Company's
backlog at December 31, 1999 was approximately thirty six-homes and twenty-
five lots at an aggregate price of approximately $11,750,000. As the Company's
sales contracts are subject to certain conditions being satisfied and
generally may be cancelled by the customer in the event mortgage financing is
unobtainable within a specified period of time, no assurances can be given
that homes and lots subject to pending sales contracts will result in
closings.
Employees
The Company currently has six full-time employees, all of whom work
at the Company's executive offices in San Francisco.
Executive Officers of the Company
The following is information with respect to the executive officer
of the Company who is not also a director of the Company:
Erika Kleczek - Ms. Kleczek, age 57, has served as the Company's
Principal Financial Officer since January 1997 and as the Company's Secretary
and Treasurer since February 1991. Ms. Kleczek served in various managerial
positions for the Company and Homestead Savings and Loan Association,
a former subsidiary of the Company, from June 1983 to February 1991.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases its executive office space in San Francisco,
California under a lease that commenced on October 1, 1997 and ends on
September 30, 2002, with an option to extend for an additional period of
five years.
See "DESCRIPTION OF BUSINESS" above for a discussion of the
Company's investments in real estate. Although the Company engages primarily
in residential real estate development, the Company may also invest in
other types of real estate. There is no limitation on the percentage of
the Company's assets that may be invested in any one investment or type
of investment. The Company primarily acquires assets for capital gain.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
Shares of the Company's Class A Common Stock and Class B Common
Stock are currently traded on the NASD OTC Bulletin Board under the symbols
DOVR-A and DOVR-B, respectively.
The high and low bid information for 1999 and 1998 are as reported
on the National Quotation Bureau Pink Sheets. Such bid quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
CLASS A COMMON STOCK
High Low
Fiscal 1999 Quarter Ended:
March 31 9.000 7.500
June 30 9.750 8.250
September 30 11.000 9.125
December 31 13.375 11.000
Fiscal 1998 Quarter Ended:
March 31 9.750 8.125
June 30 10.500 9.250
September 30 10.500 9.250
December 31 10.000 7.250
CLASS B COMMON STOCK
High Low
Fiscal 1999 Quarter Ended:
March 31 11.000 9.000
June 30 8.250 8.125
September 30 12.500 10.125
December 31 13.750 10.750
Fiscal 1998 Quarter Ended:
March 31 9.375 7.375
June 30 10.875 9.250
September 30 11.500 9.750
December 31 11.500 9.250
Holders
As of March 1, 2000, there were 463 stockholders of record of
the Class A Common Stock and 142 stockholders of record of the Class B Common
Stock.
Dividends
The Company has not paid dividends on the Class A Common Stock
and Class B Common Stock since June 30, 1989 and presently has no intention
to pay dividends in the foreseeable future.
In August 1997 and June 1995, the Company's Board of Directors
approved a stock repurchase program under which the Company may, subject to
certain requirements, purchase up to 400,000 shares of its Common Stock in
the open market. Through December 31, 1999, the Company had repurchased
164,860 shares of Common Stock, at an aggregate purchase price of $895,773.
As of December 31, 1999 and 1998, 65,066 and 59,250 shares, respectively,
had been reissued pursuant to the Company's stock option plans.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The information set forth below and elsewhere in this Annual
Report contains forward-looking statements, which reflect the Company's
current views with respect to future events and financial performance.
The words "expects", "intends", "believes", "anticipates", "likely" and
"will" and similar expressions generally identify forward-looking statements.
These forward-looking statements are subject to certain risks and
uncertainties, including, among others, the risks discussed herein, that
could cause actual results and events to differ materially from historical
results or those anticipated in the forward-looking statements.
The following table sets forth certain consolidated financial
data for the periods indicated and should be read in conjunction with the
Consolidated Financial Statements, related notes and other financial
information appearing elsewhere in Part II of this Form 10-KSB Annual
Report (dollar amounts in thousands, except per share amounts).
Selected Financial Data
Year Ended December 31,
1999 1998 1997 1996 1995
Operations:
Total revenues $68,481 $26,120 $18,921 $10,036 $4,615
Gross profit 11,805 4,839 2,553 880 612
Net income (loss) 4,305 1,410 388 (174) 452
Basic earnings
(loss) per share $3.93 $1.34 $0.39 $(0.18) $0.42
Diluted earnings
per share $3.88 $1.30 $0.38 $(0.18) $0.42
Financial Position:
Cash and cash
equivalents $15,449 $ 8,622 $ 2,660 $ 1,438 $ 639
Total assets 44,118 37,467 29,109 26,725 27,967
Total debt 8,299 12,650 7,063 5,999 8,020
Stockholders' equity 29,936 22,797 20,447 19,096 19,583
Results of Operations for the Years Ended December 31, 1999 and 1998
The Company had net income of $4,305,000 for the year ended
December 31, 1999, compared to $1,410,000 in 1998.
In the year ended December 31, 1999, the Company closed the
sale of 45 homes at the Marina Vista development project, compared to 42
closed home sales in 1998. At the Glenbriar Estates project, the Company
closed the sale of 121 homes and the sale of 121 lots for the year ended
December 31, 1999 compared to 29 homes and 117 lots in 1998. In the year
ended December 31, 1999, the Company also closed the sale of three
higher priced homes.
Total sales for the year ended December 31, 1999 were
$68,481,000, resulting in a gross profit of $11,805,000 and a gross profit
margin of 17.24%, compared to total sales of $26,120,000, resulting in a
gross profit of $4,839,000 and a gross profit margin of 18.53%, for
the same period in 1998. The increase in sales and gross profit resulted
primarily from the sale of a higher number of homes and lots at the Marina
Vista and Glenbriar Estates development projects and the sale of the three
higher priced homes, increases in sales prices and the strong California
residential real estate market in general.
Minority interest in joint ventures for the year ended
December 31, 1999 increased to $5,370,000, compared to $523,000 for 1998.
The increase in minority interest is attributable to the sale of homes and
lots at the Glenbriar Estates project and the sale of the higher priced homes.
Selling expenses for the year ended December 31, 1999 were
$3,560,000, which represents 5.20% of revenues for 1999, compared to
$1,593,000, which represents 6.10% of revenues for 1998. The increase in
selling expenses was primarily due to increased sales, increased staffing
at the development projects and increased marketing and related commission
expenses.
General and administrative expenses for the year ended
December 31, 1999 were $1,207,000, compared to $684,000 for 1998, an increase
of 76.46% compared to 1998. The increase was primarily due to increased
staffing and higher levels of personnel, salary increases and performance
based compensation, and increased professional and legal fees.
Interest income in 1999 increased to $824,000, compared to
$231,000 in 1998. The increase is attributable to higher cash balances from
increased home sales and interest from notes receivable.
The Company expects that the development projects will
continue to provide a profit from the sale of homes and lots.
See "DESCRIPTION OF BUSINESS - Homebuilding Industry" above for a discussion of
general economic conditions and competitive factors that influence the Company's
profitability.
Results of Operations for the Years Ended December 31, 1998 and 1997
The Company had net income of $1,410,000 for the year ended
December 31, 1998, compared to $388,000 for the year ended December 31, 1997.
In the year ended December 31, 1998, the Company closed the
sale of 42 homes at the Marina Vista development project, compared to 53
closed homes in 1997. At the Glenbriar Estates project, the Company closed
the sale of 29 homes and 117 lots in 1998, compared to 92 lots in 1997.
Total sales for the year ended December 31, 1998 were
$26,120,000, resulting in a gross profit of $4,839,000 and a gross profit
margin of 18.53%, compared to total sales of $18,921,000, resulting in a
gross profit of $2,553,000 and a gross profit margin of 13.49%, for
1997. The increase in sales and gross profit resulted primarily from
increases in sales prices and the sale of homes and lots at the Marina
Vista and Glenbriar Estates projects.
Minority interest in joint ventures for the year ended
December 31, 1998 increased to $523,000, compared to $38,000 for 1997.
The increase in minority interest is attributable to the sale of homes
and lots at the Glenbriar Estates project.
Selling expenses for the year ended December 31, 1998
were $1,593,000, which represents 6.10% of revenues for 1998, compared
to $1,130,000, which represents 5.97% of revenues for 1997. The increase
was primarily due to increased sales and increased marketing
and related commission expenses.
General and administrative expenses for the year ended
December 31, 1998 were $684,000, compared to $618,000 for 1997, an increase
of 9.65% compared to 1997. The increase was primarily due to increased
staffing and higher professional fees and other administrative expenses.
Interest income in 1998 increased to $231,000, compared to
$131,000 in 1997. The increase is attributable to higher cash balances from
increased home sales and interest from notes receivable.
Liquidity and Capital Resources
At December 31, 1999, the Company had total assets of
$44,118,000, as compared to total assets of $37,467,000 at December 31, 1998.
The cost of the Company's property being developed was $23,385,000 in 1999,
compared to $25,438,000 in 1998. Highly liquid assets were $15,858,000 at
December 31, 1999, compared to $9,016,000 at December 31, 1998.
The Company's total liabilities decreased to $14,182,000 at
December 31, 1999, compared to $14,670,000 at December 31, 1998. This decrease
was attributable primarily to a decrease in notes payable. Notes payable
decreased to $8,299,000 in 1999, from $12,650,000, in 1998.
The increase in additional paid-in capital of $2,522,000 for
the year ended December 31, 1999 is due to realization of the tax benefits
related to net operating losses incurred prior to the Company's
quasi-reorganization in 1993 in the amount of $2,310,000 and the reissuance
of treasury stock of $212,000.
During 1999, the Company's primary liquidity needs were
related to funding development costs of the Marina Vista project, the
Glenbriar Estates projects and the custom single family homes, repayments
of debt in the amount of $4,351,000 and interest payments in the amount
of $660,000.
At December 31, 1999, the Company had an aggregate outstanding
balance of $8,299,000 under revolving credit agreements. The loans are
secured by lots and homes under construction and will be repaid from the
proceeds of home and lot sales. The loans bear interest at the rate of
prime plus 0.75% through 1.25% per annum and have various maturity dates.
The Developers exercised an option to purchase land at the Glenbriar Estates
and obtained financing of $391,000 secured by the property. The loan bore
interest at the rate of 9.0% per annum. A principal repayment of $100,000
was made in 1999 and the remaining balance was repaid on February 26, 2000.
The Company's primary source of liquidity during 1999 was the
proceeds of home and lot sales. The Company may also borrow funds from time
to time for development of real estate projects.
Year 2000 Disclosure
The Company has taken steps to become year 2000 compliant and
has experienced no problems with the year 2000 issue. The expense to become
year 2000 compliant has had no material effect on the Company's financial
position or results of operation.
The Company believes that its subsidiaries and major
suppliers are year 2000 compliant.
ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of the
Company, as set forth on the pages indicated, are filed as part of this
report.
Index to Financial Statements
Report of Independent Certified Public Accountants . . . . . . A-1
Consolidated Balance Sheets at December 31, 1999 and 1998. . . A-2
Consolidated Statements of Earnings for the Years Ended
December 31, 1999, 1998 and 1997. . . . . . . . . . . . . . A-3
Consolidated Statement of Stockholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997. . . . . . . . A-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997. . . . . . . . . . . . . . A-5
Notes to Consolidated Financial Statements at
December 31, 1999, 1998 and 1997. . . . . . . . . . . . . . A-6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this item is incorporated by reference
to the information set forth under the caption "Proposal 1 -- Election of
Directors" contained in the Proxy Statement to be used by the Company in
connection with its 2000 Annual Meeting of Stockholders, except for the
information regarding the Company's executive officer who is not
also a director of the Company, which is included in "DESCRIPTION OF
BUSINESS - Executive Officers of the Company" above.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference
to the information set forth under the caption "Compensation of Executive
Officers and Directors" contained in the Proxy Statement to be used by the
Company in connection with its 2000 Annual Meeting of Stockholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by reference
to the information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" contained in the Proxy Statement to be used
by the Company in connection with its 2000 Annual Meeting of Stockholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference
to the information set forth under the caption "Certain Transactions"
contained in the Proxy Statement to be used by the Company in connection
with its 2000 Annual Meeting of Stockholders.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) See "FINANCIAL STATEMENTS" above for a list of the financial
statements filed as part of this report. The exhibits listed
below are filed with or incorporated into this report.
3.1 Restated Certificate of Incorporation and Restated By-Laws
of the Company.(1)
10.3 Development Agreement dated November 15, 1991 between
H. F. Properties, Ltd. and Westco Marina, Inc., as amended.
10.5 Partnership Agreement, Glenbriar Joint Venture, dated
January 7, 1994 between GIC Investment Corporation and
Westco Community Builders.
10.6 Stock Option Plan for Nonemployee Directors.(2)
10.7 Form of Nonqualified Stock Option Agreement as of
November 16, 1994.(3)
10.8 1995 Stock Option Plan.(4)
10.9 Form of Incentive Stock Option Agreement.(5)
10.10 Form of Nonqualified Stock Option Agreement.(6)
10.11 Partnership Agreement, Tracy Residential Venture
Partners, LLC, dated April 6, 1998 between the
Company and Westco Community Builders, Inc.(7)
10.12 $3,350,000 Line of Credit Collateralized by a
Deed of Trust dated October 22, 1998.(8)
10.13 $10,500,000 Promissory Note and Loan Agreement
Collateralized by a Deed of Trust dated July 22, 1998.(8)
10.14 Lease Agreement, dated October 1, 1997. (9)
10.15 Sublease Agreement, dated October 1, 1997, between the
Company and Wilfred, Inc. (9)
10.16 1995 Stock Option Plan, as amended. (10)
10.17 Partnership Agreement, Meadowbrook Ventures, LLC. (11)
10.18 Partnership Agreement, South Tracy Industrial Park, LLC.
10.19 Partnership Agreement, SPM, LLC.
21.1 Subsidiaries of the Company.
27.1 Financial Data Schedule for the Year Ended
December 31, 1999.
___________________
(1) - Incorporated by reference to Exhibit 3.1 in the Company's
Annual Report on Form 10-KSB for the Year Ended
December 31, 1994.
(2) - Incorporated by reference to Exhibit 10.10 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(3) - Incorporated by reference to Exhibit 10.11 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(4) - Incorporated by reference to Exhibit 10.12 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(5) - Incorporated by reference to Exhibit 10.13 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(6) - Incorporated by reference to Exhibit 10.14 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1995.
(7) - Incorporated by reference to Exhibit 10.15 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1998.
(8) - Incorporated by reference to Exhibits 10.12 and 10.13 in
the Company's Annual Report on Form 10-KSB for the Year
Ended December 31, 1998.
(9) - Incorporated by reference to Exhibits 10.14 and 10.15 in
the Company's Quarterly Report on Form 10-QSB for the
Quarter Ended March 31, 1999.
(10) - Incorporated by reference to Exhibit 10.16 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
June 30, 1999.
(11) - Incorporated by reference to Exhibit 10.17 in the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended
September 30, 1999.
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the fourth quarter of the year ended
December 31, 1999.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DOVER INVESTMENTS CORPORATION
Date: March 28 , 2000 By: /s/ Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board,
President and Chief
Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ Arnold Addison Director March 28, 2000
(Arnold Addison)
/s/ John Gilbert Director March 28, 2000
(John Gilbert)
/s/ Erika Kleczek Secretary, Treasurer and March 28, 2000
(Erika Kleczek) Principal Financial Officer
/s/ Lawrence Weissberg Director, Chairman of the March 28, 2000
(Lawrence Weissberg) Board, President and Chief
Executive Officer (Principal
Executive Officer)
/s/ Will C. Wood Director March 28, 2000
(Will C. Wood)
<PAGE>
APPENDIX A
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
December 31, 1999, 1998 and 1997
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Dover Investments Corporation
We have audited the accompanying consolidated balance sheets of
Dover Investments Corporation and subsidiaries, as of December 31, 1999
and 1998, and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Dover Investments Corporation and subsidiaries as of December 31, 1999 and
1998, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
GRANT THORNTON LLP
San Francisco, California
February 25, 2000
DOVER INVESTMENTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
ASSETS 1999 1998
Cash and Cash Equivalents $15,449 $ 8,622
Restricted Cash 409 394
Homes Held for Sale 1,753 2,136
Property Held for Development 21,632 23,302
Notes Receivable 3,540 1,678
Other Assets 1,335 1,335
Total Assets $44,118 $37,467
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued Interest and Other Liabilities $ 3,824 $ 1,800
Notes Payable 8,299 12,650
Minority Interest in Joint Venture 2,059 220
Total Liabilities 14,182 14,670
Stockholders' Equity
Class A Common Stock, Par Value, $.01
Per Share-Authorized 2,000,000 Shares;
Issued 832,180 Shares in 1999 and
806,864 Shares in 1998 8 8
Class B Common Stock, Par Value, $.01
Per Share-Authorized 1,000,000 Shares;
Issued 319,920 Shares in 1999 and
320,137 Shares in 1998 3 3
Additional Paid-In Capital 22,963 20,441
Retained Earnings from January 1, 1993 6,987 2,682
Treasury Stock (0 in 1999 and 60,066
in 1998 of Class A Shares and 4,560
of Class B Shares in 1999 and 1998) (25) (337)
Total Stockholders' Equity 29,936 22,797
Total Liabilities and Stockholder's Equity $44,118 $37,467
The accompanying notes are an integral part of these statements.
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
Year Ended December 31,
1999 1998 1997
Home Sales $64,294 $23,095 $16,972
Lot Sales 4,187 3,025 1,949
Total Sales 68,481 26,120 18,921
Cost of Homes Sold 48,040 18,322 14,969
Cost of Lot Sales 3,266 2,436 1,361
Total Cost of Sales 51,306 20,758 16,330
Minority Interest in
Joint Ventures 5,370 523 38
GROSS PROFIT 11,805 4,839 2,553
Selling Expenses 3,560 1,593 1,130
General and
Administrative Expenses 1,207 684 618
Other Expenses - 378 -
4,767 2,655 1,748
Operating Income 7,038 2,184 805
Other Income
Interest 824 231 131
Fees 51 32 34
Total Other Income 875 263 165
Income before Income Taxes 7,913 2,447 970
Provision for Income Taxes 3,608 1,037 582
NET INCOME $ 4,305 $ 1,410 $ 388
Basic Earnings Per Share $ 3.93 $ 1.34 $ 0.39
Diluted Earnings Per Share $ 3.88 $ 1.30 $ 0.38
Weighted Average Number of
Shares Outstanding:
Basic: 1,094,472 1,048,930 999,024
Diluted: 1,108,427 1,087,349 1,026,787
The accompanying notes are an integral part of these statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999, 1998 and 1997
(in thousands)
<CAPTION>
Additional Treasury
Common Stock Paid-In Retained Stock
Class A Class B Capital Earnings at Cost Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 8 $ 3 $19,031 $ 884 $(830) $19,096
Re-issuance of Treasury
Stock - - 19 - 184 203
Realization of Prequasi-
reorganization Net
Operating
Loss Tax Benefits - - 760 - - 760
Net Income - - - 388 - 388
Balance at December 31, 1997 8 3 19,810 1,272 (646) 20,447
Re-issuance of Treasury
Stock - - 17 - 309 326
Realization of Prequasi-
reorganization Net
Operating
Loss Tax Benefits - - 614 - - 614
Net Income - - 1,410 - 1,410
Balance at December 31, 1998 8 3 20,441 2,682 (337) 22,797
Re-issuance of Treasury
Stock - - 212 - 312 524
Realization of Prequasi-
reorganization Net
Operating
Loss Tax Benefits - - 2,310 - - 2,310
Net Income - - - 4,305 - 4,305
Balance at December 31, 1999 $ 8 $ 3 $22,963 $6,987 $ (25) $29,936
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
1999 1998 1997
Cash Flows from Operating Activities:
Net Income $4,305 $1,410 $388
Reconciliation of Net Income to
Net Cash Provided by (Used in)
Operating Activities:
Income Accruing to Minority Interest 5,370 523 38
Deferred Taxes - 352 (361)
Tax Benefit of Utilizing Prequasi-
reorganization Net Operating Losses 2,310 614 760
Changes in Assets and Liabilities:
Restricted Cash (15) 1,022 (1,291)
Property Held for Development 1,670 (2,692) 1,072
Homes Held for Sale 383 (846) 147
Other Assets - 418 (2,138)
Notes Receivable (1,862) (650) -
Accrued Interest and Other
Liabilities, Net 2,024 427 (117)
Net Cash Provided by (Used in)
Operating Activities: 14,185 578 (1,502)
Cash Flows from Financing Activities:
(Repayment to) Proceeds from
Minority Interest (3,531) (529) 57
Proceeds from Notes Payable 17,725 9,527 6,228
Repayment of Notes Payable (22,076) (3,940) (5,164)
Reissuance of Treasury Stock 524 326 203
Net Cash (Used in) Provided by
Financing Activities (7,358) 5,384 1,324
Net Increase (Decrease) in Cash
and Cash Equivalents 6,827 5,962 (178)
Cash and Cash Equivalents at
Beginning of Year 8,622 2,660 2,838
Cash and Cash Equivalents at
End of Year $15,449 $8,622 $2,660
Supplemental Cash Flow Activity:
Cash Paid for Interest $ 660 $ 763 $ 617
Cash Paid for Income Taxes $ 805 $ 193 $ 134
The accompanying notes are an integral part of these statements.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
(in thousands, except share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES
Dover Investments Corporation (the "Company") engages primarily in
residential real estate development. Westco Community Builders, Inc.,
a California corporation ("WCB") is primarily responsible for the
construction and development of the real estate.
The Company and WCB have formed one California general partnership,
Glenbriar Joint Venture, and three California limited liability companies,
Glenbriar Venture #2, LLC, Tracy Residential Venture Partners, LLC and
Meadowbrook Ventures, LLC, (collectively, the "Developers"), for development
of the Glenbriar Estates project, and another limited liability company,
South Tracy Industrial Park, LLC ("STIP"), for development of the South Tracy
Industrial Park project. For each of the above entities the Company
contributes the majority of the capital, ranging from 75% to 100%. WCB is
paid a fee for managing the construction and development of the real estate.
An annual distribution is made to the Company and WCB based upon capital
contributed in the range of 10% to 12%. Remaining profits in each entity are
split in the range of 50% to75% to the Company and the remainder to WCB,
according to the governing agreements.
The Company has also, together with three other parties, formed a New
York limited liability company, SPM, LLC ("SPM"), for development of the
Coram Plaza Shopping Center project. Capital contributions of 25% are to be
made by each member. Distributions to the members will be made according to
membership interest.
Use of Estimates
In preparing the financial statements in conformity with generally
accepted accounting principles, management is required to make estimates
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its Joint Venture and Limited Liability Companies. All significant inter-
company transactions are eliminated in consolidation.
Property Held for Development
Costs for the development of property and the building of homes are
capitalized during the construction period. Such costs include expenditures
for land, land improvements, model homes, capitalized interest, and
construction in progress. When a home is sold, the cost of the sale is
recognized, which includes land, site development, construction,
management fees and financing costs.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998 and 1997
(in thousands, except share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
Revenues From and Cost of Home Sales
The Company recognizes income from home sales upon the closing and
transfer of title to the buyer. The cost of a home sold, includes land,
site development, construction, management fees and financing costs.
For each home sold, a reserve equal to one percent of the selling price is
established to cover warranty expense incurred subsequent to the home
sale. Warranty expenditures are charged to the reserve when paid. Sale of
lots are recognized upon the closing and transfer of title to the buyer.
The cost of the lot sold, includes land, site improvement, development
and financing costs.
Income Taxes
The Company follows the liability method in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based
on differences between the financial reporting and tax basis of assets and
liabilities and on the expected future tax benefit to be derived from tax
loss carry forwards, if any. Additionally, deferred tax items are
measured using current tax rates. A valuation allowance is established to
reflect the likelihood of realization of deferred tax assets.
Concentrations of Risk
The Company maintains its cash balances, which exceed federally insured
limits, in major financial institutions. The Company has not experienced
any losses in such accounts and believes it is not exposed to significant
risk or loss. The Company developments are primarily located in Northern
California. Any changes to the housing market in this area could affect the
Company's operations.
Restricted Cash
Restricted cash is to be used for certain infrastructure improvements
relating to the Marina Vista development and the Glenbriar Estates project.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity
of three months or less to be cash equivalents. Amounts also include purchased
securities, in the amount of $11,427 under agreements to resell
(repurchase agreements) with primary securities dealers. Such repurchase
agreements are typically overnight investments and collateralized by mortgage-
backed certificates which are held on behalf of the Company by the dealers
who arrange the transaction. At December 31, 1999, the weighted average
interest rate of such repurchase agreements was 5.61%. The market value of
the repurchase agreements approximates cost.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 199, 1998 and 1997
(in thousands, except share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
Reclassification
Certain prior year amounts have been reclassified to conform to current year
presentation.
NOTE B - NOTES RECEIVABLE
During 1999, the Company extended a line of credit of up to $2,635 to
Westco Community Builders for the purpose of building single family homes.
The line of credit bears an interest rate of Prime (8.50% at December 31,
1999) plus two percent per annum and matures on November 26, 2000, and is
collateralized by a Deed of Trust.
The Company originates loans for the construction of single family homes
and disburses the funds on a draw loan basis. These loans bear interest at
the rate of Prime (8.50% at December 31, 1999) plus one and three quarter
(1.75%) and two (2%) percent per annum and mature in 12 months. The security
for these loans are first deeds of trust. These loans are presented to the
Company by Dabenica Investment Corporation ("Dabenica"), a licensed California
real estate brokerage corporation. For the service, Dabenica earns a
brokerage fee of 1.75% to 2%. Said brokerage fees are paid by the borrower.
Dabenica is a wholly owned corporation, owned by Mr. Weissberg's son.
