Exhibit 10.3
LIMITED LIABILITY COMPANY AGREEMENT
OF
SIMON/CHELSEA DEVELOPMENT CO., L.L.C.
May 16, 1997
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS; EXHIBITS........................................1
SECTION 1.1 Certain Definitions.........................................1
SECTION 1.2 Other Definitions...........................................1
SECTION 1.3 Exhibits....................................................1
ARTICLE 2 FORMATION; NAME; PLACE OF BUSINESS...........................2
SECTION 2.1 Formation of Company; Certificate of Formation..............2
SECTION 2.2 Name of Company.............................................2
SECTION 2.3 Place of Business...........................................2
SECTION 2.4 Registered Office and Registered Agent......................3
ARTICLE 3 PURPOSES AND POWERS OF COMPANY...............................3
SECTION 3.1 Purposes....................................................3
SECTION 3.2 Powers......................................................3
SECTION 3.3 Limits of Company...........................................3
SECTION 3.4 No Individual Authority.....................................5
SECTION 3.5 Responsibility of Members...................................5
ARTICLE 4 TERM OF COMPANY..............................................6
ARTICLE 5 CAPITAL......................................................6
SECTION 5.1 Members' Initial Percentage Interests.......................6
SECTION 5.2 Capital Contributions.......................................6
5.2.1 Initial Capital Contributions............................6
5.2.2 Prospective Project Expenditures.........................6
5.2.3 Pre-Construction Expenditures............................7
5.2.4 Construction Period......................................7
5.2.5 Completion of Construction...............................8
SECTION 5.3 Additional Funds............................................8
SECTION 5.4 Capital Calls...............................................9
5.4.1 General..................................................9
5.4.2 Notice by Operating Member...............................9
5.4.3 Dilution................................................10
5.4.4 Contribution Loans......................................11
5.4.5 Repayment through Distributions.........................12
5.4.6 Transferees and Assignees...............................13
5.4.7 No Third Party Rights...................................13
5.4.8 Role in Management......................................13
SECTION 5.5 No Interest on Capital.....................................14
SECTION 5.6 Reduction of Capital Accounts..............................14
SECTION 5.7 Negative Capital Accounts..................................14
SECTION 5.8 Limit on Contributions and Obligations of Members..........14
SECTION 5.9 Pre-Construction Period Withdrawals........................15
ARTICLE 6 PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS..............15
SECTION 6.1 Net Profit..................................................15
SECTION 6.2 Net Loss....................................................15
SECTION 6.3 Limitation on Net Loss Allocation...........................16
SECTION 6.4 Other Allocation Rules......................................16
SECTION 6.5 Distribution of Cash Flow...................................16
SECTION 6.6 Distribution of Capital Proceeds............................17
ARTICLE 7 COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS...............17
SECTION 7.1 Books and Records...........................................17
SECTION 7.2 Tax Returns.................................................18
SECTION 7.3 Reports.....................................................18
SECTION 7.4 Audits......................................................19
SECTION 7.5 Bank Accounts...............................................19
SECTION 7.6 Tax Elections...............................................19
SECTION 7.7 Tax Matters Member..........................................19
ARTICLE 8 MANAGEMENT OF THE COMPANY....................................20
SECTION 8.1 Management of the Company...................................20
8.1.1 General..................................................20
8.1.2 Member Representatives...................................20
8.1.3 Actions By the Members...................................20
8.1.4 Meetings.................................................21
SECTION 8.2 The Operating Member........................................21
SECTION 8.3 Duties of Operating Member; Chelsea as Initial Operating
Member......................................................24
SECTION 8.4 Authorization for Expenditures..............................24
SECTION 8.5 Rights Not Assignable.......................................25
SECTION 8.6 Major Decisions.............................................25
SECTION 8.7 Emergency Authority.........................................25
SECTION 8.8 Identification of Prospective Projects......................25
SECTION 8.9 Budgets.....................................................26
SECTION 8.10 Removal of Operating Member.................................28
SECTION 8.11 Development Agreement.......................................28
SECTION 8.12 Management Agreement........................................29
SECTION 8.13 Fees and Expense Reimbursements for Members.................30
ARTICLE 9 COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES.......30
SECTION 9.1 Compensation, Reimbursements.................................30
9.1.1 Compensation.............................................30
9.1.2 Reimbursements...........................................30
SECTION 9.2 No Contracts with Affiliates.................................31
ARTICLE 10 SALE, TRANSFER OR MORTGAGE....................................31
SECTION 10.1 General......................................................31
SECTION 10.2 Permitted Transfers by the Members...........................31
10.2.1 Transfers By Chelsea...................................31
10.2.2 Transfers by Simon.....................................31
10.2.3 Agreements with Transferees............................32
ARTICLE 11 DISSOLUTION...................................................33
SECTION 11.1 Dissolution and Termination; Continuation of Business.......33
11.1.1 Causes of Dissolution and Termination..................33
11.1.2 Right to Continue Business of the Company..............34
SECTION 11.2 Procedure in Dissolution and Liquidation....................34
11.2.1 Winding Up.............................................34
11.2.2 Management Rights During Winding Up....................34
11.2.3 Work in Progress.......................................35
11.2.4 Distributions in Liquidation...........................35
11.2.5 Non-Cash Assets........................................36
SECTION 11.3 Disposition of Documents and Records........................36
SECTION 11.4 Date of Termination.........................................36
ARTICLE 12 GENERAL PROVISIONS..............................................37
SECTION 12.1 Notices.....................................................37
SECTION 12.2 Entire Agreement............................................38
SECTION 12.3 Severability................................................38
SECTION 12.4 Successors and Assigns......................................38
SECTION 12.5 Counterparts................................................39
SECTION 12.6 Additional Documents and Acts...............................39
SECTION 12.7 Interpretation..............................................39
SECTION 12.8 Terms.......................................................39
SECTION 12.9 Amendment...................................................39
SECTION 12.10 References to this Agreement................................39
SECTION 12.11 Headings....................................................39
SECTION 12.12 No Third Party Beneficiary..................................40
SECTION 12.13 No Waiver...................................................40
SECTION 12.14 Time of Essence.............................................40
LIMITED LIABILITY COMPANY AGREEMENT
OF
SIMON/CHELSEA DEVELOPMENT CO., L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") is entered into
as of May 16, 1997, by and between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ GROUP, L.P., a Delaware
limited partnership ("Simon"), and CHELSEA GCA REALTY PARTNERSHIP, L.P., a
Delaware limited partnership ("Chelsea"). Simon and Chelsea and any other
persons or entities who shall in the future execute and deliver this Agreement
pursuant to the provisions hereof shall hereinafter collectively be referred to
as the "Members."
WHEREAS, the Members have formed a limited liability company pursuant
to the provisions of the Delaware Limited Liability Act (the "Act" or the
"Delaware LLC Act") under the name "Simon/Chelsea Development Co., L.L.C." (the
"Company") pursuant to a Certificate of Formation, dated May __, 1997 (the
"Certificate"); and
WHEREAS, the Members desire to continue the Company for the purposes
hereinafter set forth, subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:
ARTICLE 1
DEFINITIONS; EXHIBITS
SECTION 1.1 Certain Definitions.
Unless the context otherwise specifies or requires, capitalized terms
used herein shall have the respective meanings assigned thereto in Exhibit A,
attached hereto, and incorporated herein by reference, for all purposes of this
Agreement (such definitions to be equally applicable to both the singular and
the plural forms of the terms defined). Unless otherwise specified, all
references herein to Articles or Sections are to Articles or Sections of this
Agreement.
SECTION 1.2 Other Definitions.
In addition to the terms defined in Exhibit A, other terms will have
the definitions provided elsewhere in this Agreement.
SECTION 1.3 Exhibits.
Attached hereto and forming an integral part of this Agreement are
various exhibits which are listed in the Table of Contents for this Agreement,
all of which are incorporated into this Agreement as fully as if the content
thereof were set out in full herein at each point of reference thereto.
ARTICLE 2
FORMATION; NAME; PLACE OF BUSINESS
SECTION 2.1 Formation of Company; Certificate of Formation
The Members of the Company hereby:
(a) acknowledge the formation of the Company by the Members as a
limited liability company pursuant to the Delaware LLC Act by virtue of the
filing of the Certificate with the appropriate public office in Delaware on May
16, 1997;
(b) confirm and agree to their status as Members of the Company;
(c) execute this Agreement for the purpose of continuing the existence
of the Company and establishing the rights, duties, and relationship, of the
Members; and
(d) (i) agree that if the laws of any jurisdiction in which the
Company transacts business so require, the Company also shall cause to be filed,
with the appropriate office in that jurisdiction, any documents necessary for
the Company to qualify to transact business under such laws; and (ii) agree and
obligate themselves to execute, acknowledge, and cause to be filed for record,
in the place or places and manner prescribed by law, any amendments to the
Certificate as may be required, either by the Delaware LLC Act, by the laws of
any jurisdiction in which the Company transacts business, or by this Agreement,
to reflect changes in the information contained therein or otherwise to comply
with the requirements of law for the continuation, preservation, and operation
of the Company as a limited liability company under the Delaware LLC Act.
SECTION 2.2 Name of Company
The name under which the Company shall conduct its business is
"Simon/Chelsea Development Co., L.L.C.". The business of the Company may be
conducted under any other name permitted by the Delaware LLC Act that is deemed
necessary or desirable by the Members. The Company promptly shall cause to be
executed, filed, and recorded any assumed or fictitious name certificates
required by the laws of the State of Delaware or any state in which the Company
conducts business.
SECTION 2.3 Place of Business
The location of the principal place of business of the Company shall
be c/o Chelsea GCA Realty, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇. The Members may hereafter change the principal place of business of the
Company to such other place or places within the United States as the Members
may from time to time determine, and, if necessary, the Members shall amend the
Certificate in accordance with the applicable requirements of the Delaware LLC
Act. The Members may establish and maintain such other offices and additional
places of business of the Company, either within or without the State of
Delaware, as they deem appropriate.
SECTION 2.4 Registered Office and Registered Agent
The street address of the initial registered office of the Company
shall be ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the Company's
registered agent at such address shall be the Corporation Trust Company.
ARTICLE 3
PURPOSES AND POWERS OF COMPANY
SECTION 3.1 Purposes
Subject to the provisions of this Agreement, the purposes of the
Company are limited and include only the following: investing in, acquiring,
holding, owning, developing, operating, maintaining, improving, leasing, selling
as a means of recovering the Members' investment and a profit thereon,
exchanging and otherwise using one or more Projects, for profit and as an
investment, and doing any and all other acts or things which may be incidental
or necessary to carry on the business of the Company as herein contemplated.
SECTION 3.2 Powers
The Company shall have the power to do any and all acts and things
necessary, appropriate, advisable, or convenient for the furtherance and
accomplishment of the purposes of the Company, including, without limitation, to
engage in any kind of activity and to enter into and perform obligations of any
kind necessary to or in connection with, or incidental to, the accomplishment of
the purposes of the Company, so long as said activities and obligations may be
lawfully engaged in or performed by a limited liability company under the
Delaware LLC Act.
SECTION 3.3 Limits of Company
(a) The relationship between and among the Members as members of a
limited liability company shall be limited to carrying on the
business of the Company in accordance with the terms of this
Agreement. Such relationship shall be construed and deemed to be
a limited liability company only for such sole and limited
purpose.
(b) The Members shall each devote such time to the Company as is
reasonably necessary to carry out the provisions of this
Agreement. Each of the Members understands that the other Member
or its Affiliates may be interested, directly or indirectly, in
various other businesses and undertakings not included in the
Company. Each Member also understands that the conduct of the
business of the Company may involve business dealings with such
other businesses or undertakings. The Members hereby agree that
the creation of the Company and the assumption by each of the
Members of their duties hereunder shall be without prejudice to
their rights (or the rights of their Affiliates) to have such
other interests and activities and to receive and enjoy profits
or compensation therefrom, and except as otherwise expressly
agreed in writing by the Members, each Member waives any rights
it might otherwise have to share or participate in such other
interests or activities of the other Member or its Affiliates.
Except as set forth below or as otherwise expressly agreed in
writing by the Members, the Members may engage in or possess any
interest in any other business of any nature or description
independently or with others including, but not limited to, the
ownership, financing, leasing, operation, management or
development of real property which may compete with the business
of the Company, and neither the Company nor the other Member
shall have any right by virtue of this Agreement in and to any
such other business or the income or profits derived therefrom.
Notwithstanding the foregoing, the Members agree:
(i) During the term of this Agreement, each Prospective
Project shall be identified by Chelsea and presented
to Simon for the benefit of the Company, all as
provided in Section 8.8 below; and
(ii) During a term ending on the earlier of (A) six
(6) years after the date of this Agreement, or
(B) two (2) years after the termination of this
Agreement, Simon agrees that it shall not compete
with Chelsea in the acquisition, development,
leasing, construction or management of
manufacturers outlet shopping centers in the
United States. The foregoing restriction shall
not apply to (C) any "▇▇▇▇▇-type" shopping
center which the Members agree is not a
manufacturers outlet shopping center, (D)
Simon's acquisition of a portfolio of shopping
centers where 15% or less of the number of such
shopping centers so acquired are manufacturers
outlet shopping centers, and (E) any conversion
by Simon of one or more of its shopping centers
to a manufacturers outlet shopping center, it
being agreed that with respect to such
conversion, Simon shall furnish to Chelsea the
plans and budgets therefor, together with such
other information as Chelsea may reasonably
request, and Chelsea shall have the option, for
a thirty (30) day period following receipt of
such information, to elect to become a joint
venture partner with Simon in such conversion
and treat such conversion as a Project
hereunder. For purposes of this Agreement, a
"▇▇▇▇▇-type" shopping center shall mean a large
(900,000 square feet or more of gross leasable
area) value and entertainment oriented shopping
center, often enclosed, which contains a
substantial number of discount or "category
killer" big box anchors or mini anchors each
containing approximately 20,000 or more square
feet of gross leasable area.
SECTION 3.4 No Individual Authority.
Neither Member shall, without the express, prior written consent of
the other Member, take any action for or on behalf of or in the name of the
Company or other Member, or assume, undertake or enter into any commitment,
debt, duty or obligation binding upon the Company, except for (a) actions
expressly provided for in this Agreement, (b) actions by either Member within
the scope of such authority as may have been granted in this Agreement, and (c)
actions Approved by the Members, and any action taken in violation of the
foregoing limitation shall be void. Each Member shall indemnify and hold
harmless the other Member from and against any and all claims, demands, losses,
damages, liabilities, lawsuits and other proceedings, judgments and awards, and
costs and expenses (including, but not limited to, reasonable attorneys' fees
and all court costs) arising directly or indirectly, in whole or in part, out of
any breach of the foregoing provisions by such Member. This provision shall
survive dissolution of the Company.
