EXHIBIT 99.7
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AMENDED AND RESTATED OPERATING AGREEMENT OF
BP/CGCENTER ACQUISITION CO. LLC,
A DELAWARE LIMITED LIABILITY COMPANY
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TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS.....................................................................................4
1.1. DEFINITIONS.....................................................................................4
1.2. RULES OF CONSTRUCTION..........................................................................14
1.3. SECTIONS; SCHEDULES AND EXHIBITS...............................................................14
ARTICLE 2. THE COMPANY....................................................................................14
2.1. CONTINUATION OF LIMITED LIABILITY COMPANY; MERGER OF ORIGINAL COMPANY INTO THE COMPANY;
ADMISSION OF BOSTON PROPERTIES MEMBERS.........................................................14
2.2. NAME OF COMPANY................................................................................15
2.3. PURPOSE OF COMPANY.............................................................................15
2.4. PRINCIPAL AND REGISTERED OFFICE................................................................15
2.5. FURTHER ASSURANCES.............................................................................15
2.6. CERTAIN EXPENSES OF MEMBERS....................................................................15
2.7. NO INDIVIDUAL AUTHORITY........................................................................15
2.8. NO RESTRICTIONS................................................................................16
2.9. NEITHER RESPONSIBLE FOR OTHER'S COMMITMENTS....................................................16
2.10. AFFILIATES.....................................................................................16
2.11. OPERATIONS IN ACCORDANCE WITH THE ACT: OWNERSHIP...............................................16
ARTICLE 3. TERM...........................................................................................16
3.1. TERM...........................................................................................16
ARTICLE 4. CAPITALIZATION OF THE COMPANY; CONTRIBUTIONS...................................................17
4.1. CAPITAL CONTRIBUTIONS..........................................................................17
4.2. CAPITALIZATION.................................................................................18
4.3. NO OTHER CONTRIBUTIONS.........................................................................18
4.4. RETURNS........................................................................................19
4.5. NO WITHDRAWALS.................................................................................20
4.6. ADDITIONAL CONTRIBUTIONS.......................................................................20
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF CEPPETO MEMBERS..............................................20
5.1. ORGANIZATION AND POWER.........................................................................20
5.2. AUTHORIZATION..................................................................................22
5.3. ABSENCE OF LIABILITIES.........................................................................23
5.4. LITIGATION.....................................................................................23
5.5. NON-CONTRAVENTION..............................................................................24
5.6. OWNERSHIP OF DIRECT AND INDIRECT INTERESTS IN THE COMPANY......................................25
ARTICLE 6. MANAGEMENT OF THE COMPANY......................................................................26
6.1. MANAGEMENT.....................................................................................26
6.2. BANK ACCOUNTS..................................................................................28
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TABLE OF CONTENTS
(continued)
PAGE
6.3. REIMBURSEMENT FOR COSTS AND EXPENSES...........................................................29
6.4. MANAGEMENT AGREEMENT...........................................................................29
6.5. MAJOR DECISIONS................................................................................31
6.6. CONTRACTS WITH AFFILIATES......................................................................32
6.7. NON-INTERFERENCE COVENANT......................................................................32
6.8. PROCEEDS OF ADDITIONAL FINANCING...............................................................34
ARTICLE 7. BOOKS AND RECORDS, AUDITS, TAXES, ETC..........................................................35
7.1. BOOKS; STATEMENTS..............................................................................35
7.2. WHERE MAINTAINED...............................................................................36
7.3. AUDITS.........................................................................................36
7.4. INTENTIONALLY OMITTED..........................................................................36
7.5. TAX RETURNS....................................................................................36
7.6. TAX MATTERS PARTNER............................................................................36
7.7. TAX POLICY.....................................................................................37
7.8. SECTION 754 ELECTION...........................................................................37
7.9. CAPITAL ACCOUNTS...............................................................................37
7.10. PURCHASE PRICE ALLOCATIONS.....................................................................38
ARTICLE 8. FISCAL YEAR....................................................................................38
8.1. CALENDAR YEAR..................................................................................38
ARTICLE 9. DISTRIBUTIONS AND ALLOCATIONS..................................................................38
9.1. PERCENTAGE INTERESTS...........................................................................38
9.2. CERTAIN DEFINITIONS............................................................................39
9.3. DISTRIBUTIONS PRIOR TO THE FLIP DATE...........................................................40
9.4. DISTRIBUTIONS AFTER THE FLIP DATE..............................................................42
9.5. ALLOCATIONS....................................................................................44
9.6. DISTRIBUTIONS AND ALLOCATIONS UPON LIQUIDATION OF THE COMPANY..................................49
9.7. RECAPTURE INCOME...............................................................................50
ARTICLE 10. ASSIGNMENT AND OFFER TO PURCHASE..............................................................50
10.1. SALE OF THE PROPERTY...........................................................................50
10.2. TRANSFER OF INTERESTS..........................................................................53
10.3. RIGHT OF FIRST OFFER: INTERESTS...............................................................55
10.4. ASSUMPTION BY ASSIGNEE.........................................................................59
10.5. AMENDMENT OF CERTIFICATE OF FORMATION..........................................................59
10.6. PLEDGING OF INTERESTS..........................................................................60
10.7. CONVERSION RIGHTS..............................................................................60
10.8. PROVISIONS GENERALLY APPLICABLE TO SALES.......................................................63
ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER.........................................................64
11.1. DISSOLUTION OR MERGER..........................................................................64
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TABLE OF CONTENTS
(continued)
PAGE
11.2. BANKRUPTCY, ETC................................................................................65
11.3. RECONSTITUTION.................................................................................66
ARTICLE 12. DISSOLUTION...................................................................................66
12.1. WINDING UP.....................................................................................66
12.2. PURCHASE OF NON-LIQUIDATING MEMBER'S INTEREST..................................................66
12.3. OFFSET FOR DAMAGES.............................................................................67
12.4. DISTRIBUTIONS OF OPERATING CASH FLOW...........................................................67
12.5. DISTRIBUTIONS OF PROCEEDS OF LIQUIDATION.......................................................68
12.6. ORDERLY LIQUIDATION............................................................................68
12.7. FINANCIAL STATEMENTS...........................................................................68
ARTICLE 13. MEMBERS.......................................................................................68
13.1. LIABILITY......................................................................................68
13.2. NO FIDUCIARY OBLIGATIONS.......................................................................68
13.3. POWER OF ATTORNEY..............................................................................69
13.4. CONSENT OF CEPPETO MEMBERS.....................................................................69
13.5. INDEMNIFICATION OBLIGATIONS; PLEDGE OF CEPPETO MEMBERS' EQUITY INTEREST........................70
ARTICLE 14. NOTICES.......................................................................................74
14.1. IN WRITING; ADDRESS............................................................................74
14.2. COPIES. 75
ARTICLE 15. MISCELLANEOUS.................................................................................76
15.1. ADDITIONAL DOCUMENTS AND ACTS..................................................................76
15.2. INTERPRETATION.................................................................................76
15.3. ENTIRE AGREEMENT...............................................................................76
15.4. BINDING EFFECT.................................................................................76
15.5. COUNTERPARTS...................................................................................76
15.6. CONFIDENTIALITY................................................................................76
15.7. AMENDMENTS.....................................................................................77
15.8. SEVERABILITY...................................................................................77
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AMENDED AND RESTATED
OPERATING AGREEMENT
OF
BP/CGCENTER ACQUISITION CO. LLC
This AMENDED AND RESTATED OPERATING AGREEMENT OF BP/CGCENTER
ACQUISITION CO. LLC (this "AGREEMENT") is entered into and shall be effective as
of the 25th day of April, 2001, by and between CEPPETO ENTERPRISES LLC, a
Delaware limited liability company ("CEPPETO"), CEPPETO SKYLINE HOLDING LLC, a
Delaware limited liability company ("CEPPETO HOLDINGS"), BP/CG MEMBER I LLC, a
Delaware limited liability company ("BP MEMBER"), BP/CG MEMBER II LLC, a
Delaware limited liability company ("BP MEMBER II") and BP/CG MEMBER III LLC, a
Delaware limited liability company ("BP MEMBER III") as the members of
BP/CGCenter Acquisition Co. LLC (the "COMPANY"). Ceppeto, Ceppeto Holdings, BP
Member, BP Member II and BP Member III are sometimes referred to in this
Agreement collectively as the "MEMBERS" and each individually as a "MEMBER."
Ceppeto and Ceppeto Holdings are sometimes referred to in this Agreement
collectively as the "CEPPETO MEMBERS." BP Member, BP Member II and BP Member III
are sometimes referred to in this Agreement collectively as the "BOSTON
PROPERTIES MEMBERS." BP Member is sometimes referred to in this Agreement as the
"MANAGING MEMBER."
RECITALS
A. 57th Street Acquisition Co. LLC, a New York limited liability
company (the "ORIGINAL COMPANY") was formed as a limited liability company under
the laws of the State of New York by the filing of its Articles of Organization
with the New York Secretary of State on February 7, 2000. At the time of
formation, ▇▇▇▇▇▇▇ ▇. Natori was the sole member of the Original Company.
▇▇▇▇▇▇▇ ▇. Natori subsequently contributed his interest in the Original Company
to Natori 57 Street Investors LLC, and pursuant to an Amended and Restated
Operating Agreement of the Company dated March 2000 (the "ORIGINAL AGREEMENT"),
the Original Company admitted Ceppeto Corp. and Ceppeto as members of the
Original Company.
B. In connection with a First Amendment to Amended and Restated
Operating Agreement of the Original Company dated April 16, 2001 (the "FIRST
AMENDMENT") and an Assignment of Limited Liability Company Interest dated as of
April 16, 2001, Ceppeto Holdings acquired the interests in the Original Company
held by Natori 57 Street Investors LLC and Ceppeto Corp. and was admitted as a
member of the Original Company, with the result that Ceppeto and Ceppeto
Holdings were the sole members of the Original Company.
C. Skyline Holdings LLC, a Delaware limited liability company ("SKYLINE
I"), has entered into that certain Contract of Sale dated as of February 6, 2001
with Dai-Ichi Life Investment Properties, Inc. (the "UNIT 1 CONTRACT"), and
Skyline Holdings II LLC, a Delaware limited liability company ("SKYLINE II"),
has entered into that certain Agreement to Enter Into
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Assignment and Assumption of Unit Two Contract of Sale dated as of February 6,
2001 with Dai-Ichi Life Investment Properties, Inc. (the "UNIT 2 CONTRACT" and
together with the Unit 1 Contract, the "PURCHASE CONTRACTS") pursuant to which
Skyline I has the right to acquire that certain real property known as
condominium Unit #1 at Citigroup Center, New York, New York, and Skyline II has
the right to acquire, in accordance with that certain Contract of Sale between
Citibank, N.A. and Dai-Ichi Life Investment Properties, Inc. dated as of
November 22, 2000, that certain real property known as condominium ▇▇▇▇ #▇ ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (such Units collectively, the "PROPERTY").
Pursuant to those certain Operating Agreements for each of Skyline I and Skyline
II, each dated as of February 6, 2001, the members of each of Skyline I and
Skyline II were, as of such date, Ceppeto Holding Enterprises LLC, a Delaware
limited liability company and an affiliate of the Ceppeto Members ("CHE"),
holding a one percent (1%) non-managing member interest, and Skyline Holdings
MM, LLC, a Delaware limited liability company and an affiliate of the Boston
Properties Members ("SHMM"), holding a ninety-nine percent (99%) managing member
interest. Pursuant to and in accordance with that certain letter agreement dated
March 30, 2001 by and among BPLP, Allied Partners, Inc. and certain of their
respective affiliates, CHE delivered those certain Assignment of Membership
Interests to SHMM, pursuant to which CHE's one percent (1%) non-managing member
interests in each of Skyline I and Skyline II were assigned to SHMM as of April
3, 2001, with the result that SHMM was the sole member and manager of each of
Skyline I and Skyline II as of such date. Prior to the admission of the Boston
Properties Members to the Company (as described below), the Ceppeto Members were
admitted to each of SHMM and BP/CGMM2, holding an aggregate 34.5% non-managing
member interest in each of SHMM and BP/CGMM2, and immediately thereafter each of
Skyline I and Skyline II conveyed its respective rights to acquire the Property
pursuant to the Unit 1 Contract and the Unit 2 Contract to BP/CGCenter I LLC, a
Delaware limited liability company ("BP/CG I") and BP/CGCenter II LLC, a
Delaware limited liability company ("BP/▇▇ ▇▇"), respectively. Pursuant to those
certain Operating Agreements for each of BP/CG I and BP/▇▇ ▇▇, each dated as of
April 25, 2001, BP/CGCenter MM LLC, a Delaware limited liability company
("BP/CGMM") was the sole member of each of BP/CG I and BP/▇▇ ▇▇ as of such date.
Pursuant to that certain Operating Agreement of BP/CGMM dated as of April 25,
2001, BP/CGCenter MM2 LLC, a Delaware limited liability company ("BP/CGMM2") was
the sole member of BP/CGMM as of such date.
D. On April 16, 2001, the Original Company sold that certain real
property located at One East 57th Street, New York, New York (the "SALE
PROPERTY") and $150,891,083.78 in net proceeds from such sale (the "SALE
PROPERTY PROCEEDS") have been deposited with the Qualified Intermediary (as
defined below), to facilitate a tax-deferred like-kind exchange of real property
(the "EXCHANGE TRANSACTION") under Section 1031 of the Internal Revenue Code of
1986, as amended (the "CODE").
E. The Company was formed as a limited liability company under the laws
of the State of Delaware by the filing of its Certificate of Formation with the
Delaware Secretary of State on April 18, 2001. At the time of its formation,
Ceppeto and Ceppeto Holdings were the sole members of the Company, and Ceppeto
and Ceppeto Holdings entered into that certain Operating Agreement of the
Company dated April 18, 2001 (the "COMPANY'S OPERATING AGREEMENT").
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F. In connection with and pursuant to that certain Agreement and Plan
of Merger (the "MERGER AGREEMENT") of 57th Street Acquisition Co. LLC, a New
York limited liability company into BP/CGCenter Acquisition Co. LLC, a Delaware
limited liability company, that certain Certificate of Merger (the "CERTIFICATE
OF MERGER") of 57th Street Acquisition Co. LLC, a New York limited liability
company into BP/CGCenter Acquisition Co. LLC, a Delaware limited liability
company, and certain related instruments, the Original Company was merged into
the Company, effective April 20, 2001 (the "EFFECTIVE DATE OF THE MERGER"), with
the result that the Company is the surviving limited liability company of the
merger, and will continue its existence as the surviving limited liability
company under its present name from and after the Effective Date of the Merger
pursuant to the provisions of the Act (as defined below).
G. The Company desires to admit BP Member, BP Member II and BP Member
III as members of the Company, and each of BP Member, BP Member II and BP Member
III desires to be admitted as a member of the Company, on the terms and
conditions set forth in this Agreement and the Members desire to amend and
restate in its entirety the Company's Operating Agreement in order to reflect
the admission of the BP Member, the BP Member II and BP Member III as members of
the Company, and to make such other amendments and modifications to the
Company's Operating Agreement as the Members deem necessary and desirable, all
as more particularly set forth in this Agreement. In connection with the BP
Members' admission to the Company, BP Member and BP Member III shall make cash
contributions to the Company as provided herein and immediately thereafter (but
substantially simultaneously therewith) Ceppeto will assign 100% of the
Contributed Preferred Units (as defined in the Master Transaction Agreement) to
BPLP who will, immediately thereafter, contribute 100% of the Contributed
Preferred Units to BP Member II, all as more particularly set forth in the
Master Transaction Agreement.
H. Immediately after the admission of BP Member, BP Member II and BP
Member III to the Company, the Boston Properties Members and the Ceppeto Members
will cause one hundred percent (100%) of the membership interests in BP/CGMM2 to
be contributed to the Company (such contribution will have an agreed value of
zero), with the result that (i) BP/CGMM will continue to be the sole member of
each of BP/CG I and BP/▇▇ ▇▇, (ii) BP/CGMM2 will continue to be the sole member
of BP/CGMM, and (iii) the Company, indirectly through one or more wholly owned
and controlled subsidiary entities (including without limitation, through
BP/CGMM2), will be the sole indirect beneficial owner of each of BP/CG I and
BP/▇▇ ▇▇. BP/CG I and BP/▇▇ ▇▇ will immediately thereafter acquire the Property
pursuant to the Purchase Contracts.
I. In connection with the sale of the Sale Property, the consummation
of the merger pursuant to the Merger Agreement, the admission of BP Member, BP
Member II and BP Member III as members of the Company and the acquisition of the
Property through the Exchange Transaction, the Members (i) desire to enter into
this Agreement and to continue the Company in accordance with the terms of this
Agreement and the provisions of the Act, including without limitation, to
recapitalize the Company and to set forth their agreements with respect to the
ownership and operation of the Property and the Company as provided in this
Agreement, and (ii) have, simultaneously herewith, entered into the Master
Transaction
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Agreement and the Tax Protection Agreement (each as defined below), together
with certain of their respective affiliates.
NOW, THEREFORE, in order to carry out their intent as expressed above
and in consideration of the mutual agreements and covenants contained in this
Agreement, the Members hereby covenant and agree as follows.
ARTICLE 1. DEFINITIONS
1.1. DEFINITIONS. Capitalized terms used in this Agreement
have the meanings given in this SECTION 1.1, or in the Sections of this
Agreement indicated in this Section 1.1.
"ACT" means the Delaware Limited Liability Company Act, as the
same may be amended from time to time.
"ACTUAL DELIVERY DATE" has the meaning given in SECTION
10.7(c).
"ADDITIONAL PREFERRED EQUITY" means funds contributed to the
Company pursuant to SECTION 4.6, which contributed funds are, for purposes of
distributions, senior in priority to Preferred Equity and Common Equity and
junior in priority to Senior Preferred Equity.
"ADDITIONAL PREFERRED EQUITY RETURN" has the meaning given in
SECTION 4.4(c).
"ADJUSTED PREFERRED BALANCE" means an amount, to be calculated
as of the Flip Date, equal to the sum of (i) the outstanding Preferred Equity as
of the Flip Date, (ii) the Preferred Return accrued (and compounded) through and
including the Flip Date, but unpaid as of the Flip Date, and (iii) the Class A
Common Return accrued (and compounded) through and including the Flip Date, but
unpaid as of the Flip Date. The Adjusted Preferred Balance will be allocated to
the Members in proportion to their respective unpaid Preferred Equity, unpaid
Preferred Return and unpaid Class A Common Return, if any, as of the Flip Date.
"ADJUSTED PREFERRED BALANCE RETURN" has the meaning given in
SECTION 4.4(f).
"AFFILIATE" means, with respect to any Person, a Person who or
which, directly or indirectly, controls, is controlled by or is under common
control with, such Person. The term "control" (including, with correlative
meaning, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"AGREEMENT" means this Amended and Restated Operating
Agreement, as the same may from time to time be modified, supplemented, amended
or amended and restated.
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"ANNUAL BUDGET" has the meaning given in SECTION 6.1(d).
"APPRAISAL" has the meaning given in SECTION 10.7(a).
"APPRAISAL NOTICE" has the meaning given in SECTION 12.2(a).
"BOSTON PROPERTIES" means Boston Properties, Inc., a Delaware
corporation, or any successor to Boston Properties pursuant to any merger,
consolidation, business combination, reclassification or reorganization.
"BOSTON PROPERTIES MEMBERS" has the meaning given in the
introductory paragraph.
"BP/CG I" has the meaning given in RECITAL C.
"BP/▇▇ ▇▇" has the meaning given in RECITAL C.
"BP/CGMM" means BP/CGCenter MM LLC, a Delaware limited
liability company, the sole member of which is BP/CGMM2, and which is the sole
member of BP/CG I and BP/▇▇ ▇▇.
"BP/CGMM2" means BP/CGCenter MM2 LLC, a Delaware limited
liability company, the sole member of which (in connection with and pursuant to
the transactions described in Recital H) as of the Effective Date, is the
Company, and which is the sole member of BP/CGMM.
"BPLP" means Boston Properties Limited Partnership, a Delaware
limited partnership.
"BPLP INDEMNIFIED PARTIES" means the Company, Skyline I,
Skyline II, BP/CG I, BP/▇▇ ▇▇, BP/CGMM, BP/CGMM2, BP Member, BP Member II, BP/CG
Member III, BPLP, Boston Properties, and their respective officers, directors,
employees, agents, consultants, representatives, subsidiaries, Affiliates,
stockholders, partners and attorneys (excluding, however, the Ceppeto Members
and any Person claiming by, through or under either of them).
"BP MEMBER" has the meaning given in the introductory
paragraph.
"BP MEMBER II" has the meaning given in the introductory
paragraph.
"BP MEMBER III" has the meaning given in the introductory
paragraph.
"BREACH NOTICE" has the meaning given in SECTION 6.7
"BUSINESS DAY" means any weekday that is not an official
holiday in the State of New York.
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"BXP STOCK" means Boston Properties' common stock, par value
$.01 per share, or the common stock of any successor to Boston Properties
pursuant to any merger, consolidation, business combination, reclassification or
reorganization.
"CAPITAL ACCOUNT" has the meaning given in SECTION 7.9(a).
"CAPITAL CONTRIBUTION" means, for each Member, the aggregate
of sums contributed to the Company (or deemed contributed in accordance with
SECTION 4.1) by such Member pursuant to ARTICLE 4 of this Agreement, including
such Member's Initial Capital Contribution and such Member's Additional
Preferred Equity, if any.
"CAPITAL EVENT" means one or more of the following: (i) sale
of all or any part of or interest in the Company's assets (including the
Property), exclusive of sales or other dispositions of tangible personal
property in the ordinary course of business; (ii) placement and funding of any
indebtedness of the Company secured by some or all of its assets (including the
Property) with respect to borrowed money, excluding short term borrowing in the
ordinary course of business; (iii) condemnation of all or any material part of
or interest in the Property through the exercise of the power of eminent domain
or any conveyance in lieu thereof; or (iv) any unrestored loss of the Company's
assets (including the Property) or any part thereof or interest therein by
casualty, failure of title or otherwise.
"CAPITAL EVENT PROCEEDS" has the meaning given in SECTION
9.2(b).
