limited liability company agreement of … · company (“hk fund calvert crossings”) and ocwen...
TRANSCRIPT
© Copyright – Brian M. Grindall 2016
LIMITED LIABILITY COMPANY AGREEMENT OF
HK CALVERT CROSSINGS, LLC
THE SECURITIES REPRESENTED BY THE INTERESTS OF THE MEMBERS HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND/OR THE SECURITIES OR
“BLUE SKY” LAWS OF CERTAIN STATES AND, ACCORDINGLY, MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES ACT OR “BLUE SKY” LAW OR APPLICABLE EXEMPTIONS THEREFROM AND THE
RESTRICTIONS ON TRANSFER CONTAINED IN THIS AGREEMENT.
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LIMITED LIABILITY COMPANY AGREEMENT OF
HK CALVERT CROSSINGS, LLC
This Limited Liability Company Agreement (this “Agreement”) is entered into as of ______,
201__ (the “Effective Date”), by HK Calvert Manager, LLC, a Delaware limited liability company
(“HK Calvert Manager”), HK Fund Calvert Crossings, LLC, a Delaware limited liability
company (“HK Fund Calvert Crossings”) and Ocwen Capital Fund VI, LP, a Texas limited
partnership (“Ocwen Member”).
ARTICLE 1
CONTROLLING TERMS
Section 1.1 Definitions and Controlling Terms. Some of the terms used in this Agreement
with the initial letter(s) capitalized shall have the meaning as provided in the Glossary of Certain
Defined Terms attached hereto as Schedule 1.1 (the “Glossary”) unless the context otherwise
requires. Some of the terms used in this Agreement with their initial letter(s) capitalized that are
not defined in the Glossary shall have the meaning assigned to such terms elsewhere in this
Agreement unless the context otherwise requires. The singular shall include the plural and vice
versa, the use of any gender shall be deemed to include any other and any reference to a Person
shall be deemed to include reference to a Person other than an individual.
ARTICLE 2
ORGANIZATIONAL MATTERS; PURPOSE; TERM
Section 2.1 Formation and Continuation; Admission of Members. The Company has been
organized as a limited liability company pursuant to the Act under the name “HK Calvert
Crossings, LLC” by the filing of Articles of Organization with the Secretary of State of the State
of Delaware (the “Articles”). The Members, by execution of this Agreement, hereby evidence
their agreement to continue the Company as a limited liability company under the terms of this
Agreement and pursuant to the Act. The rights and liabilities of the Members shall be determined
pursuant to this Agreement and the Act. To the extent that the rights or obligations of any Member
are different by reason of any provision of this Agreement than they would be in the absence of
such provision, this Agreement shall, to the fullest extent permitted by the Act, control. HK
Calvert Manager, HK Fund Calvert Crossings and Ocwen Member have been, and hereby are
admitted as the only Members of the Company as of the Effective Date.
Section 2.2 Name. The name of the Company shall be HK Calvert Crossings, LLC, and all
Company business must be conducted in that name.
Section 2.3 Registered Office; Registered Agent; Principal Office. The registered office and
the registered agent of the Company in the State of Delaware shall be as specified in the Articles.
The principal office of the Company shall be at Hyper-Kapital Mid-Atlantic, LLC, 3520 Prospect
Street, NW, Suite 302, Washington, DC 20007; Attn: Phil Knox or at such other location in the
Baltimore-Washington corridor as the Managing Member may determine upon written notice to
each Member.
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Section 2.4 Foreign Qualification. Before the Company conducts business in any jurisdiction
other than Delaware, the Managing Member shall cause the Company to comply with all
requirements necessary to qualify the Company as a foreign limited liability company in that
jurisdiction. At the request of the Managing Member, each Member shall execute, acknowledge,
swear to, and deliver all certificates and other instruments conforming with this Agreement that
are necessary or appropriate to qualify, continue, or terminate the Company as a foreign limited
liability company in all jurisdictions in which the Company may conduct business.
Section 2.5 Purpose and Character of Business. The purpose and scope of the Company are
strictly limited to acquiring, developing, constructing, owning, operating, leasing and selling the
Project and the Company shall have all power and authority necessary for it to act in such capacity.
The Company shall not engage in any other business or activity without the consent of all
Members.
Section 2.6 Term. The Company shall commence on the effective date of the Articles and shall
have perpetual existence, unless sooner dissolved as herein provided.
ARTICLE 3
MEMBERSHIP; DISPOSITIONS OF MEMBERSHIP INTERESTS
Section 3.1 Members. As of the Effective Date, the Members of the Company are HK Calvert
Manager, HK Fund Calvert Crossings and Ocwen Member, each of which is admitted to the
Company as a Member as of the Effective Date.
Section 3.2 Dispositions of Membership Interests. A Member may not make a direct or
indirect assignment, transfer, or other disposition (voluntarily, involuntarily or by operation of
law) (a “Transfer”) of all or any portion of its Membership Interest, nor directly or indirectly
pledge, mortgage, hypothecate, grant a security interest in, or otherwise encumber (an
“Encumbrance”) all or any portion of its Membership Interest, except with the consent of all
Members. Specifically, no member in any Member may make a direct or indirect Transfer or
Encumbrance in respect of its interest in such Member if, as a result of any such Transfer or
Encumbrance, Control of such Member will have been, or could become, vested in the assignee of
any such Transfer or Encumbrance, without the consent of all of the other Members of the
Company, it being the intent of the parties to restrict indirect transfers of Membership Interests as
well as direct transfers (provided that the foregoing is specifically not intended to limit or otherwise
restrict the transfer, sale and exchange of any publicly traded securities of any Affiliate of HK
Calvert Manager, HK Fund Calvert Crossings or Ocwen Member). Any attempted Transfer or
Encumbrance of all or any portion of a Membership Interest, other than in strict accordance with
this Section 3.2 shall be void. A Person to whom a Membership Interest is Transferred may be
admitted to the Company as a Member only as provided in Section 3.2 with the consent of all of
the Members. In connection with any Transfer of a Membership Interest or any portion thereof
and any admission of an assignee as a Member, the Member making such Transfer and the assignee
shall furnish the Company with such documents regarding the Transfer as any other Member may
reasonably request, including a copy of the Transfer instrument, and a ratification by the assignee
of this Agreement (if the assignee is to be admitted as a Member).
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Section 3.3 Creation of Additional Membership Interests. Additional Membership Interests
may be created and issued to existing Members or to other Persons, and such other Persons may
be admitted to the Company as Members, on such terms and conditions as the Members may
unanimously determine at the time of admission.
Section 3.4 Conflicts of Interest. Subject to the other express provisions of this Agreement,
each Member or any Affiliate thereof may engage in and possess interests in other business
ventures of any and every type and description, independently or with others, including ones in
competition with the Company, with no obligation to offer to the Company or any other Member
the right to participate therein or to account therefor. The Company may transact business with
any Member or Affiliate thereof, provided the terms of those transactions are on terms no less
favorable to the Company than are available from similarly qualified unaffiliated Persons, and
such transaction is approved by the Members.
