EXHIBIT 10.21
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
HCPI/UTAH II, LLC
a Delaware limited liability company
Dated as of August ___, 2001
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TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINED TERMS....................................................................................1
ARTICLE 2. ORGANIZATIONAL MATTERS..........................................................................20
Section 2.1 Formation....................................................................20
Section 2.2 Name.........................................................................20
Section 2.3 Registered Office and Agent; Principal Place of Business; Other Places
of Business...............................................................20
Section 2.4 Power of Attorney............................................................21
Section 2.5 Term.........................................................................22
ARTICLE 3. PURPOSE.........................................................................................22
Section 3.1 Purpose and Business.........................................................22
Section 3.2 Powers.......................................................................22
Section 3.3 Specified Purposes...........................................................23
Section 3.4 Representations and Warranties by the Members; Disclaimer of Certain
Representations...........................................................23
ARTICLE 4. CAPITAL CONTRIBUTIONS...........................................................................25
Section 4.1 Capital Contributions of the Initial Members.................................25
Section 4.2 Additional Members...........................................................25
Section 4.3 Loans........................................................................25
Section 4.4 Additional Funding and Capital Contributions.................................25
Section 4.5 No Interest; No Return.......................................................26
ARTICLE 5. DISTRIBUTIONS...................................................................................26
Section 5.1 Requirement and Characterization of Distributions............................26
Section 5.2 Distributions in Kind........................................................27
Section 5.3 Amounts Withheld.............................................................27
Section 5.4 Distributions Upon Liquidation...............................................28
Section 5.5 Restricted Distributions.....................................................28
Section 5.6 Distributions of Proceeds from Sale of Real Properties and Refinancing
Debt......................................................................28
ARTICLE 6. ALLOCATIONS.....................................................................................29
Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss..................29
Section 6.2 General Allocations..........................................................30
Section 6.3 Additional Allocation Provisions.............................................31
Section 6.4 Tax Allocations..............................................................33
Section 6.5 Other Provisions.............................................................33
Section 6.6 Amendments to Allocation to Reflect Issuance of Additional Membership
Interests.................................................................34
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ARTICLE 7. MANAGEMENT AND OPERATION OF BUSINESS............................................................34
Section 7.1 Management...................................................................34
Section 7.2 Certificate of Formation.....................................................38
Section 7.3 Restrictions on Managing Member's Authority..................................38
Section 7.4 Compensation of the Managing Member..........................................43
Section 7.5 Other Business of Managing Member............................................44
Section 7.6 Contracts with Affiliates....................................................45
Section 7.7 Indemnification..............................................................45
Section 7.8 Liability of the Managing Member.............................................47
Section 7.9 Other Matters Concerning the Managing Member.................................47
Section 7.10 Title to Company Assets......................................................48
Section 7.11 Reliance by Third Parties....................................................48
ARTICLE 8. RIGHTS AND OBLIGATIONS OF MEMBERS...............................................................49
Section 8.1 Limitation of Liability......................................................49
Section 8.2 Managing of Business.........................................................49
Section 8.3 Outside Activities of Members................................................49
Section 8.4 Return of Capital............................................................50
Section 8.5 Rights of Non-Managing Members Relating to the Company.......................50
Section 8.6 Exchange Rights..............................................................51
Section 8.7 Fiduciary Duties.............................................................53
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS..........................................................54
Section 9.1 Records and Accounting.......................................................54
Section 9.2 Fiscal Year..................................................................54
Section 9.3 Reports......................................................................54
Section 9.4 Cooperation Regarding Tax Matters Relating to Contributed Properties.........54
ARTICLE 10. TAX MATTERS....................................................................................55
Section 10.1 Preparation of Tax Returns...................................................55
Section 10.2 Tax Elections................................................................55
Section 10.3 Tax Matters Partner..........................................................56
Section 10.4 Organizational Expenses......................................................56
ARTICLE 11. TRANSFERS AND WITHDRAWALS......................................................................56
Section 11.1 Transfer.....................................................................56
Section 11.2 Transfer of Managing Member's Membership Interest............................56
Section 11.3 Non-Managing Members' Rights to Transfer.....................................57
Section 11.4 Substituted Members..........................................................59
Section 11.5 Assignees....................................................................59
Section 11.6 General Provisions...........................................................59
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ARTICLE 12. ADMISSION OF MEMBERS...........................................................................61
Section 12.1 Admission of Successor Managing Member.......................................61
Section 12.2 Admission of Additional Members..............................................61
Section 12.3 Amendment of Agreement and Certificate.......................................62
Section 12.4 Limitation on Admission of Members...........................................62
ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION.......................................................63
Section 13.1 Dissolution..................................................................63
Section 13.2 Exchange of Non-Managing Member Units........................................64
Section 13.3 Winding Up...................................................................64
Section 13.4 Deemed Distribution and Recontribution.......................................65
Section 13.5 Rights of Members............................................................66
Section 13.6 Notice of Dissolution........................................................66
Section 13.7 Cancellation of Certificate..................................................66
Section 13.8 Reasonable Time for Winding-Up...............................................66
Section 13.9 Liability of Liquidator......................................................66
ARTICLE 14. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; AMENDMENTS; MEETINGS...........................67
Section 14.1 Procedures for Actions and Consents of Members...............................67
Section 14.2 Amendments...................................................................67
Section 14.3 Meetings of the Members......................................................67
ARTICLE 15. GENERAL PROVISIONS.............................................................................68
Section 15.1 Addresses and Notice.........................................................68
Section 15.2 Titles and Captions..........................................................68
Section 15.3 Pronouns and Plurals.........................................................68
Section 15.4 Further Action...............................................................69
Section 15.5 Binding Effect...............................................................69
Section 15.6 Creditors....................................................................69
Section 15.7 Waiver.......................................................................69
Section 15.8 Counterparts.................................................................69
Section 15.9 Applicable Law...............................................................69
Section 15.10 Entire Agreement.............................................................69
Section 15.11 Invalidity of Provisions.....................................................70
Section 15.12 Limitation to Preserve REIT Status...........................................70
Section 15.13 No Partition.................................................................71
Section 15.14 Non-Managing Member Representative...........................................71
Exhibit A Member Information............................................................................A-1
Exhibit B Notice of Exchange............................................................................B-1
Exhibit C Reimbursement Agreement.......................................................................C-1
Schedule 1.1 Reduced Tax Protection Period Property
Schedule 7.3 Existing Indebtedness
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
HCPI/UTAH II, LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
(this "Agreement") is made and entered into as of August __, 2001, by and among
Health Care Property Investors, Inc., a Maryland corporation (the "Managing
Member"), and the Persons whose names are set forth on Exhibit A as attached
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hereto (the "Non-Managing Members" and together with the Managing Member, the
"Members"), for the purpose of forming HCPI/Utah II, LLC, a Delaware limited
liability company (the "Company").
WHEREAS, the Managing Member, the Company, and each of the
parties identified on the signature page of that certain Contribution Agreement
dated as of the date hereof (the "Contribution Agreement") (collectively, the
"Transferor"), have entered into the Contribution Agreement, providing for the
contribution of certain assets to, and the acquisition of certain interests in,
the Company;
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Contribution Agreement that the parties hereto enter into
this Agreement;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE 1.
DEFINED TERMS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Accounting Firm" has the meaning set forth in Section 7.3.H
hereof.
"Act" means the Delaware Limited Liability Company Act, as it
may be amended from time to time, and any successor to such statute.
"Actions" has the meaning set forth in Sectign 7.7 hereof.
"Additional Funds" has the meaning set forth in Section 4.4.A
hereof.
"Additional Member" means a Person admitted to the Company as
a Member pursuant to Section 4.2 hereof.
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
decrease such deficit by any amounts that such Member
is obligated to restore pursuant to this Agreement or by operation of
law upon liquidation of such Member's Membership Interest or is deemed
to be obligated to restore pursuant to Regulation Section 1.704-1(b)
(2)(ii)(c) or the penultimate sentence of each of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
increase such deficit by the items described in
Regulations Section 1.704-1(b) (2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account Deficit" is intended to
comply with the provisions of Regulations Section 1.704-1(b) (2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjustment Factor" means 1.0; provided, however, that in the
event that: the Managing Member (i) declares or pays a dividend on its
outstanding REIT Shares in REIT S`ares or makes a distribution to all Members of
its outstanding REIT Shares in REIT Shares, (ii) splits or subdivides its
outstanding REIT Shares or (iii) effects a reverse stock split or otherwise
combines its outstanding REIT Shares into a smaller number of REIT Shares, the
Adjustment Factor shall be adjusted by multiplying the Adjustment Factor in
effect immediately prior to such adjustment by a fraction, (1) the numerator of
which shall be the number of REIT Shares issued and outstanding on the record
date for such dividend, distribution, split, subdivision, reverse split or
combination (assuming for such purposes that such dividend, distribution, split,
subdivision, reverse split or combination has occurred as of such time) and (2)
the denominator of which shall be the actual number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, split,
subdivision, reverse split or combination (assuming for such purposes that such
dividend, distribution, split, subdivision, reverse split or combination has not
occurred as of such time). Any adjustments to the Adjustment Factor shall become
effective immediately after the effective date of such event, retroactive to the
record date, if any, for such event.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly Controlling or Controlled by or under common Control with
such Person.
"Aggregate Sharing Amount" means$ with respect to any taxable
disposition of a Real Property, an amount equal to the excess, if any, of (i)
the Property Appreciation with respect to all Real Properties being sold or
previously sold by the Company; over (ii) the Unit Appreciation with respect to
all Real Properties being sold or previously sold by the Company.
"Agreement" means this Amended and Restated Limited Liability
Company Agreement of HCPI/Utah II, LLC, as it may be amended, supplemented or
restated from time to time.
"Appraisal" means, with respect to any assets, the written
opinion of an independent third party experienced in the valuation of similar
assets in the general location of the property being appraised, selected by the
Managing Member in good faith. Such opinion may be in the form of an opinion by
such independent third party that the value for such property or asset as set by
the Managing Member is fair, from a financial point of view, to the Company.
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"Appraised Value" means, with respect to any asset, including
any Contributed Property, the value of such asset as determined by Appraisal.
"Assignee" means a Person to whom one or more LLC Units have
been Transferred in a manner permitted under this Agreement, but who has not
become a Substituted Member, and who has the rights set forth in Section 11.5
hereof.
"Available Cash" means, with respect to any period for which
such calculation is being made:
the sum, without duplication, of:
the Company's net income or net loss (as the
case may be) for such period determined in accordance with
GAAP,
depreciation and all other noncash charges
to the extent deducted in determining net income or net loss
for such period pursuant to the foregoing clause (a)(1),
the amount of any reduction in reserves of
the Company (including, without limitation, reductions
resulting because the Managing Member determines such amounts
are no longer necessary), and
all other cash received (including, but not
limited to, Capital Contributions, amounts previously accrued
as net income and amounts of deferred income but excluding any
net amounts borrowed by the Company for such period) that was
not included in determining net income or net loss for such
period pursuant to the foregoing clause (a)(1);
less the sum, without duplacation, of:
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all principal debt payments made during such
period by the Company,
capital expenditures made by the Company
during such period,
all other expenditures and payments not
deducted in determining net income or net loss for such period
pursuant to the foregoing clause (a)(1) (including amounts
paid in respect of expenses previously accrued),
any amount included in determining net
income or net loss for such period pursuant to the foregoing
clause (a)(1) that was not received by the Company during such
period, and
the amount of any increase in reserves
(including, without limitation, working capital reserves)
established during such period that the Managing Member
determines are necessary or appropriate in its sole and
absolute discretion.
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Notwithstanding the foregoing, Available Cash shall not include (i) any cash
received or reductions in reserves, or take into account any disbursements made,
or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Company, (ii) Disposition Proceeds or (iii)
the proceeds of Refinancing Debt.
"Bankruptcy Law" meafs Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Beneficial Ownership" means ownership of REIT Shares by a
Person who is or would be treated as an owner of such REIT Shares either
actually or constructively through the application of Section 544 of the Code,
as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficially Own,"
"Beneficially Owned," "Beneficially Owns" and "Beneficial Owner" shall have the
correlative meanings.
"Built-in Gain" means the excess of the gross fair market
value of one or more of the Real Properties or Successor Properties over the
adjusted tax basis of such property or properties (as the case may be) for
federal income tax purposes, as determined as of the Effective Date, as reduced
from time to time in accordance with applicable provisions of the Code and
Regulations.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Los Angeles, California or Salt Lake
City, Utah are authorized or required by law to close.
"Call Notice" means a written notice to the Non-Managing
Members informing them of the Mafaging Member's election to call their
Non-Managing Member Units pursuant to Section 13.2 hereof.
"Capital Account" means, with respect to any Member, the
Capital Account maintained for such Member on the Company's books and records in
accordance with the following provisions:
To each Member's Capital Account, there shall be
added such Member's Capital Contributions, such Member's allocable
share of Net Income and any items of income or gain specially allocated
pursuant to Section 6.3 hereof, and the amount of any Company
liabilities assumed by such Member or that are secured by any property
distributed to such Member.
From each Member's Capital Account, there shall be
subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Member pursuant to any provision of this Agreement,
such Member's allocable share of Net Loss and any items of loss or
deductions specially allocated pursuant to Section 6.3 hereof, and the
amount of any liabilities of such Member assumed by the Company or that
are secured by any property contributed by such Member to the Company.
In the event any interest in the Company is
Transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to
the extent that it relates to the Transferred interest.
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In determining the principal amgunt of any liability
for purposes of subsections (a) and (b) above there shall be taken into
account Code Section 752(c) and any other applicable provisions of the
Code and Regulations.
The provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations
Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied
in a manner consistent with such Regulations. If the Managing Member
shall determine that it is prudent to modify the manner in which the
Capital Accounts are maintained in order to comply with such
Regulations, the Managing Member may make such modification provided
that such modification will not change the amounts distributable to any
Member without such Member's Consent. The Managing 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 1.704-1(b)
(2)(iv)(q) and (ii) make any appropriate modifications in the event
that unanticipated events might otherwise cause this Agreement not to
compdy with Regulations Section 1.704-1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any Member, the
amount of money and the initial Gross Asset Value of any Contributed Property
that such Member contributes to the Company pursuant to Section 4.1, Section 4.2
or Section 4.4 hereof.
"Cash Amount" means an amount of cash equal to the product of
(a) the Value of a REIT Share and (b) the REIT Shares Amount determined as of
the applicable Valuation Date.
"Certificate" means the Certificate of Formation of the
Company filed in the office of the Secretary of State of the State of Delaware,
as amended from time to time in accordance with the terms hereof and the Act.
"Charter" means the Articles of Incorporation of the Managing
Member, as amended, supplemented or restated from time to time.
"Closing Price" means the closing price of a REIT Share on the
New York Stock Exchange.
"Code" means the Internal Revenue Code of 1986, as amended and
in effect from time to time or any successor statute thereto, 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.
"Company" means the limited liability company formed under the
Act and pursuant to this Agreement, and any successor thereto.
"Company Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b) (2) for the phrase "partnership minimum gain,"
and the amount of Company Minimum Gain, as well as any net increase or decrease
in Company Minimum Gain, for a Fiscal Year shall be determined in accordance
with the rules of Regulations Section 1.704-2(d).
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"Consent" means the consent to, approval of, or vote on a
proposed action by a Member given in accordance with Article 14 hereof.
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"Consent of the Non-Managing Members" means the Consent of a
Majority in Interest of the Non-Managing Members, which Consent shall be
obtained prior to the taking of any action for which it is required by this
Agreement and, except as otherwise provided in this Agreement, may be given or
withheld by a Majority in Interest of the Non-Managing Members, in their
reasonable discretion.
"Constructive Ownership" means ownership of REIT Shares, or
any other interest in an entity by a Person who is or would be treated as an
owner thereof either actually or constructively through the application of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructively Own," "Constructively Owned," "Constructively Owns" and
"Constructive Owner" shall have the correlative meanings.
"Contribution Agreement" means the Contribution Agreement of
even date herewith, by and between the Managing Member, the Company and the
parties identified on the signature page thereto.
"Control" means, when used with respect to any Person, the
possession directly or indirectly, of the power to direct or cause the direction
of the management and policies of that Person, whether through the ownership of
voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" have correlative meanings.
"Custodian" means any receiver, trustee, assignee, liquidator
or other similar official under any Bankruptcy Law.
"Debt" means, as to any Person, as of any date of
determination, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services; (ii) all amounts owed by such
Person to banks or other Persons in respect of reimbursement obligations under
letters of credit, surety bonds and other similar ifstruments guaranteeing
payment or other performance of obligations by such Person; (iii) all
indebtedness for borrowed money or for the deferred purchase price of property
or services secured by any lien on any property gwned by such Person, to the
extent attributable to such Person's interest in such property, even though such
Person has not assumed or become liable for the payment thereof; and (iv) lease
obligations of such Person that, in accordance with GAAP, should be capitalized.
"Depreciation" means, for each Fiscal Year or other applicable
period, an amount equal to the federal income tax depreciation, amortization or
other cost recovery deduction allowable with respect to an asset for such year
or other period, except that, if the Gross Asset Value of an asset differs from
its adjusted basis for federal income tax purposes at the beginning of such year
or period, Depreciation shall be in an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period 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 or
period is zero, Depreciation shall be determined with
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reference to such beginning Gross Asset Value using any reasonable method
selected by the Managing Member.
"Development Agreement" means the Development Agreement of
even date herewith, by and between the Company, as "Owner", and The ▇▇▇▇▇
Company, L.C., a Utah limited liability company.
"Dissolution Protection Period" means the period beginning on
the Effective Date and ending either (i) on the date on which the Initial
Threshold Test has been satisfied, if the Initial Threshold Test is satisfied at
any time prior to the third (3rd) anniversary of the Effective Date or (ii) on
the date on which the Subsequent Threshold Test is satisfied if the Initial
Threshold Test is not satisfied at any time prior to the third (3rd) anniversary
of the Effective Date.
"Disposition Proceeds" means the net proceeds (including a
reduction for any amount used for the repayment of any Debt and the payment of
any costs related thereto) received by the Company upon the taxable disposition
of some, but not all, of the Real Properties.
"Effective Date" means the date on which the transactions
contemplated by the Contribution Agreement to be consummated on the Initial
Closing Date are consummated at which time the contributions set forth on
Exhibit A that are to be effective on the Effective Date shall become effective.
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With respect to any future contributions, the Effective Date shall be the date
that such contributions are completed.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excess LLC Units" means any LLC Units held by a Non-Managing
Member to the extent that, if such LLC Units were exchanged for the REIT Shares
Amount pursuant to Section 8.6 hereof, such Non-Managing Member would
Beneficially Own or Constructively Own REIT Shares in excess of the Ownership
Limit or otherwise in violation of the Charter.
"Exchange" has the meaning set forth in Section 8.6.A hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Existing Indebtedness" has the meaning set forth in Section
7.3E(3) hereof.
"First Exchange Date" means the "Second Exchange Date" as
defined in that certain Amended and Restated Limited Liability Company Agreement
of HCPI/Utah, LLC dated as of January 20, 1999, as amended on June 30, 1999,
November 12, 1999, January 12, 2000, March 1, 2000, December 1, 2000, March 16,
2001, and March 30, 2001.
"First Traunch Non-Managing Member Units" has the meaning set
forth in Section 8.6.A hereof.
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"Fiscal Year" means the fiscal year of the Company, which
shall be the calendar year.
"Flip-Over Event" means the occurrence of a merger of the
Managing Member with and into another Person or the consolidation of the
Managing Member with another Person, or the merger of another Person with and
into the Managing Member or the sale or transfer of assets of the Managing
Member to another Person if, as a result of such merger, consolidataon or
transfer of assets the holder of Rights issued under the Rights Agreement would
be entitled under Section 13 of the Rights Agreement (or a comparable provision
in the event the Rights Agreement is amended) to purchase shares of common stock
of such other Person (including the Managing Member as the successor to such
other Person or as the surviving corporation) (the "Successor Person").
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be its fair market value,
as agreed to by such Member and the Managing Member, and set forth on
Exhibit A with respect to that Member.
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The Gross Asset Values of all Company assets
immediately prior to the occurrence of any event described in clause
(1), clause (2), clause (3), or clause (4) hereof shall be adjusted to
equal their respective gross fair market values, as determined by the
Managing Member using such reasonable method of valuation as it may
adopt, as of the following times:
the acquisition of an additional interest in
the Company (other than in connection with the execution of
this Agreement but including, without limitation, acquisitions
pursuant to Section 4.2 hereof or contributions or deemed
contributions by the Managing Member pursuant to Section 4.4
hereof) by a new or existing Member in exchange for more than
a de minimis Capital Contribution, if the Managing Member
reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the
Members in the Company;
the distribution by the Company to a Member
of more than a de minimis amount of Company property as
consideration for an interest in the Company, if the Managing
Member reasonably determines that such adjustment is necessary
or appropriate to reflect the relative economic interests of
the Members in the Company;
the liquidation of the Company within the
meaning of Regulations Section 1.704-1(b) (2)(ii)(g); and
at such other times as the Managing Member
shall reasonably determine necessary or advisable in order to
comply with Regulations Sections 1.704-1(b) and 1.704-2.
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The Gross Asset Value of any Company asset
distributed to a Member shall be the gross fair market value of such
asset on the date of distribution as determined by the distributee and
the Managing Member, provided that, if the distributee is the Managing
Member or if the distributee and the Managing Member cannot agree on
such a determination, such gross fair market value shall be determined
by Appraisal.
At the election of the Managing Member, the Gross
Asset Values of Company assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant
to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b) (2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted
pursuant to this subsection (d) to the extent that the Managing Member
reasonably determines that an adjustment pursuant to subsection (b)
above is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this subsection
(d).
If the Gross Asset Value of a Company asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such
asset for purposes of computing Net Income and Net Loss.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such entity as may be in general use
by significant segments of the United States accounting profession, which are
applicable to the facts and circumstances on the date of determination.
"HCPI/▇▇▇▇▇▇▇▇▇" shall mean HCPI/▇▇▇▇▇▇▇▇▇, LLC, a Delaware
limited liability company and Subsidiary of the Company.
"Incapacity" or "Incapacitated" means, (i) as to any Member
who is an individual, death, total physical disability or entry by a court of
competent jurisdiction adjudicating such Member incompetent to manage his or her
person or his or her estate; (ii) as to any Member that is a corporation or
limited liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or limited liability company or the revocation
of its charter; (iii) as to any Member that is a partnership, the dissolution
and commencement of winding up of the partnership; (iv) as to any Member that is
an estate, the distribution by the fiduciary of the estate's entire interest in
the Company; (v) as to any trustee of a trust that is a Member, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Member, the bankruptcy of such Member. For purposes of this definition,
bankruptcy of a Member shall be deemed to have occurred when (a) the Member
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Member under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt
or insolvent, or a final and non-appealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the
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Member, (c) the Member executes and delivers a general assignment for the
benefit of the Member's creditors, (d) the Member files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against the Member in any proceeding of the nature described in clause
(b) above, (e) the Member seeks, consents to or acquiesces in the appointment
of a trustee, receiver or liquidator for the Member or for all or any
substantial part of the Member's properties, (f) any proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within 120
days after the commencement thereof, (g) the appointment without the Member's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within 90 days of such appointment, or (h) an appointment
referred to in clause (g) above is not vacated within 90 days after the
expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding
by reason of its status as (a) the Managing Member or (b) a director of the
Managing Member or an officer or employee of the Company or the Managing Member
and (ii) such other Persons (including Affiliates of the Managing Member or the
Company) as the Managing Member may designate from time to time (whether before
or after the event giving rise to potential liability), in its sole and absolute
discretion.