"CASH AND CASH EQUIVALENTS" means (i) cash (in U.S. Dollars),
(ii) direct obligations of the United States of America, including without
limitation, treasury bills, notes and bonds, (iii) interest bearing or
discounted obligations of Federal agencies and United States government
sponsored entities or pools of such instruments offered by banks rated AA or
better by Standard and Poor's Rating Services ("S&P") or Aa2 by ▇▇▇▇▇'▇
Investors Service Inc. ("MOODY'S"), including, without limitation, Federal Home
Loan Mortgage Corporation participation sale certificates, Government National
Mortgage Association modified pass-through certificates, Federal National
Mortgage Association bonds and notes, and Federal Farm Credit System securities,
(iv) time deposits, domestic and Eurodollar certificates of deposit, bankers
acceptances, commercial paper rated at least A-1 by S&P and P-1 by Moody's,
and/or guaranteed by an Aa rating by Moody's, an AA rating by S&P, or better
rated credit, floating rate notes, other money market instruments and letters of
credit each issued by banks which have a long-term debt rating of at least AA by
S&P or Aa2 by Moody's, (v) obligations of domestic corporations, including,
without limitation, commercial paper, bonds, debentures, and loan
participations, each of which is rated at least AA by S&P, and/or Aa2 by
Moody's, and/or unconditionally guaranteed by an AA rating by S&P, an Aa2 rating
by Moody's, or better rated credit and (vi) shares of any mutual fund that has
its assets primarily invested in the types of investments referred to in clauses
(i) through (v).
"CEPPETO" has the meaning given in the introductory paragraph.
"CEPPETO HOLDINGS" has the meaning given in the introductory
paragraph.
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"CEPPETO INDEMNITORS" has the meaning given in SECTION
13.5(a).
"CEPPETO MEMBERS" has the meaning given in the introductory
paragraph.
"CEPPETO MEMBERS' EQUITY INTEREST" means the aggregate
interest of the Ceppeto Members in the Company, including the Class B Common
Equity.
"CERTIFICATE OF FORMATION" has the meaning given in SECTION
2.1.
"CERTIFICATE OF MERGER" has the meaning given in RECITAL F.
"CHE" has the meaning given in RECITAL C.
"CLASS A COMMON EQUITY" means the BP Member's Common Equity in
the Company.
"CLASS A COMMON RETURN" has the meaning given in SECTION
4.4(d).
"CLASS B COMMON EQUITY" means the Ceppeto Members' Common
Equity in the Company.
"CLASS B COMMON RETURN" has the meaning given in SECTION
4.4(e).
"CLOSING DATE" has the meaning given in SECTION 10.3(c).
"CODE" has the meaning given in RECITAL D.
"COMMON EQUITY" means, collectively, the Class A Common Equity
and the Class B Common Equity.
"COMMON RETURN" means, collectively, the Class A Common Return
and the Class B Common Return.
"COMPANY" has the meaning given in the introductory paragraph,
PROVIDED, HOWEVER, that for all purposes of this Agreement, including without
limitation, with respect to the representations and warranties and
indemnification obligations contained in this Agreement and/or in the other
Transaction Documents, the term Company shall also include (and be deemed to
include) the Original Company; except only in the RECITALS, SECTION 2.1 and the
first sentence of SECTION 5.1(a), where the terms "Company" and "Original
Company" clearly and unambiguously refer only to the Company and Original
Company, respectively.
"COMPANY'S OPERATING AGREEMENT" has the meaning given in
RECITAL E.
"COMPETITOR" means any of the following types of entities (or
any entity that is directly or indirectly owned or controlled by any of the
following types of entities), whether domestic or foreign: (i) a publicly traded
real estate investment trust whose shares are traded on
7
the New York Stock Exchange, American Stock Exchange or NASDAQ or (ii) a
privately held real estate investment trust having a net asset value in excess
of $250 million, in each case owning Class A office buildings in New York City
with an aggregate of not less than 2,000,000 rentable square feet.
"CONVERSION RIGHT" has the meaning given in SECTION 10.7(a).
"DELAY NOTICE" has the meaning given in SECTION 10.7(b).
"DETERMINATION DATE" has the meaning given in SECTION 10.7(a).
"EFFECTIVE DATE" means April 25, 2001.
"EFFECTIVE DATE OF THE MERGER" has the meaning given in
RECITAL F.
"ENTIRE BP INTEREST" has the meaning given in SECTION
10.1A(a).
"ENTIRE INTEREST" has the meaning given in SECTION 10.7(a).
"EQUITY INTEREST" has the meaning given in SECTION 10.1(b).
"EQUITY TRANSFER" has the meaning given in SECTION 10.2(a).
"EXCHANGE TRANSACTION" has the meaning given in RECITAL D.
"EXERCISE NOTICE" has the meaning given in SECTION 10.7(a).
"EXERCISING MEMBER" has the meaning given in SECTION 10.7(a).
"FAIR MARKET VALUE" has the meaning given in SECTION 12.2(a).
"FAIR MARKET VALUE OF ONE OP UNIT" means the product of (x)
the average of the Market Prices of a share of BXP Stock for the ten (10)
consecutive trading days immediately preceding the date upon which the Fair
Market Value of One OP Unit is determined (i.e., the Actual Delivery Date (which
would be the Original Delivery Date if not postponed or otherwise extended))
multiplied by (y) the number of shares of BXP Stock into which each OP Unit is
convertible or redeemable on the Actual Delivery Date.
"FIRST AMENDMENT" has the meaning given in RECITAL B.
"FIRST OFFER NOTICE" has the meaning given in SECTION 10.3(a).
"FLIP DATE" means the first day of the first calendar month
after the date which is the tenth (10th) anniversary of the Effective Date.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
8
"INDEMNITEE" has the meaning given in SECTION 13.5(d)(1).
"INDEMNITOR" has the meaning given in SECTION 13.5(d)(1).
"INITIAL CAPITAL CONTRIBUTIONS" has the meaning given in
SECTION 4.1.
"INITIATING MEMBER" has the meaning given in SECTION 10.3(a).
"INSTITUTIONAL HOLDER" means any of the following types of
entities (or any entity that is directly or indirectly owned or controlled by
any of the following types of entities), whether domestic or foreign: (i) a
publicly traded real estate investment trust whose shares are traded on the New
York Stock Exchange, American Stock Exchange or NASDAQ; (ii) a privately held
real estate investment trust having a net asset value in excess of $250 million;
(iii) a commercial bank, trust company (whether acting individually or in a
fiduciary capacity for another entity that constitutes an Institutional Holder),
savings and loan association, savings bank, financing company or similar
institution; (iv) an insurance company; (v) an investment bank; (vi) an
employee's welfare, benefit, profit-sharing, pension or retirement trust, fund
or system (whether federal, state, municipal, private or otherwise); (vii) a
religious, educational or eleemosynary institution or foundation; (viii) a hedge
fund, opportunity fund or similar type of fund; (ix) a governmental agency; (x)
a credit union, trust or endowment fund; (xi) an entity not referred to in the
foregoing provisions of this definition that is subject to supervision and
regulation by the insurance or banking department of any of the United States,
the Board of Governors of the Federal Reserve System, the Comptroller of the
Currency, the Federal Deposit Insurance Corporation or the Federal Savings and
Loan Insurance Corporation or by any successor hereafter exercising similar
functions; (xii) any owner or operator of commercial real property assets having
a net equity value in excess of $250 million and having experience owning and
operating first-class office buildings in major metropolitan areas in the United
States; and (xiii) any combination of one or more of the foregoing entities.
"LIMITED SURVIVAL REPRESENTATIONS" has the meaning given in
SECTION 13.5(b).
"LIQUIDATING MEMBER" means the Member in sole charge of
winding up the Company and having the powers described in ARTICLE 12.
"LOSSES" means any and all claims, losses, damages, costs,
liabilities and expenses, including attorneys' fees and disbursements, but
excluding in all events lost profits, consequential or expectation damages.
"MANAGEMENT AGREEMENT" has the meaning given in SECTION
6.4(a).
"MANAGING MEMBER" has the meaning given in the introductory
paragraph, and shall also mean any other or replacement Managing Member of the
Company appointed pursuant to SECTION 6.1.
"MARKET PRICE" means, with respect to BXP Stock for any
trading day, the last reported sale price regular way or, in case no such
reported sale takes place on such day, the
9
average of the closing bid and asked prices regular way for such day, in either
case on the New York Stock Exchange Composite Transactions tape, or if the BXP
Stock is not reported on the New York Stock Exchange Composite Transactions
tape, on the principal national securities exchange on which the BXP Stock is
listed or admitted to trading, or if the BXP Stock is not listed or admitted to
trading on any national securities exchange, but is traded in the
over-the-counter market, the closing sale price of the BXP Stock or, in case no
sale is publicly reported, the average of the closing bid and asked quotations
for the BXP Stock on the NASDAQ or any comparable system.
"MASTER TRANSACTION AGREEMENT" means that certain Master
Transaction and Contribution Agreement of even date herewith, by and among
Ceppeto, Ceppeto Holdings, BPLP, Boston Properties, BP Member, BP Member II and
BP Member III.
"MEMBER(S)" has the meaning given in the introductory
paragraph.
"MERGER AGREEMENT" has the meaning given in RECITAL F.
"NON-EXERCISING MEMBER" has the meaning given in SECTION
10.7(a).
"NOTICE OF CLAIM" has the meaning given in SECTION 13.5(d)(1).
"OFFERED INTEREST" has the meaning given in SECTION 10.3(a).
"OFFERED PRICE" has the meaning given in SECTION 10.3(a).
"OFFERED PRICE DEPOSIT" has the meaning given in SECTION
10.3(a).
"OP UNITS" means "PARTNERSHIP UNITS" in BPLP, as such term is
defined in the Partnership Agreement of BPLP.
"OPERATING CASH FLOW" has the meaning given in SECTION 9.2(a).
"OPERATING EXPENSE RESERVE" means, a reserve maintained on the
books of the Company which, as of the Effective Date, shall be in an amount
equal to $3,691,083.78.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any Person,
(i) if such Person is a limited partnership, such Person's limited partnership
agreement and certificate of limited partnership, (ii) if such Person is a
corporation, such Person's certificate or articles of incorporation and by-laws,
and (iii) if such Person is a limited liability company, such Person's operating
agreement and certificate of formation or articles of organization.
"ORIGINAL AGREEMENT" has the meaning given in RECITAL A.
"ORIGINAL AMENDED AGREEMENT" means the Original Agreement as
amended by the First Amendment.
10
"ORIGINAL COMPANY" has the meaning given in RECITAL A.
"ORIGINAL DELIVERY DATE" has the meaning given in SECTION
10.7(d).
"OTHER MEMBER'S SALE DEPOSIT" has the meaning given in SECTION
10.1A(b)(2).
"PARTNERSHIP AGREEMENT" means the Second Amended and Restated
Agreement of Limited Partnership of Boston Properties Limited Partnership dated
as of June 29, 1998, as amended.
"PARTNERSHIP CLAIM" means any actual or threatened claim or
other action of any Person (including any direct or indirect owners of any
membership interests in the Original Company or the Ceppeto Members), based on
any state of facts occurring on or prior to the Effective Date, (i) that either
Ceppeto Member and/or any direct or indirect owner of either Ceppeto Member or
any Affiliate of any of them has (or may have) breached any fiduciary or other
obligations owing to such Person (including obligations arising under any
applicable organizational documents or other contractual agreements or
obligations of full and fair disclosure) and whether arising out of the
transactions contemplated by this Agreement (including the Exchange Transaction)
or the Transaction Documents or otherwise, or (ii) that the benefits derived by
either Ceppeto Member and/or by any direct or indirect owner of either Ceppeto
Member or any Affiliate of any of them in connection with the transactions
contemplated by this Agreement (including the Exchange Transaction) or the
Transaction Documents is contrary to agreements between such Person and either
Ceppeto Member and/or any direct or indirect owner of either Ceppeto Member or
any Affiliate of any of them, or is otherwise improper, or (iii) with respect to
or under the terms of any organizational documents of the Original Company or of
either Ceppeto Member and/or any direct or indirect owner of either Ceppeto
Member or any Affiliate of any of them.
"PAST COMPANY ACTIONS" means any and all acts or omissions by
or on behalf of the Company or otherwise binding on the Company that occurred
from the date of the Company's formation up until (and including) the Effective
Date, including actions taken in respect of the acquisition of the Sale
Property, the ownership, management, maintenance, leasing, financing and
operation thereof, the disposition thereof in the Exchange Transaction, and the
direct and indirect ownership (or other similar or dissimilar rights based, in
part or in whole, on any actual or claimed interests in and to the Company
and/or the Sale Property) of the Company, but shall not include any acts and
omissions by or on behalf of the Company that occurred solely (i) pursuant to
the Purchase Contracts in connection with the acquisition of the Property, (ii)
pursuant to the Senior Loan and any other loan or financing arrangement entered
into by the BP Members or their Affiliates in connection with the Deposit LC (as
defined in the Master Transaction Agreement) and (iii) as a result of any and
all acts or omissions of the BP Members by or on behalf of the Company occurring
on and after the Effective Date.
"PAST COMPANY AGREEMENTS" means any and all agreements,
letters, documents, notes, mortgages and other instruments entered into by the
Company from the date of its formation up until (and including) the Effective
Date.
11
"PERCENTAGE INTEREST" has the meaning given in SECTION 9.1.
"PERMITTED EQUITY TRANSFER" has the meaning given in SECTION
10.2(b).
"PERSON" means any individual or entity, including a
partnership, corporation, limited liability company, association or trust.
"PREFERRED EQUITY" means Company equity which is evidenced by
Preferred Units (or partial Preferred Units, as applicable) and which earns a
priority return over the Common Equity, excluding in all events, the Additional
Preferred Equity and the Senior Preferred Equity.
"PREFERRED RETURN" has the meaning given in SECTION 4.4(a).
"PREFERRED UNITS" means units of membership interest in the
Company issued in consideration of Preferred Equity and/or Senior Preferred
Equity contributions, as applicable. Each Preferred Unit shall be evidence of
$1,000,000 of preferred equity capital in the Company, with partial Preferred
Units being evidence of proportionate increments of $1,000,000.
"PRIORITY PAYMENT CESSATION DATE" means the first date on or
after the Flip Date on which the sum of the Adjusted Preferred Balance plus the
aggregate amount of all accrued (and compounded) but unpaid (i) Adjusted
Preferred Balance Return, and (ii) the Class A Common Return for the period
commencing on the Flip Date and ending on such first date after the Flip Date,
is equal to zero; it being understood that the Priority Payment Cessation Date
shall be the Flip Date if the Adjusted Preferred Balance is equal to zero as of
the Flip Date.
"PROPERTY" has the meaning given in RECITAL C.
"PROPERTY MANAGER" has the meaning given in SECTION 6.4(a).
"PROPERTY TRANSFER" has the meaning given in SECTION 10.1(a).
"PURCHASE CONTRACTS" has the meaning given in RECITAL C.
"QUALIFIED BUYER" has the meaning given in SECTION 10.3(d).
"QUALIFIED INTERMEDIARY" means Chicago Deferred Exchange
Corporation, in its capacity as "qualified intermediary" as defined in the
Regulations for purposes of the Exchange Transaction.
"REFINANCING" has the meaning given in SECTION 6.8.
"REGULATIONS" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
12
"REGULATORY ALLOCATIONS" has the meaning given in SECTION
9.5(f).
"RESPONDING MEMBER" has the meaning given in SECTION 10.3(a).
"RESPONSE PERIOD" has the meaning given in SECTION 10.3(a).
"SALE NOTICE" has the meaning given in SECTION 10.1A(a).
"SALE PROPERTY" has the meaning given in RECITAL D.
"SALE PROPERTY PROCEEDS" has the meaning given in RECITAL D.
"SALES PERIOD" has the meaning given in SECTION 10.3(d).
"SENIOR LOAN" means that certain first mortgage loan and, if
any, mezzanine loan, in the maximum aggregate amount of $525,000,000, entered
into on the Effective Date by BP/CG I and BP/▇▇ ▇▇, as borrowers, and German
American Capital Corporation, and others, as lenders.
"SENIOR PREFERRED EQUITY" means Company equity which is
evidenced by Preferred Units (or partial units, as applicable) but which does
not earn a return. As of the Effective Date, the Senior Preferred Equity shall
be (i) held by Ceppeto, (ii) in an amount equal to $3,691,083.78 and (iii) shall
be evidenced by 3.69108378 Preferred Units. In no event shall any Capital
Contributions made after the Effective Date constitute Senior Preferred Equity.
"SHMM" has the meaning given in RECITAL C.
"SKYLINE I" has the meaning given in RECITAL C.
"SKYLINE II" has the meaning given in RECITAL C.
"STATED PRICE" has the meaning given in SECTION 10.1A(a).
"TAX MATTERS PARTNER" has the meaning given in SECTION 7.6.
"TAX PROTECTION AGREEMENT" means that certain Tax Protection
Agreement of even date herewith by and between Ceppeto, Ceppeto Holdings and
BPLP.
"TAX PROTECTION PERIOD" has the meaning given to such term in
the Tax Protection Agreement.
"TERM" has the meaning given in SECTION 3.1.
"THIRD-PARTY BUYER" has the meaning given in SECTION 10.3(d).
"TRANSACTION DOCUMENTS" means the documents listed on SCHEDULE
1 attached hereto.
13
"UNIT 1 CONTRACT" has the meaning given in RECITAL C.
"UNIT NUMBER" has the meaning given in SECTION 10.7(c).
"UNIT 2 CONTRACT" has the meaning given in RECITAL C.
1.2. RULES OF CONSTRUCTION. The definitions in this ARTICLE 1
will apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. 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.
The words "include," "includes," and "including" and words of
similar import are deemed to be followed by the phrases "without limitation" or
"but not limited to." The words "herein," "hereafter" and "hereto" refer to this
Agreement as a whole and not to any particular Section or subsection.
1.3. SECTIONS; SCHEDULES AND EXHIBITS. References to Sections,
Schedules and Exhibits are to Sections of and Schedules and Exhibits attached to
this Agreement, unless otherwise indicated. The Schedules and Exhibits to this
Agreement are fully incorporated and made a part of the operative provisions of
this Agreement.
ARTICLE 2. THE COMPANY
2.1. CONTINUATION OF LIMITED LIABILITY COMPANY; MERGER OF
ORIGINAL COMPANY INTO THE COMPANY; ADMISSION OF BOSTON PROPERTIES MEMBERS. The
Company was formed as a limited liability company under the Act by the filing of
its Certificate of Formation with the Secretary of State of the State of
Delaware on April 18, 2001 (such Certificate of Formation, as the same may from
time to time be amended in accordance with this Agreement, the "CERTIFICATE OF
FORMATION"). The Original Company merged into and with the Company as of the
Effective Date of the Merger, pursuant to the Merger Agreement, with the Company
being the surviving limited liability company of the merger, and the Original
Company ceasing to separately exist. The Certificate of Merger was filed with
the Secretary of State of the State of Delaware on April 20, 2001 and with the
Secretary of State of the State of New York on April 20, 2001, which filing of
the Certificate of Merger with the Secretary of State of the State of New York
is effective as the articles of dissolution of the Original Company pursuant to
Section 1004(d) of the New York Limited Liability Company Law. The Company shall
continue as a Delaware limited liability company for the purposes and on the
terms and conditions set forth in this Agreement. The Members agree and
acknowledge that for tax purposes, the Company is a continuation of the Original
Company and is not a newly formed entity. The Members agree to execute,
acknowledge, swear to, file and publish any documents required under applicable
law to preserve the existence of the Company as a limited liability company and
to cause the Company to be duly recognized and qualified as such in all
jurisdictions in which it conducts business. The Boston Properties Members are
hereby admitted as Members of the Company as of the
14
Effective Date, and the Ceppeto Members hereby consent to the admission of the
Boston Properties Members as Members of the Company. This Agreement amends,
supersedes and wholly replaces any and all prior operating agreements or other
similar agreements of the Company, including without limitation, the Company's
Operating Agreement.
2.2. NAME OF COMPANY. The Company will continue to conduct its
business under the name "BP/CGCenter Acquisition Co. LLC". All business of the
Company will be conducted in its name or in such other name as the Managing
Member may from time to time determine. The Managing Member shall provide
written notice to the Ceppeto Members of any change in the name of the Company.
2.3. PURPOSE OF COMPANY. The purposes of the Company are to
acquire, directly or indirectly, an interest in the Property and to thereafter
own (directly or indirectly), operate, manage, finance, lease, mortgage, pledge,
encumber, maintain, redevelop, exchange, transfer, sell and/or otherwise deal
with and dispose of the Property and/or any direct or indirect debt and/or
equity interest in the Property, and to own any interests or properties or to
engage in any activities necessary, convenient or incidental thereto. The
Company is authorized to take any legal measures which will assist it in
accomplishing its purposes or benefit the Company, but shall have no power or
purpose to engage in any activity or business that is not consistent with or
related to the foregoing.
2.4. PRINCIPAL AND REGISTERED OFFICE. The principal office of
the Company shall be c/o Boston Properties, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other place in the City of New York as the Managing
Member may from time to time determine. The registered address of the Company
shall be c/o National Corporate Research, Ltd., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The registered agent of the Company at such address
shall be National Corporate Research, Ltd. The Managing Member may elect to
change the Company's registered agent and the Company's registered and principal
offices by complying with the relevant requirements of the Act.
2.5. FURTHER ASSURANCES. The parties hereto will execute
whatever certificates and documents, and will file, record and publish such
certificates and documents, which are required to operate a limited liability
company under the laws of the State of Delaware and the laws of the state in
which the Property is located. The parties hereto will also execute and file,
record and publish such certificates and documents as they, upon advice of
counsel, may deem necessary or appropriate to comply with other applicable laws
governing the operation of a limited liability company.
2.6. CERTAIN EXPENSES OF MEMBERS. Each Member shall bear its
own expenses in connection with its consideration of an investment in the
Company, formation of the Company and its acquisition of a membership interest
in the Company, including the fees of any attorney, financial advisor or other
consultant, except as this Agreement or the Master Transaction Agreement may
otherwise expressly provide.
