Exhibit 10.1

 

FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF

LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC

 

This FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement") is entered into as of November 10, 2015 (the "Effective Date"), by
and between LEWIS SANTA PAULA MEMBER, LLC, a Delaware limited liability company
("Lewis"), and LIMONEIRA EA1 LAND, LLC, a Delaware limited liability company
("Limoneira"), as the members and Lewis as the Manager of Limoneira Lewis
Community Builders, LLC, a Delaware limited liability company (the "Company").
This Agreement is entered into with reference to the following facts and
circumstances:

 

RECITALS

 

WHEREAS, the Company was formed under the Act pursuant to the filing of a
Certificate of Formation with the Secretary of State of the State of Delaware
(the "Certificate") on November 3, 2015 (the "Formation Date");

 

WHEREAS, the Company is governed by that certain Limited Liability Company
Agreement entered into by Limoneira effective as of the Formation Date (the
"Original Agreement");

 

WHEREAS, Limoneira Company, a Delaware corporation ("LIMCO") and Lewis have
entered into that certain agreement captioned "Contribution Agreement" dated as
of September 4, 2015 (the "Contribution Agreement");

 

WHEREAS, Limoneira contributed or caused to be contributed to the Company that
certain “Project Real Property"” identified on the map attached as Exhibit A
together with all of the other “Project Property” as defined in the Contribution
Agreement including, in part, the Government Agreement, Pre-Closing Agreements
and Project Entitlements, all as defined in the Contribution Agreement. As used
herein the term “Property"” means the “Project Property” as defined in
Contribution Agreement;

 

WHEREAS, pursuant to the Contribution Agreement (i) Lewis has agreed to purchase
fifty percent (50%) of Limoneira's entire interest in the Company (the "Assigned
Interest") for Twenty Million Dollars ($20,000,000), and (ii) Limoneira has
agreed to assign and transfer the Assigned Interest to Lewis. The Assigned
Interest will be transferred and conveyed by Limoneira to Lewis pursuant to that
certain Assignment of Company Interest entered into as of the Effective Date
(the "Assignment Agreement");

 

   

 

 

 

WHEREAS, the Members desire to cause the Company to develop the Project Real
Property as contemplated in the Government Agreement, Pre-Closing Agreements and
Project Entitlements, the Approved Business Plan and Approved Budget;

 

WHEREAS, each Member acknowledges and agrees that, (i) a portion of East Area 1
(such portion, as identified on Exhibit A, the "Retained Property") was conveyed
to the Company, but Limoneira has retained beneficial ownership thereof, and the
Retained Property will be conveyed to Limoneira (or its designated Affiliate) as
soon as possible following the recordation of the Final Tract Map No. 5854 for
the Property or other final tact map or parcel map that subdivides the Retained
Property as a legal parcel (and, in all events, prior to commencement of
construction activity on the Property); (ii) Limoneira has agreed to reimburse
the Company for certain infrastructure costs incurred by the Company that will
benefit the Retained Property and certain adjacent real property owned by
Limoneira commonly known as "East Area 2"; and (iii) the Company has agreed to
lease to Limoneira certain agricultural land contained within the Property,
until the Company requires such land to develop the Project;

 

WHEREAS, each Member intends that the Company will (i) own, develop, subdivide,
entitle, maintain, improve, hold for investment, market and dispose of the
Property in accordance with the business plan and budget approved by the
Executive Committee; (ii) perform the Assigned Agreements; and (iii) undertake
such other activities that are necessary, incidental, related, or convenient to
the foregoing as may be approved by the Executive Committee (the foregoing
subdivision, entitlement and development of the Property referred to
collectively as the "Project" and the Company's activities in connection with
the Project referred to as the "Business"); and

 

WHEREAS, Limoneira and Lewis desire to enter into this Agreement (i) to provide
for the admission of Lewis into the Company as a member therein, and (ii) to
amend, restate and supersede the Original Agreement in its entirety to set forth
the rights, duties and obligations of the Members and to set forth the terms and
conditions for the Company's management including, without limitation, the terms
and conditions pursuant to which the Company will undertake the development of
the Property.

 

NOW, THEREFORE, in consideration of the respective obligations undertaken by the
parties and other good and adequate consideration, the receipt of which is
hereby acknowledged, the parties hereby agree to amend, supersede and completely
restate the Original Agreement in its entirety as follows:

 

SECTION 1.
DEFINITIONS; THE COMPANY

 

1.1 Definitions.

 

Capitalized words and phrases used in this Agreement shall have the meanings set
forth in Section 12.26.

 

  -2- 

 

 

 

1.2 Admission of Lewis.

 

As of the Effective Date, Lewis is hereby admitted as a member into the Company
and is hereby entitled to exercise all of the rights, powers and privileges, and
is hereby obligated to perform all of the duties and obligations, of a member as
set forth in this Agreement and under the Act. The Company shall not dissolve or
terminate as a result of the foregoing admission; on the contrary, the Company's
business shall continue without interruption and without any break in
continuity.

 

1.3 Formation.

 

The Company was formed as a Delaware limited liability company on the Formation
Date pursuant to the Act by the filing of the Certificate. The Members hereby
adopt this Agreement as the Company's limited liability company agreement within
the meaning of the Act.

 

1.4 Name.

 

The name of the Company is Limoneira Lewis Community Builders, LLC. The name of
the Company may be changed from time to time upon the approval of the Executive
Committee.

 

1.5 Purposes.

 

The purposes of the Company are to (a) undertake and complete the Project and
operate the Business, and (b) engage in such other activities as may be approved
by the Executive Committee and permissible under the Act.

 

1.6 Intent.

 

It is the intent of the Members that the Company shall always be operated in a
manner consistent with its treatment as a "partnership" for federal and state
income tax purposes. No Member shall take any action inconsistent with the
express intent of the parties hereto. Notwithstanding the foregoing, the Company
is not a "partnership" for purposes of the Delaware Uniform Partnership Act or
the Delaware Uniform Limited Partnership Act and the Members are not partners of
each other.

 

1.7 Offices.

 

The Company shall maintain a registered office at a location designated by the
Executive Committee. The registered office may be changed to any other place as
the Executive Committee may designate from time to time. The Company's principal
place of business shall be at 1156 North Mountain Avenue, Upland, California
91786-3633, or at such other location as may be approved by the Executive
Committee. The Company may maintain one or more additional offices in such
locations as may be approved from time to time by the Executive Committee.

 

  -3- 

 

 

1.8 Public Filings.

 

The Executive Committee shall designate agents for service of legal process on
the Company in Delaware and California from time to time in accordance with
applicable law. Any agent(s) so designated may be changed from time to time by
the Executive Committee. The Manager shall cause to be filed with the California
Secretary of State such documents as are necessary to qualify the Company to
transact business in California as a foreign limited liability company (the
"Application for Registration"). The Executive Committee shall cause to be filed
any amendments to the Certificate and/or the Application for Registration that
are necessary to reflect amendments to this Agreement adopted by the Members in
accordance with the terms hereof or to comply with the requirements of
applicable laws.

 

1.9 Term.

 

The term of the Company commenced upon the filing of the Certificate with the
Delaware Secretary of State and shall continue until the Company is dissolved in
accordance with Section 9.1 of this Agreement.

 

SECTION 2.
MEMBERS; CAPITAL CONTRIBUTIONS

 

2.1 Members.

 

The name, notice address and Percentage Interest of each Member as of the
Effective Date are set forth on Exhibit B attached hereto. Upon the admission of
any additional or substituted member in accordance with this Agreement, or upon
any other change in the notice address or Percentage Interest of any Member, the
Executive Committee shall update Exhibit B to reflect the then current
Percentage Interests of the Members.

 

2.2 Member Funding Prior to Obtaining Project Loan.

 

(a) Initial Capital Contributions. Solely for federal and California state
income tax purposes, as a result of the Assignment Agreement, (i) Lewis is
treated as purchasing an undivided fifty percent (50%) interest in the Property
and the Company's other assets from Limoneira, and (ii) each of Limoneira and
Lewis is treated immediately thereafter as contributing an undivided fifty
percent (50%) interest in the Property and each such other asset to the Company
in exchange for such Member's Membership Interest. Notwithstanding the
foregoing, neither Member has actually acquired title to the Property or any
other asset of the Company under California state law or otherwise. The Members
acknowledge and agree that the fair market value of the Property is equal to
$40,000,000. As a result of the transactions described above in this
Section 2.2(a), (A) the balance standing in Limoneira's Capital Account and
Unreturned Initial Contribution Balance has been credited on the Effective Date
by $20,000,000; and (B) the balance standing in Lewis' Capital Account and
Unreturned Initial Contribution Balance has been credited on the Effective Date
by $20,000,000. Neither the Capital Account nor the Unreturned Initial
Contribution Balance of Limoneira shall be credited as a result of the
conveyance of the Retained Property to the Company.

 

  -4- 

 

 

(b) Limoneira Pre-Assignment Expenses. The parties acknowledge and agree that
prior to the Effective Date, Limoneira and/or its Affiliates paid third-party
expenses in connection with the Project described on Schedule 2.2(b) attached
hereto in the amount of One Million Three Hundred Seventy-Four Thousand Two
Hundred Seventy-Nine and No/100 Dollars ($1,374,279) (the "Limoneira
Pre-Assignment Expenses"). The Limoneira Pre-Assignment Expenses shall be
treated as Approved Project Costs. Each of the Capital Account and Unreturned
Additional Contribution Balance of Limoneira shall be credited with the amount
of the Limoneira Pre-Assignment Expenses as of the Effective Date. As of the
Effective Date, the balance standing in Limoneira's Capital Account is equal to
the amount set forth opposite such Member's name on Exhibit B under the column
labeled "Capital Account."

 

(c) Lewis Pre-Assignment Expenses. The parties acknowledge and agree that prior
to the Effective Date, Lewis and/or its Affiliates (i) paid third-party expenses
in connection with the Project described on Schedule 2.2(c) attached hereto, and
(ii) incurred reimbursable expenses, after the execution of the Contribution
Agreement, of the type described in Section 6.8(a) and itemized on Schedule
2.2(c), in the aggregate amount of Two Hundred Seventeen Thousand Seven Hundred
Seventy-Four and 26/100 Dollars ($217,774.26) (the "Lewis Pre-Assignment
Expenses"). Each of the Capital Account and the Unreturned Additional Account
Balance of Lewis shall be credited with the amount of the Lewis Pre-Assignment
Expenses as of the Effective Date. As of the Effective Date, the balance
standing in Lewis' Capital Account is equal to the amount set forth opposite
such Member's name on Exhibit B under the column labeled "Capital Account."

 

(d) Pre-Financing Contributions.

 

(i) If the Company has insufficient funds to pay any Approved Project Costs (the
"Shortfall"), then Lewis shall be required to make Capital Contributions to the
Company to the extent reasonably necessary to enable the Company to satisfy such
Shortfall until the earlier of (i) the Capital Balancing Date, or (ii) the date
the initial Project Loan closes. The term "Capital Balancing Date" means the
date upon which the sum of (A) the Lewis Pre-Assignment Expenses, and (B) the
additional Capital Contributions made by Lewis pursuant to this Section 2.2(d)
equal the amount of the Limoneira Pre-Assignment Expenses.

 

(ii) If the initial Project Loan has not closed prior to the Capital Balancing
Date, then each Member shall be required, after the Capital Balancing Date, to
contribute fifty percent (50%) of all Capital Contributions required to enable
the Company to satisfy any Shortfall until the earlier of (1) the date the
aggregate amount contributed by such Member pursuant to this sentence equals Two
Million Five Hundred Thousand Dollars ($2,500,000), or (2) the closing of the
initial Project Loan.

 

  -5- 

 

 

(iii) After the aggregate Capital Contributions made by Limoneira pursuant to
Section 2.2(d)(ii) equal Two Million Five Hundred Thousand Dollars ($2,500,000),
the Manager shall send a notice to Limoneira that such Capital Contributions
have been made. Within ten (10) Business Days after receipt of such notice,
Limoneira shall have the right, but not the obligation, to make an initial
election to contribute fifty percent (50%) of all Capital Contributions that are
required by the Company for the next 12-month period to satisfy any Shortfall,
and then shall have that same right, on each anniversary of that first election
notice and after notice from the Manager, to make the election for the next
12-month period, all until the date that the initial Project Loan closes by
delivering written notice of each such election to Lewis. If Limoneira timely
elects to contribute fifty percent (50%) of such Capital Contributions for a
12-month period, then all Capital Contributions required for such 12-month
period by the Company to satisfy any Shortfall shall be funded by the Members in
accordance with their Percentage Interests. If Limoneira does not timely elect
to contribute fifty percent (50%) of Capital Contributions for any 12-month
period, then Lewis shall contribute all additional Capital Contributions
required to satisfy any Shortfall for such 12-month period (or, if earlier,
until the initial Project Loan closes).

 

(iv) Any Capital Contribution that a Member contributes pursuant to this
Section 2.2(d) is referred to as a ("Pre-Financing Contribution"). The Manager
shall promptly notify the Executive Committee of any Shortfalls. The Executive
Committee shall have the right, but not the obligation, to approve each such
capital call before any Member will be obligated to make any additional Capital
Contribution to the Company pursuant to this Section 2.2(d) provided any capital
call made to enable the Company to pay any “Budgeted Capital Call” or “Emergency
Expense” (each as defined in Section 2.3) shall be deemed automatically approved
by the Executive Committee on the date the Executive Committee receives notice
of such capital call. The Manager shall send approved requests for Pre-Financing
Contributions to all Members, regardless of whether a Member is required to fund
any such Capital Contribution. Any Capital Contribution that a Member is
required to make under this Section 2.2(d) shall be made on the date requested
by the Manager provided each Member shall have at least fifteen (15) days’
notice before it is required to make any such Capital Contributions. Each
Member's Capital Account and Unreturned Additional Contribution Balance shall be
credited by any Capital Contribution made by such Member pursuant to this
Section 2.2(d) on the date such contribution is made.

 

(e) Balancing Contribution. If, on the earlier of the date the initial Project
Loan closes or the dissolution of the Company, Limoneira or Lewis has not
received distributions pursuant to Section 4.2 sufficient to reduce such
Member's Unreturned Additional Contribution Balance to zero (0), then the Member
(if any) whose Unreturned Additional Contribution Balance is less than the other
Member's Unreturned Additional Contribution Balance shall be obligated within
ten (10) days thereafter to make a Capital Contribution to the Company equal to
fifty percent (50%) of such excess amount (the "Balancing Contribution"). The
contributing Member's Capital Account and Unreturned Additional Contribution
Balance shall each be credited by any Capital Contribution made by such Member
pursuant to this Section 2.2(e) on the date such contribution is made. The
Capital Contribution made by the contributing Member under this Section 2.2(e)
shall be promptly distributed by the Company to the other Member pursuant to
Section 4.2(c) (and shall reduce the non-contributing Member's Capital Account
and Unreturned Additional Contribution Balance) on the date such distribution is
made.

 

  -6- 

 

 

(f) Project Loan Contributions. Notwithstanding the terms of Section 2.2(d), if
the Executive Committee approves a Project Loan, the terms of which require the
Members to contribute additional capital to the Company (such amount, a "Project
Loan Capital Shortfall"), then each Member shall be responsible for contributing
to the Company, within five (5) Business Days (or such later date designated by
the Executive Committee) after receiving notice from the Manager of the Project
Loan Capital Shortfall, such Member's Percentage Interest of the amount of such
Project Loan Capital Shortfall. Each Member's Capital Account and Unreturned
Additional Contribution Balance shall be credited by any Capital Contribution
made by such Member pursuant to this Section 2.2(f) on the date such
contribution is made.

 

2.3 Member Funding After Obtaining Project Loan.

 

If the Company has a Shortfall that is not otherwise required to be funded by
either Member pursuant to Section 2.2(d), Section 2.2(e), Section 2.2(f),
Section 2.6 or Section 2.9, then the Manager shall promptly notify the Executive
Committee of such Shortfall. The Executive Committee shall have the right, but
not the obligation, to approve each such capital call before any Member will be
obligated to make any additional Capital Contribution to the Company pursuant to
this Section 2.3 provided any capital call made to enable the Company to pay any
Budgeted Capital Call or Emergency Expense shall be deemed automatically
approved by the Executive Committee on the date the Executive Committee receives
notice of such capital call. The term "Emergency Expense" means an expense that
is necessary (i) to prevent an immediate threat to the health, safety or welfare
of any individual in the immediate vicinity of the Property, (ii) to prevent
immediate damage or loss to any portion of the Property, (iii) to prevent the
immediate loss of value to the Property by the incurrence of any liability to
the Company or otherwise, (iv) to avoid the suspension of any necessary service
in or to any portion of the Property, (v) to avoid criminal or civil liability
on the part of the Company and/or any of the Members or the direct and/or
indirect owners thereof with respect to activities at the Property or pursuant
to this Agreement, or (vi) to prevent any default under any agreement to which
the Company is a party, including, without limitation, any loan documents
evidencing, securing or relating to any loan made to the Company. The term
"Budgeted Capital Call" means an Approved Project Cost which the Executive
Committee previously agreed in the Approved Budget or by vote of the Executive
Committee to fund by Capital Contributions.

 

Upon the approval of any capital call by the Executive Committee pursuant to
this Section 2.3, the Manager shall deliver written notice to the Members (a
"Funding Notice"). The Funding Notice shall specify (A) the amount of funding
required (such amount, the "Called Funds"); and (B) the date the Called Funds
shall be contributed to the Company, which date (the "Funding Date") shall be
not earlier than (1) fifteen (15) days following the date of the Funding Notice
if the Called Funds are not required for an Emergency Expense, or (2) three (3)
Business Days following the date of the Funding Notice if the Called Funds are
required for an Emergency Expense.

 

  -7- 

 

 

If the Executive Committee reasonably determines that the Company will have
sufficient funds from a draw under a Project Loan or from other sources to
return the Called Funds within six (6) months after the date such funds are
advanced, then the Called Funds shall be funded by the Members in proportion to
their respective Percentage Interests in the form of a loan to the Company (each
such loan, a "Member Loan"), and not as a capital contribution. If the Company
does not repay any such Member Loan within such six (6)-month period, then the
balance owing under such Member Loan (both accrued and unpaid interest and
unreturned principal) shall be deemed to have been contributed to the capital of
the Company by the Member that made such Member Loan (on the due date of such
Member Loan) (and such Member Loan shall be deemed to have been fully paid by
the Company). If the Executive Committee determines that the Company will not
have sufficient funds to return the Called Funds within such six (6)-month
period, then the Called Funds shall be funded by Capital Contributions to be
made by the Members in proportion to their respective Percentage Interests. Each
Member's Capital Account and Unreturned Additional Contribution Balance shall be
credited by any Capital Contribution made (or deemed made) by such Member
pursuant to this Section 2.3 on the date such contribution is made (or deemed
made).

 

2.4 Member Loans.

 

All Member Loans shall bear interest at the greater of (i) seven and 5/10ths
percent (7.5%) per annum, or (ii) the Prime Rate plus two hundred (200) basis
points, with such interest under clause (i) or clause (ii) compounded monthly.
In addition, each Member Loan shall be (A) due and payable in six (6) months
from the date advanced, (B) fully recourse to the Company and its assets, but
nonrecourse as to each Member and its assets, (C) repayable at any time in whole
or in part without penalty, and (D) evidenced by a promissory note executed by
the Executive Committee or by such Representative(s) of the Executive Committee
as designated by the Executive Committee on behalf of the Company, which shall
contain such terms and conditions as are commercially reasonable or as may be
agreed to by the lending Member and the Executive Committee. The repayment of
any and all Member Loans shall be subordinate to the payment of any fees or
other reimbursements required to be made by the Company pursuant to
Sections 6.8, but shall be made prior to the distribution of any Cash Flow
and/or liquidation proceeds to the Members. Accordingly, subject to the payment
of any fees and/or reimbursements required to be made under Sections 6.8, but
notwithstanding the provisions of Sections 4.1 and 9.2(b), until any and all
Member Loans are repaid in full, the Members shall receive no further
distributions from the Company (except for any such fees and/or reimbursements),
and all cash or property otherwise distributable to the Members (except for any
such fees and/or reimbursements) shall be paid to the advancing Member(s) as a
reduction of the outstanding balances of such Member Loans, with such funds
being applied first to reduce any interest accrued thereon, and then to reduce
the principal amount of such loans.

 

2.5 Failure to Fund.

 

The following provisions shall apply if any Member fails to fund in full when
due its Funding Percentage of either a Capital Contribution required under
Sections 2.2(d), (e), (f) or Section 2.3, or a Member Loan required under
Section 2.3. A Member's "Funding Percentage" with respect to a required funding
under Sections 2.2(d), (e), (f) or Section 2.3 means the percentage of each
funding that such Member is required to contribute (so that, for example, Lewis'
Funding Percentage under Section 2.2(d)(i) prior to the earlier of the Capital
Balancing Date or the date the initial Project Loan closes is 100%, but its
Funding Percentage under Section 2.3 is 50%).

 

  -8- 

 

 

(a) Delinquency. If any Member (a "Delinquent Member") fails to fund in full
when due its Funding Percentage of either a Capital Contribution required under
Sections 2.2(d), (e), (f) or Section 2.3, or a Member Loan required under
Section 2.3 and 2.4, and if the other Member (the "Non-Delinquent Member") has
fulfilled its required funding obligation (if any), with respect to that
particular capital call then (i) the Delinquent Member's funding shortfall shall
be referred to as the "Deficit Amount"; and (ii) any amount funded by the
Non-Delinquent Member with respect to that particular Funding Notice shall be
held by the Company in trust for the benefit of the Non-Delinquent Member until
the earlier of (A) the expiration of the period during which the Non-Delinquent
Member can elect either remedy pursuant to Section 2.5(b); and (B) the date the
Delinquent Member cures its failure to fund in accordance with Section 2.5(c).

 

(b) Default Remedies. If the Delinquent Member fails to fund its entire Deficit
Amount prior to the expiration of the Funding Cure Period (as defined in
Section 2.5(c) below) (the "Capital Default"), then the Non-Delinquent Member
shall have the right, but not the obligation, within thirty (30) days following
the expiration of the Funding Cure Period, to elect, by written notice to the
Manager and the Delinquent Member:

 

(i) to cancel the applicable Capital Contributions or Member Loans, in which
event all amounts funded by the Members with respect to such Capital
Contributions or Member Loans shall be promptly refunded to each of them;

 

(ii) to recover the Non-Delinquent Member's Excess Funding Amount and reduce the
amount of the required Capital Contribution or Member Loan to an amount equal to
the sum of the amounts actually funded by the Members minus the Excess Funding
Amount. The term "Excess Funding Amount" means the positive difference, if any
of (i) the aggregate amount funded by the Non-Delinquent Member, minus (ii) the
excess of (a) the quotient of the amount (if any) funded by the Delinquent
Member divided by the Delinquent Member's Funding Percentage minus (b) the
amount (if any) funded by the Delinquent Member. As an example, but without
limitation on the foregoing, assume that Lewis' Funding Percentage is 25%,
Limoneira's Funding Percentage is 75%, there is a Funding Notice for $100 of
Called Funds, Lewis funds $10 and Limoneira funds $75. In such case: (1) the
Excess Funding Amount is $45, i.e., $75 – [($10/0.25) - $10], (2) Lewis would be
treated as funding $10, and (3) Limoneira would be treated as funding $30, i.e.,
its $75 initial funding minus the $45 refund of the Excess Funding Amount.