NOTE C - NOTES PAYABLE
Notes payable at December 31, are comprised of the following:
1999 1998
Notes Payable, maturing June 30, 1999,
and bearing interest at 11.25% per
annum collateralized by four
model homes $ - $ 802
Notes Payable, maturing February 27, 2000,
and bearing interest at 9.00% per
annum collateralized by a Deed of Trust 291 391
Notes Payable, maturing September 30, 1999,
and bearing interest at prime (7.75%
at December 31, 1998) plus 1.5%;
collateralized by lots - 1,407
Notes Payable, maturing August 30, 1999,
and bearing interest at prime (7.75%
at December 31,1998) plus 1.5%;
collateralized by a Deed of Trust - 1,057
Notes Payable, maturing July 22, 2000,
and bearing interest at prime (8.50%
at December 31,1999) plus 1.25%;
collateralized by a Deed of Trust 3,371 4,636
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998 and 1997
(in thousands, except share amounts)
NOTE C - NOTES PAYABLE (continued)
Notes Payable, maturing October 7, 1999,
and bearing interest at prime (7.75%
at December 31,1998) plus 1.25%;
collateralized by a Deed of Trust - 246
Notes Payable, maturing September 15, 2000,
and bearing interest at prime (8.50%
at December 31,1999) plus 1.25%;
collateralized by a Deed of Trust 620 1,459
Notes Payable, maturing November 16, 1999,
and bearing interest at prime (7.75%
at December 31,1998) plus 1.25%;
collateralized by a Deed of Trust - 2,652
Notes Payable, maturing March 10, 2000,
and bearing interest at prime (8.50%
at December 31,1999) plus 1.00%;
collateralized by a Deed of Trust 1,025 -
Notes Payable, maturing December 14, 2000,
and bearing interest at prime (8.50%
at December 31,1999) plus 0.75%;
collateralized by a Deed of Trust 1,374 -
Notes Payable, maturing December 14, 2000,
and bearing interest at prime (8.50%
at December 31,1999) plus 0.75%;
collateralized by a Deed of Trust 1,618 -
$ 8,299 $12,650
Aggregate principal payments of $8,299 are due through December 14, 2000.
Interest expense in 1999, 1998 and 1997 amounted to $660, $763 and $617,
respectively and are capitalized as part of property held for development.
NOTE D - LEASE COMMITMENT
The Company has an agreement to lease premises that expires on September
30, 2002, with an option to renew for an additional period of five years.
The Company subleases a portion of the premises to a related party. That
corporation's share of the lease equals 35% of the total rent and operating
costs. Rent and yearly operating cost from the sublease were $46 for 1999
compared to $39 for 1998 and $38 for 1997. A summary of net minimum lease
payments is as follows:
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998 and 1997
(in thousands, except share amounts)
NOTE D - LEASE COMMITMENT (continued)
Years ending December 31,
2000 $ 50
2001 52
2002 39
Total $141
Rent expenses for the years ended December 31, 1999, 1998 and 1997
totaled $73, $73 and $33, respectively.
NOTE E - INCOME TAXES
Income tax expenses for the year ended December 31, consists of:
1999 1998 1997
Current $ 750 $ 71 $181
Deferred 2,858 966 401
Total $3,608 $1,037 $582
In 1993, the Company under went a quasi-reorganization resulting in the
elimination of accumulated deficit and a decrease in additional paid-in
capital. The future tax benefit of utilization of prequasi-reorganization
operating losses are credited to paid-in capital. A tax benefit for 1999,
1998 and 1997 of $2,798, $614 and $760, respectively, for prequasi-
reorganization net operating losses has been credited to paid in capital.
The following is a reconciliation between the federal statutory rate and
the effective rate used for the Company's provision for taxes:
1999 1998 1997
Tax expense at statutory federal
income tax rate (34%) $2,690 $ 848 $330
State franchise tax 467 145 57
Change in valuation allowance 485 133 193
Other (34) (89) 2
Income tax expense $3,608 $1,037 $582
Net deferred taxes as of December 31, are as follows:
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998 and1997
(in thousands except share amounts)
NOTE E - INCOME TAXES (continued)
1999 1998 1997
Accrued warranty reserve $ 128 $ 110 $ 64
AMT credit carry forward 634 175 199
Accrued expenses 10 5 13
Other 1 - 1
Capital loss carryover - - 30
Depreciation (2) (4) (6)
Net operating loss carry forward 151 151 355
922 437 656
Valuation allowance (922) (437) (304)
Net deferred tax asset $ - $ - $ 352
Statement of Financial Accounting Standards ("SFAS") No. 109 requires
the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. The Company has recorded a valuation
allowance for the total amount of deferred tax assets. The deferred tax
asset schedule above does not give effect to any deferred tax asset related
to prequasi-reorganization tax loss carry forwards. Tax benefits resulting
from such tax loss carry forwards of approximately $20,100 for federal
purposes will be reflected in the financial statements as credits to
additional paid-in capital rather than as reductions in current income tax
expense, when and if recognized. The change in the valuation allowance
was $485 for 1999, $133 in 1998 and $193 in 1997.
As of December 31, 1999, the Company has Federal net operating loss
carry forwards of approximately $12,500 expiring through 2011.
NOTE F - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires disclosure of the estimated
fair value of an entity's financial instrument assets and liabilities.
These assets and liabilities consist of cash, notes receivable and long-term
debt. The balance sheet carrying amounts of cash, notes receivable and
debt approximate the estimated fair values.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998 and 1997
(in thousands except share amounts)
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE
At December 31, 1999, the Company had three stock-based compensation
plans. Two of the plans are primarily for employees and the other is for
non employed Directors. The Company applies APB Opinion 25 "Accounting for
Stock Issued to Employees" and related interpretations in accounting for the
plans. No compensation costs have been recognized for the plans.
STOCK OPTION PLAN FOR EMPLOYEES
Under the Amended and Restated 1982 Stock Option Plan, options granted
in 1992 to purchase 300 shares Class A Common Stock at $1.50 per share are
outstanding at December 31, 1999. The options become exercisable over 5 years.
The options terminate upon the earliest of (a) thirty days after the date of
cessation of employment, (b) one year after an optionee's death or (c) ten
years after the date such options were granted.
Under the 1995 Stock Option Plan (the "Plan"), 400,000 shares of Class A
Common Stock and 400,000 shares of Class B Common Stock of the Corporation
have been reserved for issuance pursuant to the Plan. The aggregate number
of shares which may be issued under the Plan shall not exceed 400,000 shares
of any combination of shares of Class A Common Stock and Class B Common Stock.
Awards may be made under the Plan until January 16, 2005.
The exercise price for shares subject to the options granted under the
Plan is the fair market value of the shares at the date of grant. The option
price per share of a stock option granted to a person who, on the date of
such grant, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company shall be not less than 110% of
the fair market value on the date that the option is granted. Options
granted under the Plan become exercisable over two and three years at the
rate of approximately 50% and 33.333%, each year on each anniversary of the
grant date, with full vesting occurring on the second or third anniversary
date. As of December 31, 1999, options for 167,800 shares were outstanding.
STOCK OPTION PLAN FOR NON EMPLOYEE DIRECTORS
The 1990 Stock Option Plan for Non employee Directors (the "Restated
Plan"), was restated and approved by stockholders on June 7, 1995. The
exercise price for each option granted is the market price of the shares at
the date of grant. Options granted under the Restated Plan are exercisable
in 50% increments on each anniversary of the grant date, with full vesting
occurring on the second anniversary date. All options terminate upon the
earliest of (a) thirty days after an optionee ceases to be a director of
the Company for any reason other than death, (b) six months after an
optionees death or (c) ten years after the date such options were granted.
The aggregate number of shares which may be issued under the Restated
Plan shall not exceed 12,500 shares of Class A Common Stock.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998 and 1997
(in thousands, except share amounts)
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE (continued)
The Restated Plan provides that each director who is not an employee of
the Company and has not been an employee of the Company for all or any part
of the preceding fiscal year automatically receives options to purchase
1000 shares of Class A Common Stock upon their election or appointment as a
director of the Company. Thereafter, every year options to purchase 500
shares of Class A Common Stock (subject to adjustment for recapitalization,
stock splits and similar events) will automatically be granted to such
director, provided, however, that such automatic option grants will be made
only if the director (a) has served on the Board of Directors for the entire
two preceding fiscal years, (b) is not otherwise an employee of the Company
or any subsidiaries on the date of grant and (c) has not been an
employee of the Company or any subsidiaries for all or any part of the
preceding fiscal years. As of December 31, 1999, options for 4,500 shares
were outstanding for the directors.
The Board of Directors has proposed to extend the term of the Plan,
under which options may be granted, until September 28, 2004. The plan
amendment is subject to stockholder approval.
Had compensation cost for all the plans been determined based on the
fair value of the options at the grant dates consistent with the methodology
prescribed by FAS 123, the Company's net income and income per share would
be reduced to the pro forma amounts indicated below;
Year Ended December 31,
1999 1998 1997
Net income:
As reported $4,305 $1,410 $388
Pro forma 4,225 1,333 313
Basic net income per share:
As reported $3.93 $1.34 $0.39
Pro forma 3.86 1.27 0.31
Diluted net income per share:
As reported $3.88 $1.30 $0.38
Pro forma 3.81 1.23 0.30
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options pricing model with the following weighted-
average assumptions: expected life, five years from the date of grant; stock
volatility 56% in 1999, 34% in 1998 and 88% in 1997; risk free interest
rates, 6.45% in 1999, 5.5% in 1998 and 6.2% in 1997; no dividends are expected.
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998 and 1997
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE (continued)
A summary of the status of the Company's fixed stock plans as of
December 31, 1999, 1998 and 1997, and changes during the years ending on
those dates is presented below:
December 31, 1999 December 31, 1998 December 31, 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding at
beginning of year 145,616 $ 7.17 148,366 $ 5.36 108,750 $ 5.63
Granted 111,500 13.04 56,500 10.20 77,000 4.96
Cancelled - - - - (2,250) 4.16
Exercised (84,816) 6.89 (59,250) 5.49 (35,134) 5.76
Outstanding at
end of year 172,300 11.12 145,616 7.17 148,366 5.36
Options exercisable
at year end 6,217 $ 6.31 37,866 $ 5.68 37,102 $ 5.69
Weighted-average
fair value of
options granted
during the year $ 8.59 $ 3.60 $ 3.62
The following information applies to options outstanding at
December 31, 1999:
Options Outstanding Options Exercisable
Options Weighted
Range of Outstanding Average Weighted Options Weighted
Exercise at December Remaining Average Exercisable Average
Prices 31, 1999 Contractual Exercise at December Exercise
Life Price 31,1999 Price
$ 1.50 - 1.75 1,300 4.54 $ 1.60 1,300 $ 1.60
$ 4.50 - 5.88 26,500 3.23 $ 4.97 1,334 $ 5.46
$ 6.32 - 9.50 9,000 6.06 $ 8.76 3,583 $ 8.34
$10.32 - 13.20 135,500 9.08 $12.57 - -
172,300 6,217
DOVER INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999, 1998 and 1997
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE (continued)
The following table illustrates the reconciliation of the numerators and
denominators of the basic and diluted earnings per share ("EPS") computations.
Year Ended December 31,
1999 1998 1997
Net Income $4,305 $1,410 $388
Weighted average common
shares outstanding 1,094,472 1,048,930 999,024
Additional dilutive common
share equivalents 13,955 38,419 27,763
Diluted shares outstanding 1,108,427 1,087,349 1,026,787
Net income per share - basic $3.93 $1.34 $0.39
Net income per share - diluted $3.88 $1.30 $0.38
EXHIBIT INDEX
Exhibit Description
Number
3.1 Restated Certificate of Incorporation and Restated
By-Laws of the Company.(1)
10.3 Development Agreement dated November 15, 1991 between
H. F. Properties, Ltd. and Westco Marina, Inc., as
amended.
10.5 Partnership Agreement, Glenbriar Joint Venture, dated
January 7, 1994 between GIC Investment Corporation and
Westco Community Builders.
10.6 Stock Option Plan for Nonemployee Directors.(2)
10.7 Form of Nonqualified Stock Option Agreement as of
November 16, 1994.(3)
10.8 1995 Stock Option Plan.(4)
10.9 Form of Incentive Stock Option Agreement.(5)
10.10 Form of Nonqualified Stock Option Agreement.(6)
10.11 Partnership Agreement, Tracy Residential Venture
Partners, LLC, dated April 6, 1998 between the
Company and Westco Community Builders, Inc.(7)
10.12 $3,350,000 Line of Credit Collateralized by a
Deed of Trust dated October 22, 1998.(8)
10.13 $10,500,000 Promissory Note and Loan Agreement
Collateralized by a Deed of Trust
dated July 22, 1998.(8)
10.14 Lease Agreement, dated October 1, 1997. (9)
10.15 Sublease Agreement, dated October 1, 1997, between
the Company and Wilfred, Inc. (9)
10.16 1995 Stock Option Plan, as amended. (10)
10.17 Partnership Agreement, Meadowbrook Ventures, LLC. (11)
10.18 Partnership Agreement, South Tracy Industrial
Park, LLC.
10.19 Partnership Agreement, SPM, LLC.
21.1 Subsidiaries of the Company.
27.1 Financial Data Schedule for the Year Ended
December 31, 1999.
___________________
(1) - Incorporated by reference to Exhibit 3.1 in the
Company's Annual Report on Form 10-KSB for the Year
Ended December 31, 1994.
(2) - Incorporated by reference to Exhibit 10.10 in the
Company's Quarterly Report on Form 10-QSB for the
Quarter Ended June 30, 1995.
(3) - Incorporated by reference to Exhibit 10.11 in the
Company's Quarterly Report on Form 10-QSB for the
Quarter Ended June 30, 1995.
(4) - Incorporated by reference to Exhibit 10.12 in the
Company's Quarterly Report on Form 10-QSB for the
Quarter Ended June 30, 1995.
(5) - Incorporated by reference to Exhibit 10.13 in the
Company's Quarterly Report on Form 10-QSB for the
Quarter Ended June 30, 1995.
(6) - Incorporated by reference to Exhibit 10.14 in the
Company's Quarterly Report on Form 10-QSB for the
Quarter Ended June 30, 1995.
(7) - Incorporated by reference to Exhibit 10.15 in the
Company's Quarterly Report on Form 10-QSB for the
Quarter Ended June 30, 1998.
(8) - Incorporated by reference to Exhibits 10.12 and
10.13 in the Company's Annual Report on Form 10-KSB
for the Year Ended December 31, 1998.
(9) - Incorporated by reference to Exhibits 10.14 and 10.15
in the Company's Quarterly Report on Form 10-QSB for
the Quarter Ended March 31, 1999.
(10) - Incorporated by reference to Exhibit 10.16 in the
Company's Quarterly Report on Form 10-QSB for the
Quarter Ended June 30, 1999.
(11) - Incorporated by reference to Exhibit 10.17 in the
Company's Quarterly Report on Form 10-QSB for the
Quarter Ended September 30, 1999.
(b) No reports on Form 8-K were filed with the Securities and
Exchange Commission during the fourth quarter of the year
ended December 31, 1999.
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
Glenbriar Joint Venture California General Partnership
Glenbriar Venture #2, LLC California LLC
Tracy Residential Venture
Partners, LLC California LLC
Meadowbrook Ventures, LLC California LLC
South Tracy Industrial Park, LLC California LLC
SPM, LLC New York LLC
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 15,858
<SECURITIES> 0
<RECEIVABLES> 3,540
<ALLOWANCES> 0
<INVENTORY> 23,385
<CURRENT-ASSETS> 42,783
<PP&E> 1,335
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,118
<CURRENT-LIABILITIES> 5,883
<BONDS> 8,299
0
0
<COMMON> 11
<OTHER-SE> 29,925
<TOTAL-LIABILITY-AND-EQUITY> 44,118
<SALES> 8,245
<TOTAL-REVENUES> 69,356
<CGS> 60,236
<TOTAL-COSTS> 60,236
<OTHER-EXPENSES> 1,207
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,913
<INCOME-TAX> 3,608
<INCOME-CONTINUING> 4,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,305
<EPS-BASIC> 3.93
<EPS-DILUTED> 3.88
</TABLE>
DEVELOPMENT AGREEMENT
This Agreement is entered into as of the 15th
day of November, 1991, by and between H.F. Properties, Ltd., a
California corporation ("Owner"), a wholly-owned subsidiary of
Homestead Financial Corporation, a Delaware corporation; and Westco
Marina, Inc., a California corporation ("Developer"), with reference
to, and in reliance upon, the following facts and
circumstances:
Recitals
A. Owner's parent corporation owns certain real property
located in San Leandro, California, more particularly described in
Exhibit A hereto, incorporated herein by this reference ("Property").
Owner has arranged to acquire the Property and has committed to do so.
B. The principals of Developer are experienced in the
development of single family housing.
C. Owner desires to retain the services of Developer to
provide management and supervision to Owner in developing the Property
into a single family housing development (the "Project") in San
Leandro, California and in selling the homes constructed in the
Project.
NOW, THEREFORE, in consideration of the mutual covenants and
promises set forth herein, and other valuable consideration the
receipt and sufficiency of which are acknowledged, owner and Developer
agree as follows:
Terms and Conditions
Section 1. Definitions. The following definitions shall
prevail wherever used in this Agreement:
1.1 Achievement Date means any date provided for in this
Agreement or in the Business Plan for achievement of any specific
item.
1.2 Authorized Persons shall mean the persons authorized
under Section 21 hereof to act on behalf of Owner or Developer.
1.3 Business Plan shall mean the schedules and explanatory
notes attached hereto, marked Exhibit B and incorporated herein by
reference thereto, as the same may be amended from time to time. The
Business Plan shall have the import and effect provided for herein.
1.4 Force Majeure event shall be an act of God, riot,
strikes, boycotts or other labor disturbances, insurrection,
inclement weather beyond that customarily experienced, inability
to obtain labor or materials or other elements essential to the
work due to governmental restriction or order, or inability to
perform any element of the Business Plan due to governmental
action, moratorium or regulatory order.
1.5 Homes shall mean the single family dwellings to be
constructed pursuant to the Business Plan.
1.6 Management Fee shall mean the fee payable to
Developer pursuant to Section 10.1 hereof.
1.7 Net Profit Share shall mean the fee payable to
Developer pursuant to Section 10.2 hereof.
1.8 Project means the Property and the on-site and
off-site improvements to be constructed in accordance with the
Business Plan, constituting a single family, detached housing
development known as Marina Vista and located in San Leandro,
California.
1.9 Project Documents shall consist of this Agreement,
all exhibits, schedules and attachments, and all plans, drawings,
specifications, and manuals pertaining to the Project.
1.10 Project Loan shall mean any construction
financing arranged pursuant to this Agreement.
Section 2. Purpose and Scope of Agreement. The purpose
and scope of this Agreement shall be for Developer to provide the
services necessary to develop the Property into 249 Homes, to
sell the Homes and to be compensated for such services subject to
all of the terms, covenants and conditions stated herein. Both
parties have defined their goals and expectations in terms of the
Business Plan, (as the same may be revised from time to time), to
be used as a guideline and standard of performance hereunder.
Section 3. Term. This Agreement shall be effective as
of the date first written above, and shall continue until the
first to occur of the following:
(A) All of the Homes have been conveyed, a final
accounting of profits and losses has been completed, and all
compensation due Developer has been paid; or
(B) This Agreement is terminated pursuant to the
terms hereof.
Section 4. Contract for Services. owner retains the
services of Developer as an independent contractor to provide
management and supervision to owner in developing the Project and
to construct and sell the Homes, and Developer agrees to perform
such services pursuant to the terms and conditions stated in the
Project Documents. Developer shall be the developer, general
contractor, and sales broker for the Project, as set forth
herein.
Section 5. Limited Agency. Developer shall be deemed
the Owner's representative with limited agency authority for the
specific purposes, and to the limited extent provided by this
Agreement. As used herein, the term "as Owner's representative"
shall be deemed to require that all relevant authorized
agreements shall be entered into in Owner's name, except for
subcontracts under the Construction Contract or as otherwise
agreed by Owner, and that all relevant documents including
subcontracts shall have the prior written approval of Owner
before execution.
Section 6. Developer's Responsibilities.
6.1 General. Developer shall devote such time, effort
and skill as may be necessary for the efficient and successful
conduct and completion of the Project as expeditiously as
economic conditions permit and will observe the highest standards
of business integrity in performing all of its obligations and
responsibilities hereunder. Unless otherwise specifically
provided in this Agreement, or agreed to in writing by the
parties hereto, such responsibilities shall include, but shall
not be limited to, Developer's performance of the duties and
responsibilities of a construction manager, real property
subdivider, developer, manager of marketing, broker, and all
other functions and activities normally performed by a person as
if he were an owner, builder, developer and broker of the
Property and the Homes. In addition to the above
responsibilities, Developer has the obligation and responsibility
to assure that all responsibilities and obligations of the
general contractor for the Project are carried out. In performing
its responsibilities, Developer shall maintain requisite staff
and facilities to accomplish these purposes. Developer may not
delegate the performance of any of the above to any other person
or entity regardless of whether such person or entity is
affiliated with Developer, without the prior written consent of
Owner, which may be given or withheld by Owner in its sole and
absolute discretion. Developer acknowledges that Owner is
entering into this Agreement in reliance on the abilities and
experience of Developer.
6.2 Scope of Development. The completed Project is
initially planned to consist of 249 Homes and all on-site and
off-site improvements described in the Business Plan, as the same
may be revised from time to time as provided herein.
6.3 Schedule of Development. Development of the Project
shall proceed in accordance with the Business Plan, revised from
time to time as provided herein.
6.4 Business Plan Controls Development. The Business
Plan establishes the various Achievement Dates, the timing of the
Project development, projected cost to be incurred, income to be
derived and a projection of cash flow. It presupposes development
phasing and commencement of subsequent phases based upon
performance with respect to the next preceding phase. For example
(but not by way of limitation), subsequent phases shall not be
commenced unless earlier phases have been developed on a schedule
commensurate with projection so that the parties have realized
the minimum or greater return that they have contemplated from
such phase. Developer shall utilize his best efforts and skill to
attain or exceed the goals of the Business Plan. So long as
Developer is attaining said goals (with deviations caused by
Force Majeure events or Owner's default excused), Owner shall
provide such assistance and support and cooperation as may
reasonably be necessary to facilitate achievement of the Business
Plan and shall provide Developer with such authority as may
reasonably be required to achieve those ends consistent with the
terms of this Agreement. Developer shall promptly notify owner
whenever Developer determines that, in its good faith opinion,
the goals of the Business Plan cannot be achieved whether the
interfering event is of regulatory, market or cost origin. There
shall be no amendment of or departure from the Business Plan
without the prior written consent of owner.
6.5 Services to be Performed by Developer. Developer
shall perform the following services in connection with the
Project, in accordance with the Project Documents:
(A) Development Entitlements. Developer shall
apply for, pursue, and use its best efforts to obtain all
approvals, subdivision maps, permits, and utility extensions and
hook-ups required for all demolition, grading, and construction
of all improvements and sale of Homes that will occur in
connection with the Project. Developer shall be responsible for
determining the permit, approval, and other development
requirements of all governmental agencies, other authorities, and
utilities having jurisdiction over the Property and the Project.
(B) Business Plan Amendments. Developer shall
prepare and submit to owner for its approval, all Business Plan
amendments and refinements deemed necessary or desirable by
Developer to carry out the development objectives of the parties.
(C) Construction Financing. Developer shall use
its best efforts, with Owner's cooperation and assistance as
provided in section 7.4, to arrange construction financing in
connection with the Project, and shall present to owner the
construction loan arrangements available to owner. Subject to
Owner's direction and written approval, Developer shall negotiate
on owner's behalf as necessary, and shall make appropriate
arrangements to finalize the construction financing to be
obtained by owner. Provisions for disbursement of Project Loan
proceeds shall be subject to owner's approval.
(D) Grading Plans. The grading plans for the
Project shall be prepared by a qualified engineer. Developer
shall cause to be prepared and submitted to Owner for its written
approval, preliminary and final grading plans for the Project,
within a schedule consistent with the Business Plan.
(E) Site Clearance and Site Preparation.
Developer shall (i) complete any necessary demolition of existing
improvements on the Property, if any, (ii) clear, grade, and
prepare the Property for construction, and (iii) complete all
off-site improvements, all in accordance with all grading permits
and grading plans, and all plans, specifications, drawings, and
permits applicable to the off-site improvements.
(F) Construction Plans, Drawings and Related
Documents. Developer shall prepare and submit to Owner for its
review and written approval, within a schedule consistent with
the Business Plan, construction plans, drawings and related
documents for the development of the Homes. The construction
plans, drawings and related documents shall be consistent with
the Business Plan and all such documents shall immediately become
the property of owner when paid for.
(G) Construction of On-Site Improvements. Working
in stages according to the Business Plan (as the same may be
revised from time to time), Developer shall develop and construct
the on-site improvements to the full extent required to carry out
the Business Plan and in accordance with the approved plans and
drawings and other Project Documents.
(H) Sale of Homes. Developer shall develop and
present to Owner for its review and written approval, a marketing
and sales plan for the Homes. Developer shall oversee all
marketing and sales activities in accordance with Owner's
approved plan, and acting as broker shall use its best efforts to
sell the Homes in a timely manner, on terms and conditions
previously approved in writing by owner. After commencement of
sales activity, Developer shall provide Owner with sales activity
reports as part of the periodic reports to be provided by
Developer to Owner pursuant to Section 6.6. All proceeds of all
sales of the Property, either improved or unimproved, shall be
deposited by the escrow company directly into a trust account of
owner which is a segregated trust account used only for sales
proceeds of the Project and said funds are held for disbursement
in accordance with this Agreement and, to the extent specified
herein, for the benefit of Developer.