Section 3.5 Resignation. A Member may not resign or withdraw from the Company without
the prior consent of all of the other Members.
Section 3.6 Information. In addition to the other rights specifically set forth in this Agreement,
the Members are entitled to information regarding the Company as provided in the Act.
Section 3.7 Liability to Third Parties. No Member shall be liable for the debts, obligations
or liabilities of the Company.
ARTICLE 4
MANAGEMENT OF COMPANY
Section 4.1 Management.
(a) General Appointment. The Managing Member shall manage the day-to-day
business and affairs of the Company, and make all decisions with regard thereto, except where (i)
the approval of any of the Members is specifically required under this Agreement, or (ii) the
approval of any of the Members is expressly required by a non-waiveable provision of applicable
law.
(b) Management of the Project.
(i) The Managing Member shall have the power and authority to cause the
Project to be acquired, owned, operated, leased and financed (including negotiation and
administration of any loan obtained by Company) subject, however, to the Business Plan and the
terms and conditions of Paragraph 4.1(c) hereinbelow.
(ii) Pursuant to the Management Agreement (a copy of the executable draft of
which is attached hereto as Exhibit B), the Company has retained HK Calvert Manager which
shall, in conjunction with the Company, coordinate the ownership and operation of the Project in
accordance with the Business Plan. Although the current Business Plan reflects the Members’
current estimate of the cost and time required for the ownership and management of the Project
based on information now known, the Business Plan is subject to change during the course of
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development as provided in the Business Plan and subject to the unanimous approval of the
Members.
(iii) Member Approval Rights. The Members acknowledge that prompt
responses to matters submitted for their review and approval are necessary to maintain prompt and
effective management of the Project and comply with the Company’s obligations under any leases
that may be executed with respect to the Project. For that reason the Members will not
unreasonably withhold or delay its respective consideration of, and response to, any such matter.
The Members shall respond to the Managing Member’s request for approval of any matter
pursuant to this Section 4.1 as soon as possible following the date of receipt of written request for
such approval and all applicable materials reasonably required to make an informed judgment on
such matter. If the Members disapprove any matter, the notice of disapproval shall set forth the
reason or reasons for such disapproval with reasonable specificity. If the Members do not provide
written notice denying the requested approval within twenty (20) business days, approval of the
matter in question shall be deemed given. Notwithstanding the foregoing twenty (20) day period,
in the event a shorter response time is required due to the specific nature of the request which shall
be stated in such request, the Managing Member shall have the right to require a short response
time provided that (i) such response time shall be noted on top of the request, in bold face print
and specifically referring to this Section 4.1(b)(iii) and shall state the reason for the request, and
(ii) in no event shall such response time be less than five (5) business days.
(iv) Reports. The Managing Member shall cause HK Calvert Manager to
provide all reporting information required of the HK Calvert Manager under the Management
Agreement to be delivered to the Company and to each of the Members on a timely basis.
(c) Major Decisions. No material decisions regarding the management, operations
and control of the Company and the Project (the “Major Decisions”) shall be made by the
Managing Member without the prior written consent of the Ocwen Member. As used herein, the
term Major Decisions shall mean:
(i) Acquisition of any land or interest therein other than the Project;
(ii) Financing and refinancing the Project and the operations of the Company
and entering into, amending or modifying the terms and conditions of any loan obtained
by the Company;
(iii) Sale, exchange, pledge, mortgage or other transfer of the Project or any
portion thereof, or interest therein, including the execution of any lease, easement,
restriction or covenant intended to encumber title to the Project, other than utility and
access easements and agreements in the customary form required by the utility companies
and governmental authorities to provide utility service and access solely to the Project,
provided that such easements and agreements do not materially interfere with the use,
development or enjoyment of the Project;
(iv) Adjusting, settling or compromising any claim, obligation, debt, demand,
suit or judgment against the Company or any group of claims arising out of the same or
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related facts and circumstances involving more than $25,000.00, except for claims for
which the Company has full insurance coverage;
(v) Settlement on behalf of the Company of any claim for payment of insurance
in excess of $25,000.00 or for payment of awards or damages arising out of the exercise of
eminent domain by any public or governmental authority;
(vi) Becoming a plaintiff in any litigation except for (A) landlord/tenant actions
and (B) litigation commenced by any insurer of the Company pursuant to the policy or
policies of insurance issued by such insurer;
(vii) Filing, or consenting to the filing of, on behalf of the Company, a petition
or other similar action in any Bankruptcy or other similar proceeding under any present or
future federal, state, local or other law;
(viii) Lending money to, or guaranteeing any agreement or obligation of, a
Member or any third party whether or not such agreement is beneficial to the development
or operation of the Project;
(ix) Approving, executing, modifying, accepting the surrender of or terminating
any lease of the Project or any part thereof which is contrary to the leasing parameters as
are set forth in the Business Plan;
(x) Amending this Agreement or the Business Plan or the Management
Agreement, or the replacement of the property manager;
(xi) Doing any act in contravention of this Agreement or any material deviation
from the Business Plan;
(xii) Causing the Company to undertake a merger, consolidation or other form
of reorganization, or any determination whether to form any subsidiary of the Company;
or
(xiii) Creating and issuing new Membership Interests to other Persons and
admitting such other Persons to the Company as Members pursuant to Section 3.3.
(d) The Managing Member shall discharge its duties in a good and proper manner as
provided for in this Agreement. The Managing Member, on behalf of the Company, shall in good
faith use all reasonable efforts to implement all Major Decisions approved by the Ocwen Member,
enforce agreements entered into by the Company, and conduct the ordinary business and affairs of
the Company in accordance with good and industry practice and this Agreement.
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Section 4.2 Compensation of Members. Except as otherwise specifically provided in the
Management Agreement (the compensation payable thereunder being approved by the Members
as of the Effective Date), no compensatory payment shall be made by the Company to any
Member or an Affiliate of any Member for the services to the Company of such Member,
Affiliate, or any member or employee of such Member or Affiliate.
Section 4.3 Indemnification Regarding Company Activities; Reimbursement of Expenses;
Insurance. To the fullest extent permitted by the Act: (i) the Company shall indemnify the
Members including the Managing Member from and against any threatened, pending or completed
action, suit or proceeding (“Proceeding”), any appeal therein, or any inquiry or investigation
preliminary thereto, solely by reason of the fact that it, he or she is or was a Member and was
acting within scope of its duties or authority hereunder; (ii) the Company shall pay or reimburse
the Members for expenses incurred by it, him or her (1) in advance of the final disposition of a
Proceeding to which such Managing Member was, is or is threatened to be made a party, and (2) in
connection with its, his or her appearance as a witness or other participation in any Proceeding.
