Exhibit 3.3
BC - GFS LLC
LIMITED LIABILITY COMPANY AGREEMENT
Table of Contents
PAGE
ARTICLE 1. RECITALS AND DEFINITIONS 4
1.1 Recitals 4
1.2 Definitions 4
ARTICLE 2. FORMATION OF VENTURE 6
2.1 Organization 6
2.2 Venture Name 7
2.3 Representations and Warranties 7
2.4 Purposes and Powers 7
2.5 Principal Business Office, Registered Office and Registered Agent 7
2.6 Qualification in Other Jurisdictions 7
2.7 Powers 7
2.8 Venturers 7
2.9 Corporate Existence 9
ARTICLE 3. CAPITALIZATION 10
3.1 Initial Capital Contributions 10
3.2 No Additional Capital Contributions 11
3.3 Preferred Return Reserve Account 11
ARTICLE 4. BOOKS; ACCOUNTING; TAX ELECTIONS; REPORTS 11
4.1 Books and Records 11
4.2 Financial Statements 11
4.3 Property Budget 12
4.4 Insurance Program 12
4.5 Business Plan 12
4.6 Right to Information 13
4.7 Filing of Returns 13
4.8 Tax Matters Partner 13
4.9 Fiscal and Taxable Year 13
4.10 Accountants 14
4.11 Property Management 14
4.12 Appraisal 14
4.13 Taxation as Partnership 14
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ARTICLE 5. CAPITAL ACCOUNTS; ALLOCATION OF INCOME AND LOSS 14
5.1 Capital Accounts 14
5.2 Allocations of Profits and Losses 15
ARTICLE 6. DISTRIBUTIONS 15
6.1 Definitions Relating to Distributions 15
6.2 Operating Cash Flow Distributions 16
6.3 Net Capital Proceeds Distributions 16
6.4 Withholding 17
ARTICLE 7. RIGHTS AND OBLIGATIONS OF VENTURERS 17
7.1 Limited Liability 17
7.2 Authority 17
ARTICLE 8. RIGHTS AND OBLIGATIONS OF MANAGER AND MANAGEMENT OF THE VENTURE 17
8.1 General Responsibilities 17
8.2 Operation in Accordance with Plans 18
8.3 Contracts with Affiliates 18
8.4 Employees and Contractors 18
8.5 Financing 19
8.6 Compensation and Expense Reimbursement 19
8.7 Environmental Auditing 19
8.8 Continued Involvement Requirements 19
8.9 Indemnification of Manager and Venturers 20
8.10 Authorization of Certain Actions 21
8.11 Actions Requiring Investor's Consent 21
8.12 Restrictions on Other Business 23
8.13 Modification of Liability 24
8.14 ▇▇▇▇▇'ah Compliance 24
8.15 Use of Separate Entities to Hold Properties 24
8.16 Investor's Consent 24
ARTICLE 9. TRANSFERS OF VENTURE INTERESTS 24
9.1 Prohibition of Transfers 24
9.2 Permitted Transfers 25
9.3 Admission of New Venturer 25
9.4 Non-Recognition of Certain Transfers 25
9.5 Withdrawal 25
ARTICLE 10. MISCELLANEOUS 25
10.1 Dissolution 25
10.2 Application of Assets 26
10.3 Notices 26
10.4 Successor and Assigns 28
10.5 Applicable Law 28
10.6 Severability 28
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10.7 Counterparts 28
10.8 Entire Agreement 28
10.9 Titles 28
10.10 Further Assurances 29
10.11 Consent to Jurisdiction 29
10.12 Amendments 29
10.13 Limitation on Liability of Investor 29
10.14 Waiver of Jury Trial 29
10.15 Confidentiality 29
Schedule 1.1A Legal Description of Property - ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
Schedule 1.1B Legal Description of Property - ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇
Schedule 1.1C Legal Description of Property - Ridgetop Apartments, Silverdale, WA
Schedule 1.1D Legal Description of Property - Wellington Apartments, Silverdale, WA
Schedule 2.3 Representations and Warranties
Schedule 2.8 Venturers
Schedule 3.1 Contracts to be Contributed to the Venture
Schedule 4.2 Financial Statements
Schedule 4.3 Form of Property Budget
Schedule 4.4 Insurance Plan
Schedule 4.5 Business Plan
Schedule 6.3 Example Calculation of Return
Schedule 8.5 Form of Property Management Agreement
Schedule 8.10 Contracts and Instruments Authorized to be Entered Into
Schedule 8.12 List of Competing Projects
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BC - GFS LLC
LIMITED LIABILITY COMPANY AGREEMENT
ARTICLE 1. RECITALS AND DEFINITIONS
1.1 RECITALS. This Agreement (this "Agreement") is entered into as of
December 12, 2002 by and between GFS Equity Management LLC, a Washington limited
liability company (the "Operator") with a business address of ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, BCMR Special, Inc., a Massachusetts
corporation ("Investor Manager") and BCMR Seattle, A Limited Partnership, a
Massachusetts limited partnership ("BC" and collectively with Investor Manager,
the "Investor") with a business address of ▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. Operator, Investor
Manager and BC are hereinafter each individually referred to as a "Venturer"
and, collectively as "Venturers."
Operator or an affiliate thereof has acquired the right to purchase four
multi-family apartment complexes known as Alderwood Park Apartments in Lynnwood,
Washington; Ridgegate Apartments in Kent, Washington; Ridgetop Apartments in
Silverdale, Washington; and Wellington Apartments in Silverdale, Washington, all
as more particularly described on Schedule 1.1A, 1.1B, 1.1C, and 1.1D attached
hereto (each individually a "Property" and collectively the "Properties")
pursuant to a Real Estate Sale Agreement dated as of July 11, 2002 as amended
and reinstated pursuant to that certain Reinstatement and First Amendment to
Real Estate Sale Agreement dated as of October __, 2002 (as amended, the
"Purchase and Sale Agreement") by and between ERP Operating Limited Partnership,
EQR-Alderwood Limited Partnership, EQR-Wellington, L.L.C. as Seller and ▇▇▇▇▇▇▇
Financial Services, Inc. as Purchaser. The parties have entered into this
Agreement for the purpose of forming a limited liability company (the "Venture")
under the
Delaware Limited Liability Company Act (as amended from time to time,
the "Act") to form Subsidiaries to acquire, finance, develop, own, operate,
lease and sell the Properties on the terms provided herein. The Venture shall
have an agent (the "Manager") which shall have the authority and duties
specified in this Agreement. The Operator shall serve as the initial Manager
under this Agreement subject to the right of the Investor to designate a
replacement Manager.
1.2 DEFINITIONS. Capitalized terms used in this Agreement shall have the
meanings set forth or referred to below.
"Act" - See Section 1.1.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly Controlling or Controlled by, or under direct or indirect common
Control with, such Person.
"Agreement" - See Section 1.1.
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"Asset Management Fee" means an annual fee payable to the Investor Manager
in the amount of fifty dollars per unit, payable quarterly in accordance with
Sections 6.2(b) and 6.3(b).
"BC" - See Section 1.1.
"BC Preferred Return" means an amount payable to BC each calendar month
equal to a return on BC's unreturned Capital Contributions, including funds
deposited into the Preferred Return Reserve Account, at the rate of 12% per
annum on the basis of a 360-day year.
"Business Plan" - See Section 4.5.
"Capital Account" - See Section 5.1.
"Capital Call Notice" - See Section 3.2.
"Capital Contributions" means the Initial Capital Contribution of the
Investor together with any funds provided to the Venture by the Venturers.
"Certificate" - See Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and, to the extent applicable, regulations promulgated thereunder.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities or general partnership or managing
member interests, by contract or otherwise. "Controlling" and "Controlled" shall
have correlative meanings. Without limiting the generality of the foregoing, a
Person shall be deemed to Control any other Person in which it owns, directly or
indirectly, a majority of the ownership interests.
"GAAP" shall mean generally accepted accounting principles.
"Initial Capital Contribution" - See Section 3.1.
"Insurance Program" - See Section 4.4.
"Investor" - See Section 1.1.
"Investor Manager" - See Section 1.1.
"Manager" - See Section 1.1.
"Net Capital Proceeds" - See Section 6.1.
"Operating Cash Flow" - See Section 6.1.
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"Operator" - See Section 1.1.
"Operator Party" - See Section 8.9.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, limited liability partnership, association, joint
stock company, trust, unincorporated organization, or other organization,
whether or not a legal entity, and any governmental authority.
"Preferred Return Reserve Account" - See Section 3.3.
"Principal" means ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Property" and "Properties" - See Section 1.1.
"Property Budget" - See Section 4.3.
"Property Management Agreement" - See Section 8.3.
"Property Manager" - See Section 8.3.
"Subsidiary" - See Section 8.15.
"Undertaking of Principal" means the Undertaking of Principal executed by
the Principals and delivered to the Investor on the date of this Agreement.
"Venture" - See Section 1.1.
"Venturer" - See Section 1.1.
"Write Down" - In the event of a sale of a Property at a time when the
remaining unsold Properties are reasonably and in good faith determined by the
Operator to be worth materially less than their book value, the Operator may,
with the consent of the Investor Manager (which consent will not be unreasonably
withheld or delayed) write down the book value of the remaining Properties to
the then fair market value of such Properties as reasonably determined by
Operator and the difference between the book value and the fair market value to
which the Properties are so written down shall be the "Write Down".