(1) Administration and Bookkeeping. Developer
shall use its own business premises as the administrative
headquarters for the Project. Developer shall be responsible for
coordinating all activities involved in the development of the
Project, and for maintaining field records pertaining to the
Project. Developer shall maintain books of account for the
Project, using the cash method of accounting on a calendar year
basis.
6.6 Reports By Developer. Developer shall have the
following reporting responsibilities:
(A) Books And Records. Developer shall maintain full
and complete books and records with respect to all activities
undertaken pursuant to the terms of this Agreement. The books and
records shall be available for inspection by owner, Owner's
representatives or its agents at reasonable times, during business
hours and upon reasonable notice which shall not in any event be less
than two (2) business days.
(B) Periodic Report: Weissberg As CEO. So long as
the provisions of Section 9.1(A) apply, Developer shall report to
Weissberg no less often than once every two (2) weeks, said report to
include a summary of events that have occurred up to the date of the
report, notice of any event or condition that could affect achievement
of the goals of the Business Plan (such as, for example but not by way
of limitation, a reduction in obtainable prices or delay in sales
suggesting a reduction in income, an overall increase in costs, the
intervention of an event or condition that could threaten the right to
proceed with development of some or all of the Project, etc.) and a
summary of major decisions that require Weissberg's consideration or
that will require that consideration in the near future. Developer's
report shall include such documents and schedules as Developer and
Weissberg may determine are required adequately to inform Weissberg
and keep him abreast of relevant events and activities. No less often
than once every month, Developer shall provide Weissberg with a
journal of receipts and disbursements to show all cash activity in
Project accounts for the preceding month.
(C) Periodic Report: Weissberg No Longer CEO. if
Section 9.1(A) does not apply, Developer shall submit to Owner a
report no less often than monthly, showing a schedule of costs
incurred, revenues derived and steps undertaken to achieve the
Business Plan over the preceding monthly period, with a narrative
statement of material occurrences such as (by way of example but not
limitation) procurement of approvals, letting of contracts, etc.).
(D) Annual Reports. Developer shall cause to be
prepared and submitted to owner an annual report not later than March
31 of each year, showing income and expense, cash flow, source and
application of funds, a statement comparing actual results with the
Business Plan and Project indebtedness prepared from the books and
records maintained pursuant to Section 6.5(1) above and reviewed by a
certified public accountant selected in the manner hereinafter
provided.
Section 7. Owner's Responsibilities. Owner shall have
the following responsibilities:
7.1 Commitment of Property. The Property shall be
committed and made available for the development contemplated in
the Business Plan with title in fee simple absolute, free and
clear as required to carry out the purposes of the Business Plan.
Each phase of the Project shall be in a condition to be surveyed
and made the subject of a final subdivision map, and the
condition of title of each phase of the Property shall be such as
to support conventional construction financing in amounts
sufficient to meet the requirements of the Business Plan.
Notwithstanding anything else contained in this agreement,
owner's maximum capital investment in the Project at any one time
shall not exceed $10.5 million. In addition, the inability on the
part of Owner to deliver clear title to all or any portion of the
Property, due to an order or action by any governmental agency,
authority or quasi-governmental authority, shall not constitute a
breach of covenant hereunder but shall constitute a failure of
condition suspending or terminating this Agreement with respect
to the Property to which the order or action applies, the
distinction between suspension and termination depending upon the
nature of the order or action.
7.2 Commitment Of Capital. Owner shall provide the
capital required pursuant to the Business Plan, as amended from
time to time, in accordance with the schedule therein stated.
7.3 Further Assurances. Owner shall diligently provide
such further assurances as may be required to effectuate and
carry out the purposes hereof including, without limitation,
execution of (i) such documents and instruments as may be
required to present complete applications for permits and
approvals and to perfect the same from time to time through
recordation of public utility easements, final subdivision maps
and subdivision improvement agreements, (ii) financing documents,
(iii) contracts for sale of completed Homes and grant deeds as
required in connection with closing of such sales.
7.4 Assistance In Procuring Financing. Owner shall
provide good faith assistance in procuring financing required to
be provided pursuant to the Business Plan at the times and on the
terms required therein to be provided. Owner shall execute,
acknowledge (where appropriate) and deliver such documents and
instruments as may be required to consummate such financing
including, but without limitation, promissory notes, deeds of
trust, loan agreements and guarantees of lien-free completion of
improvements to be constructed. Other than guarantees of lien
free completion, owner shall not be required to provide any other
guarantees in connection with procuring financing.
7.5 Support For Applications, Etc. owner shall join
in, provide support for and signatures on such applications,
requests for approval and other matters as may reasonably be
required in order to obtain the Project authorizations and
approvals required for the Business Plan.
7.6 Subdivision Bonds. Owner shall provide good faith
assistance (including, but without limitation, execution of such
documents as may be required) to procure subdivision bonds
required as conditions to filing of final subdivision maps with
respect to all or portions of the Project that are contemplated by
the Business Plan.
Section 8. Insurance.
8.1 Initial Coverages. Developer shall cause all
activities in which it will be engaged hereunder to be
insured in a manner consistent with sound and prudent practice in
the industry and with limits set by owner provided that such
limits are reasonably obtainable. All such policies shall name
Owner as an additional insured in the form appropriate for the
type of coverage involved and shall provide that the policy
cannot be cancelled without prior written notice to owner.
Architects, engineers and other professionals and contractors
providing labor and/or materials in connection with the work
shall be required to provide such insurance as Owner may
determine; provided, however, that no such insurance shall exceed
the requirements of prudent industry practice.
8.2 Additional Insurance. Developer shall use due
diligence to determine the appropriate insurance coverage to be
maintained during the life of the Project. If Developer has a
reason to believe that the Project will give rise to any risks
that may not be covered by the insurance policies in effect,
Developer shall obtain such insurance, subject to owner's prior
written approval as an additional Project cost. If Developer,
after due investigation, is uncertain as to whether additional
coverage is required, Developer shall advise Owner. Owner may
elect to hire an independent insurance consultant to analyze the
risks, and to recommend appropriate coverage. Developer shall
acquire and maintain all policies requested in writing by Owner,
subject to availability. Such additional policies shall include
Owner as an insured or additional insured, as appropriate, and
provide for the same protection against cancellation, non-renewal
and material change as is provided with respect to the other
coverages required hereunder.
8.3 Cost of Insurance. All insurance required to be
maintained hereunder (except coverage provided by subcontractors
and professionals and as required to be maintained by Developer
pursuant to Section 12(B)) shall be considered a Project Cost.
8.4 Evidence of Insurance. Prior to commencement of
construction, each party shall provide to the other such evidence
of insurance as the other party may reasonably require. owner
shall require copies of all liability or all risk course of
construction coverage on which it is an insured or additional
insured, as well as a certificate of insurance for the policies
Developer is to provide, and signed copies of the policy
endorsements to each naming owner as an additional insured and
including the thirty (30 ) day notice of cancellation provision
as required. Proof of insurance may be required as a condition of
payments to be made hereunder to Developer and to contractors,
subcontractors and professionals providing service and/or
material for the Project.
8.5 Subrogation. Both parties waive all rights of
subrogation. of the insurers under all policies of insurance now
or hereafter in force during the term of this Agreement and any
extensions or renewals thereof with respect to the Project and/or
the development activities thereon.
8.6 Quality of Insurers. All insurance policies
required hereunder shall be placed with insurance companies
acceptable to Owner. Such carriers shall have a Best's rating of
not less than B+ VII.
Section 9. Division Of Management Responsibilities.
9.1 Management. Developer shall be responsible for
performance of all of the work required and management of the
activities to be performed in order to achieve the goals and
objectives of the Business Plan. Developer's managerial
prerogatives shall be limited by the following:
(A) Weissberg As CEO Of Owner. So long as
Weissberg is the Chief Executive Officer of Owner and owner is a
wholly owned subsidiary of Homestead Financial Corporation, all
"Major Decisions" made by Developer with respect to the
activities to be undertaken in connection with performance of the
Business Plan shall be subject to Weissberg's prior approval. For
purposes hereof, the term "Major Decision" shall mean (i)
determination of lot layout; (ii) determinations concerning the
nature and extent of on- and off-site improvements; (iii) choice
of major subcontractors; (iv) approval of budgets; (v) approval
of financing terms; (vi) approval of phasing and construction
schedules in conformity with the Business Plan; (vii) approval of
marketing programs and sales personnel, (viii) setting sales
prices for completed residences; and (ix) determinations to
suspend or reduce the pace of development in light of market
conditions. Additionally, Weissberg shall have the right to
unilaterally suspend or reduce the pace of development in light
of market conditions. Developer shall confer with Weissberg and
include in the foregoing enumeration of Major Decisions any other
matter or decision that Weissberg determines in his good faith
discretion should be added to the list as important to his
participation in determining matters that affect achievement of
the Business Plan.
(B) Weissberg No Longer CEO Of Owner. If Section
9.1(A) does not apply (i.e., if Weissberg is no longer CEO of
owner or in control of its business), then so long as Developer
is performing within the terms of the Business Plan as the same
may be amended from time to time, Developer shall have the right
to make all decisions and shall be responsible for performance of
all of the steps to be performed in the day-to-day management and
operation of the activities contemplated in the Business Plan.
(C) Evans No Longer CEO Of Developer. If Mr.
Britt Evans is no longer CEO of Developer or in control of its
business and Mr. Weissberg is still the CEO of Owner and in
control of Owner's business, then, notwithstanding Section
6.5(B), Owner shall have the unilateral right to initiate and
adopt changes in the Business Plan by written notices to
Developer that are necessary or desirable in Owner's sole
judgment to respond to changes in economic circumstances or
conditions.
(D) Notice Of Upcoming Events. Developer shall
use its best efforts to provide Owner or Owner's representative
with notice of events that may be or become important to
achievement of the Business Plan such as (by way of example but
not by way of limitation) (i) public hearings to consider project
development and/or subdivision plans; (ii) bid openings; (iii)
meetings with primary lenders; and (iv) meetings with marketing
representatives.
Section 10. Developer's Compensation. As consideration
for its services performed hereunder, Owner shall pay to
Developer the following compensation, subject to the adjustments
hereinafter stated:
10.1 Share of Gross Sales Revenues. Owner shall pay to
Developer three percent (3%) of the gross proceeds from sales of
the Homes ("Management Fee"), which shall be a Project Cost.
During the first eighteen (18) months of the development of the
Project, Owner shall pay to Developer a non-refundable advance
against the Management Fee in an amount of up to Fifty Thousand
Dollars ($50,000) per month for each month during said initial
eighteen (18) month period, such payment to be made to the extent
that the portion of the Management Fee generated as a percentage
of gross proceeds during said month is less than Fifty Thousand
Dollars ($50,000). Notwithstanding anything to the contrary
herein, if Developer abandons the Property or its
responsibilities hereunder during the first eighteen (18) months
of the term of this agreement, the advance referred to herein
shall stop. Any such amounts so paid by Owner shall be treated as
capital only for purposes of computing the Preferential Return to
owner pursuant to Section 10.4. To the extent that the cumulative
total Management Fee paid to Developer, plus advances by Owner,
exceed three percent (3%) of gross sales revenue, then (i) such
excess shall not be treated as a Project Cost, and (ii) the
excess shall be reduced in the following manner:
(a) By a reduction in the Net Profits Share to the extent
of such excess (i.e. One Dollar ($1.00) of excess is
extinguished by a reduction of Net Profits Share of one Dollar
($1.00)); or
(b) By repaying owner from the Management Fee on Homes
built and sold in the Project, commencing with one hundred fifty
first Home and continuing thereafter. Each dollar taken from the
Management Fee to repay the advance shall extinguish One Dollar
($1.00) of such excess; or
(c) By a combination of (a) and (b) above, as applicable.
10.2 Net Profits Share. In addition to the Management
Fee set forth in Section 10.1, Owner shall pay to Developer a sum
equal to thirty percent (30%) of the net profits generated by the
Project (said amount being referred to as the Net Profits Share
herein). As used herein, the term "net profits" shall mean the
gross proceeds from sales of the Homes reduced by all costs of
the Homes (including, but not limited to, land costs, development
costs, marketing costs and financing costs). The Net Profits
Share shall be paid to Developer on a pro rata basis after owner
has recovered its total capital investment and its preferred
return pursuant to Section 10.4, with a reasonable reserve
retained by Owner as a portion of the Net Profits Share otherwise
due Developer from each Home sale to cover the likelihood of a
negative adjustment of Net Profits Share as described in Section
10.3. Such reserve may be as low as zero if experience has shown
that the final preapproved construction cost budgets have been
accurate. Any such excess reserve so created shall be disbursed
to Developer immediately after completion of the final accounting
for the Project.
10.3 Adjustments to Compensation. Net Profits Share at
the end of the build-out and sale of the Property shall be
decreased by the net amount (if any) that actual construction
expenses for the entire Project exceed the cumulative total of
all final preapproved construction cost budgets for the entire
Project (i.e., to the extent that all construction cost overruns
exceed all construction cost savings, Net Profits Share shall be
reduced), excluding from such computation any excess caused by
Force Majeure events or Owner's default. Net Profits Share at the
end of the build-out and sale of the Property shall be increased
by fifty (50%) of the net amount, if any that the cumulative
total of all final preapproved construction cost budgets for the
entire Project exceed the actual construction expenses for the
entire Project (i.e., if all construction cost savings exceed all
construction cost overruns, Net Profits Share shall be increased
by fifty (50%) of such excess). Preapproved construction cost
budgets shall include direct construction cost contingency and
warranty expense accounts.
10.4 Preferential Return to Owner. Owner shall
receive, and the Project shall be charged with an amount equal to
twelve percent (12%) of the cumulative total of all capital
invested in or expended on the Property and Project by owner (not
including earnings retained in the Project funds) in connection
with the acquisition, financing and development of the Project,
commencing with the time the expenditure is made and terminating
upon reimbursement of such amount. The payment to Owner shall be
in the nature of interest on the outstanding balance of the
Owner's total unreimbursed costs and shall be subtracted from
gross proceeds as a Project cost prior to determination of Net
Profits Share for each phase of the Project. Owner shall notify
Developer from time to time (no less often than every sixty (60)
days) of the amounts that owner has advanced and for which it
will be claiming a preferential return under this Section 10.4.
Section 11. Bank Accounts: Segregation And
Disbursement. To assure segregation of funds and to facilitate
reporting, Owner and Developer shall each establish such bank
account or accounts as may be required to serve as depositaries
for the activities to be conducted hereunder, including such
separate accounts as may be required for trust funds, deposits
and building loan disbursements. Fund requisitions to owner for
payment of capital contributions required to be paid pursuant to
the Business Plan shall be submitted on a monthly basis not later
than the tenth (10th) day of each calendar month, each such
requisition to be submitted together with such backup information
and material as is customary and usual in the industry or as
reasonably requested by Owner to establish the propriety and
proper application of the amount so requisitioned so as to insure
lien free completion of the related improvements. owner shall
make disbursement to Developer in accordance with its
instructions within fifteen (15) days thereafter, withholding
disbursement only of such items or amounts as may be disputed or
for which Owner requires additional information in good faith as
well as all holdbacks authorized in subcontractor agreements.
Developer shall establish such internal controls as shall be
prudent and proper to safeguard and assure the proper application
of funds so disbursed.
Section 12. Developer's Internal Expenses. Developer
shall be responsible for paying from its own funds:
(A) The salaries of Evans, Finch, an office
supervisor and all payroll taxes, payroll costs and benefits;
(B) Developer's office rent, maintenance and
utility costs and insurance with respect to Developer's own
operation as opposed to insurance for the activities being
undertaken on the Property;
(C) Developer's employee travel and
entertainment; and
(D) Legal and accounting services for Developer
and with respect to the activities being performed by Developer
for the Project including, but without limitation, maintenance of
the books and records and preparation of the reports required to
be provided in Section 6.6. Notwithstanding the foregoing,
however, the cost of any outside review and/or audit shall be a
Project expense and not an expense to be paid by Developer.
Section 13. Matters Subject to Owner Pre-approval. In
addition to all other references herein to Owner's right of
preapproval, the following matters shall be subject to owner's
prior written approval to be given or withheld in owner's
absolute discretion. owner shall conduct its review expeditiously
in each case, provided that Developer has submitted all relevant
materials and information to Owner in a timely manner. Owner may
condition its approval on the approval of any lender extending a
Project Loan.
13.1 Budgets. Development budgets for each phase of the
Project, and any amendments thereto;
13.2 Applications. Any applications or amendments to
be submitted to any governmental authorities in connection with
obtaining development entitlements for the Project. Developer
shall provide owner with adequate advance notice of all public
hearings involving the Project so that Owner may attend if it so
desires. Developer shall provide owner with copies of all
governmental findings, permits and reports affecting the
Property, and copies of all significant documents such as soils
reports and engineering reports;
13.3 Plans. All Plans, drawings and specifications
pertaining to the Project, and any material changes thereto;
13.4 Project Professionals. The selection of
professionals to perform services in connection with the Project,
including attorneys, architects, engineers, accountants, and
consultants;
13.5 Subcontractors And Major Suppliers. The
selection of subcontractors and suppliers to provide services,
labor, or materials for the Project;
13.6 Contracts. Contracts to be entered into with
subcontractors and suppliers;
13.7 Disbursement Requisitions. Disbursements for
project expenses; and
13.8 Marketing Plan. Marketing and sales plans for
sale of the Homes, including all promotional materials, all
pricing schedules, and all forms to be used in documenting sales,
including purchase agreements, escrow instructions, deeds, and
Declarations of Covenants, Conditions and Restrictions.
Section 14. Prohibition Against Change in ownership and
Control of Developer. Britt Evans shall own not less than
sixty-six and two thirds percent (66 2/3%) of Developer at
execution of this agreement. Without the prior written approval
of owner in its sole discretion, there shall be no significant
change (as hereinafter defined) in the ownership and control of
Developer, including the degree of relative control of the owners
of Developer, by any method or means. So long as Section 9.1(A)
applies, any change shall be a significant change. Thereafter, a
cumulative change (including transfers between Owners) of more
than twenty-five percent (25%) in the ownership or control of
Developer or any of its respective Owners shall be deemed a
"significant change."
Section 15. Assignment by Owner. Owner shall have the
right to assign not more than an aggregate of forty nine and
9/100 percent (49.9%) of its interest hereunder without the prior
written consent of Developer; provided, however, that no such
assignment may occur except under conditions where owner retains
de facto and de jure control of all matters and rights reserved
to Owner hereunder. Any assignment by Owner of a larger portion
of its interest hereunder shall be subject to and require the
prior written consent of Developer, which said consent shall not
be unreasonably withheld or delayed; provided, however, that
Developer shall have the right to withhold its consent to any
such proposed transfer or assignment on the grounds that the
assignee lacks sufficient background or experience to commit to
the terms of this Business Plan.
Section 16. Indemnification During Construction.
Developer shall indemnify and hold Owner harmless from and
against all liability, loss, damage, costs or expenses (including
but not limited to reasonable attorneys fees), arising from or as
a result of the death of any person or any accident, injury, loss
or damage caused to any person or to the property of any person
that occurs on or adjacent to the Property and that is directly
or indirectly caused by the construction of the Project or by any
act or omission of Developer, its subcontractors, agents,
employees or independent contractors. Developer shall not be
responsible for (and such indemnity shall not apply to) any loss
due solely to the gross negligence or wilful misconduct on the
part of Owner or its agents, employees or independent
contractors. For purposes of this subsection only, Developer
shall not be deemed to be an agent of owner.
Section 17. Rights of Access to Project and Books and
Records. Owner and its employees, agents and representatives
shall at all times have access to all areas of the Project. Owner
agrees that such access shall not unreasonably interfere with
authorized construction and other development activities in the
Project. Owner and its employees, agents and representatives
shall at all reasonable times and on reasonable notice have
access to all documents, books and records, including, but not
limited to, books of account in the possession or control of
Developer, and on reasonable advance notice to Developer, Owner
may remove such documents, books and records for copying. All
such entry and inspection shall be at Owner's sole risk and
expense.
Section 18. Employment Matters. Developer will not
discriminate against any employee or applicant for employment
because of race, color, creed, religion, sex, marital status,
age, handicap, ancestry or national origin. Developer shall at
all times comply with all applicable employment and labor laws,
rules, regulations, and administrative orders.
Section 19. Environmental Laws. Developer shall be
responsible for complying with all federal, state, and local
laws, rules, regulations, rulings, ordinances and orders relating
to environmental matters and hazardous materials, including
storage, handling, transportation, disposal, marking, warnings,
notices, and other requirements; provided, however, that
Developer shall be relieved of such responsibility in any case
where failure to comply is attributable to Owner's acts,
withholding of consent or other refusal to authorize appropriate
action.
Section 20. Liens and Encumbrances. Developer shall not
allow title to the Property to be encumbered by any mortgage,
deed of trust, encumbrance, or lien not authorized by this
Agreement or the Business Plan, subject to the right of
reasonable contest with respect to mechanics' and/or
materialmen's lien claims. If a prohibited encumbrance is placed
on title to the Property due to an act or omission of Developer
and has not been removed or resolved within a reasonable period
of time, Developer shall cause such encumbrance to be removed
prior to judgement in any action commenced thereon, at
Developer's sole expense.
Section 21. Authorized Persons. The persons authorized
and empowered to act on behalf of Owner and Developer in making
decisions and giving consents hereunder shall be as follows: (A)
for Developer: Britt Evans; and (B) for Owner: Lawrence
Weissberg.
Section 22. Representations and Warranties.
22.1 Developer's Representations And Warranties.
Developer represents and warrants as follows:
(A) Developer is a California corporation in
good standing with all governmental authorities having
jurisdiction over its business and activities. Within thirty (30)
days after execution hereof by Owner, Developer shall have all
licenses and permits required to conduct its business and to
perform its obligations under the Project Documents, including a
California general contractor's license and a California real
estate broker's license.
(B) All of the information provided by Developer
relating to Developer's credit, work history, and other material
information regarding Developer's qualifications to be retained
as Developer hereunder is true and correct.
(C) Developer's execution of this Agreement and
the other Project Documents and Developer's performance of its
obligations hereunder and thereunder has been duly authorized by
all necessary corporate and partnership action, and will not
violate any agreement, law, rule, regulation, decision, or order
by which Developer may be bound or affected. The person(s)
executing this Agreement on behalf of Developer have been duly
authorized to execute and deliver this Agreement on behalf of
Developer. This Agreement constitutes a legally valid and binding
obligation of Developer enforceable in accordance with its terms,
except as limited by bankruptcy, insolvency, reorganization and
similar laws affecting the rights of creditors generally.
(D) Developer and its owners are not in
violation of any order or decree of any court of competent
jurisdiction, and there are no pending or threatened judicial or
administrative proceedings which, if determined adversely to the
interests of Developer or its respective owners, could materially
affect Developer's ability to perform its obligations under the
Project Documents.
(E) Developer has reviewed the soils and seismic
reports, toxicity report and other engineering studies pertaining
to the Property, has examined the Property itself, has reviewed
the current and previous use of the Property and the adjacent
land, and has considered the applicable land use, zoning and
subdivision approvals. Based on such reviews, Developer has
concluded that, to the best of its knowledge and belief, the
Project can be built in accordance with the Business Plan.
(F) Developer has or will obtain by the time
needed, all licenses, permits and authorizations required by all
governmental agencies having jurisdiction over the Property or
the Project or otherwise required to perform the activities of
Developer is required to perform pursuant to the terms of this
Agreement.
(G) The plans, specifications, drawings and
other Project Documents, when prepared, will be sufficient to
enable Developer and all subcontractors to construct the
improvements described in the Business Plan for the price and
within the time period set forth therein. Developer will use its
best efforts to see that the improvements to be built in
accordance with such plans, specifications and drawings will
comply with all applicable laws, building codes and regulations.
(H) Developer shall indemnify and hold Owner
harmless from and against any claim, loss, or expense that owner
may realize resulting from a breach of the foregoing
representations and warranties.
22.2 Owner's Representations And warranties. Owner
represents and warrants as follows:
(A) Owner is a California corporation in good
standing with all governmental authorities having jurisdiction
over its business and activities, and has all licenses and
permits required to conduct its business and to perform its
obligations under the Project Documents.
(B) owner's execution of this Agreement and the
other Project Documents and Owner's performance of its
obligations hereunder and thereunder has been duly authorized by
all necessary corporate and partnership action, and will not
violate any agreement, law, rule, regulation, decision, or order
by which Owner may be bound or affected. Owner has the financial
and legal ability to perform all of the obligations on its part
to be performed hereunder (including, without limitation, control
over title to the Property) and all conditions precedent to such
performance have duly and properly fulfilled. The person(s)
executing this Agreement on behalf of owner have been duly
authorized to execute and deliver this Agreement on behalf of
Owner. This Agreement constitutes a legally valid and binding
obligation of owner enforceable in accordance with its terms,
except as limited by bankruptcy, insolvency, reorganization and
similar laws affecting the rights of creditors generally.
(C) To the best of Owner's knowledge, Owner and
its owners are not in violation of any order or decree of any
court of competent jurisdiction, and there are no pending or
threatened judicial or administrative proceedings which, if
determined adversely to the interests of owner or its owners,
could materially affect Owner's ability to perform its
obligations under the Project Documents. This Agreement
constitutes a legally valid and binding obligation of owner,
enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization and similar laws-affecting
the rights of creditors generally.
(D) Owner shall indemnify and hold Developer
harmless from and against any claim, loss, or expense that
Developer may realize resulting from a breach of the foregoing
representations and warranties.
Section 23. Events of Default; Remedies.
23.1 Default by Developer. The occurrence of any of
the following shall be deemed an event of default by Developer
under this Agreement:
(A) The occurrence of an event of default by
Developer under any of the other Project Documents, which said
default is not cured within the time permitted by the relevant
document.