The Company may indemnify and advance expenses to an employee or agent of the Company to
the same extent and subject to the same conditions under which it may indemnify and advance
expenses to the Members under the preceding sentence. The provisions of this Section 4.3 shall
not be exclusive of any other right under any law, provision of the Articles or this Agreement, or
otherwise. Notwithstanding the foregoing, (x) this indemnity shall not apply to actions constituting
gross negligence or willful misconduct, but shall apply to actions constituting simple negligence
and (y) in the event that the decision in the Proceeding is that the act or omission of the indemnified
Member constituted gross negligence or willful misconduct, all sums previously advanced by the
Company pursuant to this Section 4.3 shall be refunded by the Member to the Company. The
Company may purchase and maintain insurance to protect itself and any employee or agent of the
Company, including any or all Members, whether or not the Company would have the power to
indemnify such Person under this Section 4.3. This indemnification obligation shall be limited to
the assets of Company and no Member shall be required to make a Capital Contribution in respect
thereof.
Section 4.4 Fiduciary Duty. Notwithstanding any provision in this Agreement to the contrary,
the Managing Member shall have a fiduciary duty to the Company and to the Members and,
pursuant to such duty, shall make all day-to-day decisions and exercise all rights and powers
granted by this Agreement (including, without limitation, the power to distribute Net Cash Flow
and Net Cash From Capital Transactions) only in good faith and in a manner that it reasonably
believes to be in the best interests of the Company and the Members.
Section 4.5 Removal of Managing Member. In the event that (i) HK Calvert Manager is in
material default in any of its obligations under this Agreement which default has not been cured
within ten (10) days of receipt of written notice from the Ocwen Member (or such longer period
of time as may be reasonably necessary to effectuate such cure but not to exceed thirty (30) days),
or (ii) HK Calvert Manager causes the Company to materially default in any of its obligations as
landlord under the lease(s) for the Project which has not been cured within ten (10) days of receipt
of written notice from the Ocwen Member (or such longer period of time as may be reasonably
necessary to effectuate such cure but not to exceed thirty (30) days), or (iii) HK Calvert Manager
causes a material default by the Company under any of the loan documents for the loan from ABC
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Bank to the Company, then Ocwen Member, in addition to all other rights and remedies under this
Agreement and/or provided at law or in equity, shall have the right to remove HK Calvert Manager
as the Managing Member of the Company and to appoint a new Managing Member of the
Company, and to terminate the Management Agreement between the Company and HK Calvert
Manager and appoint a new property manager for the Project which may be an Affiliate of Ocwen
Member. Notwithstanding the generality of the foregoing, if the loan from ABC Bank to the
Company remains outstanding at the time Ocwen Member desires to exercise the foregoing right
to replace HK Calvert Manager as Managing Member, then it shall be a condition precedent to the
exercise of the foregoing right by the Ocwen Member that ABC consents to such removal prior to
the effective date thereof.
ARTICLE 5
ACCOUNTING AND REPORTING
Section 5.1 Fiscal Year, Accounts, Reports.
(a) The fiscal year of the Company shall be the calendar year and the Company shall
be taxed as a partnership.
(b) The books of account of the Company, at the Company’s expense, shall be kept
and maintained by Managing Member (or Managing Member’s accountant) on a cash basis in
accordance with generally accepted accounting principles applied on a consistent basis applicable
to commercial real estate. Managing Member shall prepare a reconciliation of such books and
records to cash receipts and disbursements. The books of account shall be kept at the principal
place of business of the Company, and shall at all times be available for inspection by the
Members.
(c) The Managing Member shall, at the Company’s expense, cause to be prepared and
furnished to the Members: (1) on or before the 45th day following the close of each calendar
quarter (except the last calendar quarter of each year) financial statements with respect to the
Company consisting of a balance sheet, income statement, and the statement of the Members’
capital positions, and a comparison of the Company’s operating results to the immediately
preceding quarter and the corresponding quarter in the immediately preceding year; and (2) no
later than sixty (60) days after the close of each Fiscal Year, financial statements consisting of a
balance sheet, income statement, and a statement of the Members’ capital positions, and a
comparison of the Company’s operating results to the immediately preceding quarter and the
corresponding quarter in the immediately preceding year – all of the foregoing being prepared by
the Company’s accountants. The Managing Member shall also provide to the Members copies of
all reports it provides to any lender providing financing to the Company concurrently with the
submission of such report to such lender. The Managing Member shall cause to be furnished to
the Members sufficient information (including the Company’s tax return and a K-1 for each
Member) to enable them to file all state and federal tax returns in respect of their Membership
Interest not later than February 28 of the applicable year. The Managing Member shall also
provide such additional reports to the Members regarding the business and affairs of the Company
as the Members may, from time to time, request.
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(d) Each Member, at its expense, may at all reasonable times during usual business
hours audit, examine, and make copies of or extracts from the books of account records, files, and
bank statements of the Company. Such right may be exercised by any Member, or by its
designated agents or employees.
Section 5.2 Bank Account. Managing Member shall open and maintain (in the name of the
Company) a bank account or accounts in a bank or savings and loan association, the deposits of
which are insured, up to the applicable limits, by an agency of the United States government, in
which shall be deposited all funds of the Company. Withdrawals therefrom shall be made upon
the signatures of such Persons as the Managing Member shall approve.
ARTICLE 6
CAPITAL CONTRIBUTIONS
Section 6.1 Capital Contributions
(a) Initial Capital Contributions. Concurrently with the formation of the Company,
each of the Members has made an Initial Capital Contribution to the Company in cash or by
contribution of property in the amount set forth opposite its name under the column “Initial
Capital Contributions” on Schedule 6.1(a) hereto.
(b) Additional Capital Contributions. If, after the Initial Capital Contributions called
for above have been made, the Managing Member determines that additional funds are necessary
for any Company purpose, then the Managing Member shall immediately so notify all Investor
Members (a “Capital Notice”) containing the following: (i) stating the aggregate amount of such
Additional Capital Contributions that are the subject of the applicable Capital Notice, (ii) stating
in reasonable detail the reasons that such Additional Capital Contributions are required, the
intended use thereof and such other information as any Investor Member may reasonably request,
and (iii) stating the date on which such additional funds are required as payment of Additional
Capital Contributions. Each of the Investor Members shall have the option of (but not the
obligation to) making Additional Capital Contributions in response to any Capital Notice up to
amounts pro rata and in proportion to its respective Investor Hurdle Return Share (unless they
agree upon another proportion) of the total amount requested in the Capital Notice. All such sums
so advanced by any Investor Members pursuant to this Section 6.1(b) are to be treated as
Additional Capital Contributions by such Investor Member. Notwithstanding the foregoing and
the right of Ocwen Member to provide funds to, or for the benefit of, the Company as described
in the two preceding sentences, Ocwen Member shall have no obligation or liability to provide any
Additional Capital Contributions hereunder. In the event that Ocwen Member elects not to make
Additional Capital Contributions in response to a Capital Notice, then HK Calvert Manager shall
be responsible for funding all such additional funds pursuant to any Capital Notice – in which case
such additional funds shall be advanced by HK Calvert Manager as a loan to the Company (a
“Member Loan”) – which Member Loan shall not constitute or otherwise be construed to be an
Additional Capital Contribution hereunder. Any Member Loan shall bear interest at a rate of eight
percent (8%) per annum, but shall not exceed the maximum rate allowed by law, and shall be
payable as provided in Sections 8.1 below. In the event there is more than one Member Loan
outstanding at any time in which there is a distribution made under Section 8.1, then amounts
distributed thereunder shall first be applied to repay the oldest unpaid Member Loan.