ARTICLE 2. FORMATION OF VENTURE
2.1 ORGANIZATION. The Venture has been formed by the filing of its
Certificate of Formation with the
Delaware Secretary of State pursuant to the
Act. The Certificate of Formation may be restated by the Manager as provided in
the Act or amended by the Manager to change the address of the office of the
Venture in
Delaware and the name and address of its resident agent in
Delaware
or to make corrections required by the Act. The Certificate of Formation, as so
amended from time to time, is referred to herein as the "Certificate." The
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Manager shall deliver a copy of the Certificate and any amendment thereto to any
Venturer who so requests.
2.2 VENTURE NAME. The name of the Venture shall be BC - GFS LLC. The
business of the Venture shall be conducted solely under such name.
2.3 REPRESENTATIONS AND WARRANTIES. As an inducement to the Investor to
enter into this Agreement, the Operator represents and warrants that the
statements set forth in SCHEDULE 2.3 are true and correct on and as of the date
hereof.
2.4 PURPOSES AND POWERS. The principal business activity and purposes of
the Venture shall be to acquire, improve, finance, hold, own, operate, lease,
redevelop, sell, mortgage, pledge, exchange, convey, or otherwise dispose of the
Properties, or form Subsidiaries to do the same, and to engage in all actions
necessary, convenient or incidental thereto. The Venture shall not engage in any
other business or activity.
2.5 PRINCIPAL BUSINESS OFFICE, REGISTERED OFFICE AND REGISTERED AGENT.
The principal business office of the Venture shall be located at c/▇ ▇▇▇▇▇▇▇
Financial Services, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The
principal business office of the Venture may be changed from time to time by the
Manager. The Manager shall promptly notify the Venturers of any change in such
principal business office. The registered office of the Venture in the State of
Delaware shall be c/o The Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇. The agent for service of process on the Venture
pursuant to the Act shall be The Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇. The registered agent and registered office of the
Venture may be changed by the Manager from time to time. The Manager shall
promptly notify the Venturers of any such change.
2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Manager shall cause the
Venture to be qualified or registered in any other jurisdiction in which the
Venture transacts business and shall cause each Subsidiary to be qualified or
registered under applicable laws in the state in which the applicable Property
is located and shall be authorized to execute, deliver and file any certificates
and documents necessary to effect such qualification or registration, including
without limitation the appointment of agents for service of process in such
jurisdictions.
2.7 POWERS. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Venture shall have and exercise all of the
powers and rights which can be conferred upon limited liability companies formed
pursuant to the Act.
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2.8 VENTURERS. The Venturers of the Venture and their addresses shall be
listed on SCHEDULE 2.8 and said schedule shall be amended from time to time by
the Manager to reflect the withdrawal of Venturers or the admission of
additional Venturers pursuant to this Agreement. The Venturers shall constitute
a single class or group of Venturers of the Venture for all purposes of the Act,
unless otherwise explicitly provided herein. The Manager shall notify the
Venturers of changes in SCHEDULE 2.8, which shall constitute the record list of
the Venturers for all purposes of this Agreement.
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2.9 CORPORATE EXISTENCE.
(a) This Section 2.9 is being adopted in order to comply with certain
provisions required by lenders to the Venture in order to qualify the Venture as
a "special purpose" entity.
(b) The Manager shall cause the Venture to do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; PROVIDED, however, that the
Venture shall not be required to preserve any such right or franchise if the
Manager shall determine that the preservation thereof is no longer desirable for
the conduct of the Venture's business and that the loss thereof is not
disadvantageous in any material respect to the Venture.
(c) Notwithstanding anything contained in or implied by any provision of
this Agreement or any other document covering the formation, management or
operation of the Venture, the Venture shall, and the Venturers also shall cause
the Venture to:
(i) remain solvent and pay its debts and liabilities (including,
as applicable, shared personnel and overhead expenses) from
its assets as the same shall become due, and maintain
adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in
light of its contemplated business operations (although
nothing in this subsection (c)(i) shall be deemed a
requirement of any Venturer to contribute any additional
capital);
(ii) correct any known misunderstanding regarding the separate
identity of the Venture;
(iii) maintain its accounts, including its bank accounts, and its
books and records separate from any other Person and file
its own tax returns, separate from those of any other Person
except to the extent that it is required to file
consolidated tax returns by law;
(iv) maintain its own records, books, resolutions and agreements;
(v) not commingle its funds or assets with those of any other
Person and not participate in any cash management system
with any other Person;
(vi) hold its assets in its own name;
(vii) conduct its business in its name, or in a name franchised or
licensed to it by an entity other than an Affiliate of the
Venture, except for services rendered under a business
management services agreement with an Affiliate on arms
length terms, so long as the manager, or equivalent thereof,
under such business management services agreement holds
itself out as an agent of the Venture;
(viii) maintain its financial statements (which shall show its
assets and liabilities separate and apart from those of any
other Person), accounting records and other entity documents
separate from any other Person and not permit its assets to
be listed as assets on the financial statement of any other
entity except as required by GAAP or tax basis accounting;
PROVIDED, however, that any such consolidated financial
statement shall contain a note indicating that its separate
assets and liabilities are
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neither available to pay the debts of the consolidated
entity nor constitute obligations of the consolidated
entity;
(ix) pay its own liabilities and expenses, including the salaries
of its own employees, out of its own funds and assets, and
maintain a sufficient number of employees in light of its
contemplated business operations;
(x) observe all limited liability company formalities;
(xi) not assume or guarantee or become obligated for the debts of
any other Person or hold out its credit as being available
to satisfy the obligations of any other Person;
(xii) allocate fairly and reasonably any overhead expenses that
are shared with any Affiliate, including, but not limited
to, paying for shared office space and services performed by
any employee of an Affiliate;
(xiii) maintain and use separate stationery, invoices and checks
bearing its name;
(xiv) hold itself out and identify itself as a separate and
distinct entity under its own name or in a name franchised
or licensed to it by an entity other than an Affiliate and
not as a division or part of any other Person, except for
services rendered under a business management services
agreement with an Affiliate on an arms length basis, so long
as the manager, or equivalent thereof, under such business
management services agreement holds itself out as an agent
of the Venture.
(xv) maintain its assets in such a manner that it will not be
prohibitively costly or difficult to segregate, ascertain or
identify its individual assets from those of any other
Person;
(xvi) not make loans to any Person or hold evidence of
indebtedness issued by any other Person or entity (other
than cash and investment-grade securities issued by an
entity that is not an Affiliate of or subject to common
ownership with such entity);
(xvii) not identify its members, or any Affiliate of any of them,
as a division or part of the Venture and not identify itself
as a division of any other person;
(xviii) not enter into or be a party to, any transaction with its
members, or Affiliates except in the ordinary course of its
business and on terms which are intrinsically fair,
commercially reasonable and are no less favorable to it than
would be obtained in a comparable arm's-length transaction
with an unrelated third party; and
(xix) to the fullest extent permitted by law, not dissolve,
liquidate, consolidate, merge or sell its assets outside the
ordinary course of its business.
ARTICLE 3. CAPITALIZATION
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3.1 INITIAL CAPITAL CONTRIBUTIONS. Upon execution and delivery of this
Agreement, BC shall contribute to the Venture $8,626,939, which funds include
those funds placed in the Preferred Return Reserve Account pursuant to Section
3.3, with the result that the initial Capital Account balance of BC shall be
$8,626,939. The Operator is not making any capital contribution to the Venture
on the date hereof but is transferring to the Venture the contracts referred to
in SCHEDULE 3.1, which the Operator represents to Investor and the Venture are
owned by it free and clear of any lien, security interest or encumbrance of any
kind, unless otherwise stated on SCHEDULE 3.1. The Operator shall not be deemed
to have made any additional capital contribution to the Venture as a result of
the transfer of such contracts to the Venture, with the result that the Capital
Account balance of the Operator shall be $0. Funds provided pursuant to this
Section 3.1, are referred to as the "Initial Capital Contribution."
3.2 NO ADDITIONAL CAPITAL CONTRIBUTIONS No Venturer shall be obligated
to make any further contributions to the Venture.
3.3 PREFERRED RETURN RESERVE ACCOUNT. As part of the Initial Capital
Contribution, BC shall deposit and/or retain funds in the amount of $300,000 in
an investment account under its control (the "Preferred Return Reserve
Account"). Funds from the Preferred Return Reserve Account shall be used, and
shall only be used, to make payments of the BC Preferred Return in accordance
with Sections 6.2(a) and 6.3(a) in the event operating cash flow is insufficient
to make such payments.
ARTICLE 4. BOOKS; ACCOUNTING; TAX ELECTIONS; REPORTS
4.1 BOOKS AND RECORDS. The Manager shall keep complete and accurate
books and records of the Venture and each Subsidiary. The books of the Venture
and each Subsidiary shall be kept on the accrual method of accounting (used for
federal income tax purposes) in accordance with the rules of Treasury
Regulations Section 1.704-1(b)(2)(iv) (I.E., on the so-called "section 704(b)
book basis" which takes into account the book value, rather than the adjusted
tax basis, of Venture and Subsidiary assets where there is a difference). The
books of the Venture and each Subsidiary shall at all times be maintained or
made available at the principal business office of the Venture. A current list
of the full name and last known business address of each Venturer, set forth in
alphabetical order, a copy of the Certificate and all amendments thereto,
executed copies of all powers of attorney pursuant to which the Certificate or
any certificate of amendment has been executed, copies of the Venture's federal,
state and local income tax returns and reports, if any, for the three most
recent years, copies of this Agreement and of any financial statements of the
Venture and each Subsidiary for the three most recent years and all other
records required to be maintained pursuant to the Act shall be maintained at the
principal business office of the Venture.