 

(iii) to advance the entire Deficit Amount as a Default Loan to the Delinquent
Member. As of the effective date of the advance of any Default Loan, the
Delinquent Member's Capital Account and Unreturned Additional Contribution
Balance shall be increased by an amount equal to the original principal balance
of the Default Loan advanced to such Delinquent Member. Notwithstanding the
provisions of Sections 4.1, 4.2 and 9.2(b)(ii), until any and all Default Loans
advanced to the Delinquent Member are repaid in full, the Delinquent Member
shall receive no further distributions or other amounts from the Company, and
all cash or property otherwise distributable with respect to the Delinquent
Member's Membership Interest in the Company (including, without limitation, any
reimbursements under Section 6.8) shall be distributed to the Non-Delinquent
Member. Any such amounts distributed to the Non-Delinquent Member shall be
applied to repay all outstanding Default Loans made to the Delinquent Member on
a last in, first out (LIFO) basis, with such funds being applied first to reduce
any and all interest accrued on such Default Loan(s) and then to reduce the
principal amount thereof. Any amounts so applied shall be treated, for all
purposes under this Agreement, as having actually been distributed or paid to
the Delinquent Member pursuant to Sections 4.1, 4.2, 6.8 or 9.2(b) and applied
by the Delinquent Member to repay such outstanding Default Loan(s). Any Member
that has received a Default Loan shall be treated as a Delinquent Member until
such Default Loan is paid in full.

 

  -9- 

 

 

(c) Cure Rights. For a period of thirty (30) days from the due date of a Capital
Contribution or Member Loan, as applicable (such period, the "Funding Cure
Period"), the Delinquent Member shall have the right to cure its failure to
fully fund the Deficit Amount by making a payment to the Company in an amount
equal to the Deficit Amount. The Delinquent Member's payment shall be treated as
a Capital Contribution or Member Loan, as applicable, as of the date that the
Company receives the payment and any such Capital Contribution shall be credited
to the Delinquent Member's Capital Account and Unreturned Additional
Contribution Balance on the date such contribution is made.

 

(d) Loss of Voting Rights. If the outstanding balance of any and all Default
Loans made to the Delinquent Member equal or exceed Three Million Five Hundred
Thousand Dollars ($3,500,000), then, regardless of any remedy that may be
selected by the Non-Delinquent Member (and notwithstanding any other term of
this Agreement), (i) the Delinquent Member's Representatives shall not be
entitled to serve on the Executive Committee and its Representatives shall not
be entitled to otherwise vote upon any matters under this Agreement (exclusive
of any Fundamental Decision), (ii) the management of the business and affairs of
the Company shall be vested solely in the Representatives of the Non-Delinquent
Member, (iii) the rights of the Delinquent Member shall be limited solely to
those of an assignee that is not admitted as a substituted member in accordance
with the provisions of Section 8.3 (i.e., sharing in any allocations and/or
distributions of Profits, Losses (and items thereof) and Net Cash Flow and
liquidating distributions to which such Member is entitled to receive under this
Agreement), and (iv) the Delinquent Member shall not have any authority to act
for or bind the Company. For the avoidance of any doubt, the Members acknowledge
that the loss of voting and approval rights provided for in this Section 2.5(d)
shall only apply during such time period that the outstanding amount owed on any
and all Default Loans to the Delinquent Member equal or exceed Three Million
Five Hundred Thousand Dollars ($3,500,000).

 

The term "Fundamental Decision" means (A) the admission of a new member into the
Company (other than as specifically authorized under Section 8), (B) the
formation of any Company Entity, or, with respect to any Company Entity, any
merger, consolidation, or other similar arrangement, or the entry into of any
joint venture, partnership, limited liability company, or other entity or
business combination, (C) the lending of Company Entity funds to, or directly or
indirectly providing any Credit Enhancement for, any Person, (D) the acquisition
of any real property by the Company or any Company Entity, except as provided in
the Approved Business Plan last approved by the Delinquent Member, (E) the
entering into by the Company of any transaction with any Member or any Affiliate
of any Member, except on terms and conditions generally available from
third-parties providing similar goods and services of similar quality in the
same geographical location as the Project, (F) any amendment of this Agreement
that would materially and adversely affect the Delinquent Member
disproportionately to the Non-Delinquent Member, (G) any act or omission that
would cause the Delinquent Member or its Affiliates to have any liability under
a Recourse Document, other than acts in the ordinary course of the business of
the Company and consistent with the Approved Business Plan last approved by the
Delinquent Member (for example, making draws under a Project Loan or providing
guaranties required to obtain subdivision improvement bonds), and (H) a sale of
the Project, except as contemplated in the Approved Business Plan last approved
by the Delinquent Member.

 

  -10- 

 

 

(e) Exclusive Remedies. The remedies set forth in Sections 2.3(b) and 2.3(d) are
the sole and exclusive remedies for a Member’s failure to make a required
Capital Contribution or Member Loan.

 

2.6 Cost Overrun Provisions.

 

(a) Definitions.

 

(i) "Base Budget" means, as of a particular date, the Approved Budget last
approved in accordance with this Agreement prior to commencement of the
construction of the Project (which commencement will be deemed to have occurred
no later than the date any third party is instructed to proceed with its work
under its construction contract), as the same may have been modified only to
reflect (i) a discretionary increase in scope that was approved by the Executive
Committee in a writing that expressly specifies that such increase in scope
shall be a basis for an adjustment to the Base Budget, (ii) a reduction in scope
that was approved by the Executive Committee, or (iii) additional costs that
were approved by the Executive Committee in a writing that expressly specifies
such additional costs as a basis for an adjustment to the Base Budget (it being
understood that the Executive Committee shall not have any obligation to so
approve an adjustment to the Base Budget in connection with any such additional
costs, and that reallocations among line items by reason of the transfer of cost
savings pursuant to Section 2.6(b)(i) shall not constitute modifications to the
Base Budget). For avoidance of doubt, (a) the Base Budget shall be used by the
Members solely for purposes of determining Controllable Cost Overruns (i.e., it
is the baseline budget against which actual expenditures are compared for such
purpose) and permitting the specification of sources of funds therefor, and
(b) the Approved Budget may be modified in accordance with this Agreement (for
example and without limitation, if the Executive Committee approves a revision
to the Approved Budget in connection with a change order in respect of
additional costs) but no such modification to the Approved Budget shall affect
the Base Budget except as expressly provided above.

 

(ii) "Controllable Cost Overrun" means (A) a Line Item Overrun, or (B) any cost
not covered by a line item (other than the contingency line item) in the Base
Budget, in each case that was caused by an act or omission of Lewis (or an
Affiliate of Lewis) that constitutes Bad Conduct.

 

(iii) "Line Item Overrun" means, as of a particular date for a particular line
item of the Base Budget, the amount, if any, by which (x) the costs for such
line item actually incurred by the Company on or before such date exceeds
(y) the dollar amount of such line item in the Base Budget.

 

  -11- 

 

 

(b) Controllable Cost Overruns.

 

(i) If a Controllable Cost Overrun occurs at any time, it shall be paid one
hundred percent (100%) by Lewis. If Lewis fails to pay a Controllable Cost
Overrun within ten (10) Business Days of written notice from Limoneira, then
Lewis shall be in breach of this Agreement and, without limitation on any other
remedies, Limoneira shall have the right to reduce and offset distributions,
reimbursements and other payments otherwise required to be paid by the Company
to Lewis.

 

(ii) The parties acknowledge that Controllable Cost Overruns may be computed
upon the completion of the work described in the applicable line items or
completion of the Project as a whole or as construction progresses, at the
election of Limoneira, and (without limitation on the foregoing) Limoneira's
failure to require payment of a Controllable Cost Overrun as construction
progresses shall not constitute a waiver of Lewis' obligation to pay such
Controllable Cost Overrun.

 

(iii) Lewis shall pay all Controllable Cost Overruns under Section 2.6(b)(i)
above in its individual capacity and not in its capacity as a member of the
Company, and such payments shall not be deemed a Capital Contribution or loan by
Lewis to the Company, shall not increase Lewis' Capital Account or Unreturned
Additional Contribution Balance, and shall not entitle Lewis to the recoupment
or payment of any interest, charge or other credit or consideration in respect
thereof.

 

(iv) As the final costs of construction with respect to each Base Budget line
item are determined, the same shall be added to a schedule maintained by Manager
during the construction process (the "Final Cost Schedule") showing the actual
project cost ("Actual Project Cost") in the same format (i.e., with the same
line item categories) as the Base Budget. The Final Cost Schedule shall be
supported by appropriate bills and receipts and such other material as may be in
the possession of Manager as verification of Actual Project Cost.

 

2.7 Contribution of Water Rights.

 

Upon not less than thirty (30) days' prior written notice from the Manager,
Limoneira shall cause LIMCO, to transfer to the Company sufficient groundwater
production and/or water rights to the City to allow the Company to satisfy the
requirements of Section 3.2.2 of that certain First Amended and Restated
Development Agreement entered into by and between the City of Santa Paula and
LIMCO, dated as of February 26, 2015 (as such agreement may be further amended
and/or restated from time to time), and any other groundwater production and/or
water rights required by the City or other governmental agency in connection
with existing or future entitlements for the Project. Limoneira shall not be
deemed to have made a Capital Contribution or otherwise receive credit to its
Capital Account or Unreturned Additional Contribution Balance as a result of
such transfer, and neither Limoneira nor LIMCO shall be entitled to the
recoupment or payment of any interest, charge or other credit or consideration
as a result of such transfer.

 

  -12- 

 

 

2.8 Limitations Pertaining to Capital Contributions.

 

(a) Return of Capital. Except as otherwise provided in this Agreement, no Member
shall withdraw any Capital Contributions or any money or other property from the
Company without the written consent of the other Member. Under circumstances
requiring a return of any Capital Contributions, no Member shall have the right
to receive property other than cash, unless otherwise specifically provided for
in this Agreement or otherwise agreed in writing by all of the Members at the
time of such distribution.

 

(b) No Interest or Salary. No Member shall receive any interest, salary, or
draws with respect to its Capital Contributions or its Capital Account or for
services rendered on behalf of the Company or otherwise in its capacity as a
Member, except as otherwise expressly provided in this Agreement.

 

(c) Liability of Members. Except as expressly agreed upon in any writing signed
by the party to be bound thereby (including this Agreement and each Recourse
Document described in Section 3.2), no Member or Representative shall be liable
for the debts, liabilities, contracts, or any other obligations of the Company.
Except as set forth herein or as approved by the Executive Committee, and except
as otherwise provided by the Act or by any other applicable state law, no Member
shall (i) be obligated to make a Capital Contribution or Member Loan or
otherwise provide funding to the Company; (ii) have any personal liability for
the repayment of the Capital Contributions or loans of any other Member to the
Company; or (iii) have any obligation to restore or repay to the Company any
negative balance standing at any time in such Member's Capital Account.

 

(d) No Third Party Rights. Nothing contained in this Agreement is intended or
will be deemed to benefit any creditor of the Company or other third party, and
no creditor of the Company or other third party will be entitled to require any
Member to solicit or demand Capital Contributions or Member Loans from any
Member. A Member's obligation to make a Capital Contribution or Member Loan
cannot be assigned to any other Person without the prior written consent of
other Member.

 

2.9 Special Reimbursement of LIMCO. The Members acknowledge that LIMCO has paid
$500,000 to the City under Operating Memorandum – No. 3 of the Development
Agreement (as defined in the Contribution Agreement) (the “Initial Public Safety
Facility Payments”). Limoneira shall not receive any Capital Contribution credit
for the Initial Public Safety Facility Payments. The Company shall reimburse
LIMCO for the Initial Public Safety Facility Payments as Budgeted Capital Call
as follows: $250,000 shall be reimbursed by the Company to LIMCO on February 1,
2017, and $250,000 shall be reimbursed by the Company to LIMCO on February 1,
2018. If the Company does not have sufficient funds to make such reimbursements
to LIMCO, then the Manager shall notify the Executive Committee of such
Shortfall as required in Section 2.2(d) (iv) or 2.3, as applicable, and deliver
a Funding Notice (which shall serve as the request for Pre-Financing
Contribution under Section 2.2(d)(iv) if applicable) to the Members a minimum of
15 days prior to the scheduled reimbursement date for Called Funds sufficient to
enable the Company to make such reimbursement (and if the Manager fails to
deliver such a Funding Notice, then Limoneira shall have the right to deliver
such Funding Notice). If such a Funding Notice is delivered and Lewis is not
then required under Section 2.2(d) to make Capital Contributions to fund 100% of
the Shortfall, then Limoneira shall receive a Capital Contribution credit for
its share of such Funding Notice (which credit shall reduce, dollar for dollar,
the Company’s reimbursement obligation to LIMCO). If Lewis fails to timely fund
its share of such a Funding Notice, then Lewis shall be the Delinquent Member
and Limoneira shall have the remedies of the Non-Delinquent Member set forth in
Section 2.5. In addition to the foregoing reimbursements to Limoneira, the
Company shall, as a Budgeted Capital Call, make an additional Public Safety
Facility Payment in the amount of $250,000 on February 1, 2016 to the City in
accordance with Operating Memorandum – No. 3 of the Development Agreement and
the process for the notice and funding of the capital call to make that payment
to the City shall be as set forth in Section 2.2(d)(iv).

 

  -13- 

 

 

SECTION 3.
PROJECT LOANS

 

3.1 Terms of the Project Loan.

 

The Members shall use their commercially reasonable efforts to cause the Company
to obtain the initial Project Loan from one (1) or more institutional
third-party lenders ("Project Lender") to finance the entitlement and
development of the Project on commercially reasonable terms and conditions and
on the best terms otherwise available to the Company. Any Project Loan shall be
on terms and conditions approved by the Executive Committee, which approval
shall not be unreasonably withheld, delayed or conditioned.

 

At least sixty (60) days prior to the anticipated funding of the initial Project
Loan (as reasonably determined by the Manager), the Manager shall present to the
Executive Committee for its approval the most favorable initial Project Loan
that Manager believes is available to the Company as of such date (the "Proposed
Initial Loan"). If Limoneira's Representatives do not approve the Proposed
Initial Loan and Lewis' Representatives approve the Proposed Initial Loan, then
Limoneira shall have ninety (90) days following the date the Manager presented
the Proposed Initial Loan to the Executive Committee to obtain an alternative
Project Loan that the Limoneira Representatives approve (the "Alternative
Initial Loan") provided such loan is on terms and conditions at least as
favorable to the Company and Lewis as the terms of the Proposed Initial Loan. If
Limoneira is not able to obtain an Alternative Initial Loan prior to the
expiration of such ninety (90)-day period, then Limoneira shall be required
either (i) to consent to and approve the Proposed Initial Loan (and use its
commercially reasonably efforts to cause the Company to close the Proposed
Initial Loan), or (ii) to contribute to the capital of the Company within
ten (10) days following the expiration of the ninety (90)-day period above the
Balancing Contribution described in Section 2.2(e) (even though the Company will
not yet have closed the initial Project Loan).

 

If Limoneira's Representatives approve the Proposed Initial Loan and Lewis'
Representatives do not approve the Proposed Initial Loan, then Limoneira, shall
have the right, but not the obligation, for a period of sixty (60) days
following the date the Manager presented the Proposed Initial Loan to the
Executive Committee, as its sole right and remedy available at law and/or in
equity (or otherwise), to elect by delivering written notice to Lewis to
purchase the entire Membership Interest of Lewis for an amount equal to the sum
of Lewis' Unreturned Initial Contribution Balance and Unreturned Additional
Contribution Balance, together with a return thereon calculated like simple
interest at a rate equal to the lesser of (i) two hundred (200) basis points in
excess of the Prime Rate, or (ii) eight percent (8%) per annum. The closing date
for the purchase of Lewis' Membership Interest pursuant to this Section 3.1
shall be within thirty (30) days following Limoneira's delivery of the purchase
notice. The terms and conditions of Section 6.9(c)(iii), (iv), (v), (vi) and
(viii) shall apply to any purchase of Lewis' Membership Interest pursuant to
this Section 3.1 (and any references in such Sections to the Triggering Member
shall refer to Lewis and any references to the Non-Triggering Member shall refer
to Limoneira); provided, however, if the terms of this Section 3.1 conflict with
the terms of Section 6.9(c)(iii), (iv), (v), (vi), or (viii), then the terms of
this Section 3.1 shall control.

 

  -14- 

 

 

3.2 Credit Enhancements.

 

It is the objective of the Members that each Project Loan shall be without
recourse to the Members and their Affiliates; provided, however, if a Project
Loan may only be obtained with the execution and delivery of one (1) or more
cost overrun guarantees, repayment guarantees, completion guarantees,
environmental indemnities and/or other guarantees, indemnities, documents or
other agreements (collectively, the "Recourse Documents"), then each Member
hereby agrees to cause one (1) or more of its Affiliates to provide such
Recourse Documents required by the applicable Project Lender provided the terms
and conditions of any such repayment or completion guaranty that is required to
be executed by any such party are not materially less favorable than the terms
and conditions set forth in the form guarantees from US Bank, Union Bank, and
Wells Fargo Bank provided by Lewis to Limoneira on August 24, 2015. Each Member
further hereby agrees to provide (and cause one (1) or more of its Affiliates)
to provide any Recourse Document required to be executed as a condition to
obtain any subdivision improvement or maintenance bond required for the
development of the Project or any title policy for the Company or any Project
Lender. Any such party that executes and delivers any Recourse Document is
referred to individually as a "Guarantor" and collectively as the "Guarantors."
Notwithstanding any other term of this Agreement (or any fiduciary or other
duties that any Member may have), each Member shall have the right to withhold
its approval of any Major Decision or other matter that would result in any
Guarantor incurring any liability under any Recourse Document.

 

The Company hereby agrees to indemnify, defend and hold each Guarantor wholly
harmless from and against any and all liabilities, obligations, losses, damages,
deficiencies, demands, claims, suits, actions, causes of action, awards,
assessments, interest, fines, penalties, costs, and expenses of all
investigations, proceedings, judgments, orders, and settlements including, but
not limited to, fees and expenses of attorneys, accountants and other experts
incurred in connection with the settlement or defense of any Action
(collectively, "Damages") incurred by such Guarantor that arises out of or
relates to any Recourse Document to the extent provided in Section 10.3(b).

 

The Guarantors will enter into a Reimbursement Agreement in the form attached as
Exhibit D (the "Reimbursement Agreement"), which will provide that if the
Company does not satisfy its indemnity and other obligations described in
Section 10.3(b), then the Guarantors will generally reimburse each other in such
amounts as are necessary to cause the total liability that is incurred by all of
the Guarantors (for which they are entitled to be indemnified under
Section 10.3(b) below) to be borne fifty percent (50%) by the Guarantors
affiliated with Lewis (the "Lewis Guarantors") and fifty percent (50%) by the
Guarantors affiliated with Limoneira (the "Limoneira Guarantors"). The Lewis
Guarantors and Limoneira Guarantors will also each be liable for fifty percent
(50%) of any liability incurred by LIMCO (for which LIMCO is entitled to be
indemnified under Section 10.3(b) below) under any contracts assumed by the
Company for which LIMCO is unable to obtain a release to the extent the Company
fails to satisfy its indemnity obligations described in Section 10.3(b). If
there is any inconsistency between the terms of this Agreement and the
Reimbursement Agreement, then the terms of the Reimbursement Agreement shall
control.

 

  -15- 

 

 

SECTION 4.
DISTRIBUTIONS

 

4.1 Distributions of Net Cash Flow.

 

Except as provided in Sections 4.2 and 9.2(b), distributions of Net Cash Flow,
if available, shall be distributed to the Members on a quarterly basis (or at
such more frequent intervals as the Executive Committee may determine) in
amounts reasonably determined by the Executive Committee, in the following order
of priority:

 

(a) First, to the Members in proportion to their respective Additional Capital
Contribution IRR Deficiencies (as defined on Exhibit E), until each Member's
Additional Capital Contribution IRR Deficiency is reduced to zero;

 

(b) Second, forty-eight percent (48%) to Limoneira and fifty-two percent (52%)
to Lewis until Lewis' Initial Capital Contribution IRR Deficiency (as defined on
Exhibit E) is reduced to zero;

 

(c) Third, twenty-five percent (25%) to Limoneira and seventy-five percent (75%)
to Lewis until the Company has made aggregate distributions to the Members
pursuant to this Section 4.1(c) in an amount equal to Ten Million Dollars
($10,000,000);

 

(d) Fourth, sixty percent (60%) to Limoneira and forty percent (40%) to Lewis
until the Company has made aggregate distributions to the Members pursuant to
this Section 4.1(d) in an amount equal to Twenty Million Dollars ($20,000,000);

 

(e) Fifth, fifty percent (50%) to Limoneira and fifty percent (50%) to Lewis
until the Company has made aggregate distributions to the Members pursuant to
this Section 4.1(e) in an amount equal to Twenty Million Dollars ($20,000,000);

 

(f) Sixth, seventy-eight percent (78%) to Limoneira and twenty-two percent (22%)
to Lewis until the Company has made aggregate distributions to the Members
pursuant to this Section 4.1(f) in an amount equal to Twenty Five Million
Dollars ($25,000,000);

 

  -16- 

 

 

(g) Seventh, ninety-five percent (95%) to Limoneira and five percent (5%) to
Lewis until the Company has made aggregate distributions to the Members pursuant
to this Section 4.1(g) in an amount equal to Twenty Million Dollars
($20,000,000); and

 

(h) Thereafter, seventy percent (70%) to Limoneira and thirty percent (30%) to
Lewis.

 

4.2 Other Special Distributions.

 

(a) Limoneira. An amount equal to Limoneira's Unreturned Additional Contribution
Balance shall be distributed by the Company to Limoneira from the first
disbursement that is made under the initial Project Loan. If there are
insufficient funds available from the Initial Project Loan to return Limoneira's
entire Unreturned Additional Contribution Balance and all of the amounts that
Lewis is entitled to receive under Section 4.2(b), then the Company shall
reimburse each such Member in proportion to the amount each such Member is
entitled to receive under this Section 4.2(a).

 

(b) Lewis. An amount equal to Lewis' Unreturned Additional Contribution Balance
shall be distributed by the Company to Lewis from the first disbursement that is
made under the initial Project Loan. If there are insufficient funds available
from the Initial Project Loan to return Lewis' entire Unreturned Additional
Contribution Balance and all of the amounts that Limoneira is entitled to
receive under Section 4.2(a), then the Company shall reimburse each such Member
in proportion to the amount of the reimbursement that each Member is entitled to
receive from the Company under this Section 4.2(b).