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Notwithstanding the foregoing, HK Calvert Manager shall not be obligated to provide to, or for
the benefit of, the Company any cash funds pursuant to this Section 6.1 in the event HK Calvert
Manager has ceased to be Managing Member of the Company pursuant to Section 4.5.
Section 6.2 Return of Contributions. Except as expressly provided herein, no Member shall
be entitled to (1) the return of any part of its Capital Contributions, (2) any interest in respect of
any Capital Contribution, or (3) the fair market value of its Membership Interest in connection
with a withdrawal from the Company or otherwise. Unreturned Capital Contributions shall not be
a liability of the Company or of any Member. No Member shall be required to contribute or lend
any cash or property to the Company to enable the Company to return any Member’s Capital
Contributions to the Company.
ARTICLE 7
FINANCING
Section 7.1 Financing. Prior to the date hereof the Company has arranged to obtain a loan
from ABC Bank in the principal amount of $[___].00, to fund the Company’s acquisition and
financing of the Property and closing thereunder shall have occurred simultaneously with the
execution and delivery of this Agreement.
ARTICLE 8
DISTRIBUTIONS AND ALLOCATIONS
Section 8.1 Distributions.
(a) Net Cash Flow. Distributions of Net Cash Flow shall be made by the
Company, at such times as the Managing Member may reasonably determine, but in any event no
less frequently than monthly, to the Members in the following order of priority:
(i) First, to the Members in payment of any unpaid Preferred Return,
pari passu on a pro rata basis in proportion to the unpaid balances; and then
(ii) Second, one hundred percent (100%) to the Investor Members, pro
rata, in proportion to and to the extent of the unreturned Capital Contributions of such Investor
Members; and then
(iii) Third, pari passu, sixty percent (60%) to the Investor Members in
accordance with their respective Investor Hurdle Return Share and forty percent (40%) to HK
Calvert Manager, until the Investor Members have each received an Internal Rate of Return equal
to twelve percent (12%) in respect of their respective Capital Contributions; and then
(iv) Fourth, to HK Calvert Manager in repayment of any outstanding
Member Loan(s) together with accrued interest to which payments shall be applied first; and then
(v) Thereafter, twenty-five percent (25%) to the Investor Members and
seventy-five (75%) to HK Calvert Manager.
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(b) Net Cash from Capital Transactions. Distributions of Net Cash from
Capital Transactions shall be made by the Company, promptly upon receipt, to the Members in
the following order of priority:
(i) First, to the Members in payment of any unpaid Preferred Return,
pari passu on a pro rata basis in proportion to the unpaid balances; and then
(ii) Second, one hundred percent (100%) to the Investor Members, pro
rata, in proportion to and to the extent of the unreturned Capital Contributions of such Investor
Members; and then
(iii) Third, pari passu, sixty percent (60%) to the Investor Members in
accordance with their respective Investor Hurdle Return Share and forty percent (40%) to HK
Calvert Manager, until the Investor Members have each received an Internal Rate of Return equal
to twelve percent (12%) in respect of their respective Capital Contributions; and then
(iv) Fourth, to HK Calvert Manager in repayment of any outstanding
Member Loan(s) together with accrued interest to which payments shall be applied first; and then
(v) Thereafter, twenty-five percent (25%) to the Investor Members and
seventy-five (75%) to HK Calvert Manager.
Section 8.2 Allocation of Profit or Loss.
(a) Allocation of Profit from a Capital Transaction. Subject to Section 8.3
hereof, Profit from a Capital Transaction shall be allocated in the following order and priority:
(i) first, to the Members, in proportion to their Preferred Return, until
each Member has received aggregate allocations of Profit under Section 8.2(c)(i) and this Section
8.2(a)(i) equal to their Preferred Return;
(ii) then, to the Members, pro rata, in proportion to their respective
distributions of Net Cash From Capital Transactions over and above the Preferred Return.
(b) Allocation of Loss From a Capital Transaction. Subject to Section 8.3
hereof, Loss from a Capital Transaction shall be allocated to the Members in proportion to their
respective Investor Hurdle Return Share.
(c) Allocation of Profit from Operations. Subject to Section 8.3 hereof,
Profit from operations for each tax year of the Company shall be allocated as follows:
(i) First, to the Members, in proportion to their Preferred Return, until
each Member has received aggregate allocations of Profit under Section 8.2(a)(i) and this Section
8.2(c)(i) equal to their Preferred Return;
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(ii) the remainder of the Profit from operations, if any, shall be allocated
to the Members, pro rata, in proportion to their respective distributions of Net Cash Flow from
operations over and above the Preferred Return.
(d) Allocations of Loss from Operations. Except as provided in Section 8.3
hereto, Loss from operations shall be allocated to the Members in proportion to their respective
Investor Hurdle Return Share.
Section 8.3 Special Allocations.
(a) Qualified Income Offset. No Member shall be allocated Losses or
deductions if the allocation: (i) causes a Member to have a deficit in its Adjusted Capital Account,
or (ii) increases a Member’s deficit in its Adjusted Capital Account. If a Member receives an
allocation of Loss or deduction (or item thereof), or any distribution, that causes the Member to
have a deficit in its Adjusted Capital Account at the end of any taxable year, then all items of
income and gain of the Company (consisting of a pro rata portion of each item of Company income,
including gross income and gain) for that taxable year shall be allocated to that Member before
any other allocation is made of Company items for that taxable year, in the amount and proportion
required to eliminate the deficit as quickly as possible. This Section 8.3(a) is intended to comply
with, and shall be interpreted consistently with, the “qualified income offset” provisions of the
Regulations promulgated under Code Section 704(b).
(b) Minimum Gain Chargeback. Except as set forth in Regulation
Section 1.704-2(f)(2), (3), (4) and (5), if, during any taxable year, there is a net decrease in
Minimum Gain, each Member, prior to any other allocation pursuant to this Article 8, shall be
specially allocated items of gross income and gain for such taxable year (and, if necessary,
subsequent taxable years) in an amount equal to that Member’s share of the net decrease of
Minimum Gain, computed in accordance with Regulation Section 1.704-2(g). Allocations of gross
income and gain pursuant to this Section 8.3(b) shall be made first from gain recognized from the
disposition of Company assets subject to Nonrecourse Liabilities to the extent of the Minimum
Gain attributable to those assets, and thereafter, from a pro rata portion of the Company’s other
items of income and gain for the taxable year. It is the intent of the parties hereto that any allocation
pursuant to this Section 8.3(b) shall constitute a “minimum gain chargeback” under Regulation
Section 1.704-2(f).
