Exhibit 10.9
LIMITED LIABILITY COMPANY AGREEMENT
OF
S/C ORLANDO DEVELOPMENT LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") is entered into
as of December 23, 1998 by and between SIMON PROPERTY GROUP, L.P., a Delaware
limited partnership ("Simon"), and CHELSEA GCA REALTY PARTNERSHIP, L.P., a
Delaware limited partnership ("Chelsea"). Simon and Chelsea and any other
persons or entities who shall in the future execute and deliver this Agreement
pursuant to the provisions hereof shall hereinafter collectively be referred to
as the "Members."
WHEREAS, the Members have formed a limited liability company pursuant
to the provisions of the Delaware Limited Liability Act (the "Act" or the
"Delaware LLC Act") under the name "S/C Orlando Development LLC" (the "Company")
pursuant to a Certificate of Formation, dated December 21, 1998 and filed
December 23, 1998 (the "Certificate"); and
WHEREAS, the Members desire to continue the Company for the purposes
hereinafter set forth, subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:
ARTICLE 1.
DEFINITIONS; EXHIBITS
Section 1.1 CERTAIN DEFINITIONS.
Unless the context otherwise specifies or requires, capitalized terms
used herein shall have the respective meanings assigned thereto in EXHIBIT A,
attached hereto, and incorporated herein by reference, for all purposes of this
Agreement (such definitions to be equally applicable to both the singular and
the plural forms of the terms defined). Unless otherwise specified, all
references herein to Articles or Sections are to Articles or Sections of this
Agreement.
Section 1.2 OTHER DEFINITIONS.
In addition to the terms defined in EXHIBIT A, other terms will have
the definitions provided elsewhere in this Agreement.
Section 1.3 EXHIBITS.
Attached hereto and forming an integral part of this Agreement are
various exhibits which are listed in the Table of Contents for this Agreement,
all of which are incorporated into this Agreement as fully as if the content
thereof were set out in full herein at each point of reference thereto.
ARTICLE 2.
FORMATION; NAME; PLACE OF BUSINESS
Section 2.1 FORMATION OF COMPANY; CERTIFICATE OF FORMATION.
The Members of the Company hereby:
(a) acknowledge the formation of the Company by the Members as a
limited liability company pursuant to the Delaware LLC Act by virtue
of the filing of the Certificate with the appropriate public office in
Delaware on December 23, 1998;
(b) confirm and agree to their status as Members of the Company;
(c) execute this Agreement for the purpose of continuing the
existence of the Company and establishing the rights, duties, and
relationship, of the Members; and
(d) (i) agree that if the laws of any jurisdiction in which the
Company transacts business so require, the Company also shall cause to
be filed, with the appropriate office in that jurisdiction, any
documents necessary for the Company to qualify to transact business
under such laws; and (ii) agree and obligate themselves to execute,
acknowledge, and cause to be filed for record, in the place or places
and manner prescribed by law, any amendments to the Certificate as may
be required, either by the Delaware LLC Act, by the laws of any
jurisdiction in which the Company transacts business, or by this
Agreement, to reflect changes in the information contained therein or
otherwise to comply with the requirements of law for the continuation,
preservation, and operation of the Company as a limited liability
company under the Delaware LLC Act.
Section 2.2 NAME OF COMPANY.
The name under which the Company shall conduct its business is "S/C
Orlando Development LLC". The business of the Company may be conducted under any
other name permitted by the Delaware LLC Act that is deemed necessary or
desirable by the Members. The Company promptly shall cause to be executed,
filed, and recorded any assumed or fictitious name certificates required by the
laws of the State of Delaware or any state in which the Company conducts
business.
Section 2.3 PLACE OF BUSINESS.
The location of the principal place of business of the Company shall
be c/o Chelsea GCA Realty, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇. The Members may hereafter change the principal place of business of the
Company to such other place or places within the United States as the Members
may from time to time determine, and, if necessary, the Members shall amend the
Certificate in accordance with the applicable requirements of the Delaware LLC
Act. The Members may establish and maintain such other offices and additional
places of business of the Company, either within or without the State of
Delaware, as they deem appropriate.
Section 2.4 REGISTERED OFFICE AND REGISTERED AGENT.
The street address of the initial registered office of the Company
shall be ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the Company's
registered agent at such address shall be the Corporation Trust Company.
ARTICLE 3.
PURPOSES AND POWERS OF COMPANY
Section 3.1 PURPOSES.
Subject to the provisions of this Agreement, the purposes of the
Company are limited and include only the following: investing in, acquiring,
holding, owning, developing, operating, maintaining, improving, leasing, selling
as a means of recovering the Members' investment and a profit thereon,
exchanging and otherwise using the Project, for profit and as an investment, and
doing any and all other acts or things which may be incidental or necessary to
carry on the business of the Company as herein contemplated. The Members
acknowledge and agree that the Company will be acting as the general partner of
the Partnership, and that the Partnership will own the Project.
Section 3.2 POWERS.
The Company shall have the power to do any and all acts and things
necessary, appropriate, advisable, or convenient for the furtherance and
accomplishment of the purposes of the Company, including, without limitation, to
engage in any kind of activity and to enter into and perform obligations of any
kind necessary to or in connection with, or incidental to, the accomplishment of
the purposes of the Company, so long as said activities and obligations may be
lawfully engaged in or performed by a limited liability company under the
Delaware LLC Act.
Section 3.3 LIMITS OF COMPANY.
(a) The relationship between and among the Members as members of
a limited liability company shall be limited to carrying on the
business of the Company in accordance with the terms of this
Agreement. Such relationship shall be construed and deemed to be a
limited liability company only for such sole and limited purpose.
(b) The Members shall each devote such time to the Company as is
reasonably necessary to carry out the provisions of this Agreement.
Each of the Members understands that the other Member or its
Affiliates may be interested, directly or indirectly, in various other
businesses and undertakings not included in the Company. Each Member
also understands that the conduct of the business of the Company may
involve business dealings with such other businesses or undertakings.
The Members hereby agree that the creation of the Company and the
assumption by each of the Members of their duties hereunder shall be
without prejudice to their rights (or the rights of their Affiliates)
to have such other interests and activities and to receive and enjoy
profits or compensation therefrom, and except as otherwise expressly
agreed in writing by the Members, each Member waives any rights it
might otherwise have to share or participate in such other interests
or activities of the other Member or its Affiliates. Except as
otherwise expressly agreed in writing by the Members, the Members may
engage in or possess any interest in any other business of any nature
or description independently or with others including, but not limited
to, the ownership, financing, leasing, operation, management or
development of real property which may compete with the business of
the Company, and neither the Company nor the other Member shall have
any right by virtue of this Agreement in and to any such other
business or the income or profits derived therefrom.
Section 3.4 NO INDIVIDUAL AUTHORITY.
Neither Member shall, without the express, prior written consent of
the other Member, take any action for or on behalf of or in the name of the
Company, the Partnership or the other Member, or assume, undertake or enter into
any commitment, debt, duty or obligation binding upon the Company and/or the
Partnership, except for (a) actions expressly provided for in this Agreement,
(b) actions by either Member within the scope of such authority as may have been
granted in this Agreement, and (c) actions Approved by the Members, and any
action taken in violation of the foregoing limitation shall be void. Each Member
shall indemnify and hold harmless the other Member from and against any and all
claims, demands, losses, damages, liabilities, lawsuits and other proceedings,
judgments and awards, and costs and expenses (including, but not limited to,
reasonable attorneys' fees and all court costs) arising directly or indirectly,
in whole or in part, out of any breach of the foregoing provisions by such
Member. This provision shall survive dissolution of the Company.
Section 3.5 RESPONSIBILITY OF MEMBERS.
(a) Except for Project costs previously incurred by a Member
which are reflected in the Development Budget, the Company and each
Member shall not be responsible or liable for any responsibility,
indebtedness, or other obligation of any other Member incurred prior
to, on the date of or after the execution of this Agreement, except
for those which are undertaken or incurred on behalf of the Company
and/or the Partnership after the date of this Agreement under or
pursuant to the terms of this Agreement, or assumed in writing by both
Members, and each Member hereby indemnifies and agrees to hold the
other Member, and the Company and the Partnership harmless from all
such obligations and indebtedness except as aforesaid.
(b) Each Member will notify the other Member as quickly as
reasonably possible upon receipt of any notice, (i) of the filing of
any action in law or in equity naming the Company, the Partnership, or
any Member as a party relating in any way to the business of the
Company or the Partnership; (ii) of any actions to impose liens of any
kind whatsoever or of the imposition of any lien whatsoever against
the Company, the Partnership or their assets, including the Project;
(iii) of any casualty, damage or injury to persons or property on or
related to the Project; or (iv) of the default by the Company of any
of its material obligations to creditors or other third parties. Each
Member will endeavor to notify the other Member verbally promptly upon
learning of any of the foregoing actions, or the threat thereof,
which, in such Member's judgment, is material to the Company or the
other Member.
ARTICLE 4.
TERM OF COMPANY
The existence of the Company commenced on December 23, 1998, the date
upon which the Certificate was duly filed with the Recording Office, and shall
continue until December 31, 2050, or such later date as Approved by the Members
(the "Termination Date"), unless dissolved and liquidated before the Termination
Date in accordance with the provisions of ARTICLE 11.
ARTICLE 5.
CAPITAL
Section 5.1 MEMBERS' INITIAL PERCENTAGE INTERESTS.
The Initial Percentage Interests of the Members for purposes of applying
the provisions of this Agreement are set forth below:
MEMBER INITIAL PERCENTAGE INTERESTS
Simon 50%
Chelsea 50%
The Initial Percentage Interests are subject to adjustment as provided herein.
Section 5.2 CAPITAL CONTRIBUTIONS.
(a) INITIAL CAPITAL CONTRIBUTIONS.
(i) Concurrently with the execution and delivery of this
Agreement, Chelsea has contributed $56,250.00 to the Company
("Chelsea Initial Contribution").
(ii) Concurrently with the execution and delivery of this
Agreement, Simon has contributed $56,250.00 to the Company, which
amount is equal to the Chelsea Initial Contribution (the "Simon
Initial Contribution").
(iii) As set forth in Section 3.1, the Company will be
acting as general of the Partnership which will own the Project.
Pursuant to Section 8.6 hereof and the succeeding paragraphs of
this Section, the Members will review and approve Budget(s) for
the Project. Beyond the initial capital contributions referenced
in this Section, the Members will contribute capital as necessary
to fund the interest of the Company as general partner of the
Partnership in accordance with an Approved Budget as hereinafter
set forth.
(b) PRE-CONSTRUCTION EXPENDITURES.
(i) During the Pre-Construction Period of the Project, the
Members shall contribute cash capital contributions in an amount
sufficient to fund that portion of the Total Project Costs
allocated to the General Partner pursuant to the Partnership
Agreement (the "Company Portion"), which costs are incurred from
time to time in advance of the Construction Period pursuant to an
applicable Pre-Construction Budget which has been Approved by the
Members. Such expenditures, including the net cash equity
investment of any Member in any portion of the Land which is
contributed to the Company by such Member, shall be credited as
cash capital contributions made by the Members to the Company. To
the extent that any Member and its Affiliates have contributed
less than 50% of such predevelopment expenditures, such Member
shall thereafter contribute 100% of necessary costs until the
capital contributions made by and credited to Simon and Chelsea
are equal. Thereafter, such contributions shall be divided among
them pro rata in accordance with their respective Initial
Percentage Interests.
(ii) In no event shall either party be required to
contribute amounts during the Pre-Construction Period in respect
of either (A) any fees which may be payable to either party in
connection with the Project and which are identified in the
Development Budget or (B) any other costs or expenses for which
the Development and/or Leasing Fees are supposed to reimburse the
Members or their Affiliates. Such costs described in subsections
(A) or (B) hereof shall be reimbursed to the appropriate Member
from the initial disbursement of construction financing or from
contributions by the Members pursuant to SECTION 5.2(C) hereof.
(c) CONSTRUCTION PERIOD.
(i) During the Construction Period of the Project, the
Members shall contribute cash capital contributions in the
aggregate to the Company in an amount equal to the Company
Portion of (i) the Total Project Costs incurred from time to
time, less (ii) the amount of any construction financing, public
finance assistance or other financing sources obtained for the
Partnership, or other sources of funds as to which the Members
shall agree, which contributions will be divided among them pro
rata in accordance with their respective Initial Percentage
Interests. The Operating Member may seek third party construction
financing in the amounts and upon the terms and conditions
Approved by the Members, which approval shall not be unreasonably
withheld so long as such terms and conditions are consistent with
the Development Budget. In the event any such construction loan
proceeds are less than the balance of the Total Project Costs,
the Members shall fund the Company Portion of the shortfall by
making additional capital contributions to the Company pro rata
in accordance with their Initial Percentage Interests. All such
amounts contributed to the capital of the Company pursuant to
this Section shall be credited to the Capital Account of each
Member when and as such contributions are made by such Member.
(ii) To the extent that guarantees are required in
connection with any such construction financing, Simon Property
Group, L.P. and/or Simon Property Group, Inc and/or SD Property
Group, Inc. and/or SPG Properties, Inc. ("Simon Group"), and
Chelsea GCA Realty Partnership L.P. and/or Chelsea GCA Realty,
Inc. ("Chelsea Group") or their respective successors shall each
be obligated to provide such guarantees on a several or joint and
several basis in accordance with their respective Initial
Percentage Interests and pursuant to the requirements of the
applicable lender. Should any such obligations be subject to a
joint and several guarantee by the Simon Group and the Chelsea
Group or their Affiliates in connection with the construction
financing for the Project, or otherwise (it being agreed that
neither the Simon Group, the Chelsea Group nor any Member shall
be required to provide a joint and several guaranty without its
prior Approval), the Simon Group and the Chelsea Group or their
respective successors shall each agree to indemnify and hold the
other and its Affiliates harmless from and against any loss,
cost, claim, damage or expense thereunder (including reasonable
attorneys' fees) in excess of one-half (1/2) of the costs so
guaranteed and incurred by both the Simon Group, the Chelsea
Group and/or their respective Affiliates or their respective
successors. If the Simon Group, the Chelsea Group, or an
Affiliate thereof fails to perform under such indemnity, the
Affiliated Member shall be deemed a Non-Funding Member and a
Non-Contributing Member for purposes of this ARTICLE 5.
(d) COMPLETION OF CONSTRUCTION. Upon completion of construction
of the Project, the Members shall seek to obtain third party
non-recourse permanent financing in the amounts and upon the terms and
conditions Approved by the Members, which approval shall not be
unreasonably withheld so long as such terms and conditions are
consistent with the financing assumptions set forth in the Development
Budget. The Members shall be obligated to make additional capital
contributions to the Company pro rata in accordance with their
Percentage Interests in order that the Company's Portion of the Total
Project Costs which is not financed by such permanent financing shall
be funded by equity.
Section 5.3 ADDITIONAL FUNDS.
(a) During the Operating Period of the Project, in the event
additional funds are required to operate the Project in accordance
with expenditures delineated in one or more Budgets or for other
purposes Approved by the Members, the Members hereby agree to provide
on a pro rata basis in accordance with their Percentage Interests
additional capital contributions in the amount necessary to satisfy
the Company's Portion of such obligations. If such additional funds
are necessary, any Member may send a notice thereof to the other
Member setting forth the purposes for which the additional funds are
required and a report stating the amount required as well as the
anticipated cash receipts and obligations for the quarter next
following the date of the notice with the reasons, if ascertainable,
that the available funds of the Company will be insufficient to meet
the obligations for which the additional funds have been requested.
(b) If additional funds are needed for the Company as set forth
in SECTION 5.3(A), each Member shall be obligated to contribute
additional capital to the Company pursuant to the procedure set forth
in SECTION 5.4 below.
Section 5.4 CAPITAL CALLS.
(a) GENERAL. If the Members are required to contribute capital
under this Agreement, the Members shall make capital contributions in
accordance with the provisions herein and in the same percentages as
their respective Initial Percentage Interests and in such amounts
which are sufficient to provide such funds. Chelsea and any Affiliate
Transferee(s) of part of Chelsea's Percentage Interest, on the one
hand, and Simon and any Affiliate Transferee(s) of part of Simon's
Percentage Interest, on the other hand, shall be jointly and severally
liable for making any of their respective required contributions to
the Company under this ARTICLE 5.
(b) NOTICE BY OPERATING MEMBER. If capital contributions are
required to be made pursuant to this ARTICLE 5, notice shall be given
to each Member in the manner provided in SECTION 12.1. Such notice
shall specify in reasonable detail the amount and purpose of any such
capital contributions. Each Member shall, within ten (10) calendar
days (time being of the essence) after the receipt of such notice,
deposit, by wire transfer of immediately available federal funds into
the Company's bank account, the capital contribution specified in the
notice, to be credited to the contributing Member's capital account.
(c) CONSTRUCTION OVERRUNS. Notwithstanding anything to the
contrary set forth herein, excepting, however, the provisions of
Section 8.4, in the event that the aggregate capital contributions for
which notice is given exceed an approved Budget, then, except as
hereinafter set forth in this Section or elsewhere in this Agreement,
neither Member hereto shall have any obligation to fund such excess
unless and until (i) a modification to the Budget covering such excess
is approved by both Members hereto or (ii) pursuant to Section 12.1
hereof an arbitrator or a count having jurisdiction over the Members
and/or the Project determines (after appeals, if any, which have been
appropriately taken, are exhausted) that the excess (and the proposed
modification to the Budget) is reasonable and must be funded.
However, during the Construction Period (and prior to approval of
a modification to Budget by both Members or a decision by an
arbitratoror a count having jurisdiction), the Operating Member may
fund such excess as necessary to permit the Company and/or the
Partnership to pay its debts, meet its obligations when due and
complete construction of the Project. If the parties subsequently
approve a modification to Budget or an arbitrator or court having
jurisdiction over the Members and/or the Project determines that the
excess (and the proposed modification to the Budget) is reasonable and
must be funded, then that portion of the excess which the other Member
and its Affiliate(s) are obligated to contribute (and which the
Operating Partner previously funded) shall be treated as a
Contribution Loan by the Operating Partner to the other Member and as
a Contribution Loan, on a joint and several basis, from the Operating
Partner to any Affiliate of such Member which is a Partner in the
Partnership pursuant to Section 5.4(e) and interest shall accrue from
the date that funds were advanced by the Operating Partner on behalf
of the Company and/or the Partnership, as the case maybe. In addition,
the Operating Partner shall be entitled to all other rights set forth
in Section 5.4(e) or elsewhere in this Agreement with respect to the
making of a Contribution Loan. If it is subsequently determined that
the excess and the proposed modification to Budget is not reasonable,
then the excess funded by the Operating Member shall not be credited
to the Capital Account of such Member and the Operating Member shall
not be entitled to any allocation of Net Profit or distribution of
Cash Flow by virtue of same.
If, during the Operating Period, either Member disputes the need
for any additional capital contributions requested pursuant to this
SECTION 5.4(C), pending the resolution of such dispute the Member
disputing the need for additional capital shall nevertheless
contribute its additional capital within the time period specified in
SECTION 5.4(B) and the Company shall hold the contributions of both
Members in an interest-bearing account, or shall otherwise invest such
contributions as Approved by the Members, separate from other cash
deposits of the Company until such dispute is resolved; provided,
however, that during the Operating Period, the Company shall have the
right to use the Members' contributions to the extent necessary,
subject to the budgetary limitations which are set forth in SECTION
8.9 below, to permit the Company to pay its debts and to meet its
obligations when due. If and to the extent that it is ultimately
determined that such additional capital was not required in whole or
in part, the amount of such capital contributed by each Member that
was determined to be not required, less each Member's proportionate
share (based on such Member's Percentage Interest) of any portion of
the Members' contributed capital which was expended in accordance with
the foregoing, shall be promptly refunded to each Member, together
with a proportionate share of interest, if any, earned thereon while
on deposit with the Company.
