ALL
MEMBERSHIP INTEREST MODIFICATIONS THAT RESULTED FROM THE LOW-FUNDED CAPITAL
CONTRIBUTION LOANS THAT ARE REPAID BY SOUTHWEST PRIOR TO THE OPERATION DATE
SHALL BE RE-MODIFIED SO THAT SOUTHWEST RECEIVES FULL CREDIT TO ITS MEMBERSHIP
INTEREST AND LOW RECEIVES NO CREDIT TO ITS MEMBERSHIP INTEREST FOR SUCH
LOW-FUNDED CAPITAL CONTRIBUTION.
ARTICLE IX
ALLOCATIONS AND DISTRIBUTIONS
1.
ALLOCATIONS OF NET PROFITS AND NET
LOSSES.
EXCEPT AS MAY BE REQUIRED BY SECTION 704 OF THE CODE AND THE
REGULATIONS THEREUNDER, NET PROFITS, NET LOSSES, AND OTHER ITEMS OF INCOME,
GAIN, LOSS, DEDUCTION AND CREDIT FOR PERIODS BEGINNING ON OR AFTER THE EFFECTIVE
DATE SHALL BE APPORTIONED AMONG THE MEMBERS PRO-RATA IN ACCORDANCE WITH THEIR
PERCENTAGE INTERESTS; PROVIDED, HOWEVER, THAT NET LOSSES SHALL FIRST BE
ALLOCATED TO THE MEMBERS BASED ON THEIR RESPECTIVE CUMULATIVE CAPITAL
CONTRIBUTION AMOUNTS AT THE END OF ANY FISCAL YEAR IN WHICH SUCH NET LOSSES ARE
INCURRED (PRIOR TO MAKING ANY ALLOCATIONS HEREUNDER), WITH THE FIRST NET PROFITS
ARISING THEREAFTER APPLIED AS A "CHARGEBACK" TO ANY SUCH NET LOSSES IN THE
REVERSE ORDER THEREOF.
2.
OPERATING DISTRIBUTIONS.
UPON A
DETERMINATION BY THE BOARD AFTER CONSULTATION WITH THE COMPANY'S ACCOUNTANTS AND
LEGAL COUNSEL AS TO THE AMOUNT OF DISTRIBUTABLE CASH AVAILABLE IN LIGHT OF
APPLICABLE LAW AND AFTER PAYMENT BY THE COMPANY OF ITS OPERATING EXPENSES, DEBT
SERVICE COSTS AND MANAGEMENT FEES THAT
21
ARE DUE AND OWING, AND UNLESS OTHERWISE UNANIMOUSLY AGREED TO BY THE MEMBERS OR
REQUIRED PURSUANT TO ARTICLE XV (RELATED TO A DISSOLUTION OF THE COMPANY),
DISTRIBUTIONS (OTHER THAN PURSUANT TO SECTION 3 OF THIS ARTICLE IX OR UPON
DISSOLUTION SUBJECT TO ARTICLE XV) SHALL BE MADE TO THE MEMBERS AS FOLLOWS:
(I) FIRST, UNTIL SUCH TIME AS THE MEMBERS HAVE RECEIVED A RETURN OF THEIR
RESPECTIVE CAPITAL CONTRIBUTIONS, SUCH DISTRIBUTIONS SHALL BE MADE PARI PASSU IN
PROPORTION TO EACH MEMBER'S CAPITAL CONTRIBUTIONS UNTIL THEY ARE FULLY REPAID
BASED ON A TWENTY (20) YEAR AMORTIZATION PERIOD AT THE COST OF FUNDS RATE, AND
(II) SECOND, 57.5% MAY BE RETAINED BY THE COMPANY AS ADDITIONAL RESERVES FOR THE
COMPANY'S OPERATING EXPENSES OR DISTRIBUTED TO THE MEMBERS, AS DETERMINED BY THE
BOARD, AND 42.5% OF THE REMAINDER SHALL BE DISTRIBUTED TO THE MEMBERS IN
ACCORDANCE WITH THEIR RESPECTIVE MEMBERSHIP INTERESTS; PROVIDED, HOWEVER, THAT
UNTIL SUCH TIME WHEN LOW HAS MADE ITS ENTIRE CATCH-UP CONTRIBUTION, SUCH
DISTRIBUTIONS SHALL BE MADE BASED UPON THE ACTUAL CAPITAL CONTRIBUTIONS MADE BY
EACH MEMBER IN RELATION TO THE AGGREGATE CAPITAL CONTRIBUTIONS RECEIVED BY THE
COMPANY AS OF THE DATE OF ANY SUCH DISTRIBUTION.
3.
NON-OPERATING DISTRIBUTIONS.
UNLESS
OTHERWISE UNANIMOUSLY AGREED TO BY THE MEMBERS, OR REQUIRED PURSUANT TO
ARTICLE XV, AND AFTER ANY TAX DISTRIBUTION ASSOCIATED WITH ANY NET INCOME OR
GAIN ARISING FROM SUCH EVENT IS MADE, NET PROCEEDS GENERATED BY THE COMPANY FROM
EVENTS ARISING OTHER THAN PURSUANT TO NORMAL DAY-TO-DAY BUSINESS OPERATIONS
SHALL BE DISTRIBUTED TO THE MEMBERS WITHIN FIVE (5) BUSINESS DAYS AFTER THE
EVENT GIVING RISE TO SUCH NET PROCEEDS, AS FOLLOWS:
(1)
First, to the establishment of