SECTION 3.5 Responsibility of Members.
(a) Except for Project costs previously incurred by a Member which
are reflected in the Development Budget, the Company and each
Member shall not be responsible or liable for any responsibility,
indebtedness, or other obligation of any other Member incurred
prior to, on the date of or after the execution of this
Agreement, except for those which are undertaken or incurred on
behalf of the Company after the date of this Agreement under or
pursuant to the terms of this Agreement, or assumed in writing by
both Members, and each Member hereby indemnifies and agrees to
hold the other Member and the Company harmless from all such
obligations and indebtedness except as aforesaid.
(b) Each Member will notify the other Member as quickly as reasonably
possible upon receipt of any notice (i) of the filing of any
action in law or in equity naming the Company or any Member as a
party relating in any way to the business of the Company; (ii) of
any actions to impose liens of any kind whatsoever or of the
imposition of any lien whatsoever against the Company or its
assets, including the Project; (iii) of any casualty, damage or
injury to persons or property on or related to the Project; or
(iv) of the default by the Company of any of its obligations to
creditors or other third parties. Each Member will endeavor to
notify the other Member verbally promptly upon learning of any of
the foregoing actions, or the threat thereof, which, in such
Member's judgment, is material to the Company or the other
Member.
ARTICLE 4
TERM OF COMPANY
The existence of the Company commenced on May 16, 1997, the date upon
which the Certificate was duly filed with the Recording Office, and shall
continue until December 31, 2002, or such later date as Approved by the Members
(the "Termination Date"), unless dissolved and liquidated before the Termination
Date in accordance with the provisions of Article 11.
ARTICLE 5
CAPITAL
SECTION 5.1 Members' Initial Percentage Interests.
The Initial Percentage Interests of the Members for purposes of
applying the provisions of this Agreement are set forth below:
Member Initial Percentage Interests
Simon 50%
Chelsea 50%
The Initial Percentage Interests are subject to adjustment as provided herein.
SECTION 5.2 Capital Contributions.
5.2.1 Initial Capital Contributions.
(a) Concurrently with the execution and delivery of this Agreement,
Chelsea has contributed $600.00 to the Company ("Chelsea Initial
Contribution").
(b) Concurrently with the execution and delivery of this Agreement,
Simon has contributed $600.00 to the Company, which amount is
equal to the Chelsea Initial Contribution ("Simon Initial
Contribution").
5.2.2 Prospective Project Expenditures.
During any period when the Members are examining the feasibility
of developing or acquiring a Prospective Project prior to the
commencement of the PreConstruction Period, each Member shall
contribute cash capital contributions in an amount sufficient to
fund costs incurred by the Company and Approved in advance from
time to time by the Members or contained in the Prospective
Project Budget. Such costs shall only include third party,
out-of-pocket expenditures incurred by the Company or the Members
with respect to a Prospective Project.
5.2.3 Pre-Construction Expenditures.
(a) During the Pre-Construction Period of a Project, the Members
shall contribute cash capital contributions in an amount
sufficient to fund those costs incurred from time to time in
advance of the Construction Period pursuant to an applicable
Pre-Construction Budget which has been Approved by the Members.
Such expenditures, including the net cash equity investment of
any Member in any portion of the Land which is contributed to the
Company by such Member, shall be credited as cash capital
contributions made by the Members to the Company. To the extent
that any Member and its Affiliates have contributed less than 50%
of such predevelopment expenditures, such Member shall thereafter
contribute 100% of necessary costs until the capital
contributions made by and credited to Simon and Chelsea are
equal. Thereafter, such contributions shall be divided among them
pro rata in accordance with their respective Initial Percentage
Interests.
(b) In no event shall either party be required to contribute amounts
during the Pre-Construction Period in respect of either (A) any
fees which may be payable to either party in connection with a
Project and which are identified in the Development Budget or (B)
any other costs or expenses identified in the Development Budget
as being subject to this Section 5.2.2(b)(B), but such costs
described in subsections (A) or (B) hereof shall be part of Total
Project Costs and shall be reimbursed to the appropriate Member
from the initial disbursement of construction financing or from
contributions by the Members pursuant to Section 5.2.4 hereof.
5.2.4 Construction Period.
(a) During the Construction Period of a Project, the Members shall
contribute cash capital contributions in the aggregate to the
Company in the amount of (i) the Total Project Costs incurred
from time to time, less (ii) the amount of any construction
financing, public finance assistance or other financing sources
obtained for the Company, or other sources of funds as to which
the Members shall agree, which contributions will be divided
among them pro rata in accordance with their respective Initial
Percentage Interests. The Operating Member may seek third party
construction financing in the amounts and upon the terms and
conditions Approved by the Members, which approval shall not be
unreasonably withheld so long as such terms and conditions are
consistent with the Development Budget. In the event any such
construction loan proceeds are less than the balance of the Total
Project Costs, the Members shall fund the shortfall by making
additional capital contributions to the Company pro rata in
accordance with their Initial Percentage Interests. All such
amounts contributed to the capital of the Company pursuant to
this Section shall be credited to the Capital Account of each
Member when and as such contributions are made by such Member.
(b) To the extent that guarantees are required in connection with any
such construction financing, Simon and Chelsea shall each be
obligated to provide such guarantees on a several basis in
accordance with their respective Initial Percentage Interests.
Should any such obligations be subject to a joint and several
guarantee by the Members or their Affiliates in connection with
the construction financing for the Project, or otherwise(it being
agreed that no Member shall be required to provide a joint and
several guaranty without its prior Approval), Simon and Chelsea
shall each agree to indemnify and hold the other and its
Affiliates harmless from and against any loss, cost, claim,
damage or expense thereunder (including reasonable attorneys'
fees) in excess of one-half (2) of the costs so guaranteed and
incurred by both Members and/or their respective Affiliates. Any
Members failing to perform under such indemnity shall be deemed a
Non-Funding Member and a Non-Contributing Member for purposes of
this Article 5.
5.2.5 Completion of Construction.
Upon completion of construction of the Project, the Members shall seek
to obtain third party non-recourse permanent financing in the amounts and upon
the terms and conditions Approved by the Members, which approval shall not be
unreasonably withheld so long as such terms and conditions are consistent with
the financing assumptions set forth in the Development Budget. The Members shall
be obligated to make additional capital contributions to the Company pro rata in
accordance with their Initial Percentage Interests in order that the portion of
the Total Project Costs which is not financed by such permanent financing shall
be funded by equity.
SECTION 5.3 Additional Funds.
(a) In the event additional funds are required to operate the Company
in accordance with expenditures delineated in one or more Budgets
or for other purposes Approved by the Members, the Members hereby
agree to provide on a pro rata basis in accordance with their
Initial Percentage Interests additional capital contributions in
the amount necessary to satisfy such obligations. If such
additional funds are necessary, any Member may send a notice
thereof to the other Member setting forth the purposes for which
the additional funds are required and a report stating the amount
required as well as the anticipated cash receipts and obligations
for the quarter next following the date of the notice with the
reasons, if ascertainable, that the available funds of the
Company will be insufficient to meet the obligations for which
the additional funds have been requested.
(b) If additional funds are needed for the Company as set forth in
Section 5.3(a), each Member shall be obligated to contribute
additional capital to the Company pursuant to the procedure set
forth in Section 5.4 below.
SECTION 5.4 Capital Calls.
5.4.1 General.
If the Members are required to contribute capital under this Agreement
the Members shall make additional capital contributions in accordance with the
provisions herein and in the same percentages as their respective Initial
Percentage Interests and in such amounts which are sufficient to provide such
funds. Chelsea and any Affiliate Transferee(s) of part of Chelsea's Percentage
Interest, on the one hand, and Simon and any Affiliate Transferee(s) of part of
Simon's Percentage Interest, on the other hand, shall be jointly and severally
liable for making any of their respective required contributions to the Company
under this Article 5.
5.4.2 Notice by Operating Member.
If additional capital contributions are required to be made pursuant
to Section 5.3(a), notice shall be given to each Member in the manner provided
in Section 12.1. Such notice shall specify in reasonable detail the amount and
purpose of any such additional capital contributions. Each Member shall, within
ten (10) business days (time being of the essence) after the receipt of such
notice, deposit, by wire transfer of immediately available federal funds into
the Company's bank account, the additional capital contribution specified in the
notice, to be credited to the contributing Member's capital account. If either
Member disputes the need for any additional capital contributions requested
pursuant to this Section 5.4.2, pending the resolution of such dispute the
Member disputing the need for additional capital shall nevertheless contribute
its additional capital within the time period specified in this Section 5.4.2
and the Company shall hold the contributions of both Members in an
interest-bearing account, or shall otherwise invest such contributions as
Approved by the Members, separate from other cash deposits of the Company until
such dispute is resolved; provided, however, that the Company shall have the
right to use the Members' contributions to the extent necessary, subject to the
budgetary limitations which are set forth in Section 8.9 below, to permit the
Company to pay its debts and to meet its obligations when due. If and to the
extent that it is ultimately determined that such additional capital was not
required in whole or in part, the amount of such capital contributed by each
Member that was determined to be not required, less each Member's proportionate
share (based on such Member's Initial Percentage Interest) of any portion of the
Members' contributed capital which was expended in accordance with the
foregoing, shall be promptly refunded to each Member, together with a
proportionate share of interest, if any, earned thereon while on deposit with
the Company.
5.4.3 Dilution.
(a) If a Member fails to fund its pro rata share of any capital
contributions and such failure continues for a period of thirty
(30) days (the first such failure by either Member, if uncured,
being hereinafter referred to as an "Initial Uncured Default"),
such Member shall be considered to be a "Non-Funding Member" and
the other Member (the "Funding Member") if it has funded its pro
rata share of such contribution, shall be entitled to fund the
Non-Funding Member's share of such capital contribution. The
Percentage Interest of each Member shall thereupon be
recalculated as set forth below. The Funding Member is hereby
constituted and appointed as attorney-in-fact, such appointment
being coupled with an interest, to execute, acknowledge and
deliver all instruments and documents necessary to effect such
recalculation of Percentage Interests as herein provided.
(b) The recalculation of the Percentage Interests on the Percentage
Interest Adjustment Date shall be done as follows: First, the
total amount of capital contributions made by each Member as of
the Percentage Interest Adjustment Date shall be calculated.
Second, the Non-Funding Member's Percentage Interest shall be
reduced, and the Funding Member's Percentage Interest shall be
increased, to reflect each Member's percentage of the total
contributions made by both Members as of the Percentage Interest
Adjustment Date.
(c) The Adjusted Percentage Interests of the Members shall be
expressed in terms of a decimal rounded to the nearest fourth
digit. An example illustrating the operation of this provision is
attached hereto as Exhibit C.
(d) (i) If due to the operation of this Section 5.4.3 a Non-Funding
Member's Initial Percentage Interest is diluted, the other
Member shall have the right and option for a period of 60
days after such dilution occurs to purchase the Non-Funding
Member's interest in the Company at a price equal to the
total amount of cash capital contributions which had been
contributed to the Company by the Non-Funding Member at that
point in time, less the amount of any distributions of Cash
Flow or Capital Proceeds previously made to the Non-Funding
Member.
(ii) In order to elect to purchase the interest in the Company of
a Non-Funding Member pursuant to this Section 5.4.3, the
Funding Member shall send written notice of election
to the Non-Funding Member prior to expiration of such
60-day period. In the event a Funding Member elects to
purchase a Non-Funding Member's interest, such election
pursuant to this Section 5.4.3 shall create a binding
contract for the purchase and sale of the Non-Funding
Member's interest in the Company. The closing of such
purchase and sale shall take place at the office where the
principal place of business of the Company is located
on the date specified by the Funding Member in its election
notice which date shall not be less than 20 days nor more
than 60 days following the date of such notice, unless
the Members agree to a different mutually acceptable date.
The form and substance of the closing documents shall be
reasonably satisfactory to the Funding Member and shall
consist of an assignment and ▇▇▇▇ of sale (both with
covenants against grantor's acts) from the Non-Funding
Member to the Funding Member (or its nominee or
designee), together with such other instruments and
documents as may be reasonably necessary or desirable to
effectuate the sale. The purchase price shall be payable
by federal wire transfer of immediately available funds to an
account designated by the Non-Funding Member, against
delivery of all the closing documents. At either Member's
request, the Company's bank or the title company which
issued the owner's title policy to the Company may be
appointed as escrow agent to receive all closing documents
and the purchase price in escrow in order to make
simultaneous delivery of closing documents and disbursement
of funds at the closing or the next business day thereafter.
The instruments and documents shall be legally
sufficient to convey all of the Non-Funding Member's
interest in the Company (and the Project) to the Funding
Member (or its nominee or designee), free and clear of all
deeds of trust, security interests, liens, charges and
encumbrances. The provisions of this Section 5.4.3 shall be
enforceable by a decree of specific performance and
neither Member shall assert in defense thereto that there
exists an adequate remedy at law.
5.4.4 Contribution Loans.
(a) If either Member (a "Non-Contributing Member") fails to make any
additional capital contribution within the time specified in
Section 5.4.2 and such failure continues for a period of thirty
(30) days after an Initial Uncured Default, the other Member who
makes the requested contribution of additional capital (the
"Contributing Member") shall have the right but not the
obligation to advance directly to the Company the funds required
from the Non-Contributing Member as a loan ("Contribution Loan")
to the Non-Contributing Member. If and when a Contribution Loan
is made, the Non-Contributing Member shall be deemed to have
waived the right to make the requested capital contribution as of
the date of such loan. Such Contribution Loan shall bear
interest, compounded annually, at a rate equal to the Prime Rate
plus four (4) percentage points per annum. Contribution Loans may
be prepaid by the Non-Contributing Member at any time after the
date the Contribution Loan is made. If not repaid by the
Non-Contributing Member, the Contribution Loan shall be repaid
pursuant to Section 5.4.5 or other applicable provisions of this
Agreement, but otherwise shall be and remain a recourse
obligation of the Non- Contributing Member.
(b) If the Contributing Member does not elect to advance the full
amount of the additional funds required from the Non-Contributing
Member, the Contributing Member may withdraw its additional
capital contribution.