(B) Developer or any of its owners files a
voluntary petition in bankruptcy, is adjudicated bankrupt,
becomes insolvent, makes an assignment for the benefit of
creditors, or applies for or consents to the appointment of a
receiver or trustee with respect to any substantial part of his
assets, or a receiver or trustee is appointed or an attachment or
execution is levied with respect to any substantial part of the
assets of Developer or any of its owners, and the appointment is
not vacated or the attachment or execution is not released within
60 days.
(C) Development of the Project does not proceed in
substantial accordance with the Business Plan due to a cause or
event within Developer's control.
(D) Developer commits any other material breach
of this Agreement.
23.2 Owner's Remedies on Default of Developer. Upon
the occurrence of an event of default by Developer that is not
cured during any applicable grace period, Owner shall have the
right to such relief as may be available to it at law or in
equity, subject to the requirements of section 25 with respect to
arbitration.
23.3 Default By Owner And Remedies Of Developer. If
Owner fails to perform any obligation on its part to be performed
hereunder, such failure continuing after notice and expiration of
any applicable grace period, Developer shall have the right to
such relief as may be available to it at law or in equity,
subject to the requirements of Section 25 with respect to
arbitration.
23.4 Status of Developer's Compensation Upon
Termination. In any case where this Agreement is terminated,
Developer shall be entitled to receive a payment as compensation
for its Net Profits Share determined as if the Property had been
sold on the termination date for fair market value, said
determination of Net Profits Share to be made as provided in
Section 25.2(A), subject to any remedies of owner pursuant to
Section 23.2.
Section 24. Nature of Relationship. The relationship
between Owner and Developer with respect to the Project shall be
that of property owner and independent contractor. None of the
Project Documents or the services provided by Developer shall be
deemed to create a relationship of employer and employee, a
partnership, joint venture or other arrangement. Owner
acknowledges that the principals of Developer have been employees
and officers of owner and/or its affiliates and that said
principals have had involvement with the Property and prospective
development thereof during the course of their employment.
Nothing herein contained and no act of Developer undertaken
pursuant to the terms hereof shall be deemed to be a breach of
fiduciary duty or usurpation of corporate or other opportunity by
reason of such prior employment, Owner having acted to enter into
this Agreement and the other Project Documents with full
knowledge of said principals' prior employment and contacts with
the Property.
Section 25. General Provisions.
25.1 Arbitration.
(A) Any dispute between the parties concerning
(i) any action taken hereunder, (ii) any proposed action to be
taken hereunder, (iii) any claim that the provisions hereof have
not been performed, (iv) any attempt to obtain a declaration of
rights hereunder or any interpretation of the provisions hereof,
(v) any claim for damages between the parties by reason of the
breach hereof, or (vi) any claim that this agreement should be
terminated for breach shall be resolved by arbitration. Such
arbitration shall be final and binding between the parties, and
the order of the arbitrator may be enforced in the manner
provided for enforcement of a judgment of a court of law pursuant
to the applicable provisions of the California Code of Civil
Procedure. The arbitration shall be conducted in accordance with
the procedures set forth in Section 25.1(B) through (G) below.
(B) Any party who has a claim (the "Demanding
Party") hereunder to be resolved through arbitration shall state
the claim (the "Claim") in writing. The Claim shall include (i)
the item or matter in dispute, (ii) the Demanding Party's
position, and (iii) a specific statement of the exact relief the
Demanding Party requests.
(C) The parties shall meet and confer in an
attempt to resolve the matter raised by the Claim. If they are
unable to reach a resolution within thirty (30) days after the
date of the Claim, then within ten (10) days thereafter, the
Demanding Party shall either (i) restate its Claim, (ii) amend
the Claim, or (iii) withdraw the Claim. Failure on the part of
the Demanding Party to withdraw or amend the Claim in writing
shall constitute a restatement thereof.
(D) If the Claim is not withdrawn within the ten
(10) day period provided for in Section 25.1(C) above, the other
party (the "Responding Party") shall, within fifteen (15) days
after expiration of the ten (10) day period provided for in
Section 25.1(C) above, prepare a response to the Claim (the
"Response") specifying specifically (i) the Responding Party's
position on the Claim, and (ii) the exact relief the Responding
Party requests.
(E) The matter or matters in dispute shall be
submitted to the arbitrator on the basis of the issues as framed
by the Claim (as the same may have been amended pursuant to
Section 25.1(C) above) and the Response. The arbitrator shall be
a person from the San Francisco East Bay Area with at least five
(5) years experience and professional qualifications in the
subject matter in dispute under the Claim and Response such as,
for example, civil engineering if the matter in dispute concerns
subdivision improvement matters, and financing if the matter in
dispute concerns that subject. If the parties are unable to agree
on a single person to serve as arbitrator for the resolution of
the dispute within thirty (30) days after the date of the
Response, then either party shall have the right to apply for the
appointment of a duly qualified person to act as arbitrator to
the Presiding Judge of the Superior Court of the County of
Alameda, State of California, and neither party shall have any
right to object to the qualifications of said Judge to make such
appointment. If the arbitrator resigns or refused to serve, then
a new arbitrator shall be appointed as herein provided.
(F) As soon as convenient after appointment, the
arbitrator shall meet with the parties to hear evidence and
argument on their claim or Response. The arbitrator shall not be
bound by the Rules of Evidence in the conduct of such proceeding
although the arbitrator shall take account of said rules in
considering the weight of the evidence. To the extent applicable,
the decision of the arbitrator shall conform to law and the
arbitrator shall be entitled to retain an independent attorney to
advise him as to such questions of law that may arise during the
proceeding. In making a decision, the sole function of the
arbitrator shall be to determine whether (i) the relief requested
in the Claim, or (ii) the relief requested in the Response is the
more appropriate relief to be given in connection with the matter
in dispute, and the arbitrator shall have no right to fashion an
independent or different result.
(G) Each party shall pay one-half (1/2) of the
fees and costs of the arbitrator and all of its own costs and
attorneys' fees in connection with the arbitration.
(H) The arbitrator shall have no right to award
costs or attorneys, fees to either party unless the arbitrator
determines that the Claim or the Response is based on a position
totally lacking in merit or that was asserted for purposes solely
of delay, in which case the arbitrator shall have the right to
award costs and attorneys' fees to the Prevailing Party.
25.2 Developer's Profit Interest On Sale; Right Of
First Opoortunity And Right Of First Refusal.
(A) Preservation Of Developer's Profit Interest
on Sale. No portion of the Property may be sold as a bulk sale of
undeveloped or partially developed property without Developer's
prior written consent, unless (i) at least eighteen (18) months
from the effective date of this Agreement has passed, and (ii)
development has been suspended for a period of not less than one
(1) year. If all or a portion of the Property is so sold, the
proceeds of the sale shall be applied in the following order: (i)
discharge of indebtedness secured by encumbrances against the
interest so sold; (ii) return of owner's equity, plus an amount
equal to the excess Management Fee paid to Developer and not
previously reduced in accordance with Section 10.1; (iii) payment
to Owner of its preferential return pursuant to Section 10.4,
plus the preferential return computed on the excess Management
Fee; and (iv) any remainder to be paid seventy percent (70%) to
Owner and thirty percent (30%) to Developer. It is the intention
of the parties that this Section outlines a division of sales
proceeds that is different than that which would occur if Homes
were built and sold. If this Section applies, Developer shall
have no further obligation to reduce or extinguish any excess
Management Fee previously paid to it nor is its Net Profits Share
subject to adjustment as described in Section 10.3.
(B) Right Of First opportunity. If Owner
determines to sell all or a portion of the Property prior to
completion of the activities contemplated in the Business Plan,
whether development is proceeding in accordance with the Business
Plan or not, and if Developer is not then in default, Owner shall
provide to Developer all information concerning the proposed sale
including the desired price and terms thereof. Developer shall
have sixty (60) days thereafter within which to agree to purchase
the interest that owner proposes to offer (the "Offered
Interest") upon such price and terms (reduced by the amount of a
real estate brokerage commission that Owner would pay in a sale
to a third party) or such other price and terms as owner and
Developer may agree.
(C) Right Of First Refusal. If Developer and
Owner are unable to agree on a price and terms for the Offered
Interest pursuant to Section 25.2(A) above, then owner shall have
the right to sell the Offered Interest to any third person
without any further obligation to Developer thereafter so long as
the price and terms on which such sale is made are less favorable
to Owner by no greater than five percent (5%) of the price and
terms that were offered by Owner to Developer. If the price or
terms are less favorable to Owner by an amount equal to five
percent (5%) or greater, however, and if Developer is not then in
default, Owner shall so notify Developer in writing specifying
the price and terms upon which the interest is being so offered.
For a period of fifteen (15) days thereafter, Developer shall
have the preemptive right to purchase the Offered Interest on
said revised price and terms (reduced by the amount of any real
estate brokerage commission that owner will be required to pay in
any sale to a third party). Owner's notice to Developer
constitutes a binding and irrevocable offer that may be accepted
within such time period. If Developer fails to give notice of
such purchase within said fifteen (15) day period, then the
Offered Interest may be sold by Owner on terms no less favorable
to owner than those offered to Developer. If the Offered Interest
is not so sold thereafter, however, then the right of first
refusal provided for herein shall again reapply to any subsequent
proposal to sell the Offered Interest or any part thereof.
25.3 Notices. Any notices or demands given or made
under this Agreement or the other Project Documents shall be
deemed given or made when written, signed, and either personally
delivered or two (2) days after deposited in the U.S. mail,
postage prepaid, addressed to the parties as indicated below, or
to such other address as the parties may request by notice given
in the foregoing manner:
If to Owner: If to Developer:
Lawrence Weissberg, CEO Mr. Britt Evans, CEO
H.F. Properties, Ltd., Inc. Westco Marina, Inc.
650 California Street, Suite 1440 15225 Wicks Blvd.
San Francisco, CA 94108 San Leandro, CA 94577
25.4 Amendment; waiver. This Agreement may only be
modified by a written agreement signed by Owner and Developer. No
waiver of any right under this Agreement shall be valid unless
made in writing and signed by the party waiving the right.
25.5 Conflicting Terms. In case of any conflict
between the terms of this Agreement and the terms of any other
Project Document, the terms of this Agreement shall control.
25.6 Entire Agreement. This Agreement and the other
Project Documents shall constitute the entire agreement of the
parties with respect to the Project, and shall supersede all
prior and contemporaneous agreements with respect thereto. No
promises, representations or warranties not expressly set forth
herein or in the other Project Documents shall be deemed valid,
binding, or enforceable.
25.7 Severability. If any provision of this Agreement
is held invalid or unenforceable, the remainder of this Agreement
shall nevertheless remain in full force and effect to the extent
that the same can be carried out in a manner consistent with the
intent of the parties.
25.8 Attorneys' Fees. Should any suit be instituted
in connection with this Agreement, the prevailing party in such
litigation shall be entitled to recover from the other party the
prevailing party's court costs and attorneys' fees incurred in
connection with such litigation.
25.9 Interpretation. Owner and Developer have
participated equally in the drafting of this Agreement and the
other Project Documents based on the advice of their independent
counsel, and that Civil Code Section 1654 shall not apply to this
Agreement.
26. Board Of Directors Approval. Notwithstanding
anything to the contrary herein contained, owner's execution
hereof shall be subject to ratification and approval by the Board
of Directors of Homestead Financial Corporation. owner shall
diligently seek such approval. If the Board does not so approve
execution hereof by owner within fourteen (14) calendar days from
the date hereof, by duly adopted resolution, then this Agreement
shall terminate and all obligations of the parties hereto shall
be null and void.
IN WITNESS WHEREOF, owner and Developer have set forth
their signatures below as of the date first written above.
OWNER
H.F. PROPERTIES,, LTD., a
California corporation
/s/ Lawrence Weissberg
By: Lawrence Weissberg
Its: President
DEVELOPER
WESTCO MARINA, INC., a
California Corporation
/s/ Britt Evans
By: Britt Evans
Its: President
AMENDMENT TO DEVELOPMENT AGREEMENT
THIS AMENDMENT TO DEVELOPMENT AGREEMENT is made as of
November 15, 1991 by and between H.F.PROPERTIES, LTD., a California
corporation ("Owner")and WESTCO MARINA,INC.,a California
corporation ("Developer").
Recitals
A. Owner and Developer have entered into that certain
Development Agreement dated November 15, 1991 (the "Development
Agreement").
B. Owner and Developer wish to amend the terms of the
Development Agreement to more accurately reflect their
understanding of the terms thereof.
NOW THEREFORE, in consideration of their mutual covenants
and promises, the parties agree as follows:
1. Section 24 of the Development Agreement shall be
amended to read as follows:
Section 24. Nature of Relationship. The relationship between
Owner and Developer with respect to the project shall be that of
property owner and independent contractor. None of the Project
Documents or the services provided by Developer shall be deemed to
create a relationship of employer and employee, a partnership,
joint venture or other arrangement. Owner and Developer agree that
this contract provides Developer with a conditional expectancy
interest in the rents, issues and profits of the Property. Owner
acknowledges that the principals of Developer have been employees
and officers of owner and/or its affiliates and that said
principals have had involvement with the property and prospective
development thereof during the course of their employment. Nothing
herein contained and no act of Developer undertaken pursuant to the
terms hereof shall be deemed to be a breach of fiduciary duty or
usurpation of corporate or other opportunity by reason of such
prior employment, owner having acted to enter into this Agreement
and the other Project Documents with full knowledge of said
principals' prior employment and contacts with the Property.
2. Except as amended hereby, the Development
Agreement shall remain in full force and effect as originally
executed.
EXECUTED AS OF THE YEAR AND DATE FIRST WRITTEN ABOVE.
H.F. PROPERTIES, INC. WESTCO MARINA, INC.
a California corporation a California corporation
/s/ Lawrence Weissberg /s/ Britt Evans
By: Lawrence Weissberg By:Britt Evans
Its: President Its:President
SECOND AMENDMENT TO DEVELOPMENT AGREEMENT
THIS AMENDMENT TO DEVELOPMENT AGREEMENT is made as of November 30,
1992, by and between H.F. PROPERTIES, LTD., a California
corporation ("Owner"), and WESTCO MARINA, INC., a California
corporation ("Developer").
RECITALS
A. Owner and Developer have previously entered into that
certain Development Agreement dated November 15, 1991, previously
amended once as of November 15, 1991, (the "Development Agreement")
.
B. Owner and Developer wish to amend the terms of the
Development Agreement so as to alter the manner in which both
construction cost savings and construction cost overruns affect the
computation of Developer compensation.
C. Owner and Developer intend that upon the effectiveness of
this amendment, Developer shall not be specially penalized for
construction cost overruns or be specially rewarded for
construction cost savings.
NOW THEREFORE, in consideration of their mutual covenants and
promises, the parties agree as follows:
1. Section 10.2 of the Development Agreement is hereby revised
to provide as follows:
1110.2 Net Profits Share. In addition to the Management Fee
set forth in Section 10.1, Owner shall pay to Developer a sum equal
to thirty percent (30%) of the net profits generated by the Project
(said amount being referred to as the Net Profits Share herein). As
used herein, the term 'net profits' shall mean the gross proceeds
from sales of the Homes reduced by all costs of the Homes
(including, but not limited to, land costs, development costs,
marketing costs and financing costs). The Net Profits Share shall
be paid to Developer on a pro ratax basis after Owner has recovered
its total doapital investment and its preferred return pursuant to
Section 14.4.11'.
2. The language of Section 10.3 of the Development Agreement
is hereby deleted and in its place shall be substituted the
following words: "Intentionally omitted."
3. Except as set forth above, the Development Agreement as
previously amended shall remain in full force and effect.
EXECUTED AS OF THE YEAR AND DATE FIRST WRITTEN ABOVE.
H.F. PROPERTIES WESTCO MARINA, INC.
a California Corporation a California corporation
/s/ Lawrence Weissberg /s/ Britt Evans
By:Lawrence Weissberg By: Britt Evans
Its: President Its: President
PARTNERSHIP AGREEMENT
GLENBRIAR JOINT VENTURE
THIS AGREEMENT is made and entered into as of the 1st day of
January, 1994, by and between GIC Investment Corporation, a
California corporation ("GIC") whose address is 350 California
Street, Suite 1650, San Francisco, California 94111 and Westco
Community Builders, Inc., a California corporation ("WCB"), whose
address is 15225 Wicks Boulevard, San Leandro, California 94577,
together referred to herein as the "Partners."
In consideration of the premises and mutual covenants
contained herein, the parties hereto agree to the terms, covenants
and conditions as hereinafter set forth.
SECTION 1
ORGANIZATION OF THE PARTNERSHIP
1.1 FORMATION . The parties hereto hereby form a joint venture
general partnership pursuant to the terms and conditions of this
Agreement for the purpose of owning, subdividing and developing a
tract of land comprising approximately 105 acres located in Tracy,
California known as the Glenbriar project (the "Property").
1.2 NAME. The name of this Partnership shall be the
"Glenbriar Joint Venture."
1.3 PLACE OF BUSINESS. The principal place of business of this
Venture shall be located at the offices of WCB in San Leandro,
California until changed by designation of the partners.
1.4 PURPOSE.
1.4.1 The purpose of this Venture shall be to acquire,
subdivide, own, and develop lots on the Property and conduct
related activities. The Partners expressly agree that the Venture
is formed solely to conduct this single business and that any
expansion of the business of the Venture shall require consent of
the Partners.
1.4.2 Except as otherwise expressly and specifically
provided herein, no Partner shall have any authority to bind or act
for, or assume any obligations or responsibility on behalf of, the
other Partner. This Agreement shall not be deemed to create a
partnership between the Partners with respect to any activities
whatsoever other than those activities within the scope and
business purposes of the Venture as set forth in Section 1.4.1
above.
1.5 TERM. The Venture shall commence as of the date of this
Agreement and shall continue until the Venture shall be dissolved
and terminated in accordance with the provisions of applicable law
or Section 9.1 hereof.
1.6 COMPLIANCE WITH LAW. The Partners shall execute and cause
to be filed and published a Fictitious Business Name Statement as
required by the California Business and Professions Code. From time
to time, thereafter, the Partners shall do or cause to be done all
such filings, recordings, publishings and other acts, as may be
necessary or appropriate to comply with all requirements for the
operation of a general partnership pursuant to the laws of the
State of California and of all other jurisdictions wherein the
Venture shall conduct its business.
SECTION 2
DEFINITIONS
As used herein, each of the following terms shall have the
meaning assigned to it
below:
2.1 "Adjusted Invested Capital." The Capital Contribution
of a Partner reduced by any Distributions.
2.2 "Affiliate." (i) any person or entity directly or
indirectly controlling, controlled by, or under common control with
the other person or entity; (ii) any person or entity who directly
or indirectly owns, controls, or holds the power to vote 10% or
more of the outstanding voting securities of the other person or
entity; (iii) any person or entity who has directly or indirectly
10% or more of its outstanding voting shares, owned, controlled or
held with power to vote by the other person or entity; (iv) any
officer, director or partner of the other person; and (v) if the
other person is an officer, director or partner, any company for
which the person acts in any such capacity.
2.3 "Assign One to whom a Partner has assigned all or part
of its Interest in the Venture pursuant to the terms of Section 7
of this Agreement.
2.4 "Assignor ." A Partner who assigns all or part of its
Interest in the Venture pursuant to the terms of Section 7 of
this Agreement.
2.5 "Bankruptcy." Whenever a petition (whether voluntary or
involuntary) in bankruptcy has been filed with respect to a Partner
and remains in effect, without being dismissed or stayed, for a
period of not less than 60 days.
2.6 "Capital Account." An account established and maintained
for each Partner, which initially will reflect the amount of its
Capital Contribution and will from time to time be adjusted in
accordance with the provisions of Section 3.3 of this Agreement.
2.7 "Capital Contribution. " Cash, property or services
contributed by a Partner to Venture capital.
2.8 "Code." The Internal Revenue Code of 1986, as
amended.
2.9 "Distribution. "An amount of cash or property
distributed to a partner on account of the Partner's interest in
the Venture.
2. 10 "Intangible Property. " All the personal property
described in the Assignment and Assumption Agreement dated November
23, 1993 by and between WCB and Homestead Land Development
Corporation which was delivered as part of WCB's purchase of the
Property.
2.11 "Interest . " The interest of a Partner in the profits,
losses, capital, distributions and assets of the Venture. "
2.12 "Net Cash Flow." Cash revenues from operations and other
investments of the Venture (including proceeds of sales or
refinancings, exchange, condemnation or other disposition of
Venture property) less the payment of operation costs and expenses
of the Property and mortgage and other loans of the Venture and the
retention of a reasonable reserve for costs of operations and
working capital, but not non-cash expenditures such as cost
recovery, depreciation or amortization of expenses.
2.13 "Notice . " A communication given in writing and
delivered personally or mailed as provided in Section 10.3.
2.14 "Override Preferred Return." An amount equal to a forty
percent (40%) cumulative but not compounded yield on Adjusted
Invested Capital, which is inclusive of the Preferred Return.
2.15 "Partners." All the General Partners of the Venture.
2.16 "Preferred Return." An amount equal to a twelve percent
(12%) per annum cumulative but not compounded yield on Adjusted
Invested Capital.
2.17 "Profits" and "Losses" means, for each fiscal year or
other period, an amount equal to the Venture's taxable income or
loss for such year or period, determined in accordance with Code
Section 703(a) (for this purpose, all items of income, gain, loss
or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss).
2.18 "Property". That tract of land consisting of
approximately 105 acres located at 27383 MacArthur Drive, Tracy,
California more particularly described in Exhibit A.
2.19 "Regulations" means the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding
regulations).
2.20 "Service ." The Internal Revenue Service.
2.21 "Venture." The joint venture partnership formed
pursuant to this Agreement.
SECTION 3
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.
3. 1. 1 WCB shall contribute to the Venture (i) title
to the Property, (ii) title to all the Intangible Property,
subject to accrued but unpaid costs and expenses relating
to these assets as of the date of contribution which shall not
exceed $25,000.00. The parties agree that the WCB shall receive a
capital account credit of $463,988.31 upon making such
contribution, provided, however, that the parties agree that
WCB's capital shall be adjusted if necessary to equal its
investment in the Property and the Intangible Property. WCB
shall be entitled to receive from capital contributed by GIC the
sum of $347,991.23 (75 % of the agreed contribution). Thereafter,
WCB shall contribute 25 % of all capital required by the
Venture, to a maximum of $375,000.00.
3.1.2 GIC shall initially contribute the sum of
$347,991.23 and shall be required to contribute 75 % of all capital
required by the Venture, to a maximum of $1,125,000. 00.
3.1.3 The Partners shall be required to contribute
additional capital to the Venture in such amounts as the Partners
may determine by mutual agreement.
3.2 PARTNERSHIP INTERESTS. In return for their Capital
Contributions, and subject to all the provisions of this Agreement,
the Partners shall have the following Interests in the Venture:
GIC: 75 %
WCB: 25 %
3.3 CAPITAL ACCOUNTS. A Capital Account shall be established
and maintained for each Partner, which initially shall reflect the
amount of its Capital Contribution, and shall from time to time be
(i) increased by its distributive share of profits of the Venture,
and (ii) decreased by an amount equal to the distributions made by
the Venture to it and its allocable share of losses of the Venture.
Except as otherwise expressly provided in this Agreement, no
Partner shall be permitted to make any withdrawals from or in
respect to its Capital Account.
3.4 INTEREST AND RIGHT TO PROPERTY. No interest shall be paid
on or in respect to any Capital Contribution by any Partner, and
except as is expressly provided herein no Partner shall have the
right to demand and receive cash or other property in return for
its Capital Contribution. The Partners agree that WCB shall
contribute legal title to the Property to the Venture, but that
they may mutually agree to hold the Property as tenants in common
in lieu of in the name of the Venture or by one of the Partners for
the benefit of the Venture.
3.5 BORROWINGS. If the Partners mutually determine that the
Venture requires the use of additional funds which cannot, in the
opinion of the Partners, be obtained on terms more advantageous to
the Venture than by borrowing such funds from third parties, the
Partners and/or their Affiliates, may, from time to time loan such
funds to the Venture in such amounts and on such terms as the
Partners agree are necessary to pay all costs relating to the
business of the Venture. No such loan shall be deemed to constitute
an increase in the Capital Account or Capital Contribution of the
Partners nor shall the making of any such loan entitle the Partners
to any increases in their share of profits of the Venture.
Repayment of any such loans, together with interest thereon, shall
be required before any Distributions are made to a Partner on
account of the Partner's Interest in the Venture.
SECTION 4
INTEREST OF PARTNERS IN DISTRIBUTIONS
4.1 DISTRIBUTION OF NET CASH FLOW. Distributions of Net
Cash Flow in each year shall be made as follows:
4.1.1 First, to the Partners until the Partners have
cumulatively received Distributions in an amount equal to their
Capital Contributions (such Distributions to be in proportion to
the unrecovered Capital Contributions as of the date of the
Distribution);
4.1.2 Next, to the Partners until they have received
Distributions equal to their cumulative Preferred Return (such
Distributions to be in proportion to the unrecovered Preferred
Return as of the date of the Distribution);
4.1.3 Next, 60% to GIC and 40% to WCB until GIC has
received Distributions equal to its cumulative Override Preferred
Return; and
4.1.4 Thereafter, 40% to GIC and 60% to WCB.
SECTION 5
ALLOCATION TO PARTNERS OF PROFITS AND LOSSES;
OTHER INCOME TAX MATTERS
5.1 PROFITS. Except as provided in Sections 5.3, 5.4
and 5.5 hereof, Profits for any fiscal year shall be allocated in
the following order and priority:
5. 1. 1 First, to the Partners until the cumulative
Profits allocated to each pursuant to this Section 5. 1. 1 are
equal to the cumulative Losses allocated pursuant to Section 5.2.2
hereof for all prior periods;
5.1.2 Next, to the Partners in the amount of any
accrued but undistributed Preferred Return allocable to their
Capital Contributions;
5.1.3 Next, 60% to GIC and 40% to WBC until the
cumulative amount of profits allocated to GIC pursuant to Sections
5.1.2 and 5.1.3 equals any accrued but undistributed Override
Preferred Return allocable to.GIC;
5.1.4 The balance, if any, 40% to GIC and 60% to
WCB.