"Initial Closing Date" has the meaning set forth in the
Contribution Agreement.
"Initial Non-Managing Members" means the Non-Managifg Members
who acquired their Non-Managing Member Units in exchange for the Real Properties
or the one hundred percent (100%) interest in HCPI/▇▇▇▇▇▇▇▇▇.
"Initial Threshold Test" means a test which will be satisfied
on the date on which ninety percent (90%) of the LLC Units issued by the Company
to the Initial Non-Managing Members have been disposed of pursuant to a Taxable
Disposition or series of Taxable Dispositions.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"Liquidating Event" has the meaning set forth in Section 13.1
hereof.
"Liquidator" has the meaning set forth in Section 13.3.A
hereof.
"LLC Distribution Date" means the date established by the
Managing Member for the payment of actual distributions declared by the Managing
Member pursuant to Sections 5.1 and 5.2, which date shall be the same as the
date established by the Managing Member for the payment of dividends to holders
of REIT Shares.
"LLC Record Date" means the record date established by the
Managing Member for the distribution of Available Cash pursuant to Section 5.1
hereof, which record date shall be the same as the record date established by
the Managing Member for a dividend to holders of REIT Shares.
10
"LLC Units" means the Managing Member Units and the
Non-Managing Member Units, collectively.
"Majority in Interest of the Non-Managing Members" means those
Non-Managing Members (other than the Managing Member in its capacity as a holder
of Non-Managing Member Units) holding in the aggregate more than 50% of the
aggregate outstanding Non-Managing Member Units (other than those held by the
Managing Member).
"Majority of Remaining Members" means Non-Managing Members
owning a majority of the Non-Managing Member Units held by Non-Managing Members.
"Make-Whole Payment" has the meaning set forth in Section
7.3.G hereof.
"Managing Member" means Health Care Property Investors, Inc.,
a Maryland corporation, in its capacity as a Member, or any successor Managing
Member designated pursuant to the terms of this Agreement.
"Managing Member Shortfall" has the meaning set forth in
Section 5.1.A(2) hereof.
"Managing Member Unit" means a single unit of Membership
Interest of the Managing Member issued pursuant to Article 4 hereof, as the same
may be modified from time to time as provided in this Agreement. The ownership
of Managing Member Units may (but need not in the sole and absolute discretion
of the Managing Member) be evidenced in the form of a certificate for Managing
Member Units.
"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) wath respect to "partner
nonrecourse debt minimum gain."
"Member Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b) (4) for the phrase "partner nonrecourse debt."
"Member Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2) for the phrase "partner nonrecourse
deductions," and the amount of Member Nonrecourse Deductions with respect to a
Member Nonrecourse Debt for a Fiscal Year shall be determined in accordance with
the rules of Regulations Section 1.704-2(i)(2).
"Members" means the Persons owning Membership Interests,
including the Managing Member, Non-Managing Members and any Additional and
Substitute Members, named as Members in Exhibit A attached hereto, which Exhibit
--------- -------
A may be amended from time to time.
-
"Membership Interest" means an ownership interest in the
Company representing a Capital Contribution by a Member and includes any and all
benefits to which the holder of such a Membership Interest may be entitled as
provided if this Agreement, together with all obligatigns of such Person to
comply with the terms and provisions of this Agreement.
11
A Membership Interest may be expressed as a number of Managing Member Units or
Non-Managing Member Units, as applicable.
"Net Income" or "Net Loss" means, for each Fiscal Year of the
Company, an amount equal to the Company's taxable income or loss for such year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Income
(or Net Loss) pursuant to this definition of "Net Income" or "Net Loss"
shall be added to (or subtracted from, as the case may be) such taxable
income (or loss);
Any expenditure of the Company described in Code
Section 705(a)(2)(b) or treated as a Code Section 705(a)(2)(b)
expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account in computing Net Income (or Net Loss)
pursuant to this definition of "Net Income" or "Net Loss," shall be
subtracted from (or added to, as the case may be) such taxable income
(or loss);
In the event that the Gross Asset Value of any
Company asset is adjusted pursuant to subsection (b) or subsection (c)
of the definition of "Gross Asset Value," the amount of such adjustment
shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Net Income or Net Loss;
In lieu of the depreciation, amortization and other
cost recovery deductions that would otherwise be taken into account in
computing such taxable income or loss, there shall be taken into
account Depreciation for such Fiscal Year;
To the extent that an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of a
Member's interest in the Company, the amount of such adjustment shall
be treated as an item of gain (if the adjustment increases the basis of
t`e asset) or loss (if the adjustment decreases t`e basis of the asset)
from the disposition of the asset and shall be taken into account for
purposes of computing Net Income or Net Loss; and
Notwithstanding any other provision of this
definition of "Net Income" or "Net Loss," any item allocated pursuant
to Section 6.3.A hereof shall not be taken into account in computing
gain, loss or deduction available to be allocated pursuant to Section
6.3.A hereof shall be determined by applying rules analogous to those
set forth in this definition of "Net Income" or "Net Loss."
"NMM Sharing Amount" means, with respect to any taxable
disposition of a Real Property, the product equal to (i) the Sharing Amount
multiplied by (ii) the NMM Sharing Percentage.
12
"NMM Sharing Percentage" means a percentage equal to 1%
multiplied by a fraction with the numerator equal to the number of Non-Managing
Member Units then outstanding and the denominator equal to the number of
Non-Managing Member Units issued by the Company to all Initial Non-Managing
Members; provided, however, any NMM Units reduced pursuant to Section 8.6.D
hereof shall be subtracted from the denominator of such fraction.
"Non-Managing Member" means any Member other than the Managing
Member (except to the extent the Managing Member holds Non-Managing Member
Units).
"Non-Managing Member Representative" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
until a successor Non-Managing Member Representative shall have been appginted
pursuant to Section 15.14 hereof and, thereafter, shall mean the person
appointed and then acting as the Non-Managing Member Representative hereunder.
"Non-Managing Member Unit" means a single unit of Membership
Interest issued to a Non-Managing Member pursuant to Section 4.1 hereof, as the
same may be modified from time to time as provided in this Agreement. The
ownership of Non-Managing Member Units shall be evidenced in the form of a
certificate for Non-Managing Member Units.
"Nonrecourse Debt Amount" means the amount of nonrecourse debt
of the Company allocable to the Non-Managing Members, as determined from time to
time in the reasonable discretion of the Non-Managing Member representative and
communicated to the Company and the Managing Member. Each Non-Managing Member
shall be solely responsible for ensuring that the Non-Managing Member
Representative properly informs the Managing Member and the Company regarding
Nonrecourse Debt Amount allocable to such Non-Managing Member. The Non-Managing
Member Representative has informed the Managing Member and the Company that the
Nonrecourse Debt Amount allgcable to the Non-Managing Members as of the date of
this Agreement is One Million Three Hundred Eighty-Five Thousand Two Hundred
Eighty-Two Dollars ($1,385,282.00).
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b) (1), and the amount of Nonrecourse Deductions for
a Fiscal 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).
"Notice of Exchange" means the Notice of Exchange
substantially in the form of Exhibit B attached to this Agreement.
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"One Hundred Member Limit" has the meaning set forth in
Section 11.6.E hereof.
"Ownership Limit" means 9.8% of the number or value (whichever
is more restrictive) of outstanding REIT Shares. The number of REIT Shares shall
be determined by the Board of Directors of the Managing Member, in good faith,
which determination shall be conclusive for all purposes hereof.
13
"Payment Quarter" has the meaning set forth in Section 5.1.A
hereof.
"Percentage Interest" means, as to a Member holding a
Membership Interest, its interest in the Company as determined by dividing the
LLC Units owned by such Member by the total number of LLC Units then outstanding
as specified in Exhibit A attached hereto, as it may be modified or supplemented
---------
from time to time.
"Person" means an individual or a corporation, partnership,
trust, unincorporated organization, association, limited liability company or
other entity.
"Preferred Return Per Unit" means with respect to each
Non-Managing Member Unit outstanding on a LLC Record Date an amount initially
equal to zero, and increased cumulatively on each LLC Record Date by an amount
equal to the product of (i) the cash dividend per REIT Share declared by the
Managing Member for holders of REIT Shares on that LLC Record Date, multiplied
by (ii) the Adjustment Factor in effect on that LLC Record Date; provided,
however, that the increase that shall occur in accordance with the foregoing on
the first LLC Record Date subsequent to June 30, 2001 shall be the foregoing
product of (i) and (ii) above multiplied by a fraction, the numerator of which
shall be the number of days in the period commencing on the date hereof and
ending on September 30, 2001, and the denominator of which shall be the number
of days in the period commencing on July 1, 2001 and ending on September 30,
2001.
"Preferred Return Shortfall" means, for any holder of
Non-Managing Member Units, the amount (if any) by which (i) the Preferred Return
Per Unit with respect to all Non-Managing Member Units held by such holder
exceeds (ii) the aggregate amount previously distributed with respect to such
Non-Managing Member Units pursuant to Section 5.1.A(1), Section 5.6.A(1) or
Section 5.6.B(1) hereof, together with cumulative interest accruing thereon at
the Prime Rate from the applicable LLC Record Date to the date of distribution.
"Prime Rate" means on any date, a rate equal to the annual
rate on such date announced by the Bank of New York to be its prime, base or
reference rate for 90-day unsecured loans to its corporate borrowers of the
highest credit standing but in no event greater than the maximum rate then
permitted under applicable law. If the Bank of New York discontinues its use of
such prime, base or reference rate or ceases to exist, the Managing Member shall
designate the prime, base or reference rate of another state or federally
chartered bank based in New York to be used for the purpose of calculating the
Prime Rate hereunder (which rate shall be subject to limitation by all
applicable usury laws).
"Properties" means any assets and property of the Company such
as, but not limited to, interests in real property (including the Real
Properties) and personal property, including, without limitation, fee interests,
interests in ground leases, interests in limited liability companies, joint
ventures or partnerships, interests in mortgages, and Debt instruments as the
Company may hold from time to time.
"Property Appreciation" means, with respect to a taxable
disposition of a Real Property, the excess of the sales price paid in such
disposition (including amounts paid through the assumption of debt) over the
initial Gross Asset Value of such Real Property.
14
"Real Properties" has the meaning set forth in Section
7.3.E(2) hereof.
"Recourse Debt Amount" means, initially, a number equal to the
Total Required Debt Amount minus the Nonrecourse Debt Amount, but which number
shall in no event be less than zero. The Members acknowledge that the Recourse
Debt Amount, the Total Required Debt Amount and the Nonrecourse Debt Amount may
change as a result of any subsequent contribution of Property by a Non-Managing
Member to the Company or other events, including but not limited to, the
repayment or substitution of Company indebtedness. In such event, the
Non-Managing Member Representative shall provide the Managing Member and the
Company with advance written notice of the new Recourse Debt Amount, the
guarantee of which is necessary to prevent the recognition of gain by the
Non-Managing Members (or their direct or indirect owners), provided the accuracy
of such Recourse Debt Amount (and the components thereof) shall be subject to
the approval of the Managing Member, not to be unreasonably withheld. Such
notice shall be provided not less than thirty (30) days in advance of the date
such changes are to be effective, along with schedules which support the need
for such changes; provided, however, that in the event such changes are required
by reason of any repayment or substitution of indebtedness with respect to which
the Company has delivered notice to the Non-Managing Member Representative a
notice pursuant to Section 7.3.E(4) below, the foregoing notice shall be timely
if delivered not less than seven (7) days in advance of the date such changes
are to be effective. To the extent the Non-Managing Member reasonably cannot
determine the new Nonrecourse Debt Amount (or the components thereof) at the
time such notice is delivered, the notice shall include the Non-Managing
Member's best estimate of such amounts with periodic updates as such amounts
reasonably can be determined. Neither the Managing Member nor the Company shall
be responsible or liable in any way for making such determinations or for
requesting updates to information previously delivered to the Managing Member or
the Company.
"Reduction" has the meaning set forth in Section 8.6.D hereof.
"Reduction Date" has the meaning set forth in Section 8.6.D
hereof.
"Reduction Units" has the meaning set forth in Section 8.6.D
hereof.
"Refinancing Debt" means any Debt (other than indebtedness to
the Managing Member or any Affiliate of the Managing Member), the repayment of
which is secured by all or any portion of the Real Properties.
"Refinancing Debt Proceeds" means the net proceeds from any
Refinancing Debt incurred by the Company which remain after the repayment of any
Debt with proceeds of the Refinancing Debt and all costs related to the
Refinancing Debt.
"Regulations" means the applicable income tax regulations
under the Code, whether such regulations are in proposed, temporary or final
form, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section
6.3.A(7) hereof.
15
"REIT" means a real estate investment trust qualifying under
Code Section 856, et seq.
"REIT Member" means a Member or Assignee that is, or has made
an election to qualify as, a REIT.
"REIT Payment" has the meaning set forth in Section 15.12
hereof.
"REIT Requirements" has the meaning set forth in Section 5.1.B
hereof.
"REIT Share" means a share of the Common Stock of the Managing
Member, par value $1.00 per share.
"REIT Shares Amount" means a number of REIT Shares equal to
the product of (a) the number of Tendered Units and (b) the Adjustment Factor;
provided, however, that, in the event that the Managing Member issues Rights to
all holders of REIT Shares as of a certain record date, with the record date for
such Rights issuance falling within the period starting on the date of the
Notice of Exchange and ending on the day immediately preceding the Specified
Exchange Date, which Rights will not be distributed before the relevant
Specified Exchange Date, then the REIT Shares Amount shall also include such
Rights that a holder of that number of REIT Shares would be entitled to receive,
expressed, where relevant hereunder, in a number of REIT Shares determined by
the Managing Member in good faith. So long as the holder of Tendered Units is
not an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
those terms are defined in the Rights Agreement), the number of REIT Shares
referenced in the preceding sentence shall be adjusted for the issuance,
distribution and triggering of exercisability of the Rights governed by the
Rights Agreement (so long as the Rights shall not previously have been redeemed
or expired pursuant to the Rights Agreement) which adjustment shall be satisfied
by issuing, together with the REIT Shares Amount, either (i) if Rights may be
issued under the Rights Agreement, the aggregate number of Rights issuable under
the Rights Agreement with respect to a number of REIT Shares equal to the REIT
Shares Amount, or (ii) in the event Rights may no longer be issued under the
Rights Agreement, a number of REIT Shares necessary to reflect equitably the
dilution in REIT Shares resulting from the exercise of Rights (but only if the
REIT Shares Amount is issued subsequent to the occurrence of an event that
results in a reduction in the purchase price attributable to the Rights in the
manner provided in Section 11(a)(ii) of the Rights Agreement (or any comparable
provision in the event the Rights Agreement is amended), and prior to a
Flip-Over Event), or (iii) if the REIT Shares Amount is issued concurrently with
or subsequent to a Flip-Over Event, the number of shares of common stock of the
Successor Person necessary to reflect equitably the dilution in REIT Shares
resulting from the exercise of Rights.
"Related Party" means, with respect to any Person, any other
Person whose actual ownership, Beneficial Ownership or Constructive Ownership of
shares of the Managing Member's capital stock would be attributed to the first
such Person under either (i) Code Section 544 (as modified by Code Section
856(h)(1)(B) ) or (ii) Code Section 318 (as modified by Code
Section 856(d)(5)).
16
"Replacement Indebtedness" has the meaning set forth in
Section 7.3.E(3) hereof.
"Rights" means rights, options, warrants or convertible or
exchangeable securities entitling the Managing Member's shareholders to
subscribe for or purchase REIT Shares, or any other securities or property.
"Rights Agreement" means the Rights Agreement, dated as of
July 27, 2000, by and between the Managing Member and The Bank of New York, as
the same may be supplemented or amended from time to time.
"SEC" means the Securities and Exchange Commission.
"Second Exchange Date" means that date which is one year after
the last Non-Managing Member Unit is issued pursuant to the Contribution
Agreement or, if such day is not a Business Day, the next following Business
Day.
"Second Traunch Non-Managing Member Units" has the meaning set
forth in Section 8.6.A hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Sharing Amount" means, with respect to any taxable
disposition of a Real Property, the excess, if any, of the Aggregate Sharing
Amount over the Sharing Amounts, if any, previously used for purposes of
calculating Reduction Units pursuant to Section 8.6.D.
"Sharing Percentage" means, with respect to a Non-Managing
Member or Assignee, its share of the NMM Sharing Percentage based on its share
of the Non-Managing Member Units and, with respect to the Managing Member, one
hundred percent (100%) minus the NMM Sharing Percentage.
"Specified Exchange Date" means (A) in the case of an Exchange
pursuant to Section 8.6.A hereof, (i) the First Exchange Date if a Notice of
Exchange is received by the Managing Member not less than thirty (30) days prior
to the First Exchange Date in respect of any First Traunch Non-Managing Member
Unit, (ii) the sixtieth (60th) calendar day (or, if such day is not a Business
Day, the next following Business Day) after the receipt by the Managing Member
of a Notice of Exchange if such notice is received by the Managing Member
pursuant to the provisions of Section 8.6.A hereof more than sixty (60) calendar
days prior to the Second Exchange Date in respect of any Second Traunch
Non-Managing Member Unit, (iii) the Second Exchange Date if a Notice of Exchange
as received by the Managing Member less than sixty (60) but not less than thirty
(30) calendar days prior to the Second Exchange Date in respect of any Second
Traunch Non-Managing Member Unit, or (iv) in all other events, the thirtieth
(30th) calendar day (or, if such day is not a Business Day, the next following
Business Day) after the receipt by the Managing Member of a Notice of Exchange;
provided, however, that, notwithstanding any other provisions set forth herein,
in no event shall a Specified Exchange Date as to any LLC Unit occur prior to
the first anniversary of the issuance of such LLC Unit by the Company; provided,
further, that the Specified Exchange Date, as well as the closing of an
17
Exchange on any Specified Exchange Date, may be deferred, in the Managing
Member's sole and absolute discretion, for such time (but in any event not more
than 150 days in the aggregate) as may reasonably be required to effect, as
applicable, (i) necessary funding arrangements, (ii) compliance with the
Securities Act or other law (including, but not limited to, (a) state "blue
sky" or other securities laws and (b) the expiration or termination of the
applicable waiting period, if any, under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other
commercially reasonable and customary closing conditions and requirements for a
transaction of such nature, and (B) in the case of the delivery of a Call
Notice pursuant to Section 13.2 hereof, the 10th calendar day (or, if such day
is not a Business Day, the next following Business Day) after the mailing to
the applicable Non-Managing Members of a Call Notice.
"Subsequent Threshold Test" means a test which will be
satisfied on the date on which eighty percent (80%) of the LLC Units issued by
the Company to the Initial Non-Managing Members have been disposed of pursuant
to a Taxable Disposition or series of Taxable Dispositions.
"Substituted Member" means an Assignee who is admitted as a
Member to the Company pursuant to Section 11.4 hereof. The term "Substituted
Member" shall not include any Additional Member.
"Subsidiary" means, with respect to any Person other than the
Company, any corporation or other entity of which a majority of (i) the voting
power of the voting equity securities or (ii) the outstanding equity interests
is owned, directly or indirectly, by such Person; provided, however, that, with
respect to the Company, "Subsidiary" means solely a partnership or limited
liability company (taxed, for federal income tax purposes, as a partnership and
not as an association or publicly traded partnership taxable as a corporation)
of which the Company is a member unless the Managing Member has received an
unqualified opinion from independent counsel of recognized standing, or a ruling
from the IRS, that the ownership of shares of stock of a corporation or other
entity will not jeopardize the Managing Member's status as a REIT, in which
event the term "Subsidiary" shall include the corporation or other entity which
is the subject of such opinion or ruling.
"Successor Person" has the meaning set forth in the
definition of Flip-Over Event.
"Successor Properties" means real properties acquired by the
Company in connection with a Tax-Free Disposition of any Real Property or
Successor Property.
"Tax-Free Disposition" means the disposition of property in a
transaction that is not subject to tax under the Code, including by virtue of
the provisions of Section 1031 of the Code.
"Tax Items" has the meaning set forth in Section 6.4 hereof.
"Tax Protection Period" means the period of time beginning on
the Effective Date and ending on the first to occur of (i) the tenth (10th)
anniversary of the Effective Date, or (ii) the date on which the Subsequent
Threshold Test has been satisfied; provided, however, that
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18
notwithstanding the foregoing, with respect to the Real Properties listed on
Schedule 1.1, the fourth (4th) anniversary shall be substituted for the tenth
(10th) anniversary in this definition.
"Taxable Disposition" means a transaction or event in which a
LLC Unit has either (a) been disposed of in a taxable transaction (including,
without limitation, any Exchange pursuant 8.6.A hereof) or (b) otherwise
received a "step up" in tax basis to its fair market value at the time of such
"step up" (e.g., as a result of the death of a holder of LLC Units who is an
individual).
"Tendered Units" has the meaning set forth in Section 8.6.A
hereof.
"Tendering Party" has the meaning set forth in Section 8.6.A
hereof.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Company or a
related series of transactions that, taken together, result in the sale or
other disposition of all or substantially all of the assets of the Company.
"Total Required Debt Amount" as of the date of this Agreement
is Seven Million Eight Hundred Ninety-Eight Thousand Two Hundred Eighty-Two
Dollars ($7,898,282.00); provided, however, the Total Required Debt Amount is
subject to change pursuant to the provisions contained in the definition of
"Recourse Debt Amount" above.
"Total Units" has the meaning set forth in Section 8.6.D.
hereof.
"Transfer," when used with respect to an LLC Unit or all or
any portion of a Membership Interest, means any sale, assignment, bequest,
conveyance, devise, gift (outright or in trust), pledge, encumbrance,
hypothecation, mortgage, exchange, transfer or other disposition or act of
alienation, whether voluntary or involuntary or by operation of law. The terms
"Transferred" and "Transferring" have correlative meanings.
"Transferor" shall have the meaning set forth in the Recitals.
"Transferred Properties" means the "Properties" as that term
is defined in the Contribution Agreement, except for the Properties known as
"HCPI/▇▇▇▇▇▇▇▇▇ and HCPI/▇▇▇▇▇▇" which are to be contributed to HCPI/▇▇▇▇▇▇▇▇▇
and HCPI/▇▇▇▇▇▇ respectively, and shall also mean a one hundred percent (100%)
membership interest in HCPI/▇▇▇▇▇▇▇▇▇ and HCPI/▇▇▇▇▇▇.
"Triggering Event" has the meaning set forth in Section 7.3.G
hereof.
"Unit Amount" means, with respect to a taxable disposition of
a Real Property, a number of LLC Units equal to the product of (i) the number of
LLC Units outstanding at the time of such disposition, and (ii) the Unit
Portion.
"Unit Appreciation" means, with respect to any taxable
disposition of a Real Property, the product of the (i) Unit Amount and (ii)
excess of the Value at the time of such disposition over $34.80.