(d) DILUTION.
(i) If a Member fails to fund its pro rata share of any capital
contributions and such failure continues for a period of thirty (30)
days (the first such failure by either Member, if uncured, being
hereinafter referred to as an "Initial Uncured Default"), such Member
shall be considered to be a "Non-Funding Member" and the other Member
(the "Funding Member") if it has funded its pro rata share of such
contribution, shall be entitled to fund the Non-Funding Member's share
of such capital contribution. The Percentage Interest of each Member
shall thereupon be recalculated as set forth below. The Funding Member
is hereby constituted and appointed as attorney-in-fact, such
appointment being coupled with an interest, to execute, acknowledge
and deliver all instruments and documents necessary to effect such
recalculation of Percentage Interests as herein provided.
(ii) The recalculation of the Percentage Interests on the
Percentage Interest Adjustment Date shall be done as follows: First,
the total amount of capital contributions made by each Member as of
the Percentage Interest Adjustment Date shall be calculated. Second,
the Non-Funding Member's Percentage Interest shall be reduced, and the
Funding Member's Percentage Interest shall be increased, to reflect
each Member's percentage of the total contributions made by both
Members as of the Percentage Interest Adjustment Date.
(iii)The Adjusted Percentage Interests of the Members shall
be expressed in terms of a decimal rounded to the nearest fourth
digit. An example illustrating the operation of this provision is
attached hereto as EXHIBIT C.
(iv) (1) If due to the operation of this SECTION 5.4(C) a
Non-Funding Member's Initial Percentage Interest is diluted, the
other Member shall have the right and option for a period of 60
days after such dilution occurs to purchase the Non-Funding
Member's interest in the Company at a price equal to the total
amount of cash capital contributions which had been contributed
to the Company by the Non-Funding Member at that point in time,
less the amount of any distributions of Cash Flow or Capital
Proceeds previously made to the Non-Funding Member.
(2) In order to elect to purchase the interest in the
Company of a Non-Funding Member pursuant to this SECTION 5.4(D),
the Funding Member shall send written notice of election to the
Non-Funding Member prior to expiration of such 60-day period. In
the event a Funding Member elects to purchase a Non-Funding
Member's interest, such election pursuant to this SECTION 5.4(D)
shall create a binding contract for the purchase and sale of the
Non-Funding Member's interest in the Company. The closing of such
purchase and sale shall take place at the office where the
principal place of business of the Company is located on the date
specified by the Funding Member in its election notice which date
shall not be less than 20 days nor more than 60 days following
the date of such notice, unless the Members agree to a different
mutually acceptable date. The form and substance of the closing
documents shall be reasonably satisfactory to the Funding Member
and shall consist of an assignment and ▇▇▇▇ of sale (both with
covenants against grantor's acts) from the Non-Funding Member to
the Funding Member (or its nominee or designee), together with
such other instruments and documents as may be reasonably
necessary or desirable to effectuate the sale. The purchase price
shall be payable by federal wire transfer of immediately
available funds to an account designated by the Non-Funding
Member, against delivery of all the closing documents. At either
Member's request, the Company's bank or the title company which
issued the owner's title policy to the Company may be appointed
as escrow agent to receive all closing documents and the purchase
price in escrow in order to make simultaneous delivery of closing
documents and disbursement of funds at the closing or the next
business day thereafter. The instruments and documents shall be
legally sufficient to convey all of the Non-Funding Member's
interest in the Company (and the Project) to the Funding Member
(or its nominee or designee), free and clear of all deeds of
trust, security interests, liens, charges and encumbrances. The
provisions of this SECTION 5.4(D) shall be enforceable by a
decree of specific performance and neither Member shall assert in
defense thereto that there exists an adequate remedy at law.
(e) CONTRIBUTION LOANS.
(i) If either Member (a "Non-Contributing Member") fails to
make any additional capital contribution within the time
specified in SECTION 5.4(b) and such failure continues for a
period of thirty (30) days after an Initial Uncured Default, the
other Member who makes the requested contribution of additional
capital (the "Contributing Member") shall have the right but not
the obligation to advance directly to the Company the funds
required from the Non-Contributing Member as a loan
("Contribution Loan") to the Non-Contributing Member. If and when
a Contribution Loan is made, the Non-Contributing Member shall be
deemed to have waived the right to make the requested capital
contribution as of the date of such loan. Such Contribution Loan
shall bear interest, compounded annually, at a rate equal to the
Prime Rate plus four (4) percentage points per annum.
Contribution Loans may be prepaid by the Non-Contributing Member
at any time after the date the Contribution Loan is made. If not
repaid by the Non-Contributing Member, the Contribution Loan
shall be repaid pursuant to SECTION 5.4(F) or other applicable
provisions of this Agreement, but otherwise shall be and remain a
recourse obligation of the Non-Contributing Member.
(ii) If the Contributing Member does not elect to advance
the full amount of the additional funds required from the
Non-Contributing Member, the Contributing Member may withdraw its
additional capital contribution.
(iii)Notwithstanding any other provision of this Agreement
to the contrary, if as of the date which is one hundred eighty
(180) days after the making of a Contribution Loan, such
Contribution Loan shall not have been paid in full, the
Contributing Member shall have the right for a period of sixty
(60) days to have such Contribution Loan (or the portion thereof
remaining unpaid) converted on the books of the Company to a
capital contribution by the Contributing Member, in which event
the Percentage Interest of the Non-Contributing Member shall be
adjusted and recalculated in accordance with SECTION 5.4(D) of
this Agreement, and the Contributing Member shall be entitled to
exercise all rights and remedies thereunder, including without
limitation the purchase option described in SECTION 5.4(D)(IV).
In order to elect to convert a Contribution Loan to a capital
contribution pursuant to this SECTION 5.4(E)(III), the
Contributing Member shall send written notice of election to the
Non-Contributing Member prior to the expiration of such 60-day
period.
(iv) The rights set forth in this SECTION 5.4(E) are in lieu
of the exercise of rights set forth in SECTION 5.4(D) and may not
be exercised in addition to such rights.
(f) REPAYMENT THROUGH DISTRIBUTIONS. A Contribution Loan shall be
repaid on a first priority basis out of any subsequent distributions
to which the Non-Contributing Member for whose account the
Contribution Loan was made would otherwise be entitled in accordance
with this Agreement, which amounts shall be applied first to accrued
interest and then to principal, until the Contribution Loan is paid in
full. Each Non-Contributing Member irrevocably assigns its rights to
distributions from the Company to the Contributing Member for the
purpose of effectuating this repayment. Repayment of either Member's
Contribution Loan shall also be secured by the Non-Contributing
Member's Percentage Interest in the Company, and the Non-Contributing
Member hereby grants a security interest in such Percentage Interest
and all distributions related thereto to the Contributing Member who
has advanced such Contribution Loan and hereby irrevocably appoints
the Contributing Member, and any of its agents, officers or employees,
as its attorney-in-fact, such appointment being coupled with an
interest, to execute, acknowledge and deliver any documents,
instruments and agreements including, but not limited to, any note
evidencing the Contribution Loan, and such Uniform Commercial Code
financing statements, continuation statements, and other security
instruments or documents as may be appropriate to perfect and continue
such security interest in favor of the Contributing Member.
(g) TRANSFEREES AND ASSIGNEES. If there shall be a Transfer of
part of the Percentage Interest of either Member pursuant to ARTICLE
10 below to an Affiliate of such Member, all of the calculations
necessary at any time or from time to time under this SECTION 5.4
shall be made without regard to any such partial Transfer. Any
dilution of the Percentage Interest of either Member pursuant to this
SECTION 5.4 shall be made effective against the aggregate Percentage
Interest of the Transferor and any Affiliate Transferee of which the
Company has been notified or, failing any such agreement, or notice
thereof, as the Funding Member, acting on behalf of the Company, may
elect. It is the intent and agreement of the Members that all of the
rights and obligations hereunder, including without limitation
participation in management, rights to give or receive notices and
contribution obligations, and the various consequences arising from
the failure of a Member to make a required capital contribution to the
Company hereunder are to be interpreted and applied as if Chelsea and
any Chelsea Affiliate that owns a part of its Percentage Interest, on
the one hand, and Simon and any Simon Affiliate that owns a part of
its Percentage Interest, on the other, is a single entity having a
Percentage Interest in an amount equal to the aggregate Percentage
Interests owned by such Member and its respective Transferees.
(h) NO THIRD PARTY RIGHTS. The right of the Company or the
Members to require any additional contributions under the terms of
this Agreement shall not be construed as conferring any rights or
benefits to or upon any party not a party to this Agreement including,
but not limited to, any tenant of any part of the Project, or the
holder of any obligations secured by a deed of trust or other lien or
encumbrance upon or affecting the Company, any Percentage Interest, or
the Project, or any part thereof or interest therein, or any other
creditor of the Company.
(i) ROLE IN MANAGEMENT. Notwithstanding any other provision of
this Agreement to the contrary, including without limitation ARTICLE 8
hereof, a Non-Funding Member or Non-Contributing Member (hereinafter,
a "Defaulting Member") shall thereafter have no further approval
rights, right to make decisions or role in management of the Company
or the Partnership until such funding or contribution default has been
cured. For the purpose of this paragraph if an Affiliate of a Member
has failed to satisfy its funding obligations under the Partnership
Agreement, then such Member shall also be deemed a Defaulting Member.
Without limitation of the foregoing, in such event (i) if the
Defaulting Member is the Operating Member, the other Member (the
"Non-Defaulting Member") shall have the right to remove the Defaulting
Member as the Operating Member (and to become the Operating Member
itself) in accordance with SECTION 8.9 hereof and to terminate the
Management Agreement and Development Agreement with any Affiliate of
the Defaulting Member in accordance with SECTION 8.11(A) and SECTION
8.12(a), (ii) the Non-Defaulting Member shall have the right to apply
any fees payable to the Defaulting Member or its Affiliate in
accordance with this Agreement to any amounts owed by the Defaulting
Member, (iii) the Non-Defaulting Member shall have the right to make
all decisions of the Company and the Members, and (iv) no Defaulting
Member shall have the right to initiate the buy-sell procedure
pursuant to SECTION 10.6hereof.
(j) FAILURE TO FUND UNDER PARTNERSHIP AGREEMENT. Notwithstanding
anything to the contrary set forth in this Section, in the event that an
Affiliate of either Member fails to make a required capital contribution under
the Partnership Agreement and is deemed a Defaulting Partner, then such Member
shall be deemed a "Defaulting Member" hereunder, to the same extent as if such
Member had failed to fund a Capital Contribution required of it hereunder, and
the other Member shall be entitled to exercise the rights and remedies set forth
in Section 5.4 hereof. Similarly, in the event that either Member fails to make
a required capital contribution under this Agreement and is deemed a Defaulting
Member, then any Affiliate of such Member which is a Partner in the Partnership
shall be deemed a Defaulting Partner under the Partnership Agreement to the same
extent as if such Partner had failed to fund a capital contribution required of
it thereunder and the other Partner(s) shall be entitled to exercise all
applicable rights and remedies set forth in Section 6.4 of the Partnership
Agreement.
Section 5.5 NO INTEREST ON CAPITAL.
Interest earned on Company funds shall inure solely to the benefit of
the Company, and except as specifically provided herein above, no interest shall
be paid upon any contributions or advances to the capital of the Company nor
upon any undistributed or reinvested income or profits of the Company.
Section 5.6 REDUCTION OF CAPITAL ACCOUNTS.
Any distribution to a Member, whether pursuant to SECTIONS 6.5 or 6.6
or any other Section of this Agreement, shall reduce the amount of such Member's
Capital Account in accordance with SECTION 2.A. of the Tax Allocations Exhibit,
but no adjustment in the Percentage Interest of any Member shall be made on
account of any such distribution, except as otherwise specifically provided in
this Agreement.
Section 5.7 NEGATIVE CAPITAL ACCOUNTS.
Any Member having a deficit or negative balance in its Capital Account
shall not be required to restore such deficit capital amount or otherwise to
contribute capital to the Company to restore its Capital Account.
Section 5.8 LIMIT ON CONTRIBUTIONS AND OBLIGATIONS OF MEMBERS.
Except as expressly provided in SECTIONS 5.2, 5.3(A) and 5.4 hereof
and this SECTION 5.8, the Members shall have no liability or obligation to the
Company or to the other Members (i) to make additional capital contributions to
the Company, (ii) to make any loans to the Company or (iii) to endorse or
guarantee the payment of any loan to the Company. Each Member shall be
personally liable to the other Members (but not to any third parties) for its
pro rata share of the Company liabilities (such share to be determined as of the
time the liabilities are incurred) based on its Initial Percentage Interest in
the Company.
ARTICLE 6.
PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS
Section 6.1 NET PROFIT.
All Net Profit of the Company for each Fiscal Year shall be allocated
to the Members as follows:
(a) First, to each Member until the cumulative Net Profit
allocated to each Member pursuant to this clause (a) is equal to the
cumulative Net Loss allocated to such Member pursuant to clause (b) of
SECTION 6.2 and SECTION 6.3 (such Net Profits to be allocated first
with respect to Net Loss allocated pursuant to SECTION 6.3 and
thereafter in reverse chronological order of the allocation of the Net
Loss which has not been previously offset by an allocation under this
SECTION 6.1(A)); and
(b) Thereafter, among the Members in accordance with their
respective Percentage Interests.
Section 6.2 NET LOSS.
After giving effect to the special allocations set forth in EXHIBIT B, all
Net Loss of the Company for each Fiscal Year shall be allocated to the Members
as follows:
(a) First, to each Member until the cumulative Net Loss allocated
to each Member pursuant to this clause (i) is equal to the cumulative
Net Profit allocated to such Member pursuant to clause (ii) of SECTION
6.1 (such Net Loss to be allocated in reverse chronological order of
the allocation of the Net Profit which has not been previously offset
by an allocation under this SECTION 6.2(A));
(b) Second, to each Member in accordance with their respective
positive Adjusted Capital Account balances until such balances are
reduced to zero; and
(c) Thereafter, among the Members in accordance with their
respective Percentage Interests.
Section 6.3 LIMITATION ON NET LOSS ALLOCATION.
Notwithstanding any provision of this Agreement to the contrary, in no
event shall Net Loss be allocated to a Member if such allocation would result in
such Member's having a negative Adjusted Capital Account Balance at the end of
any Fiscal Year. All Net Loss in excess of the limitation set forth in this
SECTION 6.3 shall be allocated to any remaining Member with a positive Adjusted
Capital Account, and if all such Adjusted Capital Account balances are zero or
negative to the Members under SECTION 6.2(C).
Section 6.4 OTHER ALLOCATION RULES.
Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in the Net Profits of
the Company are the same as the Members' Percentage Interests.
Section 6.5 DISTRIBUTION OF CASH FLOW.
Except as provided in SECTION 11.2(D), the Company shall distribute
Cash Flow to the Members as and when Approved by the Members, not less
frequently than quarterly, in the following order of priority:
(a) First, to pay any accrued but unpaid interest on, and then to
pay the unpaid principal balance, if any, of any and all loans made by
any Member to the Company in accordance with this Agreement, provided,
however, that any Contribution Loans shall not be regarded as loans to
the Company and shall be repaid on a first priority basis out of any
Cash Flow to which the Non-Contributing Member for whose account the
Contribution Loan was made would otherwise be entitled to in
accordance with SECTION 6.5(B) of this Agreement, which amounts shall
be applied first to accrued interest and then to principal, until the
Contribution Loan is paid in full; and
(b) Second, to the Members in accordance with their respective
Percentage Interests.
Section 6.6 DISTRIBUTION OF CAPITAL PROCEEDS.
Except as provided in SECTION 11.2(D), the Company shall distribute to
the Members Capital Proceeds received by the Company within thirty (30) calendar
days after receipt (but not prior to the Percentage Interest Adjustment Date) in
the following order of priority:
(a) First, to pay any accrued but unpaid interest on, and then to
pay the unpaid principal balance, if any, of any and all loans made by
any Member to the Company in accordance with this Agreement, provided,
however, that any Contribution Loans shall not be regarded as loans to
the Company and shall be repaid on a first priority basis out of any
Capital Proceeds to which the Non-Contributing Member for whose
account the Contribution Loan was made would otherwise be entitled to
in accordance with SECTIONS 6.6(B) through 6.6(D) of this Agreement,
which amounts shall be applied first to accrued interest and then to
principal, until the Contribution Loan is paid in full;
(b) Second, to the Members in repayment of their respective
Capital Contribution Balances, in accordance with their respective
Percentage Interests; and
(c) Third, to the Members in accordance with their respective
Percentage Interests.
ARTICLE 7.
COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS
Section 7.1 BOOKS AND RECORDS.
The Company shall keep books and records at the Company's principal
place of business which are usually maintained by persons engaged in similar
businesses, in form and substance Approved by the Members and setting forth a
true, accurate and complete account of the Company's business and affairs
including a fair presentation of all income, expenditures, assets and
liabilities thereof. Such books and records shall be maintained, and its income,
gain, losses and deductions shall be determined and accounted for on the accrual
basis in accordance with generally accepted accounting principles consistently
applied. Each Member and its authorized representatives shall have the right at
all reasonable times to have access to, inspect, audit and copy the Company's
books, records, files, securities, vouchers, canceled checks, employment
records, bank statements, bank deposit slips, bank reconciliations, cash
receipts and disbursement records, and other documents (the "Documents"). Each
Member and its authorized representatives shall also have the right, in
connection with an examination and audit of the Documents, to question during
normal business hours, upon at least ten (10) days notice, the employees, if
any, of the Company and to question any other Person and the employees of such
other Person having custody or control of any Documents, or responsibility for
preparing the same. The Documents shall also be open for inspection during
normal business hours, upon at least ten (10) days notice, by the legal or
accounting representatives of a Withdrawing Member or any Member to the extent
necessary and relevant to such Member's withdrawal from the Company and the
winding up of such Member's affairs with the Company. Each Member shall be
entitled to any additional information necessary for the Member to adjust its
financial basis statement to a tax basis as the Member's individual needs may
dictate.
Section 7.2 TAX RETURNS.
The Independent Accountants shall either prepare or review and sign,
as requested by the Members, the federal, state and local income tax returns of
the Company, and the Company shall use its reasonable efforts to cause the
Independent Accountants to either prepare or review and sign such tax returns by
March 31 of each year, and cause such tax returns to be filed on a timely basis
with the appropriate governmental authorities. In all events, should tax returns
not be filed by March 31, good faith estimates of the information to be provided
in such tax returns shall be provided to each Member no later than March 31 of
each year. Copies of each such return shall be furnished for review and Approval
by the Members prior to filing.
Section 7.3 REPORTS.
(a) During the Pre-Construction Period and the Construction Period
the Company shall cause to be prepared and sent to each Member such
reports as may be required pursuant to the Development Agreement.