5.2 LOSSES. Except as provided in Sections 5.3 and
5.4 hereof, Losses for any fiscal year shall be allocated in the
following order and priority:
5.2.1 To the extent Profits have been allocated
pursuant to Sections 5.1.4, 5.1.3 or 5.1.2 hereof for any prior
year, Losses shall be allocated first to offset any Profits
allocated pursuant to Section 5.1.4 prorata among the Partners in
proportion to their shares of the Profits being offset, then
likewise with respect to allocations pursuant to Section 5.1.3
and then with respect to Section 5.1.2; and
5.2.2 Thereafter, Losses shall be allocated 75% to
GIC and 25% to WCB.
5.3 REGULATORY ALLOCATIONS.
5.3.1 Minimum Gain Chargeback Notwithstanding anything
herein to the contrary, if there is a net decrease in the Venture's
"Minimum Gain" during a Venture's taxable year as determined under
Regulations Section 1.704-1(b)(4)(f), all Partners with deficit
Capital Account balances at the end of such year shall be allocated
income and gain for such year (and if necessary, in subsequent
years) in the amount and in the proportions needed to eliminate
such deficits as quickly as possible. Such allocations shall
consist of the items of income and gain described in Regulations
Section 1.704-1(b)(4)(e).
5.3.2 Section 734(b) or 743(b) Adjustments. To the "tent
an adjustment to the adjusted tax basis of any Venture asset
pursuant to Code Section 734(b) or Code Section 743(b) is required,
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken
into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustments increases the basis of the asset) or loss
(if the adjustment decreases such basis) and such gain or loss
shall be specially allocated to the Partners in a manner consistent
with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Regulations.
5.3.3 Intent of Allocations. The allocations set forth in
Section 5.3 hereof (the "Regulatory Allocations) are intended to
comply with certain requirements of Regulations Section 1. 704-1
(b). The Regulatory Allocations may not be consistent with the
manner in which the Partners intend to divide Venture
distributions. Accordingly, the Partners shall divide other
allocations of Profits, Losses and other items among the Partners
so as to prevent the Regulatory Allocations from distorting the
manner in which Venture distributions will be divided among the
Partners pursuant to Section 4.1 hereof. In general, the Partners
anticipate that this will be accomplished by specially allocating
other Profits, Losses and items of income, gain, loss and deduction
among the Partners so that the net amount of the Regulatory
Allocations and such special allocations to each such Person is
zero.
5.4 DETERMINATION OF INCOME AND LOSS. At the end of each
fiscal year of the Venture, or at such other time as the Partners
shall deem necessary or appropriate, each item of income, expense,
gain, loss and deduction of the Venture shall be determined for the
period then ending and shall be allocated to the Capital Account of
each Partner in accordance with the provisions hereof. in
determining the Distributions of Net Cash Flow for purposes of
allocating Profits in each Venture fiscal year, the Net Cash Flow
available for distribution at each fiscal year end which is
distributed by the Venture within seventy-five (75) days thereafter
shall be deemed allocated to the Partners in said prior fiscal
year.
5.5 TAX MATTERS PARTNER. The Tax Matters Partner ("TMP") for
the Venture shall be GIC. The TMP shall employ experienced tax
counsel to represent the Venture in connection with any tax audit
or investigation of the Venture and in connection with all
subsequent administrative and judicial proceedings arising out of
such audit. The fees and expenses of such counsel shall be a
Venture expense and shall be paid by the Venture. Such counsel
shall be responsible for representing the Venture; it shall be the
responsibility of the Partners, at their expense, to employ tax
counsel to represent their respective separate interests. All
expenses incurred by the TMP in serving as the TMP shall be Venture
expenses and shall be paid by the Venture.
SECTION 6
MANAGEMENT OF THE VENTURE BUSINESS
6.1 THE PARTNERS RIGHTS GENERALLY Except as expressly provided
herein, the Partners shall be jointly responsible for the
management of the Venture business and property. Subject to the
provisions of Section 6.2 hereof, WBC shall have primary day-to-day
responsibility for managing the Venture business and shall render
such services required in connection with the management of the
Venture business and properties as the Partners shall mutually
agree.
6.2 MANAGEMENT POWER. Except as otherwise expressly provided
herein, the Partners shall have equal power and authority to make
all decisions relating to the management and control of the Venture
business and properties; provided, however , that unanimous
agreement of the Partners shall be required to:
6.2.1 expend any of the Venture's capital and profits in
furtherance of the Venture's business;
6.2.2 sell, pledge, hypothecate, dispose of, trade,
exchange, quitclaim, surrender or release Venture properties or
interests therein;
6.2.3 loan money to the Venture or borrow money from
third Persons for, in the name of and on behalf of the Venture;
provided, however, that it shall be solely the decision of GIC
whether the Venture shall exercise rights to borrow funds which are
set forth in a letter from Robert A. Naify to Britt Evans dated
November 24, 1993 relating to a stand-by loan commitment, a copy of
which is attached hereto as Exhibit B;
6.2.4 adjust, compromise, settle or refer to arbitration
any claim in favor of or against the Venture, and institute,
prosecute and defend any legal action or proceeding or any
arbitration proceeding;
6.2.5 purchase any goods or equipment other than ordinary
business supplies intended for routine office use.
6.3 MANAGEMENT FEES. REIMBURSEMENT AND PAYMENT OF COSTS.
6.3.1 The Venture shall pay to WBC a management fee of
$60,000.00 for services rendered as project manager. This fee shall
be payable at the rate of $5,000.00 per month for the first 12
months of the term of the Venture commencing January 1, 1994.
6.3.2 The Venture shall directly pay or shall reimburse
the Partners and their Affiliates for the actual costs of goods and
materials used for or by the Venture, excluding any indirect
expenses incurred in performing their services for the Venture,
such as salaries or similar compensation, general office rent,
utilities or other general overhead items not directly allocable to
the Venture's business.
6.4 AUTHORITY. The Partners shall have the power to execute,
deliver, perform and accept on behalf of the Venture any document,
instrument or agreement incident to the Venture's business and in
furtherance of its purposes, and any such document, instrument or
agreement shall be deemed executed, delivered, performed and
accepted, as the case may be, by the Venture. No Person shall be
required to determine the Partners' authority to engage in any act
or undertaking on behalf of the Venture; and third parties dealing
with the Venture may rely conclusively upon the power and authority
of the Partners to act as set forth herein and shall not be
required to inquire into or ascertain the authority of the Partners
to so act.
6.5 NONEXCLUSIVITY. Each Partner shall devote to the affairs
of the Venture so much time as it, in its sole discretion, deems
necessary or advisable to properly carry on the Venture's business
and to perform its duties as a Partner hereunder; provided,
however, that no Partner shall be required to devote full time and
attention to the Venture or to its business. Any Partner may,
independently or with others, engage in or possess an interest in
any business venture involved in the ownership, construction,
financing, leasing, operation and management of real property and
interests therein; and neither the Venture nor any of the Partners
as such shall have the right, by virtue of this Agreement or the
relationship created hereby, to participate in any such venture or
in the income, profits or losses derived therefrom. The fact that
a Partner or any Affiliate of that Partner is employed by, or is
directly or indirectly interested in or connected with, any person
with whom the Venture transacts business shall not prohibit the
Partners from dealing with that person, and neither the Venture nor
any Partners shall have any rights in or with respect to that
person or to any income, profits or losses derived therefrom.
SECTION 7
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS;
TRANSFER OF PARTNERSHIP INTERESTS;
SUBSTITUTED PARTNERS: AND ASSIGNMENT
7.1 ADDITIONAL PARTNERS. Except as otherwise expressly
provided herein, no one shall be admitted to the Venture as a
partner without the unanimous written consent of all the Partners.
7.2 WITHDRAWAL OF PARTNERS. Except as otherwise expressly
provided herein, no Partner may voluntarily retire or withdraw from
the Venture without the prior written consent of the remaining
Partners.
7.3 TRANSFER OR SALE OF PARTNERSHIP INTERESTS.
7.3.1 Right of Refusal: Procedure. If any Partner wishes
to sell, exchange, gift or otherwise voluntarily transfer its
Venture Interest or property or any part thereof (the "Offered
Interest"), that Partner (the "Electing Partner"), or its
authorized representative, shall give written notice (the "Offering
Notice") to the other Partner (the Non-electing Partner) prior to
such sale, exchange or transfer. The price and all material
financial and other terms of purchase of the Offered Interest shall
be the same as described in the Offering Notice. Unless otherwise
expressly stated, the terms shall be delivery of the entire Offered
Interest free and clear of liens or encumbrances (but subject to
liens and encumbrances affecting the Property) in consideration for
cash at closing.
7.3.2 Exercise of Option and Closing of Purchase. The
Non-electing Partner shall have ninety (90) days from the effective
date of the Offering Notice within which to give notice to the
Electing Partner of its election to purchase the Offered Interest.
Purchase of the Offered Interest shall be thereafter completed
within thirty (30) days after notice of the Nonelecting Partner's
exercise of its election.
7.3.3 Nonexercise of Option. If the Nonelecting Partner
does not elect to purchase the interest of the Electing Partner the
Partner who wishes to transfer its Offered Interest thereafter may
transfer the Offered Interest to any person, provided that such
transfer is accomplished within ninety (90) days thereafter on the
same terms and conditions as described in the Offering Notice and
the transferee agrees in writing to be fully bound by each and
every term of this Agreement.
7.3.4 Permitted Transfers with Consent . Notwithstanding
any of the above, upon the prior written consent of the other
Partner each Partner may transfer or assign all or any part its
Venture Interest. The Partners may, in their sole discretion,
withhold their consent to the assignment or transfer of all or any
part of the Venture Interest of a Partner. Any such transfer to
which the Partners shall consent shall be effective as of the first
day of the month in which the transfer was made. Notwithstanding
the foregoing, the disposing Partner shall remain responsible for
its obligations to the Venture unless and until the transferee or
assignee of that Partner is admitted to the Venture as a
Substituted Partner as provided in Section 7.5 hereof.
7.3.5 Transfers in Violation of Agreement . If a Partner
at any time attempts to sell, assign, transfer, pledge,
hypothecate, grant a security interest in, encumber or otherwise
dispose of all or any part of its Venture Interest in violation of
the provisions of this Agreement, no purchaser, assignee,
transferee, pledgee, lender or holder of the security interest or
encumbrance with respect thereto shall be deemed a Substituted
Partner, and the Venture, the other Partners, or any of them,
shall, in addition to all other rights and remedies which they may
have at law, in equity or under the provisions of this Agreement,
be entitled to a decree or order restraining and enjoining such
attempted sale, assignment, transfer, pledge,hypothecation, grant
or security interest, encumbrance or other disposition, and the
transferor shall not be entitled to plead in defense thereto that
there would be an adequate remedy at law, it being recognized and
agreed that the injury and damage resulting from such breach would
be impossible to measure monetarily.
7.4 RETIREMENT, WITHDRAWAL, BANKRUPTCY OR DISSOLUTION OF A
PARTNER.
7.4.1 On the retirement, withdrawal, Bankruptcy, or
dissolution of a Partner, the remaining Partner shall have the
option to purchase the Venture Interest of the former Partner from
that Partner's representative or successor-in-interest, in which
event the value of said interest shall be determined by appraisal.
7.4.2 Within sixty (60) days from the date of notice to
the remaining Partner of the event giving rise to such right, the
purchasing partner shall give the retiring Partner, its
representative or successor-in-interest notice of its election to
purchase the Venture Interest and shall designate an appraiser to
conduct the appraisal. The retiring Partner or its representative
or successor-in-interest must within fifteen (15) days of receipt
of remaining Partner's notice notify the remaining Partner in
writing that he has either (i) elected to accept the appraiser
selected or (ii) appoint an appraiser and the two (2) appraisers so
selected shall then select an additional appraiser similarly
qualified. Failure of the departing Partner or its
successor-in-interest to select an appraiser within said period
shall constitute acceptance of the appraiser designated by the
remaining Partner.
7.4.3 Said appraiser or appraisers shall make an
independent appraisal of the assets and liabilities of the Venture
and the concurring opinion of two of said appraisers shall
determine the net worth on a fair market value basis of the
Venture. Good will shall be valued at one dollar ($I). If none of
the appraisers concur, then the value which is neither the highest
nor the lowest shall be the net worth of the Venture. Appraisal
shall be completed within fortyfive (45) days of the date that all
appraisers are appointed.
7.4.4 The value of the interest to be purchased shall be
determined by taking the net worth of the Venture and then
determining the amount of the resulting net worth would be
distributed to the departing Partner under Section 9.2 if the
Venture were to liquidate as of the date of the valuation.
7.4.5 Unless buyer(s) and seller(s) agree otherwise, the
purchase price of said interest shall be paid in full within
thirty-six (36) months from the time appraisal is completed and the
principal shall bear interest at the then prime rate published by
Bank of America at its San Francisco office, payable not less
frequently than quarterly. The obligation created thereby shall be
secured by the selling Partner's interest in the Venture.
7.5 SUBSTITUTED PARTNERS. Anything herein to the contrary
notwithstanding, no successor-in-interest of a Partner and no
assignee or transferee of all or any part of the Venture Interest
of a Partner shall be admitted to the Venture as a Substituted
Partner except upon: (i) submitting to the Partners a duly executed
and acknowledged counterpart of the instrument or instruments
effecting or evidencing the transfer; (ii) submitting to the
Partners a counterpart of this Agreement (as amended through the
date of transfer) signed by the transferee and appropriately
signifying the transferee's agreement to be bound by all the
provisions of this Agreement (as amended through the date of
transfer); (iii) the transferee's obtaining the remaining Partners'
written consent thereto; and (iv) the transferee's paying all costs
and expenses, including, without limitation, attomeys'fees of the
Venture incurred in effecting the substitution. An assignee who
does not, for any reason, become a Substituted Partner shall be
entitled as a result of the assignment only to receive the economic
benefits of the Venture Interest to which its assignor otherwise
would be entitled, and the assignee shall not have any right to
demand or to receive any account of the Venture's business or to
inspect the Venture's books and records or any other rights as a
Partner, unless and until he is admitted to the Venture as a
Substituted Partner.
SECTION 8
BANKING AND ACCOUNTING
8.1 DEPOSIT OF PARTNERSHIP FUNDS. Venture funds shall be
deposited in the name of the Venture in one or more savings or bank
accounts or the account of some other financial institution to be
designated by the Partners and shall be withdrawn by checks made in
the name of Venture and signed as may be determined from time to
time by the Partners.
8.2 BOOKS OF ACCOUNT. The Venture shall maintain, at the
office of the Venture or of its accountant, books, records, and
accounts which fairly present the operations of the Venture on such
basis, of accounting as is determined by the partners in
consultation with the Venture's accountants. The books shall be
available for inspection by the Partners at all reasonable times.
The fiscal year of the Venture shall be the calendar year.
8.3 STATEMENTS. Not later than 75 days after the close of each
fiscal year of the Venture, the Venture shall deliver to each
Partner a balance sheet of the Venture as at the end of, and an
income statement for, that year, and a statement setting forth that
Partner's. allocable share of all items of Venture income, gain,
loss, deduction, credit and tax preference for that fiscal which
are to be included by that Partner on its federal income tax return
for that year.
SECTION 9
DISSOLUTION: LIQUIDATION: AND TERMINATION
9.1 DISSOLUTION. Subject to the laws of the State of
California, the Venture shall be dissolved and its assets
liquidated upon the first to occur of:
9. 1. 1 the death, retirement, withdrawal, removal,
Bankruptcy, or judicially declared mental incompetence of any
Partner, unless the Venture's business is continued pursuant to
Section 9.2 hereof
9.1.2 the sale, assignment, transfer, exchange or other
disposition of all or substantially all of the Venture's assets and
the collection and distribution of the proceeds thereof; or
9.1.3 the election of the Partners to dissolve the
Venture; provided that such election shall be effective 30 days
following Notice thereof to all the Partners.
9.2 LIQUIDATION.
9.2.1 Upon dissolution of the Venture, the Partners shall
take (or cause to be taken) a full accounting of the Venture's
assets and liabilities as of the date of such dissolution and,
subject to the right of the Partners to continue the business of
the Venture for the purpose of winding up its affairs. The Partners
shall proceed with reasonable promptness to liquidate the Venture's
assets (including, without limitation, by way of the sale,
assignment, transfer, exchange, lease, sublease or other
disposition of any or all of the Venture properties) and to
terminate its business; provided, however, that the assets of the
Venture which are, in the opinion of the Partners, suitable for
distribution in kind, may be distributed in kind to the extent that
the liquidation thereof is not necessary to satisfy the
requirements of clause (i) below. The cash process from the
liquidation shall be applied in the following order:
9.2.1.1 First, to the payment of all taxes, debts
and other obligations and liabilities of the Venture (excluding
therefrom the principal and accrued interest on all then
outstanding loans made by the Partners to the Venture) and to the
necessary expenses of liquidation thereof; provided, however , that
all debts, obligations and other liabilities of the Venture as to
which personal liability exists with respect to any Partner shall,
to the extent permitted by applicable law, be satisfied, or a
reserve established therefor, prior to the satisfaction of any
debt, obligation or other liability of the Venture as to which no
such personal liability exists.
9.2.1.2 Second, to the payment and discharge of
all indebtedness of the Venture owed to the Partners;
9.2.1.3 Third, all remaining assets of the Venture
shall be allocated to the Partners in proportion to their positive
capital accounts as of the date as of the date of dissolution.
9.2.2 It is the intent of the Partners that on
liquidation the assets of the Venture be distributed according to
the provisions of Section 4.1 of this Agreement. Therefore, the
Partners shall be required to make such allocations of profits and
losses on liquidation which will cause their capital accounts to
conform to this intent.
9.2.3 The Partners shall administer the liquidation of
the Venture and the termination of its business but shall receive
no compensation therefor except for fees and compensation
specifically referred to herein. The Partners shall be allowed a
reasonable time for the orderly liquidation of the Venture's assets
and the discharge of liabilities to creditors so as to minimize
losses resulting from the liquidation of the Venture's assets.
9.2.4 Except as otherwise expressly provided herein, no
dissolution or termination of the Venture shall relieve, release or
discharge any Partner, or any of its successors, assigns, heirs or
legal representatives, from any previous breach or default of, or
any obligation theretofore incurred or accrued under, any provision
of this Agreement, and any and all such liabilities, claims,
demands or causes of action arising from any such breaches,
defaults, and obligations shall survive such dissolution and
termination.
9.3 TERMINATION. Upon compliance with the foregoing plan of
liquidation and distribution, the Partners shall file or cause a
Certificate of Dissolution of Venture to be filed in the
appropriate office(s) in the State of California and the
Partnership thereupon shall be terminated.
SECTION 10
GENERAL
10.1 MEDIATION AND ARBITRATION. In the event any controversy
arises between the Partners as to the interpretation or enforcement
of this Agreement, the parties shall attempt to utilize mediation
by a neutral third party mediator to resolve such dispute. In the
event the parties are unable to resolve the dispute through
mediation, it shall be submitted to arbitration pursuant to and in
accordance with the provisions of the California Code of Civil
Procedure governing arbitration (CCP 1280, et seq.). Unless the
parties otherwise agree, on application of any party to a dispute
a single neutral arbitrator shall be selected by the Presiding
Judge of the Superior Court of the City and County of San
Francisco. The arbitration shall be conducted in San Francisco. The
parties shall be entitled to conduct depositions of such witnesses
as each may choose and each party shall be entitle to obtain
documents from the other pursuant to reasonable discovery
supervised by the arbitrator and subject to the arbitrator's
determination as to scope. The arbitrator shall be required to
include findings of fact and conclusions of law with any award. The
costs of arbitration shall be borne by the losing party or in such
proportion as the arbitrator shall decide.
10.2 COVENANT TO SIGN DOCUMENTS. Each Partner covenants, for
himself and its successors and assigns, to execute, with
acknowledgment or verification if required, any and all documents
and writings which may be necessary or expedient in the creation of
the Venture and the achievements of its purposes.
10.3 NOTICES. Unless otherwise provided herein, any offer,
acceptance, election, approval, consent, certification, request,
waiver, notice or other communication required or permitted to be
given hereunder (hereinafter collectively referred to as a
"Notice"), shall be deemed given only if in writing and delivered
personally (with receipt acknowledged) or mailed first class,
certified or registered mail, return receipt requested, postage
prepaid to the Partner at the address set forth in the Preamble to
this Agreement. A Partner may designate another address by delivery
or mailing Notices thereof to the other Partners in accordance with
the provisions in this Section 10.3.
10.4 RECOVERY OF ATTORNEYS' FEES. If the Venture or any
Partner on behalf of the Venture is a party to an action or
arbitration to enforce any of the terms of this Agreement or of any
other contract relating to the Venture, or any action or
arbitration in any other way pertaining to Venture affairs or this
Agreement, the Venture or such Partner, then the prevailing party,
shall be entitled to recover its or its costs, including reasonable
attorneys' fees, incurred in prosecuting or defending the action or
arbitration.
10.5 RIGHT OF PARTNERS TO PURCHASE OTHER PROPERTY. Nothing
contained herein shall preclude any Partner from purchasing any
other property, or rights therein, or in any manner investing in,
participating in, developing or managing any other Venture of any
kind, without notice to the other Partners, without participation
by the other Partners, and without liability to them or any of
them.
10.6 AMENDMENT. Except as otherwise expressly provided herein
or as otherwise required by law, this Agreement may only be amended
upon the written consent of a majority in Interest of the Partners;
provided, that (i) any amendment which shall reduce the Partnership
Interest or enlarge the obligations of any Partner shall require
the consent of that Partner.
10.7 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties and supersedes all prior writing or
representations. Upon due execution, it shall be binding upon the
parties, their executors, administrators, heirs, successors and
assigns.
10.8 CHOICE OF LAWS. The laws of the State of California shall
govern all matters with respect to this Agreement, including all
matters related to formation, construction and performance of this
Agreement.
10.9 WAIVERS. Except as otherwise expressly provided herein,
no purported waiver by any party of any breach by another party of
any of its obligations, agreements or covenants hereunder, or any
part thereof, shall be effective unless made in a writing
subscribed by the party or parties sought to be bound thereby, and
no failure to pursue or elect any remedy with respect to any
default under or breach of any provision of this Agreement, or any
part thereof, shall be deemed to be a waiver of any other,
subsequent, similar or different default or breach, or any election
of remedies available in connection therewith, nor shall the
acceptance or receipt by any party of any money or other
consideration due him or it under this Agreement, with or without
knowledge of any breach hereunder, constitute a waiver of any
provision of this Agreement with respect to such or any other
breach.
10.10 SEPARABILITY. Each provision of this Agreement shall be
considered to be separable and if, for any reason, any such
provision or provisions, or any part thereof, are determined to be
invalid and contrary to any existing or future applicable law, such
invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid, but this Agreement
shall be construed and enforced in all respects as if such invalid
or unenforceable provision or provisions had been omitted.
10. 11 HEADINGS, GENDER AND NUMBER. The section headings
herein contained have been inserted only as a matter of convenience
of reference and in no way define, limit or
describe the scope or intent of any provisions of this Agreement
nor in any way affect any such provisions. Where appropriate as
used herein, the masculine gender shall be deemed to include the
feminine, the feminine gender shall be deemed to include the
masculine, the singular number shall be deemed to include the
plural and the plural number shall be deemed to include the
singular.
10. 12 BENEFIT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
executors, administrators and successors, but shall not be deemed
for the benefit of creditors or any other Persons, nor shall it be
deemed to permit any assignment by a Partner of any of its rights
or obligations hereunder except as expressly provided herein.
IN WITNESS WHEREOF, each party has executed this General
Partnership Agreement on the date set forth below the name of each.
PARTNERS :
GIC INVESTMENT CORPORATION
By: /s/ Lawrence Weissberg Dated: April 18, 1995
Lawrence Weissberg, President
WESTCO COMMUNITY BUILDERS, INC.
By: /s/ Britt Evans Dated: April 18, 1995
Britt Evans
AMENDMENT TO PARTNERSHIP AGREEMENT
GLENBRIAR JOINT VENTURE
THIS AGREEMENT is made and entered into as of the 18th day of
April, 1995, by and between GIC Investment Corporation, a
California corporation ("GIC") and Westco Community Builders, Inc.,
a California corporation ("WCB"), together referred to herein as
the "Partners". for the purpose of amending that certain
partnership agreement entered into between the Partners and
effective as of January 1, 1994, and otherwise known as the
Glenbriar Joint Venture (the "Partnership Agreement").
In consideration of GIC paying to WCB the sum of Three Hundred
Eighty Six Thousand One Hundred Fifteen Dollars ($386,115.00) and
further in consideration of the promises and mutual covenants
contained herein, the parties hereto agree to the terms, covenants
and conditions as hereinafter set forth.
1. Section 2.14, "Override Preferred Return", as contained in
the Partnership Agreement, shall be deleted.
2. The last sentence of Section 3.1.1 of the Partnership
Agreement shall be amended to provide that after the date of this
amendment, WCB shall contribute 1% of all capital required by the
Venture.
3. Section 3.1.2 of the Partnership Agreement shall be amended
to provide that after the date of this amendment, GIC shall
contribute 99% of all capital required by the Venture, to a maximum
of $1,980,000.