19
"Unit Portion" means, with respect to a taxable disposition
of a Real Property, a number determined by dividing (i) the net cash flow
(ignoring payments made by the Company under any Debt related to such Property)
produced by such Real Property for the twelve month period immediately prior to
such disposition, by (ii) the net cash flow (ignoring payments made by the
Company under any Debt related to all Real Properties) produced by all Real
Properties held by the Company for the twelve month period immediately prior to
such disposition.
"Valuation Date" means (a) in the case of a tender of LLC
Units for Exchange, the date of the receipt by the Managing Member of the
Notice of Exchange with respect to those LLC Units or, if such date is not a
Business Day, the immediately preceding Business Day or (b) for purposes of
Section 8.6.D hereof, the Reduction Date or, if the Reduction Date is not a
Business Day, the immediately preceding Business Day, (c) for purposes of
Section 13.2 hereof, the date the Call Notice is delivered or, if such day is
not a Business Day, the immediately preceding Business Day, or (d) in any other
case, the date specified in this Agreement or, if such date is not a Business
Day, the immediately preceding Business Day.
"Value" means, on any Valuation Date, the average of the
Closing Prices for the ten (10) consecutive trading days ending on the second
trading day immediately prior to the Valuation Date.
ARTICLE 2.
ORGANIZATIONAL MATTERS
SECTION 2.1 FORMATION
The Company is a limited liability company formed pursuant to
the provisions of the Act for the purposes and upon the terms and subject to the
conditions set forth in this Agreement. Except as expressly provided herein, the
rights and obligations of the Members and the administration and termination of
the Company shall be governed by the Act.
SECTION 2.2 NAME
The name of the Company is HCPI/Utah II, LLC. The Company's
business may be conducted under any other name or names deemed advisable by the
Managing Member, including the name of the Managing Member or any Affiliate
thereof. The Managing Member in its sole and absolute discretion may change the
name of the Company at any time and from time to time in accordance with
applicable law and shall notify the Members of such change in the next regular
communication to the Members.
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL PLACE
OF BUSINESS; OTHER PLACES OF BUSINESS
The address of the registered office of the Company in the
State of Delaware is located at c/o National Registered Agents, Inc., ▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the registered agent for service of
process on the Company in the State of Delaware at such registered office is
National Registered Agents, Inc., ▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇. The principal office of the Company is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the Managing
Member may
20
from time to time designate by notice to the Members. The Company may maintain
offices at such other place or places within or outside the State of Delaware
as the Managing Member deems advisable.
SECTION 2.4 POWER OF ATTORNEY
A. Each Member (other than the Managing Member) and each
Assignee hereby irrevocably constitutes and appoints the Managing Member, any
Liquidator, and authorized officers and attorneys in fact of each, and each of
those acting singly, in each case with full power of substitution, as its true
and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver,
file and record in the appropriate public offices (a) all
certificates, documents and other instruments (including, without
limitation, this Agreement and the Certificate and all amendments or
restatements thereof) that the Managing Member or any Liquidator
deems appropriate or necessary to form, qualify or continue the
existence or qualification of the Company as a limited liability
company in the State of Delaware and in all other jurisdictions in
which the Company may conduct business or own property; (b) all
instruments that the Managing Member or any Liquidator deems
appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance with its
terms; (c) all conveyances and other instruments or documents that
the Managing Member or any Liquidator deems appropriate or necessary
to reflect the dissolution and liquidation of the Company pursuant to
the terms of this Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Member pursuant
to, or other events described in, Articles 11, 12 or 13 hereof or the
Capital Contribution of any Member; and (e) all certificates,
documents and other instruments relating to the determination of the
rights, preferences and privileges of Membership Interests; and
(2) execute, swear to, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and absolute
discretion of the Managing Member or any Liquidator, to make,
evidence, give, confirm or ratify any vote, consent, approval,
agreement or other action which is made or given by the Members
hereunder or is consistent with the terms of this Agreement or
appropriate or necessary, in the sole discretion of the Managing
Member or any Liquidator, to effectuate the terms or intent of this
Agreement.
Nothing contained in this Section 2.4 shall be construed as
authorizing the Managing Member or any Liquidator to amend this Agreement
except in accordance with Article 14 hereof or as may be otherwise expressly
provided for in this Agreement.
B. The foregoing power of attorney is hereby declared
to be irrevocable and a special power coupled with an interest, in recognition
of the fact that each of the Members and Assignees will be relying upon the
power of the Managing Member to act as contemplated by this Agreement, and it
shall survive and not be affected by the subsequent Incapacity of any Member or
Assignee and the Transfer of all or any portion of such Member's or Assignee's
LLC
21
Units or Membership Interest and shall extend to such Member's or Assignee's
heirs, successors, assigns and personal representatives. Each such Member or
Assignee hereby agrees to be bound by any representation made by the Managing
Member or any Liquidator, acting in good faith pursuant to such power of
attorney; and each such Member or Assignee hereby waives any and all defenses
which may be available to contest, negate or disaffirm the action of the
Managing Member or any Liquidator, taken in good faith under such power of
attorney. Each Member or Assignee shall execute and deliver to the Managing
Member or any Liquidator, within 15 days after receipt of the Managing Member's
or Liquidator's request therefor, such further designation, powers of attorney
and other instruments as the Managing Member or the Liquidator, as the case may
be, deems necessary to effectuate this Agreement and the purposes of the
Company.
SECTION 2.5 TERM
The term of the Company commenced on June 25, 2001, the date
that the original Certificate was filed in the office of the Secretary of State
of Delaware in accordance with the Act, and shall continue until terminated
pursuant the provisions of Article 13 hereof or as otherwise provided by law.
ARTICLE 3.
PURPOSE
SECTION 3.1 PURPOSE AND BUSINESS
The sole purposes of the Company are (i) to acquire, own,
manage, operate, maintain, improve, expand, redevelop, encumber, sell or
otherwise dispose of, in accordance with the terms of this Agreement, the
Transferred Properties and any other Properties acquired by the Company and to
invest and ultimately distribute funds, including, without limitation, funds
obtained from owning or otherwise operating the Transferred Properties and any
other Properties acquired by the Company and the proceeds from the sale or
other disposition of the Transferred Properties and any other Properties
acquired by the Company, all in the manner permitted by this Agreement, and
(ii) subject to and in accordance with the terms of this Agreement, to do
anything necessary or incidental to the foregoing.
SECTION 3.2 POWERS
The Company is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein
and for the protection and benefit of the Company including, without
limitation, full power and authority, directly or through its ownership
interest in other entities, to enter into, perform and carry out contracts of
any kind, borrow money and issue evidences of indebtedness, whether or not
secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage,
improve and develop real property, and lease, sell, transfer and dispose of
real property; provided, however, that notwithstanding any other provision in
this Agreement, the Managing Member may cause the Company to take any action to
avoid a result that, or to refrain from taking any action that, in the judgment
of the Managing Member, in its sole and absolute discretion, (i) could
adversely affect the ability of the Managing
22
Member to continue to qualify as a REIT, (ii) could subject the Managing Member
to any additional taxes under Code Section 857 or Code Section 4981 or (iii)
could violate any law or regulation of any governmental body or agency having
jurisdiction over the Managing Member, its securities or the Company, unless
such action (or inaction) under clause (i), clause (ii) or clause (iii) above
shall have been specifically consented to by the Managing Member in writing.
SECTION 3.3 SPECIFIED PURPOSES
The Company shall be a limited liability company only for the
purposes specified in Section 3.1 hereof, and this Agreement shall not be
deemed to create a company, venture or partnership between or among the Members
with respect to any activities whatsoever other than the activities within the
purposes of the Company as specified in Section 3.1 hereof. Except as otherwise
provided in this Agreement, no Member shall have any authority to act for,
bind, commit or assume any obligation or responsibility on behalf of the
Company, its properties or any other Member. No Member, in its capacity as a
Member under this Agreement, shall be responsible or liable for any
indebtedness or obligation of another Member, nor shall the Company be
responsible or liable for any indebtedness or obligation of any Member,
incurred either before or after the execution and delivery of this Agreement by
such Member, except as to those responsibilities, liabilities, indebtedness or
obligations incurred pursuant to and as limited by the terms of this Agreement
and the Act.
SECTION 3.4 REPRESENTATIONS AND WARRANTIES BY THE MEMBERS;
DISCLAIMER OF CERTAIN REPRESENTATIONS
A. Each Member that is an individual (including, without
limitation, each Additional Member or Substituted Member as a condition to
becoming an Additional Member or a Substituted Member) represents and warrants
to the Company, the Managing Member and each other Member that (i) such Member
has the legal capacity to enter into this Agreement and perform such Member's
obligations hereunder, (ii) the consummation of the transactions contemplated
by this Agreement to be performed by such Member will not result in a breach or
violation of, or a default under, any material agreement by which such Member
or any of such Member's property is bound, or any statute, regulation, order or
other law to which such Member is subject, (iii) such Member is neither a
"foreign person" within the meaning of Code Section 1445(f) nor a "foreign
partner" within the meaning of Code Section 1446(e), (iv) such Member (other
than the Managing Member) either (a) does not Constructively Own more than 25%
of the interests in capital or profits of the Company or (b) does not
Constructively Own any interest in any entity that is a tenant of either the
Managing Member, the Company or any partnership, venture or limited liability
company of which the Managing Member or the Company is a direct or indirect
owner, and (v) this Agreement is binding upon, and enforceable against, such
Member in accordance with its terms.
B. Each Member that is not an individual (including,
without limitation, each Additional Member or Substituted Member as a condition
to becoming an Additional Member or a Substituted Member) represents and
warrants to the Company, the Managing Member and each other Member that (i) all
transactions contemplated by this Agreement to be performed by it have been
duly authorized by all necessary action, including, without limitation, that of
its managing member(s) (or, if there is no managing member, a majority in
interest of all members),
23
committee(s), trustee(s), general partner(s), beneficiaries, directors and
shareholder(s), as the case may be, as required, (ii) the consummation of such
transactions will not result in a breach or violation of, or a default under,
its partnership or operating agreement, trust agreement, charter or bylaws, as
the case may be, any material agreement by which such Member or any of such
Member's properties or any of its partners, members, beneficiaries, trustees or
shareholders, as the case may be, is or are bound, or any statute, regulation,
order or other law to which such Member or any of its partners, members,
trustees, beneficiaries or shareholders, as the case may be, is or are subject,
(iii) such Member is neither a "foreign person" within the meaning of Code
Section 1445(f) nor a "foreign partner" within the meaning of Code Section
1446(e), (iv) such Member (other than the Managing Member) either (a) does not
Constructively Own more than 25% of the interests in capital of profits of the
Company or (b) does not Constructively Own any interest in any entity that is a
tenant of either the Managing Member, the Company or any partnership, venture
or limited liability company of which the Managing Member or the Company is
direct or indirect owner, and (v) this Agreement is binding upon, and
enforceable against, such Member in accordance with its terms.
C. Each Member (including, without limitation, each
Additional Member or Substituted Member as a condition to becoming an
Additional Member or a Substituted Member) represents, warrants and agrees that
it has acquired and continues to hold its interest in the Company for its own
account for investment only and not for the purpose of, or with a view toward,
the resale or distribution of all or any part thereof, nor with a view toward
selling or otherwise distributing such interest or any part thereof at any
particular time or under any predetermined circumstances. Each Member further
represents and warrants that it is an "accredited investor" as defined in Rule
501(a) promulgated under the Securities Act and is a sophisticated investor,
able and accustomed to handling sophisticated financial matters for itself,
particularly real estate investments, and that it has a sufficiently high net
worth that it does not anticipate a need for the funds that it has invested in
the Company in what it understands to be a highly speculative and illiquid
investment.
D. The representations and warranties contained in
Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the execution and delivery
of this Agreement by each Member (and, in the case of an Additional Member or a
Substituted Member, the admission of such Additional Member or Substituted
Member as a Member in the Company) and the dissolution, liquidation and
termination of the Company.
E. Each Member (including, without limitation, each
Additional Member or Substituted Member as a condition to becoming an
Additional Member or a Substituted Member) hereby represents that it has
consulted and been advised by its legal counsel and tax advisor in connection
with, and acknowledges that no representations as to potential profit, tax
consequences of any sort (including, without limitation, the tax consequences
resulting from forming or operating the Company, conducting the business of the
Company, executing this Agreement, consummating the transaction provided for in
or contemplated by the Contribution Agreement, making a Capital Contribution,
being admitted to the Company, receiving or not receiving distributions from
the Company, exchanging LLC Units or being allocated Tax Items), cash flows,
funds from operations or yield, if any, in respect of the Company, such Member
or the Managing Member have been made by the Company, any Member or any
employee or representative or Affiliate of the Company or any Member, and that
projections and any other
24
information, including, without limitation, financial and descriptive
information and documentation, that may have been in any manner submitted to
such Member shall not constitute any representation or warranty of any kind or
nature, express or implied.
ARTICLE 4.
CAPITAL CONTRIBUTIONS
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE INITIAL MEMBERS
At the time of their respective execution of this Agreement,
the Members shall make Capital Contributions as set forth in Exhibit A to this
---------
Agreement. The Members shall own Managing Member Units and Non-Managing Member
Units, as applicable, in the amounts set forth on Exhibit A. Except as required
---------
by law, as provided by the Contribution Agreement or as otherwise provided in
Sections 4.1, 4.2 and 4.4 hereof, no Member shall be required or permitted to
make any additional Capital Contributions or loans to the Company.
SECTION 4.2 ADDITIONAL MEMBERS
The Managing Member is authorized to admit one or more
Additional Members to the Company from time to time, in accordance with the
provisions of Section 12.2 hereof, on terms and conditions and for such Capital
Contributions as may be established by the Managing Member in its reasonable
discretion. Except as set forth in Section 12.2, no action or consent by the
Non-Managing Members shall be required in connection with the admission of any
Additional Members. The provisions of Section 12.2 shall govern the acquisition
by the Company in the future of additional Properties by means of Capital
Contributions by other Persons, which Capital Contributions shall be set forth
in Exhibit A. As a condition to being admitted to the Company, each Additional
---------
Member shall execute an agreement to be bound by the terms and conditions of
this Agreement.
SECTION 4.3 LOANS
Subject to the provisions of Sections 4.4 and 7.3.E(3)
hereof, the Company may incur or assume Debt, enter into other similar credit,
guarantee, financing or refinancing arrangements, repay or prepay Debt, for any
purpose (including, without limitation, in connection with any further
acquisition of Properties from any Person), upon such terms as the Managing
Member determines appropriate.
SECTION 4.4 ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS
A. General. The Managing Member may, at any time and
from time to time, determine that the Company requires additional funds
("Additional Funds") for the operation of the Company. Additional Funds may be
raised by the Company in accordance with the terms of this Section 4.4 or the
terms of Section 4.3 hereof. No Person, including, without limitation, any
Member or Assignee, shall have any preemptive, preferential, participation or
similar right or rights to subscribe for or acquire any Membership Interest
except as otherwise provided in the Contribution Agreement.
25
B. Additional Contributions. The Managing Member on
behalf of the Company may raise all or any portion of the Additional Funds by
making additional Capital Contributions. Subject to the terms of this Section
4.4 and to the definition of "Gross Asset Value," the Managing Member shall
determine in good faith the amount, terms and conditions of such additional
Capital Contributions. In addition, the Managing Member shall be solely
responsible for making additional Capital Contributions to the Company in
amounts sufficient to (i) fund all necessary capital additions, tenant
improvements and leasing commissions relating to the Real Properties, except
for the Unidentified and Unpaid Tenant Improvement Costs (as such term is
defined in the Contribution Agreement) which are required to be funded by a
Non-Managing Member pursuant to the Contribution Agreement; (ii) repay any
mortgage Debt which encumbers any of the Properties as of the date of this
Agreement and which the Managing Member elects to cause the Company to repay as
permitted under this Agreement; and (iii) fund the Company's obligations under
the Development Agreement, as further described in Section 2.3(a) of the
Contribution Agreement. With respect to the Capital Contributions described in
item (iii) above, the Managing Member shall receive that number of additional
Managing Member Units as specified in the Contribution Agreement at the time
specified in the Contribution Agreement. With respect to all Capital
Contributions other than those described in item (iii) above, the Managing
Member shall receive that number of additional Managing Member Units in
consideration for additional Capital Contributions made by the Managing Member
equal to the initial Gross Asset Value of the additional capital contribution
(or, in the event of a contribution of cash, the amount of cash so contributed)
divided by the Value as of the date of such contribution.
C. Timing of Additional Capital Contributions. If
additional Capital Contributions are made by a Member on any day other than the
first day of a Fiscal Year, then Net Income, Net Loss, each item thereof and
all other items of income, gain, loss, deduction and credit allocable among
Members for such Fiscal Year, if necessary, shall be allocated among such
Members by taking into account their varying interests during the Fiscal Year
in accordance with Code Section 706(d), using the "interim closing of the
books" or "daily proration" method or another permissible method selected by
the Managing Member.
SECTION 4.5 NO INTEREST; NO RETURN
Except as provided herein, no Member shall be entitled to
interest on its Capital Contribution or on such Member's Capital Account.
Except as provided herein or by law, no Member shall have any right to demand
or receive the return of its Capital Contribution from the Company.
ARTICLE 5.
DISTRIBUTIONS
SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF
DISTRIBUTIONS
A. The Managing Member shall cause the Company to
distribute quarterly on the LLC Distribution Date all Available Cash generated
by the Company during the quarter most recently ended prior to the LLC
Distribution Date (the "Payment Quarter") as follows:
26
(1) First, to the holders of the Non-Managing
Member Units, in accordance with their relative Preferred Return
Shortfalls at the end of the Payment Quarter, until the Preferred
Return Shortfall for each holder of Non-Managing Member Units at the
end of the Payment Quarter is zero, provided, however, that in the
-------- -------
event a Reduction Date occurs during any Payment Quarter, a
distribution shall be made under this Section 5.1.A(1) on the LLC
Distribution Date associated with such Payment Quarter to the holder
or holders of the Reduction Units in an amount determined by
multiplying the amount that would have been distributed on the LLC
Distribution Date under Section 5.1.A(1) in respect of the Reduction
Units had they been outstanding on the last day of such Payment
Quarter by a fraction, the numerator of which shall be the number of
days beginning on the first day of the Payment Quarter relating to
the LLC Distribution Date and ending on the Reduction Date and the
denominator of which shall be the number of days in the Payment
Quarter in which the Reduction Date occurs.
(2) Second, to the Managing Member until the
Managing Member has received an amount equal to the excess (the
"Managing Member Shortfall"), if any, of (A) the amount of cash that
must be distributed to the Managing Member such that aggregate
distributions of cash pursuant to Sections 5.1.A(1), 5.1.A(2),
5.6.A(1) and 5.6.B(1) shall have been made to all Members pro rata to
the Members' Percentage Interests, over (B) the sum of all prior
distributions to the Managing Member pursuant to this Section
5.1.A(2) and Sections 5.6.A(1) and 5.6.B(1).
(3) Thereafter, all Available Cash remaining
after the distributions provided for in Section 5.1.A(1) and
5.1.A.(2) above shall be distributed to the Members in proportion to
their Sharing Percentages.
B. The Managing Member may take such reasonable efforts,
as determined by it in its sole and absolute discretion and consistent with its
qualification as a REIT, to cause the Company to make distributions in
accordance with Section 5.1.A and Section 5.6 in sufficient amounts to enable
the Managing Member to pay stockholder dividends that will (a) satisfy the
requirements for qualifying as a REIT under the Code and Regulations ("REIT
Requirements"), and (b) avoid any federal income or excise tax liability of the
Managing Member.
SECTION 5.2 DISTRIBUTIONS IN KIND
No right is given to any Member to demand and receive
property other than cash. The Managing Member may determine, with the Consent
of the Non-Managing Members, to make a distribution in kind to the Members of
Company assets, and such assets shall be distributed in such a fashion as to
ensure that the fair market value is distributed and allocated in accordance
with Articles 5 and 6 hereof.
----------------
SECTION 5.3 AMOUNTS WITHHELD
Each Member hereby authorizes the Company to withhold from or
pay on behalf of or with respect to such Member any amount of federal, state,
local or foreign taxes that the Managing Member determines that the Company is
required to withhold or pay with respect to
27
any amount distributable or allocable to such Member pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Company pursuant to Code Section 1441, Code Section 1442, Code
Section 1445 or Code Section 1446. Any amount paid on behalf of or with
respect to a Member shall constitute a loan by the Company to such Member,
which loan shall be repaid by such Member within 15 days after notice from the
Managing Member that such payment must be made unless (i) the Company withholds
such payment from a distribution that would otherwise be made to the Member or
(ii) the Managing Member determines, in its sole and absolute discretion, that
such payment may be satisfied out of the Available Cash of the Company that
would, but for such payment, be distributed to the Member. Any amounts withheld
pursuant to the foregoing clauses (i) or (ii) shall be treated as having been
distributed to such Member. Each Member hereby unconditionally and irrevocably
grants to the Company a security interest in such Member's Membership Interest
to secure such Member's obligation to pay to the Company any amounts required
to be paid pursuant to this Section 5.3. In the event that a Member fails to
pay any amounts owed to the Company pursuant to this Section 5.3 when due, the
Managing Member may, in its sole and absolute discretion, elect to make the
payment to the Company on behalf of such defaulting Member, and in such event
shall be deemed to have loaned such amount to such defaulting Member and shall
succeed to all rights and remedies of the Company as against such defaulting
Member (including, without limitation, the right to receive distributions). Any
amounts payable by a Member hereunder shall bear interest at the base rate on
corporate loans at large United States money center commercial banks, as
published from time to time in the Wall Street Journal, plus four (4)
-------------------
percentage points (but not higher than the maximum lawful rate) from the date
such amount is due (i.e., 15 days after demand) until such amount is paid in
full. Each Member shall take such actions as the Company or the Managing Member
shall request in order to perfect or enforce the security interest created
hereunder.
SECTION 5.4 DISTRIBUTIONS UPON LIQUIDATION
Notwithstanding the other provisions of this Article 5, net
---------
proceeds from a Terminating Capital Transaction and any other cash received or
reductions in reserves made after commencement of the liquidation of the
Company shall be distributed to the Members in accordance with Section 13.3
hereof.
SECTION 5.5 RESTRICTED DISTRIBUTIONS
Notwithstanding any provision to the contrary contained in
this Agreement, neither the Company nor the Managing Member, on behalf of the
Company, shall make a distribution to any Member on account of its Membership
Interest or interest in LLC Units if such distribution would violate Section
18-607 of the Act or other applicable law.
SECTION 5.6 DISTRIBUTIONS OF PROCEEDS FROM SALE OF REAL
PROPERTIES AND REFINANCING DEBT
A. In the event of a taxable disposition of some, but
not all, of the Real Properties, the Managing Member shall cause the Company to
(i) reinvest the Disposition Proceeds to the extent the Managing Member elects
to do so and in the amount determined by the Managing Member to be appropriate
(and to hold the Disposition Proceeds in an interest
28
bearing account pending such reinvestment) and (ii) if the Managing Member
elects to distribute all or any portion of the Disposition Proceeds, distribute
such portions of the Disposition Proceeds, to the extent thereof, as follows:
(1) First, to the holders of LLC Units in
accordance with their Preferred Return Shortfalls until the Preferred
Return Shortfall for each holder of Non-Managing Member Units is
zero, and then to the Managing Member to the extent of its Managing
Member Shortfall;
(2) Second, to the holders of LLC Units pro rata
to their holdings of LLC Units but only to the extent that such
distribution would not cause the number of LLC Units held by the
Non-Managing Members to be reduced below zero pursuant to the
provisions of Section 8.6.D hereof; and
(3) Third, the remaining balance of the
Disposition Proceeds, if any, to the Managing Member.