15
2.7. NO INDIVIDUAL AUTHORITY. Except as otherwise expressly
provided in this Agreement or as from time to time authorized in writing by the
Managing Member, neither Ceppeto nor Ceppeto Holdings, acting jointly or
individually, will have authority to act for or bind, or undertake, incur or
assume any obligations or responsibility on behalf of, Managing Member, any
Boston Properties Member or the Company.
2.8. NO RESTRICTIONS. Nothing contained in this Agreement
shall be construed so as to prohibit any Member or any Affiliate of any Member
from owning, operating, or investing in any real estate or real estate
development not owned or operated by the Company, wherever located. Each Member
agrees that the other Members and the Affiliates, directors, officers,
employees, partners and other Persons related to the other Members may engage in
or possess an interest in another business venture or ventures of any nature and
description, independently or with others, including the ownership, financing,
leasing, operation, management, syndication, brokerage and development of real
property. Without limiting the generality of the foregoing, nothing in this
Agreement shall prohibit any Member or any Affiliate of any Member from owning
and operating or investing in any real property that is competitive with the
Property, or from taking any action or failing to take any action, which action
or failure to act would be competitive with or detrimental to the Property or
the Company. Neither the Company nor the Members shall have any rights by virtue
of this Agreement in and to any of such independent ventures of any Member or
any such Member's Affiliates or to the income or profits derived therefrom.
2.9. NEITHER RESPONSIBLE FOR OTHER'S COMMITMENTS. Neither the
Members nor the Company shall be responsible or liable for any indebtedness or
obligation of a particular Member incurred either before or after the execution
of this Agreement, except as to those joint responsibilities, liabilities, debts
or obligations incurred pursuant to the terms of this Agreement, and each Member
indemnifies and agrees to hold the other Members and the Company harmless from
such obligations and debts of such Member, except as aforesaid.
2.10. AFFILIATES. Any and all activities to be performed by BP
Member (including in its capacity as Managing Member), BP Member II or BP Member
III under this Agreement may be performed by officers or employees of one or
more of their Affiliates.
2.11. OPERATIONS IN ACCORDANCE WITH THE ACT: OWNERSHIP. Except
as otherwise expressly set forth in this Agreement, the rights and obligations
of the Members and the administration, operation and termination of the Company
shall be governed by the Act. The interest of each Member in the Company shall
be deemed personal property for all purposes. All real and other property owned
by the Company is deemed owned by the Company as a company, and no Member,
individually, shall be deemed to have any ownership interest therein.
16
ARTICLE 3. TERM
3.1. TERM. Unless otherwise terminated or extended by the
Managing Member, the term of the Company (the "TERM") shall continue until the
first to occur of the following:
(a) April 24, 2100;
(b) the sale or other similar disposition of all or
substantially all of the Property, other than to a nominee or trustee
of the Company for financial or other business purposes;
(c) dissolution of the Company pursuant to the express
provisions of ARTICLE 11 and/or ARTICLE 12; or
(d) the occurrence of any event or circumstance that would
cause the dissolution of the Company under the Act.
ARTICLE 4. CAPITALIZATION OF THE COMPANY; CONTRIBUTIONS
4.1. CAPITAL CONTRIBUTIONS. Upon execution of this Agreement,
each of the Members has contributed or is deemed to have contributed capital to
the Company as follows (the "INITIAL CAPITAL CONTRIBUTIONS").
(a) The Sale Property Proceeds have been deposited with the
Qualified Intermediary, with the result that the total capital in the
Company immediately prior to the Effective Date is zero (excluding such
Sale Property Proceeds which are then held by the Qualified
Intermediary for the benefit of the Company). The Company, at the
Ceppeto Members request, shall cause the Qualified Intermediary to
apply (and the BP Members hereby consent to such application)
$150,891,083.78 of the Sale Property Proceeds toward the acquisition of
the Property by the Company (it being acknowledged that any interest
earned thereon may be disbursed directly by the Qualified Intermediary
to the Ceppeto Members, in accordance with the Master Transaction
Agreement). Accordingly, Ceppeto Holdings and Ceppeto are deemed to
have contributed $1,659,801.92 and $149,231,281.86, respectively, to
the capital of the Company. In consideration of such deemed
contribution, the Company has issued 115.89108378 Preferred Units to
Ceppeto, and Ceppeto holds $33,340,198.08 in Class B Common Equity and
Ceppeto Holdings holds $1,659,801.92 in Class B Common Equity.
(b) BP Member made a cash contribution to the Company in the
amount of $66,449,275. In consideration of such contribution, BP Member
holds $66,449,275 in Class A Common Equity. BP Member III has made a
cash contribution to the Company in the amount of $16,350,725. In
consideration of such contribution, the Company has issued 16.350725
Preferred Units to BP Member III.
17
(c) Immediately following, but substantially simultaneously
with, BP Member's and BP Member III's cash contribution to the Company,
Ceppeto contributed to BPLP 112.2 Preferred Units issued to Ceppeto by
the Company in accordance with SECTION 4.1(a) (including the Preferred
Equity in connection therewith in the amount of $112,200,000), in
consideration of an aggregate amount of $112,200,000 in OP Units to be
issued by BPLP to Ceppeto pursuant to the Master Transaction Agreement,
and BPLP has immediately thereafter contributed such 112.2 Preferred
Units (including the Preferred Equity in connection therewith in the
amount of $112,200,000) to BP Member II. Immediately following such
contribution by Ceppeto, the remaining Preferred Units (and Preferred
Equity) then held by Ceppeto are reclassified as Senior Preferred
Equity, evidenced by such Preferred Units. As a result of such
contribution and reclassification, Ceppeto continued to hold 3.69108378
Preferred Units, which Preferred Units are evidence of $3,691,083.78 of
Senior Preferred Equity. For all purposes of this Agreement, BP Member
II is treated as having made an Initial Capital Contribution that is
deemed to be the value of the Preferred Units contributed to BPLP by
Ceppeto, and BP Member II is the holder of 112.2 Preferred Units
(including the Preferred Equity in connection therewith in the amount
of $112,200,000). As of the Effective Date, neither Ceppeto nor Ceppeto
Holdings holds any Class A Common Equity or Preferred Equity and
neither BP Member II nor BP Member III holds any Class A Common Equity.
Ceppeto does, however, hold Preferred Units evidencing Senior Preferred
Equity as provided herein.
Each Member's Initial Capital Contribution will constitute such
Member's Capital Account.
4.2. CAPITALIZATION. After giving effect to the transactions
described in SECTION 4.1 and the admission of BP Member, BP Member II and BP
Member III to the Company, the resulting capital structure of the Company and
Capital Accounts of the Members, as of the Effective Date are as follows:
SENIOR PREFERRED
MEMBER COMMON EQUITY PREFERRED UNITS EQUITY/PREFERRED EQUITY
------ ------------- --------------- -----------------------
Ceppeto Holdings $ 1,659,801.92 -- --
Class B
Ceppeto $33,340,198.08 3.69108378 Units $3,691,083.78
Class B Senior Preferred
Equity
BP Member $66,449,275 -- --
Class A
BP Member II -- 112.2 Units $112,200,000
Preferred Equity
BP Member III -- 16.350725 Units $16,350,725
Preferred Equity
18
4.3. NO OTHER CONTRIBUTIONS. Except as set forth in SECTION
4.6, no Member will have any obligation to make any additional contribution or
to advance any funds to the Company.
4.4. RETURNS. The Members will, to the extent of legally
available funds, be entitled to returns on their Capital Contributions as set
forth in this SECTION 4.4 and payable in accordance with ARTICLE 9 (or, in the
event of a liquidation or dissolution of the Company in accordance with the
terms of this Agreement, ARTICLE 12). Calculation of the returns to which each
Member is entitled shall take into account all distributions made to such
Member. The Managing Member shall calculate the returns, and such calculations
will be binding on all Members and the Company absent manifest error.
(a) PREFERRED EQUITY. Commencing on and as of the Effective
Date and continuing until the Flip Date, each Member's Preferred Equity
will accrue a return at a rate of 10% per annum, compounded annually to
the extent unpaid (the "PREFERRED RETURN").
(b) SENIOR PREFERRED EQUITY. In no event shall there be any
return attributable to or accruing on the Senior Preferred Equity.
(c) ADDITIONAL PREFERRED EQUITY. Each Member's Additional
Preferred Equity, if any, will accrue a return to the extent unpaid at
a rate of (i) 10% per annum, compounded annually until the tenth (10th)
anniversary of the Effective Date and (ii) thereafter at the greater of
(x) 10% per annum, compounded annually or (y) 4.8% per annum in excess
of the yield on 10-year U.S Treasury Securities as of the first day of
each calendar month, compounded annually, as determined by the Managing
Member in its reasonable discretion (the "ADDITIONAL PREFERRED EQUITY
RETURN").
(d) CLASS A COMMON EQUITY. Commencing on and as of the
Effective Date and continuing until the later to occur of (1) the Flip
Date, or (2) the Priority Payment Cessation Date, Class A Common Equity
will accrue a return at a rate of 10% per annum, compounded annually to
the extent unpaid (the "CLASS A COMMON RETURN").
(e) CLASS B COMMON EQUITY. If on and as of the Flip Date (1)
the Preferred Equity has not been redeemed in its entirety and (2) the
accrued (and compounded) Preferred Return and the accrued (and
compounded) Class A Common Return have not been paid in full, then
commencing on and as of the Flip Date and continuing until the Priority
Payment Cessation Date, the Class B Common Equity will accrue a return
at a rate of 10% per annum, compounded annually to the extent unpaid
(the "CLASS B COMMON RETURN").
(f) ADJUSTED PREFERRED BALANCE. Commencing on and as of the
Flip Date, the Adjusted Preferred Balance, if any, will accrue a return
at a rate of ten percent (10%) per
19
annum, compounded annually to the extent unpaid (the "ADJUSTED
PREFERRED BALANCE RETURN").
Notwithstanding anything to the contrary in this Agreement, (i) the Class A
Common Equity will accrue the Class A Common Return for at least ten (10) years
following the Effective Date, (ii) the Class B Common Equity will in no event
accrue any return at any time prior to the Flip Date, and (iii) the Common
Equity shall not accrue a Common Return after the later of (x) the Flip Date or
(y) the date on which the Adjusted Preferred Balance and accrued (and
compounded) Adjusted Preferred Balance Return, if any, have been paid in full.
4.5. NO WITHDRAWALS. No Capital Contributions may be
withdrawn, except as hereinafter expressly stipulated.
4.6. ADDITIONAL CONTRIBUTIONS.
If the Managing Member determines in its good faith business
judgment that the Company is in need of additional funding for owning,
maintaining, managing, leasing or otherwise operating the Property or for
necessary capital improvements at the Property or for any other permitted
purpose as determined by the Managing Member, and the amounts required for such
funding are not borrowed by the Company from a third party lender on reasonably
satisfactory terms, as determined by the Managing Member (provided however, in
no event (except only in connection with a Refinancing) shall the Company borrow
such amounts prior to the fifteenth (15th) anniversary of the Effective Date if
the rate of interest payable thereon is in excess of the then applicable
Additional Preferred Equity Return rate), then BP Member III (and not the
Managing Member or BP Member II) may contribute all such required funds as
Additional Preferred Equity on the date designated by the Managing Member.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF CEPPETO MEMBERS
In order to induce (i) the Boston Properties Members to make
the contributions to the Company and to become Members of the Company on the
terms and conditions set forth herein and (ii) to enter into and to cause BPLP
to enter into the Master Transaction Agreement and the Tax Protection Agreement,
the Ceppeto Members, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, jointly and severally, hereby
make the following representations and warranties to the Boston Properties
Members, the remedy for any breach of which shall be as set forth in SECTION
13.5. The representations and warranties set forth in this Agreement will
survive the Effective Date as set forth in SECTION 13.5(b)(1), notwithstanding
the dissolution or termination of the Company or any redemption, transfer or
other termination of the Ceppeto Members' interests in the Company.
5.1. ORGANIZATION AND POWER.
(a) The Original Company was, at all times on or prior to the
Effective Date of the Merger, a limited liability company duly
organized, validly existing and in good
20
standing under the laws of the State of New York; a Certificate of
Merger has been filed with the Secretary of State of the State of
Delaware on April 20, 2001, and a Certificate of Merger has been filed
with the Secretary of State of the State of New York, on April 20,
2001; and the Company is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business and is in good standing in the
State of New York. The Company had all requisite limited liability
company power and authority to take the Past Company Actions, to enter
into the Past Company Agreements, and to own and convey the Sale
Property, and, as of the date hereof, has all requisite limited
liability company power and authority to acquire and hereafter own the
Property, to carry on its business as previously and presently
conducted and as contemplated by this Agreement, and to perform the
acts to be performed by it under this Agreement, including the issuance
of the Preferred Units and the Common Equity as described herein. All
Persons acting by and on behalf of the Company (including without
limitation, all members and managers of the Company) prior to the
Effective Date had all requisite limited liability company (or other
applicable entity) power and authority to take the Past Company
Actions, to enter into the Past Company Agreements, and to cause the
Company to own and convey the Sale Property, and had all requisite
limited liability company (or other applicable entity) power and
authority to cause the Company to acquire and hereafter own the
Property, to carry on its business as presently conducted and as
contemplated by this Agreement, and to cause the Company to perform the
acts to be performed by it under this Agreement, including the issuance
of the Preferred Units and the Common Equity as described herein. The
Organizational Documents of the Company (other than this Agreement), as
amended to date, which have been furnished to the Boston Properties
Members, are correct and complete and no amendments thereto are
pending, except as specifically contemplated by this Agreement. The
Company is not now and has never been in violation of its
Organizational Documents as in effect from time to time.
(b) Ceppeto is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Ceppeto has all requisite limited liability company power and
authority to own its interest in the Company, to carry on its business
as presently conducted and as contemplated by this Agreement, and to
perform the acts to be performed by it under this Agreement, including
the acquisition of Preferred Units and Class B Common Equity and the
contribution of Preferred Equity to BPLP contemplated hereby. Ceppeto
had all requisite limited liability company power and authority to take
any actions taken by it and to execute and deliver (and perform all
obligations under) all documents executed by it on and prior to the
Effective Date. Ceppeto's Organizational Documents, as amended to date,
which have been furnished to the Boston Properties Members, are correct
and complete and no amendments thereto are pending. Ceppeto is not now
and has never been in violation of its Organizational Documents as in
effect from time to time.
(c) Ceppeto Holdings is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Ceppeto Holdings has all requisite limited liability
company power and authority to own its interest in the
21
Company, to carry on its business as presently conducted and as
contemplated by this Agreement, and to perform the acts to be performed
by it under this Agreement, including the acquisition of Class B Common
Equity contemplated hereby. Ceppeto Holdings had all requisite limited
liability company power and authority to take any actions taken by it
and to execute and deliver (and perform all obligations under) all
documents executed by it prior to the Effective Date. Ceppeto Holdings'
Organizational Documents, as amended to date, which have been furnished
to the Boston Properties Members, are correct and complete and no
amendments thereto are pending. Ceppeto Holdings is not now and has
never been in violation of its Organizational Documents as in effect
from time to time.
(d) As of February 7, 2001, Skyline I and Skyline II were
each limited liability companies duly organized, validly existing and
in good standing under the laws of the State of Delaware. As of
February 7, 2001, Skyline I and Skyline II each had all requisite
limited liability company power and authority to own its respective
assets (including without limitation, its respective interests in the
Property), to carry on its business as presently conducted and as
contemplated by this Agreement and the Transaction Documents, and to
perform the acts to be performed by it under this Agreement and the
Transaction Documents. Skyline I and Skyline II each had all requisite
limited liability company power and authority to take any actions taken
by it prior to February 7, 2001, and to execute and deliver (and
perform all obligations under) all documents and agreements executed by
them prior to February 7, 2001. Skyline I's and Skyline II's
Organizational Documents, as amended to February 7, 2001, which have
been furnished to the Boston Properties Members, are correct and
complete and no amendments thereto were pending as of such date. As of
February 7, 2001, neither Skyline I nor Skyline II had ever been in
violation of its Organizational Documents as in effect from time to
time.
5.2. AUTHORIZATION.
(a) The execution, delivery and performance by each of the
Ceppeto Members of this Agreement and the Transaction Documents have
been duly authorized by all necessary limited liability company or
other action of each of the Ceppeto Members. This Agreement and the
Transaction Documents and all documents executed by the Ceppeto
Members, or any of them, pursuant hereto or thereto are valid and
binding obligations of the Ceppeto Members, enforceable against the
Ceppeto Members in accordance with their terms.
(b) The execution, delivery and performance by the Company of
the Past Company Agreements have been duly authorized by all necessary
limited liability company or other action of the Company and all
constituent members of the Company. The Past Company Agreements are
valid and binding obligations of the Company, enforceable in accordance
with their terms.
22
(c) As of February 7, 2001, the execution, delivery and
performance by Skyline I and Skyline II of all prior documents or other
agreements to which they are a party have been duly authorized by all
necessary limited liability company or other action of Skyline I or
Skyline II and all constituent members of the Skyline I and Skyline II.
All such documents or other agreements are identified on the attached
SCHEDULE 5.2(c) and are valid and binding obligations of Skyline I and
Skyline II, enforceable in accordance with their terms.
5.3. ABSENCE OF LIABILITIES. Except only pursuant to the
Purchase Contracts, the documents evidencing the Senior Loan, the Tax Protection
Agreement, the Master Transaction Agreement and as otherwise set forth on the
attached SCHEDULE 5.3, none of the Company or, as of February 7, 2001, Skyline I
or Skyline II, has or is subject to, any liability, obligation, claim, lien or
encumbrance of any kind or nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, including liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
then accrued and no Ceppeto Member or any constituent member of either Ceppeto
Member has or is subject to, any liability, obligation, claim, lien or
encumbrance of any kind or nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, including liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
then accrued which would adversely effect the Company, Skyline I, Skyline II,
BP/CG I or BP/▇▇ ▇▇. None of the Company or, as of February 7, 2001, Skyline I
or Skyline II, is or was in violation, breach or default, and there exist or
existed no events or circumstances with respect to any of them that, with notice
or the passage of time or both, would constitute defaults, in respect of or
under any preexisting agreement or obligation binding on such parties or
otherwise affecting Skyline I, Skyline II, BP/CG I or BP/▇▇ ▇▇, including
without limitation, any Past Company Actions or Past Company Agreements and none
of the Ceppeto Members or any constituent member of either Ceppeto Member is in
violation, breach or default, and there exist no events or circumstances with
respect to any of them that, with notice or the passage of time or both, would
constitute defaults, in respect of or under any preexisting agreement or
obligation binding on or otherwise affecting Skyline I, Skyline II, BP/CG I or
BP/▇▇ ▇▇, including without limitation, any Past Company Actions or Past Company
Agreements which would adversely effect the Company, Skyline I, Skyline II,
BP/CG I or BP/▇▇ ▇▇. Any and all obligations and liabilities of the Company,
Skyline I or Skyline II (or contractual or other similar rights, including any
rights based, in part or in whole, upon the assets of Skyline I, Skyline II or
the Company, including the Sale Property), whether arising from Past Company
Actions and Past Company Agreements or otherwise, have been satisfied in full
and there exist no claims or potential claims against the Company, Skyline I,
Skyline II, BP/CG I, BP/▇▇ ▇▇, or, to the extent the same would have an adverse
effect on the Company, the Ceppeto Members or any other holders of equity
interests in the Company in respect thereof (except only (a) pursuant to the
Transaction Documents, (b) with respect to Skyline I and Skyline II only, for
obligations and liabilities created by the Boston Properties Members or any of
their Affiliates after February 7, 2001) and (c) with respect to BP/CG I and
BP/▇▇ ▇▇ only, for obligations and liabilities created by the Boston Properties
Members or any of their Affiliates). As of the Effective Date there are no
agreements or obligations of any kind, including Past Company Agreements, to
which the Company, Skyline I or Skyline II is a party or by which the Company,
Skyline I or Skyline II is bound (or pursuant to
23
which the Company has or may have any liability or obligation) except only (a)
as set forth on the attached SCHEDULE 5.3 and (b) with respect to Skyline I and
Skyline II only, for obligations and liabilities created by the Boston
Properties Members or any of their Affiliates after February 7, 2001.
5.4. LITIGATION. Except only as set forth on the attached
SCHEDULE 5.4, there is no claim, litigation or governmental proceeding or
investigation asserted, pending or to the knowledge of the Ceppeto Members,
threatened against the Company, Skyline I, Skyline II, either Ceppeto Member or
any constituent member of either Ceppeto Member or to the knowledge of the
Ceppeto Members, asserted, pending or threatened against BP/CG I or BP/▇▇ ▇▇, or
affecting any of their respective properties or assets, including any litigation
or governmental proceeding or investigation that (a) arises out of Past Company
Actions or Past Company Agreements, and/or (b) may call into question the
validity or hinder the enforceability of this Agreement or any of the
Transaction Documents or the transactions contemplated hereby or thereby,
except, and with respect only to Skyline I, Skyline II, BP/CG I and BP/▇▇ ▇▇, no
such representation is made in respect of claims of third-parties unaffiliated
with the Ceppeto Members or any constituent member of either Ceppeto Member,
first arising or created by the Boston Properties Members or any of their
Affiliates after February 7, 2001. No act or omission on the part of the Ceppeto
Members or their Affiliates has occurred and no circumstances exist on account
of any act or omission on the part of the Ceppeto Members or their Affiliates
that could form the basis of any such claim, litigation, proceeding or
investigation which could have an adverse effect on the Company, Skyline I,
Skyline II, BP/CG I or BP/▇▇ ▇▇.