4.2 FINANCIAL STATEMENTS. The Manager shall cause to be prepared and
furnish to each Venturer within sixty (60) days after the end of each Venture
tax year, a copy of the annual financial statements for such tax year accurately
reflecting the financial condition of the Venture and the results of the
Venture's operations containing, without limiting the foregoing, balance sheets,
statements of changes in Venturers' capital, profit and loss statement and
statements of changes in financial condition, all prepared and certified by the
Venture's accountants. So long as the Operator is the Manager, the Manager shall
within twenty (20) days after the end of each calendar month cause to be
prepared by the Property Manager and furnish to the Investor the
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items listed in SCHEDULE 4.2 (the "Monthly Reporting Package"). The Operator
shall cooperate, and shall cause Property Manager to cooperate and respond to
requests by the Investor to reasonably expand or modify the format and content
of the Monthly Reporting Package. The Operator will promptly provide any
additional information that Investor may reasonably request regarding the
Venture, the Properties or the relevant markets so it may fully understand the
financial performance of the Venture and the Properties. All such financial
statements and other information shall be certified as accurate in all material
respects by the Operator.
4.3 PROPERTY BUDGET. At least sixty (60) days prior to the end of each
year, so long as the Operator is the Manager, the Manager shall prepare or cause
the Property Manager to prepare and submit for approval by the Investor, a
complete and detailed revision and update of the Property Budget in the form of
SCHEDULE 4.3 setting forth the projected income, expenses, capital expenditures
and financing needs relating to the operation and management of the Venture and
each Property during the following year. "Property Budget" means, for any
period, the individual and consolidated budgets for expenditures by the Venture
and each Subsidiary approved by the Investor for such period. Upon the approval
of a budget by the Investor, such budget shall become the "Property Budget" for
the period for which it is approved. If the Investor does not approve a proposed
budget submitted by the Manager, the Property Budget, if any, for the prior
period with respect to operating expense items (but not capital expenditures)
shall be deemed to continue in effect for the current period with line items for
non discretionary or negotiable expenses such as real estate taxes and utilities
modified to reflect actual amounts for the period in question. The Manager shall
submit to the Investor in conjunction with each provision of the Property Budget
such information regarding proposed capital expenditures as the Investor may
reasonably request, including plans and specifications, proposed construction
schedule, proposed disbursement arrangements, multi-year capital plans, if
appropriate, and description of arrangements for administration of work to be
performed.
4.4 INSURANCE PROGRAM. At least sixty (60) days prior to the end of each
year, so long as the Operator is the Manager, the Manager shall prepare or cause
the Property Manager to prepare and submit for approval by the Investor a
revision and update of the Insurance Program for the Venture, each Subsidiary
and the Property for the following calendar year. "Insurance Program" means the
program for insurance described in SCHEDULE 4.4 until such time as a new
Insurance Program is approved pursuant to this Section 4.4 and thereafter the
most recent Insurance Program so approved or, if the Investor require changes in
an Insurance Program, the Insurance Program with such changes as the Investor
may require.
4.5 BUSINESS PLAN. At least sixty (60) days prior to the end of each
year, so long as the Operator is the Manager, the Manager shall submit to the
Investor for approval a complete and detailed revision and update of the
Business Plan for the following year which shall include (i) plans for leasing
space that is vacant or anticipated to become vacant, (ii) guidelines for lease
terms and selection of tenants, (iii) a narrative description of preventative
maintenance activities and capital improvements and related required
expenditures and (iv) such other projections, plans and information relevant to
the operation of the Venture and each Subsidiary as is reasonably required for
the Investor to evaluate anticipated operations of each Property. The Business
Plan shall include guidelines for leasing space at each Property consisting
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of rental rates, length of lease terms, credit requirements, concessions, and,
if applicable, revisions or replacements to the standard form of lease to be
used by the Venture and such additional information as the Investor may
reasonably require. The Business Plan shall also include a description of the
Venture's and each Subsidiary's activities with respect to the construction of
any tenant improvements or any other construction or development at each
Property, and shall include each of the contracts for any such design and
construction. The Business Plan shall include market based information
including, but not limited to, competitive rents analysis, comparable sales,
area economic analysis and relevant market studies which include major
employment and economic trends in the relevant market. The "Business Plan" means
the Business Plan to be reasonably agreed to by the Operator and the Investor
within 45 days of this Agreement and which will be attached hereto as SCHEDULE
4.5 upon such agreement until such time as a new Business Plan is approved
pursuant to this Section 4.5 and thereafter the most recent Business Plan so
approved.
4.6 RIGHT TO INFORMATION. Each Venturer shall have the right at all
reasonable times during usual business hours to examine and make copies of or
extracts from the books of account and records of the Venture and each
Subsidiary and to have such materials audited. As long as the Operator is the
Manager, the Manager shall promptly furnish to the Investor such other
information bearing on the financial condition and operations of the Venture, or
the status of any Property as the Investor may from time to time reasonably
request. Upon receipt by the Manager of knowledge of the occurrence of an event
which could have a significant impact on the operation of the Venture, each
Subsidiary or any Property, the Manager shall promptly, and in any event within
five (5) business days, inform the Investor and provide relevant information
with respect to such event. Examples of events which should be immediately
disclosed to the Investor would include unusual budget variances, significant
insurance claims, material crime at a Property or adjacent area, information
regarding new proposed competing projects or existing competing projects and
news which could materially affect vacancy rates at a Property, including,
without limitation, impending layoffs or relocation of major employers in the
area or the potential creation of significant new jobs in the relevant market.
4.7 FILING OF RETURNS. The Manager shall cause the preparation and
timely filing of all Venture and Subsidiary tax returns and shall, on behalf of
the Venture, timely file all other writings required by any governmental
authority having jurisdiction. The Manager shall cause a draft of the Venture's
and each Subsidiary's tax return to be delivered to each of the Venturers for
such Venturer's review and, if applicable, comment within sixty (60) days after
the end of each Venture tax year, and in any event, at least ten (10) business
days prior to the filing thereof.
4.8 TAX MATTERS PARTNER. The Operator shall be the "tax matters partner"
for purposes of Section 6231 of the Code. The tax matters partner shall keep the
Venturers fully apprised of any action required to be taken or which may be
taken by the tax matters partner for the Venture and each Subsidiary.
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4.9 FISCAL AND TAXABLE YEAR. The fiscal year of the Venture and each
Subsidiary shall be the same as the taxable year of the Venture. The taxable
year of the Venture and each Subsidiary shall be the same as the taxable year of
the Investor, which taxable year currently ends on December 31. The Investor
shall promptly advise the Manager of any change in its taxable year.
4.10 ACCOUNTANTS. The Venture shall retain a firm of independent
certified public accountants satisfactory to the Investor to perform the
functions specified in this Agreement. Manager shall recommend accountants for
the Venture to the Investor for its approval within 60 days of this Agreement.
At any time the Investor may require that the Venture select a so-called "Big 4"
accounting firm to act as the accountants for the Venture or such other
accounting firm as may be reasonably satisfactory to the Investor and the
Operator. Costs of such accountants to perform annual audits (as opposed to
general accounting and record keeping functions which are the responsibility of
the Operator) shall be at the expense of the Venture.
4.11 PROPERTY MANAGEMENT. The Manager shall at all times retain a
Property Manager for each Property, subject to the rights of the Venturers to
approve any such Property Management Agreement pursuant to Sections 8.3 and
8.11.
4.12 APPRAISAL. The Investor shall have the right from time to time to
require that any Property be appraised by an independent appraiser who is
qualified to appraise real estate assets of the same type and scope as that of
the Property being appraised and who is otherwise approved by the Investor. The
cost of any such appraisal shall be borne by the Venture.
4.13 TAXATION AS PARTNERSHIP. The Venturers agree that the Venture and
each Subsidiary will be taxed as a partnership, and the Manager shall use all
reasonable efforts to ensure that the Venture and each Subsidiary is treated as
a partnership for tax purposes.
ARTICLE 5. CAPITAL ACCOUNTS; ALLOCATION OF INCOME AND LOSS
5.1 CAPITAL ACCOUNTS. A separate capital account (each, a "Capital
Account") shall be maintained for each Venturer in accordance with the rules of
Section 1.704-1(b)(2)(iv) of the U.S. Treasury Regulations (the "Treasury
Regulations"), and this Section 5.1 shall be interpreted and applied in a manner
consistent with said Section of the Treasury Regulations. The Venture may adjust
the Capital Accounts of its Venturers to reflect revaluations of the Venture
property whenever the adjustment would be permitted under Treasury Regulations
Section 1.704-1(b)(2)(iv)(f). In the event that the Capital Accounts of the
Venturers are so adjusted, (i) the Capital Accounts of the Venturers shall be
adjusted in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g)
for allocations of depreciation, depletion, amortization and gain or loss, as
computed for book purposes, with respect to such property and (ii) the
Venturers' distributive shares of depreciation, depletion, amortization and gain
or loss, as computed for tax purposes, with respect to such property shall be
determined so as to take account of the variation between the adjusted
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tax basis and book value of such property in the same manner as under Section
704(c) of the Code. In the event that Code Section 704(c) applies to Venture
property, the Capital Accounts of the Members shall be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book
purposes, with respect to such property. The Capital Accounts shall be
maintained for the sole purpose of allocating items of income, gain, loss and
deduction among the Venturers and shall have no effect on the amount of any
distributions to any Venturers in liquidation or otherwise. The amounts of all
distributions to Venturers shall be determined pursuant to Article VI.
Notwithstanding any provision contained herein to the contrary, no Venturer
shall be required to restore any negative balance in its Capital Account.