 

(c) Balancing Distribution. If each of Limoneira and Lewis is not fully
reimbursed by the Company for all of the amounts each such Member is entitled to
receive under Section 4.2(a) or Section 4.2(b), as the case may be, on the date
the initial Project Loan closes, then the Member whose Unreturned Additional
Contribution Balance is less than the Unreturned Additional Contribution Balance
of the other Member shall be required to make the Balancing Contribution to the
Company pursuant to Section 2.2(e). Any such amounts contributed by any Member
pursuant to Section 2.2(e) shall be promptly distributed by the Company to the
other Member pursuant to this Section 4.2(c). Any such amounts distributed by
the Company to any Member pursuant to this Section 4.2(c) shall reduce such
Member's Capital Account and Unreturned Additional Contribution Balance on the
date such distribution is made.

 

(d) Retained Property. The Retained Property shall be conveyed to Limoneira (or
its designated Affiliate) as soon as possible following the recordation of the
Final Tract Map No. 5854 for the Property or other final tact map or parcel map
that subdivides the Retained Property as a legal parcel but, in all events,
prior to obtaining a Project Loan and commencement of construction activity on
the Property. Such conveyance shall not reduce Limoneira's Capital Account or
Unreturned Initial Contribution Balance. Limoneira hereby agrees to reimburse
the Company for any loss, expense, damage or liability incurred by the Company
with respect to the Retained Property, except to the extent caused by any acts
or omissions of the Company or Lewis (or any Affiliates of Lewis) (and except as
otherwise set forth in that certain “Retained Property Development Agreement”,
as defined in the Contribution Agreement). Any payment made by Limoneira
pursuant to the preceding sentence shall be paid by Limoneira in its individual
capacity and not in its capacity as a member of the Company and any such payment
shall not be deemed a Capital Contribution or loan by Limoneira to the Company,
shall not increase Limoneira's Capital Account or Unreturned Additional
Contribution Balance, and shall not entitle Limoneira to the recoupment or
payment of any interest, charge or other credit or consideration in respect
thereof. Limoneira shall also reimburse the Company for any cost incurred by the
Company that benefits the Retained Property in accordance with the terms of
Exhibit F attached hereto.

 

  -17- 

 

 

4.3 Withholding.

 

The Company is authorized with notice to the applicable Member to withhold
and/or pay to the applicable tax authority from distributions under Sections 4.1
and 4.2 (including by reference thereto pursuant to Section 9.2(b)(ii)) if
required to do so by any applicable rule, regulation, or law any amount of
federal, state, local or foreign taxes that the Executive Committee determines
in good faith and after consultation with the Company's tax advisors, that the
Company is required to withhold or pay with respect to any amount distributable
or allocable to such Member pursuant to this Agreement. All amounts withheld
pursuant to the Code or any provision of any state, local or international tax
law or treaty with respect to a distribution made to a Member under this
Agreement will be treated as an amount distributed to the Member pursuant to
Section 4.1 or 4.2 for all purposes of this Agreement. All amounts withheld
pursuant to the Code or any provision of any state, local or international tax
law treaty with respect to an allocation will be offset against any future
amounts otherwise distributable to such Member and, in the event such amount is
not offset against future amounts otherwise distributable to such Member at the
time of and taking into account the liquidation of the Company, then such Member
shall be obligated to make a contribution to the Company equal to such amount. A
Member's authorization and obligations under this Section 4.3 will survive the
dissolution, liquidation, or winding up of the Company.

 

SECTION 5.
TAX ALLOCATIONS

 

5.1 General Allocation Rules.

 

(a) General Allocation Rule. For each taxable year of the Company, subject to
the application of Section 5.2, Profits and Losses shall be allocated to the
Members in a manner that causes each Member's Adjusted Capital Account Balance
to equal the amount that would be distributed to such Member pursuant to
Section 9.2(b)(ii) upon a hypothetical liquidation of the Company in accordance
with Section 5.1(b).

 

(b) Hypothetical Liquidation Defined. In determining the amounts distributable
to the Members under Section 9.2(b)(ii) upon a hypothetical liquidation, it
shall be presumed that (i) all of the Company's assets are sold at their
respective Book Value without further adjustment, (ii) payments to any holder of
a nonrecourse debt are limited to the Book Value of the assets securing
repayment of such debt, and (iii) the proceeds of such hypothetical sale are
applied and distributed in accordance with Section 9.2(b) (without retention of
any reserves).

 

  -18- 

 

 

(c) Item Allocations. If the Executive Committee determines, upon consultation
with the Company's tax advisors, that allocations of Profits and Losses over the
term of the Company are not likely to cause each Member's Adjusted Capital
Account Balance to equal the amount that would be distributed to such Member
pursuant to Section 9.2(b)(ii) upon a hypothetical liquidation of the Company in
accordance with Section 5.1(b), then special allocations of income, gain, loss,
and/or deduction shall be made as reasonably deemed necessary by the Executive
Committee to achieve the intended Adjusted Capital Account Balances.

 

5.2 Regulatory Allocations.

 

Notwithstanding Section 5.1 and Section 5.3:

 

(a) Loss Limitation. The Losses allocated pursuant to Section 5.1 shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Member to have an Adjusted Capital Account Deficit at the end of any Fiscal
Year. If only one (1) Member would have an Adjusted Capital Account Deficit as a
consequence of an allocation of Losses pursuant to Section 5.1, then the
limitation set forth in this Section 5.2(a) shall be applied on a Member by
Member basis so as to allocate the maximum permissible Losses to each Member
under Section 1.704-1(b)(2)(ii)(d) of the Regulations. All Losses in excess of
the limitations set forth in this Section 5.2(a) shall be allocated to the
Members in proportion to their Percentage Interests. This Section 5.2(a) shall
be interpreted consistently with the loss limitation provisions of Regulations
§ 1.704-1(b)(2)(ii)(d).

 

(b) Minimum Gain Chargeback. Except as otherwise provided in Regulations
§ 1.704-2(f), if there is a net decrease in partnership minimum gain (as defined
in Regulations §§ 1.704-2(b)(2) and 1.704-2(d)(1)) during any Fiscal Year, each
Member shall be specially allocated items of Company income and gain for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount and in the
manner required by Regulations §§ 1.704-2(f) and 1.704-2(j)(2). This
Section 5.2(b) shall be interpreted consistently with the "minimum gain"
provisions of Regulations § 1.704-2 related to nonrecourse liabilities (as
defined in Regulations § 1.704-2(b)(3)).

 

(c) Member Minimum Gain Chargeback. Except as otherwise provided in Regulation
§ 1.704-2(i)(4), if there is a net decrease in partner nonrecourse debt minimum
gain (as defined in Regulations §§ 1.704-2(i)(2) and 1.704-2(i)(3)) attributable
to partner nonrecourse debt (as defined in Regulations § 1.704-2(b)(4)) during
any Fiscal Year, each Member who has a share of the partner nonrecourse debt
minimum gain attributable to such Member's partner nonrecourse debt, determined
in accordance with Regulations § 1.704-2(i)(5), shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount and in the manner required by Regulations
§§ 1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.2(c) shall be interpreted
consistently with the "minimum gain" provisions of Regulations § 1.704-2 related
to partner nonrecourse liabilities (as defined in Regulations § 1.704-2(b)(4)).

 

  -19- 

 

 

(d) Qualified Income Offset. If any Member unexpectedly receives any
adjustments, allocations, or distributions described in Regulations
§§ 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6)
that results in such Member having an Adjusted Capital Account Deficit (or
otherwise increases the amount of any deficit), then items of Company income and
gain shall be specially allocated to such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit, if any, of such Member as quickly as possible. This
Section 5.2(d) shall be interpreted consistently with the "qualified income
offset" provisions of Regulations § 1.704-1(b)(2)(ii)(d).

 

(e) Nonrecourse Deductions. Any non-recourse deduction (as defined in
Regulations § 1.704-2(b)(1)) for any Fiscal Year shall be allocated to the
Members in proportion to their respective Percentage Interests.

 

(f) Member Nonrecourse Deductions. Any partner nonrecourse deductions (as
defined in Regulations §§ 1.704-2(i)(1) and 1.704-2(i)(2)) for any Fiscal Year
shall be specially allocated to the Member who bears the economic risk of loss
with respect to the partner nonrecourse debt (as defined in Regulations
§ 1.704-2(b)(4)) to which such Member nonrecourse deductions are attributable in
accordance with Regulations § 1.704-2(i)(1).

 

(g) Section 754 Adjustments. To the extent an adjustment to the adjusted tax
basis of any Company asset is required pursuant to Code § 732(d), Code § 734(b)
or Code § 743(b), the Capital Accounts of the Members shall be adjusted pursuant
to Regulations § 1.704-1(b)(2)(iv)(m).

 

(h) Curative Allocations. The allocations under Sections 5.2(a) through 5.2(f)
(the "Regulatory Allocations") are intended to comply with certain requirements
of the Regulations. It is the intent of the Members that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Section 5. Therefore,
notwithstanding any other provision this Section 5 (other than the Regulatory
Allocations), the Company shall make such offsetting special allocations of
Company income, gain, loss or deduction in whatever manner the Executive
Committee reasonably determines is appropriate so that, after such offsetting
allocations are made, each Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of this Agreement and all Company items
were allocated pursuant to Section 5.1. In exercising its discretion under this
Section 5.2(h), the Executive Committee shall take into account future
Regulatory Allocations under Sections 5.2(a) through 5.2(f) that are likely to
offset other Regulatory Allocations previously made.

 

5.3 Other Allocation Rules.

 

(a) Profits, Losses, and any other items allocable to any period shall be
determined on a daily, monthly, or other basis, as determined by the Executive
Committee using any permissible method under Code § 706 and the Regulations
thereunder.

 

(b) The Members are aware of the income tax consequences of the allocations made
by this Section 5 and as otherwise provided in this Agreement and hereby agree
to be bound by the provisions of this Section 5 and this Agreement in reporting
their shares of Company Profit, Loss, income, gain, deduction and credit for
income tax purposes.

 

  -20- 

 

 

5.4 Special Tax Allocations.

 

In accordance with Code § 704(c) and the Regulations thereunder, income, gain,
loss, and deduction with respect to any property contributed to the capital of
the Company (including, but not limited to, the Property) shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial Book Value (computed in accordance with the
definition of Book Value) using the "remedial method" as described in
Regulations promulgated under Code § 704(c).

 

In the event the Book Value of any Company asset is adjusted pursuant to
subparagraph (ii) of the definition of Book Value, 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 Book Value in the same manner as under Code § 704(c) and the
Regulations thereunder.

 

Any elections or other decisions relating to such allocations shall be made by
the Executive Committee in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 5.4 are solely
for purposes of federal, state, and local taxes and shall not affect, or in any
way be taken into account in computing, any Member's Capital Account or share of
Profits, Losses, other items, or distributions pursuant to any provision of this
Agreement.

 

SECTION 6.
MANAGEMENT

 

6.1 Designation of Manager.

 

(a) Manager. The Members hereby appoint Lewis as the initial manager (the
"Manager") of the Company. Lewis shall act as the Manager, unless removed
pursuant to Section 6.1(b) or a replacement Manager is appointed by the
Executive Committee.

 

(b) Designation; Removal. Limoneira may deliver a termination notice to Lewis
("Removal Notice") removing Lewis as Manager upon the occurrence of any of the
following events:

 

(i) the Manager is a member and Transfers its Membership Interest in breach of
the terms of this Agreement, which is not cured within the Cure Period;

 

(ii) Manager, Manager Affiliate, or any Representative of Lewis has been
convicted of a felony related to the Property or the Company (exclusive of any
felony involving the operation of a motor vehicle);

 

(iii) any Bad Conduct by Manager, its Affiliates, or any Representative of Lewis
relating to the Project or the Company;

 

  -21- 

 

 

(iv) any material breach of this Agreement or any Affiliate Agreement by Manager
or any of its Affiliates, which is not cured within the Cure Period;

 

(v) The occurrence of a Voluntary Bankruptcy Event, Involuntary Bankruptcy Event
or Dissolution Event with respect to Lewis, the Manager Affiliate, or Lewis
Guarantor.

 

(c) Adjudication of Removal. The Removal Notice shall specify the basis for the
same and shall become effective ten (10) Business Days after delivery. However,
Lewis may dispute the existence of grounds for the removal by delivering written
notice ("Adjudication Notice") to Limoneira within such ten (10) Business Day
period. If Lewis fails to provide an Adjudication Notice within such ten (10)
Business Day period, then notwithstanding anything to the contrary herein, Lewis
shall have no right to dispute the effectiveness of the Removal Notice, which
shall be conclusive. If an Adjudication Notice is given within the period set
forth above, then (i) the dispute shall be resolved by judicial reference as
provided in Section 12.11, and (ii) if the referee upholds the grounds for
termination, then the Removal Notice shall thereupon become effective
immediately.

 

(d) Signature Power of the Manager. The Manager, acting without the joinder of
any Member, shall have the right, power and authority to execute and deliver
documents and instruments of every type and nature on behalf of the Company,
which executed documents shall be binding on the Company, provided the same have
been approved and authorized in accordance with the terms hereof, to the extent
required herein. Any Person dealing with the Company may rely, without further
inquiry, upon the identity of the Manager and may rely on a certificate signed
by the Manager as to the existence or nonexistence of any fact or facts which
constitute a condition precedent to acts by the Manager or which are in any
other manner germane to the affairs of the Company. No Member shall have any
authority to hold itself out as a general agent of the Company or any other
Member in any other business or activity. If requested by the Manager, the
Members shall execute and deliver resolutions confirming the authority of the
Manager to act for and bind the Company on matters described in such
resolutions.

 

(e) Standard for Management. The Manager shall fully and faithfully discharge
its obligations and responsibilities and shall devote such time and attention to
affairs of the Company as may be reasonably necessary for the proper management
and supervision of the business of the Company and the discharge of its duties
under this Agreement. The Manager shall, at all times, exercise good faith and
shall promote and protect the best interests of the Company. The Manager shall
diligently and continuously pursue the Approved Business Plan in accordance with
its reasonable professional business judgment, and shall make the personnel of
its Affiliates available to the Company to the extent reasonably necessary to
carry out its duties and obligations under this Agreement in a timely manner.
Subject to the foregoing, the Manager shall not be obligated to devote its full
time efforts to the Company.

 

(f) Replacement Manager After Removal. If Lewis is removed as Manager pursuant
to a Removal Notice, Limoneira shall have the right to appoint a replacement
Manager, which may be Limoneira or an Affiliate of Limoneira.

 

  -22- 

 

 

6.2 Management of Company.

 

Except as expressly set forth in this Agreement, no Member shall undertake any
action, expend any sum, make any decision, give any consent, approval or
authorization or incur any obligation for or on behalf of the Company.  Each
Member shall only have the right to vote on (and propose) the Major Decisions
described in Section 6.5 and any other matter that such Member is granted the
express right to approve (or propose) under this Agreement.  The Members shall
not be entitled to vote on any other matter, nor shall the consent of the
Members be required for any other decision or action.  Subject to all applicable
limitations, standards, and requirements set forth in this Agreement (including
with respect to Major Decisions), the right to manage, control, and conduct the
day-to-day business and affairs of the Company is vested in the Manager which
right may be delegated to a Manager Affiliate as provided below; provided
however, neither the Manager nor Manager Affiliate shall have no power to do any
act outside the purposes of the Company as set forth in Section 1.5 hereof. 
Without limiting the generality of the foregoing, the Manager shall have the
right, duty and obligation to perform the development services described on
Schedule 6.2 attached hereto provided Manager may delegate such right, duty and
obligation (and the right duty and obligation to perform any other services or
duties required to be provided by Manager under this Agreement) to any Affiliate
of Manager (a “Manager Affiliate”) (provided such delegation shall not in any
way release Manager from its right, duty and, obligation to provide the services
described in the Agreement).  Manager has informed Limoneira that Manager has no
employees and that all of Manager’s rights, duties and obligations under this
Agreement as the Manager  have been initially delegated by Manager to its
Manager Affiliate, Lewis Operating Corp., a California corporation (“LOC”) and
that effective January 1, 2016, and provided Lewis is the Manager on that date,
 Lewis Management Corp., a California corporation (“LMC”), will succeed LOC as
the Manager Affiliate without the need for further approval by the Company.
Subject to the limitations set forth in this Section 6.2, the Manager shall have
the authority to take any action it deems necessary or advisable in connection
with implementation of the Approved Business Plan and the Approved Budget,
including, but not limited to, the following:

 

(a) Implement the Approved Business Plan consistent with the Approved Budget,
and decisions and directions of the Executive Committee;

 

(b) At the expense of the Company, supervise contractors, accountants, attorneys
and other persons necessary or appropriate to carry out the business of the
Company, and to maintain the books of account and other records and to produce
the reports required by the terms of this Agreement;

 

(c) Monitor the Company's activities and use commercially reasonable efforts to
cause the Company to maintain, at the expense of the Company, such insurance as
is required under Section 6.10 and not (i) commit or permit others to commit any
waste on or of such assets, or (ii) make any change in the use of the assets
that will in any way increase the risk of fire or other hazard arising out of
the use, ownership or operation of such assets;

 

(d) Pay, at the expense of the Company, and to the extent funds of the Company
are available, all Approved Project Costs of the Company;

 

  -23- 

 

 

(e) Cause all books of account and other records of the Company to be kept in
accordance with the terms of this Agreement;

 

(f) Prepare and deliver to each Member all reports required by the terms of this
Agreement;

 

(g) Maintain all funds of the Company in a Company account in a bank or banks or
financial institution or financial institutions as reasonably determined by the
Executive Committee, and be the signatory to such accounts;

 

(h) Undertake, at the expense of the Company, such actions as are reasonably
necessary or desirable in order that the Company promptly complies with all
material present and future laws, ordinances, orders, rules, regulations and
requirements of all governmental authorities having jurisdiction which may be
applicable to the Company, its assets, and the operations and management of the
Company;

 

(i) Perform all other duties otherwise described in this Agreement to be carried
out by the Manager and take all actions reasonably deemed necessary to carry out
any of the above rights and duties.

 

6.3 Entitlement Services.

 

Limoneira shall fully and faithfully discharge any services specifically
requested by the Executive Committee related to obtaining entitlements for the
Project, and shall devote such time and attention as may be reasonably necessary
to perform such services. Limoneira shall, at all times, exercise good faith and
shall promote and protect the best interests of the Company in performing such
services. Limoneira shall make its personnel available to the Company to the
extent reasonably necessary to carry out the services described in this
Section 6.3 in a timely manner. As compensation for rendering such services,
Limoneira shall be entitled to receive the amounts described in Section 6.8(b).

 

6.4 Executive Committee.

 

(a) Executive Committee. Whenever the approval of the Executive Committee is
required by this Agreement, or when this Agreement contemplates joint action,
consent or approval of the Members, such actions shall be taken through a
committee (the "Executive Committee"). The Executive Committee may reserve
authority to itself or delegate additional responsibilities or authority to the
Manager, as deemed necessary or advisable by the Executive Committee to
accomplish the purposes of the Company.

 

(b) Election. The Executive Committee shall be comprised of four (4)
representatives (individually, a "Representative" and collectively, the
"Representatives"). Two (2) Representatives shall be appointed by Lewis (the
"Lewis' Representatives") and two Representatives shall be appointed by
Limoneira (the "Limoneira's Representatives"). The Representatives shall be
natural persons, but need not be residents of Delaware or members of the
Company. As of the Effective Date, Lewis' Representatives are John M. Goodman
and Leon S. Swails and Limoneira's Representatives are Harold Edwards and Joe
Rumley. Each Representative shall have the authority to act on behalf of (i) the
Member that appointed such Representative on all matters that require the
consent or approval of such Member under this Agreement, or (ii) the other
Representative appointed by such Member if such other Representative is absent
from a meeting of the Executive Committee.

 

  -24- 

 

 

(c) Removal and Replacement. Only Lewis may remove and/or replace Lewis'
Representatives and only Limoneira may remove and/or replace Limoneira's
Representatives. A Representative may resign at any time by giving written
resignation to the other Representatives. The resignation is effective without
acceptance when such resignation is actually received by the other
Representatives, unless a later effective time is specified in the resignation.

 

(d) Vacancies. A vacancy created by the removal, death, incapacity or
resignation, or by any other reason, of any Representative may only be filled by
election or appointment by the Member that appointed such Representative.

 

(e) Meetings of the Executive Committee. The Executive Committee shall meet
monthly at such times and places as the Executive Committee may designate.
Unless otherwise agreed by the Executive Committee, meetings shall be held in
Santa Paula, California (provided any such meeting may be held by telephone in
accordance with Section 6.4(e)(i) below). Meetings of the Executive Committee
may be called by any Member or a Representative upon written notice to the other
Member and Representatives, delivered not less than five (5) Business Days
before the meeting, setting forth the time and general purpose of the meeting.
Any Representative may waive such notice.

 

(i) Conduct of the Meetings. Any meeting of the Executive Committee may be held
in person and by means of a conference, telephone or similar communication
equipment by means of which all Representatives and other individuals
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence by such person at the meeting. Each Member
(and its advisors) shall be entitled to attend all meetings and conferences
(both internal meetings and those including third parties) held with respect to
the Company.

 

(ii) Voting and Decisions. Subject to Sections 2.5(d), 8.3 and 11.2(d) (which
provide for the loss of voting and approval rights), all matters that are
subject to the approval, or require the action, of the Executive Committee under
this Agreement must be approved by at least one of the Lewis' Representatives
and one of the Limoneira's Representatives. Notwithstanding any other provision
of this Agreement to the contrary:

 

(A) If there is a contract between a Company Entity, on the one hand, and a
Member or an Affiliate of a Member, on the other hand, then without limitation
on the rights of the Executive Committee to approve such contract under
Section 6.5), the other Member (or its Representatives) shall have the right
unilaterally (but not the obligation) to make any decision or determination by
the Company Entity under, exercise any right under, or terminate, extend, modify
or agree to a waiver or forbearance of, such contract. However, any approval or
consent (or other determination that does not relate to (x) a default, or
(y) whether to exercise a right of the Company other than a mere approval or
consent) to be made by the Company Entity under such contract shall be subject
to the approval of the Executive Committee. Nothing in this
Section 6.4(e)(ii)(A) shall reduce the obligations of the Manager to enforce
such contracts and to keep each Member informed of the status thereof (including
any defaults thereunder and all facts relevant thereto) and of any rights that
may be exercised thereunder.

 

  -25- 

 

 

(B) If there is a good faith dispute under an Affiliate Agreement respecting the
payment of money by the Company to the other party to such agreement, then the
Member who is an Affiliate of such party shall have no right to make a Capital
Contribution or Member Loan and/or call on the other Member to make a Capital
Contribution or Member Loan, to fund such disputed payment until such dispute
has been resolved.

 

(C) If there is an outstanding Default Loan made to any Member, then the
approval of such Member's Representatives serving on the Executive Committee
shall not be required for the Company to make any distribution under
Sections 4.1, 4.2 or 9.2, to the extent such distribution is not in excess of
the amount required to discharge all outstanding Default Loans.