5.5. NON-CONTRAVENTION. The execution, delivery and
performance by the Ceppeto Members of this Agreement, and by the Ceppeto
Members, the Company, and, as of February 7, 2001, Skyline I and Skyline II, of
each of the other agreements, documents and instruments (including without
limitation, the Transaction Documents) to be executed and delivered by such
parties as contemplated hereby, and the consummation of the transactions
contemplated hereby and by the other Transaction Documents, do not and will not
(a) violate or conflict with, or result in a default (whether after the giving
of notice, lapse of time or both) or loss of a material benefit under, any
contract or obligation to which the Company or, to the extent entered into prior
to February 7, 2001, Skyline I or Skyline II or, to the knowledge of the Ceppeto
Members, BP/CG I or BP/▇▇ ▇▇, is a party or by which any of its assets are bound
(including any Past Company Agreement), or any provision of the Organizational
Documents of either Ceppeto Member, the Company or, to the extent entered into
prior to February 7, 2001, Skyline I or Skyline II, (b) violate or result in a
violation of, or constitute a default under, any provision of any law,
regulation or rule, or any order of, or any restriction imposed by, any court or
governmental agency applicable to the Company, Skyline I or Skyline II or to the
knowledge of the Ceppeto Members, BP/CG I or BP/▇▇ ▇▇, or (c) accelerate any
obligation under or give rise to a right of termination of or result in a loss
of a material benefit under any indenture or loan or credit agreement or any
other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company, or, to the extent in effect on or prior
to February 7, 2001, Skyline I, Skyline II or to the knowledge of the Ceppeto
Members, BP/CG I or BP/▇▇ ▇▇, is a party or by which the property of the
Company, BP/CG I, BP/▇▇ ▇▇, Skyline I, Skyline II, either Ceppeto
24
Member or any constituent member of either Ceppeto Member, is bound or affected,
or result in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the assets of the Company,
BP/CG I, BP/▇▇ ▇▇, Skyline I or Skyline II. Neither the Past Company Actions nor
the execution, delivery and performance of the Past Company Agreements violated
or resulted in a violation of, or constituted a default under, any provision of
any law, regulation or rule, or any order of, or any restriction imposed by, any
court or governmental agency applicable to Skyline I, Skyline II, the Company or
its members.
5.6. OWNERSHIP OF DIRECT AND INDIRECT INTERESTS IN THE
COMPANY.
(a) Immediately prior to the effectiveness of this Agreement,
the capital structure of the Company was as set forth in SCHEDULE
5.6(a), and the Ceppeto Members were the sole members of the Company.
Each Ceppeto Member is the sole legal and beneficial owner of its
interest in the Company, free and clear of any lien, claim, pledge,
easement, restrictive covenant, hypothecation, assignment, preference,
priority, security interest, option, right of first refusal or offer,
or other encumbrance or charge, and no party other than the Ceppeto
Members and, as of the date hereof, the Boston Properties Members, has
any right, title, claim or interest (i) in and to the equity interests
in the Company (or has any other direct or indirect rights or interest
in and to the Company of any kind or nature, including without
limitation, any options, warrants, rights to acquire, profit-sharing,
cash-flow, participation or other similar or dissimilar interests, or
any other convertible or exchangeable rights for interests in the
Company) or (ii) in and to the Sale Property or any proceeds therefrom.
(b) ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, immediate family members of
▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇ and trusts for the benefit of ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ or immediate family members of ▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇▇
▇▇▇▇▇ hold all beneficial interest in Ceppeto. The capital structures
of Ceppeto and of each direct or indirect holder of beneficial interest
in Ceppeto are as set forth in SCHEDULE 5.6(b), and except for the
Persons named on SCHEDULE 5.6(b), no Person has any direct or indirect
right, title or interest in or to the equity interests in Ceppeto (or
has any other direct or indirect rights or interest in and to Ceppeto
of any kind or nature, including without limitation, any options,
warrants, rights to acquire, profit-sharing, cash-flow, participation
or other similar or dissimilar interests, or any other convertible or
exchangeable rights for interests in Ceppeto).
(c) ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, immediate family members of
▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇ and trusts for the benefit of ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ or immediate family members of ▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇▇
▇▇▇▇▇ hold all beneficial interest in Ceppeto Holdings. The capital
structures of Ceppeto Holdings and of each direct or indirect holder of
beneficial interest in Ceppeto Holdings are as set forth in SCHEDULE
5.6(c), and except for the Persons named in SCHEDULE 5.6(c), no Person
has any direct or indirect right, title or interest in or to the equity
interests in Ceppeto Holdings (or has any other direct or indirect
rights or interest in and to Ceppeto Holdings of any kind or nature,
including without limitation, any options, warrants, rights to acquire,
profit-sharing, cash-
25
flow, participation or other similar or dissimilar interests, or any
other convertible or exchangeable rights for interests in Ceppeto
Holdings).
(d) As of February 7, 2001, the capital structures of Skyline
I and Skyline II and of each direct or indirect holder of beneficial
interest in Skyline I and Skyline II were as set forth in SCHEDULE
5.6(d), and except for the Persons named in SCHEDULE 5.6(d), no Person
had any direct or indirect right, title or interest in or to the equity
interests in either Skyline I or Skyline II (or had any other direct or
indirect rights or interest in and to either Skyline I or Skyline II of
any kind or nature, including without limitation, any options,
warrants, rights to acquire, profit-sharing, cash-flow, participation
or other similar or dissimilar interests, or any other convertible or
exchangeable rights for interests in either Skyline I or Skyline II).
(e) Each applicable Ceppeto Member owned beneficially and on
the records of BP/CGMM2, and assigned, contributed and otherwise
transferred to the Company, free and clear of any and all liability,
lien, claim, pledge, voting agreement, option, charge, security
interest, mortgage, deed of trust, encumbrance, right of assignment,
purchase right or other restriction of any kind, nature or description,
its entire interest (representing an aggregate 34.5% interest) in
BP/CGMM2. Ceppeto Holding Enterprises LLC owned beneficially and on the
records of each of Skyline I and Skyline II, and assigned, contributed
and otherwise transferred to SHMM, free and clear of any and all
liability, lien, claim, pledge, voting agreement, option, charge,
security interest, mortgage, deed of trust, encumbrance, right of
assignment, purchase right or other restriction of any kind, nature or
description, its entire interest (representing an aggregate 1% interest
in each) in each of Skyline I and Skyline II.
ARTICLE 6. MANAGEMENT OF THE COMPANY
6.1. MANAGEMENT.
(a) BP Member is hereby appointed to serve as Managing Member
of the Company. The name and address of the Managing Member shall be
listed on EXHIBIT A, which shall be amended from time to time by the
Managing Member to reflect the resignation of the Managing Member or
the appointment of a new Managing Member pursuant to this Agreement.
The Managing Member of the Company shall be a Member, and shall hold
office until its resignation in accordance with SECTION 6.1(b). For so
long as (x) Boston Properties or its Affiliates is a direct or indirect
beneficial owner of any interest in the Company and (y) Boston
Properties and its Affiliates and one or more Institutional Holder(s)
collectively own, directly or indirectly, more than twenty-five percent
(25%) of either (1) the Percentage Interests in the Company or (2) the
aggregate then unreturned Capital Contributions, the Managing Member
shall be BP Member or an Affiliate of Boston Properties. At any time
during which the Managing Member of the Company is BP Member or an
Affiliate of Boston Properties, all covenants of the
26
Managing Member hereunder shall be joint and several obligations of BP
Member, BP Member II and BP Member III. The Managing Member shall
devote such time to the business and affairs of the Company as is
reasonably necessary for the performance of its duties, but shall not
be required to devote full time to the performance of such duties and
may delegate its responsibilities hereunder. The Managing Member shall
have full and exclusive authority, responsibility and discretion in the
day-to-day management, supervision and control of the Company. The
Managing Member shall be responsible for the establishment of policy
and operating procedures respecting the business affairs of the Company
and all of its activities. Except as otherwise expressly provided in
this Agreement (including without limitation, SECTION 10.1(a) with
respect to a Property Transfer), the Managing Member shall have the
authority to make all decisions for or affecting, and to take or fail
to take any and all actions on behalf of, the Company, including all
such decisions or actions necessary to cause the acquisition,
financing, operation, management and sale of the Property by BP/CG I
and BP/▇▇ ▇▇ (directly and indirectly), and any and all actions and
decisions with respect to the admission of new or additional Members to
the Company as may be permitted or contemplated under this Agreement
provided, however, that the Managing Member shall pay all operating
expenses which are payable by the Company out of funds maintained in
the Operating Expense Reserve prior to paying any such amounts from the
cash receipts of the Company from Property operations or Additional
Preferred Equity or other reserves. No action shall be taken,
obligations incurred or amounts expended by the Company without the
consent of the Managing Member. If any provision of this Agreement
requires an act or decision of "the Members" such act or decision shall
take place or be made by the Managing Member on behalf of the Members
and the Company. Any action taken by the Managing Member, and the
signature of the Managing Member on any agreement, contract, instrument
or other document on behalf of the Company, shall be sufficient to bind
the Company and shall conclusively evidence the authority of the
Managing Member and the Company with respect thereto. Any Person
dealing with the Company, the Managing Member or any Member may rely
upon a certificate signed by the Managing Member as to (i) the identity
of the Managing Member or any Member; (ii) any factual matters relevant
to the affairs of the Company; (iii) the Persons who are authorized to
execute and deliver any document on behalf of the Company; or (iv) any
act or omission by the Company, the Managing Member or any Member.
(b) The Managing Member may resign upon at least thirty (30)
days' notice to the other Members (unless notice is waived by them). If
the Managing Member (or any successor Managing Member) resigns then
either (i) the Managing Member can appoint its successor or (ii) if the
Managing Member elects not to appoint its successor, a new Managing
Member can be appointed by the Members. In the event that the Ceppeto
Members or their designee acquire the Entire BP Interest pursuant to
ARTICLE 10 of this Agreement, the Ceppeto Members may replace the
Managing Member. The Managing Member shall be entitled to reimbursement
for out-of-pocket expenses (other than overhead or general
administrative expenses not solely and directly allocable to the
Property) incurred in managing and conducting the business and affairs
of the Company.
27
(c) No Managing Member, nor any officer, director, employee,
Affiliate, shareholder, partner, member, manager, agent or other
representative of Managing Member, shall be obligated personally for
any debt, obligation or liability of the Company or of any Member,
whether arising in contract, tort or otherwise, solely by reason of
being or acting as Managing Member of the Company, as distinct from the
Managing Member's contractual obligations arising under the terms of
this Agreement. No Managing Member, nor any officer, director,
employee, Affiliate, shareholder, partner, member, manager, agent or
other representative of Managing Member, shall be personally liable to
the Company or to its Members for acting in good faith reliance upon
the provisions of this Agreement, or for breach of any fiduciary or
other duty to the Members, as distinct from the Managing Member's
contractual obligations arising under the terms of this Agreement. To
the extent of the Company's assets, and to the maximum extent permitted
by law, the Company shall indemnify and hold the Managing Member and
its officers, directors, employees, Affiliates, shareholders, partners,
members, managers, agents and other representatives harmless from and
against all liability, claim, loss, damage or expense, including
reasonable attorneys' fees, incurred or sustained by Managing Member or
any of them, arising out of, relating to or by reason of any act or
omission of the Managing Member made in good faith on behalf of the
Company, except only with respect to any such liability, claim, loss,
damage or expense incurred by the Managing Member solely as a result of
a breach by the Managing Member of its obligations under this Agreement
or such Managing Member's gross negligence or willful misconduct.
(d) Prior to the beginning of each fiscal year of the
Company, the Managing Member shall develop the annual operating and
capital expenditure budget (the "ANNUAL Budget") for the Property for
such upcoming fiscal year, which Annual Budget shall include annual
leasing guidelines for the leasing and marketing of the Property. In
connection with the development of each Annual Budget, the Managing
Member shall distribute a preliminary draft of the Annual Budget to the
Ceppeto Members for review and shall consult with the Ceppeto Members
in finalizing each Annual Budget, PROVIDED, HOWEVER, that the Managing
Member may finalize and adopt the Annual Budget without the approval of
the Ceppeto Members, notwithstanding any objections or concerns raised
during such consultation or the fact that such consultation did not
occur.
(e) There is no requirement that the Members hold a meeting
in order for the Company to take action on any matter. The Managing
Member may call meetings of the Members periodically to review the
day-to-day operations of the Property or for any other purpose, but the
Managing Member shall have no obligation to do so. The Managing Member
shall endeavor in good faith to hold such meetings on a monthly basis.
Any Member shall have the right, from time, to time, to call a meeting
of the Members for such purposes during any calendar quarter in which
no such meeting has been held.
6.2. BANK ACCOUNTS. The Company will maintain separate bank
accounts in such banks as the Managing Member may approve exclusively for the
deposit and disbursement
28
of all funds of the Company. All funds of the Company shall be promptly
deposited in such accounts. The Managing Member from time to time shall approve
signatories for such accounts. Upon written request by the Ceppeto Members, the
Managing Member shall notify the Ceppeto Members as to the location and account
numbers for such accounts.
6.3. REIMBURSEMENT FOR COSTS AND EXPENSES.(a) Subject to the
terms of SECTION 6.4, the Managing Member will fix the amounts, if any, by which
the Company will reimburse each Member for any costs and expenses incurred by
such Member on behalf and for the benefit of the Company; PROVIDED, HOWEVER,
that (a) all costs incurred by either Member in connection with the acquisition
of the Property shall be reimbursed by the Company and (b) no overhead or
general administrative expenses of any Person (other than overhead or general
administrative expenses solely and directly allocable to the Property), shall be
allocated to the operation of the Company, and no salaries, fees, commissions or
other compensation shall be paid by the Company to any Affiliate of any Member
or to any partner, officer or employee of any Member or its Affiliates for any
services rendered to the Company, except as expressly provided in this Agreement
or in the separate agreements entered into from time to time consistent with the
terms of this Agreement. In no event shall any employee, officer or director of
Boston Properties or BPLP be entitled to receive any fees or other compensation
as an officer or board member of any subsidiary of the Company, including
without limitation, BP/CG I, BP/▇▇ ▇▇, BP/CGMM and BP/CGMM2.
6.4. MANAGEMENT AGREEMENT.
(a) The Company shall enter into a management and leasing
agreement with BPLP or its Affiliate (the "PROPERTY MANAGER") in
substantially the form attached hereto as EXHIBIT B (the "MANAGEMENT
AGREEMENT"). The Managing Member shall be entitled to receive under
this Agreement, for its own account and in addition to any and all
other amounts which the Managing Member is entitled to receive under
this Agreement, a leasing override payment equal to $1.00 per net
rentable square foot of leased space, including space demised under
renewals or expansions, whether pursuant to options or otherwise, in
consideration of the leasing services to be provided by the Property
Manager pursuant to the Management Agreement (but only as and to the
extent Property Manager is not entitled to receive such payment under
the Management Agreement. Should the Management Agreement terminate for
any reason, the Company shall enter into an agreement for management
and leasing services for the Property with such operator or operators,
and on such terms, as are satisfactory to the Managing Member in its
sole and absolute discretion (but subject to SECTION 6.6 with respect
to any such agreement with an Affiliate of the Managing Member, and
provided that in no event shall the fees payable under any applicable
management agreement with any such Affiliate of the Managing Member
differ from those set forth in this SECTION 6.4(a) without the prior
written consent of all Members). Any such replacement management
agreement with an Affiliate of the Managing Member shall not be on
materially different terms with respect to the level of services,
standards and obligations to be provided by the property manager
thereunder, than the original Management Agreement. The Managing Member
agrees
29
(on behalf of itself and the Property Manager) that, although the
Management Agreement will provide for management fees payable to the
Property Manager of not more than 2.00% of the Property's gross rental
revenue, any such management fees which are in excess of 1.25% of the
Property's gross rental revenue shall only be payable to the Property
Manager to the extent paid by tenants (including, for such purpose,
payments by tenants under so-called "gross leases"). The Property
Manager shall also be entitled to receive reimbursements under the
Management Agreement (in excess of the management fees payable
thereunder) for the costs of Property Manager's on-site personnel up to
and including the level of property manager. Such on-site personnel may
consist of full-time staff as well as operating personnel who may spend
time at the Property and at other properties, in which event the
reimbursement shall be limited to the allocable share of such
personnel's time spent at the Property. Property Manager shall not be
reimbursed for any corporate overhead associated with its corporate
offices. All such reimbursement amounts shall at all times to be
consistent with the then current practices of the Property Manager and
its Affiliates with respect to such matters on properties similar to
the Property. The Managing Member shall enforce the foregoing terms of
the Management Agreement on behalf of the Company.
(b) As the Managing Member considers the type and scope of
leasing guidelines to adopt for the Property from time to time, the
Managing Member may consult with the Ceppeto Members with respect to
the material issues related thereto; PROVIDED, HOWEVER, that the
Managing Member may adopt such guidelines in its sole and absolute
discretion without the approval of the Ceppeto Members, notwithstanding
any objections or other concerns relating to such consultation or the
fact that such consultation did not occur. The Members acknowledge that
▇▇▇▇▇ ▇▇▇▇ LaSalle shall be engaged as the exclusive leasing agent for
the Property for a three (3) year term commencing on the Effective
Date, on such other terms and conditions and pursuant to such agreement
as shall be mutually acceptable to the Managing Member and ▇▇▇▇▇ Lang
LaSalle. The Managing Member shall have the right to cause the Company
to obtain additional financing in its sole and absolute discretion to
pay for all or a portion of the costs associated with leasing space at
the Property or for any other working capital needs of the Company,
PROVIDED that such financing is permitted under the terms of the Senior
Loan and PROVIDED FURTHER that, in no event (except only in connection
with a Refinancing) shall the Company borrow such amounts prior to the
fifteenth (15th) anniversary of the Effective Date if the rate of
interest payable thereon is in excess of the then applicable Additional
Preferred Equity Return rate. Upon the written request of the Ceppeto
Members, the Managing Member shall provide to the Ceppeto Members
copies of all material documents relating to such financing. In the
event that Managing Member elects to cause the Company to obtain such
additional financing, the Managing Member (or its Affiliates) shall
have the right to provide such financing in an amount and on terms and
conditions no less favorable than the Company would have obtained from
an unaffiliated third-party lender (but subject to the provisos set
forth in the third sentence of this SECTION 6.4(b)), PROVIDED, HOWEVER,
that if the Managing Member (or its Affiliates) elects to provide such
financing directly, the Managing Member shall give written notice of
such election to the Ceppeto Members, which notice shall specify the
material terms
30
and conditions of such proposed financing (which terms and conditions
shall be no less favorable than the Company could have obtained from an
unaffiliated third-party lender, as determined by the Managing Member,
and the Ceppeto Members shall have the right to provide their
proportionate share of such financing (based upon the then applicable
Percentage Interests), such election to be made, in writing, within
thirty (30) days after the date on which the Ceppeto Members shall have
received such written notice from the Managing Member. In the event
that the Ceppeto Members do not timely make such election, they shall
be deemed to have elected not to provide their proportionate share of
such financing. Any such loan made by the Managing Member shall be on
terms substantially the same as those contained in the applicable
notice provided to the Ceppeto Members, and shall close no later than
180 days after the date of such notice. If the financing does not close
within such time, and the Managing Member still intends to provide such
financing, the Managing Member shall so notify the Ceppeto Members and
again allow the Ceppeto Members the option to participate in such
financing on the terms set forth above.
6.5. MAJOR DECISIONS. The Managing Member may consult with the
Ceppeto Members with respect to matters relating to the Company and the
Property, which matters shall include the following specific actions; PROVIDED
that the Managing Member is hereby authorized to cause the Company to take any
such action in its sole and absolute discretion, without the approval of the
Ceppeto Members, notwithstanding any objections or other concerns raised during
such consultation or the fact that such consultation did not occur:
(a) subject to SECTION 10.1(a), the sale, directly or
indirectly, of all or any portion of the Property;
(b) borrowing money or amending the terms and conditions of
any financing (including the Senior Loan) or making elections with
respect to interest periods, interest rates, prepayment or other
material provisions under any financing, including the Senior Loan;
(c) granting any mortgage, security interest or other lien or
encumbrance affecting all or part of the Company's assets, including
the Property;
(d) SUBJECT TO SECTION 10.1(a), entering into any transaction
involving the merger, consolidation or restructuring of the Company;
(e) substantial modifications to the Annual Budget (or any
material component thereof); or
(f) the admission of any new or additional Member(s) to the
Company.
Notwithstanding anything to the contrary contained in this Agreement,
in the event that both (1) the aggregate Percentage Interests held by (i) the
Boston Properties Members and their Affiliates and (ii) the Institutional
Holder(s), if any, and (2) the quotient of (x) the aggregate then unreturned
Capital Contributions made by the Boston Properties Members and their Affiliates
31
and the Institutional Holder(s), if any, and (y) the aggregate then unreturned
Capital Contributions made by the Members, is less than twenty-five percent
(25%) at any time, then during such time: (A) the Managing Member shall not (1)
take any of the actions described in clauses (a) through (f) above, (2) enter
into an agreement with one of its Affiliates pursuant to SECTION 6.6 or (3)
adopt any Annual Budget pursuant to SECTION 6.1(d), without in each instance
first obtaining the written approval of the Ceppeto Members, which approval
shall not be unreasonably delayed, conditioned or withheld by the Ceppeto
Members; and (B) the Ceppeto Members shall have the sole right to enforce, on
behalf of the Company, any and all contracts with Affiliates of the Managing
Member in the event of a material breach thereof by such Affiliates of the
Managing Member, including the Management Agreement.
6.6. CONTRACTS WITH AFFILIATES. In addition to the Management
Agreement, the Managing Member, on behalf of the Company, may enter into any
agreement in the ordinary course of managing the Property with one of its
Affiliates, provided that the terms of any such agreement (including any
replacement of the Management Agreement, which shall, in all events be subject
to SECTION 6.4(a) of this Agreement) are no less favorable than the Company
would have obtained in a like transaction negotiated at arms-length with an
unaffiliated third party. The Managing Member shall notify the Ceppeto Members
of the material terms of any such agreements and shall enforce the economic
terms of all such agreements.