5.2 ALLOCATIONS OF PROFITS AND LOSSES. All items of Venture income,
gain, loss and deduction as determined for book purposes shall be allocated
among the Venturers and credited or debited to their respective Capital Accounts
in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to
ensure to the maximum extent possible (i) that such allocations satisfy the
economic effect equivalence test of Treasury Regulations Section 1.704-1
(b)(2)(ii)(i) (as provided hereinafter) and (ii) that all allocations of items
that cannot have economic effect (including credits and nonrecourse deductions)
are allocated to the Venturers in accordance with the Venturers' interests in
the Venturer, which, unless otherwise required by Code Section 704(b) and the
Treasury Regulations promulgated thereunder, shall be in proportion to their
ownership percentage. To the extent possible, items that can have economic
effect shall be allocated in such a manner that the balance of each Venturer's
Capital Account at the end of any taxable year (increased by the sum of (a) such
Venturer's "share of partnership minimum gain" as defined in Treasury
Regulations Section 1.704-2(g)(1) and (b) such Venturer's share of "partner
nonrecourse debt minimum gain" as defined in Treasury Regulations Section
1.704-2(i)(5)) would be positive to the extent of the amount of cash that such
Venturer would receive (or would be negative to the extent of the amount of cash
that such Venturer would be required to contribute to the Venture) if the
Venture sold all of its property for an amount of cash equal to the book value
(as determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv), but
taking into account any Write Downs) of such property (reduced, but not below
zero, by the amount of nonrecourse debt to which such property is subject) and
all of the cash of the Venture remaining after payment of all liabilities (other
than nonrecourse liabilities) of the Venture were distributed in liquidation
immediately following the end of such taxable year in accordance with Section
6.3.
ARTICLE 6. DISTRIBUTIONS
6.1 DEFINITIONS RELATING TO DISTRIBUTIONS. The following terms have the
meanings indicated:
"Operating Cash Flow" means all cash receipts of the Venture (other than
Net Capital Proceeds), including any funds held in the Preferred Return Reserve
Account required to be distributed pursuant to Section 3.3 to the Investor in
order to make the distribution of the BC Preferred Return, in excess of the
following items (except to the extent any of the following are funded out of
reserves or proceeds from capital events): operating expenses, debt service,
expenditures on capital improvements and such reserves as are provided for in
the Property Budget or are otherwise reasonably required by the Investor.
15
"Net Capital Proceeds" means proceeds from any sale, refinancing, insurance
recovery, eminent domain award or other similar capital event, in excess of
amounts required to pay debt then due, transaction costs and such reserves as
are provided for in the Property Budget, otherwise approved by the Venturers, or
reasonably required by the Investor to fund contingent or unmatured liabilities
of the Venture.
6.2 OPERATING CASH FLOW DISTRIBUTIONS. Operating Cash Flow, if any,
shall be distributed monthly as soon as practicable, and in any event, within
fifteen (15) days after the end of each calendar month. Prior to the
distribution of any Operating Cash Flow, Manager shall deliver to the Investor
written notice indicating the anticipated date of distribution, the source of
the funds to be distributed and Manager's calculation of the amounts
distributable to each Venture hereunder. The Investor shall use reasonable good
faith efforts to approve or disapprove the Manager's calculation within five (5)
business days of receipt. Approval by the Investor of any distribution shall not
be construed to be a waiver of the right of the Investor to subsequently audit
the books and records of the Venture to determine whether distributions were
actually made in accordance with this Section 6.2. Once approved by Investor,
such Operating Cash Flow shall be distributed as follows:
(a) BC PREFERRED RETURN. First, to BC, any accrued and unpaid BC
Preferred Return.
(b) ASSET MANAGEMENT FEE. Second, each quarter, to the Investor
Manager, any accrued and unpaid Asset Management Fee.
(c) RESIDUALS. Thereafter, 50% to BC and 50% to the Operator.
6.3 NET CAPITAL PROCEEDS DISTRIBUTIONS. Net Capital Proceeds, if any,
shall be distributed as soon as reasonably practicable, and in any event within
ten (10) days after the same become available for distribution. Prior to any
distribution of Net Capital Proceeds, the Manager shall deliver to the Investor
a written notice indicating the anticipated date of distribution, the source of
the funds to be distributed and the Manager's calculation of the amounts
distributable to each Venturer hereunder. The Investor shall use reasonable good
faith efforts to approve or disapprove the Manager's calculation within thirty
(30) days of receipt (such period to be reduced to ten (10) business days if the
Net Capital Proceeds do not result from the sale of all of the Properties then
owned by the Venture.) Approval by the Investor of any distribution shall not be
construed to be a waiver of the right of the Investor to subsequently audit the
books and records of the Venture to determine whether distributions were made in
accordance with this Section 6.3. Once approved by Investor, all distributions
of Net Capital Proceeds shall be made in the following order and priority:
(a) BC PREFERRED RETURN. First, to BC, any accrued and unpaid BC
Preferred Return.
(b) ASSET MANAGEMENT FEE. Second, to the Investor Manager, any
accrued and unpaid Asset Management Fees.
(c) INVESTOR 16% RETURN. Third, to BC, until the distributions
to BC pursuant to items 6.2(a), 6.2(c) and 6.3(a) have equaled the Capital
Contributions of BC together with amount
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sufficient to provide BC with a 16% per annum return on such Capital
Contributions. An example of the calculation of such return is attached as
SCHEDULE 6.3.
(d) RESIDUALS. Thereafter, 75% to BC and 25% to the Operator.
6.4 WITHHOLDING. If the Venture is required by law or regulation to
withhold and pay to any taxing or other governmental authority any amount
otherwise distributable to a Venturer, the Venture shall be entitled to withhold
such amount and the amount so withheld shall for all purposes of this Agreement
be treated as if distributed to such Venturer.
ARTICLE 7. RIGHTS AND OBLIGATIONS OF VENTURERS
7.1 LIMITED LIABILITY. Except as otherwise provided in the Act, no
Venturer shall be obligated personally for any debt, obligation or liability of
the Venture or of any other Venturer, whether arising in contract, tort or
otherwise, solely by reason of being a Venturer.
7.2 AUTHORITY. Unless specifically authorized by the Manager, or as
permitted pursuant to Section 8.1, no member that is not a Manager shall be an
agent of the Venture or have any right, power or authority to act for or to bind
the Venture or to undertake or assume any obligation or responsibility of the
Venture or of any other member.
ARTICLE 8. RIGHTS AND OBLIGATIONS OF
MANAGER AND MANAGEMENT OF THE VENTURE
8.1 GENERAL RESPONSIBILITIES. The Operator is hereby appointed to serve
as the initial Manager of the Venture. The name and address of the Manager shall
be listed on SCHEDULE 2.8 and said schedule and the Certificate shall be amended
from time to time by the Manager to reflect the resignation or removal of the
Manager or the appointment of new or additional Managers pursuant to this
Agreement. A Manager of the Venture may be either a member or a non-member as
determined by the Investor. Except as otherwise specifically provided in this
Agreement, the Manager shall have full responsibility and discretion in the
day-to-day management and control of the business and affairs of the Venture for
the purposes stated in this Agreement. The Manager shall not take any action as
to which the Investor has a right of approval without first obtaining such
approval and shall not take any action which is inconsistent with or not
contemplated by the Business Plan or the Property Budget except as otherwise
provided in this Agreement. In circumstances where this Agreement authorizes the
Investor to require the Venture to take certain actions, the Manager shall use
diligent efforts to cause the Venture to take such actions. Investor may remove
the Operator or any successor Manager as Manager of the Venture at any time
Investor determines in its sole reasonable judgment that it is prudent to do so.
Any such removal may be affected by giving notice to such effect to Manager, and
effective immediately upon delivery, or at such later date as may be specified
at such notice. If the Investor removes the Operator as Manager, Investor may
perform the role of Manager itself
17
or may appoint another individual or entity to serve as Manager and the Operator
shall have no authority to act on behalf of the Venture. Except as provided in
Section 8.3, the Investor generally expects to have the Manager take all actions
on behalf of the Venture, however, the Investor may unilaterally act on behalf
of the Venture, or direct the Manager to act on behalf of the Venture, if it
deems it appropriate.
8.2 OPERATION IN ACCORDANCE WITH PLANS. As long as the Operator is the
Manager, the Manager shall exercise diligent efforts to cause the Venture and
each Subsidiary to be operated in compliance with the Business Plan and the
Property Budget, to cause the Properties to be leased to tenants in accordance
with leases consistent with the guidelines included in the Business Plan and to
maintain in effect the insurance required by the Insurance Program. Nothing
herein shall be construed to require the Operator to contribute funds to the
Venture to satisfy its obligations under this Section 8.2. As long as the
Operator is the Manager, the Manager shall exercise diligent efforts to obtain
financing approved by the Investor, but shall not incur Venture or Subsidiary
obligations or exercise any right or election or waive any right under
arrangements for financing without the prior approval of the Investor.
8.3 CONTRACTS WITH AFFILIATES. The Venture shall enter into or cause
each Subsidiary to enter into, a property management agreement (the "Property
Management Agreement") with Pinnacle Realty Management Company ("Property
Manager") in the form approved by the Investor and attached hereto as EXHIBIT
8.3. The Property Management Agreement shall provide for the Property Manager to
receive a property management fee equal to three and one-half percent (3.5%) of
gross revenue from the Property. The Property Management Agreement shall also
provide that the Property Manager shall (i) disclose to the Investor any rental
apartment property located within a five mile radius of a Property that the
Property Manager develops, owns, leases, acquires, manages or otherwise directly
or indirectly participates in and (ii) not have the same investment manager
involved with a rental apartment property located within a 1/4 mile radius of a
Property. The Investor shall have the sole and exclusive right to direct in good
faith the Venture's and each Subsidiary's actions with regard to the Property
Management Agreement and any other contracts between the Venture or any
Subsidiary, on the one hand, and the Operator or any person affiliated with the
Operator on the other hand, including proposing or approving any amendment or
modification of such contracts, exercising any consent, waiver, approval or
election thereunder, enforcing any remedies, including termination thereof and
taking any and all other actions under or with respect to such agreements as
owner. The Investor shall not unreasonably withhold, condition or delay any such
consent or approval contemplated by the Property Management Agreement, but shall
have no obligation to consent to or approve any modification or amendment of the
Property Management Agreement. Neither the Venture nor any Subsidiary shall
enter into any other contracts with the Operator or any person or entity
affiliated with the Operator or modify, amend or terminate the Property
Management Agreement or any other agreement between the Venture or any
Subsidiary, on the one hand, and the Operator or a person or entity affiliated
with the Operator on the other hand, without the specific prior written approval
of the Investor.