 

(iii) Attendance and Waiver of Notice. Attendance of a Representative at any
meeting shall constitute a waiver of notice of such meeting, except where a
Representative attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.

 

(iv) Actions Without a Meeting. Notwithstanding any provision contained in this
Agreement, any action of the Executive Committee may be taken by written consent
without a meeting. Subject to Sections 2.5(d), 8.3 and 11.2(d), any such action
taken by the Executive Committee without a meeting shall be effective only if
the written consent or consents set forth the action to be taken in writing and
are signed by at least one Lewis' Representative and one Limoneira's
Representative.

 

(f) Compensation. No Representative shall be entitled to compensation for
attendance at meetings of the Executive Committee or for time spent in the
capacity as a Representative. Nothing contained in this Agreement shall be
construed to preclude a Representative from serving the Company in any other
capacity and receiving compensation from the Company for such service, as
determined by the Executive Committee.

 

(g) Minutes. Minutes of all meetings of the Executive Committee shall be kept
and distributed to each Representative and the Members as soon as reasonably
practicable following each meeting. If no objection is raised in writing
following receipt of minutes or in any event at the next meeting of the
Executive Committee, then such minutes shall be deemed to be accurate and shall
be binding on the Representatives and the Company with respect to the matters
dealt with therein.

 

6.5 Major Decisions.

 

(a) Major Decisions. Notwithstanding any other provision of this Agreement to
the contrary, the following actions and matters relating to the Company and any
subsidiary of the Company (each a "Company Entity") shall be "Major Decisions"
that require the prior approval of the Executive Committee and may be proposed
by any Member:

 

  -26- 

 

 

(i) Any update, revision or modification to the Approved Business Plan as set
forth in Section 6.6(b) of this Agreement;

 

(ii) Any update, revision or modification to the Approved Budget as set forth in
Section 6.7(b) of this Agreement;

 

(iii) Any activity that is inconsistent the Approved Business Plan, the
Government Agreements or the Pre-Closing Agreements;

 

(iv) The entry into any construction, development, sale or other agreement
relating to any Company Entity or any of their respective assets, which
(i) materially deviates from any corresponding form contract approved by the
Executive Committee or is not on a form of contract that has been approved by
the Executive Committee (any such approval not to be unreasonably withheld),
(ii) is not contemplated in the Approved Business Plan or Approved Budget or is
inconsistent with the Approved Business Plan or Approved Budget, or (iii) any
termination or material modification to any of the foregoing;

 

(v) Subject to Section 3.1, the entering into and terms of all Project Loans
(and related documents) or any material modification to, or extensions thereof;

 

(vi) Undertaking or causing a Company Entity to take any action or failure to
act that would result in a breach of, or inconsistent with, the terms of any of
the Project Loan Documents, including, for this purpose, causing a Company
Entity to make any prepayment of a Project Loan that is outside the ordinary
course of the terms of the payment schedules set forth therein; provided,
further, the decision to pay any final unamortized loan balance, or to refinance
any Project Loan, and the terms thereof, shall be a Major Decision;

 

(vii) Except as contemplated in the Approved Business Plan or Approved Budget,
any modification to the general plan, specific plan, subdivision maps, zoning,
covenants, conditions and restrictions, or plans and specifications for the
Project after they have been approved by all applicable governmental
authorities, quasi-governmental authorities, and utility providers and
regulators or seeking modification of any such approval;

 

(viii) Whether to sell, and the terms and conditions of any sale or other
conveyance of any portion of, the Project;

 

(ix) Admitting a new member into the Company (other than as specifically
authorized under Section 8);

 

(x) The selection or termination of any Company legal counsel or auditors, the
institution of any legal proceedings in the name of a Company Entity (other than
collection or enforcement actions involving trade payables or receivables valued
at less than $100,000), settlement of any legal proceedings against a Company
Entity in excess of One Hundred Thousand Dollars ($100,000), confession of any
judgment against a Company Entity or any property of Company Entity in excess of
One Hundred Thousand Dollars ($100,000), submitting a claim in excess of One
Hundred Thousand Dollars ($100,000) to arbitration, or releasing, compromising,
assigning, or transferring any claims, rights, or benefits of a Company Entity
in excess of One Hundred Thousand Dollars ($100,000);

 

  -27- 

 

 

(xi) Except for any Capital Contributions (and issuing Funding Notices for those
Capital Contributions) authorized under Sections 2.2(d), 2.2(e), 2.2(f), 2.3,
2.6, 2.7, 2.9 and 10.3(c), making any Capital Contributions, issuing any Funding
Notices, or making distributions other than distributions pursuant to Sections
4.1 or 9.2(b);

 

(xii) The formation of any Company Entity, or, with respect to any Company
Entity, any merger, consolidation, or other similar arrangement, or the entry
into any joint venture, partnership, limited liability company, or other entity
or business combination;

 

(xiii) Making loans of Company Entity funds to, or directly or indirectly
providing any Credit Enhancement for, any Person;

 

(xiv) Acquiring any real property other than in accordance with the provisions
of this Agreement or the Approved Business Plan;

 

(xv) Entering into or consummating any transaction or arrangement with any
Member or any Affiliate of any Member, or any other transaction involving an
actual or potential conflict of interest;

 

(xvi) Any amendment to this Agreement;

 

(xvii) An act that is not reasonably related to the Business;

 

(xviii) The dissolution of a Company Entity (exclusive of any dissolution
resulting from the consummation of any transaction allowed under the current
Approved Business Plan or as a result of any transaction approved by the
Executive Committee);

 

(xix) Filing, consenting to, or acquiescing in any act or event that would
constitute an event of bankruptcy with respect to a Company Entity;

 

(xx) Directly or indirectly establishing, increasing or decreasing any reserves
(other than any reserves contained in the Approved Budget);

 

(xxi) A Company Entity entering any contract or other arrangement under which
the potential value or liability of or payments by the Company Entity are
reasonably expect to exceed Two Million Dollars ($2,000,000.00);

 

(xxii) Directly or indirectly deciding to rebuild any portion of the Project
after a casualty in a case where the Company has the right to elect whether or
not to rebuild under applicable agreements to which the Company is a party,
including any Project Loan; provided, however, that consent of the Executive
Committee shall be required to decide not to rebuild if the failure of the
Company to rebuild could give rise to recourse obligations of the Members or any
Affiliate of a Member under any Project Loan, Recourse Document or Credit
Enhancement;

 

  -28- 

 

 

(xxiii) Executing a contract engaging a mortgage broker in connection with any
financing or refinancing of the Property, the Business or any part thereof, or
giving listings of “Lots” or “Parcels” (as defined on Schedule 6.2) to outside
brokers;

 

(xxiv) Except as contemplated in the Approved Business Plan or Approved Budget,
amending, modifying or deviating from the Government Agreements or the
Pre-Closing Agreements;

 

(xxv) Opening any Bank Account at a financial institution not previously
approved by the Executive Committee, or closing any Bank Account; and

 

(xxvi) Press releases and marketing for the Property, the Company or any Company
Entity (and, without limitation on the foregoing, in no event shall Manager
identify Limoneira or its Affiliates in any press release or marketing).

 

(b) Mechanism for Obtaining Consents.

 

(i) Request for Approval. Any Representative may propose Executive Committee
approval of a Major Decision by giving written notice thereof to each other
Representative serving on the Executive Committee.

 

(ii) Failure to Respond. If neither of the Lewis' Representatives responds in
writing to any matter in a notice given under Section 6.4(b)(i) by (i) expressly
granting or withholding approval; (ii) providing notice that more time is
needed; or (iii) requesting a meeting for further information within ten (10)
days following delivery of such notice, that matter shall be deemed to have been
disapproved by the Lewis' Representatives. If neither of Limoneira's
Representatives responds in writing to any matter in a notice given under
Section 6.4(b)(i) by (i) expressly granting or withholding approval;
(ii) providing notice that more time is needed; or (iii) requesting a meeting
for further information within ten (10) days following delivery of such notice
that matter shall be deemed to have been disapproved by Limoneira's
Representatives.

 

(iii) Failure to Agree. If mutual agreement cannot be achieved with respect to a
Major Decision submitted to the Executive Committee, then either Member may give
written notice (a "Major Dispute Notice") to the other Member and its
Representatives that a dispute exists with respect thereto (a "Major Dispute"),
in which event:

 

(A) The Executive Committee shall meet in person, if possible, and otherwise by
telephone, not later than five (5) Business Days following delivery of the Major
Dispute Notice and attempt in good faith to resolve the applicable Major
Dispute.

 

  -29- 

 

 

(B) If a Major Dispute with respect to any "Eligible Major Decision" (defined
below) is not resolved for any reason pursuant to Section 6.5(b)(iii)(A) within
a total of fifteen (15) Business Days following delivery of a Major Dispute
Notice, then an impasse (the "Impasse") shall be deemed to exist and any Member
that is not in default under this Agreement (an "Eligible Member") may initiate
the buy/sell sale procedure under Section 6.9 at any time following the
expiration of such fifteen (15) Business Day period and prior to the resolution
of the applicable Major Dispute. An "Eligible Major Decision" means only the
Major Decisions described in Sections 6.5(a)(i), (ii), (iv), (v), (vi), (vii),
(viii), (x), (xi), (xviii), (xix), (xx), (xxi), (xxii), and (xxiv).

 

6.6 Business Plan.

 

(a) Adoption of Initial Business Plan . The Company shall undertake the Project
and conduct the Business, and the Manager shall, in accordance with
Section 6.1(e), operate the Company in conformance with the Company's business
plan. Each business plan shall contain (i) a narrative description of the
Company's business objectives and proposed activities to be undertaken by the
Company in the conduct of the Business for the next two (2) Fiscal Years
including sales plans and construction activities, (ii) a description of the
Project including a description of the proposed entitlements, site planning and
amenities, (iii) development schedules and timelines, including, without
limitation, a description of the phasing for the Project, (iv) the budget for
the Company described in Section 6.7 below, (iv) a proforma for the Project,
which shall set forth for the anticipated life of the Project (A) the
anticipated costs and expenses that will be incurred by the Company, in
connection with the development, construction and sale of the Project, (B) the
anticipated revenues that will be realized by the Company from the Project,
(C) the anticipated Capital Contributions that the Members will be required to
make to the capital of the Company, and (D) the projected returns that will be
realized by the Company, and (v) any other material matters relating to the
business and operation of the Project that is deemed relevant by the Executive
Committee.

 

(b) Revisions to Business Plan. The business plan shall be revised by the
Manager on or before November 1 of each calendar year commencing on November 1,
2016, and submitted to the Executive Committee for its review and approval. The
most recent version of the business plan that has been approved by the Executive
Committee is referred to as the "Approved Business Plan" and shall govern the
operations of the Company, until such time as a revised business plan is
approved. Except as otherwise provided in this Agreement, no revisions or
modifications to, or deviations from, the Approved Business Plan shall be
implemented, unless approved by the Executive Committee (which approval shall
not be unreasonably withheld, delayed or conditioned). Each Approved Business
Plan shall be consistent with the Company's intention of the developing the
Project as soon as market and other circumstances reasonably permit. The Members
acknowledge that the initial business plan for the Company (including, without
limitation, the proforma and the budget contained therein) has been approved by
the Executive Committee as of the Effective Date.

 

  -30- 

 

 

6.7 Budgets.

 

(a) Adoption of Initial Budget. Each business plan shall contain a budget, which
shall include, without limitation, the following: (i) a reasonable contingency
reserve for unanticipated costs associated with the matters covered thereby;
(ii) periodic payments (including any payments due at maturity) on any debt
incurred by the Company in accordance with this Agreement; (iii) the projected
costs to develop and construct the Project; (iv) routine costs incurred by the
Company in connection with holding and maintaining the Property including,
without limitation, property taxes, assessments, insurance premiums and
accounting and other professional fees; (v) anticipated Capital Contributions or
Member Loans that the Members will be required to make, if any; (vi) anticipated
draws from a Project Loan, if any; (vi) any other debt proceeds or public
finance proceeds, and (viii) anticipated revenues from the Project. Each budget
shall apply to one Fiscal Year, but may include non-binding projections for
subsequent Fiscal Years.

 

(b) Revisions to Budget. The Manager shall revise and update the budget on a
monthly basis and present it the Executive Committee at the monthly meeting of
the Executive Committee described in Section 6.4(e). The Executive Committee
shall have the right to approve each such revised and updated budget. Any
Representative having objections to any such proposed revision or update shall
provide written notice thereof to the other Representatives and the Manager
("Objection Notice"), which Objection Notice shall set forth the objections with
specificity. The Manager shall respond in writing with specificity to the
Objection Notice and include therein proposed revisions to the proposed revised
budget to address each such Representative's objections. For a period of
ten (10) days after receipt by the Manager of an Objection Notice, the Executive
Committee shall confer to resolve the objections described in the Objection
Notice. The most recent version of the budget that has been approved by the
Members or the Executive Committee is referred to as the "Approved Budget" and
shall govern the operations of the Company for one (1) Fiscal Year. Except as
otherwise provided in this Agreement, no revisions or modifications to, or
deviations from, the Approved Budget shall be implemented, unless approved by
the Executive Committee (which approval shall not be unreasonably withheld,
delayed or conditioned). The Members acknowledge that the Executive Committee
has approved the initial budget as of the Effective Date as part of the Approved
Business Plan. The Approved Budget shall be automatically adjusted to take into
account any increases in real property taxes, insurance premiums, utility
charges and similar items over which the Company has no control.

 

(c) Expenditure of Company Funds. Subject to the variances described in this
Section 6.7(c), specific expenditures to develop and operate the Project may be
made only by the Manager pursuant to the Approved Business Plan and Approved
Budget. Notwithstanding the foregoing, the Manager shall have discretion,
without the approval of the Executive Committee or any Member, (i) to use any
contingency reserves included in the Approved Budget in any reasonable manner,
(ii) to re-allocate the portion of any line item included in the Approved Budget
for which the Manager reasonably determines there will be cost savings to any
other line item contained in the Approved Budget, and (iii) to incur
expenditures in excess of any line item contained in the Approved Budget,
provided, however, that in each case, (x) the amount of any expenditures made
for any line item shall not exceed the greater of $25,000 or 110% of the
budgeted amount of such line item, and (y) the aggregate amount of all
expenditures for any Fiscal Year shall not exceed 105% of the aggregate amount
of all budgeted line items (excluding any contingency line items) for such
Fiscal Year. The Manager shall notify the Executive Committee of any
expenditures made pursuant to this Section 6.7(c). All expense items identified
in the Approved Budget from time to time, as the same may be adjusted pursuant
to this Section 6.7(b), shall constitute "Approved Project Costs" of the
Company.

 

  -31- 

 

 

6.8 Reimbursements.

 

(a) Reimbursement of the Manager. The Company shall reimburse the Manager on a
monthly basis for the costs and expenses incurred by the Manager or any
Affiliate thereof allocable to the Company and/or the Project. The costs and
expenses to be reimbursed to the Manager shall be limited to the Manager's and
its Affiliates' employees who are rendering services for the benefit of the
Company and/or the Project and to those third party expenses set forth in
Section 6.8(c). The reimbursement will be calculated in accordance with the wage
schedules approved by the Members or as otherwise approved by the Executive
Committee from time to time (but at least once per Fiscal Year). Except as
provided in this Section 6.8(a), the Manager will be responsible for all direct
and indirect expenses associated with the compensation of the Manager's and its
Affiliates' personnel or employees associated with Manager's performance of
duties and responsibilities as Manager of the Company (the "Excluded Costs").
The Company, however, will be responsible for all other expenses related to the
Company's formation (e.g., filing fees and other costs and expenses directly
related to its organization) and operations, and the Manager shall be entitled
to reimbursement from the Company for its reasonable out-of-pocket costs that
are not Excluded Costs incurred in the performance of its duties hereunder.

 

(b) Reimbursement of Limoneira. The Company shall reimburse Limoneira on a
monthly basis for the costs and expenses incurred by Limoneira allocable to the
Company and/or the Project. The costs and expenses to be reimbursed to Limoneira
shall be limited to Limoneira's employees and consultants who are rendering
services for the benefit of the Company and/or the Project and to those third
party expenses set forth in Section 6.8(c). The reimbursement will be calculated
in accordance with the wage schedules approved by the Members or as otherwise
approved by the Executive Committee from time to time (but at least once per
Fiscal Year). Except as provided in this Section 6.8(b), Limoneira will be
responsible for all direct and indirect expenses associated with the
compensation of the Limoneira's personnel or employees associated with
Limoneira's performance of duties and responsibilities hereunder.

 

(c) Compensation and Reimbursement of Members and Representatives. The Members
and Representatives shall be reimbursed by the Company for any third-party
out-of-pocket costs incurred by them in connection with the performance of their
duties hereunder, to the extent and provided that such expenses are included in
the Approved Budget. The Members and Representatives will bear their own legal
costs and expenses in negotiating and documenting this Agreement and the
Contribution Agreement (including, without limitation, all exhibits and
schedules contained therein). Except as provided in this Section 6.8, the
Members, the Representatives and their Affiliates shall not be entitled to
compensation or reimbursement of expenses from the Company, unless the amounts
of any such compensation or reimbursements have previously been approved in
writing by the Executive Committee.

 

  -32- 

 

 

6.9 Buy/Sell Procedure.

 

(a) Right to Invoke. At any time after the Development Milestone is satisfied,
each Eligible Member shall have the right, but not the obligation, to implement
the procedures set forth in this Section 6.9 if there is an Impasse with respect
to an Eligible Major Decision between the Representatives of the Executive
Committee by delivering written notice (the "Buy/Sell Notice") to the other
Member. The term "Development Milestone" means the completion of the grading and
those infrastructure improvements for the Project described more fully on
Exhibit G. The Member delivering a Buy/Sell Notice pursuant to this Section 6.9
is hereinafter referred to as the "Triggering Member" and the Member receiving
such Buy/Sell Notice from the Triggering Member is hereinafter referred to as
the "Non-Triggering Member." The Buy/Sell Notice shall set forth the proposed
sales price for the entire Project determined in the sole and absolute
discretion of the Triggering Member (the "Sales Price"), which shall be payable,
in cash, at the closing.

 

Within fifteen (15) days following the delivery date of any Buy/Sell Notice, the
Triggering Member shall cause the Independent Accountant to determine the
aggregate amount of cash that would be distributed and paid to each Member
pursuant to Section 9.2(b) (including, without limitation, any Member Loans made
by such Member that would be repaid by the Company pursuant to Section 9.2(b)(i)
below) if (i) the entire Project was sold for the Sales Price as of the
effective date of the Buy/Sell Notice; (ii) the liabilities of the Company were
liquidated pursuant to Section 9.2(b)(i); (iii) a reasonable reserve was
established for contingent liabilities of the Company pursuant to
Section 9.2(b)(i); and (iv) the Company distributed any remaining amounts in
accordance with the provisions of Sections 9.2(b)(ii) as of the effective date
of the Buy/Sell Notice (with respect to each Member, the "Purchase Price" for
such Member’s Membership Interest). Upon such determination, the Independent
Accountant shall give each Member written notice (the "Accountant's Notice")
thereof. The determination by the Independent Accountant of such amounts,
including all components thereof, shall be deemed conclusive on all of the
Members, absent any material computational error. Each Member shall bear its own
cost in connection with any sale of a Membership Interest pursuant to this
Section 6.9.

 

(b) Right to Deliver Election Notice. Within one hundred twenty (120) days
following the effective date of the Accountant's Notice (the “Exercise
Period"”), the Non-Triggering Member shall elect one of the following: (1) to
consent to the Triggering Member’s proposed determination for the applicable
Impasse, (2) to purchase the entire Membership Interest of the Triggering
Member, or (3) to sell its entire Membership Interest to the Triggering Member,
in any such case by delivering written notice (the "Exercise Notice") of such
election to the Triggering Member.

 

(i) If the Non-Triggering Member timely delivers an Exercise Notice under the
preceding clause (b)(2), then the Non-Triggering Member shall purchase the
entire Membership Interest of the Triggering Member in accordance with the terms
and conditions of Section 6.9(c).

 

(ii) If the Non-Triggering Member timely delivers an Exercise Notice under the
preceding clause (b)(1), then the Executive Committee shall be deemed to have
approved the Triggering Member’s proposed determination for the applicable
Impasse, and there shall be no purchase or sale of either Member’s Membership
Interest pursuant to this Section 6.9.

 

  -33- 

 

 

(iii) If the Non-Triggering Member timely delivers an Exercise Notice under the
preceding clause (b)(3), or if the Non-Triggering Member fails to timely deliver
any Exercise Notice, then the Non-Triggering Member shall be deemed to have
elected to sell its entire Membership Interest to the Triggering Member and the
Triggering Member shall purchase the entire Membership Interest of the
Non-Triggering Member in accordance with the terms and conditions of
Section 6.9(c).

 

(c) Purchase of a Member's Membership Interest. Following the election by the
Non-Triggering Member to be a purchaser pursuant to Section 6.9(b)(i) or the
election (or deemed election) to be a seller pursuant to Section 6.9(b)(iii)
(the “Buy/Sell Election”), the following terms and conditions shall apply (with
the purchasing Member referred to as the “Purchasing Member”, and the selling
Member referred to as the “Selling Member”):

 

(i) Within ten (10) days following the Buy/Sell Election, the Purchasing Member
shall deposit into an escrow account established in the reasonable discretion of
the Selling Member with a nationally recognized escrow company, a deposit (the
"Deposit") by wire transfer of immediately available federal funds in an amount
equal to five percent (5%) of the Purchase Price of the Selling Member’s
Membership Interest, which shall be non-refundable to the Purchasing Member if
the closing of the sale fails to occur by reason of a default by the Purchasing
Member. Upon the closing of the sale of the Selling Member's Membership
Interest, the Deposit shall be a credit against the Purchase Price. If the sale
fails to occur due to a default by the Purchasing Member, then the Selling
Member may elect (i) to sue the Purchasing Member for specific performance to
compel the Purchasing Member to sell its entire Membership Interest to the
Selling Member in accordance with the terms of this Section 6.9(c), (ii) to
retain the Deposit (without reduction to the Selling Member's Capital Account,
Unreturned Initial Contribution Balance or Unreturned Additional Contribution
Balance) as liquidated damages, as its sole and exclusive remedy at law or
equity in connection with such default (provided that from and after any such
default, the Purchasing Member and the Representatives of the Purchasing Member
shall also lose any and all rights to vote on any Company matters in accordance
with the terms of Section 11.2(d) below), (iii) to pursue all rights and
remedies available at law, in equity or otherwise against the Purchasing Member
if the Purchasing Member failed to make the Deposit (including, without
limitation, the right to seek the recovery of the Deposit), or (iv) to purchase
the entire Membership Interest of the Purchasing Member pursuant to
Section 6.9(c)(vii).