6.7. NON-INTERFERENCE COVENANT. Subject to the Ceppeto
Members' rights, if any, under the final paragraph of SECTION 6.5, each Ceppeto
Member agrees that it will not (i) interfere or attempt to interfere (and will
cause its Affiliates, and all Persons claiming by or through any of them, not to
interfere) directly or indirectly with the conduct of the business of the
Company by the Managing Member or the right of the Managing Member to control
and manage the Company, the Company's business and the Property, or the taking
or failure to take any action by the Managing Member hereunder or (ii) take any
action which the Managing Member is authorized or otherwise permitted to take
under this Agreement. If either Ceppeto Member or any of its Affiliates or any
Person claiming by or through any of them, breaches the foregoing covenant, then
the Managing Member shall have the right to deliver a written notice of such
breach to the Ceppeto Members at any time within ninety (90) days after such
breach (each, a "BREACH Notice"). If either Ceppeto Member or any of its
Affiliates or any Person claiming by or through any of them, breaches the
foregoing covenant at any time after the Managing Member shall have previously
delivered two (2) valid, bona fide Breach Notices, then the Managing Member
shall have the option, exercisable by giving notice to the Ceppeto Members at
any time within ninety (90) days after such breach, to acquire the Ceppeto
Members' entire interest in the Company for a purchase price equal to
ninety-five percent (95%) of the amount that would have been distributable to
the Ceppeto Members under SECTION 9.3(b) or 9.4(b), as applicable, if the
Property had been sold at Fair Market Value as of the date such notice of
acquisition is given by the Managing Member, as determined by an appraiser
selected in accordance with the procedure set forth in SECTION 12.2, less (i)
the amount of any reserves established by the Managing Member, in its reasonable
discretion, in consideration of any potential indemnification obligations of the
Ceppeto Indemnitors' pursuant to SECTION 13.5 and (ii) the sum of applicable
transfer taxes incurred as a result of such sale plus three percent (3%) of the
distributable amount, which the parties hereto unconditionally agree is a
reasonable estimate and
32
approximation of customary closing costs which would be associated with similar
transactions (provided however, that in consideration of the agreed upon
reduction of such Fair Market Value by the amount of the transfer taxes which
would be incurred in connection with a sale of the Property for such amount, the
Managing Member agrees to pay any transfer taxes actually payable in connection
with the conveyance contemplated hereunder, and shall indemnify the Ceppeto
Members from and against any cost or expense resulting from the failure to pay
such amounts as and when due). Any such reserves shall be retained by the BP
Member as collateral for the Ceppeto Indemnitors' indemnification obligations
under SECTION 13.5 and shall be maintained in an interest-bearing account (all
such interest to be retained in such account, and to be earned for the benefit
of the Ceppeto Members) at a commercial bank, trust company, savings bank or
other similar institutions selected by the BP Member and reasonably acceptable
to the Ceppeto Members. Any and all risk of loss with respect to such account
shall be borne solely and exclusively by the Ceppeto Members. All amounts
contained in such account will be remitted to the Ceppeto Members if, as and
when the pledge of the Ceppeto Members' Equity Interest would have been released
pursuant to SECTION 13.5(e)(3). Nothing contained in this SECTION 6.7 shall
limit or otherwise affect the Ceppeto Indemnitors' indemnification obligations
contained in SECTION 13.5. The Ceppeto Members shall assign their entire equity
interest in the Company to the Managing Member, or its designee, free and clear
of any and all claims, liens, pledges, restrictive covenants, charges,
hypothecations, preferences, priorities, security interests or other
encumbrances of any kind or nature, and shall provide customary representations
and indemnifications in connection therewith. The closing of such assignment
shall occur on a date determined by the Managing Member, which date shall be
within thirty (30) days after the determination, as set forth above, of the
amount to be paid for the Ceppeto Members' equity interest. Upon the
consummation of any such assignment of the Ceppeto Members' equity interest, the
Ceppeto Members shall be deemed to have withdrawn from the Company and shall
have no further right, claim or interest in and to the Company. The grant of
this option to the Managing Member is intended to establish a measure of
liquidated damages for the costs, expenses and damages that would be suffered by
the Boston Properties Members in the event of a breach by either Ceppeto Member
of the covenant set forth in this SECTION 6.7, since the actual damages that
might be sustained by the Boston Properties Members in such event would be
extremely difficult if not impossible to ascertain having regard to the
long-term impact on the Boston Properties Members' economic interests, the
potential dislocation of its resources and the potential damage to reputation
that might result from such a breach. The Ceppeto Members acknowledge that the
exercise of such option would afford the Boston Properties Members a reasonable
measure of damages under the circumstances. it is the intent of the parties to
this Agreement that the requirements or obligations of the Ceppeto Members to
sell its equity interest in the Company to the Managing Member, or its designee,
hereunder shall be enforceable by an action for specific performance of a
contract relating to the purchase of real property or an interest therein. In
the event that the Ceppeto Members shall have created or suffered any
unauthorized liens, encumbrances or other adverse interests against either the
Property or the Ceppeto Members' interests in the Company, the Managing Member
shall be entitled either to an action for specific performance to compel the
Ceppeto Members to have such defects removed, at the Ceppeto Members' expense,
in which case the closing shall be adjourned for such purpose,
33
or, at the Managing Members' option, to an appropriate offset against the
purchase price, which offset shall include all reasonable costs associated with
enforcement of this Section.
6.8. PROCEEDS OF ADDITIONAL FINANCING. In connection with any
refinancing of the Senior Loan (the "REFINANCING"), the Managing Member intends
to use commercially reasonable efforts to maximize the net proceeds from such
Refinancing so as to allow the repayment in full of the Preferred Equity upon
the making of distributions in connection with such Refinancing in accordance
SECTION 9.3(b); PROVIDED, HOWEVER, that the Managing Member shall have no
obligation to enter into any particular Refinancing agreement (or enter into any
Refinancing at all), or to obtain any specific loan amount upon Refinancing or
to otherwise accept any terms, conditions or other provisions (including
financial and other covenants, interest rate, loan to value and/or debt service
coverage ratios) that are not acceptable to the Managing Member in its sole and
absolute discretion. Without limiting the generality of the foregoing, the
Managing Member shall in no event be obligated to enter into any Refinancing,
the terms of which would require (a) the Company or any direct or indirect
beneficial owner of the Company to provide guaranties or incur recourse
obligations of any kind or nature, except for environmental indemnities and
then-customary carve-outs or exceptions for commercial non-recourse loans, or
(b) the payment of interest at a rate that is higher than the lower of (1) the
interest rate payable on the Senior Loan or (2) then prevailing interest rates
for comparable first mortgage loans (without equity participations or similar
features). The Managing Member intends to structure the Refinancing in
consideration of the tax consequences of such Refinancing to the Ceppeto
Members, provided that such structure (i) does not adversely impact the Boston
Properties Members or their Affiliates, the Property or the Refinancing (all as
determined by the Managing Member) and (ii) does not cause the Boston Properties
Members or their Affiliates or the Property in connection with the contemplated
Refinancing, to incur any additional cost or other liability. Notwithstanding
the foregoing, in the event and to the extent any such Refinancing or any
subsequent refinancing thereof is treated as a recourse liability under
Regulations Section 1.752-1(a)(1) allocable to the Boston Properties Members,
the Ceppeto Members or their designees (in such proportion among themselves as
they shall determine) shall have the right to guarantee a portion of such loan
in an amount up to the amount of such Refinancing which is otherwise allocable
to the Boston Properties Members under Section 752 of the Code multiplied by the
Ceppeto Members' Percentage Interests in the Company in such a manner that
results in such portion of the loan being allocated to the Ceppeto Members under
Section 752 of the Code. Such guaranty shall be in a form reasonably acceptable
to the applicable lender, the Ceppeto Members and the Managing Member. The
Managing Member shall notify the Ceppeto Members not less than fifteen (15)
Business Days prior to the anticipated date of any Refinancing which the
Managing Member, in good faith, believes is available to be guaranteed by the
Ceppeto Members hereunder, which notice shall specify (i) the expected date of
such Refinancing, (ii) the Managing Member's good faith estimate of the amount
available to be guaranteed by the Ceppeto Members thereunder (which estimate
shall not be binding upon the Managing Member) and (iii) such other matters as
the Managing Member shall determine. The Ceppeto Members shall notify the
Managing Member, within four (4) Business Days after its receipt of such notice
of its intention to provide such guaranty. In the event that the Ceppeto Members
elect to provide such guaranty, the Managing Member and the Ceppeto Members
shall thereafter cooperate in good faith in connection with
34
the consummation of such Refinancing and the delivery of any applicable
guaranties. The Managing Member shall notify the Ceppeto Members not less than
fifteen (15) Business Days prior to the anticipated date of any Refinancing,
which notice shall, if an executed commitment or detailed term sheet in lieu of
a commitment with respect to such proposed Refinancing has then been entered
into, describe the material terms of such Refinancing (or, if no such commitment
or detailed term sheet then exists, but is subsequently entered into, the
Managing Member shall promptly thereafter notify the Ceppeto Members of the
material terms of such Refinancing). Notwithstanding anything to the contrary,
the Managing Member shall have the right to consummate the Refinancing (or to
not consummate the Refinancing) on terms satisfactory to the Managing Member in
its sole discretion provided that this sentence shall not limit or affect the
Ceppeto Members right, if and when applicable, to provide a guaranty of any
applicable recourse Refinancing, as provided above.
ARTICLE 7. BOOKS AND RECORDS, AUDITS, TAXES, ETC.
7.1. BOOKS; STATEMENTS. In addition to the establishment and
maintenance of Capital Accounts pursuant to SECTION 7.9, the Company shall keep
such other books and records as the Managing Member shall determine. The
financial statements of the Company shall be prepared in accordance with
generally accepted accounting principles consistently applied and, if and to the
extent required by any applicable Senior Lender, shall be audited by the
Company's independent accountants.
Following the Effective Date, and at the Company's expense:
(a) the Company shall prepare or cause to be prepared a
statement setting forth the calculation of Operating Cash Flow for each
period of time, but not less often than monthly, at the end of which
the Company is to make periodic distributions of Operating Cash Flow as
and to the extent provided in SECTION 9.3 or 9.4, as applicable, and
the Company shall furnish a copy of such cash flow statement to each
Member within twenty-one (21) days after the end of such period;
(b) no later than the fifteenth day of each January, April,
July and October during the term of this Agreement, the Company shall
prepare and submit or cause to be prepared and submitted to each
Member, an accrual basis balance sheet dated as of the end of the
preceding month together with an accrual basis profit and loss
statement for the three calendar month period next preceding with a
cumulative calendar year accrual basis profit and loss statement to
date, and a statement of change in each Member's capital for the
quarter and year to date;
(c) as soon as practicable after the end of each fiscal year
of the Company, a general accounting shall be taken and made by
independent certified public accountants of recognized standing,
selected by the Tax Matters Partner in accordance with SECTION 7.6 and
retained by the Company, which accounting and/or audit shall cover the
assets, properties, liabilities and net worth of the Company, and its
dealings, transactions
35
and operations during such fiscal year, and all matters and things
customarily included in such accountings and audits, and a full,
detailed certified statement shall be furnished to each Member within
ninety (90) days after the end of such fiscal year, showing on an
accrual basis the assets, liabilities, properties, net worth, profits,
losses, net income, Operating Cash Flow, changes in the financial
condition of the Company for such fiscal year and each Member's capital
in the Company and amounts of Common Equity, Preferred Equity,
Additional Preferred Equity and Senior Preferred Equity then
outstanding, and, if applicable, a full and complete report of the
audit scope and audit findings in the form of a management audit report
with an internal control memorandum; and
(d) the Company shall deliver to the Ceppeto Members any
financial statements or reports regarding the Company, its subsidiaries
or the Property that are provided to the lender under the Senior Loan,
concurrently with delivery of such statements or reports to the lender.
7.2. WHERE MAINTAINED. The books, accounts and records of the
Company shall be at all times maintained at its principal office. Each Member
shall, at reasonable times and upon reasonable prior notice, have the right to
inspect such books, accounts and records and shall have access to the same.
7.3. AUDITS. Either Member may, at its option and at its own
expense, conduct internal audits of the books, records and accounts of the
Company. Audits may be on either a continuous or a periodic basis or both and
may be conducted by employees of either Member, or an Affiliate of either
Member, or by independent auditors retained by the Company or by either Member.
7.4. INTENTIONALLY OMITTED.
7.5. TAX RETURNS. The Company shall be treated and shall file
its tax returns as a partnership for Federal, state, municipal and other
governmental income tax and other tax purposes. The Company shall prepare or
cause to be prepared, on an accrual basis, all Federal, state and municipal
partnership tax returns required to be filed by it. Unless otherwise determined
by the Managing Member, such tax returns shall be prepared by independent
certified public accountants selected pursuant to SECTION 7.6, who shall sign
such returns as preparers. The Company shall submit the returns to each Member
for review and approval (which approval shall not be unreasonably withheld,
conditioned or delayed) no later than thirty (30) days prior to the due date of
the returns, but in no event later than March 15th of each year. All Members
shall be entitled to participate in any meetings or conferences with the
Internal Revenue Service with respect to matters affecting the Company
(including for this purpose the Original Company) or such Member, and in the
event of an audit of the Company's (including for this purpose the Original
Company) tax returns to approve the terms of any settlement in respect thereof
(which approval shall not be unreasonably withheld, conditioned or delayed).
Each Member shall notify the other Member(s) upon receipt of any notice of tax
examination of the Company (including for this purpose the Original Company) by
Federal, state or local
36
authorities. For tax purposes, the Company shall report the acquisition of the
Property as the tax-free acquisition of replacement property by the Company
under Section 1031 of the Code with respect to the disposition of the Sale
Property.
7.6. TAX MATTERS PARTNER. The Managing Member shall be the tax
matters partner as defined in Section 6231 (a)(7) of the Code (in such capacity,
the "TAX MATTERS Partner"). The Tax Matters Partner shall comply with the
requirements of Section 6221 through 6232 of the Code. The Tax Matters Partner
shall have the authority, to select and appoint independent certified public
accountants to prepare tax returns and annual audited financial statements for
the Company, the expense of which shall be borne by the Company. The Members
acknowledge that, immediately prior to the Effective Date, Ceppeto was the Tax
Matters Partner for the Original Company and the Company, and shall continue as
the Tax Matters Partner for the Original Company (but not for the Company) for
the period ending December 31, 2000, and shall, subject to obtaining the prior
written consent of the Managing Member with respect thereto, which consent shall
not be unreasonably withheld or delayed, be responsible for the filing of the
2000 tax returns for the Original Company for the period ending on December 31,
2000, PROVIDED HOWEVER, that Ceppeto shall comply with the requirements of
Section 6221 through 6232 of the Code with respect to such prior periods and in
no event shall the Tax Matters Partner (from and after the Effective Date) or
the Company be bound by any election or position taken by Ceppeto in connection
with the preparation of or filing of the tax returns and annual audited
financial statements for the Company, nor shall Ceppeto take any position or
make any election in connection therewith which would bind the Company or the
Tax Matters Partner from and after the Effective Date without the consent of the
Tax Matters Partner, which consent shall not be unreasonably withheld.
7.7. TAX POLICY. The Company shall make any and all tax
accounting and reporting elections and adopt such procedures as the Managing
Member, in its reasonable judgment may determine.
7.8. SECTION 754 ELECTION. At the request of a Member, the
Company shall make and file a timely election under Section 754 of the Code (and
a corresponding election under applicable state or local law) in the event of a
transfer of an interest in the Company permitted hereunder or the distribution
of property to a Member. The Members agree that the Company shall make and file
such election for the tax year ending December 31, 2001. Any adjustments
resulting from such an election shall be reflected in the Capital Accounts of
the Members in accordance with Treasury Regulation Section 1.704-l(b)(2)(iv)(m).
Any Member or transferee first requesting an election hereunder shall reimburse
to the Company the reasonable out-of-pocket expenses incurred by the Company in
connection with such election including any legal or accountants' fees.
Thereafter, each transferee shall reimburse such expenses with respect to
adjustments under Section 743 of the Code in the proportion which the interest
of each transferee bears to the sum of the interests of all transferees.
37
7.9. CAPITAL ACCOUNTS.
(a) There shall be established on the books of the Company a
single capital account (the "CAPITAL ACCOUNT") for each Member. As of
the Effective Date, the Members agree and acknowledge that the balance
of each Member's Capital Account shall be (i) as to BP Member,
$66,449,275, all of which is allocable to Class A Common Equity; (ii)
as to BP Member II, $112,200,000, all of which is allocable to
Preferred Equity, (iii) as to BP Member III, $16,350,725, all of which
is allocable to Preferred Equity, (iv) as to Ceppeto Holdings,
$1,659,801.92, all of which is allocable to Class B Common Equity; and
(v) as to Ceppeto, $33,340,198.08, which is allocable to Class B Common
Equity and $3,691,083.78 which is allocable to Senior Preferred Equity.
(b) The Capital Account of each Member shall be maintained
for each Member in accordance with the rules of Regulations Section
1.704-1(b)(2)(iv), and this SECTION 7.9 shall be interpreted and
applied in a manner consistent with said Section of the Regulations.
The Company may adjust the Capital Accounts of its Members to reflect
revaluations of the Company property whenever the adjustment would be
permitted under Regulations Section 1.704-1(b)(2)(iv)(f). In the event
that the Capital Accounts of the Members are so adjusted, (1) the
Capital Accounts of the Members shall be adjusted in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain or loss, as computed for
book purposes, with respect to such property, and (2) the Members'
distributive shares of depreciation, depletion, amortization and gain
or loss, as computed for tax purposes, with respect to such property
shall be determined so as to take account of the variation between the
adjusted tax basis and book value of such property in the same manner
as under Section 704(c) of the Code.
(c) In the event that Code Section 704(c) applies to Company
property, the Capital Accounts of the Members shall be adjusted in
accordance with Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations of depreciation, depletion, amortization and gain and loss,
as computed for book purposes, with respect to such property.
(d) The Capital Account of a Member shall carry over to the
transferee of the Member to the extent of the interest assigned.
7.10. PURCHASE PRICE ALLOCATIONS. Provided and to the extent
it is permitted under the Code and Regulations thereunder, (as determined by the
Managing Member)
(a) Not less than 15% of the purchase price for the Property
shall be allocated to land.
(b) Less than 15% of the purchase price of the Property shall
be allocated to items of personal property.
38
ARTICLE 8. FISCAL YEAR
8.1. CALENDAR YEAR. The fiscal year of the Company shall be
the calendar year, unless (subject to obtaining consent of the Internal Revenue
Service, if required) the Managing Member otherwise requires.
ARTICLE 9. DISTRIBUTIONS AND ALLOCATIONS
9.1. PERCENTAGE INTERESTS. The initial Percentage Interests
(the "PERCENTAGE INTERESTS") of BP Member, Ceppeto and Ceppeto Holdings are
sixty-five and 5/10ths percent (65.5%), thirty-two and 8639/10000ths percent
(32.8639%) and one and 6361/10000ths percent (1.6361%) respectively. The
Percentage Interests shall be adjusted as provided under this Agreement.
9.2. CERTAIN DEFINITIONS. The following terms shall have the
following meanings when used herein:
(a) "OPERATING CASH FLOW" means the net income or loss of the
Company for the fiscal period in question, as determined in accordance
with generally accepted accounting principles, consistently applied and
adjusted as follows or as otherwise determined by the Managing Member:
(1) ADDITIONS. There shall be added to such net income or
subtracted from such loss (A) the amount charged for
depreciation, amortization or any other deduction not
involving a cash expenditure, (B) the amount of Capital
Contributions to the Company to the extent not used in
connection with the acquisition of the Property or the
creation of the Operating Expense Reserve, (C) the costs and
expenses attributable to a Capital Event to the extent
deducted in the determination of net income or loss, and (D)
any amount by which cash reserves previously established by
the Managing Member from Operating Cash Flow in order to
retain sufficient working capital in the Company or to
properly reserve for actual or contingent obligations of the
Company or improvements to the Property have been reduced
(other than through the payment of such obligations).
(2) DEDUCTIONS. There shall be subtracted from such net
income or added to such loss (A) payments of principal made on
account of the Senior Loan and any other loans made to the
Company, (B) funds disbursed for capital expenditures, leasing
commissions, tenant finish or any other similar expenses that
are required to be capitalized, (C) the proceeds of a Capital
Event to the extent included in net income or loss, (D) the
fees paid pursuant to the Management Agreement to the extent
not previously deducted in calculating net income or loss, and
(E) any amount to establish or increase cash reserves pursuant
to a determination of the Managing Member that such reserve or
increase to an
39
existing reserve is necessary or appropriate in order to
retain sufficient working capital in the Company or to
properly reserve for other actual or contingent obligations of
the Company or improvements to the Property, including without
limitation, reserves required pursuant to the documents
evidencing the Senior Loan.
(b) "CAPITAL EVENT PROCEEDS" means the gross cash receipts of
the Company from a Capital Event as reduced by (1) the costs and
expenses incurred by the Company in connection with such Capital Event,
including title, survey, appraisal, recording, escrow, transfer tax and
similar costs, brokerage expense and attorneys and other professional
fees, and amounts spent on reconstruction or repair, (2) funds reserved
pursuant to a determination of the Managing Member that such reserves
are required or appropriate to provide for actual or contingent
obligations of the Company or improvements to the Property, and (3)
funds applied to pay or prepay any indebtedness of the Company in
connection with such Capital Event. To the extent that any amount
received pursuant to a Capital Event has been set aside as a reserve
for expenses relating to a Capital Event and the Managing Member
thereafter determines that all or a portion of such amount is not
required for such purposes, such amount shall be included in Operating
Cash Flow when the Managing Member determines that it is no longer
necessary or appropriate to retain such amount as a reserve. Any
non-cash consideration received pursuant to a Capital Event, including
promissory notes or deferred payment obligations, shall only be deemed
to be included in Capital Event Proceeds when converted into cash by
the Company; PROVIDED that in the discretion of the Managing Member,
such non-cash assets may be distributed in kind to the Members, in lieu
of cash, treating the fair market value of such non-cash assets at the
date of distribution as Capital Event Proceeds. Any in-kind
distributions shall, to the maximum extent applicable, be made pari
passu based on the aggregate distributions payable to each Member in
respect of such Capital Event (but shall, in any event, be distributed
only in accordance with the distributions set forth in SECTIONS 9.3 and
9.4).