8.4 EMPLOYEES AND CONTRACTORS. The Venture shall conduct its business
exclusively through independent contractors and shall not hire any employees.
The Manager shall supervise and administer all services rendered to the Venture
and
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each Subsidiary by independent contractors. If the Property Management Agreement
shall be terminated, the Manager shall select qualified contractors approved by
the Investor which are unaffiliated with the Operator to perform the management,
leasing and other services required by the Venture or a Subsidiary.
8.5 FINANCING. As long as the Operator is the Manager, the Manager at
its option or upon request by the Investor shall use diligent efforts to
identify favorable financing for the Venture and each Subsidiary. After the
Investor has approved financing for the Venture or a Subsidiary, the Manager
shall use diligent efforts to close such financing and to enter into all
incidental arrangements relating thereto, including satisfying the requirements
of prospective lenders, and entering into interest rate protection agreements
and other ancillary arrangements approved by the Investor. The Operator agrees
to cause the Principal to incur such obligations to lenders to the Venture and
each Subsidiary with respect to environmental liabilities associated with each
Property and other so-called nonrecourse carve outs as are customarily required
by lenders providing financing for comparable entities purchasing constructing
or operating comparable assets. The Venture shall indemnify the Operator and the
Principal with respect to any such liabilities to lenders of the Venture
incurred at the request or with the consent of the Investor. The Investor
covenants not to take any action, or cause the Venture to take any action, that
would cause the Principal to have liability with respect to such so-called
non-recourse carve outs. As long as the Operator is the Manager, the Manager
shall not enter into any arrangements for financing or pay any commitment or
application or other fees for financing without the prior written approval of
the Investor. The Operator acknowledges that the Investor may elect not to
approve financing which would adversely affect the Venture's or any Subsidiary's
ability to dispose of a Property or which might require the Venture to pay a
prepayment premium at a time at which an Investor may desire to liquidate its
interest in the Venture.
8.6 COMPENSATION AND EXPENSE REIMBURSEMENT. The Manager shall not
receive any compensation for serving as Manager. The Venture shall reimburse the
Investor's and the Operator's reasonable out-of-pocket costs, including fees of
attorneys and consultants, incurred in negotiating this Agreement and purchasing
and financing the Properties. The Investor shall be entitled to reimbursement
for reasonable out-of-pocket expenses incurred by it in administering its
investment in the Venture, including fees of counsel and expenses of traveling
to meet with the Operator and inspect the Properties from time to time and the
fees and expenses of an engineer retained by an Investor to monitor any
construction which may be undertaken at the Properties from time to time. The
Property Manager shall be entitled to compensation as provided in the Property
Management Agreement.
8.7 ENVIRONMENTAL AUDITING. The Venture shall cause the Property Manager
to implement and maintain an ongoing environmental auditing program satisfactory
to the Investor pursuant to which the Venture or the Subsidiaries shall conduct
periodic investigations regarding the compliance of activities at the Properties
with applicable environmental laws, and the existence of and potential for
contamination. The results of such environmental audit shall be provided to the
Investor promptly after receipt by the Venture.
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8.8 CONTINUED INVOLVEMENT REQUIREMENTS. Neither the Venture nor any
Subsidiary shall enter into any agreement or other arrangement with any third
party requiring the continued ownership, control, employment, or other
involvement with the Venture and Subsidiary or the Properties of the Operator or
any affiliate of the Operator without the specific prior written consent of the
Investor. To the extent that the Venture or any Subsidiary does enter into any
such agreement or arrangement, the Operator covenants not to take any action or
refrain from taking any action which would constitute a breach of such
requirement or which would trigger any such right or obligation.
8.9 INDEMNIFICATION OF MANAGER AND VENTURERS. "Operator Parties" means
Operator, any manager or other agent of the Operator, any direct or indirect
holder of equity in the Operator, any entity controlling, controlled by or under
common control with the Operator, each of the officers, directors and employees
of any of the preceding persons or entities, and any other person who serves at
the request of any of the preceding persons or entities as an officer, director,
trustee, manager or agent of an entity in which the Venture has an interest as
an owner, security holder, creditor or otherwise.
Except as otherwise required by applicable law, no Operator Party shall be
liable to the Venture or any person or entity holding an equity interest in the
Venture for any loss suffered by the Venture which arises out of any action or
inaction of any Operator Party as long as such Operator Party acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the Venture and which action or inaction does not constitute a
material breach of this Agreement.
The Venture shall indemnify, to the extent permitted by applicable law and
to the extent of its assets, each Operator Party against all liabilities, losses
and expenses incurred by any of them in connection with any matter relating to
the Venture or any entity in which the Venture has any interest as an owner,
security holder, creditor or otherwise, including but not limited to amounts
paid in satisfaction of judgments, settlements, fines, penalties and counsel
fees reasonably incurred in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, pending or
threatened, before any court or administrative or legislative body, in which
such Operator Party may be or may have been involved as a party or otherwise or
with which such Operator Party may be or may have been threatened.
Notwithstanding the foregoing, indemnification shall not be paid to any Operator
Party with respect to any matter as to which such Operator Party shall have been
finally adjudicated to have committed an act or omission involving willful
misconduct, fraud or bad faith or material breach of this Agreement.
"Investor Indemnified Parties" means BC, the Investor Manager, any manager
or other agent of BC or the Investor Manager, any direct or indirect holder of
equity in the Investor, any entity controlling, controlled by or under common
control with such holder, any investment manager for any holder of equity in BC
or the Investor Manager, each of the officers, directors and employees of any of
the preceding persons or entities, and any other person who serves at the
request of any of the preceding persons or entities as an officer, director,
trustee, manager or agent of an entity in which the Venture has an interest as
an owner, security holder, creditor or otherwise.
Except as otherwise required by applicable law, no Investor Indemnified
Party shall be liable to the Venture or any person or entity holding an equity
interest in the Venture for any loss suffered by the Venture which arises out of
any action or inaction of any Investor Indemnified Party as long as such
20
Investor Indemnified Party acted in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interests of the Venture and
which action or inaction does not constitute a material breach of this
Agreement.
The Venture shall indemnify, to the extent permitted by applicable law and
to the extent of its assets, each Investor Indemnified Party against all
liabilities, losses and expenses incurred by any of them in connection with any
matter relating to the Venture or any entity in which the Venture has any
interest as an owner, security holder, creditor or otherwise, including but not
limited to amounts paid in satisfaction of judgments, settlements, fines,
penalties and counsel fees reasonably incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
pending or threatened, before any court or administrative or legislative body,
in which such Investor Indemnified Party may be or may have been involved as a
party or otherwise or with which such Investor Indemnified Party may be or may
have been threatened. Notwithstanding the foregoing, indemnification shall not
be paid to any Investor Indemnified Party with respect to any matter as to which
such Investor Indemnified Party shall have been finally adjudicated to have
committed an act or omission involving willful misconduct, fraud or bad faith or
material breach of this Agreement.
Amounts required to be paid by the Venture to an indemnified party pursuant
to this Section 8.09 in reimbursement of judgments, settlements, fines,
penalties, counsel fees and other costs actually incurred by such indemnified
party shall be paid together with an annual indemnity fee equal to 1/14th of the
amount of such costs, pro-rated for partial years.
8.10 AUTHORIZATION OF CERTAIN ACTIONS. The Venturers hereby authorize the
Manager on behalf of the Venture to enter into the contracts and instruments
referred to in SCHEDULE 8.10 in the form approved by the Investor.