4. Section 3.2 of the Partnership Agreement shall be amended
to provide that the Partners shall have the following Interests in
the Venture:
GIC: 99%
WCB: 1%
5. GIC shall succeed to 96% of WCB's Capital Account as of the
date of this amendment (which portion the parties agree is
$333,238.62).
6. Section 4.1.2 of the Partnership Agreement shall be amended
by adding the following language:
"Such distribution of preferred return to be 75% to
GIC and 25% to WCB until such time as WCB has received its accrued
preferred return up to April 25, 1995 (which portion the parties
agree is $ 34,189.54), and thereafter distributions of preferred
return shall be 99% to GIC and 1% to WCB."
7. Section 4.1.3 of the Partnership Agreement shall be amended
to provide "Thereafter 60% to GIC and 40% to WCB."
8. Section 4.1.4 of the Partnership Agreement shall be
deleted.
9. A new Section 4.2 shall be added to the Partnership
Agreement and provide:
"4.2 Notwithstanding the provisions of Section 4.1, WCB
shall receive, in each fiscal year, distributions of net cash flow
in an amount not less than 40% of the amount of profit allocated
to WCB pursuant to Section 5.1.3 hereof, and thereafter GIC shall
receive the next distributions until such time as total cumulative
distributions of Net Cash Flow are consistent with Section 4.1 of
this agreement without considering this Section 4.2."
10. Section 5.1.3 of the Partnership Agreement shall be
amended to provide "The balance, if any, 60% to GIC and 40% to
WCB."
11. Section 5.1.4 of the Partnership Agreement shall be
deleted.
12. Section 5.2.1 of the Partnership Agreement shall be
amended to provide:
115.2.1 To the extent Profits have been allocated
pursuant to Section 5.1.3 or 5.1.2 hereof for any prior year,
Losses shall be allocated first to offset any Profits allocated
pursuant to Section 5.1.3 prorata among the Partners in proportion
to their shares of the Profits being offset, then likewise with
respect to allocations pursuant to Section 5.1.2.11
13. Section 6.2.3 of the Partnership Agreement shall be
amended to provide:
116.2.3 loan money to the Venture or borrow money from
third Persons for, in the name of and on behalf of the Venture;
provided, however, that GIC may solely make the decision to borrow
funds on behalf of the Partnership and to encumber the Property in
an amount up to $500,000 for the purpose of reducing the Partners
Capital Contributions to the Venture. In such case, WCB shall
cooperate with such actions or efforts."
IN WITNESS WHEREOF, each party has executed this amendment
to the Partnership Agreement on the date set forth below.
PARTNERS :
GIC INVESTMENT CORPORATION
By: /s/ Lawrence Weissberg Dated: April 18, 1995
Lawrence Weissberg, President
WESTCO COMMUNITY BUILDERS, INC.
By: /s/ Britt Evans Dated: April 18, 1995
Britt Evans
AMENDMENT TO PARTNERSHIP AGREEMENT
ADDENDUM NO, I
Section 6.3. 1 of the Partnership Agreement shall be further
amended as follows
The Venture shall extend payment of the management fee to WCB
beyond the 12-month term described in the Partnership Agreement.
The management fee shall be paid by the Venture on a continuous and
uninterrupted basis commencing on January 1, 1994 through a date,
determined by GIC Investment Corporation, as a reasonable
termination point based upon the amount of time that WCB needs to
spend on the project, The management fee shall remain unmodified at
a rate of $5,000.00 per month.
PARTNERS :
GIC INVESTMENT CORPORATION
By: /s/ Lawrence Weissberg Dated: April 18, 1995
Lawrence Weissberg, President
WESTCO COMMUNITY BUILDERS, INC.
By:/s/ Britt Evans Dated: April 18, 1995
Britt Evans
OPERATING AGREEMENT OF
SOUTH TRACY INDUSTRIAL PARK, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
In accordance with the Beverly-Killea Limited Liability
Company Act and subject to the Articles of Organization, which were
filed on July 28, 1999 with the Secretary of State of California,
the members of SOUTH TRACY INDUSTRIAL PARK, LLC, listed on the
signature page, make the following Agreement on August17, 1999
regarding the conduct of the business and affairs of SOUTH TRACY
INDUSTRIAL PARK, LLC, a California limited liability company
("Company"):
ARTICLE 1. DEFINITION OF TERMS
1.01 When used in this Agreement, the following terms have the
meanings set forth here:
(a) "Act" means California's Beverly-Killea Limited
Liability Company Act, as set forth in Corporations Code Title 2.5.
(b) "Agreement" means this operating agreement, as
originally executed and as amended from time to time.
(c) "Articles" means the Articles of Organization for
the Company as originally filed with the Secretary of State and as
amended from time to time.
(d) "Available cash" of the Company means all cash funds
of the Company on hand from time to time (other than cash funds
obtained as contributions to the capital of the Company by the
members and cash funds obtained from loans to the Company), after
(1) payment of all operating expenses of the Company as of such
time, (2) provision for payment of all outstanding and unpaid
current obligations of the Company as of such time, and (3)
provision for a working capital reserve, as defined below.
(e) "Bankruptcy" means, and a member is deemed a
"Bankrupt Member" on, (1) the entry of a decree or order for relief
against the Member by a court of competent jurisdiction in any
involuntary case brought against the Member under any bankruptcy,
insolvency, or similar law ("Debtor Relief Laws") that generally
affect the rights of creditors and relief of debtors; (2) the
appointment of a receiver, liquidator, assignee, custodian,
conservator, trustee or similar agent under Debtor Relief Laws for
the Member or for any substantial portion of the Member's assets;
(3) the issuance of an order for the winding up and/or liquidation
of the Member's affairs; (4) the filing of a petition in any
involuntary bankruptcy case that remains undismissed or suspended
under the federal bankruptcy laws; (5) the commencement by a Member
of voluntary case under any applicable Debtor Relief Law; (6) the
written admission of a Member that the Member is unable to pay the
Member's debts as they become due; (7) the consent by any Member to
the entry of an order for relief in any involuntary case, or to the
appointment of (or the taking of possession by) a receiver,
liquidator, assignee, custodian, conservator, trustee or similar
agent under Debtor Relief Law for the Member or for any substantial
portion of the Member's assets; or (8) the making by a Member of
any general assignment for the benefit of creditors.
(f) "Capital Account" means the individual accounts
established and maintained pursuant to Paragraph 3.04.
(g) "Capital Contribution" means the total value of cash
and agreed fair market value of property and/or services
contributed and/or agreed to be contributed to the Company by each
member, as shown in Exhibit A, as the same may be amended from time
to time.
(h) "Code" means the Internal Revenue Code of 1986, as
amended. All references in this Agreement to sections of the Code
include any corresponding provision or provisions of succeeding
law.
(i) "Company" means SOUTH TRACY INDUSTRIAL PARK, LLC, a
California limited liability company.
(j) "Entity" means any association, corporation, general
partnership, limited partnership, limited liability company, joint
stock association, joint venture, firm, trust, business trust,
cooperative, and foreign association of like structure.
(k) "Interest" in the Company means the entire ownership
interest of a member in the Company at any particular time,
including the right of the member to any and all benefits to which
a Member may be entitled as provided in this Agreement and under
the Act, together with the obligations of the member to comply with
all of the terms and provisions of this Agreement.
(l) "Manager" means an individual appointed by consent
of all Members and having the authority as set forth in this
Agreement.
(m) "Member" means each person who is an original
signatory to the Agreement and has been admitted to the Company as
a Member, or who is an assignee that has been admitted to the
Company as a Member that has not resigned, withdrawn, or been
dissolved.
(n) "Percentage Interests" of a Member means the
percentage of the Member set forth opposite the name of the Member
in Exhibit A attached to this Agreement, as the percentage may be
adjusted from time to time pursuant to the terms of this Agreement.
(o) "Principal office" means the office of the agent of
this Company as shown in its Articles.
(p) "Pro Rata Part" means the proportion that a
percentage interest of a Member bears to the aggregate interest in
the Company of all Members.
(q) "Share" refers to an interest in the Company
representing a contribution to capital. Whenever reference is made
to "percentage interest," a share may be converted into the same by
dividing a Member's number of shares by the total of all shares
outstanding.
(r) "Substitute Member" means any individual or entity
that is admitted into membership on the written consent of all
Members in accordance with Paragraph 3.11.
(s) "Tax Matters Member" means the Member chosen
pursuant to Internal Revenue Code Section 6231(a)(7) to deal with
the Internal Revenue Service on tax matters.
(t) Project means the purchase of lots 2 through 5 and
14 through 18, which is located in the City of Tracy, County of San
Joaquin, State of California, and is preliminarily described in
Exhibit B, with an option to purchase lots 6 through 13, which is
located in the City of Tracy, County of San Joaquin, State of
California, and is preliminarily described in Exhibit C, together
with all buildings and improvements to be constructed thereon (the
Buildings).
(u) Construction Manager means Westco Community
Builders, Inc., a California corporation. Construction Manager
shall perform all construction functions including supervision,
coordination, budgeting, the hiring of subcontractors and
consultants and other related services to achieve the construction
of the Project.
(v) Marketing Manager means Westco Community Builders,
Inc., a California corporation. The Marketing Manager shall be
responsible for making all necessary arrangements for the marketing
of the Project and its completed Buildings, including those
arrangements necessary for the sale or lease of the Buildings.
(w) Management Fee means a fee of ten thousand dollars
($10,000) per month to be paid to Member Westco Community Builders,
Inc. for its performance of the services of Construction Manager
and Marketing Manager.
(x) Financing means all loans, if any, procured by the
Company for the purpose of completing the Project, including any
construction loan.
(y) Approved Costs means all costs, including Financing
and the Management Fee, incurred in carrying out the Project.
Approved Costs include, but are not limited to: hard and soft
costs, developments costs, design and engineering costs, marketing
costs, labor costs, supplier costs, legal, administrative and
accounting costs attributable to the Project, salaries of the
project foreman, permit costs, site trailer costs, materials costs,
and insurance costs.
(z) Equity shall mean the amount of capital, in the form
of cash, supplied to the Company by a Member.
(aa) Preferred Return shall mean that twelve percent
(12%) per annum return on the amount of Equity invested by a
Member.
ARTICLE 2. ORGANIZATION OF COMPANY
2.01 Formation of Company. The Members have formed a limited
liability company under the Act by properly executing and filing
the Articles and executing this Agreement. The rights, duties, and
liabilities of the Members and the Managers are determined pursuant
to the Act, the Articles, and this Agreement.
2.02 Company Name. The name of the Company is SOUTH TRACY
INDUSTRIAL PARK, LLC. The Company will transact business under
that name. However, the Managers may conduct business under
another name if the Managers think it advisable, provided that the
Managers comply with the Act and any other applicable laws, file
fictitious name certificates and the like, and file any necessary
amendments.
2.03 Company Purpose. The purpose of the Company is to engage
in any business activity permitted by the Act.
2.04 Duration of Company and Agreement. The duration of the
Company and this Agreement is until December 31, 2049, as provided
in the Articles, unless the Company is dissolved earlier pursuant
to Article 25.
ARTICLE 3. MEMBERS AND MEMBERSHIP INTERESTS
3.01 Names, Addresses, and Initial Capital Contributions of
Members. Members, their respective addresses, their initial
Capital Contributions to the Company, and their respective
percentage interests in the Company are set forth on Exhibit A,
attached to this Agreement and made a part of it. Each Member
agrees to make the initial contribution set out in Exhibit A within
thirty (30) days of the execution of this Agreement.
(a) In accordance with the foregoing Section 3.01, and
in order to satisfy its required Capital Contribution, the Members,
and each of them, hereby consent and agree that Member Dover
Investments Corp. shall satisfy its capital contribution
requirements by supplying the Equity for the purchase of lots
comprising the Project, the construction of the Buildings thereon,
and the subsequent sale thereof.
(b) In accordance with the foregoing Section 3.01, and
in order to fully satisfy its required Capital Contribution, the
Members, and each of them, hereby consent and agree that Member
Westco Community Builders, Inc. shall satisfy its capital
contribution requirements by performing the duties of Construction
Manager and Marketing Manager for the Project.
3.02 Future Contributions. Other than those Capital
Contributions necessary to satisfy each Member's required capital
contributions specified in Section 3.01, no Member shall be
required to make any additional contributions to the to the capital
of the Company. Additional contributions to the capital of the
Company shall be made only with the unanimous consent of the
Members. Except as provided in this Agreement, no Member may
withdraw its Capital Contributions.
3.03 Member Loans or Services. Loans or services by any
Member to the Company may not be considered to be contribution to
the capital of the Company.
3.04 Capital and Capital Accounts.
(a) The initial Capital Contribution of each Member is
as set forth in Exhibit A. No interest may be paid on any other
Capital Contribution.
(b) The Company will establish and maintain individual
Capital Accounts on behalf of each Member, including any additional
or Substituted Member who shall subsequently receive any interest
in the Company. The Capital Account of each Member consists of (1)
the amount of cash the Member has contributed to the Company, (2)
less any liabilities assumed by the Company or to which the
property is subject, plus (3) the amount of profits or income
(including tax-exempt income) allocated to the Member, less (4) the
amount of losses and deductions allocated to the Member, less (5)
the amount of all cash distributed to the Member, less (6) the fair
market value of any property distributed to the Member, net of any
liability assumed by the Member or to which the property is
subject, less (7) the Member's share of any other expenditures that
are not deductible by the Company for federal income tax purposes
or that are not allowable as additions to the basis of Company
property, and (8) subject to any other adjustments that may be
required under the Code. The Capital Account of a Member is not
affected by any adjustments to basis made pursuant to Section 743
of the Internal Revenue Code, but must be adjusted with respect to
adjustments to basis made pursuant to Section 734 of the Internal
Revenue Code.
(c) No Member has the right to withdraw his or her
Capital Contribution or to demand and receive property of the
Company or any distribution in return for his or her Capital
Contribution, except as may be specifically provided in this
Agreement or required by law. No Member may receive out of Company
property any part of his, her, or its Capital Contribution until
(1) all liabilities of the Company, except liabilities to the
Members on account of their loans, have been paid or sufficient
Company property remains to pay them, and (2) all Members consent,
unless the return of the contributions to capital is rightfully
demanded as provided in the Act.
(d) Subject to the provisions of subparagraph (c) of
this paragraph, a Member may rightfully demand the return of his or
her or its Capital Contribution (1) on the dissolution of the
Company, or (2) as may otherwise be provided in the Act. A Member
may demand and receive only cash in return for the Member's Capital
Contribution.
3.05 Admission of Additional Capital. Additional capital may
be contributed to the Company, but only on the written consent of
all Members.
3.06 Admission of Additional Members. The Members may admit
to the Company additional members to participate in the profits,
losses, available cash flow, and ownership of the assets of the
Company on such terms as are determined by all of the Members.
Admission of any additional Member requires the written consent of
all Members then having any interest in the Company. Any
additional Members are allocated gain, loss, income, or expense by
the method provided in this Agreement.
3.07 Limitation on Liability. No Member is liable under a
judgment, decree, or order of the court, or in any other manner,
for a debt, obligation, or liability of the Company, except as
provided by law. No Member is required to loan any funds to the
Company.
3.08 No Individual Authority. Unless expressly provided in
this Agreement, no Member, acting alone, has any authority to act
for, or to undertake or assume, any obligation, debt, or
responsibility on behalf of, any other Member of the Company.
3.09 No Member Responsible for Other Member's Commitment. In
the event that a Member (or a Member's shareholders, partners,
members, owners, or affiliates) has incurred any indebtedness or
obligation before the date of this Agreement that relates to or
otherwise affects the Company, neither the Company nor any other
Member has any liability or responsibility with respect to the
indebtedness or obligation unless the indebtedness or obligation is
assumed by the Company pursuant to a written instrument signed by
all Members. Furthermore, neither the Company nor any Member is
responsible or liable for any indebtedness or obligation that is
subsequently incurred by any other Member (or a Member's
shareholder, partners, members, owners, or affiliates). In the
event that a Member (or a Member's shareholders, partners, members,
owners, or affiliates; collectively called the "liable Member"),
whether before or after the date of this Agreement, incurs (or has
incurred) any debt or obligation that neither the Company nor any
of the other Members is to have any responsibility or liability
for, the liable Member must indemnify and hold harmless the Company
and the other Members from any liability or obligation they may
incur in respect of the debt or obligation.
3.10 Transfer and Assignment of Membership Interests. No
Member may assign, convey, sell, encumber, or in any way alienate
all or any part of his or her interest in the Company as a Member
without prior written consent of all other Members, which consent
may be given or withheld, conditioned or delayed (as allowed by
this Agreement or the Act), as the remaining Members may determine
in their sole discretion. Transfers in violation of this section
are effective only to the extent set forth in Subparagraph 3.13(b),
below.
3.11 Further Restrictions on Membership Transfers. No Member
may assign, convey, sell, encumber, or in any way alienate all or
any part of his, her or its interest in the Company (1) without
registration under applicable federal and state securities laws, or
unless he, she or it delivers an opinion of counsel satisfactory to
the Company that registration under those laws is not required; or
(2) if the interest to be sold or exchanged, when added to the
total of all other sold or exchanged in the preceding twelve (12)
consecutive months prior to that time, would result in the
termination of the Company under Section 708 of the Internal
Revenue Code.
3.12 Substitute Members. A transferee may become a Substitute
Member if (1) the requirements of Subsections 3.10 and 3.11, above,
are met; (2) the person executes an instrument satisfactory to the
remaining Members accepting and adopting the terms and provisions
of this Agreement; and (3) the person pays all reasonable expenses
in connection with his, her or its admission as a remaining Member.
3.13 Effect of Transfer.
(a) Any permitted transfer of all or any portion of a
Member's interest in the Company takes effect on the first day of
the month following receipt by the Members of written notice of
transfer. Any transferee of an interest in the company takes
subject to the restrictions on transfer imposed by this Agreement.
(b) On a transfer of a Member's interest in the Company
in violation of this Agreement, the transferee has no right to
participate in the management of the business and affairs of the
Company or to become a Member, but the transferee is entitled only
to receive the share of profits or other compensation by way of
income and the return of contributions to which the transferor of
the interest in the Company would otherwise be entitled.
3.14 Right of First Negotiation. If any Member desires to
transfer all or any part of his, her or its Membership Interest,
such Member shall notify the Company and the other Members in
writing of such desire and, for a period of thirty (30) days
thereafter, the Members and the Company shall negotiate with
respect to the purchase of such Member's Membership Interest.
During such period, the Member desiring to transfer such Membership
Interest may not solicit a transferee for such Membership Interest.
3.15 Right of First Refusal. If the period described in
Section 3.14 expires without an agreement being reached as to the
purchase of the Membership interest referred to therein, the Member
desiring to transfer his, her or its Membership Interest may
solicit transferees. In such event, each time a Member proposed to
transfer all or any part of his, her or its Membership interest,
such Member shall first offer such Membership Interest to the
Company and the non-transferring Members in accordance with the
following provisions:
(a) Such Member shall deliver a written notice ("Option
Notice") to the Company and the other Members stating (i) such
Member's bona fide intention to transfer such Membership Interest,
(ii) the Membership Interest to be transferred, (iii) the purchase
price and terms of payment for which the Member proposes to
transfer such Membership Interest and (iv) the name and address of
the proposed transferee.
(b) Within thirty (30) days after receipt of the Option
Notice, the Company shall have the right, but not the obligation,
to elect to purchase all or any part of the Membership Interest
upon the price and terms of payment designated in the Option
Notice. If the Option Notice provides for the payment of non-cash
consideration, the Company may elect to pay the consideration in
cash equal to the good faith estimate of the present fair market
value of the non-cash consideration offered as determined by the
Managers. If the Company exercises such right within such thirty
(30) day period, the Managers shall give written notice of that
fact to the transferring and non-transferring Members.
(c) If the Company fails to elect to purchase the entire
Membership Interest proposed to be transferred within the thirty
(30) day period described in Paragraph 3.14(b), the non-
transferring Members shall have the right, but not the obligation,
to elect to purchase any remaining share of such Membership
Interest upon the price and terms of payment designated in the
Option Notice. If the Option Notice provides for the payment of
non-cash consideration, such purchasing Members each may elect to
pay the consideration in cash equal to the good faith estimate of
the present fair market value of the non-cash consideration offered
as determined by the Managers. Within sixty (60) days after
receipt of the Option Notice, each non-transferring Member shall
notify the Managers in writing of his, her or its desire to
purchase a portion of the Membership Interest proposed to be so
transferred. The failure of any Member to submit a notice within
the applicable period shall constitute an election on the part of
that Member not to purchase any of the Membership Interest which
may be so transferred. Each Member so electing to purchase shall
be entitled to purchase a portion of such Membership Interest in
the same proportion that the Percentage Interest of such Member
bears to the aggregate of the Percentage Interests of all of the
Members electing to so purchase the Membership Interest being
transferred. In the event any Member elects to purchase none or
less than all of his, her or its pro rata share of such Membership
Interest, then the other Members can elect to purchase more than
their pro rata share.
(d) If the Company and the other Members elect to
purchase or obtain any or all of the Membership Interest designated
in the Option Notice, then the closing of such purchase shall occur
within the ninety (90) days after receipt of such notice and the
transferring Member, the Company and/or the other Members shall
execute such documents and instruments and make such deliveries as
may be reasonably required to consummate such purchase.
(e) If the Company and the other Members elect not to
purchase or obtain, or default in their obligation to purchase or
obtain, all of the Membership Interest designated in the Option
Notice, then the transferring Member may transfer the portion of
the Membership Interest described in the Option Notice not so
purchased, to the proposed transferee, providing such transfer (i)
is completed within thirty (30) days after the expiration of the
Company's and the other Members' right to purchase such Membership
Interest, (ii) complies with Paragraphs 3.10, 3.11, 3.12 and 3.13
relating to unanimous consent of Managers who are Members,
securities and tax requirements.
ARTICLE 4. POWER TO AMEND AGREEMENT
4.01 The Power to adopt, alter, amend, or repeal this
Agreement is vested entirely in the Members of the Company.
ARTICLE 5. MANAGEMENT RIGHTS IN MANAGERS
5.01 The right to exercise the powers of the Company and to
manage the business and affairs of the Company is vested entirely
in the Managers.
ARTICLE 6. ELECTION OF MANAGERS
6.01 (a) The initial Managers specified in the Articles of
Organization and/or Exhibit "A" attached hereto will serve as
Managers for the period specified in the Articles of Organization
or until resignation or removal.
(b) Managers may be elected at a special meeting called
for the purpose of electing Managers. Managers may also be
designated by the unanimous written consent of the Members.
(c) The term of service for the Managers is perpetual
unless removed by the affirmative vote of a majority of the
Members.
ARTICLE 7. REMOVAL OF MANAGERS
7.01 (a) The Members may remove a Manager before the
expiration of the Manager's term specified in this Agreement by the
affirmative vote of a majority of all of the Members.
(b) At any meeting of Members called expressly for the
purpose, a Manager may be removed for any reason, with or without
cause, on a resolution adopted by the Members.
ARTICLE 8. QUORUM OF MANAGERS
8.01 At all meetings of the Managers, two (2) of the Managers
must be present to constitute a quorum for the transaction of
business.
ARTICLE 9. ACTION BY MANAGERS
9.01 Authority. The Managers have full authority to act on
behalf of the Company and its Members in its best interest. An act
of the Managers is effective if more than a Majority in Interest of
the Managers, representing their Membership Interests, vote
approval of the act at a meeting at which a quorum of Managers is
present.
9.02 Appointment of Officers. The Managers may appoint
officers at any time. The officers of the Company, if deemed
necessary by the Managers, may include a chairperson, president,
vice president, secretary, and chief financial officer. The
officers shall serve at the pleasure of the Managers, subject to
all rights, if any, of an officer under any contract of employment.
Any individual may hold any number of offices. No officer need be
a resident of the State of California or citizen of the United
States. If a Manager is not an individual, such Manager's officers
may serve as officers of the Company if elected by the Managers.
The officers shall exercise such powers and perform such duties as
specified in this Agreement and as shall be determined from time to
time by the Managers. Any such officers duly appointed by the
Managers shall have the duties, power and authority assigned to
them by the Managers.
ARTICLE 10. REGULAR MEETINGS OF MANAGERS
10.01 Regular meetings of the Managers are held at 15225
Wicks Boulevard, San Leandro, California, the principal office of
the Company. The Managers are authorized to designate, from time
to time, a place or places other than that specified above as the
place for regular meetings of the Managers.
ARTICLE 11. SPECIAL MEETINGS OF MANAGERS
11.01 Special meetings called by action of the Managers
are held at 15225 Wicks Boulevard, San Leandro, California, the
principal office of the Company or a place designated by the
Managers. Written notice of the time and place of special meetings
must be delivered personally to the Managers or sent to each
Manager by United States mail or facsimile machine at the Manager's
address as shown on the records of the Company.
ARTICLE 12. NOTICE OF PURPOSE OF MANAGER MEETINGS
12.01 Notice of special meetings of the Managers must
specify the purpose of the meeting or the business to be transacted
at the meeting, in addition to the date, time and place of the
meeting.
ARTICLE 13. COMPENSATION OF MANAGERS
13.01 Members have authority to establish reasonable
compensation of all Managers for services to the Company. The
compensation may include pensions, disability benefits, and death
benefits.
ARTICLE 14. EXECUTION OF DOCUMENTS
14.01 The Managers and Members have the authority to
execute documents and instruments for the acquisition, mortgage, or
disposal of property on behalf of the Company, to open accounts,
disburse funds and otherwise bind the Company contractually. The
countersignatures of two or more Managers will be required to
authorize disbursements on behalf of the Company or bind the
Company contractually.
(a) Notwithstanding the foregoing, Member Westco
Community Builders, Inc. shall have the authority acting alone to
enter into contracts and authorize disbursements necessary to carry
out its duties as Construction Manager and Marketing Manager for
the Project; provided, however, that such authority shall not
include the power to convey title to the Project or any homes
situated thereon.