(c) Notwithstanding any other provision of this Agreement to the
contrary, if as of the date which is one hundred eighty (180)
days after the making of a Contribution Loan, such Contribution
Loan shall not have been paid in full, the Contributing Member
shall have the right for a period of sixty (60) days to have such
Contribution Loan (or the portion thereof remaining unpaid)
converted on the books of the Company to a capital contribution
by the Contributing Member, in which event the Percentage
Interest of the Non-Contributing Member shall be adjusted and
recalculated in accordance with Section 5.4.3 of this Agreement,
and the Contributing Member shall be entitled to exercise all
rights and remedies thereunder, including without limitation the
purchase option described in Section 5.4.3(d). In order to elect
to convert a Contribution Loan to a capital contribution pursuant
to this Section 5.4.4(c), the Contributing Member shall send
written notice of election to the Non-Contributing Member prior
to the expiration of such 60-day period.
(d) The rights set forth in this Section 5.4.4 are in lieu of the
exercise of rights set forth in Section 5.4.3 and may not be
exercised in addition to such rights.
5.4.5 Repayment through Distributions.
A Contribution Loan shall be repaid on a first priority basis out of
any subsequent distributions to which the Non-Contributing Member for whose
account the Contribution Loan was made would otherwise be entitled in accordance
with this Agreement, which amounts shall be applied first to accrued interest
and then to principal, until the Contribution Loan is paid in full. Each
Non-Contributing Member irrevocably assigns its rights to distributions from the
Company to the Contributing Member for the purpose of effectuating this
repayment. Repayment of either Member's Contribution Loan shall also be secured
by the Non-Contributing Member's Percentage Interest in the Company, and the
Non-Contributing Member hereby grants a security interest in such Percentage
Interest and all distributions related thereto to the Contributing Member who
has advanced such Contribution Loan and hereby irrevocably appoints the
Contributing Member, and any of its agents, officers or employees, as its
attorney- in-fact, such appointment being coupled with an interest, to execute,
acknowledge and deliver any documents, instruments and agreements including, but
not limited to, any note evidencing the Contribution Loan, and such Uniform
Commercial Code financing statements, continuation statements, and other
security instruments or documents as may be appropriate to perfect and continue
such security interest in favor of the Contributing Member.
5.4.6 Transferees and Assignees.
If there shall be a Transfer of part of the Percentage Interest of
either Member pursuant to Article 10 below to an Affiliate of such Member, all
of the calculations necessary at any time or from time to time under this
Section 5.4 shall be made without regard to any such partial Transfer. Any
dilution of the Percentage Interest of either Member pursuant to this Section
5.4 shall be made effective against the aggregate Percentage Interest of the
Transferor and any Affiliate Transferee of which the Company has been notified
or, failing any such agreement, or notice thereof, as the Funding Member, acting
on behalf of the Company, may elect. It is the intent and agreement of the
Members that all of the rights and obligations hereunder, including without
limitation participation in management, rights to give or receive notices and
contribution obligations, and the various consequences arising from the failure
of a Member to make a required capital contribution to the Company hereunder are
to be interpreted and applied as if Chelsea and any Chelsea Affiliate that owns
a part of its Percentage Interest, on the one hand, and Simon and any Simon
Affiliate that owns a part of its Percentage Interest, on the other, is a single
entity having a Percentage Interest in an amount equal to the aggregate
Percentage Interests owned by such Member and its respective Transferees.
5.4.7 No Third Party Rights.
The right of the Company or the Members to require any additional
contributions under the terms of this Agreement shall not be construed as
conferring any rights or benefits to or upon any party not a party to this
Agreement including, but not limited to, any tenant of any part of the Project,
or the holder of any obligations secured by a deed of trust or other lien or
encumbrance upon or affecting the Company, any Percentage Interest, or the
Project, or any part thereof or interest therein, or any other creditor of the
Company.
5.4.8 Role in Management.
Notwithstanding any other provision of this Agreement to the contrary,
including without limitation Article 8 hereof, a Non-Funding Member or
Non-Contributing Member (hereinafter, a "Defaulting Member") shall thereafter
have no further approval rights, right to make decisions or role in management
of the Company until such funding or contribution default has been cured.
Without limitation of the foregoing, in such event (i) if the Defaulting Member
is the Operating Member, the other Member (the "Non-Defaulting Member") shall
have the right to remove the Defaulting Member as the Operating Member (and to
become the Operating Member itself) in accordance with Section 8.9 hereof and to
terminate the Management Agreement and Development Agreement with any Affiliate
of the Defaulting Member in accordance with Section 8.10(b) and Section 8.11(b),
(ii) the Non-Defaulting Member shall have the right to apply any fees payable to
the Defaulting Member or its Affiliate in accordance with this Agreement to any
amounts owed by the Defaulting Member and (iii) the Non- Defaulting Member shall
have the right to make all decisions of the Company and the Members.
5.4.9 The provisions of Sections 5.4.3, 5.4.4, 5.4.5, 5.4.6 and 5.4.8
shall apply only to each individual Project or Prospective Project for which a
Member may be a Defaulting Member and the exercise of any remedies hereunder by
a Funding Member or Non-Defaulting Member shall be applicable only to a Project
for which the other Member is a Defaulting Member.
SECTION 5.5 No Interest on Capital.
Interest earned on Company funds shall inure solely to the benefit of
the Company, and except as specifically provided hereinabove, no interest shall
be paid upon any contributions or advances to the capital of the Company nor
upon any undistributed or reinvested income or profits of the Company.
SECTION 5.6 Reduction of Capital Accounts.
Any distribution to a Member, whether pursuant to Sections 6.5 or 6.6
or any other Section of this Agreement, shall reduce the amount of such Member's
Capital Account in accordance with Section 2.A. of the Tax Allocations Exhibit,
but no adjustment in the Percentage Interest of any Member shall be made on
account of any such distribution, except as otherwise specifically provided in
this Agreement.
SECTION 5.7 Negative Capital Accounts.
Any Member having a deficit or negative balance in its Capital Account
shall not be required to restore such deficit capital amount or otherwise to
contribute capital to the Company to restore its Capital Account.
SECTION 5.8 Limit on Contributions and Obligations of Members.
Except as expressly provided in Sections 5.2, 5.3 and 5.4 hereof and
this Section 5.8, the Members shall have no liability or obligation to the
Company or to the other Members (i) to make additional capital contributions to
the Company, (ii) to make any loans to the Company or (iii) to endorse or
guarantee the payment of any loan to the Company. Each Member shall be
personally liable to the other Members (but not to any third parties) for its
pro rata share of the Company liabilities (such share to be determined as of the
time the liabilities are incurred) based on its Initial Percentage Interest in
the Company.
SECTION 5.9 Pre-Construction Period Withdrawals.
Notwithstanding any other provision hereof to the contrary, either
Member may elect by notice to the other Member at any time during the
Prospective Project Period or Pre-Construction Period, but prior to the
development of the Final Project Program (a "Withdrawal Notice"), to withdraw
from participation in a Prospective Project by making an additional capital
contribution equal to such Member's pro rata share of any accrued obligations
under the Pre-Construction Budget as of the date of the Withdrawal Notice plus
any penalties or termination fees which would be due and payable to third
parties if the remaining Member elects to terminate any existing binding
commitments to such third parties within thirty (30) days after receipt of a
Withdrawal Notice as a result of such withdrawal and thereafter determines not
to go forward with such Prospective Project. In such event, (i) the withdrawing
Member's Percentage Interest in such Prospective Project only shall be redeemed
in its entirety by the Company, and (ii) the withdrawing Member's aggregate
capital contributions through the date of such Withdrawal Notice (including the
amount of any capital contributions required to be made pursuant to this Section
5.9) shall be converted to an unsecured, subordinated obligation of the Company,
evidenced by a promissory note substantially in the form of Exhibit D hereto
(the "Subordinated Member Note"); provided, however, that no Member which is at
the time a Defaulting Member shall be entitled to send a Withdrawal Notice and
withdraw from the Company pursuant to this Section 5.9.
ARTICLE 6
PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS
SECTION 6.1 Net Profit.
All Net Profit of the Company for each Fiscal Year shall be allocated
to the Members as follows:
(i) First, to each Member until the cumulative Net Profit allocated
to each Member pursuant to this clause (i) is equal to the
cumulative Net Loss allocated to such Member pursuant to clause
(ii) of Section 6.2 and Section 6.3 (such Net Profits to be
allocated first with respect to Net Loss allocated pursuant to
Section 6.3 and thereafter in reverse chronological order of the
allocation of the Net Loss which has not been previously offset
by an allocation under this Section 6.1(i)); and
(ii) Thereafter, among the Members in accordance with their respective
Percentage Interests.
SECTION 6.2 Net Loss.
After giving effect to the special allocations set forth in Exhibit B,
all Net Loss of the Company for each Fiscal Year shall be allocated to the
Members as follows:
(i) First, to each Member until the cumulative Net Loss allocated to
each Member pursuant to this clause (i) is equal to the
cumulative Net Profit allocated to such Member pursuant to clause
(ii) of Section 6.1 (such Net Loss to be allocated in reverse
chronological order of the allocation of the Net Profit which has
not been previously offset by an allocation under this Section
6.2(i));
(ii) Second, to each Member in accordance with their respective
positive Adjusted Capital Account balances until such balances
are reduced to zero; and
(iii) Thereafter, among the Members in accordance with their
respective Percentage Interests.
SECTION 6.3 Limitation on Net Loss Allocation.
Notwithstanding any provision of this Agreement to the contrary, in no
event shall Net Loss be allocated to a Member if such allocation would result in
such Member's having a negative Adjusted Capital Account Balance at the end of
any Fiscal Year. All Net Loss in excess of the limitation set forth in this
Section 6.3 shall be allocated to any remaining Member with a positive Adjusted
Capital Account, and if all such Adjusted Capital Account balances are zero or
negative to the Members under Section 6.2(iii).
SECTION 6.4 Other Allocation Rules.
Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752- 3(a)(3), the Members' interests in the Net Profits of
the Company are the same as the Members' Percentage Interests.
SECTION 6.5 Distribution of Cash Flow.
Except as provided in Section 11.2.4, the Company shall distribute
Cash Flow to the Members as and when Approved by the Members, not less
frequently than quarterly, in the following order of priority:
(a) First, to pay any accrued but unpaid interest on, and then to pay
the unpaid principal balance, if any, of any and all loans made
by any Member to the Company (excluding any Subordinated Member
Note) in accordance with this Agreement, provided, however, that
any Contribution Loans shall not be regarded as loans to the
Company and shall be repaid on a first priority basis out of any
Cash Flow to which the Non-Contributing Member for whose account
the Contribution Loan was made would otherwise be entitled to in
accordance with Section 6.5(b) of this Agreement, which amounts
shall be applied first to accrued interest and then to principal,
until the Contribution Loan is paid in full; and
(b) Second, to the Members in accordance with their respective
Percentage Interests.
SECTION 6.6 Distribution of Capital Proceeds.
Except as provided in Section 11.2.4, the Company shall distribute to
the Members Capital Proceeds received by the Company within thirty (30) calendar
days after receipt (but not prior to the Percentage Interest Adjustment Date) in
the following order of priority:
(a) First, to pay any accrued but unpaid interest on, and then to pay
the unpaid principal balance, if any, of any and all loans made
by any Member to the Company in accordance with this Agreement,
provided, however, that any Contribution Loans shall not be
regarded as loans to the Company and shall be repaid on a first
priority basis out of any Capital Proceeds to which the Non-
Contributing Member for whose account the Contribution Loan was
made would otherwise be entitled to in accordance with Sections
6.6(b) through (d) of this Agreement, which amounts shall be
applied first to accrued interest and then to principal, until
the Contribution Loan is paid in full, and provided further, that
any Subordinated Member Note shall be paid in accordance with
subsection (c) below;
(b) Second, to the Members in repayment of their respective Capital
Contribution Balances, in accordance with their respective
Percentage Interests;
(c) Third, to the payment of any Subordinated Member Note; and
(d) Fourth, to the Members in accordance with their respective
Percentage Interests.
ARTICLE 7
COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS
SECTION 7.1 Books and Records.
The Company shall keep books and records at the Company's principal
place of business which are usually maintained by persons engaged in similar
businesses, in form and substance Approved by the Members and setting forth a
true, accurate and complete account of the Company's business and affairs
including a fair presentation of all income, expenditures, assets and
liabilities thereof. Such books and records shall be maintained, and its income,
gain, losses and deductions shall be determined and accounted for on the accrual
basis in accordance with generally accepted accounting principles consistently
applied. Each Member and its authorized representatives shall have the right at
all reasonable times to have access to, inspect, audit and copy the Company's
books, records, files, securities, vouchers, canceled checks, employment
records, bank statements, bank deposit slips, bank reconciliations, cash
receipts and disbursement records, and other documents (the "Documents"). Each
Member and its authorized representatives shall also have the right, in
connection with an examination and audit of the Documents, to question during
normal business hours, upon at least ten (10) days notice, the employees, if
any, of the Company and to question any other Person and the employees of such
other Person having custody or control of any Documents, or responsibility for
preparing the same. The Documents shall also be open for inspection during
normal business hours, upon at least ten (10) days notice, by the legal or
accounting representatives of a Withdrawing Member or any Member to the extent
necessary and relevant to such Member's withdrawal from the Company and the
winding up of such Member's affairs with the Company. Each Member shall be
entitled to any additional information necessary for the Member to adjust its
financial basis statement to a tax basis as the Member's individual needs may
dictate.
SECTION 7.2 Tax Returns.
The Independent Accountants shall either prepare or review and sign, as
requested by the Members, the federal, state and local income tax returns of the
Company, and the Company shall use its reasonable efforts to cause the
Independent Accountants to either prepare or review and sign such tax returns by
March 31 of each year, and cause such tax returns to be filed on a timely basis
with the appropriate governmental authorities. In all events, should tax returns
not be filed by March 31, good faith estimates of the information to be provided
in such tax returns shall be provided to each Member no later than March 31 of
each year. Copies of each such return shall be furnished for review and Approval
by the Members prior to filing.
SECTION 7.3 Reports.
(a) The Company shall cause to be prepared and sent to each Member,
by the Member designated to undertake such task on behalf of the
Company, the following unaudited statements and reports:
(i) within fifteen (15) calendar days after the last
day of each calendar month during the term of
the Company's existence, a statement of income
and expense (x) showing the actual results of
the operations of the Company for the calendar
month then ended and cumulatively to date for
the then elapsed portion of the current Fiscal
Year and (y) comparing on an itemized basis,
all costs and expenses incurred during such
month and for such Fiscal Year with the Budgets
for such month and such Fiscal Year, with a
narrative explanation of any variations to such
Budgets; and
(ii) within fifteen (15) calendar days after the last day
of each calendar month during the Term, a balance
sheet showing the financial position of the Company
as of such last day; and
(iii) such other reports as any Member may reasonably
request from time to time.