(b) During the Operating Period, the Company shall cause to be
prepared and sent to each Member, by the Member designated to undertake
such task on behalf of the Company, the following unaudited statements and
reports:
(i) within fifteen (15) calendar days after the last day of
each calendar month during the term of the Company's existence, a
statement of income and expense (x) showing the actual results of
the operations of the Company for the calendar month then ended
and cumulatively to date for the then elapsed portion of the
current Fiscal Year and (y) comparing on an itemized basis, all
costs and expenses incurred during such month and for such Fiscal
Year with the Budgets for such month and such Fiscal Year, with a
narrative explanation of any variations to such Budgets; and
(ii) within fifteen (15) calendar days after the last day of
each calendar month during the Term, a balance sheet showing the
financial position of the Company as of such last day; and
(iii)such other reports as any Member may reasonably request
from time to time.
(c) Each monthly report furnished to the Members by such
designated Member shall also state, to the best knowledge of such
designated Member, whether any default exists with respect to any
material obligation of the Company and whether any material litigation
is pending against the Company or the Project. Such designated Member
shall, upon obtaining knowledge of the occurrence of any event which,
if not cured or resolved, would be required by the preceding sentence
to be described in the next monthly report to be furnished pursuant to
this SECTION 7.3(B), promptly notify each Member of such occurrence.
Section 7.4 AUDITS.
After the end of each Fiscal Year the Operating Member shall cause an
audit to be made by the Independent Accountants covering the assets, liabilities
and net worth of the Company and its operations during such Fiscal Year, and all
other matters customarily included in such audits. By February 20 of each Fiscal
Year, the Operating Member shall deliver, or cause to be delivered to each
Member the following financial statements with respect to the Company: a balance
sheet and statements of income and expense, changes in the financial position of
the Company, and the Members' capital position as of the end of and for the
prior Fiscal Year, together with, if requested or required pursuant to the
preceding sentence of this SECTION 7.4, the report of the Independent
Accountants covering the results of such audit and certifying such financial
statements as having been prepared in accordance with generally accepted
accounting principles consistently applied.
Section 7.5 BANK ACCOUNTS.
All funds of the Company shall be deposited in its name in an account
or accounts maintained with a financial institution Approved by the Members.
Funds of the Company shall not be commingled with funds of any other Person.
Checks shall be drawn upon the Company account or accounts only for the purposes
of the Company and shall be signed by either Member or by its duly authorized
representative, provided, however, that funds shall only be spent pursuant to
applicable Budgets which have been Approved by the Members or otherwise pursuant
to Section 8.4, 8.9(b)(iii), and the emergency authority granted to a Member
pursuant to SECTION 8.7 of this Agreement.
Section 7.6 TAX ELECTIONS.
If there is a distribution of any property of the Company within the
meaning of Section 734 of the Code, or if there is a Transfer of an interest in
the Company within the meaning of Section 743 of the Code, then with the
Approval of the Members the Company shall cause to be filed an election under
Section 754 of the Code to provide for an optional adjustment to the basis of
the property or Company interest as appropriate.
Section 7.7 TAX MATTERS MEMBER.
Pursuant to Section 6231(a)(7)(A) of the Code, the Members hereby
designate Chelsea as the Company's "Tax Matters Partner."
ARTICLE 8.
MANAGEMENT OF THE COMPANY
Section 8.1 MANAGEMENT OF THE COMPANY.
(a) GENERAL. The overall management and control of the business
and affairs of the Company (and correspondingly of the Partnership)
shall be vested in the Members. The Members may, by written
resolution, except for those matters specifically required to be
Approved by the Members, delegate to one of the Members (hereinafter
called the "Operating Member") the authority to manage and administer
the affairs of the Company and the Partnership. Upon such delegation
and until the same shall have been revoked by the Members or the
Member to which such delegation was made shall become a Defaulting
Member or a Non-Contributing Member, all decisions with respect to the
management of the Company and/or the Partnership that are approved by
the Operating Member shall be binding on the Company, the Partnership
and the Non-Operating Member, except as otherwise provided in this
Agreement. At such time as a delegation hereunder shall have been made
and so long as it remains outstanding, all actions provided hereunder
to be taken by the Company either individually or in its capacity as
General Partner of the Partnership, shall be carried out by the
Operating Member.
(b) MEMBER REPRESENTATIVES. The Members shall, by written
resolution, each designate in writing from time to time its
representative for purposes of all actions, approvals and decisions
under this Agreement, plus an alternate. Each representative shall be
fully authorized to provide, on behalf of the Member which he or she
represents, any consent or approval which may be required hereunder,
and any action or decision so taken by a representative shall be
binding upon the Member which he or she represents. Each Member may
change its authorized representative or alternate at any time by
written notice to the other Member.
(c) ACTIONS BY THE MEMBERS.
(i) Either Member may initiate a request that the Members
approve any matter or take any other action respecting the
business and affairs of the Company and/or the Partnership which
is required for Approval by the Members pursuant to this
Agreement. Any such request may be made at a regularly scheduled
meeting of the Members or in writing. Any written request must be
labeled "REQUEST FOR ACTION BY MEMBERS" and must include a
narrative explanation of the approval or action which is being
requested. If pursuant to such a request the Member desires to
schedule a special meeting of the Members, such request must be
received by the other Member at least ten (10) calendar days
prior to the proposed date for such special meeting. Conversely,
a Member receiving a request for Approval or action by the
Members which does not request that a special meeting be held may
then request a special meeting by written notice to the other
Member which must be received at least five (5) calendar days
before the date proposed for such special meeting. Each Member
shall use its best efforts to comply with a request by the other
Member that a special meeting of the Members be held.
(ii) If there is a need for any Approval or action by the
Members and no special meeting therefor is requested by either
Member, the representatives of the Members shall use their best
efforts to respond within ten (10) business days after the date
the representatives are notified of the need for such Approval or
other action either in writing or at a regularly scheduled
meeting of the Members. If a representative has not responded
within said ten (10) business day period or if a special meeting
has been properly requested with respect to such proposed
Approval or other action but has not been held within ten (10)
days after the date requested for such special meeting, then the
Member requesting such Approval or other action may at any time
thereafter notify the other Member that failure of such other
Member's representative to respond within ten (10) business days
after such notice shall be deemed to be Approval by such other
Member of the matter or action requested. Such notice must be
labeled "FAILURE TO ACT BY MEMBER REPRESENTATIVE" and must
include a narrative explanation of the Approval or action which
is being requested. If the other Member's representative fails to
respond within said ten (10) business day period, such matter or
action requested shall be deemed Approved.
(iii)In order for the other Member's representative to be
deemed to have responded, the representative must affirmatively
agree to the Approval or other action (or have failed to respond
within the time frame identified in subparagraph (ii)), or deny
same. If the other Member's representative denies the Approval or
other action, he must specify his reasons for doing so and
suggest an alternative to the Approval or action in question. In
such event, the time frames and sequence of events previously
specified in subparagraph (ii) of this Section shall apply. The
Member who initiated the request for Approval or other action
shall have ten (10) business days within which to respond to the
counterproposal. If the Member has not responded within said ten
(10) business day period, then the Member suggesting the
alternative may notify the other Member that failure to respond
shall be deemed Approval, in accordance with the procedure
previously set forth. If the parties are unable to agree on the
Approval or other action after following the sequence outlined,
then each Member shall have the right to pursue any rights or
remedies that may be set forth herein or available at law or in
equity.
(d) MEETINGS. Regular meetings of the Members shall be held at
the Company's principal place of business or at such other place as
shall be Approved by the Members and at intervals as may be Approved
by the Members, but not less than once each calendar quarter. Dates,
times and places of such regular meetings shall be Approved by the
Members. No meeting of the Members shall be held unless each Member is
represented. Both regular and special meetings may be held by means of
a conference telephone or similar equipment if all persons
participating in the meeting can hear each other at the same time.
Section 8.2 THE OPERATING MEMBER.
(a) The Members shall by written resolution from time to time
designate one of the Members as the Operating Member of the Company.
Such designated Member shall continue to serve as the Operating Member
until (i) the Members mutually agree that such designated Member shall
cease to serve as the Operating Member; (ii) the Company is dissolved
and wound up in accordance with the provisions of ARTICLE 11 hereof;
or (iii) such designated Member is removed as Operating Member
pursuant to SECTION 8.10 below. Upon the removal of such designated
Member as the Operating Member in accordance with the foregoing, the
other Member shall automatically become the Operating Member of the
Company. Subject to the provisions of SECTIONS 8.4, 8.5, and 8.6 of
this Agreement, but notwithstanding delegation of certain obligations
and responsibilities by the Operating Member pursuant to SECTION
8.2(B) below, the operation of the Company and the Partnership and
management of the Company's and the Partnership's business and affairs
shall rest with and remain the obligation and responsibility of the
Operating Member, subject to such further limitations as may be set
forth in the resolution designating such Operating Member.
(b) Without limiting the generality of the foregoing, AND SUBJECT
TO THE PROVISIONS OF SECTIONS 8.4 AND 8.6 HEREINBELOW, the Operating
Member shall have the following rights and powers, subject to the
terms, conditions, restrictions and limitations of this Agreement and
shall devote such time to the performance of said rights and services
as may be necessary, which it may exercise at the cost, expense and
risk of the Company:
(i) To protect and preserve the assets of the Company, and
the Partnership and to incur liabilities (other than for borrowed
money) in the ordinary course of business of the Company and the
Partnership consistent with the Budgets for the Project which
have been Approved by the Members;
(ii) To collect all rentals and all other income accruing to
the Company and/or the Partnership and to pay all construction
costs and expenses of operations consistent with the Budgets
which have been Approved by the Members and as otherwise set
forth herein;
(iii)With the Approval of the Members, to prepare (or have
prepared) and file all tax returns for and on behalf of the
Company and the Partnership (but not the tax returns or other
reports of the individual Members);
(iv) To administer all matters pertaining to insurance with
respect to the Project, including obtaining and paying for
policies of insurance insuring against (1) loss or damage by
fire, windstorm, tornado and hail, and against loss or damage by
such other, further and additional risks as now are or hereafter
may be embraced by the standard extended coverage forms of
endorsements, as may be required by the Company's lenders and
Approved by the Members, and consistent with the Budgets Approved
by the Members; and (2) liability to the public, tenants or any
other person and risk to its properties incident to the operation
of the Project in such amounts and upon such terms as are
customary for the protection against such risks of liability and
loss and Approved by the Members, and consistent with the Budgets
Approved by the Members;
(v) Subject to the applicable Budgets which have been
Approved by the Members, to employ, terminate the engagement of,
supervise and compensate such persons, firms or corporations for
and in connection with the business of the Company and the
Partnership as it may reasonably deem necessary or desirable;
(vi) Subject to the applicable Budgets which have been
Approved by the Members, to repair and replace all fixtures and
equipment situated on or constituting a part of the Project (and
in connection therewith the Operating Member will consider using
the bundled services contracts available through Simon, subject,
however, to such contracts complying with the conditions set
forth in the Management Agreement);
(vii)Subject to the applicable Budgets which have been
Approved by the Members, to acquire such tangible personal
property and intangible personal property as may be necessary or
desirable to carry on the business of the Company and the
Partnership and sell, exchange or otherwise dispose of such
personal properties in the ordinary course of business;
(viii) To keep all books of account and other records of the
Company and the Partnership ;
(ix) To negotiate and contract with all utility companies
servicing the Project (and in connection therewith the Operating
Member will consider using the bundled services contracts
available through Simon, subject, however, to such contracts
complying with the conditions set forth in the Management
Agreement);
(x) To pay all debts and other obligations of the Company,
and/or the Partnership including amounts due under the financing
and other loans to the Company and/or the Partnership and costs
of formation of the Company and the Partnership and, subject to
the applicable Budget which has been Approved by the Members, of
ownership, improvement, operation and maintenance of the Project;
(xi) To pay all taxes, levies, assessments, rents and other
impositions applicable to the Company and/or the Partnership,
paying same before delinquency and prior to the addition thereto
of interest or penalties and undertake when appropriate and
subject to Approval of the Members any action or proceeding
seeking to reduce such taxes, assessments, rents or other
impositions;
(xii)To deposit all monies received by the Operating Member
for or on behalf of the Company and/or the Partnership in such
financial institutions as may be Approved by the Members, to
invest any excess funds and to disburse and pay all funds on
deposit on behalf of and in the name of the Company and/or the
Partnership in such amounts and at such times as the same are
required in connection with the ownership, maintenance and
operation of the Project;
(xiii) Subject to the Approval of the other Member, to
negotiate financing terms for the Project; and
(xiv) To lease portions of the Project pursuant to the
leasing guidelines established from time to time by the Members
as part of a Budget which has been Approved by the Members and on
the form lease, or such variations(s) thereto, which has been
Approved by the Members.
(c) Documents to which the Company is a party shall be executed
and performed on behalf of the Company, acting in its individual
capacity or as general partner of the Partnership by all of the
Members or by the Operating Member, or by the Non-Operating Member,
where the Members or this Agreement give the Operating Member or the
Non-Operating Member, as the case may be, the right to do so. No
person, firm, partnership, corporation or other entity shall be
required to inquire into the authority of the Members or a Member to
execute and perform any document on behalf of the Companyacting in its
individual capacity or as general partner of the Partnership. Except
as otherwise expressly provided in this Agreement, no Member or
representative thereof shall have the authority or right to bind or
act for the Company or any of the other Members.
(d) The Operating Member shall devote itself to the business and
purposes of the Company and the Partnership, as set forth in SECTION
3.1 above, to the extent reasonably necessary for the efficient
carrying on thereof, without compensation except as otherwise provided
herein. Whenever requested by the Non-Operating Member, the Operating
Member shall render a just and faithful account of all dealings and
transactions relating to the business of the Company and the
Partnership. The acts of the Operating Member shall bind the Company
and the Partnership when within the scope of the Operating Member's
authority expressly granted unless expressly prohibited hereunder.
Section 8.3 DUTIES OF OPERATING MEMBER; CHELSEA AS INITIAL OPERATING MEMBER.
The Operating Member, at the expense of and on behalf of the Company,
and the Partnership shall implement or cause to be implemented all decisions
Approved by the Members and delegated to the Operating Member by the Members,
and shall conduct or cause to be conducted the management of the business and
affairs of the Company and the Partnership in accordance with and as limited by
this Agreement. Chelsea is hereby appointed as the Operating Member of the
Company to implement all decisions Approved by the Members and shall have
primary responsibility for the development, leasing and management of the
Project.
Section 8.4 AUTHORIZATION FOR EXPENDITURES.
Except for expenditures made and obligations incurred pursuant to a
Budget, as revised or exceeded pursuant to Section 5.4 (c), SECTION 8.7 or
8.9(B)(III), the Operating Member shall not make any expenditure or incur any
obligation on behalf of the Company or the Partnership unless previously
Approved by the Members, provided that the Operating Member shall have the
right, without the prior Approval of the Members, to make expenditures and incur
obligations not authorized by a Budget (i) to the extent necessary to pay
utilities, taxes, and insurance premiums to the extent such charges exceed the
amounts budgeted therefor in the applicable Budget, (ii) to pay for other
non-capital expenditures in an amount up to 10% or cumulative expenditures of
$25,000 (whichever is less) in excess of the amount authorized under the
Applicable Budget for such expenditures or (iii) to pay for annual capital
expenditures of up to $50,000 in the aggregate for items not contemplated in, or
in excess of amounts reserved for certain line items in, the applicable Budget.
The Operating Member will be reimbursed for out-of-pocket expenses incurred on
behalf of the Company and/or the Partnership in accordance with an Approved
Budget. The Operating Member may from time to time seek broader fiscal authority
from the Members when it is appropriate to do so in connection with the
performance of its duties hereunder. In any event, the Operating Member shall
not expend more than the amount the Operating Member in good faith believes to
be the fair and reasonable market value at the time and place of contracting for
any goods purchased or services engaged on behalf of the Company and/or the
Partnership , and shall, upon request, provide the other Member with reasonable
documentation evidencing such expenditures.
Section 8.5 RIGHTS NOT ASSIGNABLE.
Except as provided in SECTION 10.2(A) or 10.2(B), the rights and
obligations of the Operating Member qua Operating Member under this Agreement
shall not be assignable voluntarily or by operation of law by the Operating
Member without the express prior written Approval of the Members, and any
attempted assignment without such Approval shall be void.
Section 8.6 MAJOR DECISIONS AND PROHIBITED ACTS.
All Major Decisions with respect to the Company's (and the
Partnership's) business and operations shall require the Approval of the
Members. As used herein, the term "Major Decisions" shall mean the following
decisions regarding the acquisition, development, ownership, management, leasing
and operation of the Project, except those matters expressly delegated to the
Operating Member and/or its Affiliate pursuant to the terms of this Agreement,
the Development Agreement and/or the Management Agreement. Accordingly, if a
decision is identified as a Major Decision, neither Member shall have the right
or the power to make any commitment or engage in any undertaking on behalf of
the Company, acting in its individual capacity or as general partner of the
Partnership with respect to a Major Decision unless and until the same has been
authorized by Approval of the Members. Without the Approval of the Members with
respect to SECTIONS 8.6(A) through 8.6(U) below, neither Member shall cause the
Company acting in its individual capacity or as general partner of the
Partnership to:
(a) Commit to acquire any additional real property or interest in
any real property other than the Land or access thereto;
(b) Commit to borrow any funds on behalf of the Company or the
Partnership other than (i) the Construction/Term Loan, (ii) from a
Member as set forth in this Agreement, or (iii) from a Third Party
Lender as set forth in Section 5.2 of this Agreement.
(c) Sell the Project or any part thereof or interest therein
except as provided in the Right of First Refusal provision set forth
in Section 10.3 or the Buy-Sell provision set forth in Section 10.6
hereof;
(d) Mortgage the Land and the Company's or the Partnership's
interest in the Project (except in connection with the
Construction/Term Loan or any Third Party Loan, and any extensions,
modifications, renewals or replacements thereof);
(e) Approve any Budget or any amendment or supplement thereto
prepared on behalf of the Company or the Partnership;
(f) Terminate or cause the termination of any lease for space at
the Project, unless the tenant under such lease is in default, or
execute or cause the execution of any lease, sublease, assignment of
lease, extension of lease, extension of sublease, amendment of lease
or sublease, of the Project, unless such lease, sublease, assignment,
extension or amendment to be executed is (a) within the leasing
guidelines established from time to time by the Members with respect
to the Project as part of an Approved Budget for the Project, (b) in
the case of a lease or license, on the form lease (or form license
agreement) with such variation(s) thereto as approved by the Members
from time to time for such Project, and (x) with a tenant whose
tenancy will be compatible with the overall Project, (d) for 10,100 or
less square feet, and (y) does not violate the provisions of any other
lease of the Project;
(g) Enter into any transaction or agreement with any Affiliate of
the Members except the Management Agreement with the Operating Member
and the Development Agreement with the Operating Member or as provided
in any Approved Budget or as otherwise provided in this Agreement;
(h) Incur any expenses on behalf of the Company or the
Partnership not specifically authorized in this Agreement or in any
Approved Budget;
(i) Amend or otherwise modify this Agreement;
(j) Partition any of the assets of the Company or the
Partnership;
(k) Admit any additional or substitute Member of the Company or
the Partnership;
(l) Sell all or any part of any interest in the Company or the
Partnership, except as specifically authorized by this Agreement;
(m) Except as specifically authorized by this Agreement, select
any successor managing agent to the Operating Member. It is
acknowledged by the Members that, except as specifically authorized by
this Agreement, the Operating Member shall continue to be the managing
agent of the Project so long as Operating Member is a Member in the
Company and owns or has an interest in the Project unless any
management agreement with the Operating Member terminates pursuant to
the provisions thereof, other than by reason of the passage of time.