(c) Contributed Property and Book-Ups. In accordance with Code
Section 704(c) and the Regulations thereunder, as well as Regulation Section 1.704-
1(b)(2)(iv)(d)(3), income, gain, loss and deduction with respect to any property contributed (or
deemed contributed) to the Company shall, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted basis of the property to the
Company for federal income tax purposes and its initial Adjusted Book Value at the date of
contribution (or deemed contribution). If the Adjusted Book Value of any Company asset is
adjusted as provided herein, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted basis of such asset
for federal income tax purposes and its Adjusted Book Value in the manner required under Code
Section 704(c) and the Regulations thereunder.
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(d) Code Section 754 Adjustment. To the extent an adjustment to the tax basis
of any Company asset pursuant to Code Section 734(b) or 743(b) is required, pursuant to
Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of the adjustment to the Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis),
and the gain or loss shall be specially allocated to the Members in a manner consistent with the
manner in which their Capital Accounts are required to be adjusted pursuant to that section of the
Regulations.
(e) Nonrecourse Deductions. Nonrecourse Deductions for a taxable year or
other period shall be allocated among the Members in proportion to their respective Investor
Hurdle Return Share.
(f) Member Loan Nonrecourse Deductions. Any Member Loan
Nonrecourse Deduction for any taxable year or other period shall be specially allocated to the
Member who bears the risk of loss with respect to the loan to which the Member Loan Nonrecourse
Deduction is attributable in accordance with Regulation Section 1.704-2(b).
(g) Tax Matters Member. The Managing Member shall be the “tax matters
partner” of the Company pursuant to section 6231(a)(7) of the Code. As tax matters partner,
Managing Member shall take such action as may be necessary to cause each Member to become a
“notice partner” within the meaning of section 6223 of the Code. Managing Member shall inform
each Member of all significant matters that may come to its attention in its capacity as tax matters
partner by giving notice thereof within ten (10) days after becoming aware thereof and, within
such time, shall forward to each Member copies of all significant written communications it may
receive in such capacity. This provision is not intended to authorize such Member to take any
action left to the determination of an individual Member under sections 6222 through 6232 of the
Code.
(h) Subsequent Allocations. Any special allocations of items of income, gain,
loss or deduction pursuant to this Section 8.3, as applicable, hereof shall be taken into account in
computing subsequent allocations of Profits pursuant to this Article 8, so that the net amount of
any items so allocated and the Profits, Losses and all other items allocated to each Member
pursuant to this Article 8 shall, to the extent possible, be equal to the net amount that would have
been allocated to each such Member pursuant to the provisions of this Article 8 if such special
allocations had not been required.
Section 8.4 Other Allocation and Distribution Rules.
(a) Authority of Managing Member. Except as otherwise provided in
Section 8.4(d) hereof, the timing and amount of all distributions shall be made as set forth in
Section 8.1 hereof. The Managing Member is hereby authorized, upon the advice of the
Company’s tax counsel, to amend this Article 8 to comply with the Code and the Regulations
promulgated under Code Section 704(b); provided, however, that no such amendment shall have
a materially adverse effect to a Member without such Member’s prior written consent.
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(b) Transfer of Membership Interest. If any Membership Interest is
Transferred during any accounting period in compliance with the provisions of this Agreement,
Profits, Losses, each item thereof and all other items attributable to such Interest for such period
shall be divided and allocated between the transferor and the transferee by taking into account their
varying interests during the period in accordance with Code Section 706(d), using any conventions
permitted by law and selected by the Managing Member.
(c) Withholding. All amounts required to be withheld by the Company
pursuant to Section 1446 of the Code or any other provision of federal, state or local tax law shall
be treated as amounts actually distributed to the affected Members pursuant to this Article IV for
all purposes under this Agreement.
(d) Limitation on Distributions. Notwithstanding any provision of Section
8.1 hereof to the contrary, the Company shall not make any distributions to the extent that the
Company shall have received from its tax counsel an opinion advising that such distributions are
prohibited under the Act.
ARTICLE 9
WITHDRAWAL, DISSOLUTION, LIQUIDATION, AND TERMINATION
Section 9.1 Dissolution, Liquidation, and Termination Generally. The Company shall be
dissolved upon the first to occur of any of the following:
(a) The sale or disposition of all of the assets of the Company and the receipt,
in cash, of all consideration therefor, the distribution thereof in accordance with Section 8.1, and
the determination of the Members not to continue the business of the Company:
(b) The determination of all of the Members to dissolve the Company; and
(c) The occurrence of any event which, as a matter of law, requires that the
Company be dissolved.
Section 9.2 Liquidation and Termination. Upon dissolution of the Company, the Managing
Member shall act as liquidator or may appoint one or more other Persons as may be approved by
all of the other Members as liquidator. Managing Member or any of its Affiliates may receive a
reasonable fee or commission as compensation for acting in its capacity as liquidator. The
liquidator shall proceed diligently to wind up the affairs of the Company and make final
distributions as provided herein. The costs of liquidation shall be a Company expense. Until final
distribution, the liquidator shall continue to operate the Company properties with all of the power
and authority of the Managing Member hereunder. The steps to be accomplished by the liquidator
are as follows:
(a) as promptly as possible after dissolution and again after final liquidation,
the liquidator shall cause a proper accounting to be made by the Company’s certified public
accountants of the Company’s assets, liabilities, and operations through the last day of the calendar
month in which the dissolution shall occur or the final liquidation shall be completed, as applicable;
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(b) the liquidator shall pay all of the debts and liabilities of the Company or
otherwise make adequate provision therefor (including the establishment of a cash escrow fund
for contingent liabilities in such amount and for such term as the liquidator may reasonably
determine); and
(c) all remaining assets of the Company shall be distributed to the Members in
accordance with Section 8.1(a).
Section 9.3 Deficit Capital Accounts. No Member shall be required to pay to the Company,
to any other Member or to any third party any deficit balance which may exist from time to time
in the Member’s Capital Account.
Section 9.4 Certificate of Dissolution. On completion of the distribution of Company assets,
the Managing Member (or such other person as the Act may require or permit) shall file a
certificate with the Secretary of State of the State of Delaware, cancel any other filings made
pursuant to Section 2.4, and take such other actions as may be necessary to terminate the existence
of the Company.
ARTICLE 10
INTENTIONALLY DELETED
ARTICLE 11
MISCELLANEOUS PROVISIONS
Section 11.1 Notices. All notices provided for or permitted to be given pursuant to this
Agreement must be in writing and shall be given or served by (i) depositing the same in the United
States mail addressed to the party to be notified, postpaid and certified with return receipt
requested, (ii) by delivering such notice in person to such party, or causing such notice to be
delivered by a recognized national overnight delivery service, or (iii) by fax, provided, however,
that a hard copy of such notice is sent simultaneously as provided in (i) or (ii) above. All notices
are to be sent to or made at the addresses set forth on Exhibit A attached hereto. All notices given
in accordance with this Agreement shall be deemed given one (1) business day after such notice
is either deposited in the U.S. mail or delivered by a recognized national overnight delivery service.
By giving written notice thereof, each Member shall have the right from time to time to change its
address pursuant hereto.