 

The Members acknowledge that it would be impractical and extremely difficult to
estimate the damages that the Selling Member may suffer in connection with a
default by the Purchasing Member under this Section 6.9(c). Therefore, the
Members have agreed that a reasonable estimate of the total net detriment that
the Selling Member would suffer in such event is and shall be the right of the
Selling Member to retain the Deposit if the Selling Member elects to do so under
clause (ii) above as liquidated damages, as its sole and exclusive remedy at law
and in equity under this Section 6.9(c) (subject to the terms of Section 11.2(d)
below). The Members expressly acknowledge and agree that the retention of the
Deposit is not intended as a forfeiture or penalty within the meaning of the Act
or any other state law. The Members acknowledge that they have been advised by
their counsel with respect to the foregoing provisions of this Section 6.9(c)(i)
and by their initials set forth below indicate that the foregoing remedies are
fair and reasonable and agree and covenant not to contest the validity of such
remedy as a penalty, forfeiture or otherwise in any court of law (and/or in any
reference or other proceeding).

 

  -34- 

 

 

 

 

___________________
INITIALS OF LEWIS

 

 

________________________
INITIALS OF LIMONEIRA

 

(ii) Within five (5) days before the actual date of the closing pursuant to
Section 6.7(c)(iii) below, the Independent Accountant shall recalculate the
amount of cash that would be distributed and/or paid to each Member pursuant to
Section 9.2(b) if such amount were determined as of the closing date under
Section 6.9(c)(iii) (in lieu of the effective date of the Buy/Sell Notice)
taking into account any contributions and/or distributions that occur after the
effective date of the Buy/Sell Notice. Upon such determination, the Independent
Accountant shall give each Member written notice ("Adjusted Price Determination
Notice") thereof. The Independent Accountant shall reasonably and in good faith
adjust the Purchase Price, if and to the extent necessary, to take into account
the adjustments described in the Adjusted Price Determination Notice and to take
into account appropriate prorations that would have been made if there had been
an actual sale of the Project to a third party.

 

(iii) The closing of a purchase and sale held pursuant to this Section 6.9(c)
shall be held at the principal office of the Company on a Business Day
designated by the Purchasing Member within forty-five (45) days following the
Buy/Sell Election. The Selling Member shall transfer to the Purchasing Member
(or the Purchasing Member's nominee(s)) the entire Membership Interest of the
Selling Member free and clear of all liens, security interests, and competing
claims and shall deliver to the Purchasing Member (or the Purchasing Member's
nominee(s)) such instruments of transfer and such evidence of due authorization,
execution, and delivery, and of the absence of any such liens, security
interests, or competing claims, as the Purchasing Member (or the Purchasing
Member's nominee(s)) shall reasonably request. The Purchase Price for the
Selling Member's Membership Interest shall be paid by the Purchasing Member by
delivering at the closing of a confirmed wire transfer of readily available
funds or one (1) or more certified or bank cashier's checks made payable to the
Selling Member in an amount equal to the Purchase Price, less the amount of the
Deposit paid by the Purchasing Member pursuant to Section 6.9(c)(i) above (which
shall be released to the Selling Member at the closing). Effective as of the
closing for the purchase of the Selling Member's Membership Interest, the
Selling Member shall withdraw as a member of the Company. In connection with any
such withdrawal, the Purchasing Member may cause any nominee designated in the
sole and absolute discretion of such Member to be admitted as a substituted
member of the Company. Notwithstanding the foregoing, any indemnity of the
Selling Member and its Affiliates provided for under this Agreement shall
survive the sale of the Membership Interest of the Selling Member and its
withdrawal as a member of the Company.

 

  -35- 

 

 

(iv) At the closing, the Selling Member shall represent and warrant to the
Purchasing Member that the sale of the Selling Member's Membership Interest to
the Purchasing Member (or its nominee(s)) (A) does not violate, conflict with,
or result in a breach of any provisions of, or constitute a material default (or
an event that, with notice or lapse of time or both, would constitute a material
default) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, security or pledge agreement, license,
lease, franchise, permit, agreement or other instrument or obligation to which
the Selling Member is a party (exclusive of any such agreement or other
instrument or obligation to which the Company is a party), and (B) does not
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to the Selling Member or any of the other properties or
assets of the Selling Member (exclusive of its Membership Interest in the
Company). The Selling Member shall also represent and warrant to the Purchasing
Member at such closing that no notice to, declaration, filing or registration
with, or authorization, consent or approval, or permit from, any domestic or
foreign governmental regulatory body or authority, or any other Person, is
necessary in connection with the sale of its Membership Interest to the
Purchasing Member.

 

(v) The Purchase Price shall be offset at the closing of such purchase by the
then unpaid principal balance of any and all Default Loan(s) (together with all
accrued, unpaid interest thereon) made by the Purchasing Member to the Selling
Member. Such Default Loan(s) (together with all accrued, unpaid interest
thereon) shall be deemed paid to the extent of such offset, with such deemed
payment to be applied first to the accrued interest thereon and thereafter to
the payment of the outstanding principal amount thereof. If the Purchase Price
is insufficient to fully offset the then unpaid principal balance of any and all
Default Loan(s) (together with all accrued, unpaid interest thereon) made by the
Purchasing Member to the Selling Member, then the portion of any such Default
Loan(s) (and accrued, unpaid interest thereon) that remains outstanding
following such offset shall be paid at the closing referenced in
Section 6.9(c)(iii). Also, notwithstanding any provision of this Agreement to
the contrary, the unpaid balance of any and all Default Loan(s) (including all
outstanding principal amounts thereof and all accrued, unpaid interest thereon)
made by the Selling Member to the Purchasing Member shall be required to be paid
by the Delinquent Member at the closing referenced in Section 6.9(c)(iii).

 

(vi) On or before the closing of a purchase and sale held pursuant to this
Section 6.9(c), the Purchasing Member shall use such Member's reasonable and
good faith efforts to obtain written releases of the Selling Member and the
Selling Member's Affiliates from all liabilities under all Recourse Documents
and all other liabilities of the Company for which the Selling Member (and/or
its Affiliates) may have personal liability. To the extent the Purchasing Member
is unable to obtain such releases on or before the closing, the Purchasing
Member and an Affiliate of the Purchasing Member with a net worth reasonably
acceptable to the Selling Member (and, in the case of Limoneira as the
Purchasing Member, LIMCO shall be deemed a reasonably acceptable party) shall
jointly and severally indemnify, defend and hold the Selling Member (and its
Affiliates) wholly harmless from and against all such liabilities and
guaranties, except for any liabilities arising out of the Bad Conduct of the
Selling Member (and/or its Affiliates).

 

(vii) If the Purchasing Member defaults in its obligation to timely and validly
close the purchase of the Selling Member's Membership Interest, then (A) the
Purchasing Member shall not have any further right to deliver a Buy/Sell Notice
pursuant to Section 6.9(a), and (B) the Selling Member shall have the right, but
not the obligation, to elect to purchase the Membership Interest of the
Purchasing Member by delivering written notice to such defaulting Member within
thirty (30) days following such default. If the Selling Member makes the
election described in clause (B) above, then the Purchase Price for the
Purchasing Member's Membership Interest shall be equal to 90% of the Purchase
Price determined under Section 6.9(a) and on the other terms and conditions set
forth in this Section 6.9(c). If the Selling Member elects to purchase the
Membership Interest of the Purchasing Member pursuant to this
Section 6.9(c)(vii), then the Selling Member shall not be entitled to retain the
Deposit under Section 6.9(c)(i).

 

  -36- 

 

 

(viii) During the pendency of any proceedings under this Section 6.9(c), the
Company shall continue its operations in the ordinary course of business, in
accordance with the terms and conditions of this Agreement, provided that no
Funding Notice shall be delivered pursuant to Section 2.3 and the Company shall
not accept any contributions from the Members, but shall accept Member Loans if
the Company has a Shortfall from either or both Members on terms reasonably
approved by the Executive Committee.

 

(ix) If, during the course of proceedings under this Section 6.9(c), and prior
to the Closing, there is material damage to the Project, taken as a whole, by
fire, accident, act of God or other similar casualty, the Company receives
notice of a threat of condemnation of a material portion of the Project, a claim
is asserted against the Company by third parties that may not be fully satisfied
from available insurance proceeds, or another similar event threatening the
continuing viability of the Company occurs, then the Purchasing Member may
terminate the proceedings under this Section 6.9(c) by written notice to Selling
Member provided that the material damage, threat of condemnation, or claim that
is the basis for such termination did not result from the intentional act or
omission of Purchasing Member occurring after the commencement of proceedings
under this Section 6.9(c).

 

6.10 Project Insurance.

 

The Company shall purchase and maintain, or shall cause to be purchased and
maintained, the policies of insurance determined by the Executive Committee.

 

SECTION 7.
BOOKS AND RECORDS

 

7.1 Books and Records.

 

(a) The Manager shall keep or cause to be made available at the specified office
of the Company the following: (a) a current list of the full name and last known
business, residence or mailing address of each Member, (b) a copy of the initial
Certificate and all amendments thereto, (c) copies of all written limited
liability company agreements, including this Agreement, and all amendments to
the limited liability company agreements for each Company Entity, including any
prior written limited liability company agreements, no longer in effect,
(d) copies of the Company's federal, state and local income tax returns and
reports, (e) minutes of every meeting of the Executive Committee as well as any
written consents of the Executive Committee or actions taken by the Executive
Committee without a meeting, and (f) any other additional pertinent information,
including any information and expenses regarding any third party arrangement.
Any such records or information maintained by the Company may be kept on or be
in the form of any information storage device, provided that the records so kept
are convertible into legible written form within a Cure Period of time. Any
Member or its designated representative shall have the right, at any reasonable
time upon at least two (2) Business Days prior written notice, to have access to
and inspect and copy the contents of such books or records and information,
which, upon request, shall be made available to such Member at the Company's
office.

 

  -37- 

 

 

(b) The Manager shall keep adequate books and records at the Company's office,
setting forth an account of all business transactions arising out of and in
connection with the conduct of the Company. Any Member or its designated
representative shall have the right, at any reasonable time upon at least two
(2) Business Days prior written notice, to have access to and inspect and copy
the contents of such books or records.

 

7.2 Reports.

 

The Manager shall provide the following reports on the dates specified:
(a) within twenty (20) days following the end of each calendar month other than
the last calendar month of the fiscal year of the Company, the Manager shall
furnish to each Member, at the Company's expense, with unaudited financial
statements consisting of a balance sheet, income statement, a statement of cash
flows and a statement of sources and uses of funds for the month then ended; and
(b) within twenty (20) days following the end of the last calendar month of the
Fiscal Year of the Company, the Manager shall furnish to each Member, at the
Company's expense, with unaudited financial statements consisting of a balance
sheet, income statement and statement of cash flows for the Fiscal Year then
ended. In addition, the Manager shall provide monthly reports (within
twenty (20) days following the end of each month) to the Members, which shall
include (i) a Project status report comparing actual results to the current
Approved Budget and the Base Budget; (ii) year-to-date draw requests on the
Project Loan; (iii) status of any litigation involving the Company; (iv) status
of marketing efforts and pending sales; (v) a job cost report; (vi) such
financial statements and financial and other reports as are required to be
provided by the Company under any of the Project Loan Documents; and (vii) such
other reports and information regarding the Company and/or the Business as and
when reasonably requested by Limoneira. The reports described in clauses (i) and
(v) above will be in a form substantially similar to the form reports attached
hereto as Exhibit H. The Company's annual financial statements shall be audited
by the Independent Accountant, and the costs of the audit shall be treated as an
Approved Project Cost for purposes of this Agreement. All of such financial
statements shall be prepared in accordance with United States generally accepted
accounting principles consistently applied, provided that monthly financial
statements may omit footnotes and may be subject to normal year-end adjustments.

 

7.3 Tax Matters.

 

The Manager shall cause the Company's tax returns to be prepared and filed by
the Independent Accountant, unless otherwise required by the Executive
Committee, at the expense of the Company as soon as reasonably practicable after
the end of each Fiscal Year and shall cause tax information to be delivered to
each Member as reasonably necessary for the filing of tax returns by such
Member. The cost of preparing and filing such returns shall be borne by the
Company (and shall be treated as an Approved Project Cost for all purposes of
this Agreement). All such tax returns shall require the approval of Limoneira
prior to their filing.

 

  -38- 

 

 

7.4 Fiscal Year; Accounting; Elections.

 

The Fiscal Year of the Company shall conclude on October 31st of each year as
required by Code Section 706(b) and the Regulations promulgated thereunder
("Fiscal Year"). All decisions as to accounting matters and any election
available pursuant to the Code, except as specifically provided to the contrary
herein, shall be made by the Tax Matters Partner in its reasonable discretion
and approved by the Executive Committee.

 

7.5 Tax Matters Partner.

 

Lewis shall be the "Tax Matters Partner" pursuant to the Code and is authorized
and required to represent the Company in connection with all examinations of the
Company's affairs by tax authorities, including resulting administrative and
judicial proceedings, and to expend Company funds for professional services and
costs associated therewith and such costs shall be treated as an Approved
Project Costs for purposes of this Agreement. The Tax Matters Partner shall take
such action as may be necessary to cause each of the Members to become a "notice
partner" within the meaning of Code Section 6223. The Tax Matters Partner agrees
to promptly notify the Members (other than the Tax Matters Partner) and the
Executive Committee upon the receipt of any correspondence from any federal,
state or local tax authorities relating by giving writing notice within five (5)
Business Days after becoming aware thereof. The Tax Matters Partner may not take
any action on behalf of the Company (including actions contemplated by Code
Sections 6222 through 6232) without the prior approval of the Executive
Committee. The prior sentence does not authorize the Tax Matters Partner to take
any action left to the determination of an individual Member under Code
Sections 6222 through 6232. Each Member (and its tax advisors) shall have the
right to participate in all meetings or telephone calls with any taxing
authority and in any tax proceedings.

 

SECTION 8.
TRANSFER OF COMPANY INTERESTS; NEW MEMBERS; DEFAULT REMEDY

 

8.1 General.

 

No Member shall Transfer all or any portion of its Membership Interest in the
Company, or permit any Person (an "Interest Holder") that holds an Ownership
Interest in such Member to Transfer any part of such interest, except for
Transfers that comply with the requirements of Section 8.8 and that are either
(a) approved in writing by the Executive Committee, (b) permitted under
Section 8.2(a), or (c) Excluded Transfers. A transferee of a Member's interest
in the Company will be admitted as a Substituted Member only pursuant to
Section 8.2(b) or Section 8.6. Any purported Transfer that does not comply with
the provisions of this Section 8 shall be void and of no force or effect to the
maximum extent allowed by law.

 

8.2 Permitted Transfers and Excluded Transfers.

 

(a) Permitted Transfers. A Member or any direct or indirect owner of a Member
shall be permitted to Transfer its entire Membership Interest or Ownership
Interest to any Person provided the Ownership Requirement applicable to such
Member remains satisfied after such Transfer. The term "Ownership Requirement"
means (i) with respect to Lewis, (A) more than fifty percent (50% ) of the total
beneficial interests in Lewis are owned, directly or indirectly, by one (1) or
more lineal descendants of Ralph M. Lewis (the "Lewis Descendants") and (B) the
Lewis Descendants have the right, directly or indirectly, to appoint and replace
the individual(s) that manage Lewis; and (ii) with respect to Limoneira,
(A) more than fifty percent (50%) of the total beneficial interests in Limoneira
are owned, directly or indirectly, by LIMCO, and (B) only LIMCO has the right to
appoint and replace the individual(s) that manage Limoneira.

 

  -39- 

 

 

(b) Admission of Permitted Transferees. If the Executive Committee approves a
Transfer of a Member's entire Membership Interest in the Company, then the
transferee shall be admitted as a Substituted Member upon (i) the payment of the
reasonable out-of-pocket costs incurred by the Company and the non-transferring
Member in connection with such admission, and (ii) the execution of instruments
reasonably satisfactory in form and substance to the non-transferring Member,
whereby the transferee agrees to be bound by all terms and conditions of this
Agreement that were applicable to the transferring Member. Following the
satisfaction of the requirements in clauses (i) and (ii), any such transferee
shall be admitted as a member in the Company effective immediately prior to the
effective date of the Transfer (as set forth in Section 8.7), and, immediately
following such admission, the transferring Member shall cease to be a member of
the Company, but shall not be released from any of its obligations or liability
under this Agreement without the written consent of the other Member, which may
be granted or withheld in the other Member's sole and absolute discretion,
unless the transferee is a Person that results from a merger or consolidation
with the transferring Member or that purchases all of the assets of the
transferring Member.

 

(c) Excluded Transfers. For purposes of this Agreement, an "Excluded Transfer"
means any of the following events, to the extent they would otherwise be treated
as a Transfer under the definition thereof: (i) the transfer of any publicly
traded equity securities of LIMCO; (ii) the sale of all or substantially all of
the assets of LIMCO, any change of control of LIMCO, or any merger or
consolidation involving LIMCO; or (iii) the transfer of any direct or indirect
interest in Lewis provided the Ownership Requirement applicable to Lewis remains
satisfied after any such transfer.

 

8.3 Assignee of Member's Interest.

 

If, pursuant to a Transfer of a Membership Interest in the Company by operation
of law and without violation of Section 8.1 (or pursuant to a Transfer that the
Company is required to recognize notwithstanding any contrary provisions of this
Agreement), a Person acquires an interest in the Company, but is not admitted as
a Substituted Member pursuant to Section 8.2 or Section 8.6, then such Person:

 

(a) shall be treated as an assignee of a Member's interest, as provided in the
Act;

 

(b) shall have no right to inspect the books or records of the Company, to
participate in the business and affairs of the Company or to exercise any rights
of a Member under the Act or this Agreement (including, without limitation, any
management, voting, or consent rights under this Agreement or the right to
appoint any Representative to the Executive Committee); and

 

  -40- 

 

 

(c) shall share in distributions from the Company with respect to the
transferred interest, on the same basis as the transferring Member provided that
any Damages to the Company as a result of such Transfer shall be offset against
amounts that otherwise would be distributed to such Member or otherwise paid to
such Member or an Affiliate of such Member pursuant to any contract or other
arrangement with the Company (including any Affiliate Agreement).

 

8.4 Election; Allocations Between Transferor and Transferee.

 

Upon the transfer of the Membership Interest in the Company by any Member or the
distribution of any property of the Company to a Member, the Manager may file an
election in accordance with applicable Regulations, to cause the basis of the
Company property to be adjusted for federal income tax purposes as provided by
Sections 734 and 743 of the Code.

 

8.5 Withdrawal.

 

Except as provided in this Section 8, no Member may voluntarily or involuntarily
withdraw or dissociate from the Company or terminate its Membership Interest
therein without the prior written consent of the other Member, which consent may
be withheld in such other Member's sole and absolute discretion. Any Member who
withdraws from the Company in breach of this Section 8.5 shall be treated in
accordance with Section 8.3 as an assignee of a Member's Membership Interest
that is not admitted as a member, and shall not be relieved from any obligations
under this Agreement, including, but not limited to, the obligation to make
Capital Contributions and Member Loans to the Company as required under
Sections 2.2 and 2.3. The right to share in distributions granted under this
Section 8.5 shall be in lieu of any right the withdrawn Member may have under
the Act or otherwise to receive a distribution or payment of the fair market
value of the Member's Membership Interest in the Company.

 

8.6 Substituted Members.

 

Except as provided in Section 8.2, no Person taking or acquiring, by whatever
means, the Membership Interest of any Member in the Company shall be admitted as
a substituted member in the Company (a "Substituted Member") without the written
consent of the Executive Committee, which consent may be withheld or granted in
the sole and absolute discretion of each Representative.

 

8.7 Effective Date of Transfer.

 

Any valid Transfer of a Member's Membership Interest in the Company, pursuant to
the provisions of this Section 8 shall be effective as of the close of business
on the day preceding the closing of the transaction evidencing the Transfer. The
Company shall, from the effective date of such Transfer, thereafter make all
distributions on account of the Membership Interest so transferred, to the
transferee of such Membership Interest. As between any Member and its
transferee, the Profits and Losses of the Company for federal, state, and local
income tax purposes for the Fiscal Year of the Company in which such assignment
occurs shall be apportioned for federal income tax purposes in accordance with
any convention permitted under Section 706(d) of the Code reasonably selected by
the Executive Committee.

 

  -41- 

 

 

8.8 Additional Limitations on Transfer.

 

Notwithstanding any other term of this Agreement, no Transfer of any Membership
Interest in the Company or Ownership Interest in any Member may be effectuated,
unless in the opinion of the Company's counsel the Transfer (a) would not result
in a breach of, or acceleration of obligations under, any provision of any
instrument governing any Recourse Document or under any provision of the Project
Loan Documents or other major contract to which the Company is a party;
(b) would comply with the Securities Act of 1933 and applicable securities laws
of any other jurisdiction; and (c) would not violate any other applicable laws,
provided that the provisions of this Section 8.8 may be waived by the consent of
the Representatives of the Executive Committee of the Member that is not causing
the Transfer of a Membership Interest or Ownership Interest in a Member. The
Member who desires to Transfer a Membership Interest in the Company (or in which
an Ownership Interest is desired to be transferred) shall be responsible for all
legal fees incurred in connection with said opinion.

 

8.9 Transfer Indemnity.

 

If the transfer of any Member's Membership Interest or the transfer of an
Ownership Interest in any Member would either (i) cause the Company to
"terminate" under Section 708(b)(1)(b) of the Code, or (ii) cause there to be a
"change in control" of the Company within the meaning of California Revenue and
Taxation Code Section 64(c)(1), then such Member and its transferee shall
jointly and severally indemnify the Company for any loss, cost, expense or
liability incurred by the Company as a result of (A) any documentary taxes that
may be imposed on the Company, and (B) any reassessment of the Project under
California Proposition 13.

 

SECTION 9.
DISSOLUTION AND TERMINATION

 

9.1 Dissolution.

 

In the event of any Member's bankruptcy, dissolution, retirement, resignation,
expulsion or other cessation to serve or the admission of any new member into
the Company, the Company shall not dissolve, but the business of the Company
shall continue without interruption and without any break in continuity. Except
as may be permitted in accordance with this Agreement, to the maximum extent
allowed by law, each Member shall not have the right to, and each Member hereby
agrees that such Member shall not, seek to dissolve or cause the dissolution of
the Company or seek to cause a partial or whole distribution or sale of Company
assets whether by court action or otherwise, it being agreed that any actual or
attempted dissolution, distribution or sale would cause a substantial hardship
to the Company and the remaining Member. The Company shall only dissolve upon
the first to occur of any of the following events:

 

(a) The unanimous election by the Members to dissolve the Company;

 

  -42- 

 

 

(b) The sale or description of all of the Company's assets and the collection of
all proceeds realized in connection thereunder (including, without limitation,
the collection of any promissory note or other deferred amounts); or

 

(c) The entry of a judicial decree of dissolution under Section 18-802 of the
Act.

 

9.2 Winding Up.

 

(a) General Matters. Following the dissolution of the Company, as provided in
Section 9.1, the Manager, or if there is no Manager, each remaining Member,
shall wind up the Company as provided in Section 18-803 of the Act. During such
winding up process, the Profits, Losses and Net Cash Flow distributions shall
continue to be shared by the Members in accordance with this Agreement. After
the dissolution of the Company, the Company shall cease to carry on its
business, except insofar as may be necessary for the winding up of its business,
but the Company's separate existence shall continue until a certificate of
cancellation has been filed with the Delaware Secretary of State or until a
decree dissolving the Company has been entered by a court of competent
jurisdiction.