ARTICLE 15. MEETINGS OF MEMBERS
15.01 All meetings of Members must take place at 2406
Merced Street, San Leandro, California. The Members are authorized
to designate, from time to time, a place or places other than that
specified above as the place for meetings of the Members. Any
Member may call a special meeting by giving at least ten (10) days'
written notice to all other Members. The notice must specify the
date, time, and place of the special meeting and the purpose for
calling the meeting. Notice of the meeting must be delivered
personally to the Members or sent to each Member by United States
mail or facsimile machine at the Member's address as shown on the
records of the Company. For mailed notice, the notice must be
deposited in the United States mail at least twelve (12) days
before the time the meeting is held.
ARTICLE 16. QUORUM
16.01 At all meetings of the Members, two (2) Members must
be present to constitute a quorum for transaction of business.
ARTICLE 17. ACTIONS BY MEMBERS AND VOTING RIGHTS
17.01 Votes Required to Act. An act of the Members of
record is effective if the Majority in Interest of Members' votes
adopt the act at a meeting at which a quorum of Members is present.
The voting rights of the Members are to be distributed in
proportion to each Member's Percentage Interest as set forth in
Exhibit "A" hereto.
17.02 Actions of Tax Matters Member. The Tax Matters
Member of the Company, chosen pursuant to Internal Revenue Code
Section 6231(a)(7), is Westco Community Builders, Inc. who has the
same authority as granted by the Internal Revenue Code to a tax
matters partner.
ARTICLE 18. ACTION BY CONSENT WITHOUT MEETING.
18.01 Any action permitted to be taken by the Members may
be taken without a meeting if all Members individually or
collectively consent by signing a written approval of the action.
Any action by written consent shall have the same force and effect
as a unanimous vote of the Members.
ARTICLE 19. RECORD DATE
19.01. Only persons whose names are listed as Members in
the official records of the Company fifteen (15) days before any
meeting of the Members are entitled to notice of or to vote at that
meeting.
ARTICLE 20. VOTE BY PROXY
20.01 Members may vote either in person or by proxy.
Proxies must be executed in writing by the Members. A telegram,
cablegram, or similar transmission by the Member or a photographic,
photostatic, facsimile, or similar reproduction of a writing
executed by a Member is deemed an execution in writing for purposes
of this Agreement.
ARTICLE 21. ALLOCATIONS: DISTRIBUTIONS AND INTERESTS
21.01 Allocation of Net Income, Net Loss, or Capital
Gains. Except as may be expressly provided otherwise in this
Article 21, and subject to the provisions of Section 704(c) of the
Internal Revenue Code, the net income, net loss, or capital gains
of the Company for each fiscal year of the Company is allocated to
the Members as follows:
(a) Net Profits. Net profits shall be allocated among
the Members as follows:
(i) First to each of the Members until the
cumulative net profits allocated pursuant to this section is equal
to cumulative net loss allocated to the Member pursuant to Section
21.01(b) for any period;
(ii) Next, pari passu to the Members in the amount
of any accrued but preferred return allocable to their Capital
Contributions;
(iii) Thereafter to each of the Members pro rata
in accordance with their percentage interest.
(b) Net Loss. Net losses shall be allocated among the
Members as follows:
(i) First to the extend any net profits have been
allocated pursuant to Section 21.01(a) hereof in the following
order: first to offset any net profits allocated pursuant to
Section 21.01(a)(iii) hereof; then to offset any net profits
allocated pursuant to Section 21.01(a)(ii); and then to offset any
net profits allocated pursuant to Section 21.01(a)(i) (in each case
pro rata in proportion to the shares of net profits being offset);
(ii) Second, in proportion to the positive balances,
if any, in the Members' respective Capital Accounts, until such
balances are reduced to zero; and
(iii) Third; to the Members, pro rata, in
accordance with their Percentage Interests.
(c) Residual Allocations. Except as otherwise provided
in this Agreement, all items of Company income, gain, loss,
deduction, and any other allocations not specifically provided for
herein shall be allocated to the Members, pro rata in accordance
with their Percentage Interest.
21.02 Distributions. Periodically, but not less
frequently than at the end of each calendar quarter, and after the
payment from gross income of all Approved Costs, the net income
from net sales proceeds shall be distributed to the Members and
will be allocated as follows:
(a) First, to Dover Investments Corp. and Westco
Community Builders, Inc., pari passu, an amount equal to their
respective return of capital contributed.
(b) Second, to Dover Investments Corp. its Preferred
Return.
(c) Third, to Dover Investments, Corp. 50% of the
remaining funds available and to Westco Community Builders, Inc.
50% of the remaining funds available.
It is anticipated that the net income and all proceeds will be
distributed in accordance with the above no less frequently than
quarterly. However, the Members agree that should either Member
have tax liability or tax liabilities requiring funds, then the
Members shall authorize distributions, including any necessary
advance distributions, to that Member. Any distributions to a
Member receiving advance distributions shall be first utilized to
satisfy such advance distributions.
21.03 Allocation of Income and Loss and Distributions in
Respect of Interests Transferred.
(a) If any interest in the company is transferred, or is
increased or decreased by reason of the admission of a new Member
or otherwise, during any fiscal year of the Company, each item of
income, gain, loss, deduction, or credit of the Company for the
fiscal year must be assigned pro rata to each day in the particular
period of the fiscal year to which the item is attributable (that
is, the day on or during which it is accrued or otherwise incurred)
and the amount of each item so assigned to any day shall be
allocated to the Member based on his, her or its respective
interest in the Company at the close of the day. For the purpose
of accounting convenience and simplicity, the Company may treat a
transfer of, or an increase or decrease in, an interest in the
Company that occurs at any time during a semimonthly period
(commencing with the semimonthly period including the date of this
Agreement) as having been consummated on the first day of the
semimonthly period, regardless of when during the semimonthly
period the transfer, increase, or decrease actually occurs (that
is, sales and dispositions made during the first fifteen (15) days
of any month are deemed to have been made on the 16th day of the
month).
(b) Distributions of the Company assets in respect of
any interest in the Company shall be made only to the Members who,
according to the books and records of the Company, are holders of
record of the interests in respect of which the distributions are
made on the actual date of distribution. Neither the Company nor
any Member incurs any liability for making distributions in
accordance with the provisions of the preceding sentence, whether
or not the Company or Member has knowledge or notice of any
transfer or purported transfer of ownership of interest the Company
that has not been approved by unanimous vote of the Members.
Notwithstanding any provision above to the contrary, gain or loss
of the Company realized in connection with a sale or other
disposition of any of the assets of the company must be allocated
solely to the parties owning interests in the Company as of the
date the sale or other disposition occurs.
ARTICLE 22. REPRESENTATIONS
Each Member hereby represents and warrants to, and agrees
with, the Members and Company as follows:
22.01. He, she or it has a preexisting personal or business
relationship with the Company or one or more of its officers or
controlling persons, or by reason of his, her or its business or
financial experience, or by reason of the business or financial
experience of his, her or its financial advisor who is unaffiliated
with and who is not compensated, directly or indirectly, by the
Company or any affiliate or selling agent of the Company; he, she
or it is capable of evaluating the risks and merits of an
investment in the Company and of protecting his, her or its own
interests in connection with this investment.
22.02. He, she or it has not seen, received, been presented
with, or been solicited by any leaflet, public promotional meeting,
article or any other form of advertising or general solicitation
with respect to the sale of the Membership Interest.
22.03. He, she or it is acquiring the Membership Interest
for investment purposes for its own account and not with a view to
or for sale in connection with any distribution of all or any part
of the Membership Interest. No other person will have any direct
or indirect beneficial interest in or right to the Membership
Interest.
22.04. He, she or it is financially able to bear the
economic risk of an investment in the Membership, including the
total loss thereof.
22.05. He, she or it acknowledges that the Membership
Interest has not been registered under the Securities Act of 1933,
as amended (the Securities Act), or qualified under any blue sky
laws in reliance, in part, on his, her or its representations,
warranties and agreements herein.
22.06. He, she or it represents, warrants and agrees that
the Company is under no obligations to register or qualify the
Membership Interest under the Securities Act or under any state
securities law, or to assist it in complying with any exemption
from registration and qualification.
22.07. Without limiting the representations set forth
above, he, she or it will not make any disposition of all or any
part of the Membership Interest which will result in the violation
by it or by the Company of the Securities Act or any other
applicable securities laws.
22.08. He, she or it understands that the certificates (if
any) evidencing the Membership Interest may bear any legend
required by applicable securities laws.
22.09. He, she or it acknowledges that the Membership
Interest is a speculative investment which involves a substantial
degree of risk of loss by it of his, her or its entire investment
in the Company, that he, she or it understands and takes full
cognizance of the risk factors related to the purchase of the
Membership Interest, and that the Company is newly organized and
has no financial or operating history.
22.10. He, she or it acknowledges that there are
substantial restrictions on the transferability of the Membership
Interest pursuant to this Agreement, that there is no public market
for the Membership Interest and none is expected to develop, and
that, accordingly, it may not be possible for it to liquidate his,
her or its investment in the Company.
22.11. Neither the Members, any agent or employee of the
Company or of the Members, nor any other person has at any time
guaranteed or warranted to him, her or it that he, she or it may
freely transfer the Membership Interest, that a percentage of
profit and/or amount or type of consideration will be realized as
a result of an investment in the Membership Interest, that past
performance or experience on the part of any Member or any other
person in any way indicates the predictable results of the
ownership of the Membership Interest or of the overall Company
business, that any cash distributions from Company operations or
otherwise will be made to the Members by any specific date or will
be made at all or that any specific tax benefits will accrue as a
result of an investment in the Company.
22.12. He, she or it acknowledges that the tax consequences
to him, her or it of investing in the Company will depend on his,
her or its particular circumstances, and neither the Company, the
Members, nor any other person will be responsible or liable for the
tax consequences to him, her or it of an investment in the Company.
He, she or it will look solely to, and rely upon, his, her or its
own advisers with respect to the tax consequences of this
investment.
ARTICLE 23. INDEMNIFICATION OF MEMBERS
AND MEMBERS' FIDUCIARY DUTIES
23.01 The Company will indemnify Members for any act taken
in the capacity of a Member, other than acts that involve a breach
of fiduciary duty. The standard of the fiduciary duty a Member
owes to the Company and to its Members are those of a partner to a
partnership and to the partners of the partnership. A Member's
standard of conduct owed to the Company and other Members is to act
in the highest good faith to the Members, and a Member may not seek
to obtain an advantage in the Company affairs by the slightest
misconduct, misrepresentation, concealment, threat, or adverse
pressure of any kind.
ARTICLE 24. INDEMNIFICATION OF MANAGERS
AND MANAGERS' FIDUCIARY DUTIES
24.01. The Company shall indemnify Managers for any act
taken in the capacity of a Manager, other than acts that involve a
breach of fiduciary duty. The standard of the fiduciary duties a
Manager owes to the Company and to its Members are those of a
partner to a partnership and to the partners of the partnership.
A Manager's standard of conduct owed to the Company and other
Members is to act in the highest good faith to the Members, and a
Manager may not seek to obtain an advantage in the Company affairs
by the slightest misconduct, misrepresentation, concealment,
threat, or adverse pressure of any kind.
ARTICLE 25. COMPANY RECORDS AND REPORTS
25.01. Records and Accounting; Fiscal Year. The books and
records of the Company must be kept, and the financial position and
the results of its operations recorded, in accordance with the
accounting methods elected to be followed by the company for
federal and state income tax purposes. The books and records of
the Company must reflect all Company transactions and must be
appropriate and adequate for the Company's business. The fiscal
year of the Company for financial reporting and for federal income
tax purposes is the calendar year.
25.02. Access to Accounting Records. All books and records
of the Company must be maintained at any office of the Company or
at the Company's principal place of business, and each Member, and
his, her or its duly authorized representative, must have access to
them at the office of the Company and the right to inspect and copy
them at reasonable times.
25.03. Annual and Tax Information. The Members must use
their best efforts to cause the Company to deliver to each Member,
within sixty (60) days after the end of each fiscal year, all
information necessary for the preparation of each Member's federal
income tax return. The Members must also use their best efforts to
cause the Company to prepare, within sixty (60) days after the end
of each fiscal year, a financial report of the Company for the
fiscal year, which must contain a balance sheet as of the last day
of the year then ended, an income statement for the year then
ended, a statement of sources and applications of funds, and a
statement of reconciliation of the capital accounts of the Members.
ARTICLE 26. DISSOLUTION OF COMPANY
26.01. The Company shall be dissolved, its assets shall be
disposed of, and its affairs shall be wound up on the first to
occur of the following events:
(a) A determination by more than 50% of the Members that the
Company should be dissolved.
(b) The expiration of the Company term as stated in the
Articles.
(c) On the death, insanity, bankruptcy, retirement,
resignation, or expulsion of any Member unless at least fifty
percent (50%) of the remaining Members consent to continue the
Company within ninety (90) days of the dissolution event.
(d) At any earlier time as may be provided by applicable law.
ARTICLE 27. CONSEQUENCES OF DISSOLUTION EVENTS ON TERMINATION
OF MEMBERS' INTEREST
27.01 Dissolution Event. Upon the occurrence of the
events specified in Paragraph 25.01(c) and the remaining Members'
consent to continue the Company as specified, the Company and/or
remaining Members (Remaining Members) shall have the right to
purchase, and if such right is exercised, the Member whose actions
or conduct resulted in the dissolution event (Former Member) shall
sell, the Former Member's Membership Interest (Former Member's
Interest) as provided in this Article 26.
27.02 Withdrawal. Upon the withdrawal by a Member in the
absence of the consent of all Remaining Members, such Member shall
be treated as a Former Member, and, unless the Company dissolves as
a result of such withdrawal, the Company and/or the Remaining
Members shall have the right to purchase, and if such right is
exercised, the Former Member shall sell, the Former Member's
Interest as provided in this Article 26.
27.03 Purchase Price. The purchase price for the Former
Member's Interest shall be the fair market value of the Former
Member's Interest as determined by an independent appraiser jointly
selected by the Former Member and by the Remaining Members holding
a majority of the remaining Membership Interests. The Company and
the Former Member shall each pay one-half of the cost of the
appraisal. Notwithstanding the foregoing, if the Dissolution Event
results from a breach of this Agreement by the Former Member, the
purchase price shall be reduced by an amount equal to the damages
suffered by the Company or the Remaining Members as a result of
such breach.
27.04 Notice of Intent to Purchase. Within thirty (30)
days after the fair market value of the Former Member's Interest
has been determined in accordance with Section 26.03, each
Remaining Member shall notify the Members in writing of his, her or
its desire to purchase a portion of the Former Member's Interest.
The failure of any Remaining Member to submit a notice within the
applicable period shall constitute an election on the part of the
Member not to purchase any of the Former Member's Interest. Each
Remaining Member so electing to purchase shall be entitled to
purchase a portion of the Former Member's Interest in the same
proportion that the Membership Interest of the Remaining Members
bears to the aggregate of the Membership Interests of all of the
Remaining Members electing to purchase the Former Member's
Interest.
27.05 Election to Purchase Less Than All of the Former
Member's Interest. If any Remaining Member elects to purchase none
or less than all or his, her or its pro rata share of the Former
Member's Interest, then the Remaining Members can elect to purchase
more than their pro rata share. If the Remaining Members fail to
purchase the entire interest of the Former Member, the Company may
purchase any remaining share of the Former Member's Interest.
27.06 Payment of Purchase Price. The Company or the
Remaining Members, as the case may be, shall pay at the closing
one-fifth (1/5) of the purchase price and the balance of the
purchase price shall be paid in four equal annual principal
installments, plus accrued interest, and be payable each year on
the anniversary date of the closing. The unpaid principal balance
shall accrue interest at the current applicable federal rate as
provided in the Code for the month in which the initial payment is
made, but the Company and the Remaining Members shall have the
right to prepay in full or in part at any time without penalty.
The obligation of each purchasing Remaining Member or the Company,
as applicable, to pay its portion of the balance due shall be
evidenced by a separate promissory note executed by the respective
purchasing Remaining Member or the Company, as applicable. Each
such promissory note shall be in an original principal amount equal
to the portion owed by the respective purchasing Remaining Member
or the Company, as applicable. The promissory note executed by
each purchasing Remaining Member shall be secured by a pledge of
that portion of the Former Member's Interest purchased by such
Remaining Member.
27.07 Closing of Former Member's Interest. The closing
for the sale of a Former Member's Interest pursuant to this Article
26 shall be held at 10:00 a.m. at the principal office of Company
no later than sixty (60) days after the determination of the
purchase price, except that if the closing date falls on a
Saturday, Sunday or California legal holiday, then the closing
shall be held on the next succeeding business day. At the closing,
the Former Member shall deliver to the Company or the Remaining
Members an instrument of transfer (containing warranties of title
and no encumbrances) conveying the Former Member's Interest. The
Former Member, the Company and the Remaining Members shall do all
things and execute and deliver all papers as may be reasonably
necessary fully to consummate such sale and purchase in accordance
with the terms and provisions of this Agreement.
ARTICLE 28. MISCELLANEOUS PROVISIONS
28.01. Complete Agreement. This Agreement and the Articles
of this Company constitute the complete and exclusive statement of
agreement among the Members with respect to the subject matter
described. This Agreement and the Articles replace and supersede
all prior agreements by and among any of the Members. This
Agreement and the Articles supersede all prior written and oral
statements; no representation, statement, or condition or warranty
not contained in this Agreement or the Articles is binding on the
Members or has any force or effect.
28.02. Governing Law. This Agreement and the rights of the
parties under this Agreement will be governed by, interpreted, and
enforced in accordance with the laws of the State of California.
28.03. Binding Effect. Subject to the provisions of this
Agreement relating to transferability, this Agreement is binding on
and inures to the benefit of the Members, and their respective
distributees, successors, and assigns.
28.04. Severability. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under the present or
future laws effective during the term of this Agreement, the
provision is fully severable; this Agreement is construed and
enforced as if the illegal, invalid, or unenforceable provision had
never comprised a part of this Agreement; and the remaining
provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid, or unenforceable
provision; and there will be added automatically as a part of this
Agreement a provision as similar in terms to the illegal, invalid,
or unenforceable provision as may be possible and be legal, valid,
and enforceable.
28.05. Multiple Counterparts. This Agreement may be
executed in several counterparts, each of which is deemed an
original but all of which constitute one and the same instrument.
However, in making proof only one copy signed by the party to be
charged is required.
28.06. Additional Documents and Acts. Each Member agrees
to execute and deliver additional documents and instruments and to
perform all additional acts necessary or appropriate to effectuate,
carry out, and perform all of the terms, provisions, and conditions
of this Agreement and the transactions contemplated by it.
28.07. No Third Party Beneficiary. This Agreement is made
solely and specifically among and for the benefit of the parties to
it, and their respective successors and assigns, subject to the
express provisions of the Agreement relating to successors and
assigns, and no other person has or will have any rights, interest,
or claims under this Agreement as a third-party beneficiary or
otherwise.
28.08. Tax Consequences. Members acknowledge that the tax
consequence of each Member's investment in the Company is dependent
on each Member's particular financial circumstances. Each Member
will rely solely on the Member's financial advisors and not the
Company. The Company makes no warranties as to the tax benefits
that the Members receive or will receive as a result of the
Member's investment in the Company.
28.09. Notices. Any notice to be given or to be served on
the Company or any party to this Agreement in connection with this
Agreement must be in writing and is deemed to have been given and
received when delivered to the address specified by the party to
receive the notice. Notices must be given to each Member at the
address specified in Exhibit A. Any Member or the Company may, at
any time, designate any other address in substitution of the
foregoing address to which notice will be given by giving written
notice to the other Members and the Company thirty (30) days before
the date of delivery of the notice.
28.10. Amendments. All Amendments to this Agreement must
be in writing and signed by all of the Members.
28.11. Title to Company Property. Legal title to all
property of the Company must be held and conveyed in the name of
the Company.
28.12. Reliance on Authority of Person Signing Agreement.
In the event that a Member is not a natural person, neither the
Company nor any Member will (1) be required to determine the
authority of the individual signing this Agreement to make any
commitment or undertaking on behalf of the entity or to determine
any fact or circumstance bearing on the existence of the authority
of the individual, or (2) be required to see to the application or
distribution of proceeds paid or credited to individuals signing
this Agreement on behalf of the entity.
28.13 Banking. All funds of the Company shall be
deposited in one or more accounts with one or more recognized
financial institutions in the name of the Company, at such
locations as shall be determined by the Managers. The Managers
shall determine, by unanimous resolution, those persons authorized
to withdraw funds from such accounts and the amount such persons
are authorized to withdraw.
IN WITNESS THEREOF, the undersigned have executed this
Agreement, to be effective as of the date that the Articles of
Organization of the Company are accepted for filing by the
Secretary of State.
MEMBERS:
WESTCO COMMUNITY BUILDERS, INC.
a California corporation
By: /s/ Britt Evans
Name: Britt Evans
Its: President
DOVER INVESTMENTS CORP.,
a Delaware corporation
By: /s/ Lawrence Weissberg
Name: Lawrence Weissberg
Its: Chief Executive Officer
<PAGE>
Exhibit A
CAPITAL CONTRIBUTION OF MEMBERS AND ADDRESSES OF MEMBERS
AND MANAGER AS OF
SOUTH TRACY INDUSTRIAL PARK, LLC
Member's Name: Westco Community Builders, Inc.
a California Corporation
Member's Address: 2406 Merced Street,
San Leandro, CA 94577
Member's Capital
Contribution: $10.00 (See Section 3.01(b) of the
Operating Agreement)
Member's Percentage
Interest: 50%
Member's Name: Dover Investments Corporation
a Delaware Corporation
Member's Address: 100 Spear Street, Suite 520
San Francisco, CA 94105
Member's Capital
Contribution: $10.00 (See Section 3.01(a) of the
Operating Agreement)
Member's Percentage
Interest: 50%
Managers Name: Managers Address:
Westco Community Builders, Inc. 2406 Merced Street
San Leandro, CA 94577
Dover Investments Corporation 100 Spear Street, Suite 520
San Francisco, CA 94105
ARTICLES OF ORGANIZATION
OF
SPM, LLC
Under Section 203 of the Limited Liability Company Law of
the State of New York
THE UNDERSIGNED, being a natural person of at least eighteen
(18) years of age and acting as the Organizer of the limited
liability company (the "Company") hereby being formed under Section
203 of the Limited Liability Company Law of the State of New York
(the "LLCL"), certifies that:
FIRST: The name of the Company is
SPM, LLC
SECOND: The county within the State of New York in which the
principal office of the Company is to be located is SUFFOLK
THIRD: In addition to the events of dissolution set forth
in 701 of the LLCL, the latest date on which the Company may
dissolve is 12/31/2050
FOURTH: The Secretary of State is designated as the agent of
the Company upon whom process against the Company may be served.
The post office address within or without the State of New York to
which the Secretary of State shall mad a copy of any process
against the Company served upon such Secretary of State is C/O SAM
WEISSMAN 575 LEXINGTON AVE., STE. 410, NY, NY 10022
FIFTH:The Company is to be managed by ONE OR MORE MEMBERS
IN WITNESS WHEREOF, I have subscribed these Articles of
Organization and do hereby affirm the foregoing as true under
penalties of perjury, this 04/01/99.
/S/ SHARON BABALA
SHARON BABALA
Sole Organizer
c/o BLUMBERGEXCELSIOR
CORPORATE SERVICES, INC.
488 Broadway, Suite 106
Albany, NY 12207
MEMBERS CERTIFICATION
SPM, LLC
The undersigned certify as follows:
1. We are the sole members (the "Members") of SPM, LLC, a New
York limited liability company (the "Company").
2. The name, address and interest of each member of the Company
is as follows:
Name of Member Address of Member Percent Interest
Samuel Weissman 575 Lexington Avenue,
New York, N.Y. 10022 25
Paul Elliott 4747-29 Nesconset Highway,
c/o Prudential Long Port Jefferson Station,
Island Commercial New York 25
Mark McAvoy 16 Forrest Court,
Oyster Bay Cove, New York 25
Dover Investments
Corporation 100 Spear Street,
San Francisco, California 25
3. The Company's Articles of Organization were filed with the
New York State Department of State on March 30, 1999. Said
Articles of Organization have not been amended.
4. The Operating Agreement of the Members, together with all
amendments thereto, as in effect on the date hereof, is
annexed hereto as Exhibit B.
5. The Members hereby unanimously agree that Samuel M. Weissman
(Weissman)and Paul Elliott (Elliott) shall have full power
and authority on behalf of the Company to:
a. Borrow $6,750,000 and obtain credit from JDI Coram LLC
(the "Bank") on such terms and conditions as Weissman
shall negotiate with the Bank;
b. Grant a security interest in or lien upon and mortgage,
pledge or assign and deliver, as security for money
borrowed or credit obtained by this Company, all or any
portion of the assets and personal property now owned
or hereafter acquired or created by the Company on such
terms and conditions as Weissman shall negotiate with the Bank;
including without limitation a mortgage upon the
Shopping Center owned by the Company located at the
intersection of Route 112 and Route 25 in Coram, New
York;
c. Consent to extensions, renewals, changes in terms
regarding credit given by the Bank to the Company, and
to waive any right to notices of any kind.
6. The Members hereby unanimously agree that Weissman and
Elliott are authorized to execute and deliver all
applications, statements, notes, drafts, security
agreements, hypothecation agreements, financial statements,
financing statements, mortgages, pledges, subordination
agreements, assignments and other instruments (the foregoing
shall be collectively referred to herein as the "Loan
Documents"), in such form or forms, and containing such
terms, provisions and conditions, as may be required by the
Bank, and to perform any and all other acts,including
(without limitation) the delivery of collateral, and to pay
all such fees and expenses as in Weissman's judgment shall
be necessary, proper or advisable in order fully to carry
out the intent and to accomplish toe purpose hereof.