(b) Each monthly report furnished to the Members by such designated
Member shall also state, to the best knowledge of such designated
Member, whether any default exists with respect to any material
obligation of the Company and whether any litigation is pending
against the Company or the Project. Such designated Member shall,
upon obtaining knowledge of the occurrence of any event which, if
not cured or resolved, would be required by the preceding
sentence to be described in the next monthly report to be
furnished pursuant to this Section 7.3(b), promptly notify each
Member of such occurrence.
SECTION 7.4 Audits.
After the end of each Fiscal Year the Operating Member shall cause an
audit to be made by the Independent Accountants covering the assets, liabilities
and net worth of the Company and its operations during such Fiscal Year, and all
other matters customarily included in such audits. By February 20 of each Fiscal
Year, the Operating Member shall deliver, or cause to be delivered to each
Member the following financial statements with respect to the Company: a balance
sheet and statements of income and expense, changes in the financial position of
the Company, and the Members' capital position as of the end of and for such
Fiscal Year, together with, if requested or required pursuant to the preceding
sentence of this Section 7.4, the report of the Independent Accountants covering
the results of such audit and certifying such financial statements as having
been prepared in accordance with generally accepted accounting principles
consistently applied.
SECTION 7.5 Bank Accounts.
All funds of the Company shall be deposited in its name in an account
or accounts maintained with a financial institution Approved by the Members.
Funds of the Company shall not be commingled with funds of any other Person.
Checks shall be drawn upon the Company account or accounts only for the purposes
of the Company and shall be signed by either Member or by its duly authorized
representative, provided, however, that funds shall only be spent pursuant to
applicable Budgets which have been Approved by the Members or otherwise pursuant
to the emergency authority granted to a Member pursuant to Section 8.7 of this
Agreement.
SECTION 7.6 Tax Elections.
If there is a distribution of any property of the Company within the
meaning of Section 734 of the Code, or if there is a Transfer of an interest in
the Company within the meaning of Section 743 of the Code, then with the
Approval of the Members the Company shall cause to be filed an election under
Section 754 of the Code to provide for an optional adjustment to the basis of
the property or Company interest as appropriate.
SECTION 7.7 Tax Matters Member.
Pursuant to Section 6231(a)(7)(A) of the Code, the Members hereby
designate Chelsea as the Company's "Tax Matters Partner."
ARTICLE 8
MANAGEMENT OF THE COMPANY
SECTION 8.1 Management of the Company.
8.1.1 General.
The overall management and control of the business and affairs of the
Company shall be vested in the Members. The Members may, by written resolution,
except for those matters specifically required to be Approved by the Members,
delegate to one of the Members (hereinafter called the "Operating Member") the
authority to manage and administer the affairs of the Company. Upon such
delegation and until the same shall have been revoked by the Members or the
Member to which such delegation was made shall become a Defaulting Member or a
NonContributing Member, all decisions with respect to the management of the
Company that are approved by the Operating Member shall be binding on the
Company and the Non-Operating Member, except as otherwise provided in this
Agreement. At such time as a delegation hereunder shall have been made and so
long as it remains outstanding, all actions provided hereunder to be taken by
the Company shall be carried out by the Operating Member.
8.1.2 Member Representatives.
The Members shall, by written resolution, each designate in writing
from time to time its representative for purposes of all actions, approvals and
decisions under this Agreement, plus an alternate. Each representative shall be
fully authorized to provide, on behalf of the Member which he or she represents,
any consent or approval which may be required hereunder, and any action or
decision so taken by a representative shall be binding upon the Member which he
or she represents. Each Member may change its authorized representative or
alternate at any time by written notice to the other Member.
8.1.3 Actions By the Members.
(a) Either Member may initiate a request that the Members approve any
matter or take any other action respecting the business and
affairs of the Company which is required for Approval by the
Members pursuant to this Agreement. Any such request may be made
at a regularly scheduled meeting of the Members or in writing.
Any written request must be labeled "REQUEST FOR ACTION BY
MEMBERS" and must include a narrative explanation of the approval
or action which is being requested. If pursuant to such a request
the Member desires to schedule a special meeting of the Members,
such request must be received by the other Member at least ten
(10) calendar days prior to the proposed date for such special
meeting. Conversely, a Member receiving a request for approval or
action by the Members which does not request that a special
meeting be held may then request a special meeting by written
notice to the other Member which must be received at least five
(5) calendar days before the date proposed for such special
meeting. Each Member shall use its best efforts to comply with a
request by the other Member that a special meeting of the Members
be held.
If there is a need for any approval or action by the Members and no
special meeting therefor is requested by either Member, the representatives of
the Members shall use their best efforts to respond within ten (10) days after
the date the representatives are notified of the need for such approval or other
action either in writing or at a regularly scheduled meeting of the Members. If
a representative has not responded within said ten (10) day period or if a
special meeting has been properly requested with respect to such proposed
approval or other action but has not been held within ten (10) days after the
date requested for such special meeting, then the Member requesting such
approval or other action may at any time thereafter notify the other Member that
failure of such other Member's representative to respond within fourteen (14)
calendar days after such notice shall be deemed to be approval by such other
Member of the matter or action requested. Such notice must be labeled "FAILURE
TO ACT BY MEMBER REPRESENTATIVE" and must include a narrative explanation of the
approval or action which is being requested. If the other Member's
representative fails to respond within said 14-day period, such matter or action
requested shall be Approved.
8.1.4 Meetings.
Regular meetings of the Members shall be held at the Company's principal place
of business or at such other place as shall be Approved by the Members and at
intervals as may be Approved by the Members, but not less than once each
calendar quarter. Dates, times and places of such regular meetings shall be
Approved by the Members. No meeting of the Members shall be held unless each
Member is represented. Both regular and special meetings may be held by means of
a conference telephone or similar equipment if all persons participating in the
meeting can hear each other at the same time.
SECTION 8.2 The Operating Member.
(a) The Members shall by written resolution from time to time
designate one of the Members as the Operating Member of the
Company. Subject to Section 8.11(b), such designated Member shall
continue to serve as the Operating Member until (i) the Members
mutually agree that such designated Member shall cease to serve
as the Operating Member; (ii) the Company is dissolved and wound
up in accordance with the provisions of Article 11 hereof; or
(iii) such Designated Member is removed as Operating Member
pursuant to Section 8.9 below. Upon the removal of such
designated Member as the Operating Member in accordance with the
foregoing, the other Member shall automatically become the
Operating Member of the Company. Subject to the provisions of
Sections 8.4, 8.5, and 8.6 of this Agreement, but notwithstanding
delegation of certain obligations and responsibilities by the
Operating Member pursuant to Section 8.2(b) below, the operation
of the Company and management of the Company's business and
affairs shall rest with and remain the obligation and
responsibility of the Operating Member, subject to such further
limitations as may be set forth in the resolution designating
such Operating Member.
(b) Without limiting the generality of the foregoing, AND SUBJECT TO
THE PROVISIONS OF SECTIONS 8.4 AND 8.6 HEREINBELOW, the Operating
Member shall have the following rights and powers, which it may
exercise at the cost, expense and risk of the Company:
(i) To protect and preserve the assets of the
Company, and to incur liabilities (other
than for borrowed money) in the ordinary
course of business of the Company consistent
with the Budgets which have been Approved by
the Members;
(ii) To collect all rentals and all other income
accruing to the Company and to pay all
construction costs and expenses of
operations consistent with the Budgets which
have been Approved by the Members;
(iii) With the Approval of the Members, to prepare
(or have prepared) and file all tax returns
for and on behalf of the Company (but not
the tax returns or other reports of the
individual Members);
(iv) To administer all matters pertaining to
insurance with respect to a Project,
including obtaining and paying for policies
of insurance insuring against (1) loss or
damage by fire, windstorm, tornado and
hail, and against loss or damage by such
other, further and additional risks as now
are or hereafter may be embraced by the
standard extended coverage forms of
endorsements, as may be required by the
Company's lenders and Approved by the
Members, and (2) liability to the public,
tenants or any other person and risk to its
properties incident to the operation of the
Project in such amounts and upon such terms
as are customary for the protection against
such risks of liability and loss and
Approved by the Members;
(v) Subject to the applicable Budgets which have
been Approved by the Members, to employ,
terminate the engagement of, supervise and
compensate such persons, firms or
corporations for and in connection with the
business of the Company as it may reasonably
deem necessary or desirable;
(vi) Subject to the applicable Budgets which have
been Approved by the Members, to repair and
replace all fixtures and equipment situated
on or constituting a part of a Project;
(vii) Subject to the applicable Budgets which
have been Approved by the Members, to
acquire such tangible personal property and
intangible personal property as may be
necessary or desirable to carry on the
business of the Company and sell, exchange
or otherwise dispose of such personal
properties in the ordinary course of
business;
(viii) To keep all books of account and other
records of the Company;
(ix) To negotiate and contract with all utility
companies servicing a Project;
(x) To pay all debts and other obligations of
the Company, including amounts due under the
financing and other loans to the Company
and costs of formation of the Company and,
subject to the applicable Budgets which have
been Approved by the Members, of ownership,
improvement, operation and maintenance of a
Project;
(xi) To pay all taxes, levies, assessments, rents
and other impositions applicable to the
Company, paying same before delinquency and
prior to the addition thereto of interest or
penalties and undertake when appropriate
and subject to Approval of the Members any
action or proceeding seeking to reduce such
taxes, assessments, rents or other
impositions; and
(xii) To deposit all monies received by the
Operating Member for or on behalf of the
Company in such financial institutions as
may be Approved by the Members, to invest
any excess funds and to disburse and pay
all funds on deposit on behalf of and in the
name of the Company in such amounts and at
such times as the same are required in
connection with the ownership, maintenance
and operation of a Project.
(c) Documents to which the Company is a party shall be executed and
performed on behalf of the Company by all of the Members or by
the Operating Member, or by the Non-Operating Member, where the
Members or this Agreement give the Operating Member or the Non-
Operating Member, as the case may be, the right to do so. No
person, firm, partnership, corporation or other entity shall be
required to inquire into the authority of the Members or a Member
to execute and perform any document on behalf of the Company.
Except as otherwise expressly provided in this Agreement, no
Member or representative thereof shall have the authority or
right to bind or act for the Company or any of the other Members.
(d) The Operating Member shall devote itself to the business and
purposes of the Company, as set forth in Section 3.1 above, to
the extent reasonably necessary for the efficient carrying on
thereof, without compensation except as otherwise provided
herein. Whenever requested by the Non- Operating Member, the
Operating Member shall render a just and faithful account of all
dealings and transactions relating to the business of the
Company. The acts of the Operating Member shall bind the Company
when within the scope of the Operating Member's authority
expressly granted hereunder.
SECTION 8.3 Duties of Operating Member; Chelsea as Initial Operating Member.
The Operating Member, at the expense of and on behalf of the Company,
shall implement or cause to be implemented all decisions Approved by the Members
and delegated to the Operating Member by the Members, and shall conduct or cause
to be conducted the management of the business and affairs of the Company in
accordance with and as limited by this Agreement. Chelsea is hereby appointed as
the Operating Member of the Company to implement all decisions Approved by the
Members and shall have primary responsibility for the development, leasing and
management of a Project.
SECTION 8.4 Authorization for Expenditures.
Except for expenditures made and obligations incurred pursuant to a
Budget, as revised or exceeded pursuant to Section 8.7 or 8.8, the Operating
Member shall not make any expenditure or incur any obligation on behalf of the
Company unless previously Approved by the Members, provided that the Operating
Member shall have the right, without the prior Approval of the Members, to make
expenditures and incur obligations not authorized by a Budget (i) to the extent
necessary to pay utilities, taxes, and insurance premiums to the extent such
charges exceed the amounts budgeted therefor in the applicable Budget, (ii) to
pay for other non-capital expenditures in an amount up to 10% or cumulative
expenditures of $25,000 (whichever is less) in excess of the amount authorized
under the Applicable Budget for such expenditures or (iii) to pay for annual
capital expenditures of up to $50,000 in the aggregate for items not
contemplated in, or in excess of amounts reserved for certain line items in, the
applicable Budget. The Operating Member will be reimbursed for out of pocket
expenses incurred on behalf of the Company. The Operating Member may from time
to time seek broader fiscal authority from the Members when it is appropriate to
do so in connection with the performance of its duties hereunder. In any event,
the Operating Member shall not expend more than the amount the Operating Member
in good faith believes to be the fair and reasonable market value at the time
and place of contracting for any goods purchased or services engaged on behalf
of the Company.
SECTION 8.5 Rights Not Assignable.
Except as provided in Section 10.2.1 or 10.2.2, the rights and
obligations of the Operating Member qua Operating Member under this Agreement
shall not be assignable voluntarily or by operation of law by the Operating
Member without the express prior written Approval of the Members, and any
attempted assignment without such Approval shall be void.
SECTION 8.6 Major Decisions.
All Major Decisions with respect to the Company's business and
operations shall require the Approval of the Members. As used herein, the term
"Major Decisions" shall mean all decisions regarding the acquisition,
development, ownership, management, leasing and operation of a Project and the
conduct of the Company's business except those matters expressly delegated to
the Operating Member and/or its Affiliate pursuant to the terms of this
Agreement, the Development Agreement and/or the Management Agreement.
Accordingly, neither Member shall have the right or the power to make any
commitment or engage in any undertaking on behalf of the Company with respect to
a Major Decision unless and until the same has been authorized by Approval of
the Members.
SECTION 8.7 Emergency Authority.
Notwithstanding the provisions of Sections 8.4 or 8.6 hereof, the
Operating Member shall have the right to take such actions and make such
emergency expenditures as it, in its reasonable judgment, deems necessary for
the protection of life or health or the preservation of Company assets if, under
the circumstances, in the good faith estimation of the Operating Member, there
is insufficient time to allow the Operating Member to obtain the Approval of the
Members of such action, a good faith attempt has been made to contact the other
Member and any delay would materially increase the risk to life or health or
materially increase the magnitude or likelihood of property damage or other
potential loss involved; provided, however, that the Operating Member shall
notify the other Member of such action contemporaneously therewith or as soon as
reasonably practicable thereafter.
SECTION 8.8 Identification of Prospective Projects.