 

(b) Liquidation and Distribution of Assets. Upon the dissolution of the Company,
the Executive Committee shall take full account of the Company's liabilities and
assets, and such assets shall be liquidated by the Manager as promptly as is
consistent with obtaining the fair value thereof. During the period of
liquidation, the business and affairs of the Company shall continue to be
governed by the provisions of this Agreement, with the management of the Company
continuing as provided in Section 6. The proceeds from liquidation of the
Company's property, to the extent sufficient therefor, shall be applied and
distributed in the following order:

 

(i) To the payment and discharge of all of the Company's debts and liabilities,
including those to Members who are creditors in the order of priority required
by law, and to the establishment of any necessary reserves (including, without
limitation, reserves for insurance deductibles); and

 

(ii) To the Members in accordance with Section 4.1.

 

Any reserves withheld pursuant to Section 9.2(b)(i) shall be distributed as soon
as practicable, as determined in the reasonable discretion of the Manager, to
the Members pursuant to Section 9.2(b)(ii).

 

9.3 Certificate of Cancellation.

 

When all debts, liabilities, and obligations of the Company have been paid and
discharged or adequate provisions have been made therefor and all of the
remaining property and assets of the Company have been distributed to the
Members, a certificate of cancellation shall be executed and filed by any Member
with the Delaware Secretary of State.

 

  -43- 

 

 

SECTION 10.
EXCULPATION AND INDEMNIFICATION

 

10.1 Exculpation and Reliance on Information and this Agreement.

 

The Members hereby agree to the exculpation, indemnity and other provisions set
forth below as follows:

 

(a) Limitation on Liability. Neither the Manager, and Manager Affiliate, any
Member, any Officer nor any direct or indirect member, partner, shareholder,
director, officer, manager or trustee of any such Person or any other Person
designated by the Manager (collectively, the "Covered Persons") shall be liable
or accountable in damages or otherwise to the Company or to any Member for any
error of judgment or any mistake of fact or law or for anything that such
Covered Person may do or refrain from doing hereafter, except to the extent
caused by such Covered Person's bad faith, fraud, willful misconduct, gross
negligence or breach of this Agreement or any Affiliate Agreement.

 

(b) Reliance upon Information, Opinions, Reports, etc. A Covered Person shall be
fully protected in relying in good faith upon the records of the Company, any
information received by the Manager, any Member or the Company with respect to
the Property (financial or otherwise), and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence including, but not limited to, information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses or cash flow or any other facts pertinent to the existence and
amount of assets from which distributions to Members might properly be paid.

 

(c) Reliance upon Agreement. To the extent that, at law or in equity, a Covered
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Company or to any other Covered Person, a Covered Person acting under
this Agreement shall not be liable to the Company or to any Member for its good
faith reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they define the duties and liabilities of a
Covered Person otherwise existing at law or in equity, are agreed by the parties
hereto to replace such other duties and liabilities of such Covered Person.

 

10.2 Member Indemnification.

 

Each Member (such Member, the "Indemnifying Party") shall and does hereby
indemnify, defend and hold wholly harmless, to the fullest extent permitted by
law, the Company, the other Member and their respective Affiliates (each, as
applicable, the "Indemnified Parties") for, from and against and in respect of
any and all Damages, actually incurred by the Indemnified Parties to the extent
attributable to Bad Conduct or breach of this Agreement (including any Capital
Default) or any Affiliate Agreement by the Indemnifying Party or any Affiliate
thereof (including, but not limited to, the breach by any Indemnifying Party or
Affiliate thereof of any representation or warranty contained in this Agreement
or any Affiliate Agreement); provided, however, that Damages shall not include
any Damages to the extent covered by insurance maintained by or for the benefit
of such Indemnified Party or any Excluded Liabilities. In the event the
Indemnifying Party or any of its Affiliates incurs an indemnification obligation
pursuant to this Section 10.2, then the Indemnifying Party shall (i) in the
event the Company has suffered Damages, make a cash payment to the Company in
the amount of the indemnification obligation which, for the avoidance of doubt,
will (A) not be treated as a Capital Contribution to the Company; and (B) not
result in credit to the Indemnifying Party's Capital Account (or Unreturned
Initial Contribution Balance or Unreturned Additional Contribution Balance); or
(ii) in the event the Indemnified Party is not the Company, make a cash payment
to the Indemnified Party in the amount of the indemnification obligation.

 

  -44- 

 

 

10.3 Company Indemnification.

 

(a) General Indemnity. The Company shall and does hereby indemnify, defend (with
counsel selected by the Executive Committee) and hold wholly harmless, to the
fullest extent permitted by law, each Covered Person, from and against any and
all Damages incurred by such Covered Person by reason of anything which such
Covered Person may do or refrain from doing that arises out of or relates to the
Company. Notwithstanding the foregoing, no Covered Person shall be entitled to
be indemnified by the Company to the extent any such Damages are covered by
insurance maintained by or for the benefit of such Covered Person or to the
extent such Damages are incurred by such Covered Person by reason of such
Covered Person's Bad Conduct or breach of this Agreement or any Affiliate
Agreement.

 

(b) Financing Indemnity. Without limiting the provisions of Section 10.3(a), the
Guarantors may execute and deliver one (1) or more Recourse Documents pursuant
to Section 3.2 that may impose liability upon such Guarantors in connection with
any financing or refinancing obtained by the Company or other transactions
entered into by the Company. The Members acknowledge and agree that each
Guarantor shall execute and deliver one (1) or more Recourse Documents as an
accommodation to the Company and the Members. Accordingly, if any Guarantor
incurs any Damages under any Recourse Document, then the Company shall
indemnify, defend, protect and hold such Guarantor wholly harmless from and
against all such Damages incurred by such Guarantor as a result of such Recourse
Document; provided, however, the foregoing indemnification obligation shall not
extend or apply to any Damages incurred by any such Guarantor resulting from the
Bad Conduct or breach of this Agreement by, such Guarantor (other than a failure
to pay any amounts due under any such Recourse Document as a result of the
breach or default of the Company) or to the extent such Damages are covered by
insurance maintained by or for the benefit of such Guarantor. For purposes of
this Section 10.3(b), any contract entered into by LIMCO that is expressly
assumed by the Company under the Contribution Agreement shall be treated as a
Recourse Document if LIMCO is unable to obtain a release from any liability
thereunder. Additionally, at the request of Limoneira (and at Limoneira’s sole
cost and expense), if Limoneira or its Affiliates are prohibited by the other
contracting party from enforcing any obligations expressly retained by Limoneira
on any such assumed contracts by reason of the assignment of the assumed
contract to Company , the Company shall use its commercially reasonable efforts
to enforce any such obligations on any such assumed contracts, on behalf of, and
for the benefit of Limoneira and its Affiliates.

 

  -45- 

 

 

(c) Delivery of Funding Notice. Notwithstanding any other term of this
Agreement, the Manager may deliver a Funding Notice to the Members pursuant to
Section 2.3 if the Company has insufficient funds to satisfy its obligations
under this Section 10.3.

 

10.4 Survivability of Provisions. The provisions of this Section 10 shall
survive each Member's withdrawal as a member of the Company and the liquidation
of the Company.

 

SECTION 11.
DEFAULT AND REMEDIES

 

11.1 Events of Default.

 

The occurrence of any of the following events (each an "Event of Default") shall
constitute an event of default and the Member so defaulting (the "Defaulting
Member") shall thereafter be deemed to be in default without any further action
whatsoever on the part of the Company or the other Member (the "Non-Defaulting
Member") (other than with respect to any notice specifically required by this
Agreement):

 

(a) Bad Acts. Bad Conduct by such Member (or by such Member as the Manager, or
by such Member’s Manager Affiliate) in connection with the Business ("Bad Act
Event");

 

(b) Resignation or Withdrawal. The resignation or withdrawal, or attempted
resignation or withdrawal, by a Member from the Company in violation of this
Agreement without the prior written consent of the other Member ("Withdrawal
Event");

 

(c) Dissolution or Liquidation. Any dissolution or liquidation of a Member or
the taking of any action by its owners, members, managers, partners, directors,
majority stockholder, or Parent intended to cause the dissolution or liquidation
of such Member, unless either (i) the business of such Member is carried on
without termination; or (ii) substantially all assets of the Member, including
its interests in the Company, are transferred or are to be transferred to a
Permitted Transferee or to a Person acquiring substantially all of the assets of
the Parent of such Member, whether by purchase, contribution, merger, or change
of control resulting from stock transfers in a Parent that is publicly traded
("Dissolution Event");

 

(d) Voluntary Bankruptcy. The bankruptcy of a Member, which means: (i) the
inability of the Member generally to pay its debts as such debts become due, or
an admission in writing by the Member of the Member's inability to pay the
Member's debts generally or a general assignment by the Member for the benefit
of creditors; (ii) the filing of any petition or answer by the Member seeking to
adjudicate the Member as bankrupt or insolvent, or seeking for the Member any
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of the Member or the Member's debts under any law
relating to bankruptcy, insolvency, or reorganization or relief of debtors, or
seeking, consenting to, or acquiescing in the entry of an order for relief or
the appointment of a receiver, trustee, custodian, or other similar official for
the Member or for any substantial part of the Member's property; or (iii) any
action taken by the Member to authorize any of the actions set forth above
("Voluntary Bankruptcy Event");

 

  -46- 

 

 

(e) Involuntary Bankruptcy. The involuntary bankruptcy of a Member, which means,
without the consent or acquiescence of the Member, the entering of an order for
relief or approving a petition for relief or reorganization or any other
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or other similar relief under any present or future
bankruptcy, insolvency, or similar statute, law, or regulation, or the filing of
any such petition against such person, which petition shall not be dismissed
within ninety (90) days, or without the consent or acquiescence of the Member,
the entering of an order appointing a trustee, custodian, receiver, or
liquidator of the Member or of all or any substantial part of the property of
the Member, which order shall not be dismissed within ninety (90) days
("Involuntary Bankruptcy Event"); or

 

(f) Breach. The occurrence of any of the following events; provided that if any
of such event is reasonably susceptible of cure, then such event shall not
constitute an Event of Default unless and until such occurrence is not cured
within a Cure Period after notice of such default is given by the other Member:

 

(i) If any material representation, warranty, or other statement of fact made by
any Member or Affiliate thereof contained in this Agreement or any Affiliate
Agreement is materially misleading in any material respect;

 

(ii) A Member's failure to perform any other material obligation or act required
of that Member (whether in its capacity as a Member or the Manager) by the
provisions of this Agreement;

 

(iii) An Affiliate of a Member failing to perform any material obligation, act,
or acts required of such Affiliate by the provisions of any Affiliate Agreement;

 

(iv) Any Transfer by any Member in breach of the terms of this Agreement
("Transfer Event"); or

 

(v) Any other breach by a Member (whether in its capacity as a Member or the
Manager) of this Agreement.

 

11.2 Remedies.

 

With respect to each Event of Default other than a failure to make a Capital
Contribution (except the water rights under Section 2.7) or Member Loan which
shall be exclusively governed by Section 2.5 of this Agreement:

 

(a) Non-Defaulting Member Remedies. The Non-Defaulting Member shall have all
rights and remedies set forth in this Agreement and all available remedies at
law and in equity;

 

(b) Company Remedies. The Company shall have all rights and remedies set forth
in this Agreement and all available remedies at law and in equity;

 

  -47- 

 

 

(c) Default Loan Remedies. If the Event of Default is attributable to the
Defaulting Member's failure to make a cash payment to the Company pursuant to
the provisions of Section 10.2, then (i) the Non-Defaulting Member shall have
the right, but not the obligation, to make a Default Loan to the Defaulting
Member in the amount of the Company's Damages; and (ii) the Defaulting Member
shall be deemed to have used the proceeds of such Default Loan to satisfy its
obligation to reimburse the Company for the Company Damages (without credit to
such Defaulting Member's Capital Account, Unreturned Initial Contribution
Balance or Unreturned Additional Contribution Balance). The Non-Defaulting
Member shall also be entitled to offset against the Defaulting Member's
obligation (i) any distributions or payments to be made by the Company to the
Defaulting Member pursuant to Section 4.1 or 4.2 (including reference thereto
pursuant to Section 9.2(b)(ii)); and (ii) any payments owed or to be made by the
Company to the Defaulting Member or any Affiliate of the Defaulting Member
pursuant to any contracts with the Company (including, without limitation, under
any Affiliate Agreement). Amounts that the Company offsets pursuant to the
preceding sentence shall be treated for all purposes of this Agreement and the
applicable contract as if such amounts had been paid by the Company directly to
the Defaulting Member or the Affiliate of the Defaulting Member followed by the
Defaulting Member's and/or the Affiliate's payment of such amount to the Company
pursuant to the indemnification obligation provided by Section 10.2 of this
Agreement.

 

(d) Loss of Voting Rights. If there is an uncured Event of Default that is a Bad
Act Event, Withdrawal Event, Voluntary Bankruptcy Event, Involuntary Bankruptcy
Event or Transfer Event, then (i) the Delinquent Member's Representatives shall
not be entitled to serve on the Executive Committee and its Representatives
shall not be entitled to otherwise vote upon any matters under this Agreement
(exclusive of any Fundamental Decision), (ii) the management of the business and
affairs of the Company shall be vested solely in the Representatives of the
Non-Delinquent Member, (iii) the rights of the Delinquent Member shall be
limited solely to those of an assignee that is not admitted as a substituted
member in accordance with the provisions of Section 8.3 (i.e., sharing in any
allocations and/or distributions of Profits, Losses (and items thereof) and Net
Cash Flow and liquidating distributions to which such Member is entitled to
receive under this Agreement), and (iv) the Delinquent Member shall not have any
authority to act for or bind the Company. For the avoidance of any doubt, the
Members acknowledge that a Transfer Event shall not be to have occurred unless
such event is not cured within the Cure Period after notice of such default is
given by the Non-Delinquent Member.

 

(e) Notwithstanding the foregoing provisions of this Section 11.2, a Member (and
its Affiliates) shall not be liable for any Excluded Liabilities.

 

  -48- 

 

 

SECTION 12.
MISCELLANEOUS

 

12.1 Notices.

 

Any notice, demand, request or communication required or permitted to be given
by any provision of this Agreement shall be in writing and shall be delivered
personally to the Person to whom the same is directed, sent by registered or
certified mail, return receipt requested, or sent by Federal Express or any
other courier service guaranteeing overnight delivery, addressed to any Member
at the address appearing below such Person's name on Exhibit B or by electronic
transmission to the electronic mail address set below such Person's name on
Exhibit B (followed by notice by mail sent in the manner described above, or by
Federal Express or other courier service), or if to the Company, by notice to
each Member as herein provided, or to such other address as each Member may from
time to time specify by notice in accordance with this Section 12.1. Any such
notice shall be deemed to have been delivered, given, and received for all
purposes as of the date so delivered, at the applicable address; provided that
notices received on a day that is not a Business Day, or after 5:00 p.m. (at the
location to which delivery is to be made) on a Business Day shall be deemed
received on the next Business Day. Notice to a party shall not be effective
unless and until each required copy of such notice specified on Exhibit B (or as
the parties may from time to time specify by notice in accordance with this
Section 12.1) is given. The inability to deliver a notice because of a changed
address of which no notice was given or an inoperative facsimile number for
which no notice was given of a substitute number, or any rejection or other
refusal to accept any notice, shall be deemed to be the receipt of the notice as
of the date of such inability to deliver or rejection or refusal to accept. Any
notice to be given by any party hereto may be given by legal counsel for such
party. Any telephone numbers set forth on Exhibit B are provided for convenience
only and shall not alter the manner of giving notice set forth in this
Section 12.1.

 

12.2 Non-Competition and Independent Activities.

 

(a) Non-Competition. Each Member agrees that it will not, and will cause its
Affiliates not to, and will cause its Representatives on the Executive Committee
not to, directly or indirectly, engage in the development, construction and/or
sale of any single family residential housing projects within any of the real
property that is located in the geographical area designated on Exhibit I
attached hereto during the time both Members (and/or any Affiliate(s) thereof)
are members in the Company; provided, however, the restrictions contained in
this Section 12.2 will automatically expire on the date the Company has fewer
than 250 residential lots to sell in the Project and/or the Company has been
dissolved. Notwithstanding the foregoing sentence, with respect to East Area 2
and the Retained Property, the restrictions and covenants contained in this
Section 12.2 shall not apply to (i) any Person that owns stock of LIMCO, or
(ii) Limoneira and its Affiliates.

 

(b) Enforcement. Each Member recognizes that irreparable harm and damage will
result to the Company in the event of any breach by any Member of any of the
covenants contained in this Section 12.2. Each Member agrees that, in the event
of such a breach and in addition to any other legal or equitable remedies to
which the Company may be entitled or which may be available, the Company will be
entitled to specific performance of the covenants in this Section 12.2, to an
injunction from a court of law to restrain the violation of those covenants by
any Member and all other Persons acting for or with the Member, or to both
specific performance and an injunction. Each Member further agrees that, in the
event the Company brings an action for the enforcement of the covenant contained
in this Section 12.2, and if the court or arbitrator under Section 12.11 finds
any part of the covenant unreasonable as to time, area, or activity covered,
then such Member agrees to abide by any finding, judgment or decree of the court
or arbitrator as to what is reasonable and the Member agrees that the Company
may enforce this Agreement to the extent of such finding, judgment or decree.

 

  -49- 

 

 

(c) Waiver of Rights with Respect to Independent Activities. Except with respect
to restrictions of business activities as set forth in this Section 12.2(a) or
as otherwise expressly set forth in this Agreement, nothing in this Agreement
shall be construed to: (i) prohibit any Member or any of its respective
Affiliates from continuing, acquiring, owning, or otherwise participating in any
transaction, investments, and business ventures and undertakings of every type
and nature (each an "Independent Activity" and collectively the "Independent
Activities") that is not owned or operated by the Company even if such
Independent Activity is or may be in competition with the Company; (ii) require
any Member or any of its Affiliates to allow the Company or any other Member to
participate in the ownership or profits of any such Independent Activity; or
(iii) require any Member or any of its Affiliates to provide notice to the
Company or any Member regarding any Independent Activity of such Person. To the
extent any Member would have any rights or claims against the other Member as a
result of the Independent Activities of such Member or its Affiliates, whether
arising by statute, common law, or in equity, the same are hereby waived.

 

(d) Acknowledgment of Reasonableness. The Members hereby expressly acknowledge,
represent and warrant that they are sophisticated investors, they understand the
terms, conditions and waivers set forth in this Section 12.2, and that the
provisions of this Section 12.2 are reasonable, taking into account the relative
sophistication and bargaining position of the Members.

 

12.3 Binding Effect.

 

Subject to any transfer restrictions set forth in this Agreement, every
covenant, term, and provision of this Agreement shall be binding upon and inure
to the benefit of the Members and their respective heirs, legatees, legal
representatives, successors, transferees, and assigns.

 

12.4 Construction.

 

Every covenant, term, and provision of this Agreement shall be construed simply
according to its fair meaning and not strictly for or against any Member.

 

12.5 Time.

 

Time is of the essence with respect to this Agreement. In the event that the
last day for performance of an act or the exercise of a right under this
Agreement falls on a day other than a Business Day, then the last day for such
performance or exercise shall be the first Business Day thereafter.

 

12.6 Headings.

 

Section and other headings contained in this Agreement are for reference
purposes only and are not intended to describe, interpret, define, or limit the
scope, extent, or intent of this Agreement or any provision hereof.

 

  -50- 

 

 

12.7 Severability.

 

Every provision of this Agreement is intended to be severable. If any term or
provision hereof is illegal, invalid, or unenforceable for any reason
whatsoever, then such illegality, invalidity, or unenforceability shall not
affect the legality, validity, or enforceability of the remainder of this
Agreement.

 

12.8 Incorporation by Reference.

 

Every exhibit, schedule, recital and other appendix attached to this Agreement
and referred to herein is hereby incorporated into this Agreement by reference.

 

12.9 Additional Documents.

 

Each Member, upon the request of the other Member, agrees to perform all further
acts and execute, acknowledge, and deliver any documents that may be reasonably
necessary, appropriate, or desirable to carry out the provisions of this
Agreement.

 

12.10 Variation of Pronouns.

 

All pronouns and any variations thereof shall be deemed to refer to masculine,
feminine, or neuter, and singular or plural, as the identity of the Person or
Persons may require.

 

12.11 Dispute Resolution; Jury Trial Waiver.

 

(a) Generally. Each and every controversy, dispute, or claim between the Members
arising out of or relating to this Agreement or the transactions contemplated
hereby (exclusive of any impasse on any Major Decision other than the Major
Decision) ("Dispute") that is not settled in writing within thirty (30) days
after the date (the "Claim Date") upon which any such party hereto gives written
notice to the other that a Dispute exists, shall be submitted for binding
adjudication to a reference proceeding in California, without a jury, in
accordance with the provisions of Section 638, et seq. of the California Code of
Civil Procedure ("CCP"), or their successor sections. The procedures set forth
herein in this Section 12.11 shall constitute the exclusive means for the
resolution of any such Dispute, including, without limitation, whether such
Dispute is subject to such reference proceedings and regardless of whether such
Dispute includes any tort claims.

 

The referee shall be a retired Judge of the Superior Court in Ventura County
(the "Court") selected by mutual agreement of the parties to the Dispute, and if
they cannot so agree within thirty (30) days after the Claim Date, then the
referee shall be promptly selected by the Presiding Judge of the Court (or his
or her representative) and in accordance with CCP §640. The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one (1) peremptory
challenge of a referee selected by the Court pursuant to CCP §170.6. The referee
shall (i) be requested to set the matter for hearing within ninety (90) days
after the referee's appointment, and (ii) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within thirty (30)
days after all parties have rested and the case has been submitted for decision.
Any decision rendered by the referee will be final, binding and conclusive
(except as otherwise provided expressly in this Agreement) and judgment thereon
shall be entered pursuant to CCP §644 in any court in the State of California
having jurisdiction.

 

  -51- 

 

 

Any party may apply for a reference proceeding by filing a petition for a
hearing and/or trial by reference pursuant to CCP §638 at any time after the
earlier of (A) thirty (30) days following notice of the Claim Date, or
(B) commencement by a party to this Agreement of a regular (non-reference) legal
action involving a Dispute. All discovery permitted herein shall be at the
discretion of the referee and shall be completed no later than fifteen (15) days
before the first hearing (trial) date established by the referee. The referee
may extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Subject to the discretion of the referee, depositions may be taken by
either party upon seven (7) days' written notice, and request for production or
inspection of documents shall be responded to within fourteen (14) days after
service. All disputes relating to discovery that cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Court is empowered to issue temporary and/or provisional remedies, as
appropriate.