9.3. DISTRIBUTIONS PRIOR TO THE FLIP DATE.
(a) OPERATING CASH FLOW. For each month prior to the Flip
Date in which the Managing Member determines that there is Operating
Cash Flow (based on the Managing Member's estimate of Operating Cash
Flow for the current fiscal year), the Company shall make distributions
to the Members, as and to the extent declared by the Managing Member,
within twenty-one (21) days after the end of such month, as follows:
(1) FIRST, (A) to the Members in respect of Senior
Preferred Equity, if any, on a pari passu basis in proportion
to the sum of each such Member's aggregate unreturned Senior
Preferred Equity until such Members have received
distributions equal to their respective aggregate unreturned
Senior Preferred Equity, provided however that notwithstanding
the foregoing, (i) no more than $307,590.31 may be distributed
in any one month (plus any portion of such amounts (i.e.,
$307,590.31) not distributed during any prior month) and (ii)
in no
40
event shall the aggregate distributions in consideration of
Senior Preferred Equity at any time exceed amounts expended by
the Company out of the Operating Expense Reserve prior to the
date of such distribution, AND THEN (B) to the Members in
respect of Additional Preferred Equity, if any, on a pari
passu basis in proportion to the sum of each such Member's
aggregate unreturned Additional Preferred Equity and accrued
(and compounded but) unpaid Additional Preferred Equity
Return, until such Members have received distributions equal
to their respective aggregate unreturned Additional Preferred
Equity and aggregate accrued (and compounded but) unpaid
Additional Preferred Equity Return;
(2) SECOND, to the holders of Preferred Equity and Class
A Common Equity, on a pari passu basis in proportion to each
such holder's accrued (and compounded but) unpaid Preferred
Return and accrued (and compounded but) unpaid Class A Common
Return, until each holder has received distributions equal to
its respective aggregate accrued (and compounded but) unpaid
Preferred Return and Class A Common Return;
(3) THIRD, to the Members to repay the Preferred Equity
on a pari passu basis in proportion to the Preferred Equity
held by each Member until the Preferred Equity has been repaid
in its entirety; and
(4) THEREAFTER, to the Members in accordance with their
Percentage Interests.
To the extent that distributed Operating Cash Flow for any given month
pursuant to this SECTION 9.3 and SECTION 9.4 below, as applicable, is
insufficient to pay the accrued Additional Preferred Equity Return,
Preferred Return, Adjusted Preferred Balance Return, the Class A Common
Return or the Class B Common Return, each as and when applicable, on a
current basis, such unpaid amounts will accrue, compound (as
applicable) and be payable out of the next succeeding months' Operating
Cash Flow (in the order of priority set forth in SECTION 9.3(a) and
9.4(a) of this Agreement, as applicable) and/or from Capital Event
Proceeds, until paid in full.
(b) CAPITAL EVENT PROCEEDS. The Company shall distribute
Capital Event Proceeds within three (3) Business Days after the Company
receives Capital Event Proceeds from any Capital Event that occurs
prior to the Flip Date to the Members as follows:
(1) FIRST, (A) to the Members in respect of Senior
Preferred Equity, if any, on a pari passu basis in proportion
to the sum of each such Member's aggregate unreturned Senior
Preferred Equity until such Members have received
distributions equal to their respective aggregate unreturned
Senior Preferred Equity, provided however that notwithstanding
the foregoing, (i) no more than $307,590.31 may be distributed
in any one month (plus any portion of such amounts (i.e.,
$307,590.31) not distributed during any prior month) and (ii)
in no
41
event shall the aggregate distributions in consideration of
Senior Preferred Equity at any time exceed amounts expended by
the Company out of the Operating Expense Reserve prior to the
date of such distribution, AND THEN (B) to the Members in
respect of Additional Preferred Equity, if any, on a pari
passu basis in proportion to the sum of each such Member's
aggregate unreturned Additional Preferred Equity and accrued
(and compounded but) unpaid Additional Preferred Equity
Return, until such Members have received distributions equal
to their respective aggregate unreturned Additional Preferred
Equity and aggregate accrued (and compounded but) unpaid
Additional Preferred Equity Return;
(2) SECOND, to the holders of Preferred Equity and Class
A Common Equity, on a pari passu basis in proportion to each
such holder's accrued (and compounded but) unpaid Preferred
Return and accrued (and compounded but) unpaid Class A Common
Return, until each holder has received distributions equal to
its respective aggregate accrued (and compounded but) unpaid
Preferred Return and Class A Common Return;
(3) THIRD, to the Members to repay the Preferred Equity
on a pari passu basis in proportion to the Preferred Equity
held by each Member until the Preferred Equity has been repaid
in its entirety;
(4) FOURTH, to the Members to repay the Common Equity on
a pari passu basis in proportion to the Common Equity held by
each Member until the Common Equity has been repaid in its
entirety;
(5) THEREAFTER, to the Members in accordance with their
Percentage Interests.
9.4. DISTRIBUTIONS AFTER THE FLIP DATE.
(a) OPERATING CASH FLOW. For each month subsequent to the
Flip Date in which the Managing Member determines that there is
Operating Cash Flow (based on the Managing Member's estimate of
Operating Cash Flow for the current fiscal year), the Company shall
make distributions to the Members, as and to the extent declared by the
Managing Member, within twenty-one (21) days after the end of such
month, as follows:
(1) FIRST, (A) to the Members in respect of Senior
Preferred Equity, if any, on a pari passu basis in proportion
to the sum of each such Member's aggregate unreturned Senior
Preferred Equity until such Members have received
distributions equal to their respective aggregate unreturned
Senior Preferred Equity, provided however that notwithstanding
the foregoing, (i) no more than $307,590.31 may be distributed
in any one month (plus any portion of such amounts (i.e.,
$307,590.31) not distributed during any prior month) and (ii)
in no event shall the aggregate distributions in consideration
of Senior Preferred Equity at any time exceed amounts expended
by the Company out of the Operating
42
Expense Reserve prior to the date of such distribution, AND
THEN (B) to the Members in respect of Additional Preferred
Equity, if any, on a pari passu basis in proportion to the sum
of each such Member's aggregate unreturned Additional
Preferred Equity and accrued (and compounded but) unpaid
Additional Preferred Equity Return, until such Members have
received distributions equal to their respective aggregate
unreturned Additional Preferred Equity and aggregate accrued
(and compounded but) unpaid Additional Preferred Equity
Return;
(2) SECOND, to the holders of Class B Common Equity on a
pari passu basis until such holders have received
distributions equal to the aggregate accrued (and compounded
but) unpaid Class B Common Return, if any;
(3) THIRD, to the holders of Preferred Equity and Class A
Common Equity, on a pari passu basis until each such holder
has received distributions equal to the sum of its aggregate
accrued (and compounded but) unpaid shares of (i) the Adjusted
Preferred Balance Return and (ii) the Preferred Return and
Class A Common Return as of the Flip Date and (iii) the Class
A Common Return for the period commencing on the Flip Date and
ending on the Priority Payment Cessation Date;
(4) FOURTH, to the Members to repay the Preferred Equity
on a pari passu basis in proportion to the Preferred Equity
held by each Member until the Preferred Equity has been repaid
in its entirety; and
(5) THEREAFTER, to the Members in accordance with their
Percentage Interests.
(b) CAPITAL EVENT PROCEEDS. The Company shall distribute
Capital Event Proceeds within three (3) Business Days after the Company
receives Capital Event Proceeds from any Capital Event that occurs
subsequent to the Flip Date to the Members as follows:
(1) FIRST, (A) to the Members in respect of Senior
Preferred Equity, if any, on a pari passu basis in proportion
to the sum of each such Member's aggregate unreturned Senior
Preferred Equity until such Members have received
distributions equal to their respective aggregate unreturned
Senior Preferred Equity, provided however that notwithstanding
the foregoing, (i) no more than $307,590.31 may be distributed
in any one month (plus any portion of such amounts (i.e.,
$307,590.31) not distributed during any prior month) and (ii)
in no event shall the aggregate distributions in consideration
of Senior Preferred Equity at any time exceed amounts expended
by the Company out of the Operating Expense Reserve prior to
the date of such distribution, AND THEN (B) to the Members in
respect of Additional Preferred Equity, if any, on a pari
passu basis in proportion to the sum of each such Member's
aggregate unreturned Additional Preferred Equity and accrued
(and compounded but) unpaid Additional Preferred
43
Equity Return, until such Members have received distributions
equal to their respective aggregate unreturned Additional
Preferred Equity and aggregate accrued (and compounded but)
unpaid Additional Preferred Equity Return;
(2) SECOND, to the holders of Class B Common Equity on a
pari passu basis until such holders have received
distributions equal to the aggregate accrued (and compounded
but) unpaid Class B Common Return, if any;
(3) THIRD, to the holders of Preferred Equity and Class A
Common Equity, on a pari passu basis until each such holder
has received distributions equal to the sum of its aggregate
accrued (and compounded but) unpaid shares of (i) the Adjusted
Preferred Balance Return and (ii) the Preferred Return and
Class A Common Return as of the Flip Date and (iii) the Class
A Common Return for the period commencing on the Flip Date and
ending on the Priority Payment Cessation Date;
(4) FOURTH, to the Members to repay the Preferred Equity
on a pari passu basis in proportion to the Preferred Equity
held by each Member until the Preferred Equity has been repaid
in its entirety;
(5) FIFTH, to the Members to repay the Common Equity on a
pari passu basis in proportion to the Common Equity held by
each Member until the Common Equity has been repaid in its
entirety; and
(6) THEREAFTER, to the Members in accordance with their
Percentage Interests.
(c) Notwithstanding anything to the contrary contained in
SECTION 9.3 and this SECTION 9.4, distributions in consideration of
aggregate unpaid returns on capital and loans, and in repayment or
redemption of capital shall be calculated with consideration to all
prior distributions with respect to such amounts pursuant to SECTION
9.3 and SECTION 9.4, and shall be calculated in accordance with SECTION
4.4. For example, (i) the aggregate amount distributed pursuant to
SECTION 9.3(b)(4) or SECTION 9.4(b)(5) in repayment of the BP Member's
Common Equity shall be limited to the aggregate amount of the BP
Member's Capital Contributions attributable to Common Equity minus any
such amounts previously or contemporaneously distributed pursuant to
SECTION 9.3(b)(4) and SECTION 9.4(b)(5) in repayment of the BP Member's
Common Equity and (ii) the Class B Common Return shall only accrue and
be payable, as and to the extent applicable, commencing on the Flip
Date through and including the Priority Payment Cessation Date.
Notwithstanding anything to the contrary contained in SECTION 9.3(b)
and SECTION 9.4(b), liquidating distributions shall be made in
accordance with SECTION 9.6.
9.5. ALLOCATIONS.
(a) Allocations of Net Income. Subject only to the special
allocations set forth in SECTIONS 9.5(c)-(g) and 9.6(c) below, net
income with respect to the period
44
commencing on the Effective Date shall be allocated in each year in the
following manner:
(1) First, to the Members, in the reverse order and then
in the same ratio as losses were allocated pursuant to
SECTIONS 9.5(b)(2) THROUGH 9.5(b)(5) for all fiscal years
until the excess of the aggregate amount of net loss allocated
pursuant to SECTIONS 9.5(b)(2) THROUGH 9.5(b)(5) for all
fiscal years over the aggregate amount of net income allocated
pursuant to this SECTION 9.5(a)(1) for all fiscal years is
equal to zero;
(2) Second, to the Members, in proportion to their
Percentage Interests.
(b) ALLOCATIONS OF NET LOSS. Subject only to the special
allocations set forth in SECTIONS 9.5(c)-(g) below, net loss with
respect to the period commencing on the Effective Date shall be
allocated in each year in the following manner:
(1) First, in the same ratio and reverse order as net
income was allocated to the Members pursuant to SECTION
9.5(a)(2) for all fiscal years until the excess of the
aggregate amount of net income allocated to the Members
pursuant to SECTION 9.5(a)(2) for all fiscal years over the
aggregate amount of net loss allocated pursuant to this
SECTION 9.5(b)(1) for all fiscal years is equal to zero;
(2) Second, to the Members in proportion to their
Percentage Interests until the excess of (A) the difference
between the portion of each Member's adjusted capital account
balance properly allocable to their contributions in respect
of Common Equity minus the sum of the distributions to each
such Member pursuant to SECTIONS 9.3(b)(4) and 9.4(b)(5) for
all fiscal years over (B) the difference between allocations
of net loss to each such Member pursuant to this SECTION
9.5(b)(2) and the allocations of net income to each such
Member pursuant to SECTION 9.5(a)(1) attributable to losses
allocated pursuant to this SECTION 9.5(b)(2) is equal to zero;
(3) Third, to the holders of the Preferred Equity until
the excess of (A) the difference between the portion of each
Member's adjusted capital account balance properly allocable
to Preferred Equity minus the sum of the distributions to each
such Member properly treated as a return of such Preferred
Equity pursuant to SECTIONS 9.3(a)(3), 9.3(b)(3), 9.4(a)(4)
and 9.4(b)(4) over (B) the difference between the allocations
of net loss to each such Member pursuant to this SECTION
9.5(b)(3) and the allocations of net income to each such
Member pursuant to SECTION 9.5(a)(1) attributable to losses
allocated pursuant to this SECTION 9.5(b)(3) is equal to zero;
(4) Fourth, to the holders of the Additional Preferred
Equity until the excess of (A) the difference between the
portion of each Member's adjusted
45
capital account balance properly allocable to Additional
Preferred Equity minus the sum of the distributions to each
such Member properly treated as a return of such Additional
Preferred Equity pursuant to SECTIONS 9.3(a)(1), 9.3(b)(1),
9.4(a)(1) and 9.4(b)(1) over (B) the difference between the
allocations of net loss to each such Member pursuant to this
SECTION 9.5(b)(4) and allocations of net income to each such
Member pursuant to SECTION 9.5(a)(1) attributable to losses
allocated pursuant to this SECTION 9.5(b)(4) is equal to zero;
and
(5) Thereafter, to the Members in proportion to their
Percentage Interests.
(c) SPECIAL ALLOCATIONS OF INCOME AND LOSS. Notwithstanding
anything to the contrary contained in SECTIONS 9.5(a)(2) or 9.5(b)(5)
above,
(1) First, in any fiscal year in which a distribution is
made to the holder or holders of Additional Preferred Equity
pursuant to Sections 9.3(a)(1), 9.3(b)(1), 9.4(a)(1) or
9.4(b)(1), net income shall first be allocated 100% to the
holders of the Additional Preferred Equity in proportion to
and to the extent of distributions with respect to the
Additional Preferred Return in such fiscal year;
(2) Second, in any fiscal year in which distributions
made to the holder or holders of Additional Preferred Equity
pursuant to SECTIONS 9.3(a)(1), 9.3(b)(1), 9.4(a)(1) or
9.4(b)(1) in all prior fiscal years exceed the aggregate
amount of net income allocated to such Members pursuant to
SECTION 9.5(c)(1) and this SECTION 9.5(c)(2) in all prior
fiscal years, net income shall be allocated 100% to the
holders of the Additional Preferred Equity, in proportion to
and to the extent of distributions with respect to the
Additional Preferred Return in all prior fiscal years, until
the excess of the aggregate amount distributed with respect to
the Additional Preferred Return for all fiscal years over the
aggregate amount of net income allocated to such Members
pursuant to SECTION 9.5(c)(1) and this SECTION 9.5(c)(2) for
all fiscal years is equal to zero;
(3) Third, subject only to the provisions of SECTION
9.5(c)(1) and (2) above, in any fiscal year in which
distributions are made to the holder of the Preferred Equity
and Class A Common Equity with respect to the Preferred Return
and the Class A Common Return pursuant to SECTION 9.3(a)(2)
and 9.3(b)(2) 100% of the net income shall be allocated to
such Member to the extent of such distributions;
(4) Fourth, in any fiscal year in which distributions are
made to the holders of the Preferred Equity and Class A Common
Equity with respect to the Preferred Return and Class A Common
Return pursuant to SECTION 9.3(a)(2) and 9.3(b)(2), 100% of
the net income to the holder of the Preferred Equity and Class
A Common Equity in an amount equal to the excess, if any, of
the aggregate distributions of the Preferred Return and Class
A Common Return pursuant to
46
SECTION 9.3(a)(2) and 9.3(b)(2) for all fiscal years over the
aggregate amount of net income allocated pursuant to this
SECTION 9.5(c)(4) and SECTION 9.5(c)(3) for all fiscal years,
until such excess is reduced to zero;
(5) Fifth, 100% of the net income to the holder of the
Class B Common Equity until the excess of the aggregate
allocations of net income pursuant to this SECTION 9.5(c)(5)
for all fiscal years over the aggregate distributions to such
Member of the Class B Common Return pursuant to SECTIONS
9.4(a)(2) and 9.4(b)(2) for all fiscal years is equal to zero
and;
(6) Sixth, 100% of the net income to the holder of the
Adjusted Preferred Balance and the holder of the Class A
Common Equity until the aggregate amount of net income
allocated to such holders pursuant to this SECTION 9.5(c)(6)
for all fiscal years over the aggregate distributions pursuant
to SECTIONS 9.4(a)(3) and 9.4(b)(3) for all fiscal years is
equal to zero.
(7) Seventh, in any fiscal year in which a distribution
is made to the holders of Class A Common Equity and Class B
Common Equity pursuant to SECTIONS 9.4(a)(5) and 9.4(b)(6),
net income shall be allocated 100% to such holders in
proportion to and to the extent of such distributions in such
fiscal year.
(8) Eighth, in any fiscal year in which the aggregate
amount of the distributions made to the holders of Class A
Common Equity and Class B Common Equity pursuant to SECTIONS
9.4(a)(5) and 9.4(b)(6) in all prior fiscal years exceeds the
aggregate amount of net income allocated to such Member
pursuant to SECTION 9.5(c)(7) and this SECTION 9.5(c)(8) in
all prior fiscal years, net income shall be allocated 100% to
such holders in proportion to and to the extent of such
distributions in all prior fiscal years, until the excess of
the aggregate amount distributed pursuant to SECTIONS
9.4(a)(5) and 9.4(b)(6) for all fiscal years over the
aggregate amount of net income allocated to such Members
pursuant to SECTIONS 9.5(c)(7) and 9.5(c)(8) for all fiscal
years is equal to zero.
(9) Ninth, net income shall be allocated 100% to the
Members in proportion to and to the extent that distributions
previously made to the Members pursuant to SECTIONS 9.3(a)(2),
9.3(a)(4), 9.3(b)(2) and 9.3(b)(5) exceed allocations of net
income previously made to the Members pursuant to SECTIONS
9.5(c)(3), 9.5(c)(4), 9.5(a)(2) and this SECTION 9.5(c)(9).
(10) Notwithstanding anything to the contrary above, 100%
of the gain recognized in connection with a sale or other
disposition of the Property shall be allocated to the Members
in such amounts as are required to cause each Member's
adjusted capital account balance to equal, to the greatest
extent possible, the distributions each such Member would
receive upon liquidation of the Company at such time if such
distributions were made pursuant to the provisions of SECTION
9.3(b) or 9.4(b) as applicable;
47
(11) LOSS LIMITATION. Notwithstanding anything to the
contrary in SECTION 9.5(b)(5), net loss allocated pursuant to
SECTION 9.5(b) shall not exceed the maximum amount of net loss
that can be allocated without causing or increasing a deficit
balance in any member's adjusted capital account. A Member's
"adjusted capital account" balance shall mean the Member's
capital account balance increased by its obligation to restore
a deficit balance in its Capital Account, if any, including
any deemed obligations pursuant to the penultimate sentences
of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5), and decreased by the amounts described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or
(6). In the event that a Member would have a deficit balance
in its adjusted capital account as a consequence of an
allocation of net loss pursuant to SECTION 9.5(b) in excess of
the amount, if any, permitted under the first sentence of this
SECTION 9.5(c)(11) the limitation set forth herein shall be
applied by allocating 100% of the remaining net loss to the
other Members, in proportion to each such Member's positive
adjusted capital account balance immediately prior to such
loss allocation. Any net income allocated by the Company after
an allocation of net loss under the prior sentence shall first
be allocated to the Members to which such net loss was
allocated, in the same ratio and amount.
(d) MINIMUM GAIN CHARGEBACKS AND NONRECOURSE DEDUCTIONS.
(1) PARTNERSHIP MINIMUM GAIN CHARGEBACK. Notwithstanding
any other provision of this Agreement, in the event there is a
net decrease in Partnership Minimum Gain during a fiscal year,
the Members shall be allocated items of income and gain in
accordance with Treasury Regulations Section 1.704-2(f). For
purposes of this Agreement, the term "Partnership Minimum
Gain" shall have the meaning for partnership minimum gain set
forth in Treasury Regulations Section 1.704-2(b)(2), and any
Member's share of Partnership Minimum Gain shall be determined
in accordance with Treasury Regulations Section 1.704-2(g)(1).
This SECTION 9.5(d) is intended to comply with the minimum
gain chargeback requirement of Treasury Regulations Section
1.704-2(f) and shall be interpreted and applied in a manner
consistent therewith.
(2) NONRECOURSE DEDUCTIONS. Notwithstanding any other
provision of this Agreement, Nonrecourse Deductions shall be
allocated to the Members' pro rata in accordance with their
Percentage Interests. For purposes of this Agreement, the term
"Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(1). This SECTION
9.5(d)(2) is intended to comply with Treasury Regulations
Section 1.704-2(e) and shall be interpreted and applied in a
manner consistent therewith.
(3) PARTNER NONRECOURSE DEBT. Notwithstanding any other
provision of this Agreement, to the extent required by
Treasury Regulations Section 1.704-2(i), any items of income,
gain, loss or deduction of the Company that are
48
attributable to a nonrecourse debt of the Company that
constitutes Partner Nonrecourse Debt (including chargebacks of
Partner Nonrecourse Debt Minimum Gain) shall be allocated in
accordance with the provisions of Treasury Regulations Section
1.704-2(i). For purposes of this Agreement, the term "Partner
Nonrecourse Debt" shall have the meaning for partner
nonrecourse debt set forth in Treasury Regulations Section
1.704-2(b)(4), and the term "Partner Nonrecourse Debt Minimum
Gain" shall have the meaning for partner nonrecourse debt
minimum gain set forth in Treasury Regulations Section
1.704-2(i)(2). This SECTION 9.5(d)(3) is intended to satisfy
the requirements of Treasury Regulations Section 1.704-2(i)
(including the partner nonrecourse debt minimum gain
chargeback requirement) and shall be interpreted and applied
in a manner consistent therewith.