B. Upon the incurrence of Refinancing Debt, the Managing
Member shall cause the Company to (i) reinvest the Refinancing Debt Proceeds to
the extent the Managing Member elects to do so and in the amount determined by
the Managing Member to be appropriate (and to hold the Refinancing Debt
Proceeds in an interest bearing account pending such reinvestment) and (ii) if
the Managing Member elects to distribute all or any portion of the Refinancing
Debt Proceeds, distribute such portion of the Refinancing Debt Proceeds, to the
extent thereof, as follows:
(1) First, to the holders of the Non-Managing
Member Units in accordance with their Preferred Return Shortfalls
until the Preferred Return Shortfall for each holder of Non-Managing
Member Units is zero and then to the Managing Member to the extent of
its Managing Member Shortfall;
(2) Second, the remaining balance of the
Refinancing Debt Proceeds, if any, to the Managing Member.
C. The Managing Member shall have no obligation to incur
Refinancing Debt for the purpose of making distributions pursuant to this
Section 5.6 or for any other purpose, except as provided in Section 7.3.E(3)
and Section 7.3.E(4).
ARTICLE 6.
ALLOCATIONS
SECTION 6.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME
AND NET LOSS
Net Income and Net Loss of the Company shall be determined
and allocated with respect to each Fiscal Year of the Company as of the end of
each such year. Except as otherwise provided in this Article 6, an allocation
---------
to a Member of a share of Net Income or Net Loss shall be treated as an
allocation of the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.
29
SECTION 6.2 GENERAL ALLOCATIONS
A. Operating Net Income, Depreciation, and Net Loss.
Except as otherwise provided in Sections 6.2.B, 6.2.C or 6.3:
(1) Net Loss with respect to any Fiscal Year
of the Company, other than Net Loss attributable to a disposition of
any or all of the Real Properties, and other than Net Loss
attributable to a Liquidating Event, shall be allocated to the
Members and Assignees in proportion to their Sharing Percentages.
(2) Net Income with respect to any Fiscal Year
of the Company, other than Net Income attributable to a disposition
of any or all of the Real Properties, and other than Net Income
attributable to a Liquidating Event, shall be allocated as follows:
(a) First, to each Member or Assignee in
proportion to, and to the extent of, the amount that cumulative Net
Loss previously allocated to such Member or Assignee pursuant to
Section 6.2.A(1) exceeds the cumulative amount of Net Income
previously allocated to such Member or Assignee pursuant to this
Section 6.2.A(2)(a); and
(b) Thereafter, to each Member or Assignee in
an amount that will cause such allocation, together with the amount
of all previous allocations of Net Income under this Section
6.2.A(2)(b) and Section 6.2.B(2)(b), to be pro rata to the cumulative
distributions received by such Member or Assignee pursuant to
Sections 5.1.A, 5.6.A(1) and 5.6.B(1) for the current and all prior
Fiscal Years.
B. Net Income and Net Loss from the Disposition of Real
Properties. Except as otherwise provided in Sections 6.2.C or 6.3:
(1) Net Loss attributable to a disposition of
any or all of the Real Properties shall be allocated to the Members
and Assignees in proportion to their Sharing Percentages.
(2) Net Income attributable to a disposition of
any or all of the Real Properties shall be allocated as follows:
(a) First, to each Member or Assignee in
proportion to, and to the extent of, the amount that cumulative Net
Loss previously allocated to such Member or Assignee pursuant to
Section 6.2.B(1) exceeds the cumulative amount of Net Income
previously allocated to such Member or Assignee pursuant to this
Section 6.2.B(2)(a);
(b) Second, to each Member or Assignee in an
amount that will cause such allocation, together with the amount of
all previous allocations of Net Income under this Section 6.2.B(2)(b)
and Section 6.2.A(2)(b) to be pro rata to the cumulative distributions
received by such Member or Assignee pursuant to Sections 5.1.A,
5.6.A(1) and 5.6.B(1) for the current and all prior Fiscal Years; and
30
(c) Thereafter, to each Member or Assignee pro
rata to such Member's or Assignee's Percentage Interest.
C. Net Income and Net Loss Upon Liquidation.
If a Liquidating Event occurs in a Fiscal Year, or if the number of LLC Units
held by the Non-Managing Members have been reduced (pursuant to Section 8.6.D
or otherwise) to zero, Net Income or Net Loss (or, if necessary, separate items
of income, gain, loss and deduction) for such Fiscal Year and any Fiscal Years
thereafter shall, subject to Section 6.3, be allocated among the Members, as
follows:
(1) First, to holders of Non-Managing Member
Units, pro rata to their Percentage Interests, in such amounts as
will cause, to the greatest extent possible, each such holder's
Capital Account per Non-Managing Member Unit (if any) to be equal to
the sum of (a) such holder's Preferred Return Shortfall per unit, (b)
the product of (i) the Value of a REIT Share (with the date of the
liquidating distribution being the Valuation Date), and (ii) the
Adjustment Factor (with the product set forth in (b) being equal to
zero if the number of outstanding Non-Managing Member Units has been
reduced (pursuant to Section 8.6.D, or otherwise) to zero), and (c)
an amount equal to (x) the NMM Sharing Amount, calculated as if all
of the Real Properties then owned by the Company were sold in a
taxable transaction at their fair market values, divided by (y) the
total number of Non-Managing Member Units then outstanding; and
(2) Thereafter, to the Managing Member.
SECTION 6.3 ADDITIONAL ALLOCATION PROVISIONS
A. REGULATORY ALLOCATIONS.
(1) Minimum Gain Chargeback.
-----------------------
Except as otherwise provided in Regulations Section
1.704-2(f), notwithstanding the provisions of Section 6.2 hereof, or any other
provision of this Article 6, if there is a net decrease in Company Minimum Gain
---------
during any Fiscal 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
allocated shall be determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(1) is intended to qualify
as a "minimum gain chargeback" within the meaning of Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
(2) Member Minimum Gain Chargeback.
------------------------------
Except as otherwise provided in Regulations Section
1.704-2(i)(4) or in Section 6.3.A(1) hereof, if there is a net decrease in
Member Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal
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
31
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)(4). 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 Sections 1.704-2(i)(4) and 1.704-2(j)(2). This
Section 6.3.A(2) is intended to qualify as a "chargeback of partner nonrecourse
debt minimum gain" within the meaning of Regulations Section 1.704-2(i) and
shall be interpreted consistently therewith.
(3) Member Nonrecourse Deductions.
-----------------------------
Any Member Nonrecourse Deductions for any Fiscal Year shall
be specially allocated to the Member(s) 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).
(4) Qualified Income Offset.
-----------------------
If any Member unexpectedly receives an adjustment, allocation
or distribution described in Regulations Section 1.704-1(b) (2)(ii)(d)(4), (5)
or (6), items of Company income and gain shall be allocated, in accordance with
Regulations Section 1.704-1(b) (2)(ii)(d), to such Member in an amount and
manner sufficient to eliminate, to the extent required by such Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible,
provided that an allocation pursuant to this Section 6.3.A(4) shall be made if
and only to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided in this Article 6 have been
---------
tentatively made as if this Section 6.3.A(4) were not in the Agreement. It is
intended that this Section 6.3.A(4) qualify and be construed as a "qualified
income offset" within the meaning of Regulations Section 1.704-1(b) (2)(ii)(d)
and shall be interpreted consistently therewith.
(5) Limitation on Allocation of Net Loss.
------------------------------------
To the extent that any allocation of Net Loss would cause or
increase an Adjusted Capital Account Deficit as to any Member, such allocation
of Net Loss shall be reallocated among the other Members in accordance with
their respective LLC Units, subject to the limitations of this Section 6.3.A(5).
(6) Section 754 Adjustment.
----------------------
To the extent that an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-1(b) (2)(iv)(m)(2) or
Regulations Section 1.704-1(b) (2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in
complete liquidation of its interest in the Company, 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 gain or loss shall be specially allocated to
the Members in accordance with their LLC Units in the event that Regulations
Section 1.704-
32
1(b)(2)(iv)(m)(2) applies, or to the Members to whom such
distribution was made in the event that Regulations Section 1.704-1(b)
(2)(iv)(m)(4) applies.
(7) Curative Allocations.
--------------------
The allocations set forth in Sections 6.3.A(1) through (6)
hereof (the "Regulatory Allocations") are intended to comply with certain
regulatory requirements, including the requirements of Regulations Sections
1.704-1(b) and 1.704-2. Notwithstanding the provisions of Sections 6.1 and 6.2
hereof, the Regulatory Allocations shall be taken into account in allocating
other items of income, gain, loss and deduction among the Members so that, to
the extent possible without violating the requirements giving rise to the
Regulatory Allocations, the net amount of such allocations of other items and
the Regulatory Allocations to each Member shall be equal to the net amount that
would have been allocated to each such Member if the Regulatory Allocations had
not occurred.
B. Allocation of Excess Nonrecourse Liabilities. For
purposes of determining a Member's proportional share of the "excess
nonrecourse liabilities" of the Company within the meaning of Regulations
Section 1.752-3(a)(3), each Member's interest in Company profits shall be such
Member's Percentage Interest.
SECTION 6.4 TAX ALLOCATIONS
A. In General. Except as otherwise provided in this
Section 6.4, for income tax purposes under the Code and the Regulations each of
the Company's items of income, gain, loss or deduction as determined for
federal income tax purposes (collectively "Tax Items") 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 Sections 6.2 and 6.3 hereof.
B. Allocations Respecting Section 704(c) Revaluations.
Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property that
is contributed to the Company with a Gross Asset Value that varies from its
basis in the hands of the contributing Member immediately preceding the date of
contribution shall be allocated among the Members for income tax purposes
pursuant to the "traditional method" as described in Regulations Section
1.704-3(b). In the event that the Gross Asset Value of any Company asset is
adjusted pursuant to subsection (b) of the definition of "Gross Asset Value"
(provided in Article 1 hereof), subsequent allocations of Tax Items with
---------
respect to such asset shall take account of the variation, if any, between the
adjusted basis of such asset and its Gross Asset Value in the same manner as
under Code Section 704(c) and the applicable Regulations and this Section
6.4.B, pursuant to any method permitted under Regulations Section 1.704-3 as
selected by the Managing Member
SECTION 6.5 OTHER PROVISIONS
A. Other Allocations. In the event that (i) any
modifications are made to the Code or any Regulations, (ii) any changes occur
in any case law applying or interpreting the Code or any Regulations, (iii) the
IRS changes or clarifies the manner in which it applies or interprets the Code
or any Regulations or any case law applying or interpreting the Code or any
Regulations or (iv) the IRS adjusts the reporting of any of the transactions
contemplated by this Agreement which, in each case, in the opinion of an
independent tax counsel, either (a) requires
33
allocations of items of income, gain, loss, deduction or credit or (b) requires
reporting of any of the transactions contemplated by this Agreement in a manner
different from that set forth in this Article 6, the Managing Member is hereby
authorized to make new allocations or report any such transactions (as the case
may be) in reliance of the foregoing, and such new allocations and reporting
shall be deemed to be made pursuant to the fiduciary duty of the Managing
Member to the Company and the other Members, and no such new allocation or
reporting shall give rise to any claim or cause of action by any Member.
B. Consistent Tax Reporting. The Members acknowledge
and are aware of the income tax consequences of the allocations made by this
Article 6 and hereby agree to be bound by the provisions of this Article 6 in
--------- ---------
reporting their shares of Net Income, Net Loss and other items of income, gain,
loss, deduction and credit for federal, state and local income tax purposes.
SECTION 6.6 AMENDMENTS TO ALLOCATION TO REFLECT ISSUANCE OF
ADDITIONAL MEMBERSHIP INTERESTS
In the event that the Company issues additional Membership
Interests to the Managing or any Additional Member pursuant to Article 4
---------
hereof, the Managing Member shall make such revisions to this Article 6 as it
---------
determines are necessary to reflect the terms of the issuance of such
additional Membership Interests, including making preferential allocations to
certain classes of Membership Interests.
ARTICLE 7.
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 MANAGEMENT
A. Except as otherwise expressly provided in this
Agreement, the Managing Member, in its capacity as a Member of the Company
under the Act, shall have sole and complete charge and management over the
business and affairs of the Company, in all respects and in all matters. The
Managing Member shall at all times act in good faith in exercising its powers
hereunder. The Managing Member shall be an agent of the Company's business, and
the actions of the Managing Member taken in such capacity and in accordance
with this Agreement shall bind the Company. The Managing Member shall at all
times be a Member of the Company. Except as otherwise expressly provided in
this Agreement or required by any non-waivable provisions of applicable law,
the Non-Managing Members shall not participate in the control of the Company,
shall have no right, power or authority to act for or on behalf of, or
otherwise bind, the Company and shall have no right to vote on or consent to
any other matter, act, decision or document involving the Company or its
business. The Managing Member may not be removed by the Members with or without
cause, except with the consent of the Managing Member. In addition to the
powers now or hereafter granted a manager of a limited liability company under
applicable law or that are granted to the Managing Member under any other
provision of this Agreement, the Managing Member, subject to the other
provisions hereof including the limitations on the authority of the Managing
Member set forth in Section 7.3, shall have full power and authority to do all
things deemed necessary or desirable by it to conduct the
34
business of the Company, to exercise all powers set forth in Section 3.2 hereof
and to effectuate the purposes set forth in Section 3.1 hereof, including,
without limitation:
(1) except as restricted pursuant to Section
7.3.E(2) through Section 7.3(E)(4), inclusive, but notwithstanding
the provisions of Section 7.3.E(1) hereof, the making of any
expenditures, the lending or borrowing of money (including, without
limitation, making prepayments on loans and borrowing money to permit
the Company to make distributions to its Members in such amounts as
will permit the Managing Member (so long as the Managing Member
qualifies as a REIT) to avoid the payment of any federal income tax
(including, for this purpose, any excise tax pursuant to Code Section
4981) and to make distributions to its stockholders sufficient to
permit the Managing Member to maintain REIT status or otherwise to
satisfy the REIT Requirements), the assumption or guarantee of, or
other contracting for, indebtedness and other liabilities (including,
but not limited to indebtedness of Managing Member or any of its
Affiliates), the issuance of evidences of indebtedness (including the
securing of same by deed to secure debt, mortgage, deed of trust or
other lien or encumbrance on the Company's assets) and the incurring
of any obligations that it deems necessary for the conduct of the
activities of the Company;
(2) the making of tax, regulatory and other
filings, or rendering of periodic or other reports to governmental or
other agencies having jurisdiction over the business or assets of the
Company;
(3) except as restricted pursuant to Section
7.3.E(2) hereof, the acquisition, sale, transfer, exchange or other
disposition of any assets of the Company (including, but not limited
to, the exercise or grant of any conversion, option, privilege or
subscription right or any other right available in connection with
any assets at any time held by the Company);
(4) except as restricted in this Agreement, but
notwithstanding the provisions of Section 7.3.E(1) hereof, the
mortgage, pledge, encumbrance or hypothecation of any assets of the
Company (including, without limitation, any Contributed Property) and
the use of the assets of the Company (including, without limitation,
cash on hand) for any purpose consistent with the terms of this
Agreement which the Managing Member believes will directly benefit
the Company and on any terms that the Managing Member sees fit,
including, without limitation, the financing of the conduct or the
operations of the Company, the lending of funds to other Persons
(including, without limitation, the Managing Member (if necessary to
permit the financing or capitalization of a Subsidiary of the
Managing Member or the Company)), the repayment of obligations of the
Company and the securing of obligations of the Managing Member or any
of its Affiliates;
(5) the management, operation, leasing,
landscaping, repair, alteration, demolition, replacement or
improvement of any Property, including, without limitation, any
Contributed Property, or other asset of the Company or any
Subsidiary, subject to any management agreements to which the Company
is a party;
35
(6) the negotiation, execution and performance
of any contracts, leases, conveyances or other instruments that the
Managing Member considers useful or necessary to the conduct of the
Company's operations or the implementation of the Managing Member's
powers under this Agreement, including, without limitation, (i)
contracting with property managers (including, without limitation, as
to any Contributed Property or other Property, contracting with the
contributing or any other Member or its Affiliates for property
management services), contractors, developers, consultants,
accountants, legal counsel, other professional advisors and other
agents and the payment of their expenses and compensation out of the
Company's assets, and (ii) the execution, delivery and performance of
the Contribution Agreement and the agreements and instruments
referred to therein or contemplated thereby, including the Management
Agreement (as defined in the Contribution Agreement) and the Loan
Assumption Documents;
(7) the distribution of Company cash or other
Company assets in accordance with this Agreement, the holding,
management, investment and reinvestment of cash and other assets of
the Company, and the collection and receipt of revenues, rents and
income of the Company;
(8) the selection and dismissal of employees of
the Company or the Managing Member (including, without limitation,
employees having titles or offices such as "president," "vice
president," "secretary" and "treasurer"), and agents, outside
attorneys, accountants, consultants and contractors of the Company or
the Managing Member and the determination of their compensation and
other terms of employment or hiring;
(9) the maintenance of such insurance including
(i) liability insurance for the Indemnitees hereunder and (ii)
casualty, liability, earthquake and other insurance on the Properties
of the Company for the benefit of the Company and the Members
comparable in coverage to that maintained by the Managing Member with
respect to the properties it owns and otherwise as it deems necessary
or appropriate;
(10) the control of any matters affecting the
rights and obligations of the Company, including the settlement,
compromise, submission to arbitration or any other form of dispute
resolution, or abandonment, of any claim, cause of action, liability,
debt or damages, due or owing to or from the Company, the
commencement or defense of suits, legal proceedings, administrative
proceedings, arbitrations or other forms of dispute resolution, and
the representation of the Company in all suits or legal proceedings,
administrative proceedings, arbitrations or other forms of dispute
resolution, the incurring of legal expense, and the indemnification
of any Person against liabilities and contingencies to the extent
permitted by law;
(11) the determination of the fair market value
of any Company property distributed in kind using such reasonable
method of valuation as it may adopt; provided that such methods are
otherwise consistent with the requirements of this Agreement;
36
(12) the enforcement of any rights against any
Member pursuant to representations, warranties, covenants and
indemnities relating to such Member's contribution of property or
assets to the Company;
(13) holding, managing, investing and reinvesting
cash and other assets of the Company;
(14) the collection and receipt of revenues and
income of the Company;
(15) the exercise, directly or indirectly,
through any attorney-in-fact acting under a general or limited power
of attorney, of any right, including the right to vote, appurtenant
to any asset or investment held by the Company;
(16) the exercise of any of the powers of the
Managing Member enumerated in this Agreement on behalf of or in
connection with any Subsidiary of the Company or any other Person in
which the Company has a direct or indirect interest, or jointly with
any such Subsidiary or other Person;
(17) the exercise of any of the powers of the
Managing Member enumerated in this Agreement on behalf of any Person
in which the Company does not have an interest pursuant to
contractual or other arrangements with such Person;
(18) the maintenance of working capital and
other reserves in such amounts as the Managing Member deems
appropriate and reasonable from time to time;
(19) the making, execution and delivery of any
and all deeds, leases, notes, deeds to secure debt, mortgages, deeds
of trust, security agreements, conveyances, contracts, guarantees,
warranties, indemnities, waivers, releases or legal instruments or
agreements in writing necessary or appropriate in the judgment of the
Managing Member for the accomplishment of any of the powers of the
Managing Member enumerated in this Agreement;
(20) the distribution of cash to acquire LLC
Units held by a Member in connection with a Member's exercise of its
Exchange Right under Section 8.6 hereof;
(21) the amendment and restatement of Exhibit A
---------
hereto to reflect accurately at all times the Capital Accounts, LLC
Units, and Percentage Interests of the Members as the same are
adjusted from time to time to the extent necessary to reflect
redemptions, Capital Contributions, the issuance of or reduction in
the number of LLC Units, the admission of any Substituted Member or
otherwise, as long as the matter or event being reflected in Exhibit A
---------
hereto otherwise is authorized by this Agreement; and
(22) notwithstanding the provisions of Section
7.3.E(1) below, the formation of corporations, trusts, limited
liability companies or other entities as wholly-owned subsidiaries of
the Company for purposes of holding title to all or a portion of the
Properties.
37
B. Each of the Non-Managing Members agrees that, except
as provided in Section 7.3 hereof, the Managing Member is authorized to execute,
deliver and perform the above-mentioned agreements and transactions on behalf
of the Company without any further act, approval or vote of the Non-Managing
Members, notwithstanding any other provision of this Agreement (except as
provided in Section 7.3 hereof), the Act or any applicable law, rule or
regulation. The execution, delivery or performance by the Managing Member or
the Company of any agreement authorized or permitted under this Agreement shall
not constitute a breach by the Managing Member of any duty that the Managing
Member may owe the Company or the Members or any other Persons under this
Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the
Managing Member may cause the Company to establish and maintain working capital
reserves in such amounts as the Managing Member, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.
D. Except as otherwise expressly provided in this
Agreement, in exercising its permitted authority under this Agreement, the
Managing Member may, but shall be under no obligation to, take into account the
tax consequences to any Member (including the Managing Member) of any action
taken by it. The Managing Member and the Company shall not have liability to a
Member under any circumstances as a result of an income tax liability incurred
by such Member as a result of an action (or inaction) by the Managing Member
pursuant to its authority under this Agreement so long as the action or
inaction is taken in good faith.
SECTION 7.2 CERTIFICATE OF FORMATION
To the extent that such action is determined by the Managing
Member to be reasonable and necessary or appropriate, the Managing Member shall
file amendments to and restatements of the Certificate and do all the things to
maintain the Company as a limited liability company under the laws of the State
of Delaware and each other state, the District of Columbia or any other
jurisdiction in which the Company may elect to do business or own property.
Subject to the terms of Section 8.5.A(4) hereof, the Managing Member shall not
be required, before or after filing, to deliver or mail a copy of the
Certificate or any amendment thereto to any Member. The Managing Member shall
use all reasonable efforts to cause to be filed such other certificates or
documents as may be commercially reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited liability
company in the State of Delaware and any other state, or the District of
Columbia or other jurisdiction in which the Company may elect to do business or
own property.
SECTION 7.3 RESTRICTIONS ON MANAGING MEMBER'S AUTHORITY
A. The Managing Member may not take any action in
contravention of an express prohibition or limitation of this Agreement,
including, without limitation:
(1) take any action that would make it
impossible to carry on the ordinary business of the Company, except as
otherwise provided in this Agreement;
38
(2) possess Company property, or assign any
rights in specific Company property, for other than a Company purpose
except for purposes of securing any obligation of Managing Member or
any of its Affiliates or as otherwise provided in this Agreement;
(3) perform any act that would subject a Member
to liability as a Managing Member in any jurisdiction or any other
liability except as provided herein or under the Act; or
(4) enter into any contract, mortgage, loan or
other agreement that expressly prohibits or restricts, or has the
effect of prohibiting or restricting, the ability of (a) the Managing
Member or the Company from satisfying its obligations under Section 8.6
hereof in full, (b) a Member from exercising its rights to an Exchange
in full, or (c) the Company to make distributions of Available Cash as
required by Article 5 hereof, except, in any such case, with the
written consent of any Member affected by the prohibition or
restriction.