(n) Settle a condemnation case or insured casualty loss involving
more than One Million Dollars ($1,000,000) and/or decide to
reconstruct the Project in such case;
(o) Select or terminate any Accountant for the Company or the
Partnership; provided, however, in the event the Members cannot agree
on the selection of an Accountant within thirty (30) days after the
receipt of proposals from proposed Accountants, the Operating Member
shall have the sole right to select the Accountant. The Members hereby
designate Ernst & Young as the Accountants for the Company and the
Partnership to serve until such time as the Members shall determine
otherwise;
(p) Amend or terminate the Development Agreement or the
Management Agreement except as expressly authorized in this Agreement;
(q) Approve or enter into (except as permitted in the Development
Agreement) any contracts for the construction or development of the
Project. Specifically, the Approval of both Members shall be required
for contracts, which are with the architect for the Project, any
engineer for the Project, the general contractor of the Project or
which would, individually, impose an aggregate liability on the
Company in excess of $1,000,000.00.
(r) Approve: (i) the site plan and/or schematic building drawings
for the Project which shall be submitted by the Operating Member to
the other Member as part of the Final Project Program; or (ii) the
design development drawings for the Project.
(s) Enter into or modify any redevelopment agreement, or other
documents related to any tax increment financing available for the
benefit of the Company, the Partnership or Project;
(t) Modify, cancel, terminate or enter into any new or modified
property or liability insurance for the Project, the Partnership or
the Company, except as provided in the Budget Approved by the Members;
or
(u) File a petition in bankruptcy or for reorganization or for
the appointment of a receiver, custodian or trustee of all or a
portion of the Company's or the Partnership's property, or an
assignment for the benefit of creditors.
The Members must be reasonable in approving or refusing to approve any
Major Decision.
Section 8.7 EMERGENCY AUTHORITY.
Notwithstanding the provisions of SECTIONS 8.4 or 8.6 hereof, the
Operating Member shall have the right to take such actions and make such
emergency expenditures as it, in its reasonable judgment, deems necessary for
the protection of life or health or the preservation of Company and/or the
Partnership assets if, under the circumstances, in the good faith estimation of
the Operating Member, there is insufficient time to allow the Operating Member
to obtain the Approval of the Members to such action, a good faith attempt has
been made to contact the other Member and any delay would materially increase
the risk to life or health or materially increase the magnitude or likelihood of
property damage or other potential loss involved; provided, however, that the
Operating Member shall notify the other Member of such action contemporaneously
therewith or as soon as reasonably practicable thereafter.
Section 8.8 AUTHORIZED ACTS.
No Member shall be liable to the Company, the Partnership or to any
other Member for any act performed, or omitted to be performed, by it in the
conduct of its duties as a Member, if such act or omission is within the scope
of authority of such Member hereunder and if such act or omission is not
performed or made fraudulently or in bad faith. The Company and the Partnership
, and not the Members, shall indemnify and save harmless each Member from all
personal liability, loss, cost, expense or damage incurred or sustained by
reason of any act performed, or omitted to be performed by it in the permitted
conduct of its duties hereunder except for acts or omissions done or made
fraudulently or in bad faith. Such indemnity, or the denial thereof, shall not
be construed to limit or diminish the coverage of any Member under any insurance
effected or maintained by the Company and/or the Partnership.
Section 8.9 BUDGETS.
(a) The Members shall, by written resolution, Approve a
Pre-Construction Budget and a Development Budget for the Project,
which Budgets the Members acknowledge are subject to change only as
Approved by the Members. The Development Budget is intended to cover
all expenditures of the Project through the completion of construction
of the Project, including, without limitation, those expenditures
included in a Pre-Construction Budget and Prospective Project Budget
for the Project. The Members agree that the Development Budget has
been approved and a copy is attached to the Development Agreement. Any
revisions to the Approved Development Budgets shall be submitted to
the Non-Operating Member in accordance with the procedure set forth in
the Development Agreement. No later than sixty (60) calendar days
prior to the Project Completion Date, the Operating Member shall
submit to the Non-Operating Member a proposed Operating Budget for the
then remaining Fiscal Year covering anticipated expenses of the
Company in owning, operating and maintaining the Project. No later
than sixty (60) days prior to the commencement of each Fiscal Year the
Operating Member shall submit to the Non-Operating Member a proposed
Operating Budget for such Fiscal Year for the Project. Further,
projections of current Fiscal Year revenues and expenses shall be
prepared by the Operating Member and submitted to the Non-Operating
Member on June 1 and November 1 of each Fiscal Year covering the
balance of such fiscal year.
(b) After submission of the proposed Operating Budgets to the
Non-Operating Member, the following procedures shall be followed in
adopting such Operating Budgets:
(i) Within twenty (20) calendar days after the proposed
Operating Budgets are submitted to the Non-Operating Member, the
Non-Operating Member shall either approve each such proposed
Operating Budget or notify the Operating Member of any proposed
revisions therein that it deems necessary. If the Non-Operating
Member fails to approve or reject any proposed Operating Budget
or to make proposed revisions thereto within twenty (20) calendar
days after it is submitted to the Non-Operating Member, such
proposed Operating Budget shall be deemed Approved and shall
thereafter constitute the "Operating Budget" for the Fiscal Year
in question for all purposes hereof. Any objections to the
proposed Operating Budget must be made on a line item basis, and
any line items not objected to shall be deemed Approved by the
Members.
(ii) If the Non-Operating Member approves a proposed
Operating Budget, or the Non-Operating Member makes proposed
revisions thereto and the Operating Member does not make
objections to such proposed revisions within ten (10) calendar
days after it receives them, such proposed Operating Budget, and
revisions if any, shall be deemed Approved by the Members and
shall be deemed thereafter to constitute the "Budget" for the
Fiscal Year in question for all purposes hereof.
(iii)If either Member makes any objection to any proposed
revisions to any proposed Operating Budget, the Members shall
cooperate with each other to resolve any questions with respect
to such proposed revisions and shall use their best efforts to
agree upon such Operating Budget for the Fiscal Year in question
prior to the beginning of the Fiscal Year to which such Operating
Budget relates. If the Members fail to agree upon an Operating
Budget for any Fiscal Year prior to the commencement thereof,
then, pending final resolution of any dispute in the manner
provided herein, the Operating Member shall continue to manage,
maintain, supervise, direct, and operate the activities for which
such Operating Budget was proposed in accordance with the
approved Operating Budget for such activities or asset(s), if
any, for the previous Fiscal Year until a new Operating Budget is
approved; except that the Operating Member shall be authorized
during any interim period to pay related expenses which
reasonably exceed the prior year's budgeted amounts for interest
payments, taxes, utility charges, insurance and other items not
within the reasonable control of the Company or the Partnership
as well as pay for increases in contract services and personnel
costs to the extent reasonably required to maintain the same
level of service provided during the previous Fiscal Year.
(c) The Operating Member may from time to time submit to the
Non-Operating Member revisions to an Approved Operating Budget for its
approval. The Non-Operating Member shall promptly reject or approve
the same or make such changes to the proposal as it may deem
reasonably necessary and proper within the time frame contemplated by
subparagraph (b) hereof. If the Non-Operating Member fails to approve
or reject any proposed revisions or to suggest additional
modifications thereto within twenty (20) calendar days after submittal
to the Non-Operating Member, then such revisions shall be deemed
Approved by the Members. The proposal, as finally approved or changed
by the Members, shall be incorporated into and become part of such
Budget for the remaining period of the Fiscal Year in question.
Section 8.10 REMOVAL OF OPERATING MEMBER.
The Non-Operating Member shall have the right, to be exercised by written
notice to the Operating Member, to remove the Operating Member and to appoint
itself as the Operating Member of the Company at such time as:
(a) The Operating Member Transfers its Percentage Interest
without the consent of the Non-Operating Member, except Transfers
permitted as a matter of right under SECTION 10.2 below;
(b) The Operating Member becomes a Non-Funding Member or
Non-Contributing Member pursuant to SECTION 5.4;
(c) The Operating Member commits a breach of fiduciary duty or an
act of gross negligence or willful misconduct;
(d) The Operating Member experiences a Change in Control; or
(e) Grounds exist for discharging any Affiliate of the Operating
Member under any Development Agreement or the Management Agreement,
pursuant to SECTION 8.11 or SECTION 8.12 hereof, including without
limitation the conditions described in subsections (a), (b), (c) or
(d) hereof.
Section 8.11 DEVELOPMENT AGREEMENT.
(a) If an Affiliate of a Member or a Member is to render services
to the Partnership in connection with the initial development or
redevelopment of the Project, then the Members shall, by written
resolution, Approve a Development Agreement with such Affiliate or
Member who shall be designated as the "Developer" thereunder. The
Member which is not an Affiliate of the Developer shall be responsible
for supervising the performance of the Developer under a Development
Agreement and for monitoring expenditures incurred by or on behalf of
the Partnership by the Developer to determine whether such
expenditures are contemplated in, and within the limits prescribed by,
the applicable Budget Approved by the Members.
(b) Supplementing the provisions of a Development Agreement which
authorize termination thereof, if the Developer thereunder fails to
cure an "Event of Default," as such term is defined in a Development
Agreement, the Member which is not the Developer or an Affiliate of
the Developer shall have the right to exercise the termination rights
of the Partnership, discharge on behalf of the Company acting as
general partner of the Partnership and to discharge the Developer from
its duties thereunder and appoint a new Developer for the Project,
including the Member or an Affiliate of such non-affiliated Member,
under an agreement on the same terms as the Development Agreement.
Such non-affiliated Member may exercise such option by giving the
other Member notice of its election. If a new Developer appointed
pursuant to this SECTION 8.11 is a Member or an Affiliate of a Member,
the other Member shall, if grounds subsequently exist under the new
Development Agreement with such new Developer which allow for
termination, have the right to exercise the termination rights of the
Company as general partner of the Partnership, discharge the new
Developer from its duties thereunder and appoint on behalf of the
Partnership, a replacement Developer (including an Affiliate) under an
agreement on the same terms.
(c) The Members acknowledge and agree that simultaneously with
the execution of this Agreement, the Company, as general partner of
the Partnership, is executing a Development Agreement appointing an
Affiliate of the Operating Member as Developer of the Project and
appointing an Affiliate of the Non-Operating Member as Co-Developer.
The Members further agree that they may subsequently decide to
develop, in one or more phases, certain of the out-parcels which
constitute a portion of the Land for purposes which include, but are
not limited to, the development of restaurants and/or for other retail
projects (a "Subsequent Project"). In such case, the Company, acting
as general partner of the Partnership, may negotiate a second
development agreement with an Affiliate of the Operating Member on
substantially the same terms and conditions as are set forth in the
Development Agreement and the Developer under the new Development
Agreement shall be entitled to the same fees payable to the Developer
under the existing Development Agreement.
Section 8.12 MANAGEMENT AGREEMENT.
(a) If a Member or an Affiliate of a Member is to render services
to the Company or the Partnership in connection with the management of
the Project, then the Members shall, by written resolution, approve a
Management Agreement with such Member or Affiliate who shall be
designated as the Manager thereunder. The Member which is not the
Manager or an Affiliate of the Manager shall be responsible for
supervising the performance of the Manager under a Management
Agreement and for monitoring expenditures incurred by or on behalf of
the Partnership by the Manager to determine whether such expenditures
are contemplated in, and within the limits prescribed by, the
applicable Budget Approved by the Members.
(b) Supplementing the provisions of any Management Agreement
entered into under SECTION 8.12(A), if grounds exist under the
Management Agreement which allow for termination, the Member which is
not the Manager or an Affiliate of the Manager shall have the right to
exercise the termination rights of the Company and the Partnership
discharge on behalf of the Company acting in its capacity as general
partner of the Partnership, the Manager from its duties thereunder and
appoint a new Manager for the Project, including an Affiliate of such
Member, under an agreement on the same terms as the Management
Agreement. Such non-affiliated Member may exercise such option by
giving the other Member notice of its election. If a new Manager
appointed pursuant to this SECTION 8.12(A) is a Member or an Affiliate
of a Member, the other Member shall, if grounds subsequently exist
under the new Management Agreement with such new Manager which allow
for termination, have the right to exercise the termination rights of
the Company and as general partner of the Partnership, discharge the
new Manager from its duties thereunder and appoint a replacement
Manager on behalf of the Partnership (including an Affiliate) under an
agreement on the same terms.
Section 8.13 CONSTRUCTION CONTRACT, ARCHITECT'S CONTRACT AND ENGINEER'S
CONTRACT.
The Members shall, by written resolution, approve the Construction
Contract and the Architect's and the Engineer's Contract(s) for the Project.
Section 8.14 FEES AND EXPENSE REIMBURSEMENTS FOR MEMBERS.
While it is contemplated that the Operating Member shall be primarily
responsible for implementing the decisions of the Members and carrying out their
directives with respect to the acquisition, development, construction, leasing
and management of each Project, the Members acknowledge that they or their
Affiliates will both render valuable services to the Company in connection with
the Project. The Members, or such Affiliates, shall be compensated for such
services in the form of fees, cost recoveries, expense reimbursements or other
means in amounts and upon such other terms and conditions as are set forth in
the Development Budget and the Operating Budgets(s) Approved by the Members, and
subject to Section 9.1 hereof.
ARTICLE 9.
COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES
Section 9.1 COMPENSATION, REIMBURSEMENTS.
(a) COMPENSATION. Except as may be expressly provided for in
SECTION 9.1(B) below or in the agreements referred to in SECTION 9.2,
or in another written agreement Approved by the Members, no payment
will be made by the Company, to either Member for the services of such
Member or any member, shareholder, director or employee, or Affiliate
of such Member.
(b) REIMBURSEMENTS.
(i) Subject to the provisions of this Agreement, each of the
Members shall be reimbursed promptly by the Company, , for all
reasonable out-of-pocket costs and expenses incurred by each on
behalf of the Company in accordance with Budgets which have been
Approved by the Members so long as such costs and expenses are
not intended to be paid for from fees otherwise payable to such
Member or its Affiliates as set forth in the Development
Agreement and the Management Agreement, respectively.
(ii) Neither Member shall be entitled to reimbursement of
any costs or expenses incurred by such Member in connection with
the preparation and negotiation of this Agreement or any of the
Exhibits hereto.
(iii)Requests for reimbursement hereunder shall be paid
within thirty (30) days after submission of a request therefore
accompanied by reasonable back-up documentation, subject to
necessary third-party approvals.
Section 9.2 NO CONTRACTS WITH AFFILIATES.
Except as provided in SECTIONS 8.11 and 8.12, neither Member shall
enter into any agreement or other arrangement for the furnishing to or by the
Company of goods or services with any Person who is an Affiliate of such Member
unless such agreement or arrangement has been Approved by the other Member after
the nature of the relationship or affiliation has been disclosed; provided,
however, if an Affiliate of either Member is in the business of providing
services of a kind needed by the Company, such Affiliate will have the right to
provide those services to the Company at market rates of compensation and terms
and conditions Approved by the Members.
ARTICLE 10.
SALE, TRANSFER OR MORTGAGE
Section 10.1 GENERAL.
Except as expressly permitted in this Agreement, no Member shall
directly or indirectly sell, assign, transfer, mortgage, convey, charge or
otherwise encumber or contract to do or permit any of the foregoing, whether
voluntarily or by operation of law (herein sometimes collectively called a
"Transfer"), or suffer any Affiliate or other third party to Transfer, any part
or all of its Percentage Interest or its share of capital, profits, losses,
allocations or distributions hereunder without the express prior written consent
of the other Member, which consent may be withheld for any or no reason
whatsoever. Any attempt to Transfer in violation of this ARTICLE 10 shall be
null and void. The giving of consent in any one or more instances of Transfer
shall not limit or waive the need for such consent in any other or subsequent
instances.
Section 10.2 PERMITTED TRANSFERS BY THE MEMBERS.
(a) TRANSFERS BY CHELSEA. Without the consent of Simon, Chelsea
may from time to time Transfer its Percentage Interest, in whole or in
part (i) to a Chelsea Affiliate or (ii) from a Chelsea Affiliate to
another Chelsea Affiliate so long as such transfer does not result
from, or occur in connection with, a Change in Control as defined in
Subparagraph (i)(A) or (i)(c) of Paragraph 4 of Exhibit A hereof. Any
Transfer under SECTION 10.2(A) shall not relieve Chelsea of its
obligations under this Agreement.
(b) TRANSFERS BY SIMON. Without the consent of Chelsea, ▇▇▇▇▇ ▇▇▇
from time to time Transfer its Percentage Interest, in whole or in
part (i) to a Simon Affiliate, or (ii) from a Simon Affiliate to
another Simon Affiliate so long as such transfer does not result from,
or occur in connection with, a `Change in Control as defined in
Subparagraph (ii)(A) or (ii)(C)of Paragraph (l) of Exhibit A hereof.
Any Transfer under SECTION 10.2(B) shall not relieve Simon of its
obligations under this Agreement.
(c) AGREEMENTS WITH TRANSFEREES.
(i) If pursuant to the provisions of this SECTION 10.2, any
Member (the "Transferor") shall purport to make a Transfer of any
part of its Percentage Interest to any Person ("Transferee"), no
such Transfer shall entitle the Transferee to any benefits or
rights hereunder until:
(1) the Transferee agrees in writing to assume and be
bound by all the obligations of the Transferor and be
subject to all the restrictions to which the Transferor is
subject under the terms of this Agreement and any agreements
with respect to the Project to which the Transferor is then
subject or is then required to be a party; and
(2) the Transferor and Transferee enter into a written
agreement with the other Member and the Company which
provides (x) that the Transferor is irrevocably designated
the proxy of the Transferee to exercise all voting and other
approval rights appurtenant to the Percentage Interest
acquired by the Transferee, (y) that the Transferor shall
remain liable for all obligations arising under this
Agreement prior to or after such Transfer in respect of the
Percentage Interest so transferred, and (z) that the
Transferee shall indemnify the Members from and against all
claims, losses, liabilities, damages, costs and expenses
(including reasonable attorneys' fees and court costs) which
may arise as a result of any breach by the Transferee of its
obligations hereunder.
(ii) No Transferee of any Percentage Interest shall make any
further disposition except in accordance with the terms and
conditions hereof.
(iii)All costs and expenses incurred by the Company, or the
non-transferring Member, in connection with any Transfer of a
Percentage Interest, including any filing or recording costs and
the fees and disbursements of counsel, shall be paid by the
Transferor.
Section 10.3 FIRST RIGHT OF REFUSAL PROCEDURE.
(a) FIRST REFUSAL NOTICE. Except as provided in SECTIONS 10.2(A)
and 10.2(B), if, subsequent to the date which is 6 (six) full calendar
years after the Project Completion Date, either Simon or Chelsea
desires to sell all of its and its Affiliates' Percentage Interest in
the Company it shall give written notice (the "First Refusal Notice")
of such intention to the other Member (the Member issuing the First
Refusal Notice is hereinafter called the "Offeror" and the Member
receiving the First Refusal Notice is hereinafter called the
"Offeree"). The First Refusal Notice must set forth (i) the price (the
"Refusal Price") and terms upon which the Offeror has received a
bona-fide, third party, arms-length offer to purchase such Percentage
Interest (the Percentage Interest in the Company subject to the First
Refusal Notice is hereinafter called the "Subject Interest") subject
to all liabilities of the Company as of that date, (ii) a copy of such
third-party offer, and (iii) the name and address of the proposed
purchaser, provided, that the Offeror shall deal with only one such
purchaser at a time. The Refusal Price set forth therein must be
payable with cash consideration only, although, at the Offeror's
election, payment of portions of such cash consideration may be
deferred and paid, with interest, in one or more installments after
closing. Moreover, in furtherance of SECTION 10.3(E) below, so as to
avoid a termination of the Company for federal income tax purposes
pursuant to Section 708(b)(1)(B) of the Code the First Refusal Notice
must propose a structure for the sale of the Subject Interest so that
the sale when combined with previous sales will not cause there to be
a sale or exchange of more than a forty-nine percent (49%) interest in
the Net Profits or capital of the Company in any 12-month period, or,
alternatively to fairly compensate the Offeree for the cost (including
loss of benefits and/or increased taxes) of any such tax termination.