Section 11.2 Governing Law. This Agreement and the obligations of the Members hereunder
shall be construed and enforced in accordance with the laws of the State of Delaware, excluding
any conflicts of law rule or principle which might refer such construction to the laws of another
state or country. Each Member submits to the jurisdiction of the state and federal courts in the
State of Delaware.
Section 11.3 Entireties; Amendments. This Agreement and its exhibits constitute the entire
agreement between the Members relative to the formation of the Company. Except as otherwise
provided herein, no amendments to this Agreement shall be binding upon any Member unless set
forth in a document duly executed by such Member.
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Section 11.4 Waiver. No consent or waiver, express or implied, by any Member of any breach
or default by any other Member in the performance by the 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 of the same or any other obligation hereunder.
Failure on the part of any Member to complain of any act or to declare any other Member in
default, irrespective of how long such failure continues, shall not constitute a waiver of rights
hereunder.
Section 11.5 Severability. If any provision of this Agreement or the application thereof to any
Person or circumstances shall be invalid or unenforceable to any extent, and such invalidity or
unenforceability does not destroy the basis of the bargain between the parties, then the remainder
of this Agreement and the application of such provisions to other Persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent permitted by law.
Section 11.6 Ownership of Property and Right of Partition. A Membership interest in the
Company shall be personal property for all purposes. No Member shall have any right to partition
the Project owned by the Company.
Section 11.7 Captions, References. Pronouns, wherever used herein, and of whatever gender,
shall include natural persons and corporations and associations of every kind and character, and
the singular shall include the plural wherever and as often as may be appropriate. Article and
section headings are for convenience of reference and shall not affect the construction or
interpretation of this Agreement. Whenever the terms “hereof”, “hereby”, “herein”, or words of
similar import are used in this Agreement they shall be construed as referring to this Agreement
in its entirety rather than to a particular section or provision, unless the context specifically
indicates to the contrary. Any reference to a particular “Article” or a “Section” shall be construed
as referring to the indicated article or section of this Agreement unless the context indicates to the
contrary.
Section 11.8 Involvement of Members in Certain Proceedings. Should any Member become
involved in legal proceedings unrelated to the Company’s business in which the Company is
required to provide books, records, an accounting, or other information, then such Member shall
indemnify the Company from all expenses incurred in conjunction therewith.
Section 11.9 Interest. No amount charged as interest on loans hereunder shall exceed the
maximum rate from time to time allowed by applicable law.
Section 11.10 Specific Performance. The parties recognize that irreparable injury will result
from a breach of any provision of this Agreement and that money damages will be inadequate to
fully remedy such injury. Accordingly, in the event of a breach or threatened breach of one or
more of the provisions of this Agreement, any party who may be injured shall be entitled to seek
(in addition to any other remedies that may be available to that party) one or more preliminary or
permanent orders: (i) restraining and enjoining any act which would constitute a breach, or (ii)
compelling the performance of any obligation that, if not performed, would constitute a breach.
Section 11.11 Counterparts. This Agreement may be executed in two or more counterparts, each
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of which shall be deemed an original, and all of which together shall constitute one and the same
document.
ARTICLE 12
SPE PROVISIONS
Section 12.1 Separateness and Operations. Since the Company’s creation, the Company has
and shall:
(a) maintain books, accounts, records, financial statements, invoices and
checks which are separate and apart from those of any other Person;
(b) hold itself out as being a Person separate and apart from any other Person
and not as a division or part of another Person;
(c) conduct its business in its own name;
(d) exercise reasonable efforts to correct any known misunderstanding actually
known to it regarding its separate identity, and maintain an arm’s-length relationship with its
Affiliates;
(e) pay its own liabilities out of its own funds (including the salaries of its own
employees) and reasonably allocate any overhead that is shared with an Affiliate, including, but
not limited to, paying for shared office space and services performed by any officer or employee
of an Affiliate;
(f) maintain a sufficient number of employees in light of its contemplated
business operations;
(g) observe all applicable limited liability company formalities in all material
respects;
(h) not commingle its assets with those of any other Person and shall hold such
assets in its own name;
(i) not assume, guarantee or become obligated for the debts of any other
Person, and shall not hold out its credit as being available to satisfy the obligations or securities of
others;
(j) not acquire obligations or securities of its members or partners;
(k) not pledge its assets for the benefit of any other Person (except for the
benefit of lender(s) for loan(s) for the Project) and shall not make any loans or advances (except
for initial deposits that may be due on service contracts in the ordinary course of business) to any
Person;
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(l) maintain adequate capital in light of its contemplated business operations;
(m) not own any asset or property other than (i) the Project, and (ii) incidental
personal property necessary for the ownership, management and operation of the Project; and
(n) not engage in any business other than the ownership, management and the
operation of the Project.
Section 12.2 Representations, Warranties and Indemnities. HK Calvert Manager and Phil
Knox (collectively the “Indemnitors”) hereby, jointly and severally, make the following
representations and warranties to Ocwen Member concerning the Company and the Project:
(a) Since the Company’s creation through the Effective Date, the Company has
complied with the separateness covenants set forth in Section 12.1 above.
(b) No Membership Interest in the Company is subject as of the Effective Date
to any liens or other encumbrances, and HK Calvert Manager or HK Fund Calvert Crossings have
full authority to execute this Agreement and that no other members or managers of the Company
exist as of the Effective Date; and
(c) As of the Effective Date, the Property is not subject to any liens or other
monetary encumbrances which will not be removed at settlement, other than the lien of a deed of
trust securing a loan from ABC Bank and those matters of exception noted in that certain
Commonwealth Land Title Insurance Company Commitment for Title Insurance (Commitment
NO. 12-345678).
The Indemnitors, jointly and severally, shall defend, indemnify and hold harmless Ocwen Member
from and against all costs, expenses, claims, causes of action, losses, liabilities and damages,
including reasonable attorneys’ fees and court costs, arising out of or as a result of a breach of the
representations and warranties set forth hereinabove.
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[SIGNATURE PAGE 1 OF 3 OF OPERATING AGREEMENT OF
HK CALVERT CROSSINGS, LLC]
Executed effective as of the date above written.
Ocwen Member
By: Ocwen Capital Fund VI, LP,
a Texas limited partnership
By:
Name: Morgan James
Title: Managing Director
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[SIGNATURE PAGE 2 OF 3 OF OPERATING AGREEMENT OF
HK CALVERT CROSSINGS, LLC]
Executed effective as of the date above written.
HK Calvert Manager, LLC,
a Delaware limited liability
By:
Name: Phil Knox
Title: Managing Director
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[SIGNATURE PAGE 3 OF 3 OF OPERATING AGREEMENT OF
HK CALVERT CROSSINGS, LLC]
Executed effective as of the date above written.
HK Fund Calvert Crossings, LLC,
a Delaware limited liability
By:
Name: Phil Knox
Title: Managing Director
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JOINDER
The following Indemnitor hereby join in this Agreement for the sole purpose of
specifically agreeing to the representations, warranties and indemnity obligations expressly set
forth in Article 12 of this Agreement.