B. The Managing Member shall not, without the prior
Consent of the Non-Managing Members undertake or have the authority to do or
undertake, on behalf of the Company, any of the following actions or enter into
any transaction which would have the effect of such transactions:
(1) except as provided in Section 7.3.C and
except in connection with a dissolution or termination of the Company
permitted by Section 7.3.E, amend, modify or terminate this Agreement
other than to reflect the admission, substitution, termination or
withdrawal of Members pursuant to Article 11 or Article 12 hereof;
---------- ----------
(2) approve or acquiesce to the Transfer of the
Membership Interest of the Managing Member to any Person other than
the Company;
(3) admit into the Company any Additional
Managing Member or Substitute Managing Member;
(4) make a general assignment for the benefit
of creditors or appoint or acquiesce in the appointment of a Custodian
for all or any part of the assets of the Company;
(5) institute any proceeding for bankruptcy on
behalf of the Company; or
(6) confess a judgment against the Company in
an amount in excess of $5,000,000.
(7) [Intentionally Omitted].
C. Notwithstanding Section 7.3.B, the Managing Member
shall have the exclusive power to amend this Agreement as may be required to
facilitate or implement any of the following purposes:
39
(1) to reflect the issuance of additional
Membership Interests pursuant to Section 4.4, to reflect the
admission, substitution, termination, or withdrawal of Members in
accordance with this Agreement and to amend Exhibit A in connection
---------
therewith and to reflect the redemption or other reduction in the
number of LLC Units outstanding pursuant to Section 5.6 hereof and as
otherwise permitted by this Agreement;
(2) to reflect a change that is of an
inconsequential nature and does not adversely affect the Non-Managing
Members in any material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent with law
or with other provisions, or make other changes with respect to
matters arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
(3) to satisfy any requirements, conditions, or
guidelines contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in federal or
state law;
(4) to reflect such changes as are reasonably
necessary for the Managing Member to maintain its status as a REIT
or to satisfy the REIT Requirements; and
(5) to modify, as set forth in the definition
of "Capital Account," the manner in which Capital Accounts are
computed.
D. Notwithstanding Section 7.3.B and 7.3.C hereof, this
Agreement shall not be amended with respect to any Member adversely affected,
and no action may be taken by the Managing Member, without the Consent of such
Member adversely affected if such amendment or action would (i) convert a
Non-Managing Member's interest in the Company into a Managing Member's
interest, (ii) modify the limited liability of a Non-Managing Member, (iii)
alter rights of the Member to receive distributions pursuant to Article 5 or
---------
Section 13.3.A(4), or the allocations specified in Article 6 (except as
---------
permitted pursuant to Section 4.4 and Section 7.3.C(1) hereof), (iv) materially
alter or modify the rights to an Exchange as set forth in Section 8.6, and
related definitions hereof or (v) amend this Section 7.3.D. Further, no
amendment may alter the restrictions on the Managing Member's authority set
forth elsewhere in this Section 7.3 without the Consent specified in such
section. Any such amendment or action consented to by any Member shall be
effective as to that Member, notwithstanding the absence of such consent by any
other Member.
E. Except as otherwise permitted by Section 11.2, the
Company shall pay to each Non-Managing Member the Make-Whole Payment, if any,
as provided below if the Company takes any of the following actions during the
Tax Protection Period without the prior Consent of the Non-Managing Members:
(1) cause or permit the Company to merge,
consolidate or combine with or into any other partnership, limited
partnership, limited liability company, corporation or other person,
to sell or otherwise dispose of all or substantially all of its
40
assets, or to reclassify or change its outstanding equity interests;
except in connection with a transaction described in Sections
7.1.A(1), 7.1.A(4), and 7.1.A(22);
(2) sell, dispose, convey or otherwise transfer
any of the real properties the Company acquired in connection with the
transactions consummated pursuant to the Contribution Agreement
(collectively, the "Real Properties") or any Successor Properties, in
a transaction that causes holders of Non-Managing Member Units to
recognize taxable income under the Code on account of a Built-in Gain,
other than a casualty loss, taking by eminent domain or pursuant to
the exercise of a purchase option granted to a Person pursuant to any
document or instrument executed pursuant to the Contribution
Agreement; provided that the Company shall use commercially reasonable
efforts to apply the proceeds of any such casualty or taking to the
restoration or replacement of such Real Properties or Successor
Properties in a transaction qualifying under Code Section 1033; or
(3) (A) replace or refinance any nonrecourse
indebtedness set forth on Schedule 7.3 encumbering the Real Properties
("Existing Indebtedness"), unless such indebtedness is replaced or
refinanced with other indebtedness satisfying the requirements set
forth below ("Replacement Indebtedness"), (B) prepay the Existing
Indebtedness or any Replacement Indebtedness, including Replacement
Indebtedness assumed or taken subject to in a transaction qualifying
under Code Section 1031, and (C) convert the Existing Indebtedness or
Replacement Indebtedness from nonrecourse indebtedness to recourse
indebtedness; provided, however, the above limitations shall not
-----------------
prevent (i) regularly scheduled periodic principal payments on
Existing Indebtedness or Replacement Indebtedness (including full
payment at maturity) and (ii) the replacement, prepayment, or
refinancing of the Existing Indebtedness or any Replacement
Indebtedness, provided such replacement, prepayment, or refinancing
shall be made with Replacement Indebtedness. Any Replacement
Indebtedness shall (x) be nonrecourse, (y) not require principal
repayments during such period that are greater than the payments
required on the Existing Indebtedness replaced by such debt during
such period, and (z) be secured solely by the Real Property or
Properties which secure the Existing Indebtedness or the Replacement
Indebtedness that is being refinanced. The determination of whether
indebtedness is recourse or nonrecourse shall be determined under
Code Section 752.
(4) Each Non-Managing Member shall have the
option from time to time during the Tax Protection Period to guarantee
debt of the Company (or enter into a reimbursement agreement with
respect to debt of the Company) in an amount up to its share of the
Recourse Debt Amount as determined by the Non-Managing Member
Representative, provided that the aggregate amount to be guaranteed
shall not exceed the Recourse Debt Amount. If a Non-Managing Member
elects to guarantee debt as described in this Section 7.3.E(4), the
Company, the Managing Member, and such Non-Managing Member agree
to enter into a reimbursement agreement substantially in the form
attached hereto as Exhibit C. The Company shall be required to ensure
that there is a sufficient level of debt available to all Non-Managing
Members for such guarantees, but not greater in the aggregate, than
the Recourse Debt Amount; provided, however, that each Non-Managing
Member shall be solely responsible for providing accurate
41
information to the Company regarding the level of debt deemed
"sufficient" by such Non-Managing Member, and the Company shall be
deemed to have satisfied its obligations under this Section 7.3.E(4)
with respect to a Non-Managing Member if it acts in good faith
reliance on information delivered to the Company by such Non-Managing
Members without any duty to question the accuracy of such information.
The Company may incur or repay such indebtedness from time to time as
it so chooses; provided, however, if the Company intends to repay, in
-----------------
whole or in part, or to substitute other debt for, indebtedness of the
Company that one or more Non-Managing Members has guaranteed (or with
respect to which one or more Non-Managing Members has entered into a
reimbursement agreement) in accordance with this Section 7.3.E(4), the
Company shall provide notice to the Non-Managing Member Representative
prior to such repayment or substitution and such additional
information as the Non-Managing Member Representative shall reasonably
request to permit such Non-Managing Member(s) to decide whether or not
to enter into different and/or additional guarantees or reimbursement
agreements (as the case may be). The notice described in the
immediately preceding sentence shall be deemed to have been satisfied
so long as the Company provides notice to the Non-Managing Member
Representative at least fifteen (15) calendar days prior to any such
repayment or substitution of indebtedness.
In the event that the prior Consent of the Non-Managing
Members is not required for the Managing Member, on behalf of the Company, to
take or engage in any of the actions described in the foregoing subparagraphs
(1) and (2), the Managing Member may take such action only after providing the
Non-Managing Members with not less than 30 days notice of its intention to do
so.
F. Except as otherwise permitted by Section 11.2, the
Company shall pay to the Non-Managing Members the Make-Whole Payment as
provided below if the Company takes any action to dissolve or otherwise
terminate the Company during the Dissolution Protection Period. In the event
the Managing Member intends to dissolve or otherwise terminate the Company
following the Dissolution Protection Period, it shall give not less than thirty
(30) days notice to that effect to the Non-Managing Member prior to taking such
action. In the event the Managing Member provides the Non-Managing Members
notice of its intent to dissolve or otherwise terminate the Company after June
30th of any year, the closing of the termination or dissolution shall not occur
prior to January 1 of the subsequent year.
G. Any event in Sections 7.3.E and 7.3.F that triggers
the obligation of the Company to make a Make-Whole Payment (as defined below)
is called a "Triggering Event." The Company shall pay to each Non-Managing
Member an amount (the "Make-Whole Payment") equal to the aggregate federal,
state and local income taxes, if any, incurred by the Non-Managing Member as a
result of a Triggering Event. Any such federal, state and local income taxes
shall be deemed to be the amount of gain or income recognized by the
Non-Managing Members multiplied by the then highest rate or rates applicable to
such gain or income for the year in which such gain or income is recognized
grossed up to include any federal, state and local income taxes incurred by the
Non-Managing Member by reason of the receipt of the payment from the Company.
No effect shall be given in determining the amount of the Make-Whole Payment of
a Non-Managing Member's taxable income, tax deductions, tax credits, tax carry
forwards nor to any other of their tax benefits or tax attributes. The
Make-Whole Payment
42
hall be made within a reasonable period of time after the Triggering Event, but
in no event later than the date by which the Non-Managing Member would be
required to make the applicable tax payment.
H. The parties agree that the sole and exclusive rights
and remedies to which the Non-Managing Members may be entitled at law or in
equity in connection with any Triggering Event shall be for payment of the
Make-Whole Payment pursuant to Section 7.3.G, and no Non-Managing Member shall
be entitled to pursue any other claim with respect to a Triggering Event. If
any Non-Managing Member notifies the Company of a claim that the Company owes a
Make-Whole Payment, the Managing Member, on behalf of the Company, and the
Non-Managing Member shall negotiate in good faith to resolve any disagreements
regarding any such Triggering Event. If any such disagreement cannot be
resolved by the parties within thirty (30) days after the receipt by the
Company of the notice in accordance with the preceding sentence, the Managing
Member, on behalf of the Company, and the Non-Managing Member shall jointly
retain a nationally recognized independent public accounting firm (an
"Accounting Firm") to act as an arbitrator to resolve as expeditiously as
possible all points of any such disagreement (including, without limitation,
whether a Triggering Event has occurred and, if so, the amount of the
applicable Make-Whole Payment that the Non-Managing Member is entitled to as a
result thereof, determined as set forth in Section 7.3.G). If the parties
cannot agree on an Accounting Firm, each of the Managing Member, on behalf of
the Company, and the Non-Managing Member shall retain an Accounting Firm, and
the Accounting Firms selected shall jointly retain a third Accounting Firm. If
the two Accounting Firms cannot agree upon a third Accounting Firm within
thirty (30) days, such matter shall be referred to a court of competent
jurisdiction to select the third Accounting Firm. The Accounting Firms shall be
instructed to resolve as expeditiously as possible all points of any such
disagreement (including, without limitation, whether a Triggering Event has
occurred and, if so, the amount of the applicable Make-Whole Payment that the
Non-Managing Member is entitled to as a result thereof, determined as set forth
in Section 7.3.G). All determinations made by the Accounting Firm or the
Accounting Firms, as the case may be, with respect to the resolution of whether
a Triggering Event has occurred shall be final, conclusive and binding on the
Company and the Non-Managing Member. The fees and expenses of any Accounting
Firms incurred in connection with any such determination shall be shared
equally by the Company and the Non-Managing Member.
SECTION 7.4 COMPENSATION OF THE MANAGING MEMBER
A. The Managing Member shall not be compensated for its
services as the manager of the Company. Distributions, payments and allocations
to which the Managing Member may be entitled in its capacity as the Managing
Member shall not constitute compensation for services rendered by the Managing
Member as provided in this Agreement (including the provisions of Articles 5
----------
and 6 hereof).
-----
B. Subject to Sections 7.4.C and 15.12 hereof, the
Company shall be liable, and shall reimburse the Managing Member on a monthly
basis (or such other basis as the Managing Member may determine in its sole and
absolute discretion), for all sums expended in connection with the Company's
business. Any such reimbursements shall be in addition to any reimbursement of
the Managing Member as a result of indemnification pursuant to Section 7.7
hereof.
43
C. To the extent practicable, Company expenses shall be
billed directly to and paid by the Company. Subject to Section 15.12 hereof,
reimbursements to the Managing Member or any of its Affiliates by the Company
shall be allowed, however, for the actual cost to the Managing Member or any of
its Affiliates of operating and other expenses of the Company, including,
without limitation, the actual cost of goods, materials and administrative
services related to (i) Company operations, (ii) company accounting, (iii)
communications with Members, (iv) legal services, (v) tax services, (vi)
computer services, (vii) risk management, (viii) mileage and travel expenses
and (ix) such other related operational and administrative expenses as are
necessary for the prudent organization and operation of the Company. "Actual
cost of goods and materials" means the actual cost to the Managing Member or
any of its Affiliates of goods and materials used for or by the Company
obtained from entities not affiliated with the Managing Member, and "actual
cost of administrative services" means the pro rata cost of personnel (as if
such persons were employees to the Company) providing administrative services
to the Company. The cost for such services to be reimbursed to the Managing
Member or any Affiliate thereof shall be the lesser of the Managing Member's or
Affiliate's actual cost, or the amount the Company would be required to pay to
independent parties for comparable administrative services in the same
geographic location.
D. The Managing Member shall also be reimbursed for all
expenses it incurs relating to any issuance of additional Membership Interests,
Debt of the Company, or rights, options, warrants or convertible or
exchangeable securities of the Company pursuant to Article VIII hereof
(including, without limitation, all costs, expenses, damages and other payments
resulting from or arising in connection with litigation related to any of the
foregoing), all of such expenses are considered by the Members to constitute
expenses of, and for the benefit of, the Company.
To the extent that reimbursements to the Managing Member or
any of its Affiliates by the Company pursuant to this Section 7.4 would
constitute gross income to the Managing Member for purposes of Code Section
856(c)(2) or 856(c)(3), then such amounts shall be treated as "guaranteed
payments" within the meaning of Code Section 707(c).
SECTION 7.5 OTHER BUSINESS OF MANAGING MEMBER
The Managing Member shall devote to the Company such time as
may be necessary for the performance of its duties as Managing Member, but the
Managing Member is not required, and is not expected, to devote its full time to
the performance of such duties. The Managing Member may engage independently or
with others in other business ventures of every nature and description,
including, without limitation, the ownership of other properties and the making
or management of other investments. Nothing in this Agreement shall be deemed to
prohibit the Managing Member or any Affiliate of the Managing Member from
dealing, or otherwise engaging in business with, Persons transacting business
with the Company, or from providing services related to the purchase, sale,
financing, management, development or operation of real or personal property and
receiving compensation therefor, not involving any rebate or reciprocal
arrangement that would have the effect of circumventing any restriction set
forth herein upon dealings with the Managing Member or any Affiliate of the
Managing Member. Neither the Company nor any Member shall have any right by
virtue of this Agreement or the relationship created hereby in or to such other
ventures or activities or to the
44
income or proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper.
SECTION 7.6 CONTRACTS WITH AFFILIATES
A. Subject to Section 7.6.B below, the Company may lend
or contribute to Persons in which it has an equity investment, and such Persons
may borrow funds from the Company, on terms and conditions established in the
sole and absolute discretion of the Managing Member. The foregoing authority
shall not create any right or benefit in favor of any Person.
B. The Managing Member or any of its Affiliates,
directly or indirectly, shall be permitted to sell, transfer or convey any
property to, or purchase any property from, or borrow funds from, or lend funds
to, the Company or engage in any other transaction with the Company, but only
upon terms determined by the Managing Member in good faith to be fair and
reasonable and comparable to terms that could be obtained from an unaffiliated
party in an arm's length transaction, except as otherwise expressly permitted
by this Agreement; provided, however, that notwithstanding the foregoing, the
Managing Member shall at all times be entitled to cause the Company to
mortgage, pledge, encumber or hypothecate the Properties, any property owned by
a Subsidiary of the Company or any portion thereof as security for the debt of
Managing Member or any of its Affiliates.
SECTION 7.7 INDEMNIFICATION
A. To the fullest extent permitted by applicable law,
the Company shall indemnify each Indemnitee from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including,
without limitation, attorney's fees and other legal fees and expenses),
judgments, fines, settlements and other amounts arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, that relate to the operations of the Company ("Actions") as
set forth in this Agreement in which such Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise unless it is established
that: (i) the act or omission of the Indemnitee was material to the matter
giving rise to the proceeding and either was committed in bad faith or was the
result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. Without limitation the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise, for any indebtedness of the Company or any Subsidiary of
the Company (including, without limitation, any indebtedness which the Company
or any Subsidiary of the Company has assumed or taken subject to), and the
Managing Member is hereby authorized and empowered, on behalf of the Company,
to enter into one or more indemnity agreements consistent with the provisions
of this Section 7.7 in favor of any Indemnitee having or potentially having
liability for any such indebtedness. The termination of any proceeding by
judgment, order or settlement does not create a presumption that the Indemnitee
did not meet the requisite standard of conduct set forth in this Section 7.7.A.
The termination of any proceeding by conviction or upon a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, creates a rebuttable presumption that the Indemnitee acted in a
manner contrary to that specified in this
45
Section 7.7.A with respect to the subject matter of such proceeding. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Company, and any insurance proceeds from the liability policy
covering the Managing Member and any Indemnitees, and neither the Managing
Member nor any Non-Managing Member shall have any obligation to contribute to
the capital of the Company or otherwise provide funds to enable the Company to
fund its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is
a party to a proceeding or otherwise subject to or the focus of or is involved
in any Action shall be paid or reimbursed by the Company as incurred by the
Indemnitee in advance of the final disposition of the Action upon receipt by
the Company of (i) a written affirmation by the Indemnitee of the Indemnitee's
good faith belief that the standard of conduct necessary for indemnification by
the Company as authorized in Section 7.7.A has been met, and (ii) a written
undertaking by or on behalf of the Indemnitee to repay the amount if it shall
ultimately be determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7
shall be in addition to any other rights to which an Indemnitee or any other
Person may be entitled under any agreement, pursuant to any vote of the
Members, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity unless otherwise provided
in a written agreement with such Indemnitee or in the writing pursuant to which
such Indemnitee is indemnified.
D. The Company may, but shall not be obligated to,
purchase and maintain insurance, on behalf of any of the Indemnitees and such
other Persons as the Managing Member shall determine, against any liability
that may be asserted against or expenses that may be incurred by such Person in
connection with the Company's activities, regardless of whether the Company
would have the power to indemnify such Person against such liability under the
provisions of this Agreement.
E. In no event may an Indemnitee subject any of the
Members to personal liability by reason of the indemnification provisions set
forth in this Agreement.
F. An Indemnitee shall not be denied indemnification in
whole or in part under this Section 7.7 because the Indemnitee had an interest
in the transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
G. The provisions of this Section 7.7 are for the
benefit of the Indemnitees, their heirs, successors, assigns and administrators
and shall not be deemed to create any rights for the benefit of any other
Persons. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the Company's liability to any Indemnitee under this Section 7.7
as in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
46
H. If and to the extent any reimbursements to the
Managing Member pursuant to this Section 7.7 constitute gross income to the
Managing Member (as opposed to the repayment of advances made by the Managing
Member on behalf of the Company) such amounts shall constitute guaranteed
payments within the meaning of Code Section 707(c), shall be treated
consistently therewith by the Company and all Members, and shall not be treated
as distributions for purposes of computing the Members' Capital Accounts.
SECTION 7.8 LIABILITY OF THE MANAGING MEMBER
A. Notwithstanding anything to the contrary set forth
in this Agreement, neither the Managing Member nor any of its directors or
officers shall be liable or accountable in damages or otherwise to the Company,
any Members or any Assignees for losses sustained, liabilities incurred or
benefits not derived as a result of errors in judgment or mistakes of fact or
law or of any act or omission if the Managing Member or such director or
officer acted in good faith.
B. The Non-Managing Members expressly acknowledge that
the Managing Member is acting for the benefit of the Company, the Members and
the Managing Member's shareholders collectively, that the Managing Member is
under no obligation to give priority to the separate interests of the Members
or the Managing Member's shareholders (including, without limitation, the tax
consequences to Members, Assignees or the Managing Member's shareholders) in
deciding whether to cause the Company to take (or decline to take) any actions
and that the Managing Member shall not be liable to the Company or to any
Member for monetary damages for losses sustained, liabilities incurred, or
benefits not derived by Non-Managing Members in connection with such decisions,
provided that the Managing Member has acted in good faith and has not breached
its express covenants set forth in this Agreement.
C. Subject to its obligations and duties as Managing
Member set forth in Section 7.1.A hereof, the Managing Member may exercise any
of the powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its employees or
agents. The Managing Member shall not be responsible for any misconduct or
negligence on the part of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this
Section 7.8 or any provision hereof shall be prospective only and shall not in
any way affect the limitations on the Managing Member's, and its officers' and
directors', liability to the Company and the Non-Managing Members under this
Section 7.8 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless
of when such claims may arise or be asserted.
SECTION 7.9 OTHER MATTERS CONCERNING THE MANAGING MEMBER
A. The Managing Member may rely and shall be protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture or other paper or document believed by it in good faith to be genuine
and to have been signed or presented by the proper party or parties.
47
B. The Managing Member may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion of such Persons as to matters that the Managing Member
reasonably believes to be within such Person's professional or expert
competence shall be conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.
C. The Managing Member shall have the right, in respect
of any of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact. Each
such attorney shall, to the extent provided by the Managing Member in the power
of attorney, have full power and authority to do and perform all and every act
and duty that is permitted or required to be done by the Managing Member
hereunder.
D. Notwithstanding any other provisions of this
Agreement or the Act, any action of the Managing Member on behalf of the
Company or any decision of the Managing Member to refrain from acting on behalf
of the Company undertaken in the good faith belief that such action or omission
is necessary or advisable in order (i) to protect the ability of the Managing
Member to continue to qualify as a REIT, (ii) for the Managing Member otherwise
to satisfy the REIT Requirements or (iii) to allow the Managing Member to avoid
incurring any liability for taxes under Section 857 or Section 4981 of the
Code, is expressly authorized under this Agreement and is deemed approved by
all of the Non-Managing Members.
SECTION 7.10 TITLE TO COMPANY ASSETS
Title to Company assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Company as an
entity, and no Member, individually or collectively with other Members or
Persons, shall have any ownership interest in such Company assets or any portion
thereof. All Company assets shall be recorded as the property of the Company in
its books and records, irrespective of the name in which legal title to such
Company assets is held.