(e) QUALIFIED INCOME OFFSET. If a Member unexpectedly receives
an adjustment, allocation or distribution described in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes or
increases a deficit balance in its Capital Account in excess of any
obligation to restore a deficit balance in its Capital Account
(including any deemed deficit restoration obligation pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1)
and (i)(5), and adjusted as provided in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)) such Member shall be allocated items of income
and gain in an amount and a manner sufficient to eliminate, to the
extent required by the Treasury Regulations, such deficit balance as
quickly as possible. This SECTION 9.5(e) is intended to comply with the
alternate test for economic effect set forth in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in a
manner consistent therewith.
(f) CURATIVE ALLOCATIONS. The allocations set forth in
Sections 9.5(d) and (e) (the "REGULATORY ALLOCATIONS") are intended to
comply with the requirements of Treasury Regulations Sections
1.704-1(b) and 1.704-2. Notwithstanding any other provisions of this
ARTICLE 9 (other than the Regulatory Allocations), the Regulatory
Allocations shall be taken into account as provided for in the
following two sentences. Income, gain, loss and deduction shall be
reallocated to the extent that such reallocation causes the net
aggregate amount of allocations of income, gain, deduction and loss to
each Member to be equal to or more closely approximate the net
aggregate amount of such items that would have been allocated to each
such Member if the Regulatory Allocations had not occurred. This
SECTION 9.5(f) shall be interpreted and applied in such a manner and to
such extent as is reasonably necessary to eliminate, as quickly as
possible permanent economic distortions that would otherwise occur as a
consequence of the Regulatory Allocations in the absence of this
SECTION 9.5(f).
(g) DISTRIBUTIONS OF NONRECOURSE LIABILITY PROCEEDS. If,
during a fiscal year, the Company makes a distribution to any Member
that is allocable to the proceeds of any nonrecourse liability of the
Company that is allocable to an increase in Partnership Minimum Gain
pursuant to Treasury Regulations Section 1.704-2(h), then the Company
shall elect, to the extent permitted by Treasury Regulations Section
1.704-2(h)(3), to treat
49
such distribution as a distribution that is not allocable to an
increase in Partnership Minimum Gain.
(h) PRIOR PERIOD ALLOCATIONS. Allocations with respect to the
period ending on the day prior to the Effective Date shall be made
using an interim closing of the books method as provided under Section
706 of the Code and the Regulations thereunder.
9.6. DISTRIBUTIONS AND ALLOCATIONS UPON LIQUIDATION OF THE
COMPANY.
(a) DISTRIBUTIONS UPON LIQUIDATION. In the event the Company
(or any Member's interest therein) is "liquidated" within the meaning
of Treasury Regulations Section 1.704-1(b)(2)(ii)(g), then any
distributions shall be made pursuant to this SECTION 9.6 to the Members
(or such Member, as appropriate) in accordance with their positive
Capital Account balances in compliance with Treasury Regulations
Section 1.704-1(b)(2)(ii)(b)(2).
(b) DEFICIT RESTORATION BY COMPANY. Except as provided herein,
no Member shall be required to contribute capital to the Company to
restore a deficit balance in its Capital Account upon liquidation or
otherwise.
(c) ALLOCATIONS OF INCOME AND LOSS IN THE YEAR OF LIQUIDATION.
Notwithstanding anything to the contrary above, in the year in which
the Company is "liquidated" within the meaning of SECTION 9.6(a), items
of income, gain, loss and deduction shall be allocated to the Members
(and, to the extent necessary to accomplish the purposes of this
SECTION 9.6(c), the items of income, gain, loss and deduction of the
prior fiscal year, provided any such determination with respect to
allocations of such items in the prior fiscal year shall be made on or
before the date on which the filing of the return for such prior fiscal
year is due) shall be allocated among the Members to cause each such
Member's adjusted capital account balance to equal, to the greatest
extent possible, the distribution such Member would be entitled to
receive pursuant to the provisions of SECTION 9.3(b) or 9.4(b), as
applicable, at such time, in the event liquidating distributions were
made pursuant to either of such sections in lieu of the provisions of
SECTION 9.6(a) above.
(d) The Members agree that allocations of depreciation with
respect to the Property shall be made pursuant to the remedial
allocation method of Treasury Regulation Section 1.704-3(d).
9.7. RECAPTURE INCOME. To the extent of any net income
resulting from the sale or other taxable disposition, directly or indirectly, of
a Company asset that represents the recapture (under Section 1245 or Section
1250 of the Code or otherwise) of deductions previously taken for Federal income
tax purposes, the amount of gain from such disposition allocated to each of the
Members pursuant to the foregoing provisions shall be recapture income to the
extent such Member or a predecessor-in-interest has been allocated or has
claimed any deduction directly or indirectly giving rise to the treatment of
such gain as recapture income.
50
ARTICLE 10. ASSIGNMENT AND OFFER TO PURCHASE
10.1. SALE OF THE PROPERTY.
(a) The Managing Member shall have the sole and exclusive
power and authority to cause a sale, transfer, conveyance or other
similar disposition of the Property or any portion thereof by operation
of law or otherwise, either directly or indirectly through the sale of
the Property or other disposition of the Company's interests in
BP/CGMM2, BP/CGMM, BP/CG I or BP/▇▇ ▇▇ or any other Person owned by the
Company that directly or indirectly owns the Property or any portion
thereof (a "PROPERTY TRANSFER"), and no other Member shall have the
right, power or authority to do so. Notwithstanding the foregoing,
prior to the expiration of the Tax Protection Period, the Managing
Member shall not have the authority to cause a Property Transfer
without the prior written consent of the Ceppeto Members, which consent
may be granted or withheld in the Ceppeto Members' sole and absolute
discretion. Any time after the expiration of the Tax Protection Period,
the Managing Member may cause a Property Transfer in its sole and
absolute discretion, PROVIDED it first complies with SECTION 10.1A.
Notwithstanding anything to the contrary contained herein, in no event
shall a Property Transfer hereunder be deemed to include any
conveyances or other dispositions which are not in the nature of a sale
and which for federal income tax purposes would not be treated as a
sale or other taxable disposition of the Property, such as, by way of
example only, space leases, contracts, pledges, mortgages, easements
and other encumbrances; PROVIDED that such conveyances or other
dispositions are not made for the principal purpose of avoiding the
terms and conditions of this SECTION 10.1.
(b) Notwithstanding anything to the contrary contained in
this Agreement, at any time when the Managing Member has notified the
Members that the Property is being actively marketed as permitted under
this SECTION 10.1, (1) each Member's right to sell its interest in the
Company (such Member's "EQUITY INTEREST") pursuant to the terms of this
ARTICLE 10 (other than pursuant to a Permitted Equity Transfer) shall
be suspended and (2) each Member shall suspend all marketing efforts or
negotiations that may have been commenced with respect to a sale of its
Equity Interest; PROVIDED, HOWEVER, that nothing contained in this
SECTION 10.1(b) shall require either Member to suspend any activity
undertaken pursuant to SECTION 10.7 of this Agreement or delay or
otherwise effect the Managing Member's rights pursuant to SECTION 6.7.
Upon the request therefor by the Ceppeto Members, the Managing Member
shall confirm whether it is continuing to actively market the Property
or has suspended such marketing.
10.1A RIGHT OF FIRST OFFER: SALE OF PROPERTY
(a) After the expiration of the Tax Protection Period,
Managing Member shall, prior to the exercise of its right to cause a
Property Transfer as set forth in SECTION 10.1(a), give written notice
(the "SALE NOTICE") to the Ceppeto Members (1) stating Managing
Member's intention to cause such Property Transfer at a specified price
(the "STATED PRICE") and (2) offering to sell, and to cause the Boston
Properties Members to
51
sell, their entire Equity Interests in the Company (the "ENTIRE BP
INTEREST") to the Ceppeto Members at a price calculated in accordance
with SECTION 10.1A(c) and on all other relevant terms and conditions.
The Sale Notice shall include a non-binding calculation of the amount
which would be distributable to the Ceppeto Members in the event of a
sale of the Property or such Property Transfer at the Stated Price,
which calculation shall be determined in good faith by the Managing
Member.
(b) If Managing Member has forwarded a copy of the Sale
Notice to the Ceppeto Members, the Ceppeto Members shall, within thirty
(30) days after receiving a copy of the Sale Notice, elect one of the
following options:
(1) notify Managing Member of the Ceppeto Members election not
to purchase the Entire BP Interest for the price determined
under SECTION 10.1A(c), in which event and at which time
Managing Member may cause the Company to market and sell the
Property, provided that the price obtained for the Property is
at least ninety-four percent (94%) of the Stated Price and a
letter of interest (or similar statement) to acquire the
Property is executed within six (6) months of Managing
Member's receipt of the Ceppeto Member's election or deemed
election pursuant to item (2) below not to purchase the Entire
BP Interest and such letter (or similar statement) provides
for a closing within a commercially reasonable time and such
closing is consummated within such time period on terms which
are, in all material respects, no less favorable to the
Company as those specified in the letter of interest (or
similar statement); or
(2) notify Managing Member of the Ceppeto Member's election to
purchase the Entire BP Interest for the price determined under
SECTION 10.1A(c) on the same terms and conditions contained in
the Sale Notice. Such notification shall be accompanied by a
deposit in an amount equal to five percent (5%) of the amount
payable to Managing Member pursuant to this SECTION
10.1A(b)(2) (such amount, together with any interest earned
thereon, the "OTHER MEMBER'S SALE DEPOSIT"), which shall be
refundable until the date which is the earlier of (i) thirty
(30) days after the notification, or (ii) execution of a
purchase and sale agreement on terms and conditions
substantially the same as those contained in the Sale Notice,
with such changes as the parties may agree upon. Notice of
election to purchase shall be addressed to Managing Member and
shall set forth the place of closing which, unless the Members
shall otherwise agree, shall be at the office of the Company
(or the offices of the Ceppeto Members' lender located in New
York City), during usual business hours within ninety (90)
days after the date of the giving of the notice of election to
Managing Member. The Other Member's Sale Deposit shall be
credited against the total purchase price for the Entire BP
Interest being purchased pursuant to this SECTION 10.1A(b);
PROVIDED, HOWEVER, that, if the closing shall fail to occur
for any reason other than a default by the Boston Properties
Members, subject to the provisions of this SECTION 10.1A(b)(2)
above concerning refundability of the deposit, Managing Member
shall have the
52
right to retain the Other Member's Sale Deposit as liquidated
damages, it being agreed that in such instance Managing
Member's actual damages would be difficult, if not impossible,
to ascertain. If the Ceppeto Members shall not have given
written notice to Managing Member of its election to purchase
the Entire BP Interest within the thirty (30) day notice
period, the Ceppeto Members shall be deemed to have exercised
the option provided in subsection (1) above.
(c) The value of the Entire BP Interest with respect to this
SECTION 10.1A is the amount that the Boston Properties Members,
collectively, would receive in liquidation of the Company's interest in
the Property if (1) the Property were sold for the Stated Price, and
the debts and other obligations of the Company secured by or otherwise
incurred as to the Property (including the Senior Loan) are paid
(including any prepayment penalties and other fees resulting from such
prepayment), less the sum of all applicable transfer taxes incurred as
a result of such sale, and an amount equal to three percent (3%) of
such Stated Price, which the Members hereby unconditionally and
irrevocably agree is a reasonable estimate and approximation of
customary closing costs associated with similar transactions (provided
however, that in consideration of the agreed upon reduction of such
Stated Price by the amount of the transfer taxes which would be
incurred in connection with a sale of the Property for such amount, the
Ceppeto Members agree to pay any transfer taxes actually payable in
connection with the conveyance contemplated hereunder, and shall
indemnify the Boston Properties Members from and against any cost or
expense resulting from the failure to pay such amounts as and when
due), and (2) the proceeds of such hypothetical sale and any cash
balances and/or reserves of the Company properly attributable to such
Property were distributed in accordance with SECTION 9.3(b) or SECTION
9.4(b).
(d) In connection with the sale of the Entire BP Interest to
the Ceppeto Members pursuant to this SECTION 10.1A, the provisions of
SECTION 10.8 and SCHEDULE 10.7(e) shall be applicable to such sale
(acknowledging, however, that the Boston Properties Members are the
transferring Members).
(e) If the contemplated Property Transfer, or the conveyance
of the Entire BP Interest, is not consummated pursuant to the
provisions of this SECTION 10.1A, all the provisions of this SECTION
10.1A shall apply to any subsequent proposed Property Transfers.
(f) The Management Agreement shall be terminated, at no cost
to the Company or the Ceppeto Members, upon the closing of any transfer
of the Entire BP Interest to the Ceppeto Members.
10.2. TRANSFER OF INTERESTS.
(a) Except as otherwise specifically provided in this
ARTICLE 10, no Member, and no direct or indirect beneficial owner of
any Ceppeto Member, may, directly or indirectly, by operation of law or
otherwise, sell, assign, gift, convey or otherwise
53
transfer all or any part of its Equity Interest (an "EQUITY TRANSFER"),
including without limitation, any profits interest, rights to receive
distributions, or other similar or dissimilar right or interest,
without complying with the right of first offer procedures in SECTION
10.3. Any purported Equity Transfer not otherwise specifically
permitted by this ARTICLE 10 shall be null and void and of no effect
whatsoever. Notwithstanding the foregoing, (x) BPLP or any wholly-owned
subsidiary of BPLP which is a disregarded entity for Federal income tax
purposes, shall own at least one percent (1%) of the Percentage
Interests which are represented by Class A Common Equity at all times
prior to the expiration of the Tax Protection Period and (y) BP Member
II (and BPLP, as applicable) may not cause or suffer to occur an Equity
Transfer that is a direct transfer (or an indirect transfer through the
sale or other conveyance of the equity interests in BP Member II (or
such other disregarded person as may from time to time hold the
Contributed Preferred Units) held directly or indirectly by BPLP) of
all or any part of its Contributed Preferred Units in the Company (or
any Exchange Property as defined in the Tax Protection Agreement) at
any time prior to the expiration of the Tax Protection Period (1)
without the consent of the Ceppeto Members, which consent may be
withheld in the Ceppeto Members' sole and absolute discretion, or (2)
unless no Built-In Gain (as defined in the Tax Protection Agreement)
would be incurred by the Ceppeto Members as a result of such transfer.
Anytime after the expiration of the Tax Protection Period, BPLP and/or
BP Member II may cause or suffer to occur an Equity Transfer that is a
direct transfer (or an indirect transfer through the sale or other
conveyance of the direct or indirect equity interest in BP Member II
held by BPLP) of all or any part of its Preferred Equity in the
Company, PROVIDED that it first complies with SECTION 10.3. Any of BP
Member, BP Member III and/or BPLP (and any other subsidiaries of BPLP
who own a direct or indirect interest in each of BP Member and BP
Member III), may cause or suffer to occur an Equity Transfer of all or
any part of their respective direct or indirect Equity Interest in the
Company (other than the direct or indirect interest of BPLP in BP
Member II (or such other disregarded person as may from time to time
hold the Contributed Preferred Units), which is subject to the third
and fourth sentences of this SECTION 10.2(a)), provided that they first
comply with SECTION 10.3. Notwithstanding anything to the contrary
contained herein, in no event shall the terms of this SECTION 10.2
apply to any distributions to the Boston Properties Members in
repayment of Preferred Equity pursuant to SECTION 9.3 or SECTION 9.4.
In the event that BP Member II breaches its obligations as set forth in
this SECTION 10.2(a), and such breach causes any of the Ceppeto
Indemnified Parties (as defined in the Tax Protection Agreement) to
incur Built-In Gain as provided above, the provisions of Section 8(a)
of the Tax Protection Agreement shall apply as the sole and exclusive
remedy of the Ceppeto Members (and the Ceppeto Indemnified Parties, as
applicable) with respect to such breach.
(b) Notwithstanding anything to the contrary contained in
this Agreement, the following shall be permitted transfers (each,
"PERMITTED EQUITY TRANSFERS"), which shall not be subject to the
provisions of this ARTICLE 10 (except only the limitations, prior to
the expiration of the Tax Protection Period, if any, (i) on transfers
of equity interests in BP Member II and/or (ii) an Equity Transfer by
BP Member II, as and to the extent set forth in SECTION 10.2(a)): (1)
(A) BP Member and/or BP Member II and/or BP Member
54
III may sell, assign, gift, convey or otherwise transfer all or any
portion of its Equity Interest to an Affiliate at any time and from
time to time, (B) Boston Properties, Inc., a Delaware corporation
("BOSTON PROPERTIES"), and/or BPLP may engage in any merger,
consolidation or other combination with or into another Person, or sell
all or substantially all of its assets, or effect any reclassification,
recapitalization or change in the terms of outstanding equity, or
undertake any other change in control transaction, (C) Boston
Properties and/or BPLP may admit any new equity interest holder or
assign or issue to any Person any kind of interest whatsoever in Boston
Properties and/or BPLP, (D) Boston Properties and/or BPLP may issue,
sell, assign, gift, pledge, hypothecate or encumber any interest in
Boston Properties and/or BPLP or any instruments convertible into or
exchangeable for any interest in Boston Properties and/or BPLP and
Boston Properties and/or BPLP may the transfer any right to vote any
equity interest in Boston Properties and/or BPLP and (E) Boston
Properties and/or BPLP may, directly or indirectly, sell, assign, gift,
convey or otherwise transfer all or any portion of its beneficial
ownership interest in BP Member and/or BP Member II and/or BP Member
III to an Affiliate or, subject to compliance with SECTION 10.3, to an
Institutional Holder at any time and from time to time, and (2) any
Ceppeto Member and any direct or indirect beneficial owner of any
Ceppeto Member shall have the right, from time to time and at any time
(but subject in all events to the pledge of the Ceppeto Members' Equity
Interest to the Company or the Boston Properties Members and their
Affiliates pursuant to SECTION 13.5) to directly or indirectly sell,
assign, gift, convey or otherwise transfer all or any of its Equity
Interest to one (1) or more immediate family members of ▇▇▇▇▇▇▇ ▇▇▇▇▇
and/or ▇▇▇▇ ▇▇▇▇▇ or any trust for the benefit of ▇▇▇▇▇▇▇ ▇▇▇▇▇ and/or
▇▇▇▇ ▇▇▇▇▇ and/or any of their immediate family members. For all
purposes under this Agreement, the term "immediate family member" shall
mean any children, grandchildren, parents, grandparents, spouse and
siblings of the applicable person, or any entity owned, directly or
indirectly, solely by any one or more of such parties.
(c) The Ceppeto Members and holders of direct or indirect
beneficial interests in the Ceppeto Members may sell, assign, gift,
convey or otherwise transfer all or any portion of their Class B Common
Equity, PROVIDED that (1) they first comply with the provisions of
SECTION 10.3 and (2) in no event shall the Ceppeto Members or any
direct or indirect beneficial owner of the Ceppeto Members sell,
assign, gift, convey or otherwise transfer any partial rights in and to
their Class B Common Equity, including without limitation, any profits
interest, rights to receive distributions, or other similar or
dissimilar right or interest. Notwithstanding the foregoing, this
SECTION 10.2(c) shall not apply to (A) Permitted Equity Transfers, or
(B) pledges of the Ceppeto Members' equity in the Company pursuant to
SECTION 10.6, that are made after the full and unconditional release of
the pledge made by the Ceppeto Members to the Company or the Boston
Properties Members and their Affiliates under SECTION 13.5. The Ceppeto
Members, for themselves and on behalf of all direct and indirect
beneficial owners of the Ceppeto Members, hereby acknowledge and agree
that the identity of the holders of all direct and indirect beneficial
interests in each of the Ceppeto Members is of material importance to
each of the Boston Properties Members in agreeing to enter into this
Agreement (and, specifically, in agreeing to the terms and restrictions
contained in this ARTICLE 10) and to
55
perform the transactions contemplated hereby and by the Transaction
Documents. The Ceppeto Members represent and warrant that SCHEDULE
5.6(b) and SCHEDULE 5.6(c) contain true and correct lists of all direct
and indirect beneficial owners of the Ceppeto Members, and any direct
or indirect transfer (as provided herein) of all or any portion of the
interests held by such beneficial owners will be subject to SECTION
10.3.
10.3. RIGHT OF FIRST OFFER: INTERESTS.
(a) Either the Ceppeto Members (acting collectively) or the
Boston Properties Members (acting collectively), or their direct and
indirect beneficial owners (as and to the extent applicable) (each, an
"INITIATING MEMBER") may, at any time and from time to time only in
accordance with SECTION 10.2 of this Agreement, deliver a written
notice (a "FIRST OFFER NOTICE") to the other Member (the "RESPONDING
MEMBER") stating a gross cash purchase price (the "OFFERED PRICE") at
which the Initiating Member is prepared to sell all or a specified
portion of its Equity Interest (or the direct or indirect interests
therein, as applicable)(such Initiating Member's "OFFERED INTEREST") to
one or more third parties. The Responding Member may elect to purchase
the Offered Interest from the Initiating Member upon the terms and
conditions set forth in the First Offer Notice by (1) giving written
notice thereof to the Initiating Member and (2) depositing with an
escrow agent reasonably acceptable to the Initiating Member an amount
equal to 5% of the Offered Price (the "OFFERED PRICE DEPOSIT"), each
within thirty (30) days after the receipt of a First Offer Notice (the
"RESPONSE PERIOD").
(b) If the Responding Member elects to purchase the Offered
Interest, the Responding Member shall be obligated to purchase the
Offered Interest without any reserve or adjustment for any contingent
liabilities of the Company; PROVIDED, however, if the Boston Properties
Members, collectively, are the Responding Member, the Responding Member
shall be entitled to reserve or adjust in its reasonable discretion for
any potential liability or obligation of the Ceppeto Members pursuant
to SECTION 13.5. Any such reserves shall be retained by the BP Member
as collateral for the Ceppeto Indemnitors' indemnification obligations
under SECTION 13.5 and shall be maintained in an interest-bearing
account (all such interest to be retained in such account, and to be
earned for the benefit of the Ceppeto Members) at a commercial bank,
trust company, savings bank or other similar institutions selected by
the BP Member and reasonably acceptable to the Ceppeto Members. Any and
all risk of loss with respect to such account shall be borne solely and
exclusively by the Ceppeto Members. All amounts contained in such
account will be remitted to the Ceppeto Members if, as and when the
pledge of the Ceppeto Members' Equity Interest would have been released
pursuant to SECTION 13.5(e)(3). Nothing contained in this SECTION
10.3(b) shall limit or otherwise affect the Ceppeto Indemnitors'
indemnification obligations contained in SECTION 13.5. In addition, if
the Initiating Member has incurred recourse obligations (including any
guaranty) with respect to any Company financing (including the Senior
Loan), the obligation of the Initiating Member to convey the Offered
Interest shall be conditioned on the Responding Member either (1)
paying in full all amounts owing to the lender with respect to such
financing, (2) obtaining from such lender a full and unconditional
release of any recourse
56
obligations of the Initiating Member, except for amounts payable under
any environmental indemnities and customary carve-outs or exceptions
for commercial non-recourse loans, or (3) providing an indemnification
with respect to such recourse obligations in form and substance
reasonably acceptable to the Initiating Member.