8.11 ACTIONS REQUIRING INVESTOR'S CONSENT. The Venture shall not take any
of the following actions, nor cause any Subsidiary to take any of the following
actions, whether or not consistent with the Business Plan, without the prior
approval of the Investor of the specific action, including the form of
instrument, parties involved or any other matter relating to such action:
(a) borrow money or amend the terms and conditions of any
financing or make elections or waive any rights with respect to interest
periods, interest rates, prepayment or other material provisions under any
financing;
(b) grant any mortgage, security interest or any other lien;
(c) subject all or any part of a Property to a condominium
statute;
(d) sell any portion of any Property;
(e) enter into or amend any contract for the design,
construction, management or leasing of a Property, or make any material
change in the plans for the development of a Property;
21
(f) seek or consent to any change in the zoning or other land
use regulations affecting a Property or any permits or approvals granted
thereunder;
(g) rebuild or reconstruct the improvements on a Property if
they are substantially damaged by a fire or other casualty;
(h) file or defend lawsuits or other proceedings except for the
defense by insurers of insured claims, the enforcement of leases and the
pursuit of evictions;
(i) engage counsel to advise the Venture or any Subsidiary on
any matter other than on matters in the ordinary course of business,
including, without limitation, tax appeals, other tax matters and eviction
proceedings, provided the cost for such engagement is provided for in the
Property Budget;
(j) acquire any real property (other than the Properties as
provided herein) or any interest in any entity;
(k) modify in any material respect the form of lease used for
leasing space at a Property;
(l) modify, amend or terminate any existing lease of any portion
of the Property, or enter into any new lease of any portion of the Property
unless, in each case (i) such action relates to a residential lease with a
third party and is undertaken in the ordinary course of the Venture's or
Subsidiary's operation of the residential apartment complex, (ii) any such
new lease is on the standard form of lease for a Property approved by the
Investor without material changes, and (iii) the terms of such new lease
comply with the Business Plan;
(m) make material alterations to a Property other than as
expressly permitted by the Business Plan;
(n) change the Venture's accounting method, either for financial
or tax reporting purposes;
(o) make any material change in the plans and specifications for
any construction at a Property;
(p) amend or fail to obtain any insurance coverage contemplated
by the Insurance Program;
(q) incur any obligation which would exceed the applicable
annual line item in the Property Budget for an individual Property by more
than the lesser of $25,000 or ten percent (10%) of such annual line item or
which would cause the total of all annual line items in each Property
Budget for an individual Property to be exceeded by more than $75,000;
provided, however, that if an emergency arises which threatens imminent
harm to property or injury to persons and prior communication with the
Investor with respect to such emergency is not practicable, the Operator
may expend such funds as may reasonably be necessary to avert such harm or
injury as long as it gives notice to the Investor on the next business day
after such
22
expenditure of the nature of such emergency and provides such additional
information as the Investor may reasonably request in connection therewith;
(r) dissolve the Venture or any Subsidiary;
(s) enter into any merger, consolidation or restructuring of the
Venture or any Subsidiary;
(t) take any other action which pursuant to any provision of
this Agreement requires the approval of the Investor or which materially
affects the Venture, any Subsidiary or the Property; or
(u) use of any insurance proceeds in excess of $10,000;
(v) confession of any judgments;
(w) taking any steps with respect to environmental conditions or
matters effecting a Property, other than in the ordinary course of
business;
(x) indemnification of any other person or entity;
(y) the establishment of or increase in reserves not set forth
in the Property Budget; or
(z) entering into or amending any contract which does not
require the Investor's consent pursuant to Section 8.11(e), unless such
contract is terminable on thirty (30) days notice and on a sale, in each
case without penalty; or
(aa) the filing, commencement, or consent to the filing or
commencement of any proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief from debts or creditors,
dissolution, insolvency or similar law of any jurisdiction whether now or
hereinafter effect or the seeking or consenting to of the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any
similar official for the Venture, any Subsidiary or any portion of a
Property.
(bb) Make any capital contribution to any Subsidiary, or use
funds received from the operations of a Subsidiary to satisfy obligations
at a different Subsidiary.
8.12 RESTRICTIONS ON OTHER BUSINESS. The Operator shall not develop, own,
lease, acquire, operate or otherwise directly or indirectly participate in any
rental apartment property located within a five (5) mile radius of a Property
and shall not permit the Principal or any entity in which the Principal owns in
the aggregate more than ten percent of the equity to engage in any such
activities without in either case providing the Investor prior notice. In
addition, except for those existing projects listed on Schedule 8.12, the
Operator and any entity in which the Principal owns more than ten percent of the
equity (excluding Property Manager) shall not develop, own, lease, acquire or
otherwise directly or indirectly participate in a rental apartment property
located within a radius of 1/4 mile from a Property without the prior consent of
Investor, which consent shall not be unreasonably withheld. For purposes of this
covenant, any interest held by the spouse or an ancestor
23
or descendant of the Principal or any trust for any of them shall be deemed to
be owned by such Principal. Except as provided in this Section 8.12, no Venturer
shall be prohibited from engaging in or possessing an interest in any other
business ventures of any kind or description, or have any responsibility to
account to the Venture for the income or profits from any such enterprises.
8.13 MODIFICATION OF LIABILITY. Operator expressly agrees that with
respect to any unilateral or approval right granted to Investor and its
affiliates shall have no fiduciary duty whatsoever to Operator or the Venture,
and Investor may grant such approval or refuse to grant such approval, and
exercise its rights as replacement manager, under this Agreement for the sole
benefit of Investor, as determined in its sole discretion.
8.14 ▇▇▇▇▇'AH COMPLIANCE. Operator expressly agrees and acknowledges that
the operation of the Venture, each Subsidiary and the Properties, including,
without limitation, any investments, borrowings or other financial transactions
involving the Venture may be required to comply with ▇▇▇▇▇'ah requirements and
customs. Investor has the sole and absolute discretion to approve or disapprove
matters based on compliance with ▇▇▇▇▇'ah requirements and customs, even if such
decisions could have an adverse effect on the Venture, provided such
requirements and customs do not adversely effect the economic relationship of
the Venturers outlined in Article 6 or create new liabilities of the Operator or
the Principal.
8.15 USE OF SEPARATE ENTITIES TO HOLD PROPERTIES. Unless otherwise agreed
by the Operator and the Investor, the Venture shall hold each Property in a
separate limited liability entity, including, without limitation, a limited
partnership or a limited liability company. The Manager shall form such entities
and, if necessary, qualify them to do business in the states in which they own
property or operate. All such entities (each a "Subsidiary") must be wholly
owned, directly or indirectly, by the Venture. Prior to forming any Subsidiary,
the Manager shall seek the approval of the Investor for the organizational
documents for such Subsidiary. The Manager will consult with counsel and
structure Subsidiaries to minimize state, local and federal taxes. The Manager
shall advise the Investor if it is unable to obtain assurance from counsel that
any Subsidiary will not be treated as a pass-through entity and therefore not
subject to state, federal and local taxes, and shall not form any Subsidiary
without the consent of the Investor if it has been unable to obtain such
assurance. It is the intention of the Venturers that the use of Subsidiaries not
alter the rights of approval and control of the Investor herein and references
in this agreement to the Venture shall include the Subsidiaries where
appropriate to accomplish that intent.
8.16 INVESTOR'S CONSENT. Any consent or approval specified to be obtained
from, or any election to be made by, the Investor hereunder shall be obtained
from, or made by, Investor Manager and all third parties dealing with the
Venture may conclusively rely on any such written consent, approval, or election
by Investor Manager as being the consent, approval or election of the Investor.
ARTICLE 9. TRANSFERS OF VENTURE INTERESTS
9.1 PROHIBITION OF TRANSFERS. Except as provided in Section 9.2, no
Venturer shall suffer or permit any transfer of or encumbrance upon such
Venturer's interest in the Venture or any transfer of or encumbrance on any
direct or indirect interest in such Venturer without the prior written approval
of the Investor, in the case of transfers of
24
interests of or in the Operator or transferees of the Operator, or the Operator,
in the case of transfers of or in the Investor or transferees of the Investor.
9.2 PERMITTED TRANSFERS. Notwithstanding the provisions of Section 9.1,
any holder of a direct or indirect interest in the Investor shall be permitted
to transfer all or any portion of its direct or indirect interest in the
Investor without the consent of any Venturer. The Investor agree not to
unreasonably withhold or delay their consent to transfers of direct or indirect
ownership interests in the Operator as long as (i) the Operator continues to be
controlled directly or indirectly by the Principals as evidenced to the
reasonable satisfaction of the Investor and (ii) all of the direct and indirect
beneficial interest in the Operator remains owned by the Principals and members
of his, her or their families or trusts for the exclusive benefit of such family
members or entities owned exclusively by such family members.
9.3 ADMISSION OF NEW VENTURER. No Person to which an interest in the
Venture is transferred shall be admitted as a substitute Venturer without the
prior written consent of the Investor, which consent may be withheld in its sole
and absolute discretion. Transferees of the Investor's interest shall be
admitted as a member and shall have the rights of an Investor under this
Agreement.
9.4 NON-RECOGNITION OF CERTAIN TRANSFERS. Any transfer or assignment of
any interest in the Venture not permitted by this Agreement shall be ineffective
and shall not be recognized by the Venture.
9.5 WITHDRAWAL. Except upon the permitted transfer by a Venturer of its
entire interest in the Venture and the admission of such Venturer's transferee
as a substituted member in compliance with the terms of this Agreement, no
Venturer shall have the right to withdraw from the Venture without the prior
approval of all of the Venturers. No Venturer shall be entitled to the return of
such Venturer's capital or any other payment upon withdrawal under Section
18-604 of the Act or otherwise.
ARTICLE 10. MISCELLANEOUS
10.1 DISSOLUTION. The Venture shall be dissolved upon the occurrence of
any of the following events:
(a) election by the Investor, by written notice to the Operator,
to dissolve the Venture;
(b) unanimous written consent by the Venturers to dissolve the
Venture;
(c) the sale or taking by eminent domain of substantially all of
the Property;
25
(d) the death, insanity, bankruptcy, retirement, resignation or
expulsion of any member; except that the Venture may be continued with the
consent of all of the remaining Venturers if such consent is given within
ninety (90) days following such event;
(e) the entry of a decree of judicial dissolution under Section
18-802 of the Act; or
(f) a consolidation or merger of the Venture in which it is not
the resulting or surviving entity.
Dissolution of the Venture shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Venture shall not terminate until
the assets of the Venture have been distributed as provided herein and a
certificate of cancellation of the Venture has been filed with the Secretary of
State of
Delaware.
10.2 APPLICATION OF ASSETS. In the event of dissolution, the Venture
shall conduct only such activities as are necessary to wind up its affairs,
including a sale of the assets of the Venture in an orderly manner, and the
assets of the Venture shall be applied in the manner and in the priority set
forth in Article 6. If the Manager in good faith determines that reserves are
required to be established for any contingent or unmatured liabilities of the
Venture, the amount of such reserves shall be subject to the reasonable approval
of the Investor, and such reserve shall be released and distributed as set forth
in Article 6 at such time as they are no longer reasonably required.