During the term hereof, Chelsea shall identify and provide Simon with
an opportunity to evaluate each Prospective Project Area and determine whether
or not the Company should proceed to review and assess the advisability of
developing a Project within the Prospective Project Area. In that regard,
Chelsea shall promptly furnish to Simon all information in Chelsea's possession
concerning a Prospective Project Area and describe why Chelsea believes the
Prospective Project Area may be appropriate for the development of a Project,
together, if appropriate, with a Prospective Project Budget. Within thirty (30)
days after receipt of such information, Simon shall elect, on notice to Chelsea,
whether or not to have the Company proceed with further due diligence concerning
a Prospective Project Area which would include, without limitation, the
Company's acquisition of right to acquire a site within a Prospective Project
Area on which to build a Project, determine the initial interest of prospective
tenants for a Project within the Prospective Project Area, determining the land
use, zoning and related requirements with respect to a Prospective Project Area
and other related terms. Once a site is found by Chelsea within any Prospective
Project Area and Chelsea has determined that it wishes to proceed into the
Pre-Construction Period, Chelsea shall promptly so notify Simon and provide
Simon with information concerning the proposed site, including its acquisition
costs, a site plan showing the location and proposed configuration of a Project,
a Proposed Development Budget for such Project emphasizing, in particular, those
costs and expenses to be incurred in the Pre- Construction Period, proposed
tenant commitments or expressions of interest and financial and other related
information for such Project. Within thirty (30) days after receipt of such
information, Simon shall elect, on notice to Chelsea whether or not to have the
Company proceed for a Pre-Construction Period with such a Prospective Project.
If a Prospective Project is instead an acquisition of one or more existing
shopping centers, Chelsea shall promptly furnish to Simon all information in
Chelsea's possession and reasonably necessary to assist Simon in its
determination to proceed including, without limitation, site plans showing the
location of said Prospective Project, a proposed Budget for any redevelopment of
such Prospective Project, a proposed leasing plan and tenant commitments or
expressions of interest, rent rolls, operating statements, budgets and other
related financial information for such Prospective Project which is to be
acquired, title commitments and related documentation, surveys, engineering and
environmental reports. Within thirty (30) days after receipt of such
information, Simon shall elect, on notice to Chelsea, whether or not to have the
Company proceed to acquire such Prospective Project. Simon's failure to make any
election to proceed with a Prospective Project Area or a Prospective Project
within the time periods provided above shall be deemed an election to not have
the Company proceed therewith, following which Chelsea shall be free, at its
election, to proceed with a Prospective Project for its own account. If the
Members proceed with a Prospective Project, they may elect to have the ownership
thereof held in a separate partnership, limited liability company or other
mutually acceptable entity, in which event the organizational documents for such
entity shall be substantially identical to this Agreement with such changes
thereto as the Members may agree.
SECTION 8.9 Budgets.
(a) The Members shall, by written resolution, Approve a Prospective
Project Budget (if appropriate), a Pre-Construction Budget and a
Development Budget for a Project, which Budgets the Members
acknowledge are subject to change only as Approved by the
Members. The Development Budget is intended to cover all
expenditures of the Project through the completion of
construction of the Project, including, without limitation, those
expenditures included in a Pre-Construction Budget and
Prospective Project Budget for such Project. No later than sixty
(60) calendar days prior to the Project Completion Date, the
Operating Member shall submit to the Non-Operating Member a
proposed Operating Budget for the then remaining Fiscal Year
covering anticipated expenses of the Company in owning, operating
and maintaining the Project. No later than sixty (60) days prior
to the commencement of each Fiscal Year the Operating Member
shall submit to the Non-Operating Member a proposed Operating
Budget for such Fiscal Year for the Project. Further, projections
of current Fiscal Year expenditures shall be prepared by the
Operating Member and submitted to the Non-Operating Member on
June 1 and November 1 of each Fiscal Year.
(b) After submission of the proposed Operating Budgets to the
Non-Operating Member, the following procedures shall be followed
in adopting such Operating Budgets:
(i) Within twenty (20) calendar days after the
proposed Operating Budgets are submitted to the
Non-Operating Member, the Non-Operating Member
shall either approve each such proposed Operating
Budget or notify the Operating Member of any
proposed revisions therein that it deems
necessary. If the Non-Operating Member fails to
approve or reject any proposed Operating Budget
or to make proposed revisions thereto within
thirty (30) calendar days after it is submitted
to the Non-Operating Member, such proposed
Operating Budget shall be deemed approved and
shall thereafter constitute the "Operating
Budget" for the Fiscal Year in question for all
purposes hereof. Any objections to the proposed
Operating Budget must be made on a line item
basis, and any line items not objected to shall
be deemed approved.
(ii) If the Non-Operating Member approves a proposed
Operating Budget, or the Non-Operating Member
makes proposed revisions thereto and the
Operating Member does not make objections to such
proposed revisions within ten (10) calendar days
after it receives them, such proposed Operating
Budget, and revisions if any, shall be deemed
approved and shall be deemed thereafter to
constitute the "Budget" for the Fiscal Year in
question for all purposes hereof.
(iii) If the Operating Member makes any objection
to any proposed revisions to any proposed
Operating Budget, the Members shall cooperate
with each other to resolve any questions with
respect to such proposed revisions and shall use
their best efforts to agree upon such Operating
Budget for the Fiscal Year in question prior to
the beginning of the Fiscal Year to which such
Operating Budget relates. If the Members fail to
agree upon an Operating Budget for any Fiscal
Year prior to the commencement thereof, then,
pending final resolution of any dispute in the
manner provided herein, the Operating Member
shall continue to manage, maintain, supervise,
direct, and operate the activities for which such
Operating Budget was proposed in accordance with
the approved Operating Budget for such
activities or asset(s), if any, for the previous
Fiscal Year until a new Operating Budget is
approved; except that the Operating Member
shall be authorized during any interim period to
reasonably exceed the prior year's budgeted
amounts for interest payments, taxes, utility
charges, insurance and other items not within
the reasonable control of the Company as well as
for increases in contract services and personnel
costs to the extent required to maintain the
same level of service provided during the
previous Fiscal Year.
(c) The Operating Member may from time to time submit to the
Non-Operating Member revisions to an approved Budget for its
approval. The Non-Operating Member shall promptly reject or
approve the same or make such changes to the proposal as it may
deem reasonably necessary and proper. The proposal, as finally
approved or changed by the Members, shall be incorporated into
and become part of such Budget for the remaining period in
question.
SECTION 8.10 Removal of Operating Member.
The Non-Operating Member shall have the right, to be exercised by
written notice to the Operating Member, to remove the Operating Member and to
appoint itself as the Operating Member of the Company at such time as:
(a) The Operating Member Transfers its Percentage Interest without
the consent of the Non-Operating Member, except Transfers
permitted as a matter of right under Section 10.2 below;
(b) The Operating Member becomes a Non-Funding Member or
Non-Contributing Member pursuant to Section 5.4;
(c) The Operating Member commits a breach of fiduciary duty or an act
of gross negligence or willful misconduct;
(d) The Operating Member experiences a Change in Control; or
(e) Grounds exist for discharging any Affiliate of the Operating
Member under any Development Agreement or the Management
Agreement, pursuant to Section 8.10 or Section 8.11 hereof,
including without limitation the conditions described in
subsections (a), (b), (c) or (d) hereof.
SECTION 8.11 Development Agreement.
(a) If an Affiliate of a Member or a Member is to render services to
the Company in connection with the initial development or
redevelopment of a Project, then the Members shall, by written
resolution, Approve a Development Agreement with such Affiliate
or Member who shall be designated as the "Developer" thereunder.
The Member which is not an Affiliate of the Developer shall be
responsible for supervising the performance of the Developer
under a Development Agreement and for monitoring expenditures
incurred by or on behalf of the Company by the Developer to
determine whether such expenditures are contemplated in, and
within the limits prescribed by, applicable Budgets.
(b) Supplementing the provisions of a Development Agreement which
authorize termination thereof, if the Developer thereunder fails
to cure an "Event of Default," as such term is defined in a
Development Agreement, the Member which is not the Developer or
an Affiliate of the Developer shall have the right to exercise
the termination rights of the Company, discharge on behalf of the
Company the Developer from its duties thereunder and appoint a
new Developer for the Project, including the Member or an
Affiliate of such non-affiliated Member, under an agreement on
the same terms as the Development Agreement. Such non-affiliated
Member may exercise such option by giving the other Member notice
of its election. If a new Developer appointed pursuant to this
Section 8.10 is a Member or an Affiliate of a Member, the other
Member shall, if grounds subsequently exist under the new
Development Agreement with such new Developer which allow for
termination, have the right to exercise the termination rights of
the Company, discharge the new Developer from its duties
thereunder and appoint a replacement Developer (including an
Affiliate) under an agreement on the same terms.
SECTION 8.12 Management Agreement.
(a) If a Member or an Affiliate of a Member is to render services to
the Company in connection with the management of a Project, then
the Members shall, by written resolution, approve a Management
Agreement with such Member or Affiliate who shall be designated
as the Manager thereunder. The Member which is the Manager or an
Affiliate of the Manager shall be responsible for supervising the
performance of the Manager under a Management Agreement and for
monitoring expenditures incurred by or on behalf of the Company
by the Manager to determine whether such expenditures are
contemplated in, and within the limits prescribed by, applicable
Budgets.
(b) Supplementing the provisions of any Management Agreement entered
into under Section 8.11(a), if grounds exist under the Management
Agreement which allow for termination, the Member which is not
the Manager or an Affiliate of the Manager shall have the right
to exercise the termination rights of the Company, discharge on
behalf of the Company the Manager from its duties thereunder and
appoint a new Manager for the Project, including an Affiliate of
such Member, under an agreement on the same terms as the
Management Agreement. Such non- affiliated Member may exercise
such option by giving the other Member notice of its election. If
a new Manager appointed pursuant to this Section 8.11(b) is a
Member or an Affiliate of a Member, the other Member shall, if
grounds subsequently exist under the new Management Agreement
with such new Manager which allow for termination, have the right
to exercise the termination rights of the Company, discharge the
new Manager from its duties thereunder and appoint a replacement
Manager (including an Affiliate) under an agreement on the same
terms.
SECTION 8.13 Fees and Expense Reimbursements for Members.
While it is contemplated that the Managing Member shall be primarily
responsible for implementing the decisions of the Members and carrying out their
directives with respect to the acquisition, development, construction, leasing
and management of each Project, the Members acknowledge that they or their
Affiliates will both render valuable services to the Company in connection with
each Project. The Members, or such Affiliates, shall be compensated for such
services in the form of fees, cost recoveries, expense reimbursements or other
means in amounts and upon such other terms and conditions as are set forth in an
approved Budget therefor. In no event shall any fees or cost allocations be paid
to any Member during the Prospective Project Period.
ARTICLE 9
COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES
SECTION 9.1 Compensation, Reimbursements.
9.1.1 Compensation.
Except as may be expressly provided forth in Section 9.1.2 below or in
the agreements referred to in Section 9.2, or in another written agreement
Approved by the Members, no payment will be made by the Company to either Member
for the services of such Member or any member, shareholder, director or
employee, or Affiliate of such Member.
9.1.2 Reimbursements.
(a) Subject to the provisions of this Agreement, each of the Members
shall be reimbursed promptly by the Company for all reasonable
out-of-pocket costs and expenses incurred by each on behalf of
the Company in accordance with Budgets which have been Approved
by the Members and so long as such costs and expenses are not
intended to be paid for from fees otherwise payable to such
Member or its Affiliates.
(b) Neither Member shall be entitled to reimbursement of any costs or
expenses incurred by such Member in connection with the
preparation and negotiation of this Agreement or any of the
Exhibits hereto.
(c) Requests for reimbursement hereunder shall be paid within thirty
(30) days after submission, subject to necessary third-party
approvals.
SECTION 9.2 No Contracts with Affiliates.
Except as provided in Sections 8.10 and 8.11, neither Member shall
enter into any agreement or other arrangement for the furnishing to or by the
Company of goods or services with any Person who is an Affiliate of such Member
unless such agreement or arrangement has been Approved by the other Member after
the nature of the relationship or affiliation has been disclosed; provided,
however, if an Affiliate of either Member is in the business of providing
services of a kind needed by the Company, such Affiliate will have the right to
provide those services to the Company at market rates of compensation and
terms and conditions Approved by the Members.
ARTICLE 10
SALE, TRANSFER OR MORTGAGE
SECTION 10.1 General.
Except as expressly permitted in this Agreement, no Member shall
directly or indirectly sell, assign, transfer, mortgage, convey, charge or
otherwise encumber or contract to do or permit any of the foregoing, whether
voluntarily or by operation of law (herein sometimes collectively called a
"Transfer"), or suffer any Affiliate or other third party to Transfer, any part
or all of its Percentage Interest or its share of capital, profits, losses,
allocations or distributions hereunder without the express prior written
consent of the other Member, which consent may be withheld for any or no reason
whatsoever. Any attempt to Transfer in violation of this Article 10 shall be
null and void. The giving of consent in any one or more instances of Transfer
shall not limit or waive the need for such consent in any other or subsequent
instances.
SECTION 10.2 Permitted Transfers by the Members.
10.2.1 Transfers By Chelsea.
Without the consent of Simon, Chelsea may from time to time Transfer
its Percentage Interest, in whole or in part (i) to a Chelsea
Affiliate or (ii) from a Chelsea Affiliate to another Chelsea
Affiliate. Any Transfer under Section 10.2.1(a) shall not relieve
Chelsea of its obligations under this Agreement.
10.2.2 Transfers by Simon.
Without the consent of Chelsea, ▇▇▇▇▇ ▇▇▇ from time to time Transfer
its Percentage Interest, in whole or in part (i) to a Simon
Affiliate, or (ii) from a Simon Affiliate to another Simon
Affiliate. Any Transfer under Section 10.2.2(a) shall not relieve
Simon of its obligations under this Agreement.
10.2.3 Agreements with Transferees.
(a) If pursuant to the provisions of this Section 10.2, any Member
(the "Transferor") shall purport to make a Transfer of any part
of its Percentage Interest to any Person ("Transferee"), no such
Transfer shall entitle the Transferee to any benefits or rights
hereunder until:
(i) the Transferee agrees in writing to assume and be
bound by all the obligations of the Transferor and be subject
to all the restrictions to which the Transferor is subject
under the terms of this Agreement and any agreements with
respect to the Project to which the Transferor is then subject
or is then required to be a party; and
(ii) the Transferor and Transferee enter into a written
agreement with the other Member and the Company which provides
(x) that the Transferor is irrevocably designated the proxy of
the Transferee to exercise all voting and other approval
rights appurtenant to the Percentage Interest acquired by the
Transferee, (y) that the Transferor shall remain liable for
all obligations arising under this Agreement prior to or after
such Transfer in respect of the Percentage Interest so
transferred, provided, however that as to any Transfer to a
non-Affiliate of a Member, the Transferor shall only be liable
for all obligations arising under this Agreement and any
agreements with respect to the Project to which the Transferor
is then subject or is then required to be a party from and
after such Transfer in respect of the
Percentage Interest so transferred; and (z) that the
Transferee shall indemnify the Members from and against all
claims, losses, liabilities, damages, costs and expenses
(including reasonable attorneys' fees and court costs) which
may arise as a result of any breach by the Transferee of its
obligations hereunder.