Any First Refusal Notice providing for non-cash consideration, in
whole or in part, (except as permitted in this SECTION 10.3(A)) or a
sale that would cause a combined sale or exchange of more than a
forty-nine percent (49%) interest in any 12-month period (except as
permitted in this SECTION 10.3(A)) shall not be effective to institute
the First Refusal procedures. If the First Refusal Notice provides
that payment of a portion of the Refusal Price is to be deferred, then
the required collateral for such deferred payment shall be described
in the First Refusal Notice and shall be the Subject Interest to be
purchased and/or a certificate of deposit, irrevocable stand-by letter
of credit, or other type of collateral which is generally available,
liquid, and not unique. Such First Refusal Notice shall constitute an
offer by the Offeror to sell to the Offeree the Subject Interest
specified in the First Refusal Notice for such price and terms,
exclusive of any brokerage or similar commission provided for therein.
Notwithstanding anything to the contrary set forth herein, neither
Member may sell its Percentage Interest in the Company pursuant to the
provisions of this Section unless any Affiliate which is a Partner in
the Partnership also sells its interest in the Partnership pursuant to
the First Right of Refusal Procedure set forth in the Partnership
Agreement, and any attempt to do so shall be null and void. Neither
Chelsea nor ▇▇▇▇▇ ▇▇▇ give a First Refusal Notice during the
Construction Period nor until six (6) years after the Project
Completion Date.
(b) ELECTION BY OFFEREE.
(i) For a period of thirty (30) days following the date of
receipt by the Offeree of the First Refusal Notice (the "First
Refusal Period"), the Offeree shall have the option to purchase
all, but not less than all, of the Subject Interest specified in
the First Refusal Notice for the price and on the terms stated in
the First Refusal Notice. In the alternative the Offeree shall
also have the option to sell its entire Percentage Interest in
the Company to the Purchaser as set forth in subparagraph (d)
hereof. If the Offeree elects to purchase the Subject Interest it
must so notify the Offeror in writing (the "First Refusal
Exercise Notice") within said 30-day period, which notice must be
accompanied by a First Refusal Deposit (defined below). If the
Offeree fails to send a First Refusal Exercise Notice or to
deliver a First Refusal Deposit within said 30-day period it
shall be deemed to have elected not to purchase. "First Refusal
Deposit" shall mean an amount equal to 5% of the price set forth
in the First Refusal Notice.
(c) CLOSING.
(i) If the Offeree elects to so purchase the Subject
Interest, the transfer of the Subject Interest specified in the
First Refusal Notice from the Offeror to the Offeree shall be
closed and consummated in the principal office of the Company at
11:00 a.m., local time, on the sixtieth (60th) day following the
date of the First Refusal Exercise Notice (or if such date is not
a business day, the business day next following such day), or on
such earlier day as may be selected by the Offeree. At the
closing, the Offeree shall deliver to the Offeror (i) such
portion of the Refusal Price which is payable at closing in
accordance with the terms of the First Refusal Notice in cash
(U.S. dollars) by wire transfer representing immediately
available Federal Reserve System funds and (ii) the promissory
note and the applicable security instruments, if any, required by
the First Refusal Notice. Simultaneously with the receipt of such
payment, the Offeror shall deliver the Subject Interest to the
Offeree free and clear of all liens, security interests and
competing claims (other than security interests granted in favor
of the Offeree to secure any Contribution Loans made by the
Offeree on behalf of the Offeror and not fully credited as
hereinafter provided) and shall deliver to the Offeree 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 Offeree shall
reasonably request. The Refusal Price paid at closing shall be
reduced by the amount of any outstanding Contribution Loans made
by the Offeree to the Offeror, together with all accrued interest
thereon and the costs (including loss of benefits and/or
increased taxes), if any, associated with any termination under
Section 708(b) (1) (B) of the Code caused by the transfer.
(ii) If, by virtue of the election of the Offeree to
purchase any Subject Interest in accordance with the provisions
of this SECTION 10.3, the holder of any loan to the Company under
which the Offeror has personal liability has the right to, and
notifies the Company of its intent to accelerate the loan, it
shall be a condition to the closing that the Offeree repay such
loan (plus any deferred and accrued and unpaid interest thereon
and any required prepayment premium and/or yield maintenance
fees), or have the Offeror released from personal liability for
payment of the loan by a written instrument reasonably
satisfactory to the Offeror, at the closing of the sale of such
Subject Interest.
(d) SALE OF PROJECT TO THIRD PARTY
(i) During the First Refusal Period, the Offeree shall also
have the option to sell its entire Percentage Interest in the
Company to the Purchaser. If the Offeree elects to sell its
Percentage Interest to the Purchaser, it must notify the Offeror
in writing (the "Sale Notice") within the First Refusal Period.
If Offeree fails to send a Sale Notice within said time 30-day
period, it shall be deemed to have elected not to sell its
Percentage Interest. In order for the Offeree to elect to sell
its Percentage Interest in the Company, any Affiliates of the
Offeree which are Partners in the Partnership must also elect to
sell all interest which they hold in the Partnership.
(ii) If the Offeree elects to sell its Percentage Interest,
the Offeror shall proceed to consummate a sale of both the
Subject Interest and the Offeree's Percentage Interest to the
Purchaser at a purchase price equal to the product of (i) the
Refusal Price and (ii) the quotient resulting from the division
of (x) one (1) by (y) the percentage interest in the Company
represented by the Subject Interest, subject to all liabilities
of the Company as of the date of the First Refusal Notice. For
example, if the Refusal Price for the Offeror's Percentage
Interest is $1,000,000 and Offeror's Percentage Interest equals
50%, then the interest held by the Company in the Partnership may
be sold at a purchase price equal to $2,000,000 ($1,000,000 times
1.00/.50). The purchase price shall be payable as set forth in
Section 10.3 (a); provided however, that if a portion of the
purchase price is to be deferred, then the required collateral
for such deferred payment shall be a mortgage on the Project
and/or a certificate of deposit, irrevocable stand-by letter of
credit or other type of collateral which is generally available,
liquid and not unique and no more than 50% of the purchase price
may be deferred. The form of the contract of sale shall be
subject to the reasonable approval of the Offeree, and the
contract shall be executed, and close, within the time frames,
identified in Subparagraph (e)(i) of this section. If the holder
of any loan to the Company under which a Member or Members or
their Affiliates have personal liability has the right to and
notifies the Company of its intent to accelerate the loan, it
shall be a condition to the closing that the Purchaser repay such
loan and obtain releases of any guarantees made in connection
therewith. Costs incurred in connection with the drafting and
negotiation of the contract of sale (excluding, however, costs
incurred by the Offeree in commenting on same) and any
conveyance, transfer or similar taxes payable in connection with
the closing shall be expenses of the Company. The interests of
any Affiliates of Offeror and Offeree which are Partners in the
Partnership shall be sold at the purchase price and under the
terms and conditions set forth in the First Right of Refusal
Procedure in the Partnership Agreement.
(e) SALE OF SUBJECT INTEREST TO THIRD PARTY.
(i) If the Offeree fails to exercise its right to purchase
the Subject Interest, or if the Offeree exercises its right to
purchase but through no fault of the Offeror subsequently fails
to purchase the Subject Interest within the time specified, or
the Offeree fails to offer to sell its entire Percentage Interest
to the Purchaser, or any Affiliates of Offeree which are Partners
in the Partnership fail to offer to sell the interest held by
such Affiliates, then the Offeror shall have the right, for four
(4) months after the expiration of the First Refusal Period, to
obtain a bona fide, binding contract for the sale of such Subject
Interest to the third party which is identified as the
prospective purchaser in the First Refusal Notice, so long as
such third party is not an Affiliate of the Offeror (a
"Purchaser") for a price and on terms and conditions consistent
with SECTION 10.3(A) which are no less favorable to the Offeror
than those stated in the First Refusal Notice, except that any
such contract must provide for a closing of the purchase and sale
of such Subject Interest within sixty (60) days after the date of
such contract; PROVIDED, that if the Offeree fails to purchase
the Offeror's Subject Interest in breach of a commitment by the
Offeree to do so the Offeror shall have, as its sole remedy, the
right to retain the First Refusal Deposit as liquidated damages
and not as a penalty, and in addition thereto the above
four-month limitation on the Offeror's rights to obtain a binding
contract with a third party shall be extended to six (6) months.
(ii) In the event the Offeror proposes to consummate a sale
of the Subject Interest to the Purchaser identified pursuant to
SECTION 10.3(A) hereof within the time specified and in a manner
otherwise consistent with the requirements of SECTIONS 10.3(D)(I)
above, the Purchaser shall not be entitled to any benefits or
rights under this Agreement unless and until:
(1) The Offeree shall reasonably approve the form and
content of the instruments of transfer;
(2) The Purchaser in writing accepts and adopts all of
the terms and conditions of this Agreement, as the same may
have been amended, including, without limitation, the
restrictions on transfer set forth in SECTION 10.1, and
acknowledges that the Offeror's rights under this SECTION
10.3 are transferable, but shall not be available for a
period of two (2) years, to such Purchaser;
(3) The Offeror or the Purchaser, as the case may be,
pays all debts of the Offeror then due and payable to the
Company or to the Offeree (including interest accrued
thereon) and all capital contributions then due and payable
by the Offeror to the Company;
(4) The Offeror or the Purchaser pays all reasonable
expenses incurred by the Offeree from the date the Offeree
last declines to purchase the Subject Interest through the
date on which the Subject Interest is transferred to the
Purchaser, including, without limitation, legal and
accounting fees, and pays all costs incurred by the Company
as the result of such transfer, including, without
limitation, real or personal property transfer taxes, if
any, imposed on the Company by virtue of the transfer and
the cost of preparing and filing any and all tax returns
which are required to be filed as a result of such sale; and
(5) If required by the Offeree, the Purchaser delivers
an opinion of counsel to the Company, which counsel and
opinion are satisfactory to the Offeree, that an exemption
from registration or qualification under the Securities Act
of 1933, as amended, and under all applicable statutes,
rules or laws of any state which may be applicable thereto
is available.
(ii) In the event the Offeror is the Operating Member, the
Non-Operating Member shall have the right to become the Operating
Member and the Manager (or to have an Affiliate become the
Manager) upon sale of the Subject Interest by giving notice of
exercise to the Offeror.
(f) REINSTATEMENT OF FIRST REFUSAL PROCEDURE. In the event the
Offeror fails within the time specified in SECTION 10.3(D) OR SECTION
10.3(E), AS APPLICABLE, to consummate such proposed sale, through no
fault of the Offeree, the Offeror shall reimburse the Offeree for its
above-described costs and shall, prior to any subsequent proposed sale
of the Subject Interest be required to extend to the Offeree, and the
Offeree shall have, the rights of First Refusal set forth in this
SECTION 10.3. Except as otherwise permitted by this Agreement, any
sale, assignment or other transfer by either Member of its Percentage
Interest or any portion thereof in violation of the restrictions and
procedures set forth in this SECTION 10.3 shall be void.
Section 10.4 RESTRAINING ORDER.
If either Member shall at any time Transfer or attempt to Transfer its
Percentage Interest or part thereof in violation of the provisions of this
Agreement and any rights hereby granted, then the other Member shall, in
addition to all rights and remedies at law and in equity, be entitled to a
decree or order restraining and enjoining such Transfer and the offending Member
shall not plead in defense thereto that there would be an adequate remedy at
law; it being hereby expressly acknowledged and agreed that damages at law will
be an inadequate remedy for a breach or threatened breach of the violation of
the provisions concerning Transfer set forth in this Agreement.
Section 10.5 NO TERMINATION.
Neither Member shall Transfer all or any part of its Percentage
Interest to any party other than the other Member, whether or not the Transfer
would otherwise be permitted hereunder, if the Transfer would result in a
termination of the Company under Section 708(b)(1)(B) of the Code, unless the
Transferor reasonably compensates the other Member for the costs (including loss
of benefits and/or increased taxes), if any, associated with any resulting tax
termination under Section 708(b) (1) (B). Unless so compensated, at the request
of the other Member and as a condition of the consummation of any Transfer of
all or any part of a Percentage Interest to any party other than the other
Member, the Member proposing to Transfer all or any part of its Percentage
Interest shall at its cost provide an unqualified opinion of counsel, which must
be reasonably satisfactory to the other Member, that the Transfer would not
result in such a termination and, in addition to the other Member's rights under
SECTION 10.4, the Member proposing to Transfer all or any part of its Percentage
Interest to any party other than the other Member shall indemnify and hold
harmless the other Member from and against any and all loss, cost, liability or
expense (including, but not limited to, reasonable attorneys' fees and court
costs) which such other Member may suffer if the Transfer would, either by
itself or together with any other prior Transfer of a Percentage Interest in the
Company of which the transferring Member has knowledge at the time of the
Transfer, cause such a termination.
Section 10.6 BUY-SELL.
(a) At any time during the Operating Period, in the event that a
good faith dispute shall exist between the Members regarding one of
the Major Decisions identified in Section 8.6(b), 8.6(d) or 8.6(m) and
the Members are unable to agree upon the action to be taken by the
Company (hereinafter, a "Deadlock"), and at any time following the
date which is six (6) full calendar years after the Project Completion
Date, whether or not a Deadlock shall exist between the Members,
either Member (the "Offeror"), provided such Member is not then a
Defaulting Member, may by giving the other Member (the "Offeree")
written notice (the "Sale Notice") implement the sale procedures which
are set forth in this SECTION 10.6. However prior to implementing the
sale procedures the Member wishing to cause such buy-sell shall first
be obligated to notify the other Member of its desire to sell its
interest and the Members shall thereafter commence good faith
discussions to determine whether or not they mutually agree upon the
terms and conditions for the sale of one Member's interest in the
Company to the other Member. If the Members are unable to agree, then
upon the earlier to occur of thirty (30) days after commencement of
discussions or on the date either party notifies the other that it
doesn't want to continue discussions the Offeror may deliver the Sale
Notice which shall state the cash price (determined or to be
determined as set forth in subparagraph (d) below) at which the
Offeror would be willing to sell its entire interest in the Company to
the Offeree or to purchase the Offeree's entire interest in the
Company.
(b) No Member may make a Sale Notice described in SECTION 10.6(A)
during the Construction Period or, except as previously specified in
Section 10.6(a) or hereafter specified in Section 10.6(c) for six (6)
years after the Project Completion Date.
(c) If there is a merger, consolidation, or other business
reorganization of Chelsea or Chelsea, Inc., or Simon, Simon, Inc., SD
Inc. or SPG, as a result of which a Change in Control occurs (as
defined in Exhibit A) then the non-merging, non-consolidating, or
non-reorganizing Partner may, at its option implement the Buy-Sell
procedures set forth in this Section 10.6 regardless of the period of
time that has elapsed subsequent to the Project Completion Date.
(d) If any Member shall choose to deliver a Sale Notice, upon
receipt of the Sale Notice given and delivered pursuant to SECTION
10.6(A), the Offeree shall be obligated to elect, in accordance with
the provisions of this SECTION 10.6, either to purchase the Offeror's
entire interest in the Company or to sell its entire interest in the
Company to the Offeror for cash at the closing described in SECTION
10.7.
(e) The purchase price (the "PURCHASE PRICE") for any purchase
and sale of the interest in the Company of a Member under this SECTION
10.6 shall be equal to the cash amount set forth in the Sale Notice
(less the outstanding principal balance of the mortgage, transfer
taxes, recording fees, and prepayment premiums or other amounts
payable to the lender, which amount shall be adjusted for the
respective Percentage Interests of the Members).
(f) The Offeree shall give written notice of its election to the
Offeror within 30 days after receipt of the Offer. Failure of the
Offeree to give notice that such Offeree has elected to purchase the
Offeror's entire interest in the Company shall be conclusively deemed
to be an election of the Offeree to sell to the Offeror its entire
interest in the Company.
(g) If the holder of any loan to the Company under which the
selling Member or its Affiliates has personal liability, has the right
to, and notifies the Company of its intent to accelerate such loan, it
shall be a condition to the closing that the purchasing Member repay
such loan (plus any deferred and accrued and unpaid interest thereon
and any prepayment premium and/or yield maintenance fees) at the
closing, or to have the selling Member and any Affiliates released
from liability for payment of the loan and any guaranties given in
connection therewith by a written instrument reasonably satisfactory
to the selling Member, and the failure to do so will cause such Member
to be a Defaulting Member. The purchasing Member agrees to indemnify
the selling Member and its Affiliates and hold each of them harmless
from and against any damage, loss or liability to any of them as a
result of the indemnifying party's failure to repay such loan at the
closing in accordance with the provisions hereof. In addition, the
selling Member may, in its sole and absolute discretion, and without
prejudice to any other legal or equitable remedies it may have, refuse
to proceed with the closing unless simultaneously therewith any such
loan is so repaid.
(h) The Offeree's election pursuant to subparagraph (f) shall
create a binding contract for the purchase by Offeree of Offeror's
Entire Interest or sale, as the case may be, of the Offeree's Entire
Interest in the Company on the terms set forth in this SECTION 10.6.
If the Offeree shall thereafter be in breach of its obligation to
close the purchase or sale in accordance with such election, such
Member shall be a Defaulting Member and in addition to all other
rights and remedies herein provided, the Offeror shall have all
remedies at law or in equity. In the event the Offeror shall be in
breach of its obligation to close the purchase or sale herein
provided, then such Member shall be a Defaulting Member, and in
addition to all other rights and remedies herein provided, the Offeree
shall have all remedies available in law or at equity.
(i) Notwithstanding the foregoing, the rights granted pursuant to
this Section may not be exercised unless any Affliate of the Offeror
which holds an interest as a Partner in the Partnership also offers
the entire interest held by it in the Partnership in accordance with
the Buy-Sell provisions set forth in the Partnership Agreement.
Section 10.7 CLOSING OF PURCHASE OF A MEMBER'S INTEREST.
(a) The closing of any sale of a Member's interest pursuant to
SECTION 10.6 shall be held at the office where the principal place of
business of the Company is located on the 120th day after the election
by the Offeree (unless the Members agree to a different mutually
acceptable date), unless such 120th day is not a business day, in
which event the closing shall take place on the first business day
following such 120th day. Within 30 days prior to such closing, there
shall be a preliminary closing at which the Members shall act
diligently and in good faith to agree upon the form and substance of
all documents necessary to effectuate the closing.