Notwithstanding the foregoing, in connection with any sale of assets of the
Venture, the Investor shall be unilaterally entitled to require that reasonable
reserves be set aside by the Venture for any contingent or unmatured liabilities
of the Venture, provided that such reserves shall be released and distributed as
set forth in Article 6 at such time as they are no longer required, in
Investor's reasonable judgment.
10.3 NOTICES. Any and all notices, consents, approvals and other
communications required or permitted under this Agreement shall be deemed
adequately given only if in writing delivered either in hand, by mail or by
expedited commercial carrier which provides evidence of delivery or refusal,
addressed to the recipient, postage prepaid and registered with return receipt
requested, if by mail, or with all freight charges prepaid, if by commercial
carrier. All notices and other communications shall be deemed to have been given
for all purposes of this Agreement upon the date of receipt or refusal. All such
notices and other communications shall be addressed to the Venturers at their
respective addresses set forth below or at such other addresses as any of them
may designate by notice to the other Venturers.
Notices to the Investor shall be addressed to:
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
26
and copies to:
▇▇▇▇▇▇▇ Procter LLP
Exchange Place
Boston, Massachusetts 02109-2881
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
27
Notices to the Operator shall be addressed to:
▇▇▇▇▇▇▇ Financial Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
and copies to:
▇▇▇▇▇▇, Pepper & Sheffelman PLLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
10.4 SUCCESSOR AND ASSIGNS. The agreements contained herein shall be
binding upon and inure to the benefit of the permitted successors and assigns of
the respective parties hereto.
10.5 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of
Delaware. In the event of any conflict
between any provision of this Agreement and any non-mandatory provision of the
Act, the provision of this Agreement shall control.
10.6 SEVERABILITY. If for any reason any provision of this Agreement is
determined to be invalid, or unenforceable in any circumstance, such invalidity
or unenforceability shall not impair the effectiveness of the other provisions
in this Agreement or, to the extent permissible, the effectiveness of such
provision in other circumstances.
10.7 COUNTERPARTS This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original of this Agreement
binding on the parties hereto.
10.8 ENTIRE AGREEMENT. This Agreement and the schedules attached hereto
constitute the entire agreement between the parties hereto with respect to the
transactions contemplated herein and supersede all prior understandings or
agreements between the parties.
10.9 TITLES. Titles of provisions of this Agreement are for descriptive
purposes only and shall not control or alter the meanings of this Agreement as
set forth in the text.
28
10.10 FURTHER ASSURANCES. The Venturers shall execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.
10.11 CONSENT TO JURISDICTION. The Operator consents to the personal
jurisdiction of the federal and state courts of the Commonwealth of
Massachusetts and agrees that service of process may be made upon the Operator
by any manner permitted by law. The Operator agrees not to assert in any action
brought in any such court that such action is brought in an inconvenient forum,
or otherwise make any objection to venue or jurisdiction.
10.12 AMENDMENTS. Except as otherwise provided in this Agreement, no
amendment or modification of this Agreement shall be effective unless reflected
in a document executed and delivered by all of the Venturers.
10.13 LIMITATION ON LIABILITY OF INVESTOR. The liability of each Investor
hereunder shall be limited solely to the interest of such Investor in the
Venture. The Operator agrees not to seek to recover against any person or entity
other than the Investor with respect to any claim or circumstance arising out of
or relating to the Venture or the Property and not to seek to recover on any
claim against an Investor against any asset other than such Investor's interest
in the Venture.
10.14 WAIVER OF JURY TRIAL. Each of the parties hereto waives trial by
jury in any litigation, suit or proceeding between them in any court with
respect to, in connection with or arising out of this Agreement, or the
validity, interpretation or enforcement thereof.
10.15 CONFIDENTIALITY. Without the Investor's prior approval, which
approval may be withheld in the Investor's absolute discretion, the Operator
shall not issue any press release or otherwise make any public announcement
naming an Investor or any of its direct or indirect beneficial owners, advisors
or other agents, or indicating any of their involvement with the Operator, the
Venture or the Property.
[Signatures appear on following page.]
29
Executed as of the date first set forth above.
INVESTORS:
BCMR Special, Inc., a Massachusetts corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
BCMR Seattle, A Limited Partnership, a Massachusetts
limited partnership
By: BCMR, Inc., a Massachusetts corporation, its general
partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
OPERATOR:
GFS Equity Management LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
30
SCHEDULE 1.1A
LEGAL DESCRIPTION OF PROPERTY -
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
See attached.
31
SCHEDULE 1.1B
LEGAL DESCRIPTION OF PROPERTY -
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇
See attached.
32
SCHEDULE 1.1C
LEGAL DESCRIPTION OF PROPERTY -
RIDGETOP APARTMENTS, SILVERDALE, WA
See attached.
33
SCHEDULE 1.1D
LEGAL DESCRIPTION OF PROPERTY -
WELLINGTON APARTMENTS, SILVERDALE, WA
See attached.
34
SCHEDULE 2.8
VENTURERS
NAME AND ADDRESS
OF VENTURER CONTRIBUTION
---------------------------------------------------------------------
GFS Equity Management LLC $ 0
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BCMR Seattle, A Limited Partnership $ 8,626,939
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
BCMR Special, Inc. $ 0
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
NAME AND ADDRESS
OF INITIAL MANAGER
------------------------------------
GFS Equity Management LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
35
SCHEDULE 3.1
CONTRACTS TO BE CONTRIBUTED TO THE VENTURE
Real Estate Sale Agreement (Washington Portfolio) dated July 11, 2002 between
ERP Operating Limited Partnership, an Illinois limited partnership,
EQR-Alderwood Limited Partnership, a Washington limited partnership, and
EQR-Wellington, L.L.C., a
Delaware limited liability company as Sellers, and
▇▇▇▇▇▇▇ Financial Services, Inc., a Washington corporation, as Purchaser, as
amended by that certain Reinstatement and First Amendment dated October ___,
2002.
36
SCHEDULE 4.2
FINANCIAL STATEMENTS
The following documentation will be furnished to each Investor within
twenty (20) days after the end of the calendar month in a format acceptable to
the Investor:
PROPERTY REPORTING PROVIDED BY MANAGER AS INDICATED IN THE PROPERTY MANAGEMENT
AGREEMENT.
1. Transmittal letter which highlights key operational, leasing and financial
matters including comments on the financial and physical condition of the
property. Included in the letter should be a brief discussion of any income
or expense line item with a negative variance for the month of greater than
5%.
2. Balance sheet prepared on an accrual basis reflecting the operating results
of the Property.
3. Income and expense statements prepared on an accrual basis reflecting the
operating results of the Property. Statement should contain actual and
budget current month and cumulative year-to-date figures along with a
variance column.
4. Current rent roll for the Property. Rent roll should include tenant name,
suite/apartment number, vacant suites, security deposits, prepaid rent,
lease expiration and other information specified by Owner.
5. A status report on capital improvements, tenant improvements and lease
commissions including an analysis of expenditures to date, costs to
complete and expected completion date.
6. A calculation of the Property Management Fee.
7. A cash flow statement reconciling from net income to net cash flow on a
monthly and year-to-date basis and a statement showing the calculation of
the monthly transfer of funds to the Owner pursuant to Section 4.6 of the
Property Management Agreement.
8. If the Property has commercial or retail tenants, include a calculation of
lease commissions paid during the month.
9. If the Property includes retail users, include a report of tenant sales and
percentage rent with a comparison against last year.
OWNERSHIP ENTITY REPORTING PROVIDED BY OPERATOR
10. Balance sheet prepared on an accrual basis reflecting the operating results
of the Venture and each Subsidiary.
11. Income and expense statements prepared on an accrual basis reflecting the
operating results of the Venture and each Subsidiary.
37
12. A statement showing the calculation of the Distributions pursuant to
Article 6 of the Venture's operating agreement.
38
SCHEDULE 4.3
FORM OF PROPERTY BUDGET
See attached.
39
SCHEDULE 4.4
INSURANCE REQUIREMENTS
I. Builder's Risk "All Risk" for Buildings under Construction/Renovation
Through the Completion Date, or such later date as may be required by any Agency
or any Lender, the Operator shall cause to maintain "all risk" builder's risk
insurance in favor of the Company and the General Contractor in an amount not
less than the greater of (i) the full replacement value of the Apartment Complex
and coverage for new construction or (ii) such other amount as shall be required
by any Agency or Lender. For those properties under renovation, the limit of
insurance must be equal to the value of the building(s) after the demolition
portion is completed, plus full construction/rehabilitation value including cost
of labor with soft cost contingency. This coverage shall include flood (if
applicable); earthquake (if applicable); hail, wind and hurricane (if
applicable); and boiler and machinery coverage for all properties that have a
central boiler or heating system, sprinklers, central air conditioning,
generators, other machinery and equipment and/or elevators.
II. Comprehensive General Liability (Commercial General Liability) for
Buildings under Construction/Renovation
The Operator shall cause to be maintained commercial general liability insurance
in favor of the Company and the General Contractor, during the construction
period, in an amount not less than $2,000,000 in the general aggregate (per
project) , $1,000,000 products and completed operations aggregate, $1,000,000
each occurrence (combined single limit), $50,000 fire damage and $5,000 medical
expenses
Coverage for hostile fire must be included/endorsed onto policy with no points
of exclusion.