7. We further certify that the execution, delivery and
performance of the Loan Documents by the Company will not
violate any provision of the Articles of Organization, the
Operating Agreement, any existing law or regulation, or any
order or decree of any court, arbitrator, governmental
authority, bureau or agency,and will not violate, or cause
the default under, any provision of any mortgage,indenture,
note, instrument, contract or other agreement to which the
Company is a party or which is or purports to be binding
upon the Company, or any of its property or assets, and will
not result in the creation or imposition of any lien,charge
or encumbrance on, or security interest in, any of such
properties pursuant to the provisions of such mortgage,
indenture, note, instrument, contract or other agreement.
8. Dated: October 20, 1999
MEMBERS:
/s/Samuel Weissman
Samuel Weissman
/s/Paul Elliott
Paul Elliott
/s/Mark McAvoy
Mark McAvoy
/s/Lawrence Weissberg
Lawrence Weissberg
Dover Investments Corporation
CERTIFICATE AS TO RESOLUTIONS
We,Samuel Weissman, Paul Elliott,Mark Mcavoy and Dover
Investments Corporation the sole members of SPM, LLC (hereinafter
calle the "Company or Borrower"), hereby certify, as follows:
1. At a Special Meeting of the Company, duly held on
September 29, 1999, at which a quorum as prescribed by law was
present and voting throught, the following recitals and
resolutions were unanimously adopted and the same have not been
revoked, cancelled, annulled or amended in any manner and are in
full force and effect on the date of this Certificate.
WHEREAS,Samuel Weissman, Paul Elliott, Mark McAvoy and
Dover Investments Corporation (hereinafter the "Members") are the
sole members of SPM, LLC a New York limited liability company;
WHEREAS,Borrower seeks to borrow $6,750,000 from Lender
to be secured by, inter alia, a mortgage upon premises
constituting a shopping center owned by the Company located at
the intersection of Route 112 and Route 25 in Coram, New York;
WHEREAS,Lender has agreed to make a $6,750,000 loan to
Borrower (hereinafter the "Loan").
"NOW, THREFORE, be it
RESOLVED that any and all acts of Samuel Weissman to
the date of this meeting in connection with the
transactions referred to in the preceding recitals are
hereby in each and every ratified, confirmed, adopted
and approved as the acts of the Company;
RESOLVED that the Company, in order to obtain the Loan
from Lender, executed and deliver, to the Lender, such
Loan Documents and such other documents, instruments
and certificates as may be necessary or appropriate to
enable Borrower to obtain the Loan and to conculed the
Loan transaction;
RESOLVED that Samuel Weissman and Paul Elliott, be
empowered and have full power and authority to execute
on behalf of the company all documents necessary in
order to enable the Company to obtain the Loan and to
conclude the Loan transaction.
2. The execution and delivery by the Company, of the Loan
Documents or any other instrument or document authorized in the
actions authorized thereby, will not (i) conflict with or violate
or result in a breach of any of the provisions of, or constitute a
default under, or result in the creation or imposition of a lien,
charge or encumbrance upon any of the properties or assets of
Borrower pursuant to, any agreement or instrument to which Borrower
is a party or by which any of its properties is bound, or (ii)
conflict with or violate any judgment, order, writ, injunction or
decree binding on Borrower.
3.The undersigned hereby certify that Samuel Weissman,
Paul Elliott, Mark McAvoy and Dover Investments Corporation are
the sole members of SPM, LLC.
IN WITNESS WHEREOF, this certificate as to the
resolutions of the Company have been signed this 26th day of
October 1999.
/s/Samuel Weissman
Samuel Weissman
/s/Paul Elliott
Paul Elliott
/s/Mark McAvoy
Mark McAvoy
/s/Lawrence Weissberg
Dover Invetments Corporation
Lawrence Weissberg
SPM, L.L.C.
OPERATING AGREEMENT
AGREEMENT ("Agreement") is made and entered into as of this
26th day of October 1999, by and between the parties who have
executed Exhibit "A" attached hereto and forming part hereof, who
are all of the Members (the "Members") of SPM, L.L.C., (the "LLC")
WITNESSETH
WHEREAS, the Members have formed the LLC to (i) own, develop,
operate, manage, finance, lease, and otherwise deal with real
estate and (ii) from time to time to engage in other business or
hold other investments which a Limited Liability Company may
lawfully engage in or hold; and
WHEREAS, it is the intention of the Members to set forth the
respective rights and obligations.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the receipt and sufficiency of such consideration
being acknowledged, the parties hereto agree as follows:
ARTICLE I
FORMATION, PURPOSES, DURATION
Section 1.1. Formation and Name.
1.1.01. Formation. The parties hereto have formed the LLC under
the laws of the State of New York for the limited purposes and
scope set forth in this Agreement.
1.1.02. Name. The business of the LLC shall be carried on
solely under the name of SPM, L.L.C.
Section 1.2. Purposes and Scope of the LLC.
1.2.01 Purposes. The sole and only purposes of the LLC are: to
own, develop, operate, manage, finance, lease, and otherwise deal
with real estate at Middle Country Road, Coram, New York, now known
as and to be know as the New Century Plaza, and (ii) from time to
time to engage in other business or hold other investments which a
Limited Liability Company may lawfully engage in or hold. The LLC
is specifically authorized to enter into a mortgage loan
transaction with the JDI Realty, LLC, the proceeds of winch loan
shall be used for the acquisition of the said property and to grant
to JDI Realty, LLC a first mortgage lien on the said property.
Section 1.3. Principal Place of Business.
The principal place of business of the LLC shall be located at
c/o Prudential L. I. Commercial Realty, 4747-2 Nesconset Highway,
Port Jefferson Station, New York, 11776, or at such other location
as may be approved by the Managers from time to time.
Section 1.4. Term.
The term of the LLC shall commence as of the date set forth
above, and shall continue until terminated in accordance with any
other provision of this Agreement, or until the Members agree to
its termination.
ARTICLE II
CAPITAL CONTRIBUTIONS, ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS
Section 2.1. Capital Accounts.
Capital Accounts Defined. As used herein, the term "Capital
Account" shall mean and refer to the capital account of each Member
in the LLC reflecting the value of each cash contribution of such
Member to the capital of the LLC as of the date of such
contribution. A Capital Account, as defined herein, shall be
maintained for each Member and shall be subject to adjustment as
hereinafter provided.
Section 2.2. Initial Contribution: Interim Account, Operating
Account.
Each of the Members shall make the contributions to the LLC
as shown on SCHEDULE "A" hereto.
Section 2.3. Additional Capital Contributions.
In the event additional capital is required for the operation
of the business of the Company, beyond the Initial Capital
Contribution of each Member, then each Member agrees to contribute
a percent thereof equivalent to their respective Membership
Interest. In the event any Member ("Defaulting Member") shall fail
to make any capital contribution required from him or it,
("Defaulted Contribution") then the other Members may make the
Defaulted Contribution and the amount thereof shall be deemed a
loan to the Defaulting Member. If the loan is not repaid within 90
days from its advance, then the paying Members at theirs option,
may extend the term of the loan or may acquire a portion of the
Defaulted Member's Membership Interest in the Company. The portion
of Defaulting Member's interest to be acquired shall be determined
as follows:
The amount of the Defaulted Contribution shall be divided by
the Defaulted Members Capital Account and the resulting percentage
shall be multiplied by the Defaulted Member's Membership interest.
The resulting number shall be the percentage by which the Defaulted
Member's interest in the Company is diminished and the Paying
Member's interest is increased.
In any event any distribution otherwise due to a Defaulting
Member shall be paid to the paying Member on account of the loan.
Section 2.4. Bank Accounts.
All funds of the LLC shall be deposited into accounts
maintained by the LLC as determined from time to time by the
Managers. Checks or withdrawals of funds from such accounts shall
require the signature of two Managers. With the consent of the
Managers, a representative of the building manager may have sole
signatory rights of the accounts of the LLC
Section 2.5. Distributions,
Distributions to the Members shall be made, from time to
time, at the discretion of the Managers, only out of net operating
cash flow. Distributions to Members shall be in accordance with the
percentages shown on Schedule "A".
Section 2.7. Allocations.
The profits and losses of die LLC shall be allocated amongst
the Members in accordance with their membership interest in the
LLC.
ARTICLE III
MANAGEMENT
Section 3.1. Management of the LLC.
3.1.01. All of the Members of the LLC shall be Managers and they
shall serve as Managers until voluntary withdrawal, death or
disability. Any two Managers may execute all documents in the name
of and on behalf of the LLC, including documents borrowing monies
or extending the credit of the LLC or imposing a mortgage or other
lien on the real or personal property of the LLC. Any tender to the
LLC shall be authorized to rely on the signature of any two
Managers.
Section 3.2. Time Devoted to LLC.
3.2.01. The Members shall each devote such time to the LLC as is
reasonably necessary to carry out the provisions of this Agreement.
Section 3.3. Other Business Activities; Disclosure.
3.3.01. Each of the Members understands that the other Members
may be interested, directly or indirectly, in various other
businesses and undertakings not included in the LLC. Each Member
also understands that the conduct of the business of the LLC may
involve business dealings with such other businesses or
undertakings. The Members hereby agree that the creation of the LLC
and the assumption by each of the Members of their duties hereunder
shall be without prejudice to their rights to have such other
interests and activities and to receive and enjoy profits or
compensation therefrom. The Members may engage in or possess any
interest in any other business venture of any nature or description
independently or with others.
Day to day management of the property known as New Century Plaza,
is by separate management agreement with an outside contractor,
Soundview Property Management.
ARTICLE IV
ACCOUNTING
Section 4.1. Books and Records.
4.1.01. General- At all times during the term hereof, the
Managers, shall cause accurate books and records of account to be
maintained in which shall be entered all matters relating to the
LLC, including all income and expenditures, and liabilities thereof
4.1.02. Cash Basis. Such books and records of account shall be
maintained on a cash basis and shall be adequate to provide any
Member with all financial information as may be needed by any
Member or any affiliate Of any Member for purposes of satisfying
the financial reporting obligations of any Member or his/her or its
respective affiliate or affiliates.
4.1.03. Information to Members. Each Member shall be entitled
to any additional information necessary for the Member to adjust
his financial basis statement to a tax basis as the Member's
individual needs may dictate.
Section 4.2. Location and Rights of Inspection.
The LLC's books and records of account shall be kept and
maintained at all times at the principal place of business of the
LLC, or at the place or places approved by the Managers. Each
Member and its authorized representatives and any other supervisory
or regulatory authority shall have the right to inspect, examine,
copy and audit the books, records, files securities, and other
documents of the LLC at all reasonable times.
Section 4.3. Fiscal Year.
The fiscal year of the LLC shall end on December 31 of each
year.
Section 4.4. Statements of Financial Condition.
An annual statement of the financial condition of the LLC and
income and cash flow statements (unaudited) shall be prepared in
accordance with generally accepted accounting principles and shall
be furnished to the Members within ninety (90) days after the close
of the fiscal year.
ARTICLE V
INCOME TAX RETURNS, TAX ACCOUNTING,
TAX ELECTIONS
Section 5.1. Preparation of Tax Returns.
Federal, state and local income tax returns of the LLC shall
be prepared by an accountant selected by the LLC. Copies of all tax
returns of the LLC shall be furnished for review and approval by
each of the Members and the Managers at least thirty (30) days
prior to the statutory date for filing, including extensions
thereof if any. If the Managers shall fail to approve any such
return, an application for extension of time to file shall be
timely filed by the Managers.
Section 5.2. Tax Decisions Not Specified.
Tax decisions and elections for the LLC not provided for
herein must be approved by the Managers.
Section 5.3. Notice of Tax Audit.
Prompt notice shall be given to the Members upon receipt of
advice that the Internal Revenue Service intends to examine LLC's
income tax returns for any year.
ARTICLE VI
SALE, TRANSFER, OR ENCUMBRANCE
Section 6.1. Right of First Refusal.
In the event any Member ("Selling Member) desires to sell his
Membership Interest in the Company he shall obtain a bona fide
written offer ("Bona Fide Offer') from a purchaser ("Bona Fide
Offeree") to purchase his interest together with a contract deposit
in the amount of not less than five (5%) percent of the sales
price. The Selling Member shall give to each Member notice
("Seller's Notice") of Seller's desire to sell his interest to the
Bona Fide Offeree which notice shall include a full copy of the
bona fide offer. Seller shall provide the other Members with such
information regarding the bona fide offeree as the other Members
may reasonably request.
The other Members, or any of them may elect to purchase the
Selling Member's Membership interest under the terms contained in
the Seller's Notice by so notifying Seller within 21 days of
receipt of Seller's Notice. If more than one Member desires to
acquire the interest, the purchasing Members shall each have the
right to a acquire a portion of the Seller's interest equal to that
purchasing Member's percentage interest in the Company calculated
as if the Selling Member had no interest.
If any Member or Members give notice to Seller electing to
purchase the Selling Member's interest, then the Selling Member
shall sell his interest to such Member or Members, and such Member
or Members shall purchase the interest, under the terms contained
in the Bona Fide Offer
If no Member or Members give timely notice (21 days written
notice) to Seller electing to purchase the Selling Member's
interest, then the Selling Member may sell the interest to the Bona
Fide Offeree under the terms contained in the Bona Fide Offer. If
the sale to the Bona Fide Offeree is not completed within 6 months
of the Seller's Notice, then Seller, prior to completing the said
sale, shall give further notice to the other Members and the
opportunity to purchase his interest as above provided.
Any sale must have 51% approval of the members.
ARTICLE VII
DEFAULT AND DISSOLUTION
Section 7.1. Events of Default.
7.1.01. Definitions. The occurrence of any of the following
events shall constitute an event of default ("Event of Default")
hereunder on the part of the Member with respect to whom such event
occurs and shall constitute an Event of Default immediately upon such
occurrence without any requirement of notice or passage of time
except as specifically set forth in any such subparagraphs:
(a) the failure by a Member to comply with his obligations
pursuant to this Agreement which are not cured by such within ten
(10) days after written notice;
(b) the inability of a Member to continue with its obligations
under this Agreement as a result of federal or state regulatory
authorities refusing to permit the LLC to carry out its purpose;
(c) institution by a Member of proceedings of any nature under
any laws of the United States or of any state, whether now existing
or subsequently enacted or amended, for the relief of debtors
wherein person is seeking relief as debtor;
(d) a general assignment by a Member for the benefit of
creditors;
(e) the institution by or against a Member of a case or other
proceeding under any section or chapter of Federal or state
bankruptcy laws as now existing or hereafter amended or becoming
effective which shall not be dismissed within sixty (60) days;
(f) the appointment of a receiver, custodian, trustee or like
officer, to take possession of assets owned by a Member if die
Pendency of said receivership would reasonably tend to have a
materially adverse effect upon the performance by said party of any
of its or their respective obligations under this Agreement.
(g) admission by a Member in writing of his or its inability to
pay its or his debts as they mature;
(h) attachment execution or other judicial seizure of any or
all of the assets of a Member in an amount more than $25,000 with
respect to a Member which has not been bonded or vacated within
sixty (60) days from such attachment execution orjudicial seizure;
Section 7.1.02 Remedies in event of Member's Default.
The occurrence of an event of default by a Member shall
constitute an offer to the LLC and to the remaining Members to
purchase the Membership Interest of the defaulting Member at an
amount equivalent to his capital account.
Section 7.2. Cause of Dissolution.
The LLC shall be dissolved only in the event that:
(a) an Event of Default has occurred as provided herein and the
non-defaulting Members, after fifteen (15) days written notice to
the defaulting Member, elect to dissolve the LLC as provided
herein; or
(b) the Members mutually agree to terminate the LLC; or
(c) the LLC by its terms as set forth in this Agreement, is
terminated; or
(d) a governmental or quasi-governmental authority having
jurisdiction over the LLC or a specific Member refuses to permit
the LLC to carry out its purpose.
An election to dissolve the LLC shall not be the exclusive remedy
of a non-defaulting parry.
Section 7.3. Procedure in Dissolution and Liquidation.
7.3.01. Winding up. Upon dissolution of the LLC pursuant to
Section 7.2. hereof, the LLC shall immediately commence to wind up
its affairs and the Members shall proceed with reasonable
promptness to liquidate the business of the LLC.
7.3.02. Allocation of Profits. Profits of the LLC following the
date of dissolution shall be determined in accordance with the
provisions of this Agreement and shall be credited in the same
manner as profits of the
LLC would have been credited if there was no termination,
dissolution and liquidation.
ARTICLE
MISCELLANEOUS
Section 8.1. Notices.
8.1.01. Addresses. All notices under this Agreement shall be in
writing and shall be delivered by (a) hand delivery; (b) certified
or registered mail, postage prepaid, return receipt requested; or
(c) a commercial overnight air courier, airbill prepaid, to the
Members at the addresses herein set forth.
8.1.02. Effective Date of Notices. All notices, demands and
requests shall be effective upon delivery, being deposited in the
United Sates Mail or depositing with an agent of such overnight air
courier service. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice
was given as provided in Subsection 8.1.3 shall be deemed to be
receipt of the notice, demand or request sent.
8.1.03. Changes. By giving to the other parties at least thirty
(30) days written notice thereof in the manner provided herein, the
parties hereto and their respective permitted successors and
assigns shall have the right from time to time and at any time
during the term of this Agreement to change their respective
addresses for notices and each shall have the right to specify as
its or his address for notices any other address within the United
States of America.
Section 8.2. Attorneys' Fees.
Should any litigation be commenced between the parties hereto or
their representatives or should any party institute any proceeding
in a bankruptcy or similar court which has jurisdiction over any
other party hereto or any or all of his or its property or assets
concerning any provision of this Agreement or the rights and duties
of any person or entity in relation thereto, the party or parties
prevailing in such litigation shall be entitled, in addition to
such other relief as may be granted, to a reasonable stun as and
for his or its or their attorneys' fees and court costs in such
litigation which shall be determined by the court in such
litigation or in a separate action brought for that purpose. 'Me
provisions of this paragraph 8.2 shall not apply to any action
wising out of a willful tort.
Section 8.3. Validity.
In the event that any provision of this Agreement shall be held
to be invalid or unenforceable, the same shall not affect in any
respect whatsoever the validity or enforceability of the remainder
of this Agreement.
Section 8.4. Survival of Rights.
Subject to restriction on right of transfer of Membership
interests and designation of Managers, this Agreement shall be
binding upon and inure to the benefit of the parties signatory
hereto, their respective heirs, executors, legal representatives
and permitted successors and assigns.
Section 8.5. Governing Law.
This Agreement has been entered into the State of New York
and all questions with respect to this Agreement and the rights and
liabilities of the parties hereto shall be governed by the laws of
that state.
Section 8.6. Waiver.
No consent or waiver, express or implied, by a Member to or of
any breach or default by the other Member in the performance by
such other Member of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or
default in the performance by such other Member hereunder. Failure
on the part of a Member to complain of any act or failure to act of
the other Member or to declare the other Member in default,
irrespective of how long such failure continues, shall not
constitute a waiver by such Member in any one instance shall not
limit or waive the necessity to obtain such Member's consent in any
future instance.
Section 8.7. Remedies In Equity.
The rights and remedies of any Member hereunder shall not be
mutually exclusive, i.e., the exercise of one or more of the
provisions hereof shall not preclude the exercise of any other
provisions hereof Each of the Members confirms that damages at law
will be an inadequate remedy for a breach or threatened breach of
this Agreement and agree that, in the event of a breach or
threatened breach of any provisions hereof, the respective rights
and obligations hereunder shall be enforceable by specific
performance, injunction or other equitable remedy, but nothing
herein contained is intended to, nor shall it, limit or affect any
rights at law or by statute or otherwise of any party aggrieved as
against the other breach for a breach or threatened breach of any
provision hereof it being the intention by this Section to make
clear the agreement of the Members hereunder shall be enforceable
in equity as well as at law or otherwise.
Section 8.8. Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which
shall constitute one and the same Agreement.
Section 8.9. Further Assurances.
Each party hereto agrees to do all acts and things and to
make, execute and deliver such written instruments, as shall from
time to time be reasonably required to carry out the terms and
provisions of this Agreement,
Section 8.10. Confidentiality.
The parties hereto shall keep the terms of this Agreement and
shall not disclose any such information except (i) pursuant to
court order; (ii) as required by law or any regulatory agency;
(iii) in connection with any action or proceeding to enforce its
rights in connection with this Agreement or otherwise; or (iv) to
their accountants and attorneys. This provision shall survive the
termination of this Agreement and the dissolution of the LLC.
Section 8. 11. Representations.
Each of the parties hereto wan-ants and represents that the
other parties, their agents, servants and employees, have made no
representation or statement whether oral or in writing, relating to
or concerning this
This Agreement has been entered into the State of New York
and all questions with respect to this Agreement and the tights and
liabilities of the parties hereto shall be governed by the laws of
that state.
Section 8.6. Waiver.
No consent or waiver, express or implied, by a Member to or of
any breach or default by the other Member in the performance by
such other Member of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or
default in the performance by such other Member hereunder. Failure
on the part of a Member to complain of any act or failure to act of
the other Member or to declare the other Member in default,
irrespective of how long such failure continues, shall not
constitute a waiver by such Member in any one instance shall not
limit or waive the necessity to obtain such Member's consent in any
future instance.
Section 8.7. Remedies In Equity.
The rights and remedies of any Member hereunder shall not be
mutually exclusive, i.e., the exercise of one or more of the
provisions hereof shall not preclude the exercise of any other
provisions hereof. Each of the Members confirms that damages at law
will be an inadequate remedy for a breach or threatened breach of
this Agreement and agree that in the event of a breach or
threatened breach of any provisions hereof, the respective rights
and obligations hereunder shall be enforceable by specific
performance, injunction or other equitable remedy, but nothing
herein contained is intended to, nor shall it, limit or affect any
rights at law or by statute or otherwise of any party aggrieved as
against the other breach for a breach or threatened breach of any
provision hereof, it being the intention by this Section to make
clear the agreement of the Members hereunder shall be enforceable
in equity as well as at law or otherwise.
Section 8.8. Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which
shall constitute one and the same Agreement.
Section 8.9. Further Assurances.
Each party hereto agrees to do all acts and things and to
make, execute and deliver such written instruments, as shall from
time to time be reasonably required to carry out the terms and
provisions of this Agreement.
Section 8.10. Confidentiality.
The parties hereto shall keep the terms of this Agreement and
shall not disclose any such information except (i) pursuant to
court order; (ii) as required by law or any regulatory agency;
(iii) in connection with any action or proceeding to enforce its
rights in connection with this Agreement or otherwise; or (iv) to
their accountants and attorneys. This provision shall survive the
termination of this Agreement and the dissolution of the LLC.
Section 8.11. Representations.
Each of the parties hereto wan-ants and represents that the
other parties, their agents, servants and employees, have made no
representation or statement, whether oral or in writing, relating
to or concerning this
Agreement other than specifically set forth herein.
Section 8.12. Expenses.
The LLC will pay all expenses incurred with respect to the
prosecution or defense of any claim, complaint, action or
proceeding or other litigation affecting the LLC arising out of the
acts or omissions of the LLC, including (without limiting the
generality of the foregoing) all court costs and attorneys' fees,
and will reimburse the Mangers for all expenses paid to third
parties of the nature described in this paragraph which have been
or may be incurred by them with respect to any and all of the
transactions contemplated herein.
Section 8.13. Mortgage Loan Commitment
The LLC hereby ratifies and accepts the terms of a certain
mortgage loan commitment dated September 19, 1999 made by JDI
Realty LLC to the LLC. The LLC and each of its members further
consents to the taking of all further actions as may be deemed
necessary or desirable, as determined by Sam Weissman in order to
consummate the aforesaid loan transaction. Without limiting the
generality of the foregoing, each of the Members of the LLC, hereby
authorizes Sam Weissman to act on behalf of the LLC to execute all
documentation required to be signed by the LLC, (including, without
limitation any evidences of indebtedness and to secure same by
mortgage, pledge or other Hen upon the assets of the LLC) in order
to obtain the loan and close said transaction.
Section 8.14. Interest Payments/Personal Guarantee
Each member is responsible for their proportionate share of the
mortgage interest payment, on or before the first of every month.
Any member not making said payment will be diluted in percentage
of interest ownership on a dollar per dollar basis, as provided
in Section 2.3 hereof. It is agreed and understood that Paul
Elliot, Sam Weissman and Mark McAvoy are personally guaranteeing
the first mortgage to JDI Realty, Inc. It is agreed and
understood that Dover Investments Corporation is not personally
guaranteeing the first mortgage. It is agreed and understood that
any and all members under this operating agreement are fully
responsible for all costs and expenses of the mortgage loan
(other then mortgage principal) real estate taxes and operating
costs on a proportionate share. In the event payments shall be
required on account of mortgage principal no member shall be
required to make such payments, but any new member who fails to
make such payment shall have his membership interest diminished
proportionately as provided in section 2.3 hereof.
SCHEDULE A
MEMBERS, MEMBERSHIP INTERESTS, CONTRIBUTIONS,
SIGNATURES
MEMBER Capital Percentage
Contribution Interest Signature
Mark McAvoy
16 Forest Court
Oyster Bay, NY 11791 $875,000.00 25% /s/Mark Mcavoy
Paul Elliott
17 Tuthill Ct.
Miller Place, NY 11764 $875,000.00 25% /s/Paul Elliott
Dover Investments DOVER INVESTMENTS
Corporation CORPORATION
100 Spear Street /s/ Lawrence Weissberg
San Francisco, CA 94105 $875,000.00 25% Lawrence Weissberg
President
Sam Weissman
575 Lexington Ave,4th Fl
New York, NY 10022 $875,000.00 25% /s/Sam Weissman