(b) At the closing, an assignment and, if requested by the
purchasing Member, a ▇▇▇▇ of sale (both with covenants against
grantor's acts) from the selling Member to the purchasing Member of
the selling Member's interest therein, together with such other
instruments and documents as may be reasonably necessary or desirable
to effectuate the sale and transfer to the purchasing Member, shall be
deposited in escrow under an escrow agreement and with an escrow agent
approved by the Members, which approval shall not be unreasonably
withheld. If there is any dispute between the Members, any title
company which issued a fee title policy to the Company or acted as
co-insurer or reinsurer may be designated by any Member as the escrow
agent. The instruments and documents to be deposited in escrow at the
closing shall be legally sufficient to convey all of the selling
Member's interest in the Company to the purchasing Member, free and
clear of all mortgages, deeds of trust, liens and encumbrances. The
purchase price shall be paid to the selling Member by federal wire
transfer of immediately available funds to an account designated by
the selling Member.
(c) In the event there are any conveyance, transfer or similar
taxes payable as an incident to the conveyances at the preliminary
closing or the closing, such taxes shall be expenses of the Company.
In the event that any title insurance company insuring the title of
the Company to the Project shall refuse to endorse its policy of title
insurance to reinsure the Company's title to the Project effective
immediately after the transfer to the purchasing Member without
exception other than as set forth in the original policy of title
insurance (other than exceptions for real estate taxes, rights of
tenants in possession, as tenants only, any surviving deeds of trust,
mortgages, liens or charges against the Project, any easements created
by the Company and Approved by the Members, and any other matter
Approved by the Members at any time or from time to time), then the
assignment from the Offeror to the purchasing Member shall contain
general warranties of its title to its interest in the Company and the
Project.
Section 10.8 ASSUMPTION OF LIABILITIES.
(a) At any closing held pursuant to SECTION 10.7, the purchasing
Member shall, by a legally enforceable agreement, assume the payment
of all obligations of the Company accruing after closing, including,
without limitation, any indebtedness under any lien on the Project
identified in the Offer to the extent that the Members have personal
liability therefor, and shall further secure the release of the
selling Member's guaranties, if any.
(b) If, at the time of the purchase of the selling Member's
interest, the Project is subject to any mortgage, deed of trust, lien
or charge, other than those which were in existence at the time of the
Sale Notice and used to calculate the Purchase Price, the purchasing
Member shall discharge, assume, or take subject to such mortgage, deed
of trust, lien or charge and reduce the amount of the Purchase Price
otherwise payable pursuant to SECTION 10.6(D) by the selling Member's
pro rata share of the amount of money as would be required to
discharge such mortgage, deed of trust, lien or charge (including,
without limitation, any and all prepayment premiums or penalties). In
addition, if such an encumbrance shall have been placed by the selling
Member in contravention of the terms and provisions of this Agreement,
then the purchasing Member shall also have all of the rights provided
in SECTION 10.6 with respect to a default by the selling Member, and
the purchasing Member shall not be required to close the purchase and
sale of the interest of the selling Member in the Company.
(c) Unless the Sale Notice provides otherwise, if the Project is
damaged by fire or other casualty, or if any party possessing the
right of eminent domain or such similar right shall give notice of an
intention to take or acquire a part of the Project, and such damage
occurs, or such notice is given between the date of the Sale Notice
and the closing, the following shall apply:
(i) If the Project is damaged by an insured casualty (or an
uninsured casualty not resulting in significant damage, which for
the purposes of this subsection only shall mean damage the cost
to repair of which would not exceed $1,000,000), or if the taking
or acquisition shall not involve a substantial portion of the
Project resulting in an other than substantial reduction in
income, then the Offeree shall be required to complete the
transaction and accept an assignment of the insurance or
condemnation proceeds, in which case the Purchase Price shall be
reduced by a portion of the uninsured casualty, if any, equal to
the amount of the uninsured casualty multiplied by the selling
Member's Adjusted Percentage Interest, and shall be further
reduced by the sum of all deductible amounts specified under the
policies of insurance multiplied by the selling Member's Adjusted
Percentage Interest.
(ii) If the Project is damaged by an uninsured casualty
resulting in significant damage, or if the taking or acquisition
shall or may result in a substantial reduction in the income
producing capacity of the Project, then the purchasing Member
shall have the option to either (1) accept the Selling Member's
interest in the Project in an "as is" condition together with any
insurance proceeds, settlements and awards (in which case the
Purchase Price shall be reduced by the sum of all deductible
amounts specified under policies of insurance multiplied by the
selling Member's Adjusted Percentage Interest), or (2) cancel the
purchase.
In the event that the purchase is canceled by the purchasing Member
in accordance with this SECTION 10.8(C), the terms of this Agreement shall
remain in effect and continue to be binding on the parties.
ARTICLE 11.
DISSOLUTION
Section 11.1 DISSOLUTION AND TERMINATION; CONTINUATION OF BUSINESS.
(a) CAUSES OF DISSOLUTION AND TERMINATION. Except as set forth in
this ARTICLE 11 and ARTICLE 10, neither Member shall have the right
and each Member hereby agrees not to withdraw from the Company, nor to
dissolve, terminate or liquidate, or to petition a court for the
dissolution, termination or liquidation of the Company, except as
provided in this Agreement, and neither Member at any time shall have
the right to petition or to take any action to subject the Company's
assets or any part thereof, including the Project, or any part
thereof, to the authority of any court of bankruptcy, insolvency,
receivership or similar proceeding. The Company shall be dissolved and
terminated only upon the earlier occurrence of any of the following
dates or events:
(i) December 31, 2050 or such later date as Approved by the
Members;
(ii) a dissolution of the Company is Approved by the
Members;
(iii)one or both of the Members elect to dissolve the
Company pursuant to any provision of this Agreement permitting
such election to be made;
(iv) the sale or other disposition (exclusive of an exchange
for other real property or the granting of a lien or security
interest in the Project) by the Company of all or substantially
all of the Project and other assets of the Company;
(v) the "Bankruptcy" (as hereinafter defined), dissolution
or liquidation of a Member;
(vi) the occurrence of any event that, under the Delaware
LLC Act, would cause the dissolution of the Company or that would
make it unlawful for the business of the Company to be continued;
or
For the purposes of this Agreement, the term "Bankruptcy" shall
mean, and the Member shall be deemed "Bankrupt" upon, (i) the entry of
a decree or order for relief of the Member by a court of competent
jurisdiction in any involuntary case involving the Member under any
bankruptcy, insolvency, or other similar law now or hereafter in
effect; (ii) the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or other similar agent for the
Member or for any substantial part of the Member's assets or property;
(iii) the ordering of the winding up or liquidation of the Member's
affairs; (iv) the filing with respect to the Member of a petition in
any such involuntary bankruptcy case, which petition remains
undismissed for a period of 90 days or which is dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any
corresponding provision of any future United States bankruptcy law);
(v) the commencement by the Member of a voluntary case under any
bankruptcy, insolvency, or other similar law now or hereafter in
effect; (vi) the consent by the Member to the entry of an order for
relief in an involuntary case under any such law or to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator, or other similar agent for the Member or for
any substantial part of the Member's assets or property; (vii) the
making by the Member of any general assignment for the benefit of
creditors; or (viii) the failure by the Member generally to pay its
debts as such debts become due.
(b) RIGHT TO CONTINUE BUSINESS OF THE COMPANY. Upon an event
described in SECTIONS 11.1(A)(I), 11.1(A)(V) or 11.1(A)(VI) (but not
an event described in SECTION 11.1(A)(VI) that makes it unlawful for
the business of the Company to be continued), the Company thereafter
shall be dissolved and liquidated unless, within 90 days after the
event described in any of such Sections, an election to continue the
business of the Company shall be made in writing by the remaining
Members holding fifty percent (50%) or more of the Percentage
Interests. If such an election to continue the Company is made, then
the Company shall continue until another event causing dissolution in
accordance with this ARTICLE 11 shall occur.
Section 11.2 PROCEDURE IN DISSOLUTION AND LIQUIDATION.
(a) WINDING UP. Upon dissolution of the Company pursuant to
SECTION 11.1 hereof, the Company shall immediately commence to wind up
its affairs and the Members shall proceed with reasonable promptness
to liquidate the business of the Company and (at least to the extent
necessary to pay any debts and liabilities of the Company) to convert
the Company's assets into cash. A reasonable time shall be allowed for
the orderly liquidation of the business and assets of the Company in
order to reduce any risk of loss that might otherwise be attendant
upon such a liquidation.
(b) MANAGEMENT RIGHTS DURING WINDING UP. During the period of the
winding up of the affairs of the Company, the Operating Member shall
manage the Company and shall make with due diligence and in good faith
all decisions relating to the conduct of any business or operations
during the winding up period and to the sale or other disposition of
Company assets; provided, however, that if the termination of the
Company results from an Event of Default of a Member, the defaulting
Membershall have no further right to participate in the management or
affairs of the Company and the non-defaulting Member shall manage the
Company during the period of winding up. Each Member hereby waives any
claims it may have against the other that may arise out of the
management of the Company by the other, pursuant to this SECTION
11.2(B), so long as such other Member and its representatives act in
good faith.
(c) WORK IN PROGRESS. If the Company is dissolved for any reason
while there is development or construction work in progress, winding
up of the affairs and termination of the business of the Company may
include completion of the work in progress to the extent the Members
or non-defaulting Member, as the case may be, may determine same to be
necessary to permit a sale or other disposition of the Project which
is most beneficial to the Members.
(d) DISTRIBUTIONS IN LIQUIDATION. The assets of Company shall be
applied or distributed in liquidation in the following manner and in
the following order of priority:
(i) In payment of debts and obligations of the Company owed
to third parties, which shall include either Member as the holder
of any secured loan, and to the expenses of liquidation in the
order of priority as provided by law; then
(ii) To the setting up of any reserves for a period of up to
twelve (12) months which the Members or the non-defaulting
Member, as the case may be, may deem necessary for any contingent
or unforeseen liabilities or obligations of the Company; then
(iii)In payment of any debts or obligations of the Company
to either Member, and then
(iv) To the Members pro rata in proportion to the positive
balances in their respective Capital Accounts until said Capital
Accounts have been reduced to zero.
Losses attributable to the expenditure of funds held under the
reserve in SECTION 11.2(D)(II) shall be allocated to each Member to
the extent such expenditure will reduce the amount of cash eventually
distributed to each Member.
Notwithstanding the foregoing, if there are any outstanding
Contribution Loans at the time of any distribution pursuant to this
SECTION 11.2(D), the Member to whom such Contribution Loans are owed
shall be entitled to payment of the Contribution Loans on a priority
basis out of the distributions to which the Member for whose benefit
the Contribution Loans were made is entitled, to be applied to the
Contribution Loans in order of priority based on the chronological
order in which they were made, the earliest to be paid first in full,
and to each Contribution Loan in payment first of interest and then of
principal.
(e) NON-CASH ASSETS. Every reasonable effort shall be made to
dispose of the assets of the Company so that the distribution may be
made to the Members in cash. If at the time of the termination of the
Company, the Company owns any assets in the form of work in progress,
notes, deeds to secure debt or other non-cash assets, such assets, if
any, shall be distributed in kind to the Members, in lieu of cash,
proportionately to their right to receive the assets of the Company on
an equitable basis reflecting the Fair Market Value of the assets so
distributed. In the alternative, the Members may cause the Company to
distribute some or all of its non-cash assets to the Members as
tenants-in-common subject to such terms, covenants and conditions as
the Members may adopt.
Section 11.3 DISPOSITION OF DOCUMENTS AND RECORDS.
All Documents of the Company shall be retained upon termination of the
Company for a period of not less than seven (7) years by a party mutually
acceptable to the Members. The costs and expenses of personnel and storage costs
associated therewith shall be shared by the Members equally. The Documents shall
be available during normal business hours to all Members for inspection and
copying at such Member's cost and expense. If either Member for any reason
ceases as provided herein to be a Member at any time prior to termination of the
Company ("Non-Surviving Member"), and the Company is continued without the
Non-Surviving Member, the other Member ("Surviving Member") agrees that the
Documents of the Company up to the date of the termination of the Non-Surviving
Member's interest shall be maintained by the Surviving Member, its successors
and assigns, for a period of not less than seven (7) years thereafter; provided,
however, that if there is an Internal Revenue Service examination or audit, or
notice thereof, which requires access to the Documents, the Documents shall be
retained until the examination or audit is completed and any tax liability
finally determined, and provided further, the Non-Surviving Member shall
reimburse the Surviving Member for one-half of personnel and storage costs
associated herewith. The Documents shall be available for inspection,
examination and copying by the Non-Surviving Member or its representatives upon
reasonable notice in the same manner as herein provided during said seven (7)
year period.
Section 11.4 DATE OF TERMINATION.
The Company shall be terminated when its cash and other assets have
been applied and distributed in accordance with the provisions of SECTION
11.2(D). The establishment of any reserves in accordance with the provisions of
SECTION 11.2(D) shall not have the effect of extending the Termination Date of
the Company, but any unexpended reserve amount shall be distributed in the order
and priority provided in such Section upon expiration of the period of such
reserves.
ARTICLE 12.
GENERAL PROVISIONS
Section 12.1 Voluntary Dispute Resolution.
(a) All disputes and controversies relating to the interpretation,
construction, performance or breach of this Agreement, the Development
Agreement or the Management Agreement may be resolved by submission to
binding arbitration at the offices of JAMS/ENDISPUTE located in
Delaware ("JAMS"); provided that both members agree to subject
themselves to such dispute resolution procedure. If agreement is
reached between the Members that they will subject themselves to an
arbitration proceeding, either party can initiate arbitration by
sending written notice of an intention to arbitrate by registered or
certified mail to the other party hereto and to JAMS. The notice must
contain a description of the dispute and the remedy sought. If and when
a demand for arbitration is made by either party, the parties agree to
abide by the then-current rules and procedures established by JAMS for
discovery, the conduct of the arbitration hearing, and appeal of the
arbitration award. The parties may agree on a retired judge from the
JAMS panel. If they are unable to agree, JAMS will provide a list of
three available judges and each party may strike one. The remaining
judge will serve as the arbitrator at the settlement conference.
(b) The arbitration shall be governed by Delaware law, shall be submitted
to arbitration in Delaware and judgment upon the award rendered by the
arbitrator may be entered in any federal or state court having
jurisdiction thereof. The parties agree that arbitration must be
initiated within nine (9) months after the claimed breach occurred and
that the failure to initiate arbitration within said period constitutes
an absolute bar to the institution of any new proceeding.
(c) The prevailing party in any arbitration proceeding shall be entitled to
reasonable attorneys' fees and costs as determined by the arbitrator as
part of its decision in the arbitration.
Section 12.2 NOTICES.
Any notice, consent, approval, or other communication which is
provided for or required by this Agreement must be in writing and may be
delivered in person to any party or may be sent by a facsimile transmission,
telegram, courier or registered or certified U.S. mail, with postage prepaid,
return receipt requested. Any such notice or other written communications shall
be deemed received by the party to whom it is sent (i) in the case of personal
delivery, on the date of delivery to the party to whom such notice is addressed
as evidenced by a written receipt signed on behalf of such party, (ii) in the
case of facsimile transmission or telegram, the next business day after the date
of transmission, (iii) in the case of courier delivery, the date receipt is
acknowledged by the party to whom such notice is addressed as evidenced by a
written receipt signed on behalf of such party, and (iv) in the case of
registered or certified mail, the earlier of the date receipt is acknowledged on
the return receipt for such notice or five (5) business days after the date of
posting by the United States Post Office. For purposes of notices, the addresses
of the parties hereto shall be as follows, which addresses may be changed at any
time by written notice given in accordance with this provision:
If to Simon:
Simon Property Group, L.P.
c/o Simon Property Group, Inc.
National City Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Simon Property Group, L.P.
c/o Simon Property Group, Inc.
National City Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Chelsea:
Chelsea GCA Realty Partnership, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Chelsea GCA Realty Partnership, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Failure of, or delay in delivery of any copy of a notice or other
written communication shall not impair the effectiveness of such notice or
written communication given to any party to this Agreement as specified herein.
Section 12.3 ENTIRE AGREEMENT.
This Agreement (including all Exhibits referred to herein and attached
hereto, which Exhibits are part of this Agreement for all purposes) contains the
entire understanding between the Members with respect to the Project and
supersedes any prior understanding and agreements between them respecting the
within subject matter. There are no representations, agreements, arrangements or
understandings, oral or written, between the Members relating to the subject of
this Agreement which are not fully expressed herein.
Section 12.4 SEVERABILITY.
This Agreement is intended to be performed in accordance with, and
only to the extent permitted by, all applicable Laws of the State of Delaware.
If any provision of this Agreement, or the application thereof to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law; provided,
however, that the above-described invalidity or unenforceability does not
diminish in any material respect the ability of the Members to achieve the
purposes for which this Company was formed.
Section 12.5 SUCCESSORS AND ASSIGNS.
Subject to the restrictions on Transfer set forth in ARTICLE 10, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the parties hereto.
Section 12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
Section 12.7 ADDITIONAL DOCUMENTS AND ACTS.
In connection with this Agreement, as well as all transactions
contemplated by this Agreement, each Member agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may
be necessary or appropriate to effectuate, carry out and perform all of the
terms, provisions and conditions of this Agreement, and all such transactions.
Section 12.8 INTERPRETATION.
This Agreement and the rights and obligations of the respective
parties hereunder shall be governed by and interpreted and enforced in
accordance with the Laws of the State of Delaware.
Section 12.9 TERMS.
Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the person or
persons, firm or corporation may in the context require. Any reference to the
Code or Laws shall include all amendments, modifications, or replacements of the
specific sections and provisions concerned.
Section 12.10 AMENDMENT.
This Agreement, the Development Agreement and the Management Agreement
may not be amended, altered or modified except by instrument in writing and
signed by the Members.
Section 12.11 REFERENCES TO THIS AGREEMENT.
Numbered or lettered articles, sections and subsections herein
contained refer to articles, sections and subsections of this Agreement unless
otherwise expressly stated. The words "herein," "hereof," "hereunder," "hereby,"
"this Agreement" and other similar references shall be construed to mean and
include this Agreement and all amendments thereof and Exhibits thereto unless
the context shall clearly indicate or require otherwise.
Section 12.12 HEADINGS.
All headings herein are inserted only for convenience and ease of
reference and are not to be considered in the construction or interpretation of
any provision of this Agreement.
Section 12.13 NO THIRD PARTY BENEFICIARY.
This Agreement is made solely and specifically between and for the
benefit of the parties hereto, and their respective successors and assigns
subject to the express provisions hereof relating to successors and assigns, and
no other Person whatsoever shall have any rights, interest, or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
Section12.14 NO WAIVER.
No consent or waiver, either expressed or implied, by any Member to or
of any breach or default by any other Member in the performance by such other
Member of the obligations thereof under this Agreement shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other Member of the same or any other obligations of such
other Member under this Agreement. Failure on the part of any Member to complain
of any act or failure to act of any other Member, failure on the part of any
complaining Member to continue to complain or to pursue complaints with respect
to any act or failure to act of any other Member, or failure on the part of any
Member to declare any other Member in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member of the rights
and remedies thereof under this Agreement or otherwise at law or in equity.
Section12.15 TIME OF ESSENCE.
Time is of the essence of this Agreement.
Section 12.16 ATTORNEY'S FEES.
The prevailing party in any litigation initiated to interpret and/or
enforce the provisions of this Agreement shall be entitled to reasonable
attorney's fees and costs.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized corporate officers, each on the day
and year first above written.
Simon: SIMON PROPERTY GROUP, L.P., a
Delaware limited partnership
By: SIMON PROPERTY GROUP, INC., a
Delaware corporation, General Partner
By:________________________
Its:_______________________
Chelsea: CHELSEA GCA REALTY PARTNERSHIP,
L.P., a Delaware limited partnership
By: CHELSEA GCA REALTY, INC., a
Maryland corporation, sole general partner
By:__________________________
Its:_________________________
EXHIBIT A
DEFINITIONS
When used in this Agreement, the following terms will have the meanings set
forth below:
(a) "ACT" shall mean the Delaware Limited Liability Act.