Phil Knox
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SCHEDULE 1.1
GLOSSARY OF CERTAIN DEFINED TERMS
As used in this Agreement, the following terms shall have the following meanings:
“Act” means the Delaware Limited Liability Company Act, Delaware Code, Corporations and
Associations, Title 4A, et seq., as it may be amended from time to time and including any successor
statute.
“Adjusted Book Value” means, with respect to any asset, such asset’s adjusted basis for federal
income tax purposes, with the following exceptions and adjustments:
(i) The initial Adjusted Book Value of any asset contributed to the Company by a
Member shall be the fair market value of such asset (unreduced by liabilities secured by such asset)
as determined by the contributing Member and the Managing Member;
(ii) The Adjusted Book Values of all Company assets shall be adjusted to equal their
respective fair market values (unreduced by liabilities secured by such assets), as determined by
the Managing Member as of the following times: (a) the acquisition from the Company of an
additional Membership Interest by any new or existing Member in exchange for more than a de
minimis Capital Contribution; (b) the distribution of the Company to a Member of more than a de
minimis amount of Property as consideration for a Membership Interest if the Managing Member
determines that such adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company; and (c) the liquidation of the Company within the
meaning of Regulation Section 1.704-1(b)(2)(ii)(g);
(iii) The Adjusted Book Value of any Company asset distributed to any Member shall
be the fair market value of such asset (unreduced by liabilities secured by such asset) on the date
of distribution;
(iv) The Adjusted Book Value of Company assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or
Code Section 743(b), but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulation Section 1.704-1(b)(iv)(m) and Section 8.3(d)
hereof; provided, however, that the Adjusted Book Values shall not be adjusted pursuant to this
subsection (iv) to the extent that the Managing Member determines that an adjustment pursuant to
subsection (ii) above is necessary or appropriate in connection with a transaction that otherwise
would result in an adjustment pursuant to this subsection (iv).
(v) The Adjusted Book Value of each asset determined or adjusted pursuant to
subsections (i), (ii) or (iv) above thereafter shall be adjusted by the Depreciation taken into account
with respect to such asset in computing Profit or Loss.
“Adjusted Capital Account” means, with respect to a Member, such Member’s Capital Account
as of the end of the fiscal year, as the same is specially computed to reflect the adjustments required
or permitted to be taken into account in applying Regulations Section 1.704-1(b)(2)(ii)(d)
(including adjustments for Minimum Gain and partner nonrecourse debt minimum gain).
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“Affiliate” means either:
(i) with respect to any Person that is an entity, including general partnership, limited
partnership, corporation, association, limited liability company, trust, business trust, or any other
firm or organization:
(A) any other Person directly or indirectly Controlling, Controlled by, or under
common Control with such entity;
(B) any other Person owning ten percent (10%) or more of the outstanding
voting interests in such entity;
(C) any officer, director, general partner, manager or managing Member of such
entity; or
(D) any other Person that is an officer, director, general partner, manager,
managing member or holder of ten percent (10%) or more of the voting interests of any other
Person described in subsections (A) through (C) above; and
(ii) with respect to any Person who is an individual:
(A) any other Person directly or indirectly Controlled by such individual;
(B) any parent, grandparent, adult sibling (by birth or by marriage), adult child
or adult grandchild, or the spouse, of such individual;
(C) any trust established for the benefit of such individual, for the benefit of any
minor child or minor grandchild of such individual, or for the benefit of any other individual
described in subsection (B) above; or
(D) the testamentary estate, executor, executrix, administrator, personal
representative, heir or devisee of such individual.
“Business Day” means any day other than Saturday, Sunday, or other day on which commercial
banks in Washington, DC and/or Baltimore, Maryland are authorized or required to close under
the laws of the each such jurisdiction.
“Business Plan” means that business plan for the initial development, financing, leasing,
ownership and disposition of the Project, as attached hereto as Exhibit D.
“Capital Account” means the capital account maintained by the Company for each Member in
accordance with the following provisions:
(i) A Member’s Capital Account shall be credited with the Member’s Capital
Contributions, the amount of any Company liabilities assumed by the Member (or that are secured
by Property distributed to the Member), the Member’s distributive share of Profit and any item in
the nature of income or gain specially allocated to such Member pursuant to the provisions of
Article 8 (other than Section 8.3) hereof; and
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(ii) A Member’s Capital Account shall be debited with the amount of money and the
Adjusted Book Value of any Property distributed to the Member, the amount of any liabilities of
the Member assumed by the Company (or that are secured by property contributed by the Member
to the Company), the Member’s distributive share of Loss and any item in the nature of expenses
or losses specially allocated to the Member pursuant to the provisions of Article 8 (other than
Section 8.3) hereof.
If any Membership Interest is Transferred pursuant to the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent that the Capital Account is
attributable to the Transferred Membership Interest. If the Adjusted Book Value of Property is
adjusted pursuant to Section 8.3(c) hereof, the Capital Account of each Member shall be adjusted
to reflect the aggregate adjustment in the same manner as if the Company had recognized gain or
loss equal to the amount of such aggregate adjustment. It is intended that the Capital Accounts of
all Members shall be maintained in compliance with the provisions of Regulation Section 1.704-
1(b), and all provisions of this Agreement relating to the maintenance of Capital Accounts shall
be interpreted and applied in a manner consistent with such Regulation.
“Capital Contribution” means, with respect to each Member, the amount of cash and the
Adjusted Book Value of any property (net of liabilities assumed by the Company resulting from
such contribution and liabilities to which the property is subject) contributed to the Company by
that Member, including, with respect to the Managing Member, those funds expended by the
Managing Member and allocated to the Company as set forth on Schedule 6.1(a) attached hereto.
“Capital Transaction” means any transaction that results in the receipt by the Company of cash
or other consideration other than Capital Contributions or other contributions to capital, including,
without limitation, proceeds of sales or exchanges or other dispositions of real or personal property
(including, specifically, any sale of the Project, or any portion thereof, financings and refinancings,
condemnations, recoveries of damage awards and insurance proceeds.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any
corresponding provisions of succeeding law.
“Company” means HK Calvert Crossings, LLC, a Delaware limited liability company.
“Control” (or any form thereof) means ownership of more than fifty percent (50%) of the voting
interests of the entity to which the term is applied.
“Depreciation” means, for each taxable year or other period, an amount equal to the depreciation,
amortization or other cost recovery deduction allowable with respect to an asset for the year or
other period, except that if the Adjusted Book Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of the year or other period, Depreciation will be an
amount which bears the same ratio to the beginning Adjusted Book Value as the federal income
tax depreciation, amortization or other cost recovery deduction for the year or other period bears
to the beginning adjusted tax basis, provided that if the federal income tax depreciation,
amortization, or other cost recovery deduction for the year or other period is zero, Depreciation
shall be equal to the federal income tax depreciation, amortization and other cost recovery
deductions that would be allowable if the federal income tax basis of the asset equals its Adjusted
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Book Value.
“Fiscal Year” means the date hereof through December 31, 2013, and each calendar year
thereafter.
“Including” means including without limitation.