SECTION 7.11 RELIANCE BY THIRD PARTIES
Notwithstanding anything to the contrary in this Agreement,
any Person dealing with the Company shall be entitled to assume that the
Managing Member has full power and authority, without the consent or approval of
any other Member or Person, to encumber, sell or otherwise use in any manner any
and all assets of the Company and to enter into any contracts on behalf of the
Company, and take any and all actions on behalf of the Company, and such Person
shall be entitled to deal with the Managing Member as if it were the Company's
sole party in interest, both legally and beneficially. Each Non-Managing Member
hereby waives any and all defenses or other remedies that may be available
against such Person to contest, negate or disaffirm any action of the Managing
Member in connection with any such dealing. In no event shall any Person dealing
with the Managing Member or its representatives be obligated to ascertain that
the terms of this Agreement have been complied with or to inquire into the
necessity or expediency of any act or action of the Managing Member or its
representatives. Each and every certificate, document or other instrument
executed on behalf of the Company by
48
the Managing Member or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i)
at the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Company and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Company.
ARTICLE 8.
RIGHTS AND OBLIGATIONS OF MEMBERS
SECTION 8.1 LIMITATION OF LIABILITY
The Non-Managing Members shall have no liability under this
Agreement except as expressly provided in this Agreement or under the Act.
SECTION 8.2 MANAGING OF BUSINESS
No Non-Managing Members or Assignee (other than the Managing
Member, any of its Affiliates or any officer, director, employee, partner, agent
or trustee of the Managing Member, the Company or any of their Affiliates, in
their capacity as such) shall take part in the operations, management or control
(within the meaning of the Act) of the Company's business, transact any business
in the Company's name or have the power to sign documents for or otherwise bind
the Company. The transaction of any such business by the Managing Member, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the Managing Member, the Company or any of their Affiliates, in their capacity
as such, shall not affect, impair or eliminate the limitations on the liability
of the Non-Managing Members or Assignees under this Agreement.
SECTION 8.3 OUTSIDE ACTIVITIES OF MEMBERS
Subject to any agreements entered into by a Member or its
Affiliates with the Managing Member, the Company or a Subsidiary (including,
without limitation, any employment agreement), any Member and any Assignee,
officer, director, employee, agent, trustee, Affiliate or shareholder of any
Member shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Company, including
business interests and activities that are in direct or indirect competition
with the Company or that are enhanced by the activities of the Company. Neither
the Company nor any Member shall have any rights by virtue of this Agreement in
any business ventures of any Member or Assignee. Subject to such agreements,
none of the Members nor any other Person shall have any rights by virtue of this
Agreement or the relationship established hereby in any business ventures of any
other Person (other than the Managing Member, to the extent expressly provided
herein), and such Person shall have no obligation pursuant to this Agreement,
subject to any agreements entered into by a Member or its Affiliates with the
Managing Member, the Company or a Subsidiary, to offer any interest in any such
business ventures to the Company, any Member or any such other Person, even if
such opportunity is of a character that, if presented to the Company, any Member
or such other Person, could be taken by such Person.
49
SECTION 8.4 RETURN OF CAPITAL
Except pursuant to the rights of Exchange set forth in
Section 8.6 hereof, no Member shall be entitled to the withdrawal or return of
its Capital Contribution, except to the extent of distributions made pursuant
to this Agreement or upon termination of the Company as provided herein. Except
to the extent provided in Article 5, Article 6 and Article 13 hereof or
--------- --------- ----------
otherwise expressly provided in this Agreement, no Member or Assignee shall
have priority over any other Member or Assignee either as to the return of
Capital Contributions or as to profits, losses, distributions or credits.
SECTION 8.5 RIGHTS OF NON-MANAGING MEMBERS RELATING
TO THE COMPANY
A. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.C hereof, each
Non-Managing Member shall have the right, for a purpose reasonably related to
such Non-Managing Member's Membership Interest in the Company, upon written
demand with a statement of the purpose of such demand and at such Non-Managing
Member's own expense:
(1) to obtain a copy of (i) the most recent
annual and quarterly reports filed with the SEC by the Managing
Member pursuant to the Exchange Act and (ii) each report or other
written communication sent to the shareholders of the Managing Member;
(2) to obtain a copy of the Company's federal,
state and local income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and
last known business, residence or mailing address of each Member;
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with executed copies
of all powers of attorney pursuant to which this Agreement, the
Certificate and all amendments thereto have been executed; and
(5) to obtain true and full information
regarding the amount of cash and a description and statement of any
other property or services contributed by each Member, and the date on
which each became a Member.
B. The Company shall notify any Non-Managing Member of
the then current Adjustment Factor or any change made to the Adjustment Factor
or to the REIT Shares Amount within 30 days following such change or
adjustment.
C. Notwithstanding any other provision of this Section
8.5, the Managing Member may keep confidential from the Non-Managing Members,
for such period of time as the Managing Member determines in its sole and
absolute discretion to be reasonable, any information that (i) the Managing
Member believes to be in the nature of trade secrets or other information the
disclosure of which the Managing Member in good faith believes is not in the
best interests of the Company or could damage the Company or its business or
(ii) the Company
50
or the Managing Member is required by law or by agreements with unaffiliated
third parties to keep confidential.
SECTION 8.6 EXCHANGE RIGHTS
A. On or after the First Exchange Date, each Non-Managing
Member shall have the right (subject to the terms and conditions set forth
herein) to require the Managing Member to acquire all or a portion of those
Non-Managing Member Units held by such Non-Managing Member which were issued by
the Company on the Initial Closing Date (the "First Traunch Non-Managing Member
Units"), and on or after the Second Exchange Date, each Non-Managing Member
shall have the right (subject to the terms and conditions set forth herein) to
require the Managing Member to acquire all or a portion of those Non-Managing
Member Units held by such Non-Managing Members which were issued by the Company
at any time after the Initial Closing Date (the "Second Traunch Non-Managing
Member Units") (all such Non-Managing Member Units being hereafter called
"Tendered Units") in exchange (an "Exchange") for, at the election of and in
the sole and absolute discretion of the Managing Member, either the Cash Amount
or a number of REIT Shares equal to the REIT Shares Amount payable on the
Specified Exchange Date. Notwithstanding the foregoing, a third party lender
that has acquired a Membership Interest upon the foreclosure of debt secured by
such Membership Interest in accordance with Section 11.3.A hereof shall have
the right to tender such Non-Managing Member Units for Exchange (subject to the
terms and conditions set forth herein) and require the Managing Member to
acquire all of those Non-Managing Member Units which were acquired by such
lender pursuant to such foreclosure and which were issued by the Company at
least one year prior to the related Specified Exchange Date regardless of
whether the Second Exchange Date will have occurred by the related Specified
Exchange Date. Any Exchange shall be exercised pursuant to a Notice of Exchange
delivered to the Managing Member by the Non-Managing Member exercising the
Exchange right (the "Tendering Party"). On the Specified Exchange Date, the
Tendering Party shall sell the Tendered Units to the Managing Member in
exchange for, at the election of and in the sole and absolute discretion of the
Managing Member, either the Cash Amount or a number of REIT Shares equal to the
REIT Shares Amount. Any Tendered Units so acquired by the Managing Member
pursuant to this Section 8.6.A shall be held by the Managing Member as
Non-Managing Member Units with all the rights and preferences relating thereto
as provided in this Agreement. The Tendering Party shall submit (i) such
information, certification or affidavit as the Managing Member may reasonably
require in connection with the Ownership Limit and (ii) in the event the REIT
Shares issuable upon such Exchange are not registered for resale under the
Securities Act, such written representations, investment letters, legal
opinions or other instruments necessary, in the Managing Member's view, to
effect compliance with the Securities Act. If a Cash Amount is to be delivered
upon the Exchange, the Cash Amount shall be delivered as a certified check
payable to the Tendering Party or, in the Managing Member's sole discretion, in
immediately available funds. If REIT Shares are to be delivered upon the
Exchange, the REIT Shares Amount shall be delivered by the Managing Member as
duly authorized, validly issued, fully paid and nonassessable REIT Shares (and,
if applicable, Rights), free of any pledge, lien, encumbrance or restriction,
other than the Ownership Limit, and other restrictions provided in the Charter
or the Bylaws of the Managing Member in the event the REIT Shares issuable upon
such Exchange are not registered for resale under the Securities Act, the
Securities Act and relevant state securities or "blue sky" laws. The Tendering
Party shall be deemed the owner of such REIT Shares and
51
Rights for all purposes, including, without limitation, rights to vote or
consent, receive dividends, and exercise rights, as of the Specified Exchange
Date. REIT Shares issued upon an acquisition of the Tendered Units by the
Managing Member pursuant to this Section 8.6.A may contain such legends
regarding restrictions on Transfer or ownership to protect the Managing
Member's tax status as a REIT and in the event the REIT Shares issuable upon
such Exchange are not registered for resale under the Securities Act,
restrictions under the Securities Act and applicable state securities laws as
the Managing Member in good faith determines to be necessary or advisable in
order to ensure compliance with such laws.
B. Notwithstanding anything herein to the contrary,
with respect to any Exchange pursuant to this Section 8.6:
(1) The consummation of any Exchange shall be
subject to the expiration or termination of the applicable waiting
period, if any, under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
(2) Each Tendering Party shall continue to own
all LLC Units subject to any Exchange, and be treated as a Member with
respect to such LLC Units for all purposes of this Agreement, until
such LLC Units are Transferred to the Managing Member and paid for or
exchanged on the Specified Exchange Date. Until a Specified Exchange
Date and an acquisition of the Tendered Units by the Managing Member
pursuant to Section 8.6.A hereof, the Tendering Party shall have no
rights as a shareholder of the Managing Member with respect to the REIT
Shares issuable in connection with such acquisition.
C. In connection with an exercise of Exchange rights
pursuant to this Section 8.6, the Tendering Party shall submit the following
to the Managing Member, in addition to the Notice of Exchange:
(1) A written affidavit, dated the same date
as, and accompanying, the Notice of Exchange, (a) disclosing the
actual and Constructive Ownership, as determined for purposes of Code
Sections 856(a)(6), 856(h), 856(d)(2)(b) and 856(d)(5), of REIT Shares
by (i) such Tendering Party and (ii) any Related Party and (b)
representing that, after giving effect to the Exchange, neither the
Tendering Party nor any Related Party will have actual, Beneficial
Ownership or Constructive Ownership of a number of REIT Shares that is
in excess of the Ownership Limit;
(2) A written representation that neither the
Tendering Party nor any Related Party has any intention to acquire
any additional REIT Shares prior to the closing of the Exchange on the
Specified Exchange Date; and
(3) An undertaking to certify, at and as a
condition to the closing of the Exchange that either (a) the actual,
Beneficial Ownership and Constructive Ownership of REIT Shares by the
Tendering Party and any Related Party remain unchanged from that
disclosed in the affidavit required by Section 8.6.C(1) or (b) after
giving effect to the Exchange, neither the Tendering Party nor any
Related Party shall
52
have actual, Beneficial Ownership or Constructive Ownership of a
number of REIT Shares that is in violation of the Ownership Limit.
D. The number of LLC Units outstanding on the date of a
distribution pursuant to Section 5.6.A(2) will be reduced on the date of the
distribution (the "Reduction Date") by the aggregate number of LLC Units (the
"Total Units") determined by dividing (i) the excess, if any, of (a) the
aggregate amount of the distributions so made pursuant to Section 5.6.A(2) over
(b) the NMM Sharing Amount divided by the aggregate of the Non-Managing
Members' Percentage Interests by (ii) the Value on the Reduction Date. The
Non-Managing Member Units shall be reduced (each such reduction a "Reduction")
by a number of LLC Units (rounded down to the nearest whole unit) (the
"Reduction Units") determined by dividing (i) the excess of (a) the aggregate
amount of distributions made on the Reduction Date to Non-Managing Members and
Assignees pursuant to Section 5.6.A(2), over (b) the NMM Sharing Amount by (ii)
the Value on the Reduction Date. The Reduction Units shall be allocated (as
closely as practicable in whole units) among the holders of Non-Managing Member
Units in accordance with their respective holdings of Non-Managing Member
Units. The Managing Member Units shall be reduced by a number of Managing
Member Units equal to the difference between the number of Total Units and the
number of Reduction Units. To reflect the foregoing reduction, each Member
shall return to the Managing Member the certificate evidencing the Reduction
Units allocated to him or it or the Managing Member Units so reduced which will
be canceled and a new certificate evidencing the reduced number of Managing
Member Units or Non-Managing Member Units shall be immediately issued to such
Member by the Managing Member on behalf of the Company. In the event the number
of outstanding Non-Managing Member Units held by a Non-Managing Member or
Assignee is reduced (pursuant to this Section 8.6.D or otherwise) to zero, such
Non-Managing Member or Assignee shall cease to have an interest in the Company
(other than the right to receive final distributions and allocations resulting
from the liquidation of their interest).
SECTION 8.7 FIDUCIARY DUTIES
Pursuant to the terms of a Management Agreement, The ▇▇▇▇▇
Company, L.C. has been retained by the Company as manager and non-exclusive
leasing agent for certain of the Transferred Properties and as a result has
certain duties and obligations to the Company in its capacity as manager of the
Transferred Properties, whether specifically provided for in the Management
Agreement or otherwise imposed by law. The ▇▇▇▇▇ Company, L.C. is not currently
a Non-Managing Member of the Company but may hereafter be admitted as such in
accordance with and subject to the terms hereof. Accordingly, in the event The
▇▇▇▇▇ Company, L.C. shall be admitted as a Non-Managing Member of the Company,
it is agreed that no additional or special duties or obligations shall be
imposed upon The ▇▇▇▇▇ Company, L.C. as a manager merely by virtue of its
status as a Non-Managing Member that would not otherwise be imposed on it as
the manager of the Transferred Properties, provided, however, that nothing set
forth in this Section 8.7 shall be deemed to modify or diminish any fiduciary
duties or obligations that The ▇▇▇▇▇ Company, L.C. may owe to the Company or
its Members in connection with its status as a Non-Managing Member.
53
ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 9.1 RECORDS AND ACCOUNTING
A. The Managing Member shall keep or cause to be kept
at the principal office of the Company those records and documents required to
be maintained by the Act and other books and records deemed by the Managing
Member to be appropriate with respect to the Company's business, including,
without limitation, all books and records necessary to provide to the Members
any information, lists and copies of documents required to be provided pursuant
to Section 9.3 hereof. Any records maintained by or on behalf of the Company in
the regular course of its business may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time.
B. The books of the Company shall be maintained, for
financial and tax reporting purposes, on an accrual basis in accordance with
GAAP, or on such other basis as the Managing Member determines to be necessary
or appropriate. To the extent permitted by sound accounting practices and
principles, the Company and the Managing Member may operate with integrated or
consolidated accounting records, operations and principles.
SECTION 9.2 FISCAL YEAR
The Fiscal Year of the Company shall be the calendar year.
SECTION 9.3 REPORTS
A. As soon as practicable, but in no event later than
ninety (90) days after the close of each calendar quarter, the Managing Member
shall cause to be mailed to each Member of record as of the last day of the
calendar quarter, a copy of the general ledger of the Company covering the
calendar quarter and a copy of the general ledger of any Subsidiary of the
Company.
SECTION 9.4 COOPERATION REGARDING TAX MATTERS RELATING
TO CONTRIBUTED PROPERTIES
A. In connection with the issuance of Non-Managing
Member Units to any contributor of property to the Company (each, a
"Contributor"), including the issuance of Non-Managing Member Units to the
Initial Non-Managing Members upon the contributions of the Transferred
Properties to the Company pursuant to the Contribution Agreement, each
Contributor shall deliver to the Company at or prior to the effective date of
such issuance, at the Contributor's sole cost and expense, the following
information prepared as of the date of such anticipated contribution.
(1) depreciation and amortization schedules for
the assets constituting the property or properties to be contributed to
the Company (collectively, the "Contributed Properties"), as kept for
both book and tax purposes, showing original basis and accumulated
depreciation or amortization;
54
(2) basis information (computed for both book
and tax purposes, if different) for all assets that are components of
the Contributed Properties;
(3) the adjusted basis of the Contributor and
any constituent partners or members of the Contributor in their
interests in the Company; and
(4) calculations of the estimated amounts of
gain to be realized and recognized by the Contributor (if any) as a
result of the transactions involving the Contributed Properties in
accordance with this Agreement and showing the method by which such
amounts are calculated.
B. The Company is relying on the information provided
or to be provided to it under this Section 9.4 as to the adjusted tax basis of
the Contributed Properties and the relevant depreciation schedules thereto in
determining the amount of Built-in Gain on a going forward basis.
C. Each Contributor shall provide reasonable assistance
to the Company and the Managing Member to enable the Company and the Managing
Member to prepare their tax returns. The Contributor shall deliver to the
Company copies of its final federal, state and local tax returns (including
information returns), including associated Schedules K-1, for the tax year in
which the contribution of the Contributed Properties occurs, including any
amendments thereto, and to notify the Company, in writing, of any audits of
such return, or of any audits for other tax years that could affect the amounts
shown on the returns for the tax year in which the Closing occurs. Copies of
such returns shall be provided to the Company in draft form at least ten (10)
days before they are filed, and in final form upon filing. The Contributor
shall also provide to the Company, promptly upon receipt, any notice that it
receives from any of its direct or indirect constituent partners or members
that such partner(s) or member(s) intends to prepare its tax returns in a
manner inconsistent with the returns filed by the Contributor. The Contributor
understands and agrees that the tax returns filed by the Contributor will be
substantially consistent with the information provided to the Company pursuant
to this Section 9.4.
ARTICLE 10.
TAX MATTERS
SECTION 10.1 PREPARATION OF TAX RETURNS
The Managing Member shall arrange for the preparation and
timely filing of all returns with respect to Company income, gains, deductions,
losses and other items required of the Company for federal and state income tax
purposes and shall use all commercially reasonable efforts to furnish, within
ninety (90) days of the close of each taxable year, the tax information
reasonably required by Members for federal and state income tax reporting
purposes.
SECTION 10.2 TAX ELECTIONS
Except as otherwise provided herein, the Managing Member
shall, in its sole and absolute discretion, determine whether to make any
available election pursuant to the Code, including, without limitation, the
election under Section 754 of the Code. The Managing Member shall have the
right to seek to revoke any such election (including, without limitation,
55
any election under Code Sections 754) upon the Managing Member's determination
in its sole and absolute discretion that such revocation is in the best
interests of the Members.
SECTION 10.3 TAX MATTERS PARTNER
A. The Managing Member shall be designated and shall
operate as "Tax Matters Partner" (as defined in Code Section 6231), to oversee
or handle matters relating to the taxation of the Company; provided, however,
that the Consent of the Non-Managing Members shall be required to settle any
administrative proceeding or institute or settle any litigation with respect to
tax issues if such action (i) is reasonably likely to affect materially the
Non-Managing Members, and (ii) does not relate to the Managing Member's tax
status as a REIT.
B. Income tax returns of the Company shall be prepared
by such certified public accountant(s) as the Managing Member shall retain at
the expense of the Company.
SECTION 10.4 ORGANIZATIONAL EXPENSES
The Company shall elect to deduct expenses, if any, incurred
by it in organizing the Company ratably over a sixty (60) month period as
provided in Code Section 709.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
SECTION 11.1 TRANSFER
A. No part of the interest of a Member shall be subject
to the claims of any creditor, to any spouse for alimony or support, or to
legal process, and may not be voluntarily or involuntarily alienated or
encumbered except as may be specifically provided for in this Agreement.
B. No Membership Interest shall be Transferred, in
whole or in part, except in accordance with the terms and conditions set forth
in this Article 11. Any Transfer or purported Transfer of a Membership Interest
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not made in accordance with this Article 11 shall be null and void ab initio.
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SECTION 11.2 TRANSFER OF MANAGING MEMBER'S MEMBERSHIP
INTEREST
A. Except in connection with a transaction described in
Section 11.2.B, the Managing Member shall not withdraw from the Company and
shall not Transfer all or any portion of its interest in the Company without
the Consent of all of the Non-Managing Members, which may be given or withheld
by each Non-Managing Member in its sole and absolute discretion. Upon any
Transfer of the Membership Interest of the Managing Member in accordance with
the provisions of this Section 11.2, the transferee shall become a Substitute
Managing Member for all purposes herein, and shall be vested with the powers
and rights of the transferor Managing Member, and shall be liable for all
obligations and responsible for all duties of the Managing Member, once such
transferee has executed such instruments as may be necessary to effectuate such
admission and to confirm the agreement of such transferee to be bound by all
the terms and provisions of this Agreement with respect to the Membership
Interest
56
so acquired. It is a condition to any Transfer otherwise permitted hereunder
that the transferee assumes, by operation of law or express agreement, all of
the obligations of the transferor Managing Member under this Agreement with
respect to such Transferred Membership Interest, and such Transfer shall
relieve the transferor Managing Member of its obligations under this Agreement
accruing subsequent to the date of such Transfer. In the event the Managing
Member withdraws from the Company, in violation of this Agreement or otherwise,
or otherwise dissolves or terminates, or upon the Incapacity of the Managing
Member, all of the remaining Members may elect to continue the Company business
by selecting a Substitute Managing Member in accordance with the Act.
B. The Managing Member shall not engage in any merger,
consolidation or other combination with or into another person, sale of all or
substantially all of its assets or any reclassification, or change of its
outstanding equity interests (a "Termination Transaction"), unless either (i)
the Termination Transaction has been approved by the Consent of the
Non-Managing Members or (ii) in connection with the Termination Transaction,
all holders of LLC Units (other than the Managing Member) either will receive
for each LLC Unit, or will be entitled to receive, for each LLC Unit (in lieu
of the REIT Shares Amount) upon an Exchange of the LLC Unit pursuant to Section
8.6 hereof, an amount of cash, securities, or other property equal to the
amount that would have been paid to the holder had the LLC Unit been Exchanged
for REIT Shares pursuant to Section 8.6 hereof immediately prior to the
consummation of the Termination Transaction subject, in the event of an
Exchange of the LLC Unit pursuant to Section 8.6 hereof subsequent to the
consummation of the Termination Transaction, to further adjustment to the
extent provided in this Agreement to compensate for the dilutive effect of
certain transactions described herein; provided, however, that, if, in
connection with the Termination Transaction, a purchase, tender or exchange
offer shall have been made to and accepted by the holders of more than fifty
percent (50%) of the outstanding REIT Shares, each Member shall receive, or
shall have the right to elect to receive, the greatest amount of cash,
securities, or other property which such Member would have received had it
exchanged its LLC Units for REIT Shares pursuant to Section 8.6 immediately
prior to the expiration of such purchase, tender or exchange offer and had
thereupon accepted such purchase, tender or exchange offer.