(b) No Transferee of any Percentage Interest shall make any further
disposition except in accordance with the terms and conditions
hereof.
(c) All costs and expenses incurred by the Company, or the
non-transferring Member, in connection with any Transfer of a
Percentage Interest, including any filing or recording costs and
the fees and disbursements of counsel, shall be paid by the
Transferor.
ARTICLE 11
DISSOLUTION
SECTION 11.1 Dissolution and Termination; Continuation of Business.
11.1.1 Causes of Dissolution and Termination.
Except as set forth in this Article 11 and Article 10, neither
Member shall have the right and each Member hereby agrees not to withdraw from
the Company, nor to dissolve, terminate or liquidate, or to petition a court for
the dissolution, termination or liquidation of the Company, except as provided
in this Agreement, and neither Member at any time shall have the right to
petition or to take any action to subject the Company's assets or any part
thereof, including the Project, or any part thereof, to the authority of any
court of bankruptcy, insolvency, receivership or similar proceeding. The Company
shall be dissolved and terminated only upon the earlier occurrence of any of the
following dates or events:
(a) December 31, 2002 or such later date as Approved by the Members;
(b) a dissolution of the Company is Approved by the Members;
(c) one or both of the Members elect to dissolve the Company pursuant
to any provision of this Agreement permitting such election to be
made;
(d) the sale or other disposition (exclusive of an exchange for other
real property or the granting of a lien or security interest in
the Project) by the Company of all or substantially all of the
Project and other assets of the Company;
(e) the "Bankruptcy" (as hereinafter defined), dissolution or
liquidation of a Member;
(f) the occurrence of any event that, under the Delaware LLC Act,
would cause the dissolution of the Company or that would make it
unlawful for the business of the Company to be continued; or
(g) if Simon does not elect to have the Company participate in any of
the first three (3) Prospective Projects proposed to it by
Chelsea under the terms of Section 8.8 hereof.
For the purposes of this Agreement, the term "Bankruptcy"
shall mean, and the Member shall be deemed "Bankrupt" upon, (i) the entry of a
decree or order for relief of the Member by a court of competent jurisdiction in
any involuntary case involving the Member under any bankruptcy, insolvency, or
other similar law now or hereafter in effect; (ii) the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or other
similar agent for the Member or for any substantial part of the Member's assets
or property; (iii) the ordering of the winding up or liquidation of the Member's
affairs; (iv) the filing with respect to the Member of a petition in any such
involuntary bankruptcy case, which petition remains undismissed for a period of
90 days or which is dismissed or suspended pursuant to Section 305 of the
Federal Bankruptcy Code (or any corresponding provision of any future United
States bankruptcy law); (v) the commencement by the Member of a voluntary case
under any bankruptcy, insolvency, or other similar law now or hereafter in
effect; (vi) the consent by the Member to the entry of an order for relief in an
involuntary case under any such law or to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar agent for the Member or for any substantial part
of the Member's assets or property; (vii) the making by the Member of any
general assignment for the benefit of creditors; or (viii) the failure by the
Member generally to pay its debts as such debts become due.
11.1.2 Right to Continue Business of the Company.
Upon an event described in Sections 11.1.1(a), 11.1.1(e) or 11.1.1(f)
(but not an event described in 11.1.1(f) that makes it unlawful for the business
of the Company to be continued), the Company thereafter shall be dissolved and
liquidated unless, within 90 days after the event described in any of such
Sections, an election to continue the business of the Company shall be made in
writing by the remaining Members holding fifty percent (50%) or more of the
Percentage Interests. If such an election to continue the Company is made, then
the Company shall continue until another event causing dissolution in accordance
with this Article 11 shall occur.
SECTION 11.2 Procedure in Dissolution and Liquidation.
11.2.1 Winding Up.
Upon dissolution of the Company pursuant to Section 11.1 hereof, the
Company shall immediately commence to wind up its affairs and the Members shall
proceed with reasonable promptness to liquidate the business of the Company and
(at least to the extent necessary to pay any debts and liabilities of the
Company) to convert the Company's assets into cash. A reasonable time shall be
allowed for the orderly liquidation of the business and assets of the Company in
order to reduce any risk of loss that might otherwise be attendant upon such a
liquidation.
11.2.2 Management Rights During Winding Up.
During the period of the winding up of the affairs of the Company, the
Operating Member shall manage the Company and shall make with due diligence and
in good faith all decisions relating to the conduct of any business or
operations during the winding up period and to the sale or other disposition of
Company assets; provided, however, that if the termination of the Company
results from an Event of Default of a Member, the Defaulter shall have no
further right to participate in the management or affairs of the Company and the
Non-Defaulter shall manage the Company during the period of winding up. Each
Member hereby waives any claims it may have against the other that may arise out
of the management of the Company by the other, pursuant to this Section 11.2.2,
so long as such other Member and its representatives act in good faith.
11.2.3 Work in Progress.
If the Company is dissolved for any reason while there is development
or construction work in progress, winding up of the affairs and termination of
the business of the Company may include completion of the work in progress to
the extent the Members or Non- Defaulter, as the case may be, may determine same
to be necessary to permit a sale or other disposition of the Project which is
most beneficial to the Members.
11.2.4 Distributions in Liquidation.
The assets of Company shall be applied or distributed in liquidation
in the following manner and in the following order of priority:
(a) In payment of debts and obligations of the Company owed to third
parties, which shall include either Member as the holder of any
secured loan, and to the expenses of liquidation in the order of
priority as provided by law; then
(b) To the setting up of any reserves for a period of up to twelve
(12) months which the Members or the Non-Defaulter, as the case
may be, may deem necessary for any contingent or unforeseen
liabilities or obligations of the Company; then
(c) In payment of any debts or obligations of the Company to either
Member, and then
(d) To the Members pro rata in proportion to the positive balances in
their respective Capital Accounts until said Capital Accounts
have been reduced to zero.
Losses attributable to the expenditure of funds held under the reserve
in Section 11.2.4(b) shall be allocated to each Member to the extent such
expenditure will reduce the amount of cash eventually distributed to each
Member.
Notwithstanding the foregoing, if there are any outstanding
Contribution Loans at the time of any distribution pursuant to this Section
11.2.4, the Member to whom such Contribution Loans are owed shall be entitled to
payment of the Contribution Loans on a priority basis out of the distributions
to which the Member for whose benefit the Contribution Loans were made is
entitled, to be applied to the Contribution Loans in order of priority based on
the chronological order in which they were made, the earliest to be paid first
in full, and to each Contribution Loan in payment first of interest and then of
principal.
11.2.5 Non-Cash Assets.
Every reasonable effort shall be made to dispose of the assets of the
Company so that the distribution may be made to the Members in cash. If at the
time of the termination of the Company, the Company owns any assets in the form
of work in progress, notes, deeds to secure debt or other non-cash assets, such
assets, if any, shall be distributed in kind to the Members, in lieu of cash,
proportionately to their right to receive the assets of the Company on an
equitable basis reflecting the Fair Market Value of the assets so distributed.
In the alternative, the Members may cause the Company to distribute some or all
of its non-cash assets to the Members as tenants-in-common subject to such
terms, covenants and conditions as the Members may adopt.
SECTION 11.3 Disposition of Documents and Records.
All Documents of the Company shall be retained upon termination of the
Company for a period of not less than seven (7) years by a party mutually
acceptable to the Members. The costs and expenses of personnel and storage costs
associated therewith shall be shared by the Members equally. The Documents shall
be available during normal business hours to all Members for inspection and
copying at such Member's cost and expense. If either Member for any reason
ceases as provided herein to be a Member at any time prior to termination of the
Company ("Non-Surviving Member"), and the Company is continued without the
Non-Surviving Member, the other Member ("Surviving Member") agrees that the
Documents of the Company up to the date of the termination of the Non-Surviving
Member's interest shall be maintained by the Surviving Member, its successors
and assigns, for a period of not less than seven (7) years thereafter; provided,
however, that if there is an Internal Revenue Service examination or audit, or
notice thereof, which requires access to the Documents, the Documents shall be
retained until the examination or audit is completed and any tax liability
finally determined, and provided further, the Non-Surviving Member shall
reimburse the Surviving Member for one-half of personnel and storage costs
associated herewith. The Documents shall be available for inspection,
examination and copying by the Non-Surviving Member or its representatives upon
reasonable notice in the same manner as herein provided during said seven (7)
year period.
SECTION 11.4 Date of Termination.
The Company shall be terminated when its cash and other assets have
been applied and distributed in accordance with the provisions of Section
11.2.4. The establishment of any reserves in accordance with the provisions of
Section 11.2.4 shall not have the effect of extending the Termination Date of
the Company, but any unexpended reserve amount shall be distributed in the order
and priority provided in such Section upon expiration of the period of such
reserves.
ARTICLE 12
GENERAL PROVISIONS
SECTION 12.1 Notices.
Any notice, consent, approval, or other communication which is
provided for or required by this Agreement must be in writing and may be
delivered in person to any party or may be sent by a facsimile transmission,
telegram, courier or registered or certified U.S. mail, with postage prepaid,
return receipt requested. Any such notice or other written communications shall
be deemed received by the party to whom it is sent (i) in the case of personal
delivery, on the date of delivery to the party to whom such notice is addressed
as evidenced by a written receipt signed on behalf of such party, (ii) in the
case of facsimile transmission or telegram, the next business day after the date
of transmission, (iii) in the case of courier delivery, the date receipt is
acknowledged by the party to whom such notice is addressed as evidenced by a
written receipt signed on behalf of such party, and (iv) in the case of
registered or certified mail, the earlier of the date receipt is acknowledged on
the return receipt for such notice or five (5) business days after the date of
posting by the United States Post Office. For purposes of notices, the addresses
of the parties hereto shall be as follows, which addresses may be changed at any
time by written notice given in accordance with this provision:
If to Simon:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group, L.P.
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group, Inc.
National City Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group, L.P.
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group, Inc.
National City Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Chelsea:
Chelsea GCA Realty Partnership, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Chelsea GCA Realty Partnership, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Failure of, or delay in delivery of any copy of a notice or other
written communication shall not impair the effectiveness of such notice or
written communication given to any party to this Agreement as specified herein.
SECTION 12.2 Entire Agreement.
This Agreement (including all Exhibits referred to herein and attached
hereto, which Exhibits are part of this Agreement for all purposes) contains the
entire understanding between the Members with respect to the Project and
supersedes any prior understanding and agreements between them respecting the
within subject matter. There are no representations, agreements, arrangements or
understandings, oral or written, between the Members relating to the subject of
this Agreement which are not fully expressed herein.
SECTION 12.3 Severability.
This Agreement is intended to be performed in accordance with, and
only to the extent permitted by, all applicable Laws of the State of Delaware.
If any provision of this Agreement, or the application thereof to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law; provided,
however, that the above-described invalidity or unenforceability does not
diminish in any material respect the ability of the Members to achieve the
purposes for which this Company was formed.
SECTION 12.4 Successors and Assigns.
Subject to the restrictions on Transfer set forth in Article 10, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the parties hereto.
SECTION 12.5 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
SECTION 12.6 Additional Documents and Acts.
In connection with this Agreement, as well as all transactions
contemplated by this Agreement, each Member agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may
be necessary or appropriate to effectuate, carry out and perform all of the
terms, provisions and conditions of this Agreement, and all such transactions.
SECTION 12.7 Interpretation.
This Agreement and the rights and obligations of the respective
parties hereunder shall be governed by and interpreted and enforced in
accordance with the Laws of the State of Delaware.
SECTION 12.8 Terms.
Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the person or
persons, firm or corporation may in the context require. Any reference to the
Code or Laws shall include all amendments, modifications, or replacements of the
specific sections and provisions concerned.
SECTION 12.9 Amendment.
This Agreement, the Development Agreement and the Management Agreement
may not be amended, altered or modified except by instrument in writing and
signed by the Members.
SECTION 12.10 References to this Agreement.
Numbered or lettered articles, sections and subsections herein
contained refer to articles, sections and subsections of this Agreement unless
otherwise expressly stated. The words "herein," "hereof," "hereunder," "hereby,"
"this Agreement" and other similar references shall be construed to mean and
include this Agreement and all amendments thereof and Exhibits thereto unless
the context shall clearly indicate or require otherwise.
SECTION 12.11 Headings.
All headings herein are inserted only for convenience and ease of
reference and are not to be considered in the construction or interpretation of
any provision of this Agreement.
SECTION 12.12 No Third Party Beneficiary.
This Agreement is made solely and specifically between and for the
benefit of the parties hereto, and their respective successors and assigns
subject to the express provisions hereof relating to successors and assigns, and
no other Person whatsoever shall have any rights, interest, or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
SECTION 12.13 No Waiver.
No consent or waiver, either expressed or implied, by any Member to or
of any breach or default by any other Member in the performance by such other
Member of the obligations thereof under this Agreement shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other Member of the same or any other obligations of such
other Member under this Agreement. Failure on the part of any Member to complain
of any act or failure to act of any other Member, failure on the part of any
complaining Member to continue to complain or to pursue complaints with respect
to any act or failure to act of any other Member, or failure on the part of any
Member to declare any other Member in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member of the rights
and remedies thereof under this Agreement or otherwise at law or in equity.
SECTION 12.14 Time of Essence.
Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal by their duly authorized corporate officers, each on the
day and year first above written.
Simon: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ GROUP, L.P.,
a Delaware limited partnership
By: SD PROPERTY GROUP, INC., an
Ohio corporation, managing general partner
By:______________________________
Title:__________________________
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ GROUP, INC., a
Maryland corporation, general partner
By:_______________________________
Title:_________________________
Chelsea: CHELSEA GCA REALTY PARTNERSHIP, L.P.,
a Delaware limited partnership
By: CHELSEA GCA REALTY, INC.,
a Maryland corporation, sole general partner
By: _____________________________
Title:__________________________
EXHIBIT A.
DEFINITIONS
When used in this Agreement, the following terms will have the meanings set
forth below:
(a) "Act" shall mean the Delaware Limited Liability Act.