“Initial Capital Contribution” means a Capital Contribution made pursuant to Section 6.1.
“Internal Rate of Return” means the annual percentage rate, compounded monthly, which, when
utilized to calculate the present value of all distributions of Net Cash Flow and/or Net Cash From
Capital Transactions to a Member, causes such present value of distributions to equal the present
value of such Member’s aggregate Capital Contributions to the Company. The present value of a
Member’s Initial Capital Contributions to the Company is the nominal amount thereof and the
present value of a Member’s Additional Capital Contributions to the Company (other than Initial
Capital Contributions) is the nominal amount of such Additional Capital Contribution discounted
back from the date such Additional Capital Contribution was made utilizing said annual percentage
rate. All equity contributions and distributions will be assumed to have occurred on the last day
of the month in which they were made and all present values shall be calculated as if discounted
back to the date of the last day of the month in which the Initial Capital Contribution was made
based upon the actual number of days (including the first day, but excluding the last day) occurring
during the period for which such period is payable, over a year of 365 days.
“Investor Hurdle Return Share” means a fraction, the numerator of which shall be the respective
Percentage Interest of a certain Investor Member and the denominator of which shall be the
aggregate Percentage Interests of all Investor Members – as set forth opposite the name of such
Member under the column “Investor Hurdle Return Share” on Exhibit A attached hereto, as
such may be adjusted from time to time pursuant to the terms hereof.
“Investor Member” means by reference Ocwen Member and HK Fund Calvert Crossings.
“Land” means that portion of the real property located at located at the intersection of Maryland
Routes 2 and 4 and Olivet Road in Calvert County, Maryland, more particularly described on
Exhibit C attached hereto.
“Management Agreement” means that certain Property Management Agreement to be entered
into by and between the Company and HK Calvert Manager effective as of the Effective Date in
form similar to Exhibit B attached hereto.
“Managing Member” means HK Calvert Manager and each Person hereafter designated as the
Managing Member in accordance with this Agreement, until such Person ceases to be the
Managing Member.
“Member Loan Nonrecourse Deduction” means any Company deduction that would be a
Nonrecourse Deduction if it were not attributable to a loan made or guaranteed by a Member within
the meaning of Regulation Section 1.704.2(i).
“Members” means the HK Calvert Manager, HK Fund Calvert Crossings, Ocwen Member and
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any Person subsequently admitted as a Member pursuant to this Agreement.
“Membership Interests” means all of the rights and interests of whatsoever nature of the
Members in the Company, including the right to approve matters to the extent herein expressly
provided, to receive distributions of funds, and to receive allocations of income, gain, loss,
deduction, and credit.
“Minimum Gain” has the meaning set forth in Regulation Section 1.704-2(d). Minimum Gain
shall be computed separately for each Member in a manner consistent with the Regulations under
Code Section 704(b).
“Net Cash Flow” means all cash funds derived from the operations of the Company (including
interest received on reserves), without reduction for any non-cash charges, but less cash funds used
to pay current operating expenses and to pay or establish reasonable reserves for future expenses,
debt payments, partial or complete redemptions of Interests, capital improvements and
replacements, as determined by the Managing Member in its reasonable discretion, excluding
however Net Cash Flow From Capital Transactions.
“Net Cash From Capital Transactions” means the net cash proceeds to the Company from all
Capital Transactions of the Company less any portion of the proceeds used to pay debts and
liabilities of the Company, or to establish reserves, all as determined by the Managing Member in
its reasonable discretion.
“Nonrecourse Deductions” has the meaning set forth in Regulation Section 1.704-2(b)(1). The
amount of Nonrecourse Deductions for a taxable year of the Company equals the net increase, if
any, in the amount of Minimum Gain during that taxable year, determined according to the
provisions of Regulation Section 1.704.2(c).
“Nonrecourse Liability” means any liability of the Company with respect to which no Member
and no Person related to a Member has personal liability determined in accordance with Code
Section 752 and the Regulations promulgated thereunder.
“Percentage Interest” of a Member shall mean and refer to the percentage participation in the
Company of such Member as set forth opposite the name of such Member under the column
“Percentage Interest” on Exhibit A attached hereto, as such percentage may be adjusted from
time to time pursuant to the terms hereof.
“Person” means an individual or an entity.
“Preferred Return” means an amount that accrues at a per annum rate of eight percent (8%) on
each Member’s Capital Contributions. The Preferred Return shall accrue on all Capital
Contributions from the dates such contributions are made until such Capital Contributions are
returned to the contributing Member. The Preferred Return shall be cumulative and shall
compound annually.
“Prime Interest Rate” shall mean the rate of interest per annum from time to time published in
the Wall Street Journal as the prime rate of interest. The Prime Interest Rate shall change with
each change announced by such paper. If the Wall Street Journal ceases to publish the prime rate,
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the Managing Member shall pick a new reference source that is reasonably comparable.
“Profits” and “Losses” mean, for each taxable year or other period, an amount equal to the
Company’s taxable income or loss for the year or other period, determined in accordance with
Section 703(a) of the Code (including all items of income, gain, loss or deduction required to be
stated separately under Section 703(a)(1) of the Code), with the following adjustments:
(i) Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses will be added to taxable income or
loss;
(ii) Any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Section 705(a)(2)(B) expenditures under Regulations Section 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account in computing Profits or Losses, will be subtracted from taxable
income or loss;
(iii) Gain or loss resulting from any disposition of Company property with respect to
which gain or loss is recognized for federal income tax purposes will be computed by reference to
the Adjusted Book Value of the property, notwithstanding that the adjusted tax basis of the
property differs from its Adjusted Book Value;
(iv) In lieu of depreciation, amortization and other cost recovery deductions taken into
account in computing taxable income or loss, there will be taken into account Depreciation for the
taxable year or other period;
(v) Any items which are specially allocated under Section will not affect calculations
of Profits or Losses; and
(vi) If the Adjusted Book Value of any Company asset is adjusted under Section 8.3,
the adjustment will be taken into account as gain or loss from disposition of the asset for purposes
of computing Profits or Losses.
“Project” means the Land and those certain buildings, improvements, fixtures and equipment
thereon subject to certain leases as reflected in the Business Plan attached hereto.
SCHEDULE 6.1(A)
INITIAL CAPITAL CONTRIBUTIONS
Initial Capital Contribution
Ocwen Member $305,000.00
HK Fund Calvert
Crossings
$105,000.00
HK Calvert
Manager*
$1,000.00
Total $411,000.00
EXHIBIT A
Schedule of Members
Member Notice
Address
Percentage
Interest
Investor Hurdle
Return Share
Ocwen Member 18.60 % 74.39 %
HK Fund Calvert
Crossings 6.40 % 25.61 %
HK Calvert
Manager 75.00 % 0.00 %
Totals 100.00% 100.00%
EXHIBIT B
Property Management Agreement
(Property Management Agreement for the Project approved by Ocwen Member, HK Fund
Calvert Crossings and HK Calvert Manager as of the Effective Date of this Agreement to be
attached hereto)