SECTION 11.3 NON-MANAGING MEMBERS' RIGHTS TO TRANSFER
A. General. No Non-Managing Member shall Transfer all
or any portion of its Membership Interest, or any of such Non-Managing Member's
economic rights as a Non-Managing Member, to any transferee without first
offering such Membership Interest to the Managing Member and otherwise
obtaining the consent of the Managing Member, which consent (i) may be withheld
in its sole and absolute discretion with respect to taxable Transfers, and (ii)
with respect to non-taxable Transfers, shall not be unreasonably withheld;
provided, however, that notwithstanding the foregoing or any other provisions
of this Agreement, any Non-Managing Member may, without the consent of the
Managing Member, (x) pledge all or any portion of its Membership Interest to a
lender to such Member to secure indebtedness to such lender and Transfer such
Membership Interest to such lender upon foreclosure of the debt secured by such
Membership Interest, so long as any such pledge or other Transfer would not
otherwise violate the provisions of this Agreement or (y) transfer all or any
portion of its Membership Interest or economic rights as a Non-Managing Member
to a partner of such Non-
57
Managing Member in liquidation of such partner's interest in such Non-Managing
Member, to a family member of such Non-Managing Member or to an organization
described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Code, so long
as any such Transfer would not otherwise violate the provisions of this
Agreement.
B. Conditions to Transfer. It is a condition to any
Transfer otherwise permitted hereunder that the transferee assume by operation
of law or express agreement all of the obligations of the transferor Member
under this Agreement with respect to such Transferred Membership Interest.
Notwithstanding the foregoing, any transferee of any Transferred Membership
Interest shall be subject to the Ownership Limits and any and all ownership
limitations contained in the Charter. Any transferee, whether or not admitted
as a Substituted Member, shall take subject to the obligations of the
transferor hereunder. Unless admitted as a Substituted Member, no transferee,
whether by a voluntary Transfer, by operation of law or otherwise, shall have
any rights hereunder, other than the rights of an Assignee as provided in
Section 11.5 hereof.
C. Incapacity. If a Non-Managing Member is subject to
Incapacity, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Non-Managing Member's estate shall have all the
rights of a Non-Managing Member, but not more rights than those enjoyed by
other Non-Managing Members, for the purpose of settling or managing the estate,
and such power as the Incapacitated Non-Managing Member possessed to Transfer
all or any part of its interest in the Company. The Incapacity of a
Non-Managing Member, in and of itself, shall not dissolve or terminate the
Company.
D. Opinion of Counsel. In connection with any Transfer
of a Membership Interest, the Managing Member shall have the right to receive
an opinion of counsel reasonably satisfactory to it to the effect that the
proposed Transfer may be effected without registration under the Securities Act
and will not otherwise violate any federal or state securities laws or
regulations applicable to the Company or the Membership Interests Transferred.
If, in the opinion of such counsel, such Transfer would require the filing of a
registration statement under the Securities Act or would otherwise violate any
federal or state securities laws or regulations applicable to the Company or
the LLC Units, the Managing Member may prohibit any Transfer by a Member of
Membership Interests otherwise permitted under this Section 11.3.
E. Transfers to Lenders. No Transfer of any LLC Units
may be made to a lender to the Company or any Person who is related (within the
meaning of Section 1.752-4(b) of the Regulations) to any lender to the Company
whose loan constitutes a Nonrecourse Liability, without the consent of the
Managing Member, in its sole and absolute discretion; provided that, as a
condition to such consent, the lender will be required to enter into an
arrangement with the Company and the Managing Member to redeem or exchange for
the REIT Shares Amount any LLC Units in which a security interest is held
simultaneously with the time at which such lender would be deemed to be a
member in the Company for purposes of allocating liabilities to such lender
under Code Section 752.
58
SECTION 11.4 SUBSTITUTED MEMBERS
A. Each Non-Managing Member shall have the right to
substitute a transferee (including any transferees pursuant to Transfers
permitted by Section 11.3 hereof) as a Member in its place so long as the
Transfer of such Non-Managing Member's LLC Units is otherwise made pursuant to
the terms and in satisfaction of the conditions of this Agreement, specifically
including the provisions of Section 11.3 and Sections 11.4.B and C. hereof.
B. A transferee who has been admitted as a Substituted
Member in accordance with this Article 11 shall have all the rights and powers
----------
and be subject to all the restrictions and liabilities of a Member under this
Agreement. The admission of any transferee as a Substituted Member shall be
subject to the transferee executing and delivering to the Company an acceptance
of all of the terms and conditions of this Agreement (including without
limitation, the provisions of Section 2.4 and such other documents or
instruments as may be required to effect the admission).
C. Upon receipt of written notice from a Non-Managing
Member that the transferee of its LLC Units is to be admitted by the Company as
a Substituted Member, the Managing Member shall amend Exhibit A to reflect the
---------
name, address, Capital Account, number of LLC Units and Percentage Interest of
such Substituted Member and to eliminate or adjust, if necessary, the name,
address, Capital Account, number of LLC Units and Percentage Interest of the
predecessor of such Substituted Member (and any other Member, as necessary).
SECTION 11.5 ASSIGNEES
If upon the Transfer of its LLC Units, the transferring
Non-Managing Member does not substitute the transferee as a Member in its place
as a Substituted Member as described in Section 11.4 hereof, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be entitled to all the rights of an assignee of a limited liability
company interest under the Act, including the right to receive distributions
from the Company and the share of Net Income, Net Loss and other items of
income, gain, loss, deduction and credit of the Company attributable to the LLC
Units assigned to such transferee, the rights to Transfer the LLC Units
provided in this Article 11, and the right of Exchange provided in Section 8.6,
----------
but shall not be deemed to be a Member of LLC Units for any other purpose under
this Agreement, and shall not be entitled to effect a Consent or vote with
respect to such LLC Units on any matter presented to the Members for approval
(such right to Consent or vote, to the extent provided in this Agreement or
under the Act, fully remaining with the transferor Member). In the event that
any such transferee desires to make a further assignment of any such LLC Units,
such transferee shall be subject to all the provisions of this Article 11 to
----------
the same extent and in the same manner as any Members desiring to make an
assignment of LLC Units. The Managing Member shall have no liability under any
circumstance with respect to any Assignee as to which it does not have notice.
SECTION 11.6 GENERAL PROVISIONS
A. No Non-Managing Member may withdraw from the Company
other than (i) as a result of a permitted Transfer of all of such Non-Managing
Member's LLC Units in
59
accordance with this Article 11 and the transferee(s) of such LLC Units being
----------
admitting to the Company as a Substituted Member or (ii) pursuant to an
Exchange by the Non-Managing Member of all of its LLC Units under Section 8.6
hereof.
B. Any Non-Managing Member who shall Transfer all of
its LLC Units in a Transfer (i) permitted pursuant to this Article 11 where
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such transferee was admitted as a Substituted Member; (ii) pursuant to the
exercise of its rights to effect an Exchange of all of its LLC Units under
Section 8.6 hereof; (iii) pursuant to a Reduction; or (iv) pursuant to a
combination of Transfers of the types specified in the foregoing (i) - (iii),
shall cease to be a Member.
C. Transfers pursuant to this Article 11 may only be
----------
made on the first day of a fiscal quarter of the Company, unless the Managing
Member otherwise agrees.
D. All distributions of Available Cash attributable to
an LLC Unit with respect to which the LLC Record Date is before the date of a
Transfer or an Exchange of the LLC Unit shall be made to the transferor Member
and all distributions of Available Cash thereafter attributable to such LLC
Unit shall be made to the transferee Member.
E. Notwithstanding anything to the contrary set forth
herein, in addition to any other restrictions on Transfer herein contained, in
no event may any Transfer or assignment of a Membership Interest by any Member
(including any redemption or any Exchange or any other acquisition of LLC Units
by the Company) be made:
(a) to any person or entity who lacks the legal
right, power or capacity to own a Membership Interest;
(b) in violation of applicable law;
(c) without the consent of the Managing Member,
which may be granted or withheld in its sole and absolute discretion
if such Transfer would, in the opinion of counsel to the Company or
the Managing Member, cause an increased tax liability to any other
Member or Assignee as a result of the termination of the Company, in
either case for federal or state income or franchise tax purposes
(except in the case of a Terminating Capital Transaction or as a
result of the Exchange of LLC Units pursuant to Section 8.6 hereof);
(d) without the consent of the Managing
Member, which may be granted or withheld in its sole and absolute
discretion if such Transfer could, as determined in the sole
discretion of the Managing Member, (i) result in the Company being
treated as an association taxable as a corporation for federal income
tax or for state income or franchise tax purposes, (ii) adversely
affect the ability of the Managing Member to continue to qualify as a
REIT or would subject the Managing Member to any additional taxes
under Code Section 857 or Code Section 4981 or (iii) such Transfer
could be treated as having been effectuated through an "established
securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Code Section 7704, or such
Transfer fails to satisfy a "safe-harbor" preventing such treatment
60
(as set forth in Treasury Regulations under Code Section 7704 or any
successor provision);
(e) if such Transfer would cause the Company to
become, with respect to any employee benefit plan subject to Title I
of ERISA, a "party-in-interest" (as defined in ERISA Section 3(14))
or a "disqualified person" (as defined in Code Section 4975(c));
(f) if such Transfer would, in the opinion of
legal counsel to the Company, cause any portion of the assets of the
Company to constitute assets of any employee benefit plan pursuant to
Department of Labor Regulations Section 2510.2-101;
(g) if such Transfer causes the Company (as
opposed to the Managing Member) to become a reporting company under
the Exchange Act;
(h) if such Transfer subjects the Company to
regulation under the Investment Company Act of 1940, the Investment
Advisors Act of 1940 or ERISA, each as amended; or
(i) without the consent of the Managing Member,
which may be granted or withheld in its sole and absolute discretion,
if such Transfer would result in the Company having more than 100
Members (including as Members those persons indirectly owning an
interest in the Company through a partnership, limited liability
company, S corporation or grantor trust (such entity, a "flow through
entity"), but only if substantially all of the value of such person's
interest in the flow through entity is attributable to the flow
through entity's interest (direct or indirect) in the Company) (the
"One Hundred Member Limit").
F. No Non-Managing Member will take or allow any
Affiliate to take any action that would cause a violation of the One Hundred
Member Limit.
ARTICLE 12.
ADMISSION OF MEMBERS
SECTION 12.1 ADMISSION OF SUCCESSOR MANAGING MEMBER
A successor to all of the Managing Member's Membership
Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a
successor Managing Member shall be admitted to the Company as the Managing
Member, effective immediately upon such Transfer. Any such successor shall
carry on the business of the Company without dissolution. In each case, the
admission shall be subject to the successor Managing Member executing and
delivering to the Company an acceptance of all of the terms, conditions and
applicable obligations of this Agreement and such other documents or
instruments as may be required to effect the admission.
SECTION 12.2 ADMISSION OF ADDITIONAL MEMBERS
A. A Person (other than an existing Member) who makes a
Capital Contribution to the Company in accordance with this Agreement shall be
admitted to the
61
Company as an Additional Member, only upon furnishing to the
Managing Member (i) evidence of acceptance, in form and substance satisfactory
to the Managing Member, of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Section 2.4
hereof, and (ii) such other documents or instruments as may be required in the
sole and absolute discretion of the Managing Member in order to effect such
Person's admission as an Additional Member.
B. Notwithstanding anything to the contrary in this
Section 12.2, except pursuant to the transactions contemplated by the
Contribution Agreement, no Person shall be admitted as an Additional Member
without the Consent of the Non-Managing Members and Managing Member, which may
be given or withheld by each Non-Managing Member and Managing Member in its
sole and absolute discretion. The admission of any Person as an Additional
Member shall become effective on the date upon which the name of such Person is
recorded on the books and records of the Company, following the Consent of the
Non-Managing Members and Managing Member to such admission.
C. If any Additional Member is admitted to the Company
on any day other than the first day of a Fiscal Year, then Net Income, Net
Loss, each item thereof and all other items of income, gain, loss, deduction
and credit allocable among Members and Assignees for such Fiscal Year shall be
allocated among such Additional Member and all other Members and Assignees by
taking into account their varying interests during the Fiscal Year in
accordance with Code Section 706(d), using the "interim closing of the books"
method or another permissible method selected by the Managing Member. Solely
for purposes of making such allocations, each of such items for the calendar
month in which an admission of any Additional Member occurs shall be allocated
among all the Members and Assignees including such Additional Member, in
accordance with the principles described in Section 11.6.C hereof. All
distributions of Available Cash with respect to which the LLC Record Date is
before the date of such admission shall be made solely to Members and Assignees
other than the Additional Member, and all distributions of Available Cash
thereafter shall be made to all the Members and Assignees including such
Additional Member.
SECTION 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE
For the admission to the Company of any Member, the Managing
Member shall take all steps necessary and appropriate under the Act to amend
the records of the Company and, if necessary, to prepare as soon as practical
an amendment of this Agreement (including an amendment of Exhibit A) and, if
---------
required by law, shall prepare and file an amendment to the Certificate and may
for this purpose exercise the power of attorney granted pursuant to Section 2.4
hereof.
SECTION 12.4 LIMITATION ON ADMISSION OF MEMBERS
No Person shall be admitted to the Company as a Substituted
Member or an Additional Member if, in the opinion of legal counsel for the
Company, it would result in the Company being treated as a corporation for
federal income tax purposes or otherwise cause the Company to become a
reporting company under the Exchange Act.
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ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 13.1 DISSOLUTION
The Company shall not be dissolved by the admission of
Substituted Members or Additional Members or by the admission of a successor
Managing Member in accordance with the terms of this Agreement. Upon the
withdrawal of the Managing Member, any successor Managing Member shall continue
the business of the Company without dissolution. However, the Company shall
dissolve, and its affairs shall be wound up, upon the first to occur of any of
the following (each a "Liquidating Event"):
A. [Intentionally Omitted]
B. an event of withdrawal of the Managing Member, as
defined in the Act (other than an event of bankruptcy), unless, within 90 days
after the withdrawal, a Majority of Remaining Members agree in writing to
continue the business of the Company and to the appointment, effective as of
the date of withdrawal, of a substitute Managing Member;
C. subject to the provisions of Section 7.3.E hereof,
an election to dissolve the Company made by the Managing Member;
D. entry of a decree of judicial dissolution of the
Company pursuant to the provisions of the Act;
E. the sale of all or substantially all of the assets
and properties of the Company;
F. a final and non-appealable judgment is entered by a
court of competent jurisdiction ruling that the Managing Member is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the Managing Member, in each case under
any Bankruptcy Law as now or hereafter in effect, unless prior to or within 90
days after the entry of such order or judgment a Majority of Remaining Members
Consent in writing to continue the business of the Company and to the
appointment, effective as of a date prior to the date of such order or
judgment, of a substitute Managing Member;
G. the Incapacity of the Managing Member, unless prior
to or within 90 days after such Incapacity a Majority of Remaining Members
agree in writing to continue the business of the Company and to the
appointment, effective as of a date prior to the date of such Incapacity, of a
substitute Managing Member; or
H. the Exchange of all LLC Units (other than those held
by the Managing Member) or, at the election of the Managing Member, which
election may be made it its sole and absolute discretion, at any time after the
end of the Dissolution Protection Period.
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SECTION 13.2 EXCHANGE OF NON-MANAGING MEMBER UNITS
Notwithstanding anything in this Agreement to the contrary,
on or after such time as the Managing Member has the right to dissolve the
Company, or at any time with respect to Members that are an organization
described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Code, the
Managing Member may, in its sole and absolute discretion, require each
Non-Managing Member (by delivering a Call Notice to such Non-Managing Member)
to tender all of its Non-Managing Member Units to the Managing Member in
exchange for, at the election of and in the sole and absolute discretion of the
Managing Member, either (i) an amount of cash equal to the sum of (a) the Cash
Amount and (b) the NMM Sharing Amount, calculated as if all of the Real
Properties then owned by the Company were sold in a taxable transaction at
their fair market values, or (ii) a number of REIT Shares equal to the sum of
(a) the REIT Shares Amount payable on the Specified Exchange Date and otherwise
in accordance with the procedures and provisions set forth in Section 8.6.A,
and (b) a number of REIT Shares with a value equal to the amount set forth in
Section 13.2(i)(b).
SECTION 13.3 WINDING UP
A. Upon the occurrence of a Liquidating Event, the
Company shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets and satisfying the claims of its
creditors and Members. After the occurrence of a Liquidating Event, no Member
shall take any action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Company's business and affairs. The
Managing Member (or, in the event that there is no remaining Managing Member,
any Person elected by a Majority in Interest of the Non-Managing Members (the
Managing Member or such other Person being referred to herein as the
"Liquidator")) shall be responsible for overseeing the winding up and
dissolution of the Company and shall take full account of the Company's
liabilities and property, and the Company property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the Managing Member,
include shares of stock in the Managing Member) shall be applied and
distributed in the following order:
(1) First, to the satisfaction of all of the
Company's debts and liabilities to creditors other than the Members
and their Assignees (whether by payment or the making of reasonable
provision for payment thereof);
(2) Second, to the satisfaction of all of the
Company's debts and liabilities to the Managing Member
(whether by payment or the making of reasonable provision for payment
thereof);
(3) Third, to the satisfaction of all of the
Company's debts and liabilities to the other Members and any
Assignees incurred with the consent of the Managing Member (whether
by payment or the making of reasonable provision for payment
thereof), pro rata based upon the amount of the debts and liabilities
owing to the respective Member or Assignee; and
64
(4) The balance, if any, to the Members and any
Assignees in accordance with and proportion to their positive Capital
Account balances, after giving effect to all contributions,
distributions and allocations for all periods.
The Managing Member shall not receive any additional compensation for any
services performed pursuant to this Article 13.
----------
B. Notwithstanding the provisions of Section 13.3.A
hereof that require liquidation of the assets of the Company, but subject to
the order of priorities set forth therein, if prior to or upon dissolution of
the Company the Liquidator determines that an immediate sale of part or all of
the Company's assets would be impractical or would cause undue loss to the
Members, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Company (including to those Members as creditors) and/or
distribute to the Members, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.3.A hereof, undivided interests in
such Company assets as the Liquidator deems not suitable for liquidation. Any
such distributions in kind shall be made only if, in the good faith judgment of
the Liquidator, such distributions in kind are in the best interest of the
Members, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the event that the Company is "liquidated" within
the meaning of Regulations Section 1.704-1(b) (2)(ii)(g), distributions shall
be made pursuant to this Article 13 to the Members and Assignees that have
----------
positive Capital Accounts in compliance with Regulations Section 1.704-1(b)
(2)(ii)(b) (2) to the extent of, and in proportion to, their positive Capital
Account balances. If any Member has a deficit balance in its Capital Account
(after giving effect to all contributions, distributions and allocations for
all taxable years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any contribution to the capital of
the Company with respect to such deficit, and such deficit shall not be
considered a debt owed to the Company or to any other Person for any purpose
whatsoever. In the sole and absolute discretion of the Managing Member or the
Liquidator, a pro rata portion of the distributions that would otherwise be
made to the Members pursuant to this Article 13 may be withheld or escrowed to
----------
provide a reasonable reserve for Company liabilities (contingent or otherwise)
and to reflect the unrealized portion of any installment obligations owed to
the Company, provided that such withheld or escrowed amounts shall be
distributed to the Members in the manner and order of priority set forth in
Section 13.3.A hereof as soon as practicable.
SECTION 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION
Notwithstanding any other provision of this Article 13, in
----------
the event that the Company is liquidated within the meaning of Regulations
Section 1.704-1(b) (2)(ii)(g), but no Liquidating Event has occurred, the
Company's Property shall not be liquidated, the Company's liabilities shall not
be paid or discharged and the Company's affairs shall not be wound up. Instead,
for federal and state income tax purposes, the Company shall be deemed to have
distributed its assets in kind to the Members, who shall be deemed to have
assumed and taken
65
such assets subject to all Company liabilities, all in accordance with their
respective Capital Accounts. Immediately thereafter, the Members shall be
deemed to have recontributed the Company assets in kind to the Company, which
shall be deemed to have assumed and taken such assets subject to all such
liabilities.
SECTION 13.5 RIGHTS OF MEMBERS
Except as otherwise provided in this Agreement, (a) each
Member shall look solely to the assets of the Company for the return of its
Capital Contribution, (b) no Member shall have the right or power to demand or
receive property other than cash from the Company and (c) except as provided in
this Agreement, no Member shall have priority over any other Member as to the
return of its Capital Contributions, distributions or allocations.
SECTION 13.6 NOTICE OF DISSOLUTION
In the event that a Liquidating Event occurs or an event
occurs that would, but for an election or objection by one or more Members
pursuant to Section 13.1 hereof, result in a dissolution of the Company, the
Managing Member shall, within 30 days thereafter, provide written notice
thereof to each of the Members and, in the Managing Member's sole and absolute
discretion or as required by the Act, to all other parties with whom the
Company regularly conducts business (as determined in the sole and absolute
discretion of the Managing Member), and the Managing Member may, or, if
required by the Act, shall, publish notice thereof in a newspaper of general
circulation in each place in which the Company regularly conduct business (as
determined in the sole and absolute discretion of the Managing Member).
SECTION 13.7 CANCELLATION OF CERTIFICATE
Upon the completion of the liquidation of the Company's cash
and property as provided in Section 13.3 hereof, the Company shall be
terminated and the Certificate and all qualifications of the Company as a
foreign limited liability company in jurisdictions other than the State of
Delaware shall be canceled and such other actions as may be necessary to
terminate the Company shall be taken.
SECTION 13.8 REASONABLE TIME FOR WINDING-UP
A reasonable time shall be allowed for the orderly winding-up
of the business and affairs of the Company and the liquidation of its assets
pursuant to Section 13.3 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Members during the period of liquidation.
SECTION 13.9 LIABILITY OF LIQUIDATOR
The Liquidator shall be indemnified and held harmless by the
Company from and against any and all claims, liabilities, costs, damages, and
causes of action of any nature whatsoever arising out of or incidental to the
Liquidator's taking of any action authorized under or within the scope of this
Agreement; provided, however, that the Liquidator shall not be entitled to
indemnification, and shall not be held harmless, where the claim, demand,
liability, cost, damage or cause of action at issue arises out of (i) a matter
entirely unrelated to the
66
Liquidator's action or conduct pursuant to the
provisions of this Agreement or (ii) the proven willful misconduct or gross
negligence of the Liquidator.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS
SECTION 14.1 PROCEDURES FOR ACTIONS AND CONSENTS OF
MEMBERS
The actions requiring consent or approval of Non-Managing
Members pursuant to this Agreement, including Section 7.3 hereof, or otherwise
pursuant to applicable law, are subject to the procedures set forth in this
Article 14.
----------
SECTION 14.2 AMENDMENTS
Except for amendments to Exhibit A as provided in Sections
---------
7.3.C, 11.4.C and 12.3 hereof, amendments to this Agreement may be proposed by
the Managing Member or by a Majority in Interest of the Non-Managing Members.
Following such proposal, the Managing Member shall submit any proposed
amendment to the Members. The Managing Member shall seek the written Consent of
the Members on the proposed amendment or shall call a meeting to vote thereon
and to transact any other business that the Managing Member may deem
appropriate. The affirmative vote or consent, as applicable, of the holders of
a majority of the outstanding LLC Units is required for the approval of a
proposed amendment. For purposes of obtaining a written consent, the Managing
Member may require a response within a reasonable specified time, but not less
than 15 days, and failure to respond in such time period shall constitute a
consent that is consistent with the Managing Member's recommendation with
respect to the proposal; provided, however, that an action shall become
effective at such time as requisite consents are received even if prior to such
specified time.