 

(b) Manner of Proceedings. Except as expressly set forth herein, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties. All other costs shall be
divided equally between all of the parties to the proceeding; provided, however,
that such costs, along with all other costs and expenses, including, without
limitation, attorneys' fees, shall be subject to award, in full or in part, by
the referee, in the referee's discretion, to the prevailing party. Unless the
referee so awards attorneys' fees, each party shall be responsible for such
party's own attorneys' and expert witness fees and costs.

 

(c) Determination of Issues. The referee shall be required to determine all
issues in accordance with existing case law and the statutory law of the State
of Delaware; provided, however, that the referee shall apply the rules of civil
procedure and evidence applicable to proceedings at law in the State of
California. The referee shall be empowered to enter equitable as well as legal
relief, to provide all temporary and/or provisional remedies and to enter
equitable orders that will be binding upon the parties. The referee shall issue
written findings of fact and conclusions of law, a written statement of
decision, and a single judgment at the close of the reference proceeding that
shall dispose of all of the claims of the parties that are the subject of the
reference. The parties hereto expressly reserve the right to contest or appeal
from the final judgment or any appealable order or appealable judgment entered
by the referee. The parties hereto also expressly reserve the right to move for
a new trial or a different judgment, which new trial, if granted, is also to be
a reference proceeding under this provision.

 

  -52- 

 

 

(d) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES
HERETO EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY DISPUTE AS
DEFINED HEREINABOVE, IN ANY ACTION, PROCEEDING, OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PARTIES HERETO
EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A REFERENCE
PROCEEDING AS PROVIDED ABOVE BUT THIS WAIVER SHALL BE EFFECTIVE EVEN IF, FOR ANY
REASON WHATSOEVER, SUCH CLAIM OR CAUSE OF ACTION CANNOT BE TRIED BY SUCH
REFERENCE PROCEEDING. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM, OR OTHER PROCEEDING THAT SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT.

 

12.12 Attorneys' Fees.

 

If any proceeding is commenced by any Member against any other Member that
arises out of, or relates to, this Agreement (including, but not limited to, any
reference proceeding), then the prevailing Member in such proceeding shall be
entitled to recover reasonable attorneys' fees and costs. Any judgment or order
entered in any legal proceeding shall contain a specific provision providing for
the recovery of all costs and expenses of suit including, but not limited to,
reasonable attorneys' and expert witness fees, costs and expenses incurred in
connection with (i) enforcing, perfecting and executing such judgment;
(ii) post-judgment motions; (iii) contempt proceedings; (iv) garnishment, levy,
and debtor and third-party examinations; (v) discovery; and (vi) bankruptcy
litigation.

 

12.13 Governing Law.

 

Subject to Section 12.12, the laws of the State of Delaware (without reference
to the rules regarding conflict or choice of laws of such State), including,
without limitation, the Act, shall govern the organization and internal affairs
of the Company, the liability of the Members of the Company and the construction
and interpretation of this Agreement.

 

12.14 Waiver of Action for Partition.

 

The Company may be dissolved, liquidated and terminated only pursuant to the
provisions of Section 9.1 above, and, to the fullest extent permitted by
applicable law but subject to the terms of this Agreement, each Member (on
behalf of itself and any person or entity that may claim for or on behalf of
such Member) hereby irrevocably waives any and all other rights that it (or any
such person or entity) may have to maintain any action for or otherwise cause
(i) a dissolution, liquidation or termination of the Company or any Company
Subsidiary or (ii) a sale or partition of, or appointment of a receiver for, any
or all of the assets of the Company or any Company Subsidiary, except as
expressly provided in this Agreement.

 

  -53- 

 

 

12.15 Counterpart Execution; Facsimile Signatures.

 

This Agreement may be executed in any number of counterparts, each of which may
be executed by less than all of the parties to this Agreement, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one and the same agreement. Executed
copies of the signature pages of this Agreement sent by facsimile or transmitted
electronically in either Tagged Image Format Files or Portable Document Format
shall be treated as originals, fully binding and with full legal force and
effect, and the parties waive any rights they may have to object to such
treatment.

 

12.16 Entire Agreement.

 

This Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof. All prior agreements among the parties with respect
to the subject matter of this Agreement, whether written or oral, are merged
herein and shall be of no force or effect. This Agreement can be modified or
amended only upon the written consent of all Members.

 

12.17 Representations and Warranties.

 

Each Member hereby represents and warrants as of the Effective Date, for the
sole and exclusive benefit of the Company, the Manager and each other Member, as
follows:

 

(a) Such Member has acquired its interest in the Company for its own account,
for investment, and not with a view to or for the resale, distribution,
subdivision, or fractionalization thereof;

 

(b) Such Member has no contract, undertaking, understanding, agreement or
arrangement, formal or informal, with any Person to sell, transfer, or pledge
all or any portion of its interest in the Company and has no current plans to
enter into any such contract, undertaking, understanding, agreement or
arrangement;

 

(c) Such Member has such business and financial experience alone, or together
with its professional advisers, that it has the capacity to protect its own
interests in connection with its acquisition of an interest in the Company;

 

(d) Such Member has sufficient financial strength to hold the interest in the
Company as an investment and bear the economic risks of that investment
(including possible complete loss of such investment) for an indefinite period
of time;

 

(e) Such Member has performed its own due diligence with respect to its interest
in the Company and the Company's acquisition of the Property and is relying on
that due diligence in making this investment, and such Member is not relying on
the Manager or representation or information provided by the other Member or any
of the other Member's Affiliates, with respect to tax, suitability, or other
economic considerations, other than the representations and warranties contained
in this Section 12.17 and the Contribution Agreement;

 

(f) Such Member has not received any assurances from anyone, including the other
Member, that it will receive the return of, or any return on, its Capital
Contributions, and that it is aware that its investment in the Company has
substantial risks, including, without limitation, the risk of changes in the
Ventura County, California real estate market and risk of the use of substantial
leverage, and that it may lose all of its Capital Contributions;

 

  -54- 

 

 

(g) The Membership Interest in the Company acquired by such Member has not been
registered under the Securities Act of 1933, 15 U.S.C. § 15b et seq., the
Delaware Securities Act, the California Corporate Securities Law of 1968 or any
other state securities laws (the "Securities Acts") because the Company has
issued the Interests in the Company in reliance upon the exemptions from the
registration requirements of the Securities Acts providing for issuance of
securities not involving a public offering;

 

(h) Such Member has not received any advertisement or general solicitation with
respect to the sale of the Membership Interests in the Company;

 

(i) Such Member acknowledges and agrees that the projections contained in any
documents, reports or other information previously or subsequently provided to
such Member are based on numerous assumptions that are subject to uncertainty
and over which the Company and the Manager have no control, are for illustrative
purposes only and should not be viewed as a guarantee of actual results. Neither
the Company, the Manager nor any of their Affiliates (or any other party) have
any obligation whatsoever to update information contained in any projections or
other materials provided to any Member. Such Member should consult with its own
advisors (A) to evaluate any projections and any associated assumptions, (B) to
make its own independent determination of the feasibility of any projections
(and the assumptions contained therein), and (C) to evaluate whether such Member
should execute and deliver this Agreement;

 

(j) Such Member is an "accredited investor" within the meaning of Regulation D
and the rules and regulations promulgated under the Securities Act of 1933;

 

(k) This Agreement constitutes a legal, valid, and binding obligation of the
Member enforceable against the Member in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect affecting generally
the enforcement of creditors' rights and statutes or rules of equity concerning
the enforcement of the remedy of specific performance;

 

(l) Such Member is duly organized, validly existing, and in good standing under
the laws of the state of its formation or incorporation, as applicable, is
qualified to do business in the State of California, and has full power and
authority to enter into this Agreement and to perform the terms and provisions
hereof;

 

(m) The execution, delivery, and performance of this Agreement by such Member
have been duly authorized by all necessary limited liability company and
corporate action and the Persons executing this Agreement and all documents
related thereto on behalf of such Member are fully authorized to do so. No
consent of any person exercising control (as such term is defined in the
definition of Affiliate) over such Member or any judicial or administrative body
or other governmental authority or any other Person or party is required for
such execution, delivery, or performance (or, if required, such consent already
has been obtained);

 

  -55- 

 

 

(n) The execution, delivery, and performance of this Agreement by such Member do
not and will not violate, conflict with or contravene any judgment, order,
decree, writ or injunction, or any law, rule, regulation, contract or agreement
to which the Member is subject, which conflict, violation, or breach would have
a material adverse effect on the business, operations, properties or condition
(financial or otherwise) of the Company;

 

(o) To the actual knowledge of such Member, no representation, warranty or
covenant of such Member in this Agreement or any Affiliate Agreement contains or
will contain any untrue statement of material facts or omits or will omit to
state material facts necessary to make the statements or facts contained therein
not misleading; and

 

(p) Such Member has not retained any broker, finder, agent or the like in
connection with this Agreement or the transactions contemplated under this
Agreement for which the Company or the other Member is responsible, in whole or
in part, for any fee or commission.

 

12.18 Enforceability of Provisions.

 

THE MEMBERS ACKNOWLEDGE AND AGREE THAT, UNDER THE CIRCUMSTANCES EXISTING AS OF
THE DATE HEREOF, THE REMEDIES PROVIDED FOR IN SECTIONS 2.5, 6.9 AND 11.2 ARE
FAIR AND REASONABLE AND DO NOT CONSTITUTE A FORFEITURE OR PENALTY. THE MEMBERS
FURTHER ACKNOWLEDGE AND AGREE THAT THEY HAVE BEEN PROVIDED WITH THE OPPORTUNITY
TO CONSULT WITH INDEPENDENT COUNSEL WITH RESPECT TO THE PROVISIONS OF
SECTIONS 2.5, 6.9 AND 11.2 AND AGREE AND COVENANT NOT TO CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY SUCH REMEDY AS A PENALTY, FORFEITURE OR OTHERWISE IN ANY
COURT OF LAW AND/OR REFERENCE PROCEEDING (OR OTHERWISE).

 

12.19 Contractual Duties Prevail; Approval Standard.

 

To the extent that, at law or in equity, a Member has duties (including
fiduciary duties) and liabilities relating thereto to the Company or any Company
Entity or to the other Member, a Member acting pursuant to this Agreement shall
not be liable to the Company or any Company Subsidiary or to any other Member
except to the extent provided in Section 10.2. The provisions of this Agreement,
to the extent that they restrict the duties and liabilities of a Member
otherwise existing at law or in equity, are agreed by the parties hereto to
replace such other duties (including fiduciary duties) and liabilities of such
Member. Except as expressly provided herein: (1) any agreement, approval,
consent, judgment or other determination to be made by a Member (or its
Representatives) under this Agreement shall not be effective unless it is in
writing and shall be in the sole and absolute discretion of such Member (or its
Representatives) for any reason or no reason; and (2) such Member (and its
Representatives) shall be entitled to consider only such interests and factors
as it desires, including such Member's interests, and shall, to the fullest
extent permitted by applicable law, have no duty (including fiduciary duties) or
obligation to give any consideration to any interest of or factors affecting the
Company, any Company Entity or any other Member.

 

  -56- 

 

 

12.20 Scope of Representation.

 

EACH MEMBER HEREBY ACKNOWLEDGES AND AGREES THAT, IN CONNECTION WITH THE
DRAFTING, PREPARATION AND NEGOTIATION OF THIS AGREEMENT AND THE CONTRIBUTION
AGREEMENT, THE FORMATION OF THE COMPANY AND ANY OTHER MATTERS RELATED THERETO,
(I) ALLEN MATKINS LECK GAMBLE MALLORY & NATSIS LLP HAS ONLY REPRESENTED THE
INTERESTS OF LEWIS, AND NOT THE INTERESTS OF LIMONEIRA OR THE COMPANY OR ANY
OTHER PARTY (AS A GROUP AND/OR INDIVIDUALLY), AND (II) PIRCHER, NICHOLS & MEEKS
HAS ONLY REPRESENTED THE INTERESTS OF LIMONEIRA AND NOT THE INTERESTS OF LEWIS
OR THE COMPANY (OR ANY OTHER PARTY). THE ATTORNEYS, ACCOUNTANTS AND OTHER
EXPERTS WHO PERFORM SERVICES FOR ANY OF THE PARTIES HERETO MAY ALSO PERFORM
SERVICES FOR THE COMPANY. TO THE EXTENT THE FOREGOING REPRESENTATION CONSTITUTES
A CONFLICT OF INTEREST, EACH MEMBER HEREBY EXPRESSLY WAIVES ANY SUCH CONFLICT OF
INTEREST. EACH MEMBER FURTHER ACKNOWLEDGES THAT THE ATTORNEYS, ACCOUNTANTS AND
OTHER EXPERTS WHO PERFORM SERVICES FOR THE COMPANY SHALL NOT BE DEEMED BY VIRTUE
OF SUCH REPRESENTATION TO HAVE ALSO REPRESENTED ANY OTHER PARTY IN CONNECTION
WITH ANY SUCH MATTERS.

 

12.21 Nonrecourse Parties.

 

Except as provided in Sections 3.2 and 10.2 (and without limiting the liability
of Lewis Guarantor or Limoneira Guarantor under its Joinder), no direct or
indirect partner, shareholder, officer, director or trustee of the Manager or
any Member (collectively, the "Nonrecourse Parties") shall be personally liable
in any manner or to any extent under or in connection with this Agreement, and
the Company shall not have any recourse to any assets of any of the Nonrecourse
Parties to satisfy any liability, judgment or claim that may be obtained or made
against any such Nonrecourse Party under this Agreement. The limitation of
liability provided in this Section 12.21 is in addition to, and not in
limitation of, any limitation on liability applicable to any Nonrecourse Parties
provided by law or by this Agreement or any other contract, agreement or
instrument; provided, however, the foregoing shall not limit any liability that
a Nonrecourse Party has to return any distribution received by such party in
violation of applicable law.

 

12.22 No Suretyship Defenses.

 

Each Member hereby unconditionally waives any guarantor or suretyship defense
that may otherwise apply with respect to this Agreement.

 

  -57- 

 

 

12.23 Interpretation.

 

For purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires, (i) the terms defined herein shall include the
plural as well as the singular; (ii) accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with US generally
accepted accounting procedures; (iii) references in this Agreement to
"Sections," "subsections," "paragraphs" and other subdivisions without reference
to a document are to designated Sections, subsections, paragraphs and other
subdivisions of this Agreement; (iv) a reference to a subsection without further
reference to a Section is a reference to such subsection as contained in the
same Section in which the reference appears, and this rule shall also apply to
paragraphs and other subdivisions; (v) the words "herein," "hereof," "hereunder"
and other words of similar import refer to this Agreement as a whole and not to
any particular provision; (vi) the words "include", "such as" and "including"
and their variations, shall mean "including, but not limited to;"
(vii) references to "days" shall mean calendar days unless otherwise stated;
(viii) every reference to any document refers to that document as modified from
time to time, and includes all exhibits and schedules to that document;
(ix) "good faith" means "honesty in fact" as such phrase is used in the Uniform
Commercial Code, as adopted in the State of Delaware as of the date of this
Agreement; (x) "reasonable efforts" or "commercially reasonable efforts" means
the level of effort a reasonable person would exert under similar circumstances
acting on its own behalf and shall require diligence and good faith but not
illegal or other unreasonable actions; and (xi) the headings in this Agreement
are for convenience only and are not intended to describe, interpret, define, or
limit the scope, extent, or intent of any of the provisions of this Agreement.

 

12.24 Omitted.

 

 

 

12.25 Joinder.

 

Certain obligations of Lewis under this Agreement shall be guaranteed by the
parties (the "Lewis Guarantors") pursuant to that certain Joinder of Lewis
Guarantors attached to this Agreement to be executed by the Lewis Guarantors.
Certain obligations of Limoneira under this Agreement shall be guaranteed by
LIMCO (the "Limoneira Guarantor") pursuant to that certain Joinder of Limoneira
Guarantor attached to this Agreement to be executed by Limoneira Guarantor.

 

12.26 Definitions.

 

The following terms shall have the meanings specified in this Section 12.26:

 

"Act" means the Delaware Limited Liability Company Act, as set forth in Del.
Code Ann. Tit. 6, 18-101, et. seq., as amended from time to time (or any
corresponding provisions of succeeding law).

 

"Action" means any claim, action, cause of action, demand, lawsuit, arbitration,
inquiry, audit, notice of violation, proceeding, litigation, citation, summons,
subpoena or investigation of any nature, civil, criminal, administrative,
regulatory or otherwise, whether at law or in equity.

 

"Adjusted Capital Account Balance" means an amount with respect to each Member
equal to the balance in such Member's Capital Account at the end of the relevant
Fiscal Year, after taking into account contributions and distributions during
such Fiscal Year and after increasing the balance in such Member's Capital
Account by any amount such Member is deemed to be obligated to restore pursuant
to Regulations Sections 1.704-2(g)(1), 1.704-2(i)(5) or 1.704-1(b)(2)(ii)(c).

 

  -58- 

 

 

"Adjusted Capital Account Deficit" means, with respect to any Member, a deficit
balance in such Member's Capital Account as of the end of the Fiscal Year after
giving effect to the following adjustments: (a) credit to such Capital Account
the additions, if any, permitted by Regulations §§ 1.704-1(b)(2)(ii)(c)
(referring to obligations to restore a capital account deficit), 1.704-2(g)(1)
(referring to "minimum gain") and 1.704-2(i)(5) (referring to a partner's share
of "partner nonrecourse debt minimum gain"), and (b) debit to such Capital
Account the items described in §§ 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
Regulations. This definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulation § 1.704-1(b)(2)(ii)(d).

 

"Affiliate" means, with respect to any Person: (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling twenty-five percent (25%) or more of the
outstanding voting and/or beneficial ownership interests of such Person;
(iii) any officer, director, manager, managing member, or general partner of
such Person; or (iv) any Person who is an officer, director, manager, managing
member, general partner, trustee, or holder of twenty-five percent (25%) or more
of the voting interests of any Person described in clauses (i) through (iii) of
this definition. For purposes of clause (i) of this definition, two or more
Persons shall be deemed to be under common control if there is a twenty-five
percent (25%) or greater overlap in the ownership of any classes of equity in
such Persons. Without limitation on the foregoing, Lewis, LOC and LMC are
Affiliates of each other.

 

"Affiliate Agreement" means an agreement, contract or other arrangement between
the Company and an Affiliate of a Member including, but not limited to, the
Contribution Agreement and the Assignment Agreement.

 

"Agreement" means this First Amended and Restated Limited Liability Company
Agreement, as amended from time to time. Words such as "herein," "hereinafter,"
"hereof," "hereto" and "hereunder," refer to this Agreement as a whole, unless
the context otherwise requires.

 

"Assigned Agreements" has the meaning given that term in the recitals of this
Agreement.

 

"Bad Conduct" means acts or omissions constituting gross negligence, willful or
wanton misconduct, fraud, intentional misrepresentation, criminal conduct, bad
faith or a knowing violation of law.

 

"Bank Account" means a bank account established by the Company at a financial
institution reasonably approved by the Executive Committee.

 

"Book Value" means, with respect to any asset, the asset's adjusted basis for
federal income tax purposes, except as follows:

 

  -59- 

 

 

(i) The initial Book Value of any asset contributed by a Member to the Company
shall be the fair market value of such asset at the time of contribution to the
Company, as reasonably determined by the contributing Member and the Executive
Committee as reflected in this Agreement or another writing agreed to by all the
Members;

 

(ii) The Company shall adjust the Book Value of all Company assets to equal
their respective gross fair market values (taking Code § 7701(g) into account),
as determined by the Executive Committee as of the following times: (A) the
acquisition of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis Capital Contribution; (B) the
distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for an interest in the Company; (C) the
liquidation of the Company within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g); and (D) in connection with the issuance by the
Company of a non-compensatory option (as defined in Regulations § 1.721-2(f)
other than an option for a de minimis interest; provided that the Company is
required to make an adjustment described in clauses (A), (B) and (C) of this
paragraph only if the Executive Committee determines that the adjustment is
necessary to reflect the relative economic interests of the Members in the
Company.

 

(iii) The Company shall increase (or decrease) the Book Value of Company assets
to reflect any adjustments to the adjusted basis of the Company's assets
pursuant to Code § 734(b) or Code § 743(b), but only to the extent that the
adjustments are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m), provided, however, that the Company
will not adjust the Book Value pursuant to this subparagraph (iii) to the extent
that an adjustment pursuant to subparagraph (ii) is required in connection with
a transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iii).

 

(iv) The Book Value of any Company asset distributed to any Member shall be the
gross fair market value of such asset on the date of the distribution as
reasonably determined by the Executive Committee.

 

(v) If any non-compensatory option is outstanding at the time the Book Value of
the Company's assets is adjusted, then the provisions of Regulations
§ 1.704-1(b)(iv)(h)(2) apply.

 

If the Book Value of an asset has been determined or adjusted pursuant to
subparagraph (ii) or (iii) above, then the Book Value will thereafter be
adjusted by the Capital Account Depreciation taken into account with respect to
such asset, for purposes of computing Profits and Losses.

 

"Business Day" means any day that is not a Saturday, Sunday, legal holiday in
California, or a day on which banking institutions in California are authorized
or required by law to close.

 

"Capital Account" means, with respect to each Member or assignee, the Capital
Account maintained for such Person in accordance with the following provisions:

 

  -60- 

 

 

(a) To each Person's Capital Account there shall be credited such Person's
Capital Contributions, including the amount listed under the column labeled
"Capital Account" on Exhibit B, such Person's distributive share of Profits and
any items in the nature of income or gain which are specially allocated to such
Person pursuant to Section 5.2, and the amount of any Company liabilities
assumed by such Person or which are secured by any Property distributed to such
Person.

 

(b) To each Person's Capital Account there shall be debited the amount of cash
and the Book Value of any Property distributed to such Person pursuant to any
provision of this Agreement, such Person's distributive share of Losses and any
items in the nature of expenses or losses which are specially allocated to such
Person pursuant to Section 5.2, and the amount of any liabilities of such Person
assumed by the Company or which are secured by any property contributed by such
Person to the Company.

 

(c) In the event all or a portion of a Membership Interest in the Company is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest, except that if the Transfer causes a termination of the
Company under Section 708(b)(1)(B) of the Code, then Regulations § 1.708.1(b)
shall apply.

 

(d) In determining the amount of any liability for purposes of (a) and (b) of
this definition, there shall be taken into account Code § 752(c) and any other
applicable provisions of the Code and Regulations.

 

The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
§ 1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Executive Committee determines that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including debits or credits relating to liabilities which are
secured by contributions or distributed property or which are assumed by the
Company, a Member, or assignee), are computed in order to comply with such
Regulations, the Executive Committee may make such modification, provided that
it is not likely to have a material effect on the amounts distributed to any
Person pursuant to Section 9.2 of this Agreement upon the dissolution of the
Company. The Executive Committee also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between (A) the aggregate balances
standing in the Capital Accounts of the Members and assignees, and (B) the
amount of Company capital reflected on the Company's balance sheet, as computed
for book purposes, in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate modifications in the
event unanticipated events might otherwise cause this Agreement not to comply
with Treasury Regulations Section 1.704-1(b).