(b) "ADJUSTED PROJECT COST" shall mean Total Project Cost minus Development
Fees.
(c) "ADJUSTED PERCENTAGE INTEREST" shall mean the aggregate percentage
interest(s) in the Company owned by each Member after the calculation
made pursuant to SECTION 5.4(C).
(d) "AFFILIATE(S)" shall mean a Chelsea Affiliate or a Simon Affiliate, or
a Person or Persons directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
the Person(s) in question. The term "control", as used in the
immediately preceding sentence, means, (i) with respect to a Person
that is a corporation, the right to exercise, directly or indirectly,
more than 50% of the rights attributable to the shares of the
controlled corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the
controlled Person, or (ii) owning a majority of the equity interest in
such Person.
(e) "AGREEMENT" shall mean this Limited Liability Company Agreement, as
amended from time to time.
(f) "Approval or APPROVED BY THE MEMBERS" or "APPROVAL OF THE MEMBERS"
shall mean approval by all of the Members acting through their duly
authorized representatives.
(g) "BUDGETS" shall mean the following budgets of the Company from time to
time:
(i) "DEVELOPMENT BUDGET", which shall mean the budget of Total
Project Costs estimated to be incurred with respect to the
Project including, without limitation, that portion of Total
Project Costs included in the Pre-Construction Budget which shall
be Approved by the Members by written resolution, subject to
revision from time to time by Approval of the Members; and
(ii) "OPERATING BUDGET", which shall mean the annual budgets of the
Company for the Project which shall be Approved by the Members by
written resolution, and which shall be comprised of: (A) an
estimate of all receipts from and expenditures for the ownership,
management, maintenance and operation of the Project and the
Company for such Fiscal Year and (B) an estimate of all capital
replacements, substitutions and/or additions to the Project, or
any component thereof, which are to be accomplished during such
Fiscal Year; and
(iii)"PRE-CONSTRUCTION BUDGET", which shall mean the budget of costs
and expenses estimated to be incurred with respect to the Project
during the Pre-Construction Period which shall be Approved by the
Members by written resolution, subject to revision from time to
time by Approval of the Members.
(iv) "PROSPECTIVE PROJECT BUDGET", which shall mean costs incurred for
this Project pursuant to SECTION 5.2(2) of the Limited Liability
Company of Simon/Chelsea Development Co., L.L.C. or the maximum
amount of costs and expenses estimated to be incurred with
respect to the Project during the Prospective Project Period,
which shall be Approved by the Members, subject to revision from
time to time by Approval of the Members.
(h) "CAPITAL ACCOUNT" shall have the meaning specified in SECTION 1 of the
Tax Allocations Exhibit.
(i) "CAPITAL CONTRIBUTION BALANCE" shall mean, as to each Member, the
amount of the aggregate capital contributions made by such Member from
time to time, reduced by all cash distributions to such Member other
than (i) distributions of Cash Flow pursuant to SECTION 6.5 hereof and
(ii) the repayment of, or any payment of interest on, any Contribution
Loans or any loans to the Company made by such Member.
(j) "CAPITAL PROCEEDS" shall mean the net proceeds from:
(i) loans to the Company in excess of current or reasonably
anticipated Company needs (including reasonable reserves for
Company debt obligations and working capital as determined by the
Members) or excess funds received from refinancing of any Company
indebtedness (x) after the payment of, or provision for the
payment of, all costs and expenses incurred by the Company in
connection with such refinancing, and (y) after deduction or
retention of such sums as are deemed necessary to be retained as
a reserve for the conduct of the business of the Company; and
(ii) any sale, exchange, condemnation or other disposition of the
Project, or any portion thereof or any interest therein, any
equipment used thereon, or any other capital asset of the Company
or from claims on policies of insurance maintained by the Company
for damage to or destruction of capital assets of the Company or
the loss of title thereto (to the extent that such proceeds
exceed the actual or estimated costs of repairing or replacing
the assets damaged or destroyed if, pursuant to this Agreement,
such assets are repaired or replaced) (x) after the payment of,
or provision for the payment of, all costs and expenses incurred
by the Company in connection with such sale or other disposition
or the receipt of such insurance proceeds, as the case may be,
and (y) after deduction or retention of such sums as are deemed
necessary to be retained as a reserve for the conduct of the
business of the Company.
(k) "CASH FLOW" shall mean for any period the Gross Receipts of the Company
for such period less Operating Expenses for such period.
(l) "CHANGE IN CONTROL" shall mean any event or occurrence, the result of
which is that: (i) as to Chelsea only, (A) during the Pre-Construction
Period and the Construction Period, none of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇ or ▇▇▇ ▇▇▇▇▇ is an executive officer of Chelsea or its
general partner with the power and authority to conduct the day-to-day
activities of, and make binding decisions for, Chelsea, (B) at any time
during the term of this Agreement, there occurs a Transfer of the
Percentage Interest of Chelsea or the Percentage Interest of any
Chelsea Affiliate, other than a Transfer permitted pursuant to SECTION
10.2 of this Agreement, or (C) at any time during the term of this
Agreement, there occurs a merger, consolidation or other business
reorganization of Chelsea GCA Realty Partnership, L.P. ("Chelsea") or
Chelsea GCA Realty. Inc. ("Chelsea, Inc.") in which (x) Chelsea or
Chelsea, Inc. or a Chelsea Affiliate is not the surviving entity or (y)
a majority of the directors and officers of the surviving entity have
not been nominated and appointed by Chelsea or Chelsea, Inc.; and (ii)
as to Simon only, (A) during the Pre-Construction Period and the
Construction Period, none of ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is an executive officer of Simon or its general
partner with the power and authority to conduct the day-to-day
activities of, and make binding decisions for, Simon, (B) at any time
during the term of this Agreement, there occurs a Transfer of the
Percentage Interest of Simon or any Simon Affiliate, other than a
Transfer permitted pursuant to SECTION 10.2 of this Agreement, or (C)
at any time during the term of this Agreement, there occurs a merger,
consolidation or other business reorganization of the Simon Property
Group, L.P. ("Simon") or Simon Property Group, Inc. ("Simon Inc.")
and/or SD Property Group ("SD Inc.") and/or SPG Properties, Inc.
("SPG") in which Simon or Simon Inc. or SD Inc. or SPG or a Simon
Affiliate is not the surviving entity or (y) a majority of the
directors and officers of the surviving entity have not been nominated
and appointed by ▇▇▇▇▇, ▇▇▇▇▇ Inc., SD Inc. or SPG.
(m) "CHELSEA" shall mean Chelsea GCA Realty Partnership, L.P., a Delaware
limited partnership whose sole general partner is Chelsea GCA Realty,
Inc., a Maryland corporation.
(n) "CHELSEA AFFILIATE" shall mean (i) Chelsea, (ii) Chelsea GCA Realty,
Inc., (iii) any other Person which, directly or indirectly, through one
or more intermediaries, controls or is controlled by or is under common
control with any of the aforesaid specifically identified Chelsea
Affiliates. The term "control", as used in the immediately preceding
sentence, means, (i) with respect to a Person that is a corporation,
the right to the exercise, directly or indirectly, of more than 50% of
the rights attributable to the shares of the controlled corporation
and, with respect to a Person that is not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the controlled Person, or
(ii) having a majority of the equity interest in such Person.
(o) "COMPANY" shall mean the limited liability company formed pursuant to
the terms hereof for the limited purposes and scope set forth herein.
(p) "CONSTRUCTION OVERRAGES" shall mean the excess costs and expenses over
an Approved Development Budget which the Operating Member has funded
pursuant to the provisions of Section 5.4 ( c).
(q) "CONSTRUCTION PERIOD" shall mean the period commencing upon the
earliest to occur of (i) the date of closing of a third-party
construction loan in accordance with SECTION 5.2(D) or (ii) the actual
start of construction of the site work or any portion of the Project's
buildings and improvements, or (iii) entry into commitments with third
parties for the construction of any portion of the Project's buildings
and improvements, and ending on the later to occur of (x) the opening
for business with the public of any portion of the Project or (y) the
Project Completion Date.
(r) "CONTRIBUTION LOAN" shall have the meaning specified in SECTION 5.4(D).
(s) "CONTRIBUTING MEMBER" shall have the meaning specified in SECTION
5.4(D).
(t) "DEVELOPER" shall, collectively, mean a Member or an Affiliate of
Member engaged as Developer of the Project pursuant to the Development
Agreement.
(u) "DEVELOPMENT AGREEMENT" shall mean the agreement entered into by and
between the Developer and the Company with respect to the management of
the development and construction activities of the Project, as Approved
by the Members pursuant to SECTION 8.11.
(v) "DEVELOPMENT BUDGET" shall have the meaning specified in (f) above.
(w) "DOCUMENTS" shall have the meaning specified in SECTION 7.1.
(x) "FAIR MARKET VALUE" shall have the meaning specified in SECTION 10.1.
(y) "FINAL PROJECT PROGRAM" shall mean the development of the final project
program (which shall include, among other things, the basic terms and
conditions for any financing required to complete the development and
construction of the Project and evidence reasonably acceptable to the
Members, that such financing can be obtained) site plan and schematic
building design and final Development Budget and construction schedule,
which shall be prepared at least 60 days prior to the commencement of
the Construction Period.
(z) "FISCAL YEAR" shall mean the twelve month period ending December 31 of
each year; provided that the first Fiscal Year shall be the period
beginning on the date the Company is formed and ending on December 31,
1998, and the last Fiscal Year shall be the period beginning on January
1 of the calendar year in which the final liquidation and termination
of the Company is completed and ending on the date such final
liquidation and termination is completed (to the extent any computation
or other provision hereof provides for an action to be taken on a
Fiscal Year basis, an appropriate proration or other adjustment shall
be made in respect of the first or final Fiscal Year to reflect that
such period is less than a full calendar year period).
(aa) "GROSS RECEIPTS" shall mean receipts (other than Capital Proceeds) from
the conduct of the business of the Company from all sources.
(bb) "INDEPENDENT ACCOUNTANTS" shall mean Ernst & Young or other nationally
recognized accounting firm designated pursuant to this Agreement.
(cc) "INITIAL PERCENTAGE INTEREST" shall mean the aggregate initial
percentage interest(s) in the Company owned by each Member as set forth
in SECTION 5.
(dd) "LAND" shall mean the approximately 70 acres of land on which the
Project is to be constructed, as same may be subsequently increased
pursuant to the Approval of both Member.
(ee) "LAWS" shall mean federal, state and local statutes, case law, rules,
regulations, ordinances, codes and the like which are in full force and
effect from time to time and which affect the Project or the ownership
or operation thereof.
(ff) "MAJOR DECISIONS" shall have the meaning specified in SECTION 8.6.
(gg) "MANAGEMENT AGREEMENT" shall mean the agreement entered into by and
between the Manager and the Company with respect to the management,
operation, maintenance and servicing of the Project, as Approved by the
Members pursuant to SECTION 8.12.
(hh) "MANAGER" shall mean, collectively, a Member or an Affiliate of Member
engaged as the Manager of the Project pursuant to the Management
Agreement.
(ii) "MEMBER" shall mean Simon, Chelsea or any other Person from time to
time owning a Percentage Interest as permitted by this Agreement.
(jj) "MEMBERS" shall mean, collectively, Simon, Chelsea and any other Person
from time to time owning a Percentage Interest as permitted by this
Agreement.
(kk) "NET PROFIT" or "NET LOSS" shall mean for each Fiscal Year the
Company's taxable income or taxable loss for such Fiscal Year,
determined in accordance with EXHIBIT B.
(ll) "NON-CONTRIBUTING MEMBER" shall have the meaning specified in SECTION
5.4(D)(I).
(mm) "NON-OPERATING MEMBER" shall mean any Member which is not the Operating
Member. The initial Non-Operating Member shall be Simon.
(nn) "OPERATING BUDGET" shall have the meaning specified in (G)(II) above.
(oo) "OPERATING EXPENSES" shall mean all expenditures of any kind made with
respect to the operations of the Company in the normal course of
business including, but not limited to, debt service (principal and
interest) payable on indebtedness of the Company, ad valorem taxes,
insurance premiums, repair and maintenance expense, management fees or
salaries, advertising expenses, professional fees, wages, and utility
costs, plus such sums as are deemed reasonably necessary as a reserve
to be retained for the conduct of the business of the Company, and
capital expenditures and investments in other assets. Such expenses
shall be determined on a cash basis and shall not include any non-cash
items such as depreciation or amortization.
(pp) "OPERATING MEMBER" shall mean the Member designated as such by written
resolution of the Members pursuant to SECTION 8.1(A) and SECTION 8.2,
subject to the provisions of SECTION 5.4(H) and 8.10 with respect to
its removal or withdrawal from such position.
(qq) "OPERATING PERIOD" shall mean the period commencing on the later to
occur of (I) the opening for business with the public of any portion of
the Project and (ii) the Project Completion Date and ending on the date
that the Project is no longer open for business.
(rr) "PARTNERSHIP" shall mean Simon/Chelsea Orlando Development Limited
Partnership, a Florida limited partnership.
(ss) "PARTNERSHIP AGREEMENT" shall mean that certain Agreement of Limited
Partnership dated as of January 22, 1999 by and among the Company, as
general partner, and Simon Property Group, L.P., a Delaware limited
partnership, and Chelsea GCA Realty Partnership, L.P., a Delaware
limited partnership, as limited partners.
(tt) "PERCENTAGE INTEREST" shall mean the Initial Percentage Interest or
Adjusted Percentage Interest, as the case may be.
(uu) "PERCENTAGE INTEREST ADJUSTMENT DATE" shall mean the date of funding of
a Non-Funding Member's share of a capital contribution by a Funding
Member in accordance with SECTION 5.4(C)(I) hereof.
(vv) "PERSON" shall mean an individual, partnership, corporation, trust,
unincorporated association, limited liability corporation, joint stock
company or other entity or association.
(ww) "PRE-CONSTRUCTION PERIOD" shall mean the period commencing upon the
date of this Agreement and ending upon the commencement of the
Construction Period.
(xx) "PRIME RATE" shall mean the per annum interest rate which is publicly
announced (whether or not actually charged in each instance) from time
to time (adjusted daily) by The Chase Manhattan Bank, as its "prime
rate". In the event such bank discontinues the quotation of such rate
or in the event the same ceases to be readily ascertainable, the
Operating Member shall designate, subject to the approval of the
Non-Operating Member (which approval shall not be unreasonably withheld
or delayed), as the Prime Rate, either another bank's quotation of such
rate or equivalent rate of interest which is readily ascertainable and
is appropriate, as the case may be.
(yy) "PROJECT" shall mean the Land located in Orange County, Florida, all
infra-structure necessary or appropriate in connection with the
development of such Land, the approximately 432,000 square foot Orlando
Premium Outlets manufacturers outlet shopping center constructed
thereon, the surface and structural parking facilities and all
equipment and personal property necessary or desirable for the
operation of the Houston Premium Outlets. The Members agree that they
may, subsequent to the date hereof, decide to develop certain of the
out-parcels which constitute a portion of the Land as restaurants
and/or for other retail projects. In such case the term "Project" may,
at the option of Members hereof, also be deemed to refer to such
subsequent development.
(zz) "PROJECT COMPLETION DATE" shall mean the date upon which the Project
has been substantially completed in accordance with the Plans and
Specifications, as certified by the Project's architect.
(aaa) "SIMON" shall mean Simon Property Group L.P., a Delaware limited
partnership whose sole managing general partner is Simon Property
Group, Inc., a Delaware corporation and whose sole non-managing
partners are SD Property Group, Inc., an Ohio corporation and SPG
Properties, Inc., a Maryland corporation.
(bbb) "SIMON AFFILIATE" shall mean (i) Simon; (ii) Simon Property Group, Inc.
(or any of its Affiliates (collectively, "SPG"), (iii) SD Property
Group, Inc., (iv) SPG Properties, Inc., (v) any successor to Simon in
connection with a bona fide reorganization, recapitalization,
acquisition or merger, (vi) any Person which acquires all or
substantially all of the assets of Simon or SPG and (vii) any other
Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control
with any of the aforesaid specifically identified Simon Affiliates. The
term "control", as used in the immediately preceding sentence, means,
(i) with respect to a Person that is a corporation, the right to the
exercise, directly or indirectly, of more than 50% of the rights
attributable to the shares of the controlled corporation and, with
respect to a Person that is not a corporation, the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of the controlled Person, or (ii) having a
majority of the equity interest in such Person.
(ccc) "TAX ALLOCATIONS EXHIBIT" shall mean the provisions on Capital Accounts
and special allocations rules attached hereto as EXHIBIT B.
(ddd) "TERMINATION DATE" shall have the meaning specified in ARTICLE 4.
(eee) "TOTAL PROJECT COSTS" shall mean all costs which have been or are
estimated to be incurred by the Company with respect to the
acquisition, design, development, construction, debt financing,
leasing, and completion of the Project, which Total Project Costs
(including without limitation tenant allowances) are initially
estimated on the Development Budget. Total Project Costs shall include
the Development and Leasing Fees referenced in the Development
Agreement.
(fff) "TRANSFER" shall have the meaning specified in SECTION 10.1.
(ggg) "TRANSFEREE" shall have the meaning specified in SECTION 10.2(C).
(hhh) "TRANSFEROR" shall have the meaning specified in SECTION 10.2(C).
EXHIBIT B
CAPITAL ACCOUNTS; SPECIAL ALLOCATION RULES
1. DEFINITIONS
The following definitions shall be applied to the terms used in this
EXHIBIT B. Capitalized terms not defined shall have the meaning set forth in the
Agreement.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account maintained for
each Member as of the end of each Company Year (i) increased by any amounts
which such Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii)
decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), l.704-l(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member,
the deficit balance, if any, in such Member's Adjusted Capital Account as of the
end of the relevant Company Year.
"ADJUSTED PROPERTY" means any property the Carrying Value of which has
been adjusted pursuant to SECTION 2.D of this EXHIBIT B. Once an Adjusted
Property is deemed distributed by, and recontributed to, the Company for federal
income tax purposes upon a termination thereof pursuant to Section 708 of the
Code, such property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is further adjusted pursuant to SECTION 2.D of
this EXHIBIT B.
"AGREED VALUE" means (i) in the case of any Contributed Property, as
of the time of its contribution to the Company, the 704(c) Value of such
property, reduced by any liabilities either assumed by the Company upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Member by the Company, the Company's
Carrying Value of such property at the time such property is distributed,
reduced by any indebtedness either assumed by such Member upon such distribution
or to which such property is subject at the time of distribution as determined
under Section 752 of the Code and the Regulations thereunder.
"BOOK-TAX DISPARITIES" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date.
"CARRYING VALUE" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Property charged to the Members'
Capital Accounts following the contribution of or adjustment with respect to
such property, and (ii) with respect to any other Company property, the adjusted
basis of such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time to
time in accordance with SECTION 2.D of this EXHIBIT B, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Company properties, as deemed appropriate by the Operating
Member.
"COMPANY MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2) for "partnership minimum gain," and the amount of Company
Minimum Gain, as well as any net increase or decrease in a Company Minimum Gain,
for a Company Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).
"COMPANY YEAR" means the fiscal year of the Company, which shall be
the calendar year.