(b) "Adjusted Percentage Interest" shall mean the aggregate percentage
interest(s) in the Company owned by each Member after the calculation made
pursuant to Section 5.4.3.
(c) "Affiliate(s)" shall mean a Chelsea Affiliate or a Simon Affiliate, or a
Person or Persons directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with the
Person(s) in question. The term "control", as used in the immediately
preceding sentence, means, (i) with respect to a Person that is a
corporation, the right to exercise, directly or indirectly, more than 50%
of the rights attributable to the shares of the controlled corporation and,
with respect to a Person that is not a corporation, the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of the controlled Person, or (ii) owning a
majority of the equity interest in such Person.
(d) "Agreement" shall mean this Limited Liability Company Agreement, as amended
from time to time.
(e) "Approved by the Members" or "Approval of the Members" shall mean approval
by all of the Members acting through their duly authorized representatives.
(f) "Budgets" shall mean the following budgets of the Company from time to
time:
(i) "Development Budget", which shall mean the budget of Total
Project Costs estimated to be incurred with respect to a
Project including, without limitation, that portion of Total
Project Costs included in a Pre-Construction Budget which
shall be Approved by the Members by written resolution,
subject to revision from time to time by Approval of the
Members; and
(ii) "Operating Budget", which shall mean the annual
budgets of the Company for a Project which shall be
Approved by the Members by written resolution, and
which shall be comprised of: (A) an estimate of all
receipts from and expenditures for the ownership,
management, maintenance and operation of a Project and
the Company for such Fiscal Year and (B) an estimate
of all capital replacements, substitutions and/or
additions to a Project, or any component thereof,
which are to be accomplished during such Fiscal Year;
and
(iii) "Pre-Construction Budget", which shall mean the budget of
costs and expenses estimated to be incurred with respect to a
Project during the Pre-Construction
Period which shall be Approved by the Members by written
resolution, subject to revision from time to time by Approval
of the Members.
(iv) "Prospective Project Budget", which shall mean costs incurred
pursuant to Section 5.2.2 hereof or the maximum amount of
costs and expenses estimated to be incurred with respect to a
Prospective Project during the Prospective Project Period,
which shall be Approved by the Members, subject to revision
from time to time by Approval of the Members.
(g) "Capital Account" shall have the meaning specified in Section 1 of the Tax
Allocations Exhibit.
(h) "Capital Contribution Balance" shall mean, as to each Member, the amount of
the aggregate capital contributions made by such Member from time to time,
reduced by all cash distributions to such Member other than (i)
distributions of Cash Flow pursuant to Section 6.5 hereof and (ii) the
repayment of, or any payment of interest on, any Contribution Loans or any
loans to the Company made by such Member.
(i) "Capital Proceeds" shall mean the net proceeds from:
(i) loans to the Company in excess of current or
reasonably anticipated Company needs (including
reasonable reserves for Company debt obligations and
working capital as determined by the Members) or
excess funds received from refinancing of any Company
indebtedness (x) after the payment of, or provision
for the payment of, all costs and expenses incurred
by the Company in connection with such refinancing,
and (y) after deduction or retention of such sums as
are deemed necessary to be retained as a reserve for
the conduct of the business of the Company; and
(ii) any sale, exchange, condemnation or other disposition
of the Project, or any portion thereof or any
interest therein, any equipment used thereon, or any
other capital asset of the Company or from claims on
policies of insurance maintained by the Company for
damage to or destruction of capital assets of the
Company or the loss of title thereto (to the extent
that such proceeds exceed the actual or estimated
costs of repairing or replacing the assets damaged or
destroyed if, pursuant to this Agreement, such assets
are repaired or replaced) (x) after the payment of,
or provision for the payment of, all costs and
expenses incurred by the Company in connection with
such sale or other disposition or the receipt of such
insurance proceeds, as the case may be, and (y) after
deduction or retention of such sums as are deemed
necessary to be retained as a reserve for the conduct
of the business of the Company.
(j) "Cash Flow" shall mean for any period the Gross Receipts of the Company for
such period less Operating Expenses for such period.
(k) "Change in Control" shall mean any event or occurrence, the result of which
is that: (i) as to Chelsea only, (A) during the Pre-Construction Period and
the Construction Period, none of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ or
▇▇▇ ▇▇▇▇▇ is an executive officer of Chelsea or its general partner with
the power and authority to conduct the day- to-day activities of, and make
binding decisions for, Chelsea, (B) at any time during the term of this
Agreement, there occurs a Transfer of the Percentage Interest of Chelsea or
any Chelsea Affiliate, other than a Transfer permitted pursuant to Section
10.2 of this Agreement, or (C) at any time during the term of this
Agreement, there occurs a merger, consolidation or other business
reorganization of Chelsea or its general partner in which Chelsea or such
general partner or a Chelsea Affiliate is not the surviving entity; and
(ii) as to Simon only, (A) during the Pre-Construction Period and the
Construction Period, none of ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is an executive officer of Simon or its general partner
with the power and authority to conduct the day-to-day activities of, and
make binding decisions for, Simon, (B) at any time during the term of this
Agreement, there occurs a Transfer of the Percentage Interest of Simon or
any Simon Affiliate, other than a Transfer permitted pursuant to Section
10.2 of this Agreement, or (C) at any time during the term of this
Agreement, there occurs a merger, consolidation or other business
reorganization of Simon or its general partner in which Simon or such
general partner or a Simon Affiliate is not the surviving entity.
(l) "Chelsea" shall mean Chelsea GCA Realty Partnership, L.P., a Delaware
limited partnership whose sole general partner is Chelsea GCA Realty, Inc.,
a Maryland corporation.
(m) "Chelsea Affiliate" shall mean (i) Chelsea, (ii) Chelsea GCA Realty, Inc.,
(iii) any other Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control
with any of the aforesaid specifically identified Chelsea Affiliates. The
term "control", as used in the immediately preceding sentence, means, (i)
with respect to a Person that is a corporation, the right to the exercise,
directly or indirectly, of more than 50% of the rights attributable to the
shares of the controlled corporation and, with respect to a Person that is
not a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the
controlled Person, or (ii) having a majority of the equity interest in such
Person.
(n) "Company" shall mean the limited liability company formed pursuant to the
terms hereof for the limited purposes and scope set forth herein.
(o) "Construction Period" shall mean the period commencing upon the earliest to
occur of (i) the date of closing of a third-party construction loan in
accordance with Section 5.2.4(a) or (ii) the actual start of construction
of any portion of the Project's buildings and improvements, or (iii) entry
into commitments with third parties for the construction of any portion of
the Project's buildings and improvements, and ending on the later to occur
of (x) the opening for business with the public of any portion of the
Project or (y) the Project Completion Date.
(p) "Contribution Loan" shall have the meaning specified in Section 5.4.4.
(q) "Contributing Member" shall have the meaning specified in Section 5.4.4.
(r) "Developer" shall, collectively, mean a Member or an Affiliate of Member
engaged as Developer of a Project pursuant to the Development Agreement.
(s) "Development Agreement" shall mean the agreement entered into by and
between the Developer and the Company with respect to the management of the
development and construction activities of a Project, as Approved by the
Members pursuant to Section 8.10.
(t) "Development Budget" shall have the meaning specified in (f) above.
(u) "Documents" shall have the meaning specified in Section 7.1.
(v) "Fair Market Value" shall have the meaning specified in Section 10.1.
(w) "Final Project Program" shall mean the development of the final project
program (which shall include, among other things, the basic terms and
conditions for any financing required to complete the development and
construction of a Project and evidence reasonably acceptable to the
Members, that such financing can be obtained) site plan and schematic
building design and final Development Budget and construction schedule,
which shall be prepared at least 60 days prior to the commencement of the
Construction Period.
(x) "Fiscal Year" shall mean the twelve month period ending December 31 of each
year; provided that the first Fiscal Year shall be the period beginning on
the date this Company is formed and ending on December 31, 1997, and the
last Fiscal Year shall be the period beginning on January 1 of the calendar
year in which the final liquidation and termination of the Company is
completed and ending on the date such final liquidation and termination is
completed (to the extent any computation or other provision hereof provides
for an action to be taken on a Fiscal Year basis, an appropriate proration
or other adjustment shall be made in respect of the first or final Fiscal
Year to reflect that such period is less than a full calendar year period).
(y) "Gross Receipts" shall mean receipts (other than Capital Proceeds) from the
conduct of the business of the Company from all sources.
(z) "Independent Accountants" shall mean Ernst & Young or other nationally
recognized accounting firm designated pursuant to this Agreement.
(aa) "Initial Percentage Interest" shall mean the aggregate initial percentage
interest(s) in the Company owned by each Member as set forth in Section 5.
(bb) "Land" shall mean the land on which a Project is to be constructed.
(cc) "Laws" shall mean federal, state and local statutes, case law, rules,
regulations, ordinances, codes and the like which are in full force and
effect from time to time and which affect a Project or the ownership or
operation thereof.
(dd) "Major Decisions" shall have the meaning specified in Section 8.6.
(ee) "Management Agreement" shall mean the agreement entered into by and between
the Manager and the Company with respect to the management, operation,
maintenance and servicing of the Project, as Approved by the Members
pursuant to Section 8.11.
(ff) "Manager" shall mean, collectively, a Member or an Affiliate of Member
engaged as the Manager of the Project pursuant to the Management Agreement.
(gg) "Member" shall mean Simon, Chelsea or any other Person from time to time
owning a Percentage Interest as permitted by this Agreement.
(hh) "Members" shall mean, collectively, Simon, Chelsea and any other Person
from time to time owning a Percentage Interest as permitted by this
Agreement.
(ii) "Net Profit" or "Net Loss" shall mean for each Fiscal Year the Company's
taxable income or taxable loss for such Fiscal Year, determined in
accordance with Exhibit B.
(jj) "Non-Contributing Member" shall have the meaning specified in Section
5.4.4(a).
(kk) "Non-Operating Member" shall mean any Member which is not the Operating
Member. The initial Non-Operating Member shall be Simon.
(ll) "Operating Budget" shall have the meaning specified in (f) above.
(mm) "Operating Expenses" shall mean all expenditures of any kind made with
respect to the operations of the Company in the normal course of business
including, but not limited to, debt service (principal and interest)
payable on indebtedness of the Company, ad valorem taxes, insurance
premiums, repair and maintenance expense, management fees or salaries,
advertising expenses, professional fees, wages, and utility costs, plus
such sums as are deemed reasonably necessary as a reserve to be retained
for the conduct of the business of the Company, and capital expenditures
and investments in other assets. Such expenses shall be determined on a
cash basis and shall not include any non-cash items such as depreciation or
amortization.
(nn) "Operating Member" shall mean the Member designated as such by written
resolution of the Members pursuant to Section 8.1.1 and Section 8.2,
subject to the provisions of Section 5.4.8 and 8.9 with respect to its
removal or withdrawal from such position. (oo) "Percentage Interest" shall
mean the Initial Percentage Interest or Adjusted Percentage Interest, as
the case may be.
(pp) "Percentage Interest Adjustment Date" shall mean the date of funding of a
Non-Funding Member's share of a capital contribution by a Funding Member
in accordance with Section 5.4.3(a) hereof.
(qq) "Person" shall mean an individual, partnership, corporation, trust,
unincorporated association, limited liability corporation, joint stock
company or other entity or association.
(rr) "Pre-Construction Period" shall mean the period commencing upon the date on
which Simon elects to have the Company proceed with a Prospective Project
pursuant to this Agreement and ending upon the commencement of the
Construction Period.
(ss) "Prime Rate" shall mean the per annum interest rate which is publicly
announced (whether or not actually charged in each instance) from time to
time (adjusted daily) by The Chase Manhattan Bank, as its "prime rate". In
the event such bank discontinues the quotation of such rate or in the event
the same ceases to be readily ascertainable, the Operating Member shall
designate, subject to the approval of the Non-Operating Member (which
approval shall not be unreasonably withheld or delayed), as the Prime Rate,
either another bank's quotation of such rate or equivalent rate of interest
which is readily ascertainable and is appropriate, as the case may be.
(tt) "Project" shall mean a Prospective Project which the Members determine to
proceed with in accordance with this Agreement including, without
limitation, the Land, the manufacturers outlet shopping center constructed
thereon, the surface and structural parking facilities, all equipment and
personal property necessary or desirable for the operation of the
manufacturers outlet shopping center and all other improvements located on
such Land and the appurtenances thereto.
(uu) "Project Completion Date" shall mean the date upon which the initial phase
of the Project has been substantially completed in accordance with the
Plans and Specifications, as certified by the Project's architect.
(vv) "Prospective Project" shall mean (i) a manufacturers outlet shopping center
which is proposed to be acquired or developed and which is planned to
contain, either initially or through a phased development, approximately
500,000 square feet or more of gross leasable area and (ii) an acquisition
of a portfolio of five (5) or more manufacturers outlet shopping centers
regardless of size or a portfolio of any size which contains one (1) or
more manufacturers outlet shopping centers containing, or which are planned
to contain, approximately 500,000 square feet or more of gross leasable
area, in each instance to be identified by Chelsea and offered to Simon for
the benefit of the Company as provided in this Agreement.
(ww) "Prospective Project Area" shall mean a geographic area identified by
Chelsea and agreed to by Simon as one in which a Project may be developed.
(xx) "Prospective Project Period" shall mean the period commencing on the date
on which the Members decide to examine a Prospective Project Area and
ending on the commencement of the Pre-Construction Period.
(yy) "Simon" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group, L.P., a Delaware limited
partnership whose sole general partners are ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group, Inc., a
Maryland corporation and SD Property Group, Inc., an Ohio corporation.
(zz) "Simon Affiliate" shall mean (i) Simon; (ii) Simon Property Group, Inc. (or
any of its Affiliates), (iii) any successor to Simon in connection with a
bona fide reorganization, recapitalization, acquisition or merger, (iv) any
Person which acquires all or substantially all of the assets of Simon and
(v) any other Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control
with any of the aforesaid specifically identified Simon Affiliates. The
term "control", as used in the immediately preceding sentence, means, (i)
with respect to a Person that is a corporation, the right to the exercise,
directly or indirectly, of more than 50% of the rights attributable to the
shares of the controlled corporation and, with respect to a Person that is
not a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the
controlled Person, or (ii) having a majority of the equity interest in such
Person.
(aaa) "Tax Allocations Exhibit" shall mean the provisions on Capital Accounts
and special allocations rules attached hereto as Exhibit B.
(bbb) "Termination Date" shall have the meaning specified in Article 4.