 

If the Book Value of Company assets are adjusted pursuant to this Agreement,
then the Capital Accounts of all Members shall be adjusted simultaneously to
reflect the aggregate net adjustments as if the Company recognized gain or loss
equal to the amount of such aggregate net adjustment. On the exercise of a
non-compensatory option (as defined in Regulations § 1.721-2(f) the Capital
Accounts of the Members shall be adjusted in accordance with Regulations
§ 1.704-1(b)(2)(iv)(s).

 

  -61- 

 

 

"Capital Account Depreciation" shall mean for each Fiscal Year or other period,
an amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such Fiscal Year or other
period, except that if the Book Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such Fiscal Year or
other period, then Capital Account Depreciation shall be an amount which bears
the same ratio to such beginning Book Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such Fiscal Year
or other period bears to such beginning adjusted tax basis.

 

"Capital Contribution" means, with respect to each Member, the amount of money
and the net fair market value of any property (other than money) contributed to
the Company by such Member pursuant to any provision of this Agreement
(exclusive of any amounts paid by any Indemnifying Party pursuant to
Section 10.2).

 

"Code" means the Internal Revenue Code of 1986, as amended from time to time (or
any corresponding provisions of succeeding law).

 

"Company" means the limited liability company formed pursuant to the filing of
the Certificate and the execution of the Original Agreement and any limited
liability company continuing the business of this Company in the event of
dissolution as herein provided.

 

"Credit Enhancement" means any letter of credit, bond or similar credit
enhancement.

 

"Cure Period" means, with respect to any Defaulting Member, a period of
thirty (30) calendar days after such Defaulting Member receives written notice
of its default from a non-defaulting Member; provided, however, that if such
breach can be cured but cannot reasonably be cured within such thirty (30)-day
period, then the period shall continue, if such Defaulting Member commences to
cure the breach within such thirty (30)-day period, for so long as such
defaulting Member diligently prosecutes the cure to completion, up to a maximum
of the lesser of (a) sixty (60) calendar days, or (b) the period of time allowed
for such performance under any Project Loan Documents.

 

"Default Loan" means a recourse loan that has been advanced to a Delinquent
Member or a Defaulting Member pursuant to Section 2.5(b)(iii) or
Section 11.2(c), respectively, that shall bear interest at a rate equal to
fifteen percent (15%) per annum, compounded annually; provided that any
applicable laws limiting the rate of interest that may be legally charged with
respect to such loan shall be taken into account and, if applicable, the rate of
interest charged on such loan shall be reduced to the maximum rate of interest
permitted by such law. Subject to any extension provided for under this
Agreement, each Default Loan shall be due and payable in full one (1) year from
the date advanced (or, if earlier, upon the sale of any Member's Membership
Interest under Section 6.9(c) or the dissolution of the Company).

 

"Entity" means any Person other than an individual.

 

"Excluded Liabilities" means (a) special, exemplary, punitive, and/or
consequential damages, unless payable to third parties; and (b) any claim for
lost profits or similar claim by a Member.

 

  -62- 

 

 

"Gross Revenues" means the gross cash proceeds realized by the Company from any
source pursuant to sound accounting principles.

 

"Independent Accountant" means Ernst & Young, or such other accounting firm that
is approved by the Executive Committee.

 

"Manager" means Lewis and any Person who succeeds to Lewis as Manager in
accordance with Section 6.1(a).

 

"Member" means any Person identified as a member of the Company in the
introductory paragraph to this Agreement. If any Person is admitted as
Substituted Member pursuant to the terms of this Agreement, then the term
"Member" shall also be deemed to refer to such Person. "Members" refers
collectively to all Persons who are designated as a "Member" pursuant to this
definition, until such time as any such Person ceases to be a member of the
Company in accordance with this Agreement or the Act.

 

"Membership Interest" means, with respect to each Member, (i) that Member's
status as a member, (ii) that Member's Capital Account and share of the Profits,
Losses and other items of income, gain, loss, deduction and credits of, and the
right to receive distributions (liquidating or otherwise) from, the Company
under the terms of this Agreement, (iii) all other rights, benefits and
privileges enjoyed by that Member (under the Act or this Agreement) in its
capacity as a member, including that Member's rights to vote, consent and
approve those matters described in this Agreement, and (iv) all obligations,
duties and liabilities imposed on that Member under the Act or this Agreement in
its capacity as a member.

 

"Net Cash Flow" means Gross Revenues less the portion thereof used to pay for
Company expenses, to repay any Member Loans and to establish reserves for
Approved Project Costs, all as reasonably determined by the Executive Committee,
consistent in all material respects with any Approved Business Plan then in
effect.

 

"Ownership Interest" means the direct and/or indirect ownership in any Member.

 

"Parent" means any Person that holds, directly or indirectly, more than fifty
percent (50%) of the outstanding equity securities, or comparable equity
interests, of a Member.

 

"Percentage Interest" means, with respect to a particular Member, that Member's
interest, expressed as a percentage. The Percentage Interest of each Member is
fifty percent (50%).

 

"Person" means any individual, partnership, corporation, trust, limited
liability company, or other entity.

 

"Pre-Assignment Expenses" means Lewis Pre-Assignment Expenses and the Limoneira
Pre-Assignment Expenses, collectively.

 

  -63- 

 

 

"Pre-Closing Agreements" has the meaning assigned to such term in the
Contribution Agreement.

 

"Prime Rate" means the highest prime rate of interest published in the then most
recent edition of the Wall Street Journal, Western Edition (if such edition is
then published), or any successor publication.

 

"Profits" and/or "Losses" for each Fiscal Year or other period, an amount equal
to the Company's taxable income or loss for such year or period determined in
accordance with Code Section 703(a) (including in such taxable income or loss
all items of income, gain, loss or deduction required by Code Section 703(a) to
be stated separately) with the following adjustments:

 

(a) Any income of the Company that is exempt from federal income tax, and not
otherwise taken into account in this definition in computing Profits or Losses,
shall be added to such taxable income or loss;

 

(b) Any Company expenditures described in Code Section 705(a)(2)(B), or treated
as such pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in this definition in computing Profits or Losses shall be
subtracted from such taxable income or loss, including nonrecourse deductions;

 

(c) Gain or loss resulting from any disposition of Company property shall be
computed by reference to the Book Value of the Company property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Book Value;

 

(d) In lieu of the depreciation, amortization and other cost recovery deductions
taken into account in computing such taxable income or loss, there shall be
taken into account the Capital Account Depreciation computed in accordance with
such definition contained above; and

 

(e) Notwithstanding any other provision of this subsection, any items of income,
gain; loss or deduction which are specially allocated shall not be taken into
account in computing Profits or Losses.

 

"Project Loan" means a third-party loan made to the Company necessary for the
Company to acquire, own, develop, design, construct, furnish, operate and
maintain the Project.

 

"Project Loan Documents" shall mean any instrument and documents that evidence
or secure the Project Loan.

 

"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).

 

"Related Party" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. For
purposes of this definition of Related Party, the term "control" (including the
terms "controlled by" and "under common control with") with respect to the
relationship between or among two or more Persons, means direct or indirect,
record or beneficial, ownership of one hundred percent (100%) of the outstanding
equity, capital, or right to profits of such Person.

 

  -64- 

 

 

"Transfer" means any change in the ownership of any Membership Interest in the
Company or in the Ownership Interest of any Member, whether made voluntarily,
involuntarily, directly, indirectly or by operation of law, including, but not
limited to, the following: (i) a sale, assignment, contribution, distribution,
gift or other transfer of an Ownership Interest to any Person; (ii) a transfer
of an Ownership Interest to the personal representative of the estate of a
Person upon such Person's death, and any subsequent transfer of an Ownership
Interest from such personal representative to the heirs or devisees of the
deceased Person under his will or by the laws of descent and distribution;
(iii) a transfer of an Ownership Interest to a judicially appointed personal
representative as a result of the adjudication by a court of competent
jurisdiction that the transferring Person is mentally incompetent to manage his
person or property; (iv) a transfer of an Ownership Interest to the transferring
Person's spouse or former spouse, or heirs of such spouse or former spouse, in
connection with a division of their community or other property upon the death
or divorce of the transferring Person, divorce or the death of such spouse;
(v) a general assignment for the benefit of creditors, or any assignment to a
creditor resulting from the creditor's foreclosure upon or execution against any
Person holding an Ownership Interest; (vi) the filing of a voluntary bankruptcy
petition; (vii) the adjudication of any Person holding an Ownership Interest as
bankrupt or insolvent or the entry of an order for relief under the United
States Bankruptcy Code against any Person holding an Ownership Interest;
(viii) the filing of a petition or answer by any Person holding an Ownership
Interest seeking for such Person's reorganization, arrangement, composition,
readjustment, liquidation or similar relief under any statute, law or rule;
(ix) the filing of an answer or other pleading by any Person holding an
Ownership Interest admitting or failing to contest the material allegations of a
petition filed against such Person in a bankruptcy, insolvency, reorganization
or similar proceeding; (x) the seeking, consenting to or acquiescing in the
appointment of a trustee, receiver or liquidator of any Person holding an
Ownership Interest or of all or any substantial part of such Person's property;
(xi) if a Person holding an Ownership Interest is a general or limited
partnership, the dissolution and commencement of winding up of the partnership;
(xii) if a Person holding an Ownership Interest is a corporation, the filing of
a certificate of dissolution or its equivalent for the corporation or revocation
of its charter; (xiii) if a Person holding an Ownership Interest is another
limited liability company, the filing of articles of dissolution or termination
or their equivalent for the limited liability company; or (xiv) if a Person
holding an Ownership Interest is an Entity, any change in the control or
majority ownership of such Person to another Person that is not a Related Party
of the transferring Person.

 

"Unreturned Additional Contribution Balance" means, with respect to each Member,
an amount equal to (a) the sum of such Member's Capital Contributions made or
deemed made to the Company pursuant to the provisions of either Section 2.2(b),
2.2(c), 2.2(d), 2.2(e), 2.2(f), 2.3 or 2.5(iii) of this Agreement, minus (b) all
distributions to such Member pursuant to Section 4.1(a) (including by reference
thereto pursuant to Section 9.2(b)) and Section 4.2 until the balance standing
in such account has been reduced to zero.

 

  -65- 

 

 

"Unreturned Additional Contribution Balances" means the Unreturned Contribution
Balance for both Members.

 

"Unreturned Initial Contribution Balance" means, with respect to each Member, an
amount equal to the sum of such Member's Capital Contributions made or deemed
made to the Company pursuant to the provisions of Section 2.2(a) of this
Agreement, minus all distributions to such Member pursuant to Section 4.1(b)
(including by reference thereto pursuant to Section 9.2(b)) until the balance
standing in such account has been reduced to zero.

 

 

 

 

[SIGNATURES BEGIN ON FOLLOWING PAGE]

 

  -66- 

 

 

IN WITNESS WHEREOF, the Members have executed and entered into this First
Amended and Restated Limited Liability Company Agreement of Limoneira Lewis
Community Builders, LLC as of the date first set forth above.

 

  MEMBERS:       LEWIS SANTA PAULA MEMBER, LLC,   a Delaware limited liability
company       By: Lewis Operating Corp.,     a California corporation    
Its:  Manager           By: /s/ John M. Goodman       John M. Goodman      
Its:  Senior Vice President

 

 

  LIMONEIRA EA1 LAND, LLC   a Delaware limited liability company       By:
Limoneira Company,     a Delaware corporation     its sole Member           By:
/s/ Joseph D. Rumley     Name: Joseph D. Rumley     Title: Chief Financial
Officer        

 

  MANAGER:       LEWIS SANTA PAULA MEMBER, LLC,   a Delaware limited liability
company       By: Lewis Operating Corp.,     a California corporation    
Its:  Manager           By: /s/ John M. Goodman       John M. Goodman      
Its:  Senior Vice President

 

Signature Page to First Amended and Restated Limited Liability Company
Agreement  

 

 

 

JOINDER OF LEWIS GUARANTORS

 

 

In consideration of Limoneira's execution of that certain First Amended and
Restated Limited Liability Company Agreement of Limoneira Lewis Community
Builders, LLC (the "Agreement"), to which this Joinder ("Joinder") is attached
each of the undersigned (each, a "Lewis Guarantor"), jointly and severally,
hereby absolutely, unconditionally and irrevocably guarantees to Limoneira that
all obligations (the “Guaranteed Obligations”) of Lewis under Sections 2.2, 2.3,
2.4, 2.5, 2.6, 2.9, 10.2, and 12.2, of the Agreement will be timely satisfied.
Capitalized terms used in this Joinder of Lewis Guarantors and not otherwise
defined herein shall have the same meanings as set forth in the Agreement. Each
Lewis Guarantor represents and acknowledges that the direct or indirect owners
of such Lewis Guarantor own a substantial direct or indirect interest in Lewis,
that the direct or indirect owners of such Lewis Guarantor will derive
substantial benefits from the execution of the Agreement and the transactions
contemplated thereby, and that such Lewis Guarantor's execution of this Joinder
is a material inducement and condition to Limoneira's execution of the Agreement
and that Limoneira is, for all purposes, a third-party beneficiary of this
Joinder.

  

To the fullest extent permitted by applicable law, each Lewis Guarantor
unconditionally waives any guarantor or suretyship defenses that might otherwise
be available to such Lewis Guarantor. The obligations of each Lewis Guarantor
under this Joinder are independent of the obligations of Lewis under the
Agreement and, in the event of any default hereunder, a separate action or
actions may be brought and prosecuted against such Lewis Guarantor whether or
not any Lewis Guarantor is the alter ego of Lewis and whether or not Lewis is
joined therein or a separate action or actions are brought against Lewis. The
obligations of each Lewis Guarantor hereunder shall remain in full force and
effect without regard to, and shall not be affected or impaired by, the
following, any of which may be taken without the consent of, or notice to, any
Lewis Guarantor, nor shall any of the following give any Lewis Guarantor any
recourse or right of action against the Company, any Company Subsidiary, or
Limoneira: (a) any express or implied amendment, modification, renewal,
addition, supplement, extension of the Guaranteed Obligations or the Agreement;
(b) any exercise or non-exercise by the Company, any Company Subsidiary, or
Limoneira of any right or remedy under the Agreement or this Joinder of or
available at law or in equity; (c) any Bankruptcy Event relating to any Lewis
Guarantor or Lewis, or any action taken with respect to the Company, any Company
Subsidiary or this Joinder by any trustee or receiver, or by any court, in any
such proceeding, whether or not any Lewis Guarantor shall have had notice or
knowledge of any of the foregoing; (d) the occurrence of a Dissolution Event
with respect to any Lewis Guarantor or Lewis; (e) any release or discharge of
Lewis from its liability under the Guaranteed Obligations or any release or
discharge of any other party at any time directly or contingently liable for the
Guaranteed Obligations; (f) any limitation or exculpation of liability under the
Agreement provided for Lewis, Manager or any Affiliate, or any of their
respective agents, officers, directors, managers, members, partners,
shareholders and employees; (g) any subordination, compromise, release (by
operation of law or otherwise), discharge, compound, collection, or liquidation
of any or all of the Property, or any substitution with respect thereto; (h) any
assignment or other transfer of any interest in the Company, in whole or in
part; and (i) any acceptance of partial performance of the Guaranteed
Obligations.

  

Lewis Joinder

  

 

 

Each Lewis Guarantor agrees to pay all costs and expenses, including reasonable
attorneys' fees, that may be incurred by Limoneira in any effort to collect or
enforce any of the Guaranteed Obligations, whether or not any lawsuit is filed,
including all costs and attorneys' fees incurred by Limoneira as the prevailing
party in any bankruptcy proceeding (including any action for relief from the
automatic stay of any bankruptcy proceeding). Such amounts shall bear interest
until paid at the lesser of (i) fifteen percent (15%) per annum, compounded
monthly (i.e., 1.0125% per month, compounded monthly), or (ii) the maximum rate
allowed by law. No Lewis Guarantor shall have the right to assign any of its
rights or obligations under this Joinder. Notwithstanding the foregoing, in no
event shall Lewis Guarantor have any liability under this Joinder for any
Excluded Liability.

  

For so long as Lewis is a Member of the Company, the Lewis Guarantors shall
collectively maintain a Net Worth equal to or greater than One Hundred Million
Dollars ($100,000,000). Within one hundred eighty (180) days after the end of
each calendar year, and within twenty (20) days of a written request by
Limoneira to Lewis (which requests may not occur more frequently than once per
calendar quarter), the Lewis Guarantors shall certify in writing their then
aggregate Net Worth, with evidence of the same reasonably acceptable to
Limoneira. "Net Worth" means, as of a given date, (i) the Lewis Guarantors’
total assets as of such time, less, (ii) the Lewis Guarantors’ total liabilities
as of such time, determined in accordance with US GAAP, except that material
assets and liabilities will be valued in accordance with ASC 820 - Fair Value
Measurements and Disclosures.

  

The following Sections of the Agreement shall apply to this Joinder as though
herein set forth in full, mutatis mutandis (and, without limitation on the
foregoing, references to "the Members," “Lewis” and "this Agreement" therein
shall be deemed changed for this purpose to "the parties," "Lewis Guarantor" and
"this Joinder," respectively): 12.1 (with any notice to Lewis Guarantor to be
sent to the address set forth for Lewis in the Agreement), 12.3 through 12.7,
12.11, 12.12, 12.13, 12.16, 12.18, 12.20 and 12.23. Each Lewis Guarantor
acknowledges (a) that this Joinder involves at least One Hundred Thousand
Dollars ($100,000), and (b) that this Joinder has been entered into and accepted
in express reliance upon 6 Del. C. § 2708.

 

  LEWIS HOLDING COMPANY, L.P.   a Delaware limited partnership       By: EMPIRE
BUILDING CORP.,     a Nevada corporation     Its Administrative Partner        
By: /s/ John M. Goodman   Name: John M. Goodman    Its: Authorized Agent

  

Lewis Joinder

 2 

 

 

JOINDER OF LIMONEIRA GUARANTOR

   

 

In consideration of Lewis' execution of that certain First Amended and Restated
Limited Liability Company Agreement of Limoneira Lewis Community Builders, LLC
(the "Agreement") to which this Joinder of Limoneira Guarantor is attached, the
undersigned ("Limoneira Guarantor"), hereby absolutely, unconditionally and
irrevocably guarantees to Lewis that all obligations (the “Guaranteed
Obligations”) of Limoneira under Sections 2.2, 2.3, 2.4, 2.5, 2.9, 10.2, and
12.2 of the Agreement will be timely satisfied. Capitalized terms used in this
Joinder of Limoneira Guarantor ("Joinder") and not otherwise defined herein
shall have the same meanings as set forth in the Agreement. Limoneira Guarantor
represents and acknowledges that Limoneira Guarantor owns a substantial interest
in and controls Limoneira, that such Limoneira Guarantor will derive substantial
benefits from the execution of the Agreement and the transactions contemplated
thereby, and that Guarantor's execution of this Joinder is a material inducement
and condition to Lewis' execution of the Agreement and that Lewis is, for all
purposes, a third party beneficiary of this Joinder of Limoneira Guarantor.

  

To the fullest extent permitted by applicable law, Limoneira Guarantor
unconditionally waives any guarantor or suretyship defenses that might otherwise
be available to Limoneira Guarantor. The obligations of Limoneira Guarantor
under this Joinder are independent of the obligations of Limoneira under the
Agreement and, in the event of any default hereunder, a separate action or
actions may be brought and prosecuted against Limoneira Guarantor whether or not
Limoneira Guarantor is the alter ego of Limoneira and whether or not Limoneira
is joined therein or a separate action or actions are brought against Limoneira.
The obligations of Limoneira Guarantor hereunder shall remain in full force and
effect without regard to, and shall not be affected or impaired by, the
following, any of which may be taken without the consent of, or notice to,
Limoneira Guarantor, nor shall any of the following give Limoneira Guarantor any
recourse or right of action against the Company, any Company Subsidiary, or
Lewis: (a) any express or implied amendment, modification, renewal, addition,
supplement, extension of the Guaranteed Obligations or the Agreement; (b) any
exercise or non-exercise by the Company, any Company Subsidiary, or Lewis of any
right or remedy under the Agreement or this Joinder of or available at law or in
equity; (c) any Bankruptcy Event relating to Limoneira Guarantor or Limoneira,
or any action taken with respect to the Company, any Company Subsidiary or this
Joinder by any trustee or receiver, or by any court, in any such proceeding,
whether or not Limoneira Guarantor shall have had notice or knowledge of any of
the foregoing; (d) the occurrence of a Dissolution Event with respect to
Limoneira Guarantor or Limoneira; (e) any release or discharge of Limoneira from
its liability under the Guaranteed Obligations or any release or discharge of
any other party at any time directly or contingently liable for the Guaranteed
Obligations; (f) any limitation or exculpation of liability under the Agreement
provided for Limoneira, Manager or any Affiliate, or any of their respective
agents, officers, directors, managers, members, partners, shareholders and
employees; (g) any subordination, compromise, release (by operation of law or
otherwise), discharge, compound, collection, or liquidation of any or all of the
Property, or any substitution with respect thereto; (h) any assignment or other
transfer of any interest in the Company, in whole or in part; and (i) any
acceptance of partial performance of the Guaranteed Obligations.

 

  (1) 

 

 

Limoneira Guarantor agrees to pay all costs and expenses, including reasonable
attorneys' fees, which may be incurred by Lewis in any effort to collect or
enforce any of the Guaranteed Obligations, whether or not any lawsuit is filed,
including all costs and attorneys' fees incurred by Lewis as the prevailing
party in any bankruptcy proceeding (including any action for relief from the
automatic stay of any bankruptcy proceeding). Such amounts shall bear interest
until paid at the lesser of (i) 15% per annum compounded monthly (i.e., 1.0125%
per month, compounded monthly), or (ii) the maximum rate allowed by law.
Limoneira Guarantor shall not have the right to assign any of its rights or
obligations under this Joinder. Notwithstanding the foregoing, in no event shall
Limoneira Guarantor have any liability under this Joinder for any Excluded
Liability.

  

The following Sections of the Agreement shall apply to this Joinder as though
herein set forth in full, mutatis mutandis (and, without limitation on the
foregoing, references to "the Members", "Limoneira" and "this Agreement" therein
shall be deemed changed for this purpose to "the parties", "Limoneira Guarantor"
and "this Joinder", respectively): 12.1 (with any notice to Guarantor to be sent
to the address set forth for Limoneira in the Agreement), 12.3 through 12.7,
12.11, 12.12, 12.13, 12.16, 12.18, 12.20 and 12.23. Limoneira Guarantor
acknowledges (a) that this Joinder involves at least One Hundred Thousand
Dollars ($100,000), and (b) that this Joinder has been entered into and accepted
in express reliance upon 6 Del. C. § 2708.

 

 

  Limoneira Company,     a Delaware corporation           By: /s/ Joseph D.
Rumley     Name: Joseph D. Rumley     Title: Chief Financial Officer  

 

  (2)