SECTION 14.3 MEETINGS OF THE MEMBERS
A. Meetings of the Members may be called by the
Managing Member and shall be called upon the receipt by the Managing Member of
a written request by a Majority in Interest of the Non-Managing Members. The
call shall state the nature of the business to be transacted. Notice of any
such meeting shall be given to all Members not less than seven days nor more
than 30 days prior to the date of such meeting. The meeting shall be held at
the headquarters office of the Managing Member or at such other location as may
be designated by the Managing Member. Members may vote in person or by proxy at
such meeting. Whenever the vote or Consent of Members is permitted or required
under this Agreement, such vote or Consent may be given at a meeting of Members
or may be given in accordance with the procedure prescribed in Section 14.3.B
hereof.
B. Any action required or permitted to be taken at a
meeting of the Members may be taken without a meeting if a written consent
setting forth the action so taken is signed by Members holding a majority of
the LLC Units (or such other percentage as is expressly required by this
Agreement for the action in question). Such consent may be in one instrument or
in several instruments, and shall have the same force and effect as a vote of
Members holding a majority of the LLC Units (or such other percentage as is
expressly required by this Agreement).
67
Such consent shall be filed with the Managing Member. An action so taken shall
be deemed to have been taken at a meeting held on the effective date so
certified.
C. Each Member may authorize any Person or Persons to
act for it by proxy on all matters in which a Member is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Member or its
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy (or there
is receipt of a proxy authorizing a later date). Every proxy shall be revocable
at the pleasure of the Member executing it, such revocation to be effective
upon the Company's receipt of written notice of such revocation from the Member
executing such proxy.
D. Each meeting of Members shall be conducted by the
Managing Member or such other Person as the Managing Member may appoint
pursuant to such rules for the conduct of the meeting as the Managing Member or
such other Person deems appropriate in its sole and absolute discretion.
Without limitation, meetings of Members may be conducted in the same manner as
meetings of the Managing Member's shareholders and may be held at the same time
as, and as part of, the meetings of the Managing Member's shareholders.
ARTICLE 15.
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted
to be given or made to a Member or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication
(including by telecopy, facsimile, or commercial courier service) (i) in the
case of a Member, to that Member at the address set forth in Exhibit A or such
---------
other address of which the Member shall notify the Managing Member in writing
and (ii) in the case of an Assignee, to the address of which such Assignee
shall notify the Managing Member in writing.
SECTION 15.2 TITLES AND CAPTIONS
All article or section titles or captions in this Agreement
are for convenience only. They shall not be deemed part of this Agreement and
in no way define, limit, extend or describe the scope or intent of any
provisions hereof. Except as specifically provided otherwise, references to
"Articles" or "Sections" are to Articles and Sections of this Agreement.
SECTION 15.3 PRONOUNS AND PLURALS
Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.
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SECTION 15.4 FURTHER ACTION
The parties shall execute and deliver all documents, provide
all information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 15.5 BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their heirs, executors, administrators, successors,
legal representatives and permitted assigns.
SECTION 15.6 CREDITORS
Other than as expressly set forth herein with respect to
Indemnitees, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Company.
SECTION 15.7 WAIVER
No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
SECTION 15.8 COUNTERPARTS
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart.
SECTION 15.9 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law. In the event of a conflict between any
provision of this Agreement and any non-mandatory provision of the Act, the
provisions of this Agreement shall control and take precedence.
SECTION 15.10 ENTIRE AGREEMENT
This Agreement, the Contribution Agreement and the other
agreements executed on the Effective Date as provided in the Contribution
Agreement contain all of the understandings and agreements between and among
the Members with respect to the subject matter of this Agreement and the
rights, interests and obligations of the Members with respect to the Company.
69
SECTION 15.11 INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected thereby.
SECTION 15.12 LIMITATION TO PRESERVE REIT STATUS
Notwithstanding anything else in this Agreement, to the extent
any amount paid, credited or reimbursed to the Managing Member or its officers,
directors, employees or agents, whether as a reimbursement, fee, expense or
indemnity (a "REIT Payment"), would constitute gross income to the Managing
Member for purposes of Sections 856(c)(2) or 856(c)(3) of the Code, then,
notwithstanding any other provision of this Agreement, the amount of such REIT
Payments, as selected by the Managing Member in its discretion from among items
of potential reimbursement, fees, expenses and indemnities, shall be reduced for
any Fiscal Year so that the REIT Payments, as so reduced, to, for or with
respect to such REIT Member shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a)
four and seventeen one-hundredths percent (4.17%) of the Managing
Member's total gross income (but not including the amount of any REIT
Payments) for the Fiscal Year that is described in subsections (A)
through (H) of Section 856(c)(2) of the Code over (b) the amount of gross
income (within the meaning of Section 856(c)(2) of the Code) derived by
the Managing Member from sources other than those described in
subsections (A) through (H) of Section 856(c)(2) of the Code (but not
including the amount of any REIT Payments); or
(ii) an amount equal to the excess, if any, of (a)
twenty-five percent (25%) of the Managing Member's total gross income
(but not including the amount of any REIT Payments) for the Fiscal Year
that is described in subsections (A) through (I) of Section 856(c)(3) of
the Code over (b) the amount of gross income (within the meaning of
Section 856(c)(3)) of the Code derived by the Managing Member from
sources other than those described in subsections (A) through (I) of
Section 856(c)(3) of the Code (but not including the amount of any REIT
Payments);
provided, however, that REIT Payments in excess of the amounts set forth in
subparagraphs (i) and (ii) above may be made if the Managing Member, as a
condition precedent, obtains an opinion of tax counsel that the receipt of such
excess amounts would not adversely affect the Managing Member's ability to
qualify as a REIT. To the extent that REIT Payments may not be made in a Fiscal
Year as a consequence of the limitations set forth in this Section 15.12, such
REIT Payments shall carry over and be treated as arising in the following Fiscal
Year; provided, however, that such amount shall not carry over for more than
five (5) years, and if not paid within such five (5) year period, shall expire;
provided, further, that (a) as REIT Payments are made, such payments shall be
applied first to carry over amounts outstanding, if any, and (b) with respect to
carry over amounts for more than one Fiscal Year, such payment shall be applied
to the earliest Fiscal Year first.
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SECTION 15.13 NO PARTITION
No Member nor any successor-in-interest to a Member shall have
the right while this Agreement remains in effect to have any property of the
Company partitioned, or to file a complaint or institute to any proceeding at
law or in equity to have such property of the Company partitioned, and each
Member, on behalf of itself and its successors and assigns hereby waives any
such right. It is the intention of the Members that the rights of the parties
hereto and their successors-in-interest to Company property, as among
themselves, shall be governed by the terms of this Agreement, and that the
rights of the Members and their successors-in-interest shall be subject to the
limitations and restrictions as set forth in this Agreement.
SECTION 15.14 NON-MANAGING MEMBER REPRESENTATIVE
A. All actions taken by the Non-Managing Member
Representative pursuant to those provisions of this Agreement which authorize
the Non-Managing Member Representative to so act shall be binding upon all
Non-Managing Members as if they had individually taken such action and each
Non-Managing Member, by entering into or agreeing to be bound by the provisions
of this Agreement, authorize the Non-Managing Member Representative to take
such actions on his, her or its behalf and agree that the actions so taken
shall be binding upon him, her or it to the same extent as if he, she or it had
taken the action directly.
B. The holders of a majority of the outstanding Non-
Managing Members Units shall be entitled to replace the Non-Managing Member
Representative by delivering to the Managing Member a written notice signed by
the holders of a majority of the outstanding Non-Managing Members Units stating
(i) that the notice is being provided to the Managing Member pursuant to this
Section 15.14.B, (ii) that the Members signing the notice own of record on the
books of the Company a majority of the outstanding Non-Managing Members Units,
(iii) that the Members signing the notice desire to replace the person then
serving as the Non-Managing Member Representative with the person named in the
notice, and (iv) specifying the date on which the appointment of the named
individual to replace the then serving Non-Managing Member Representative shall
be effective (which shall be a date not earlier than the fourteenth day after
the date on which the notice shall have been delivered to the Managing Member).
The appointment of the new Non-Managing Member Representative specified in the
notice shall be effective on the date specified in the notice and upon
effectiveness, the individual previously serving as the Non-Managing Member
Representative shall cease to be entitled to act in that capacity under this
Agreement.
[Signatures appear on following page]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
MANAGING MEMBER: HEALTH CARE PROPERTY INVESTORS,
INC., a Maryland corporation
By: ____________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President, General Counsel
and Corporate Secretary
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NON-MANAGING MEMBERS: THE ▇▇▇▇▇ COMPANY, L.C.,
a Utah limited liability company,
in its capacity as Managing Member of each
limited liability company named below as a
"Non-Managing Member" and in its capacity
as General Partner of each limited partnership
named below as a "Non-Managing Member"
By: _______________________________________
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President and Manager
Property Non-Managing Member
-------- -------------------
[OLD MILL II] ▇▇▇▇▇ OLD MILL II, L.C., a Utah limited liability
company
[ARUP I/▇▇▇▇ ▇▇] ▇▇▇▇▇-RESEARCH PARK ASSOCIATES, LTD., a Utah limited
partnership
[ARUP III] ▇▇▇▇▇ RESEARCH PARK ASSOCIATES VII, L.C., a Utah
limited liability company CHIMNEY RIDGE, L.C., a Utah
limited liability company
[MYRIAD ▇▇▇▇▇-FOOTHILL ASSOCIATES, LTD., a Utah limited
I/MYRIAD III] partnership
[MYRIAD II] ▇▇▇▇▇ RESEARCH PARK ASSOCIATES VI, L.C., a Utah limited
liability company
[STANSBURY] ▇▇▇▇▇ STANSBURY II, ▇.▇., a Utah limited liability
company
[RANCHO ▇▇▇▇▇ RANCHO VISTOSO, L.C., a Utah limited liability
VISTOSO] company
[▇▇▇▇▇▇] ▇▇▇▇▇-ALTA VIEW ASSOCIATES, LTD., a Utah limited
partnership
[HCA SUPPLY] ▇▇▇▇▇ KAYSVILLE ASSOCIATES, L.C., a Utah limited
liability company
[▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ HIGHLANDS DENTAL CLINIC, L.C., a Utah
DENTAL] limited liability company
[LANSING] AMARILLO ▇▇▇▇ ASSOCIATES, a Utah general partnership
[EVANSTON] ▇▇▇▇▇ EVANSTON, L.C., a Utah limited liability company
[DENVER I / ▇▇▇▇▇ DENVER MEDICAL, L.C., a Utah limited liability
DENVER II] company
[NORTHWEST II] ▇▇▇▇▇ NORTHWEST MEDICAL CENTER TWO, L.C., a Utah
limited liability company
[▇▇▇▇▇▇▇▇] ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ MEDICAL, L.C., a Utah limited liability
company
73
SCHEDULE 1.1
REDUCED TAX PROTECTION PERIOD PROPERTY
▇▇▇▇▇▇
▇▇▇▇▇▇▇
Evanston MOB
▇▇▇▇▇▇▇▇
SCHEDULE 7.3
EXISTING INDEBTEDNESS
--------------------------------------------------------------------------------
Property Lender Principal Amount of
Loan at Initial Closing
--------------------------------------------------------------------------------
ARUP I/II/III The Northwestern $13,789,007.17
Mutual Life Insurance
Company
--------------------------------------------------------------------------------
EXHIBIT A
MEMBERS' CAPITAL CONTRIBUTIONS
Non-Managing Members
Address:
c/o The ▇▇▇▇▇ Company, L.C. with a copy to:
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, Waddoups, ▇▇▇▇▇, ▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------------------------------------------------------------------------------------
Member Contribution Gross Asset Net Asset Value of Unit Value Number of
Value of Contribution Units
Contribution
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇-Research Park Associates, ARUP I / $25,313,000.00 $9,815,414.25 $34.80 282,052.00
Ltd. ▇▇▇▇ ▇▇
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Research Park Associates ARUP III $10,000,000.00 $5,171,620.63 $34.80 148,609.00
VII, L.C. and Chimney Ridge,
L.C.
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇-Foothill Associates, Ltd. Myriad I $7,498,000.00 $3,153,549.02 $34.80 90,619.00
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇-Research Park Associates Myriad II $6,450,000.00 $2,087,736.74 $34.80 59,991.00
VI, L.C.
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇-Foothill Associates, Ltd. Myriad III $10.00 $0.00 $34.80 0
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Old Mill II, L.C. Old Mill $10,451,000.00 $2,484,180.37 $34.80 71,383.00
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Rancho Vistoso, L.C. Rancho Vistoso $7,121,294,000 $1,809,162.84 $34.80 51,987.00
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Kaysville Associates, L.C. HCA Supply $4,985,409.00 $995,190.82 $34.80 28,597.00
-----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ Highlands Dental ▇▇▇▇▇ Dental $1,144,000.00 $197,823.32 $34.80 5,685.00
Clinic, L.C.
-----------------------------------------------------------------------------------------------------------------------
Total Non-Managing Member Units $7,187,135,419.00 $25,714,677.99 738,923.00
-----------------------------------------------------------------------------------------------------------------------
A-1
Non-Managing Member
Address:
Health Care Property Investors, Inc. with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
----------------------------------------------------------------------------------------------------------------------
Member Contribution Gross Asset Net Asset Value of Unit Value Number of
Value of Contribution Units
Contribution
----------------------------------------------------------------------------------------------------------------------
Health Care Property Cash (Initial Closing) $32,804,928.96 $32,804,928.96 $34.80 942,670.00
Investors, Inc.
----------------------------------------------------------------------------------------------------------------------
Total Managing Member Units $32,804,928.96 $32,804,928.96 942,670.00
----------------------------------------------------------------------------------------------------------------------
A-2
EXHIBIT B
NOTICE OF EXCHANGE
To: Health Care Property Investors, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The undersigned Member or Assignee hereby irrevocably tenders
for Exchange __________ LLC Units in HCPI/Utah II, LLC in accordance with the
terms of the Amended and Restated Limited Liability Company Agreement of
HCPI/Utah II, LLC, dated as of August ___, 2001 (the "Agreement"), and the
Exchange rights referred to therein. The undersigned Member or Assignee:
(a) undertakes (i) to surrender such LLC Units and any
certificate therefor at the closing of the Exchange and (ii) to furnish to the
Managing Member, prior to the Specified Exchange Date, the documentation,
instruments and information required under Section 8.6.D of the Agreement;
(b) directs that, at the sole discretion of the Managing
Member, either (i) a certified check representing the Cash Amount deliverable
upon closing of the Exchange be delivered to the address specified below or
(ii) a certificate(s) representing the REIT Shares deliverable upon the closing
of such Exchange be delivered to the address specified below;
(c) represents, warrants, certifies and agrees that: (1)
the undersigned Member or Assignee has, and at the closing of the Exchange will
have, good, marketable and unencumbered title to such LLC Units, free and clear
of the rights or interests of any other person or entity, (2) the undersigned
Member or Assignee has, and at the closing of the Exchange will have, the full
right, power and authority to tender and surrender such LLC Units as provided
herein, (3) the undersigned Member or Assignee has obtained the consent or
approval of all persons and entities, if any, having the right to consent to or
approve such tender and surrender, and (4) such Exchange is in compliance with
the provisions of Section 8.6 of the Agreement; and
(d) acknowledges that it will continue to own such LLC
Units until and unless such Exchange transaction closes.
All capitalized terms used herein and not otherwise defined
shall have the same meaning ascribed to them respectively in the Agreement.
Dated: _______________________
Name of Member or Assignee:
_________________________________________
_________________________________________
(Signature of Member or Assignee)
_________________________________________
(Street Address)
_________________________________________
(City) (State) (Zip)
Signature Guaranteed by:
_________________________________________
Issue REIT Shares in the name of: _________________________________________
Please insert social security or
identifying number: _________________________________________
B1
EXHIBIT C
FORM OF REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT (this "Agreement") is entered
into as of _____________, ____, by and among ___________________________________
__________________________________________ (each a "Reimbursor" and collectively
the "Reimbursors"), and HCPI/Utah II, LLC, a Delaware limited liability company
(the "Company").
RECITALS
A. Pursuant to a Contribution Agreement and Escrow
Instructions dated August__, 2001, (the "Contribution Agreement") by and among
Health Care Property Investors, Inc., a Maryland corporation, the Company, the
Reimbursors, The ▇▇▇▇▇ Company, L.C., a Utah limited liability company, and the
other parties named therein, the Reimbursors contributed (the "Contribution")
certain properties to the Company in exchange for membership interests
("LLC Units") in the Company.
B. [In connection with the Contribution, the Company
assumed and/or took the contributed properties subject to various liabilities
and debts of Reimbursors including, but not limited to, the mortgage loan from
________________________("Lender") to ▇▇▇▇▇-Research Park Associates, Ltd.
evidenced by a promissory note in the original principal amount of _____________
_______________ dated _______ (the "Loan")/pursuant to Section 7.3.E(4) of the
Company's Limited Liability Company Agreement, the Company borrowed $_______
from __________________("Lender") as evidenced by that certain promissory note
in the original principal amount of $_____________________ dated _________ (the
"Loan")]. All of the documents or agreements evidencing or securing or
otherwise relating to the Loan shall be referred to herein as the "Loan
Documents."
C. [___________________________/the Managing Member] (the
"Guarantor") has guaranteed payment of $______________ of the Loan. That
guarantee is referred to herein as the "Guarantee."
D. Pursuant to Section 7.3.E(4) of the Limited Liability
Company Agreement of the Company, each Reimbursor wishes to agree to pay, and
thereby bear the economic risk of loss with respect to, a portion of the Loan if
an "event of default" as defined in the Loan Documents ("Default") occurs with
respect to the Loan and the Lender is otherwise unable to recover that amount
from the Company.
E. The owners of the Reimbursors (the "Owners") have
agreed pursuant to separate Owner Reimbursement Agreements of even date herewith
(the "Owner Reimbursement Agreements") to reimburse the Reimbursors in which
they hold equity interests for each such Owner's respective share of the amount
of any payment made by the Reimbursors hereunder.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Reimbursors and the
Company hereby agree as follows:
Exhibit C
AGREEMENT
1. Term. Each Reimbursor's obligations hereunder shall be
----
effective from the date hereof through the termination date applicable to such
Reimbursor, which termination date shall be the earlier of: (a) repayment in
full of the Loan; (b) __________________, or such later date as the Reimbursor
may irrevocably designate from time to time by written notice given to the
Company at least 30 days prior to the date this Agreement would otherwise
terminate; or (c) the date which is 90 days after the date that the Reimbursor
ceases to own any LLC Units; provided, however, that if at the time a
Reimbursor's obligations hereunder would otherwise terminate the Loan is in
Default or an event has occurred which with the passage of time will result in
a Default, then this Agreement shall not terminate as to the Reimbursor and the
Reimbursor's obligations hereunder shall continue in full force and effect
until such Default is cured under the terms of the Loan Documents and any
required reimbursement from Reimbursor is paid in full.
2. Reimbursement Obligations.
-------------------------
(a) In the event of a Default with respect to the
Loan, each Reimbursor shall contribute to the Company or, if directed by the
Company, pay directly to the Lender [or Guarantor if that Guarantor is the
Managing Member of the Company] on behalf of the Company, an amount equal to the
Reimbursor's allocable share of the Shortfall Amount (as defined below) after
the Lender has fully and completely exhausted its remedies against the
Company's other assets. Each Reimbursor's maximum reimbursement liability
hereunder is set forth on Schedule 1 attached hereto. No demand shall be made
----------
under this Agreement for payment or contribution of the Shortfall Amount or any
portion thereof until such time as the Lender shall have fully and completely
exhausted its remedies against the Company's other assets (including any real
and personal property securing the repayment of the Loan), or following the
date any such Default is cured. The "Shortfall Amount" shall equal the excess
of (a) $___________________ or the amount of outstanding principal and accrued
interest owed on the Loan immediately prior to the Default, whichever is less;
over (b) the sum of all amounts recovered and the fair market value of all
property obtained by Lender, if any, from the Company after the Default in
proceedings against the Company under the Loan Documents (including, without
limitation, principal, interest, late fees, penalties, and costs of
collection), but excluding amounts paid] under the Guarantee. Subject to
reduction under Section 2(b) below, each Reimbursor's allocable share of the
Shortfall Amount shall be equal to the product of (x) the total Shortfall
Amount, multiplied by (y) the percentage listed opposite the Reimbursor's name
on Exhibit A attached hereto. Each Reimbursor's obligation to pay their
---------
allocable share of the Shortfall Amount set forth in this Section 2 shall be
referred to herein as its "Reimbursement Obligation."
(b) If: (i) a Reimbursor distributes to one or more
of its partners or members some, but not all, of the LLC Units received in the
Contribution (or the proceeds from the exchange or other disposition of some,
but not all, of such LLC Units) in redemption of their ownership interests in
the Reimbursor; (ii) no Default has occurred and is continuing with respect to
the Loan; and (ii) neither a Default nor an event which with the passage of
time will give rise to a Default occurs within 90 days after such distribution,
then the amount of the Reimbursement Obligation otherwise applicable to the
distributing Reimbursor under Section
2
2(a) above shall be reduced by a percentage equal to a fraction the numerator
of which is the number of such LLC Units distributed, exchanged or redeemed and
the denominator of which is the total number of LLC Units that the Reimbursor
received in the Contribution transaction. For example, if 2,000 out of 10,000
LLC Units that a Reimbursor received in a Contribution transaction are redeemed
and the conditions of this Section 2(b) are met, the otherwise applicable
Reimbursement Obligation of that Reimbursor would be reduced by 20-percent 90
days after such redemption.
(c) Each Reimbursor shall be liable with respect to
its allocable Reimbursement Obligation until termination of that obligation
under Section 1 above. Termination or reduction of a Reimbursor's Obligations
under this Agreement shall not increase, decrease or otherwise affect the
allocable Reimbursement Obligation of any other Reimbursor.
(c) Notwithstanding any agreement between any
Reimbursor and any other person, or any state law or interpretation thereof, no
Reimbursor shall be entitled to indemnification, contribution or reimbursement
from any other person with respect to any amounts paid or payable by Reimbursor
hereunder except for Reimbursor's right to reimbursement under the separate
Owner Reimbursement Agreement executed by its partners or members.
3. Miscellaneous.
-------------
(a) The Lender and its successors in interest are
intended to be third party beneficiaries of this Agreement.
(b) This Agreement shall be binding upon, and shall
inure to the benefit of, the successors in interest and assigns of the parties
hereto.
(c) This Agreement may be executed in one or more
counterparts, all of which shall constitute the same agreement, and the
signature of any party to any counterpart shall be deemed a signature to, and
may be appended to, any other counterpart.
3
IN WITNESS WHEREOF, the parties have executed this
Reimbursement Agreement the day and year first above written.
"REIMBURSORS"
-----------
_______________________________
_______________________________
_______________________________
_______________________________
"COMPANY"
-------
HCPI/UTAH II, LLC,
a Delaware limited liability company
By: HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation,
its Managing Member
By:__________________________
Name:________________________
Its:_________________________
4
SCHEDULE 1
Reimbursors and Their Allocable Shortfall Percentages
Name Shortfall Percentage
---- --------------------
__________________
__________________
__________________
5