"CONTRIBUTED PROPERTY" means each property or other asset (excluding
cash) contributed or deemed contributed to the Company (including deemed
contributions to the Company on termination and reconstitution thereof pursuant
to Section 708 of the Code). Once the Carrying Value of a Contributed Property
is adjusted pursuant to SECTION 2.D of this EXHIBIT B, such property shall no
longer constitute a Contributed Property, but shall be deemed an Adjusted
Property for such purposes.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"DEPRECIATION" means, for each fiscal year an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the Operating Member.
"MEMBER MINIMUM GAIN" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
"MEMBER NONRECOURSE DEBT" has the meaning set forth Regulations
Section 1.704-2(b)(4) for "partner nonrecourse debt."
"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2) for "partner nonrecourse deductions," and the
amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse
Debt for a Company Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(i)(2).
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Company
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"NONRECOURSE LIABILITY" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"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).
"RESIDUAL GAIN" or "RESIDUAL LOSS" means any item of gain or loss, as
the case may be, of the Company recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to SECTION 6.B.(1)(A) OR 6.B.(2)(A) of this EXHIBIT B to eliminate
Book-Tax Disparities.
"704(C) VALUE" of any Contributed Property means the fair market value
of such property at the time of contribution as determined by the Operating
Member, using such reasonable method of valuation as it may adopt; provided,
however, that the 704(c) Value of any property deemed contributed to the Company
for federal income tax purposes upon termination and reconstitution thereof
pursuant to Section 708 of the Code shall be determined in accordance with
SECTION 2.D of this EXHIBIT B.
"UNREALIZED GAIN" attributable to any item of Company property means,
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under this EXHIBIT B) as of such date,
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to this EXHIBIT B) as of such date.
"UNREALIZED LOSS" attributable to any item of Company property means,
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to this EXHIBIT B)
as of such date, over (ii) the fair market value of such property (as determined
under this EXHIBIT B) as of such date.
2. CAPITAL ACCOUNTS OF THE MEMBERS
A. The Company shall maintain for each Member a separate Capital
Account in accordance with the rules of Regulations Section l.704-l(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Member to the
Company pursuant to this Agreement and (ii) all items of Company income and gain
(including income and gain exempt from tax) computed in accordance with SECTION
2.B hereof and allocated to such Member pursuant to SECTION 6.1 of the Agreement
and/or SECTION 5 of this EXHIBIT B, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of property made to such
Member pursuant to this Agreement and (y) all items of Company deduction and
loss computed in accordance with SECTION 2.B hereof and allocated to such Member
pursuant to SECTION 6.2 of the Agreement and/or SECTION 5 of this EXHIBIT B.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Members' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income,
gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by the
Company, provided that the amounts of any adjustments to the
adjusted bases of the assets of the Company made pursuant to
Section 734 of the Code as a result of the distribution of
property by the Company to a Member (to the extent that such
adjustments have not previously been reflected in the Members'
Capital Accounts) shall be reflected in the Capital Accounts of
the Members in the manner, and subject to the limitations,
prescribed in Regulations Section l.704-1(b)(2)(iv) (m)(4).
(2) The computation of all items of income, gain, and deduction shall
be made without regard to the fact that items described in
Sections 705(a)(l)(B) or 705(a)(2)(B) of the Code are not
includable in gross income or are neither currently deductible
nor capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable disposition
of any Company property shall be determined as if the adjusted
basis of such property as of such date of disposition were equal
in amount to the Company's Carrying Value with respect to such
property as of such date.
(4) 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 Depreciation
for such fiscal year.
(5) In the event the Carrying Value of any Company property is
adjusted pursuant to SECTION 2.D hereof, the amount of any such
adjustment shall be taken into account as gain or loss from the
disposition of such asset.
(6) Any items specially allocated under SECTION 6 of this EXHIBIT B
hereof shall not be taken into account.
C. Generally, a transferee (including an assignee) of a Company interest
shall succeed to a pro rata portion of the Capital Account of the transferor;
provided, however, that, if the transfer causes a termination of the Company
under Section 708(b)(l)(B) of the Code, the Company's properties shall be deemed
solely for federal income tax purposes, to have been distributed in liquidation
of the Company to the holders of Company interests (including such transferee)
and recontributed by such Persons in reconstitution of the Company. In such
event, the Carrying Values of the Company properties shall be adjusted pursuant
to SECTION 2.D.(2) hereof immediately prior to such deemed distribution
pursuant. The Capital Accounts of such reconstituted Company shall be maintained
in accordance with the principles of this EXHIBIT B.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in SECTION 2.D.(2), the
Carrying Values of all Company assets shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company property, as of the times of the
adjustments provided in SECTION 2.D.(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an
actual sale of each such property and allocated pursuant to
SECTION 6.1 OR 6.2 of the Agreement and/or SECTION 5 of this
EXHIBIT B.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to 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) immediately prior to
the distribution by the Company to a Member of more than a de
minimis amount of property as consideration for an interest in
the Company; and (c) immediately prior to the liquidation of the
Company within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g), provided, however, that adjustments
pursuant to clauses (a) and (b) above shall be made only if the
Operating Member determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the
Members in the Company.
(3) In accordance with Regulations Section 1.704 -l(b)(2)(iv)(e), the
Carrying Value of Company assets distributed in kind shall be
adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Company property, as of the
time any such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for purposes of
this EXHIBIT B, the aggregate cash amount and fair market value
of all Company assets (including cash or cash equivalents) shall
be determined by the Operating Member using such reasonable
method of valuation as it may adopt.
E. The provisions of this Agreement (including this EXHIBIT B)
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Operating Member shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Company and/or one or more of the Members)
are computed in order to comply with such Regulations, the Operating Member may
make such modification, provided that it is not likely to have a material effect
on the amounts distributable to any Member pursuant to the Agreement upon the
dissolution of the Company. The Operating Member also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company's balance sheet, as computed for book purposes, in accordance with
Regulations Section l.704-l(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section l.704-1(b).
3. NO INTEREST
No interest shall be paid by the Company on Capital Contributions or
on balances in Members' Capital Accounts.
4. NO WITHDRAWAL
No Member shall be entitled to withdraw any part of its Capital
Contribution or its Capital Account or to receive any distribution from the
Company, except as expressly provided in the Agreement.
5. SPECIAL ALLOCATION RULES
Notwithstanding any other provision of the Agreement or this EXHIBIT
B, the following special allocations shall be made in the following order:
A. MINIMUM GAIN CHARGEBACK. Notwithstanding the provisions of
ARTICLE 6 of the Agreement or any other provisions of this
EXHIBIT B, if there is a net decrease in Company Minimum Gain
during any Company Year, each Member shall be specially allocated
items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Member's
share of the net decrease in Company Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto.
The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(f)(6). This SECTION 5.A is
intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f).
B. MEMBER MINIMUM GAIN CHARGEBACK. Notwithstanding the provisions of
ARTICLE 6 of this Agreement or any other provisions of this
EXHIBIT B (except SECTION 5.A hereof), if there is a net decrease
in Member Minimum Gain attributable to a Member Nonrecourse Debt
during any Company Year, each Member who has a share of the
Member Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5),
shall be specially allocated items of Company income and gain for
such year (and, if necessary, subsequent years) in an amount
equal to such Member's share of the net decrease in Member
Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to
each Member pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section
1.704-2(i)(4). This SECTION 5.B is intended to comply with the
minimum gain chargeback requirement in Regulations Section 1.704
- 2(i)(4) and shall be interpreted consistently therewith.
C. QUALIFIED INCOME OFFSET. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described
in Regulations Sections 1.704-l(b)(2)(ii)(d)(4),
l.704-1(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6), and after
giving effect to the allocations required under SECTIONS 5.A and
5.B hereof, such Member has an Adjusted Capital Account Deficit,
items of Company income and gain (consisting of a pro rata
portion of each item of Company income, including gross income
and gain for the Company Year) shall be specifically allocated to
such Member in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, its Adjusted Capital
Account Deficit created by such adjustments, allocations or
distributions as quickly as possible.
D. NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any Company
Year shall be allocated to the Members in accordance with their
respective Percentage Interests. If the Operating Member
determines in its good faith discretion that the Company's
Nonrecourse Deductions must be allocated in a different ratio to
satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the Operating
Member is authorized, upon notice to the other Members, to revise
the prescribed ratio to the numerically closest ratio for such
Company Year which would satisfy such requirements.
E. MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions
for any Company Year shall be specially allocated to the Member
who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable, in accordance with Regulations Section 1.704-2(i).
F. CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Section
734(b) or 743(b) of the Code is required, pursuant to Regulations
Section 1.704-l(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment to
the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such item of gain or loss
shall be specially allocated to the Members in a manner
consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such Section of the
Regulations.
6. ALLOCATIONS FOR TAX PURPOSES
A. Except as otherwise provided in this SECTION 6, for federal
income tax purposes, each item of income, gain, loss and
deduction shall be allocated among the Members in the same manner
as its correlative item of "book" income, gain, loss or deduction
is allocated pursuant to SECTION 6.1 or 6.2 of the Agreement
and/or SECTION 5 of this EXHIBIT B.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain,
loss, and deduction attributable to a Contributed Property or an
Adjusted Property shall be allocated for federal income tax
purposes among the Members as follows:
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the
Members consistent with the principles of Section
704(c) of the Code to take into account the variation
between the 704(c) Value of such property and its
adjusted basis at the time of contribution; and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be
allocated among the Members in the same manner as its
correlative item of "book" gain or loss is allocated
pursuant to SECTION 6.1 or 6.2 of the Agreement and/or
SECTION 5 of this EXHIBIT B.
(2) (a) In the case of an Adjusted Property, such items
shall
(i) first, be allocated among the Members in a
manner consistent with the principles of
Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized
Loss attributable to such property and the
allocations thereof pursuant to SECTION 2 of
this EXHIBIT B, and
(ii) second, in the event such property was
originally a Contributed Property, be
allocated among the Members in a manner
consistent with SECTION 6.B.(1)(A) of this
EXHIBIT B; and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated
among the Members in the same manner its correlative
item of "book" gain or loss is allocated pursuant to
SECTION 6.1or 6.2of the Agreement and/or SECTION 5 of
this EXHIBIT B.
(3) all other items of income, gain, loss and deduction
shall be allocated among the Members in the same manner
as their correlative item of "book" gain or loss is
allocated pursuant to SECTION 6.1 or 6.2 of the
Agreement and/or SECTION 5 of the EXHIBIT B.
C. To the extent Treasury Regulations promulgated pursuant to
Section 704(c) of the Code permit the utilization of alternative
methods to eliminate the disparity between the agreed value of
property and its adjusted basis, the Operating Member shall have
the authority to elect the method to be used by the Company and
such election shall be binding on all Members.
EXHIBIT C
ADJUSTED PERCENTAGE INTEREST CALCULATION
Assume that on the Percentage Interest Adjustment Date Member A has
contributed $10 million to the Company and Member B has contributed $6 million
to the Company. Member A's percentage of the total contribution is
$10 MILLION = .625 (62.5%)
-----------
$16 million
and the percentage of the total contributions of Member B is
$6 MILLION= .375 (37.5%)
----------
$16 million
As a result, 37.5% shall be Member B's Adjusted Percentage Interest. Member A's
Adjusted Percentage Interest shall be 62.5%.
LIMITED LIABILITY COMPANY AGREEMENT
OF
S/C ORLANDO DEVELOPMENT LLC
TABLE OF CONTENTS
PAGE NUMBER
ARTICLE 1.........................................................1
DEFINITIONS; EXHIBITS..........................................1
Section 1.1 CERTAIN DEFINITIONS ............................1
Section 1.2 OTHER DEFINITIONS...............................1
Section 1.3 EXHIBITS........................................1
ARTICLE 2.........................................................2
FORMATION; NAME; PLACE OF BUSINESS.............................2
Section 2.1 FORMATION OF COMPANY; CERTIFICATE OF FORMATION..2
Section 2.2 NAME OF COMPANY.................................2
Section 2.3 PLACE OF BUSINESS...............................2
Section 2.4 REGISTERED OFFICE AND REGISTERED AGENT..........3
ARTICLE 3.........................................................3
PURPOSES AND POWERS OF COMPANY.................................3
Section 3.1 PURPOSES........................................3
Section 3.2 POWERS..........................................3
Section 3.3 LIMITS OF COMPANY...............................3
Section 3.4 NO INDIVIDUAL AUTHORITY.........................4
Section 3.5 RESPONSIBILITY OF MEMBERS.......................4
ARTICLE 4.........................................................5
TERM OF COMPANY................................................5
ARTICLE 5.........................................................5
CAPITAL........................................................5
Section 5.1 MEMBERS'INITIAL PERCENTAGE INTERESTS............5
Section 5.2 CAPITAL CONTRIBUTIONS...........................5
(a) INITIAL CAPITAL CONTRIBUTIONS.........................5
(b) PRE-CONSTRUCTION EXPENDITURES.........................6
(c) CONSTRUCTION PERIOD...................................6
(d) COMPLETION OF CONSTRUCTION............................7
Section 5.3 ADDITIONAL FUNDS................................8
Section 5.4 CAPITAL CALLS...................................8
(a) GENERAL...............................................8
(b) NOTICE BY OPERATING MEMBER............................8
(c) CONSTRUCTION OVERRUNS.................................8
(d) DILUTION.............................................10
(e) CONTRIBUTION LOANS...................................11
(f) REPAYMENT THROUGH DISTRIBUTIONS......................12
(g) TRANSFEREES AND ASSIGNEES............................12
(h) NO THIRD PARTY RIGHTS................................13
(i) ROLE IN MANAGEMENT...................................13
(j) FAILURE TO FUND UNDER PARTNERSHIP AGREEMENT..........13
Section 5.5 NO INTEREST ON CAPITAL.........................14
Section 5.6 REDUCTION OF CAPITAL ACCOUNTS..................14
Section 5.7 NEGATIVE CAPITAL ACCOUNTS......................14
Section 5.8.LIMIT ON CONTRIBUTIONS AND OBLIGATIONS
OF MEMBERS.....................................14
ARTICLE 6........................................................15
PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS...............15
Section 6.1 NET PROFIT.....................................15
Section 6.2 NET LOSS.......................................15
Section 6.3 LIMITATION ON NET LOSS ALLOCATION..............15
Section 6.4 OTHER ALLOCATION RULES.........................16
Section 6.5 DISTRIBUTION OF CASH FLOW......................16
Section 6.6 DISTRIBUTION OF CAPITAL PROCEEDS...............16
ARTICLE 7........................................................17
COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS................17
Section 7.1 BOOKS AND RECORDS..............................17
Section 7.2 TAX RETURNS....................................17
Section 7.3 REPORTS........................................17
Section 7.4 AUDITS.........................................18
Section 7.5 BANK ACCOUNTS..................................19
Section 7.6 TAX ELECTIONS..................................19
Section 7.7 TAX MATTERS MEMBER.............................19
ARTICLE 8........................................................19
MANAGEMENT OF THE COMPANY.....................................19
Section 8.1 MANAGEMENT OF THE COMPANY......................19
(a) GENERAL..............................................19
(b) MEMBER REPRESENTATIVES...............................20
(c) ACTIONS BY THE MEMBERS...............................20
(d) MEETINGS.............................................21
Section 8.2 THE OPERATING MEMBER...........................21
Section 8.3 DUTIES OF OPERATING MEMBER; CHELSEA AS
INITIAL OPERATING MEMBER.......................24
Section 8.4 AUTHORIZATION FOR EXPENDITURES.................24
Section 8.5 RIGHTS NOT ASSIGNABLE..........................25
Section 8.6 MAJOR DECISIONS AND PROHIBITED ACTS............25
Section 8.7 EMERGENCY AUTHORITY............................27
Section 8.8 AUTHORIZED ACTS................................28
Section 8.9 BUDGETS........................................28
Section 8.10 REMOVAL OF OPERATING MEMBER...................30
Section 8.11 DEVELOPMENT AGREEMENT.........................30
Section 8.12 MANAGEMENT AGREEMENT..........................31
Section 8.13 CONSTRUCTION CONTRACT AND ARCHITECT'S
CONTRACT AND ENGINEER'S CONTRACT..............32
Section 8.14 FEES AND EXPENSE REIMBURSEMENTS FOR MEMBERS...32
ARTICLE 9........................................................32
COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES.......32
Section 9.1 COMPENSATION, REIMBURSEMENTS...................32
(a) COMPENSATION.........................................32
(b) REIMBURSEMENTS.......................................32
Section 9.2 NO CONTRACTS WITH AFFILIATES...................33
ARTICLE 10.......................................................32
SALE, TRANSFER OR MORTGAGE....................................33
Section 10.1 GENERAL.......................................33
Section 10.2 PERMITTED TRANSFERS BY THE MEMBERS............33
(a) TRANSFERS BY CHELSEA.................................33
(b) TRANSFERS BY SIMON...................................33
(c) AGREEMENTS WITH TRANSFEREES..........................34
Section 10.3 FIRST RIGHT OF REFUSAL PROCEDURE..............34
Section 10.4 RESTRAINING ORDER.............................39
Section 10.5 NO TERMINATION................................39
Section 10.6 BUY-SELL......................................40
Section 10.7 CLOSING OF PURCHASE OF A MEMBER'S INTEREST....42
Section 10.8 ASSUMPTION OF LIABILITIES.....................42
ARTICLE 11.......................................................44
DISSOLUTION...................................................44
Section 11.1 DISSOLUTION AND TERMINATION;
CONTINUATION OF BUSINESS......................44
(a) CAUSES OF DISSOLUTION AND TERMINATION................44
(b) RIGHT TO CONTINUE BUSINESS OF THE COMPANY............45
Section 11.2 PROCEDURE IN DISSOLUTION AND LIQUIDATION......45
(a) WINDING UP...........................................45
(b) MANAGEMENT RIGHTS DURING WINDING UP..................45
(c) WORK IN PROGRESS.....................................46
(d) DISTRIBUTIONS IN LIQUIDATION.........................46
(e) NON-CASH ASSETS......................................47
Section 11.3 DISPOSITION OF DOCUMENTS AND RECORDS..........47
Section 11.4 DATE OF TERMINATION...........................47
ARTICLE 12.......................................................48
GENERAL PROVISIONS............................................48
Section 12.1 VOLUNTARY DISPUTE RESOLUTION.................48
Section 12.2 NOTICES......................................48
Section 12.3 ENTIRE AGREEMENT.............................50
Section 12.4 SEVERABILITY.................................50
Section 12.5 SUCCESSORS AND ASSIGNS.......................50
Section 12.6 COUNTERPARTS.................................50
Section 12.7 ADDITIONAL DOCUMENTS AND ACTS................50
Section 12.8 INTERPRETATION...............................50
Section 12.9 TERMS........................................51
Section 12.10 AMENDMENT....................................51
Section 12.11 REFERENCES TO THIS AGREEMENT.................51
Section 12.12 HEADINGS.....................................51
Section 12.13 NO THIRD PARTY BENEFICIARY...................51
Section 12.14 NO WAIVER....................................51
Section 12.15 TIME OF ESSENCE..............................52
Section 12.16 ATTORNEY'S FEES..............................52
EXHIBIT LIST:
Exhibit A
Definitions, 54
Exhibit B
Capital Accounts; Special Allocation Rules, 62
Exhibit C
Adjusted Percentage Interest Calculation 71
LIMITED LIABILITY COMPANY AGREEMENT
OF
S/C ORLANDO DEVELOPMENT LLC
DECEMBER 23, 1998