(ccc) "Total Project Costs" shall mean all costs which have been or are
estimated to be incurred by the Company with respect to the acquisition,
design, development, construction, debt financing, leasing, and completion
of the Project, which Total Project Costs (including without limitation
tenant allowances) are initially estimated on the Development Budget.
(ddd) "Transfer" shall have the meaning specified in Section 10.1.
(eee) "Transferee" shall have the meaning specified in Section 10.2.3.
(fff) "Transferor" shall have the meaning specified in Section 10.2.3.
EXHIBIT B
Capital Accounts; Special Allocation Rules
1. Definitions
The following definitions shall be applied to the terms used in this
Exhibit B. Capitalized terms not defined shall have the meaning set forth in the
Agreement.
"Adjusted Capital Account" means the Capital Account maintained for
each Member as of the end of each Company Year (i) increased by any amounts
which such Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii)
decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), l.704- l(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Adjusted Capital Account as of the
end of the relevant Company Year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 2.D of this Exhibit B. Once an Adjusted
Property is deemed distributed by, and recontributed to, the Company for federal
income tax purposes upon a termination thereof pursuant to Section 708 of the
Code, such property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is further adjusted pursuant to Section 2.D of
this Exhibit B.
"Agreed Value" means (i) in the case of any Contributed Property, as
of the time of its contribution to the Company, the 704(c) Value of such
property, reduced by any liabilities either assumed by the Company upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Member by the Company, the Company's
Carrying Value of such property at the time such property is distributed,
reduced by any indebtedness either assumed by such Member upon such distribution
or to which such property is subject at the time of distribution as determined
under Section 752 of the Code and the Regulations thereunder.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Property charged to the Members'
Capital Accounts following the contribution of or adjustment with respect to
such property, and (ii) with respect to any other Company property, the adjusted
basis of such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time to
time in accordance with Section 2.D of this Exhibit B, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Company properties, as deemed appropriate by the Operating
Member.
"Company Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2) for "partnership minimum gain," and the amount of Company
Minimum Gain, as well as any net increase or decrease in a Company Minimum Gain,
for a Company Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).
"Company Year" means the fiscal year of the Company, which shall be
the calendar year.
"Contributed Property" means each property or other asset (excluding
cash) contributed or deemed contributed to the Company (including deemed
contributions to the Company on termination and reconstitution thereof pursuant
to Section 708 of the Code). Once the Carrying Value of a Contributed Property
is adjusted pursuant to Section 2.D of this Exhibit B, such property shall no
longer constitute a Contributed Property, but shall be deemed an Adjusted
Property for such purposes.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"Depreciation" means, for each fiscal year an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the Operating Member.
"Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
"Member Nonrecourse Debt" has the meaning set forth Regulations
Section 1.704-2(b)(4) for "partner nonrecourse debt."
"Member Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2) for "partner nonrecourse deductions," and the
amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse
Debt for a Company Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(i)(2).
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Company
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Company recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.B.1(a) or 6.B.2(a) of this Exhibit B to eliminate Book-
Tax Disparities.
"704(c) Value" of any Contributed Property means the fair market value
of such property at the time of contribution as determined by the Operating
Member, using such reasonable method of valuation as it may adopt; provided,
however, that the 704(c) Value of any property deemed contributed to the Company
for federal income tax purposes upon termination and reconstitution thereof
pursuant to Section 708 of the Code shall be determined in accordance with
Section 2.D of this Exhibit B.
"Unrealized Gain" attributable to any item of Company property means,
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under this Exhibit B) as of such date,
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to this Exhibit B) as of such date.
"Unrealized Loss" attributable to any item of Company property means,
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to this Exhibit B)
as of such date, over (ii) the fair market value of such property (as determined
under this Exhibit B) as of such date.
2. Capital Accounts of the Members
A. The Company shall maintain for each Member a separate Capital
Account in accordance with the rules of Regulations Section l.704-l(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Member to the
Company pursuant to this Agreement and (ii) all items of Company income and gain
(including income and gain exempt from tax) computed in accordance with Section
2.B hereof and allocated to such Member pursuant to Section 6.1 of the Agreement
and/or Section 5 of this Exhibit B, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of property made to such
Member pursuant to this Agreement and (y) all items of Company deduction and
loss computed in accordance with Section 2.B hereof and allocated to such Member
pursuant to Section 6.2 of the Agreement and/or Section 5 of this Exhibit B.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Members' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of
income, gain, loss and deduction shall be made
without regard to any election under Section 754 of
the Code which may be made by the Company, provided
that the amounts of any adjustments to the adjusted
bases of the assets of the Company made pursuant to
Section 734 of the Code as a result of the
distribution of property by the Company to a Member
(to the extent that such adjustments have not
previously been reflected in the Members' Capital
Accounts) shall be reflected in the Capital Accounts
of the Members in the manner, and subject to the
limitations, prescribed in Regulations Section
l.704-1(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and deduction
shall be made without regard to the fact that items described
in Sections 705(a)(l)(B) or 705(a)(2)(B) of the Code are not
includable in gross income or are neither currently deductible
nor capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Company property shall be determined as if
the adjusted basis of such property as of such date of
disposition were equal in amount to the Company's Carrying
Value with respect to such property as of such date.
(4) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Company property is
adjusted pursuant to Section 2.D hereof, the amount of any
such adjustment shall be taken into account as gain or loss
from the disposition of such asset.
(6) Any items specially allocated under Section 6 of this Exhibit
B hereof shall not be taken into account.
C. Generally, a transferee (including an assignee) of a Company
interest shall succeed to a pro rata portion of the Capital Account of the
transferor; provided, however, that, if the transfer causes a termination of the
Company under Section 708(b)(l)(B) of the Code, the Company's properties shall
be deemed solely for federal income tax purposes, to have been distributed in
liquidation of the Company to the holders of Company interests (including such
transferee) and recontributed by such Persons in reconstitution of the Company.
In such event, the Carrying Values of the Company properties shall be adjusted
pursuant to Section 2.D (2) hereof immediately prior to such deemed distribution
pursuant. The Capital Accounts of such reconstituted Company shall be maintained
in accordance with the principles of this Exhibit B.
D. (1) Consistent with the provisions of Regulations
Section 1.704-1(b)(2)(iv)(f), and as provided in
Section 2.D (2), the Carrying Values of all
Company assets shall be adjusted upward or
downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Company
property, as of the times of the adjustments
provided in Section 2.D (2) hereof, as if such
Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such
property and allocated pursuant to Section 6.1 or
6.2 of the Agreement and/or Section 5 of this
Exhibit B.
(2) Such adjustments shall be made as of the
following times: (a) immediately prior to the
acquisition of an additional interest in the
Company by any new or existing Member in
exchange for more than a de minimis Capital
Contribution; (b) immediately prior to the
distribution by the Company to a Member of more
than a de minimis amount of property as
consideration for an interest in the Company;
and (c) immediately prior to the liquidation of
the Company within the meaning of Regulations
Section 1.704-l(b)(2)(ii)(g), provided, however,
that adjustments pursuant to clauses (a) and (b)
above shall be made only if the Operating Member
determines that such adjustments are necessary or
appropriate to reflect the relative economic
interests of the Members in the Company.
(3) In accordance with Regulations Section
1.704 -l(b)(2)(iv)(e), the Carrying Value of Company
assets distributed in kind shall be adjusted
upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such
Company property, as of the time any such asset
is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount
and fair market value of all Company assets
(including cash or cash equivalents) shall be
determined by the Operating Member using such
reasonable method of valuation as it may adopt.
E. The provisions of this Agreement (including this Exhibit B)
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Operating Member shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Company and/or one or more of the Members)
are computed in order to comply with such Regulations, the Operating Member may
make such modification, provided that it is not likely to have a material effect
on the amounts distributable to any Member pursuant to the Agreement upon the
dissolution of the Company. The Operating Member also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company's balance sheet, as computed for book purposes, in accordance with
Regulations Section l.704-l(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section l.704-1(b).
3. No Interest
No interest shall be paid by the Company on Capital Contributions or
on balances in Members' Capital Accounts.
4. No Withdrawal
No Member shall be entitled to withdraw any part of its Capital
Contribution or its Capital Account or to receive any distribution from the
Company, except as expressly provided in the Agreement.
5. Special Allocation Rules
Notwithstanding any other provision of the Agreement or this Exhibit
B, the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the
provisions of Article 6 of the Agreement or any other
provisions of this Exhibit B, if there is a net
decrease in Company Minimum Gain during any Company
Year, each Member shall be specially allocated items
of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to
such Member's share of the net decrease in Company
Minimum Gain, as determined under Regulations Section
1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the
respective amounts required to be allocated to each
Member pursuant thereto. The items to be so
allocated shall be determined in accordance with
Regulations Section 1.704-2(f)(6). This Section 5.A
is intended to comply with the minimum gain
chargeback requirements in Regulations Section 1.704-
2(f).
B. Member Minimum Gain Chargeback. Notwithstanding the
provisions of Article 6 of this Agreement or any
other provisions of this Exhibit B (except Section 5.A
hereof), if there is a net decrease in Member Minimum Gain
attributable to a Member Nonrecourse Debt during any Company
Year, each Member who has a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of Company income and gain for such
year (and, if necessary, subsequent years) in an amount equal
to such Member's share of the net decrease in Member Minimum
Gain attributable to such Member Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(5).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Section
1.704-2(i)(4). This Section 5.B is intended to comply with the
minimum gain chargeback requirement in Regulations Section
1.704 - 2(i)(4) and shall be interpreted consistently
therewith.
C. Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or
distributions described in Regulations Sections 1.704-
l(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or
1.704-l(b)(2)(ii)(d)(6), and after giving effect to the
allocations required under Sections 5.A and 5.B hereof, such
Member has an Adjusted Capital Account Deficit, items of
Company income and gain (consisting of a pro rata portion of
each item of Company income, including gross income and gain
for the Company Year) shall be specifically allocated to such
Member in an amount and manner sufficient to eliminate, to the
extent required by the Regulations, its Adjusted Capital
Account Deficit created by such adjustments, allocations or
distributions as quickly as possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for
any Company Year shall be allocated to the Members in
accordance with their respective Percentage
Interests. If the Operating Member determines in its
good faith discretion that the Company's Nonrecourse
Deductions must be allocated in a different ratio to
satisfy the safe harbor requirements of the
Regulations promulgated under Section 704(b) of the
Code, the Operating Member is authorized, upon notice
to the other Members, to revise the prescribed ratio
to the numerically closest ratio for such Company
Year which would satisfy such requirements.
E. Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Company Year shall be specially allocated
to the Member who bears the economic risk of loss with respect
to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable, in accordance with
Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Company
asset pursuant to Section 734(b) or 743(b) of the Code
is required, pursuant to Regulations Section
1.704-l(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated
as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss
shall be specially allocated to the Members in a
manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant
to such Section of the Regulations.
6. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 6, for federal
income tax purposes, each item of income, gain, loss and
deduction shall be allocated among the Members in the same
manner as its correlative item of "book" income, gain, loss or
deduction is allocated pursuant to Section 6.1 or 6.2 of the
Agreement and/or
Section 5 of this Exhibit B.
B. In an attempt to eliminate Book-Tax Disparities attributable
to a Contributed Property or Adjusted Property, items of
income, gain, loss, and deduction attributable to a
Contributed Property or an Adjusted Property shall be
allocated for federal income tax purposes among the Members as
follows:
(1) (a) In the case of a Contributed Property, such
items attributable thereto shall be
allocated among the Members consistent with
the principles of Section 704(c) of the
Code to take into account the variation
between the 704(c) Value of such property
and its adjusted basis at the time of
contribution; and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall
be allocated among the Members in the same
manner as its correlative item of "book"
gain or loss is allocated pursuant to
Section 6.1 or 6.2 of the Agreement and/or
Section 5 of this Exhibit B.
(2) (a) In the case of an Adjusted Property, such
items shall
(i) first, be allocated among the Members
in a manner consistent with the
principles of Section 704(c) of the
Code to take into account the
Unrealized Gain or Unrealized Loss
attributable to such property and the
allocations thereof pursuant to
Section 2 of this Exhibit B, and
(ii) second, in the event such property
was originally a Contributed
Property, be allocated among the
Members in a manner consistent with
Section 6.B (1)(a) of this Exhibit
B; and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall
be allocated among the Members in the same
manner its correlative item of "book" gain
or loss is allocated pursuant to
Section 6.1 or 6.2 of the Agreement and/or
Section 5 of this Exhibit B.
(3) all other items of income, gain, loss and deduction
shall be allocated among the Members in the same
manner as their correlative item of "book" gain or
loss is allocated pursuant to Section 6.1 or 6.2 of
the Agreement and/or Section 5 of the Exhibit B.
C. To the extent Treasury Regulations promulgated
pursuant to Section 704(c) of the Code permit the
utilization of alternative methods to eliminate the
disparity between the agreed value of property and
its adjusted basis, the Operating Member shall have
the authority to elect the method to be used by the
Company and such election shall be binding on all
Members.
EXHIBIT C
Adjusted Percentage Interest Calculation
Assume that on the Percentage Interest Adjustment Date Member A has
contributed $10 million to the Company and Member B has contributed $6 million
to the Company. Member A's percentage of the total contribution is
$10 million = .625 (62.5%)
$16 million
and the percentage of the total contributions of Member B is
$6 million = .375 (37.5%)
$16 million
As a result, 37.5% shall be Member B's Adjusted Percentage Interest. Member
A's Adjusted Percentage Interest shall be 62.5%.
EXHIBIT D
Form of Subordinated Member Note
$_____________ (Maximum) Date: ______________
For value received, the undersigned ______________________, a
___________ ("______"), promises to pay to ____________________, a ____________
("_______"), having a business address of ________________________, the
principal sum of up to ____________ ($________) together, with interest thereon
at __%.
Demand may be made by _____ for the payment of all or any portion
hereof upon five (5) days' prior written notice to ____ given at any time after
_______, 199__ [Date to follow commencement of Construction Period].
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived by the undersigned and any and all others who may at
any time become liable for the payment of all or any part of this obligation.
No delay or omission on the part of the holder hereof in the exercise
of any right or remedy shall operate as a waiver, thereof, and no single or
partial exercise by the holder hereof of any right or remedy shall preclude
other or further exercise thereof or of any other right or remedy.
If payment of this Note or any portion thereof shall not be made as
provided for herein, and any action is brought to enforce collection thereof,
the undersigned agrees to pay a reasonable sum as attorneys' fees and costs in
such action.
IN WITNESS WHEREOF, ___ has caused this Note to be executed by its
duly authorized officers.
By:________________________
Printed:_____________________
Its:_________________________