III. Worker's Compensation and Employer's Liability
The Operator shall cause to be maintained worker's compensation and employer's
liability insurance in favor of the General Contractor, during the construction
period, in an amount required by the State's laws governing such insurance.
IV. Comprehensive Automobile Liability for Buildings under
Construction/Renovation
The Operator shall cause to be maintained comprehensive automobile coverage,
including any automobile liability, in favor of the Company and the General
Contractor in an amount not less than $1,000,000 (combined single limit).
V. Excess or Umbrella Liability for Buildings under Construction/Renovation
The Operator shall cause to be maintained excess or umbrella liability insurance
in favor of the Company and the General Contractor in an amount not less than
$4,000,000 per occurrence and $4,000,000 in the aggregate. Blanket policies will
be evaluated on a case-by-case basis.
40
VI Architect's Errors and Omissions
The Architect shall maintain non-project-specific errors and omissions insurance
under commercial general liability coverage in an amount equal to the greater of
$250,000 or 10% of the construction contract amount.
VII Comprehensive Casualty (All Risk Property Coverage) for
Completed/Operational Buildings:
The Operator shall cause to be maintained comprehensive casualty insurance
including, but not limited to; 100% Replacement Cost coverage with an Agreed
Amount Endorsement and a deductible no more than $5,000 for properties of 100
units or less and $10,000 for properties of more than 100 units (a blanket
policy is acceptable as long as the policy includes a Stated Value and Agreed
Amount Endorsement); Loss of Rents coverage in an amount equal to the actual
loss sustained on rents and extra expense; loss caused by fire; earthquake (if
applicable); hail, wind and hurricane; flood (if applicable); and boiler and
machinery coverage for all properties that have a central boiler or heating
system, sprinklers, central air conditioning, generators, other machinery and
equipment and/or elevators.
VIII Comprehensive General Liability (Commercial General Liability) for
Completed/Operational Buildings:
The Operator shall cause to be maintained commercial general liability insurance
in favor of the Company, in an amount not less than $2,000,000 in the general
aggregate (per project), $1,000,000 products and completed operations aggregate,
$1,000,000 each occurrence (combined single limit), $50,000 fire damage and
$5,000 medical expenses.
Coverage for hostile fire must be included/endorsed onto policy with no points
of exclusion.
IX. Comprehensive Automobile Liability for Completed/Operational Buildings:
The Operator shall cause to be maintained comprehensive automobile coverage,
including all owned autos, hired autos and non-owned autos in favor of the
Company in an amount not less than $1,000,000 (combined single limit).
X. Excess or Umbrella Liability for Completed/Operational Buildings:
The Operator shall cause to be maintained excess or umbrella liability insurance
in favor of the Company in an amount not less than $4,000,000 per occurrence and
$4,000,000 in the aggregate. Blanket policies will be evaluated on a
case-by-case basis.
XI. Management Agent
The Management Agent shall maintain for the term of the Management Agreement,
worker's compensation insurance in accordance with the State's laws governing
such insurance and a fidelity bond in the amount of not less than six (6) months
of the Apartment Complex's projected gross rent.
XII. General Requirements
41
All the policies required above must be issued by insurance carriers that are
currently rated by Best as A-7 or better.
Throughout the term of the Company, the Operator shall provide copies of all
such insurance certificates to the Investor Manager promptly after their receipt
thereof or upon request but no less frequently than annually.
30 days prior to the expiration date for any such insurance policy, the Operator
shall deliver to the Investor Manager a copy of the comparable new or
replacement insurance certificate(s), including all endorsements, exhibits and
riders thereto.
The Operator shall cause the applicable insurer to name the Investors as
"additional insureds" on each insurance policy and as "loss payees" on each
Comprehensive Casualty and/or Builder's Risk policy.
In the event that the Company has a property insurance claim in excess of
$50,000, then the Investor shall have the right to approve the Operator's
intended use of the insurance proceeds.
42
SCHEDULE 4.5
BUSINESS PLAN
To be attached.
43
SCHEDULE 6.3
EXAMPLE CALCULATION OF RETURN
See attached.
44
SCHEDULE 8.3
FORM OF PROPERTY MANAGEMENT AGREEMENT
See attached.
45
SCHEDULE 8.12
COMPETING PROJECTS
OWNER PROPERTY
▇▇▇▇▇▇▇/OTHER NAME ADDRESS CITY STATE ZIP CODE
---------------------------------------------------------------------------------------------------------------------------------
NORTHEND/LYNNWOOD
Other Amberwood Village ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Kingsbrook Apartments ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Marthas Landing ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Northpointe ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Whispering Pines ▇▇▇▇▇ ▇▇▇▇ ▇▇▇. ▇. ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ Maple ▇▇▇▇ Apartments ▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Brentwood Apartments ▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Deer Creek Apartments ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Forest Park Apartments ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Mill Pointe ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Pacific Bay Club Apartments ▇▇▇▇ ▇▇▇ ▇▇▇. ▇. ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other RainTree Village ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ On The Green @ Harbour Pt ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
BREMERTON/SILVERDALE
Other Sunn Fjord ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ #▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Village Fair Apartments ▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Crestwood ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
KENT
Other Bend of the River ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Forest Creek Apartments ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Island Park Apartments ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Jonathan's Landing ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Lake Meridian ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
46
OWNER PROPERTY
▇▇▇▇▇▇▇/OTHER NAME ADDRESS CITY STATE ZIP CODE
---------------------------------------------------------------------------------------------------------------------------------
Other Royal Firs ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ Signature Pointe Apartments ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Other Sterling Ridge ▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Other ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇ ▇▇▇▇▇
Other White Dove Pointe ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇ ▇▇▇▇▇
47
SCHEDULE 8.13
CONTRACTS AND INSTRUMENTS AUTHORIZED TO BE ENTERED INTO
ALL DOCUMENTS ARE DATED AS OF THE DATE HEREOF UNLESS OTHERWISE INDICATED
1. Property Management Agreement by and between GFS Alderwood LLC and Pinnacle
Realty Management Company, dated of even date herewith.
2. Property Management Agreement by and between GFS Ridgegate LLC and Pinnacle
Realty Management Company, dated of even date herewith.
3. Property Management Agreement by and between GFS Ridgetop LLC and Pinnacle
Realty Management Company, dated of even date herewith.
4. Property Management Agreement by and between GFS Wellington LLC and
Pinnacle Realty Management Company, dated of even date herewith.
5. Construction Management Agreement by and between GFS Alderwood LLC and GFS
Equity Management LLC, dated of even date herewith.
6. Construction Management Agreement by and between GFS Ridgegate LLC and GFS
Equity Management LLC, dated of even date herewith.
7. Construction Management Agreement by and between GFS Ridgetop LLC and GFS
Equity Management LLC, dated of even date herewith.
8. Construction Management Agreement by and between GFS Wellington LLC and GFS
Equity Management LLC, dated of even date herewith.
9. Mortgage Loan Documents from each Subsidiary in favor of ▇▇▇▇▇▇ ▇▇▇, all
dated of even date herewith:
a. Fixed Facility Note (▇▇▇▇▇▇ Mae Form)
b. Multifamily Deed of Trust, Assignment of Rents and Security Agreement
(▇▇▇▇▇▇ ▇▇▇ Form 4048)
c. Guaranty (▇▇▇▇▇▇ Mae Form/Exhibit M to Loan Agreement)
d. Assignment of Collateral Agreements and Other Loan Documents (▇▇▇▇▇▇
Mae Form 4509)
e. Limited Liability Company Certification (BMF Form 02-052)
f. W-9 (Borrower)
g. Replacement Reserve and Security Agreement (▇▇▇▇▇▇ ▇▇▇ Form 4506A)
h. Capital Improvement Escrow Agreement (▇▇▇▇▇▇ Mae Form 4505)
i. Borrower's Certification and Agreement (BMF Form 03-008)
j. Borrower's Servicing Certification (BMF Form 03-044)
k. Borrower's Insurance Certification (BMF Form 02-032)
Assignment of Management Agreement (▇▇▇▇▇▇ ▇▇▇ Form 4508)
l. Agreement to Amend or Comply (▇▇▇▇▇▇ Mae Form 4530)
m. Borrower's Certification of Compliance (▇▇▇▇▇▇ ▇▇▇ Form 4518)
n. Interest Rate Cap Agreement
o. UCC-1 Financing Statements
10. Mezzanine Loan Documents in favor Berkshire/WAFRA Mezzanine Debt Investors
Foreign Fund, all dated of even date herewith:
a. Loan Agreement
b. Mezzanine Note
c. Guaranty and Equity Pledge
d. UCC-1 Financing Statement
e. Assignment and Subordination of Management Agreement between Mezz
Lender, Mezz Borrower and Property Manager
f. Environmental Indemnity
g. Intercreditor Agreement
h. Subordination of Asset Management Fee
11. Assignment of Purchase and Sale Agreement from ▇▇▇▇▇▇▇ Financial Services,
Inc. to BC-GFS LLC
12. Assignment of Purchase and Sale Agreement from BC-GFS LLC to GFS Alderwood
LLC
13. Assignment of Purchase and Sale Agreement from BC-GFS LLC to GFS Ridgegate
LLC
14. Assignment of Purchase and Sale Agreement from BC-GFS LLC to GFS Ridgetop
LLC
15. Assignment of Purchase and Sale Agreement from BC-GFS LLC to GFS Wellington
LLC
16. Loan Agreement between GFS Alderwood LLC, GFS Ridgegate LLC, GFS Ridgetop
LLC, GFS Wellington LLC, ▇▇▇▇▇▇▇ Financial Services, Inc. and Berkshire
Mortgage Finance Limited Partnership for ▇▇▇▇▇▇▇ credit facility of up to
$200,000,000
2