(c) The closing on any sale of an Offered Interest to a
Responding Member pursuant to this SECTION 10.3 shall be held on the
date which is ninety (90) days following the date on which the
Responding Member delivered the notice described in clause (1) of
SECTION 10.3(a), or at such earlier date as the Responding Member may
specify on at least three (3) days prior written notice to the
Initiating Member (in either event, the "CLOSING DATE"). The closing
shall be held at the office of the Company (or the office of the
Ceppeto Members' lender located in New York City) or at such other
location as may be mutually acceptable to the Initiating Member and the
Responding Member. On the Closing Date, the purchase price shall be
paid in cash by wire transfer of immediately available federal funds
(and the amount of the Offered Price Deposit pursuant to SECTION
10.3(a) shall be released to the Initiating Member in partial
satisfaction of the purchase price), PROVIDED, HOWEVER, that if the
closing shall fail to occur on the Closing Date for any reason other
than a default by the Initiating Member, then the Initiating Member
shall be entitled to retain the Offered Price Deposit as liquidated
damages, it being agreed that in such instance the Initiating Member's
actual damages would be difficult, if not impossible, to ascertain.
Such purchase price shall equal the Offered Price less an amount equal
to the sum of all applicable transfer taxes incurred as a result of
such sale plus three percent (3%) of the Offered Price, which the
parties hereto unconditionally agree is a reasonable estimate and
approximation of customary closing costs which would be associated with
similar transactions (provided however, that in consideration of the
agreed upon reduction of such Offered Price by the amount of the
transfer taxes which would be incurred in connection with a sale of the
Property for such amount, the Responding Member agrees to pay any
transfer taxes actually payable in connection with the conveyance
contemplated hereunder, and shall indemnify the Initiating Member from
and against any cost or expense resulting from the failure to pay such
amounts as and when due). The Initiating Member shall assign its
Offered Interest to the Responding Member free and clear of any and all
claims, liens, pledges, options, restrictive covenants, charges,
hypothecations, preferences, priorities, security interests or other
encumbrances of any kind or nature, and shall provide customary
representations and indemnifications in connection therewith.
(d) If the Responding Member fails to elect to purchase
within the Response Period or fails to close the transaction on the
designated Closing Date for any reason other than a default by the
Initiating Member, the Initiating Member may, without the further
consent of the Responding Member, sell its Offered Interest to a third
party reasonably acceptable to the Responding Member (a "THIRD-PARTY
BUYER"), PROVIDED that: (1) the terms and conditions of such sale
(including without limitation, representations, warranties, covenants,
guaranties, indemnities, agreements and side agreements) shall be no
more favorable (in any material manner) to such Third-Party Buyer than
those contained in the First Offer Notice; (2) such sale or assignment
shall be
57
consummated by no later than the date which is six (6) months (the
"SALES PERIOD") after the earlier of (x) in the case of a failure to
elect to purchase, the end of the Response Period, or (y) in the case
of the Responding Member's failure to close, the date that was to be
the Closing Date; (3) the purchase price shall be paid in cash or
immediately available funds on the closing date of such conveyance; and
(4) the Third-Party Buyer shall be a Qualified Buyer. For purposes
hereof, a "QUALIFIED BUYER" shall mean any entity (w) that has not been
and whose principals have not been convicted or charged with a felony
and is otherwise of good moral character and reputation, (x) if the
Responding Member is the Boston Properties Members, collectively, that
is not a Competitor of the Company, the Responding Member or any of
their respective Affiliates, (y) if the Responding Member is the
Ceppeto Members, that expressly assumes all of the Boston Properties
Members' and BPLP's, as the case may be, covenants and other
obligations hereunder and under the Tax Protection Agreement with
respect to the restrictions on sale and the maintenance of certain
indebtedness to be guaranteed by the Ceppeto Members, prior to the
expiration of the Tax Protection Period, and (z) is otherwise
reasonably acceptable to the Responding Member. The Initiating Member
shall promptly and diligently provide the Responding Member with all
information and materials reasonably necessary or otherwise requested
by Responding Member so as to permit to Responding Member to determine
whether or not the Third-Party Buyer is a Qualified Buyer.
(e) Upon the assignment of the Offered Interest to the
Third-Party Buyer in compliance with this SECTION 10.3, the Third-Party
Buyer shall be admitted as a member of the Company in place of, or (if
less than the entire interest of the Initiating Member is assigned) in
addition to, the Initiating Member. As a condition precedent to the
foregoing, the Third-Party Buyer shall execute and deliver an
instrument, in substance and form satisfactory to the Responding
Member, assuming and agreeing to perform the terms and conditions of
this Agreement as provided in SECTION 10.4 (and if the Responding
Member is the Ceppeto Members, the Boston Properties Members' and
BPLP's, as the case may be, covenants and other obligations hereunder
and under the Tax Protection Agreement with respect to the restrictions
on sale and the maintenance of certain indebtedness to be guaranteed by
the Ceppeto Members, prior to the expiration of the Tax Protection
Period), and such other documents as the Responding Member may
reasonably require in order to effectuate the foregoing. If the
Third-Party Buyer is not a Qualified Buyer, then the Initiating Member
shall retain its Offered Interest and shall not proceed with its sale
to the Third-Party Buyer.
(f) During the Sales Period, the Initiating Member may
require the Company to incur reasonable and customary expenses in
connection with the marketing of the Offered Interest, such as the
preparation of studies and brochures and legal fees to prepare and
negotiate agreements, and all such expenses shall be reimbursed
promptly by the Initiating Member.
58
(g) The Managing Member shall, when directed by either the
Initiating or the Responding Member, exercise reasonable efforts to
enter into any arrangement and take any action that such Member is
entitled to require pursuant to this SECTION 10.3.
(h) At the request of the Responding Member, the purchase
and sale of the Offered Interest, whether to the Responding Member or
to a Third-Party Buyer, will be structured, if possible, to avoid a
termination of the Company for Federal tax purposes and/or under the
Act; PROVIDED that such structure does not adversely impact the
Initiating Member or the contemplated transfer.
(i) If a transaction pursuant to this SECTION 10.3 results
in the Ceppeto Members acquiring the Entire BP Interest, then the
Management Agreement shall be terminated, at no cost to the Company or
the Ceppeto Members, upon the closing of such transaction.
(j) Whether or not any transaction contemplated by the
foregoing provisions of this SECTION 10.3 is consummated pursuant to
the provisions of any First Offer Notice, compliance with all of the
provisions of this SECTION 10.3 will be required in connection with any
subsequent Equity Transfer previously proposed but not consummated
within the applicable Sales Period and any subsequently proposed Equity
Transfer (other than a Permitted Equity Transfer) in accordance with
SECTION 10.2.
10.4. ASSUMPTION BY ASSIGNEE.
(a) Any assignment of a Member's Equity Interest permitted
under this ARTICLE 10 shall be in writing, and shall be an assignment
and transfer of all of the assignor's rights and obligations hereunder
with respect to such Equity Interest, and the assignee shall expressly
agree in writing to be bound by all of the terms of this Agreement (and
if the Ceppeto Members will continue to be Members following such
assignment, the Boston Properties Members' and BPLP's, as the case may
be, covenants and other obligations hereunder and under the Tax
Protection Agreement with respect to the restrictions on sale and the
maintenance of certain indebtedness to be guaranteed by the Ceppeto
Members, prior to the expiration of the Tax Protection Period), and
assume and agree to perform all of the assignor's agreements and
obligations existing or arising at the time of and subsequent to such
assignment with respect to such Equity Interest. Upon any such
permitted assignment of the assignor's Equity Interest, and after such
assumption, the assignor shall be relieved of its agreements and
obligations hereunder with respect to such Equity Interest arising
after such assignment and the assignee shall become a Member in place
of the assignor with respect to such Equity Interest. An executed
counterpart of each such assignment of an Equity Interest and
assumption of a Member's obligations shall be delivered to each Member
and to the Company. The assignee shall pay all expenses incurred by the
Company in admitting the assignee as a Member. Except as otherwise
expressly provided herein, no permitted assignment shall terminate the
Company.
59
(b) As a condition to any assignment of a Member's Equity
Interest, the selling Member shall obtain such consents as may be
required from third parties, if any, or waivers of such consent
requirements. The other Members shall use reasonable efforts to
cooperate with the selling Member in obtaining such consents or
waivers, provided, however, that in no event shall the other Members be
required to incur or assume any cost or obligation, divest any asset or
make any financial accommodation of any kind in connection therewith.
10.5. AMENDMENT OF CERTIFICATE OF FORMATION. If an assignment
of a Member's Equity Interest shall take place pursuant to the provisions of
this ARTICLE 10, then the continuing Members promptly thereafter shall cause to
be filed, to the extent necessary, an amendment to the Company's Certificate of
Formation with all applicable state authorities, together with any necessary
amendments to the fictitious or assumed name(s) of the Company in order to
reflect such change or take such similar action as may be required.
10.6. PLEDGING OF INTERESTS. The Ceppeto Members, and any
permitted assignee of their Equity Interest, may pledge, hypothecate or
otherwise encumber all or any part of such Equity Interests as security for any
financing provided to the Ceppeto Members or their Affiliates by an
institutional lender and in form and substance reasonably satisfactory to the
Managing Member; PROVIDED that (a) such financing may be obtained and such
pledge, hypothecation or encumbrance may be made, only in the event that and for
so long as no part of the Ceppeto Members' Equity Interest is then pledged to
the Company, the Boston Properties Members or any of their Affiliates pursuant
to SECTION 13.5, (b) the pledge shall be limited solely to the right to receive
distributions and/or other proceeds of the Equity Interest and (c) such
financing institution agrees in writing, in form and substance reasonably
acceptable to the Managing Member, that if, as a result of a default under any
such financing, a party other than Ceppeto or Ceppeto Holdings (each as
currently constituted) acquires, succeeds to ownership of, or gains any rights
in any part or all of the Ceppeto Members' Equity Interest in the Company, such
party's interest in the Company shall be subject to the terms and conditions of
this Agreement, in no event shall the holder of such Equity Interest be entitled
to be admitted to the Company as a Member and the Managing Member shall continue
to have exclusive authority to act for and make decisions on behalf of the
Company as and to the extent set forth in this Agreement. The Boston Properties
Members and any permitted assignees of their respective Equity Interests, may
pledge, hypothecate or otherwise encumber all or any part of such Equity
Interests at any time and from time to time in its discretion.
10.7. CONVERSION RIGHTS.
(a) Subject to the terms and conditions set forth herein,
(1) at any time after expiration of the Tax Protection Period, the
Ceppeto Members (acting collectively) or (2) at any time after the
twenty-fifth (25th) anniversary of the Effective Date, the BP Member,
shall have the right (either such right, the "CONVERSION RIGHT") to
require the conveyance to the BP Member by the Ceppeto Members of the
Ceppeto Members' collective entire Equity Interest (the "ENTIRE
INTEREST") in consideration of the value of said Entire Interest as
determined by the procedures set forth in this SECTION 10.7(a)
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(whichever of the BP Member or the Ceppeto Members as shall exercise
the Conversion Right for the purposes of this SECTION 10.7, the
"EXERCISING MEMBER"). The consideration to be paid to the Ceppeto
Members for the Ceppeto Members' Entire Interest shall be, at the
option of the Ceppeto Members, exercised as provided in SECTION
10.7(c), paid in cash and/or OP Units. The value of the OP Units shall
be determined in the manner set forth in SECTION 10.7(c) below. If the
Ceppeto Members receive OP Units pursuant to this SECTION 10.7, the
Managing Member shall cause Boston Properties to enter into a
Registration Rights Agreement for the benefit of the Ceppeto Members in
substantially the form attached hereto as EXHIBIT 10.7. The Conversion
Right shall be exercised by delivery of a written notice (the "EXERCISE
NOTICE") from the Exercising Member to the other Member(s) (the
"NON-EXERCISING MEMBER"). Upon the exercise of a Conversion Right, the
value of the Ceppeto Members' Entire Interest shall be determined in
accordance with SCHEDULE 10.7(a) - "APPRAISAL" attached hereto (such
procedure and determination of value, the "APPRAISAL"). The date on
which the value is determined by the Appraisal is herein referred to as
the "DETERMINATION DATE."
(b) Notwithstanding anything to the contrary provided in
SECTION 10.7(a), the Non-Exercising Member may delay the effective date
of the Exercise Notice, and thus the commencement of the Appraisal,
once, for not more than six (6) months from the date of the Exercise
Notice, by written notice (the "DELAY NOTICE") to the Exercising Member
sent within twenty (20) Business Days after receipt of the Exercise
Notice, such Delay Notice to specify the period of delay requested
(but, regardless of the period of delay requested, the Non-Exercising
Member shall have no additional right to delay the commencement of the
Appraisal, the only right being a one-time right to delay the
commencement of the Appraisal for no longer than six (6) months from
the date of the Exercise Notice). In the event a Delay Notice is given,
the date of the Exercise Notice shall be deemed to be the date within
such six (6) month period as specified in the Delay Notice.
(c) No later than the date which is ten (10) days prior to
the Original Delivery Date, the Ceppeto Members shall elect by written
notice to the BP Member whether payment under this SECTION 10.7 shall
be in cash or OP Units or a combination of cash and OP Units (subject,
with respect to such election as to OP Units, to the rights of the BP
Member as set forth in this SECTION 10.7(c)). If the Ceppeto Members
fail to timely make the election contemplated by this SECTION 10.7(c),
the BP Member shall be entitled to make such payment in cash and/or OP
Units, as determined by the BP Member (and subject to the rights of the
BP Member as set forth in this SECTION 10.7(c)). Notwithstanding
anything to the contrary contained in this SECTION 10.7, in the event
that the Ceppeto Members elect to receive (or the BP Member elects to
pay) all or a portion of the payment in cash pursuant to this SECTION
10.7(c), the BP Member shall have the right at its option to pay a
portion of the applicable amount (but not less than fifty percent (50%)
of the applicable amount) in cash on the Actual Delivery Date and the
balance through the delivery by BPLP of an unsecured promissory note
for the remaining amount (provided that, at BP Member's option, BP
Member may deliver such promissory note, together with a guaranty of
BPLP with respect to BP Member's obligations thereunder),
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such note to be due in full on the first anniversary of such Actual
Delivery Date and to bear interest at a rate equal to seven and
one-half percent (7 1/2%) per annum (except that the BP Member or BPLP,
as applicable, shall have the right to prepay such promissory note, in
whole or in part, at any time with no premium or penalty). If the
Ceppeto Members elect to receive payment in OP Units (or the BP Member
elects to pay OP Units) pursuant to this SECTION 10.7(c), the Ceppeto
Members will be admitted as Additional Limited Partners (as defined in
the Partnership Agreement) of BPLP (effective as of the Actual Delivery
Date), and BPLP will issue to the Ceppeto Members OP Units and
corresponding Partnership Interests (as defined in the Partnership
Agreement). The number of OP Units to be issued to the Ceppeto Members
pursuant to this SECTION 10.7(c) (the "UNIT NUMBER") shall be equal to
the quotient of (1) the value of the Ceppeto Members' Entire Interest
determined in accordance with SCHEDULE 10.7(a), LESS the amount, if
any, to be paid to the Ceppeto Members in cash or by delivery of such
unsecured promissory note, DIVIDED BY (2) the Fair Market Value of One
OP Unit. In the event that the Ceppeto Members elect to receive OP
Units (or the BP Member elects to pay OP Units), the BP Member may
postpone or adjourn, on one or more occasions, the date of closing of
the Conversion Right (the "ACTUAL DELIVERY DATE") (including the
Original Delivery Date) for a period not to exceed in the aggregate one
year from the Original Delivery Date. If the Actual Delivery Date is so
postponed, the Members hereby acknowledge that: (i) the Unit Number
shall be determined based on the Fair Market Value of One OP Unit
determined on the Actual Delivery Date, PROVIDED that, in such case,
the Ceppeto Members shall also be entitled to receive an amount equal
to any distributions that they otherwise would have been entitled to
receive as holders of such OP Units for the period from the Original
Delivery Date to the Actual Delivery Date; (ii) the Ceppeto Members
shall be entitled to receive interest on the portion of the payment
which is to be paid in cash, to the extent not paid in cash or by
delivery of a promissory note on the Original Delivery Date, at a rate
of seven and one-half percent (71/2%) per annum for the period from the
Original Delivery Date to the date so paid in cash or by delivery of
the promissory note; and (iii) the value of the Ceppeto Members' Entire
Interest determined in accordance with this SECTION 10.7 shall remain
fixed as of and after the Determination Date until the Actual Delivery
Date, and in no event shall the Ceppeto Members be entitled to any
distributions in consideration of such Entire Interest pursuant to this
Agreement after the Original Delivery Date.
(d) Subject to the BP Member's right to postpone or adjourn
the Actual Delivery Date pursuant to SECTION 10.7(c), the BP Member
shall designate a closing date on not less than ten (10) Business Days
prior written notice to the Ceppeto Members for the conveyance of the
Ceppeto Members' Entire Interest required pursuant to this SECTION 10.7
(such initially scheduled closing date, the "ORIGINAL DELIVERY DATE"
with the actual closing date being the Actual Delivery Date (which
shall be the Original Delivery Date if the Original Delivery Date is
not adjourned or postponed by the BP Member as provided in SECTION
10.7(c) above)), which Original Delivery Date shall be not less than
fifteen (15) nor more than ninety (90) Business Days after the
Determination Date. On the Actual Delivery Date, in exchange for the
Ceppeto Members' Entire Interest, the BP Member shall, as the case may
be: (i) cause the applicable number of OP Units to be
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issued to the Ceppeto Members or (ii) pay to the Ceppeto Members the
applicable amount in cash (together with the promissory note, if
applicable), each as provided in SECTION 10.7(c), PROVIDED, HOWEVER,
that in lieu of any fractional OP Units resulting from such
calculation, the BP Member shall pay in cash the value attributable to
such fractional OP Unit.
(e) Any transfer of the Ceppeto Members' Entire Interest to
the BP Member or its designee pursuant to this SECTION 10.7 shall, in
addition to any other provisions of this ARTICLE 10, be subject to the
provisions of SCHEDULE 10.7(e) - "PURCHASING DOCUMENTS: CLOSING
MATTERS".
(f) If and to the extent OP Units cannot be issued to the
Ceppeto Members pursuant to this SECTION 10.7 upon the exercise of a
Conversion Right without violating (based upon the reasonable
determination of the BP Member, with the advice of counsel) any
applicable federal or state securities laws or the HSR Act or due to
the inability of the Ceppeto Members to provide the information and
representations referred to or contained in this SECTION 10.7(f), the
consideration not so paid in OP Units shall be paid by the BP Member to
the Ceppeto Members in cash pursuant to SECTION 10.7(c) (subject to the
BP Member's right to deliver up to fifty percent (50%) of such amount
in the form of an unsecured promissory note made or guaranteed by BPLP
as provided in SECTION 10.7(c)), subject to the BP Member's right to
waive the information and representation requirements of this SECTION
10.7(f). In determining if OP Units can be provided as consideration
pursuant to the exercise of any Conversion Right, the BP Member may
require that the Ceppeto Members submit to BPLP such information,
certification or affidavit (including representations and warranties)
as the BP Member may reasonably require in connection with determining
compliance with any applicable federal or state securities laws or the
HSR Act. The Ceppeto Members shall use reasonable efforts to respond
promptly to such requests for such written representations or other
instruments as are necessary or appropriate, in BP Member's reasonable
judgment, to effect compliance with applicable law. Nothing contained
in this Agreement shall be deemed to limit the right of the BP Member,
BPLP or Boston Properties to modify, restate or otherwise amend their
respective Organizational Documents.
(g) With respect to any OP Units issued to the Ceppeto
Members pursuant to this SECTION 10.7 (the "ISSUED OP UNITS"), the
Ceppeto Members shall receive a pro rata distribution for the portion
of the fiscal quarter in which the Actual Delivery Date occurs (the
"CLOSING QUARTER") commencing on the Actual Delivery Date and ending on
the last day of the Closing Quarter on all outstanding Issued OP Units
held by the Ceppeto Members on the record date for dividends declared
on the BXP Stock for the Closing Quarter.
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10.8. PROVISIONS GENERALLY APPLICABLE TO SALES. For purposes
of this SECTION 10.8, the Ceppeto Members shall be treated as a single Member
and the Boston Properties Members shall be treated as a single Member. The
following provisions shall be applicable to sales under SECTIONS 10.1A, 10.3,
10.7 and 12.2:
(a) At the closing of the sale of all or a portion of the
Equity Interest of a Member to the other Member, the selling Member
shall execute an assignment of its interest in the Company, free and
clear of all liens, encumbrances and adverse claims, which assignment
shall be in form and substance reasonably satisfactory to the
purchasing Member, and such other instruments as the purchasing Member
shall reasonably require to assign all or such portion of the Equity
Interest of the selling Member to such Person as the purchasing Member
may designate. For any sale or transfer of all or a portion of a
Member's Equity Interest under this ARTICLE 10, the purchasing Member
may designate the assignee of such Equity Interest, which assignee (i)
in connection with the sale of transfer of a Member's Entire Interest,
need not be an Affiliate of the purchasing Member and (ii) in
connection with the sale of transfer of less than all of a Member's
Entire Interest, shall be an Affiliate of the purchasing Member.
(b) It is the intent of the parties to this Agreement that
the requirements or obligations, if any, of one Member to sell all or a
portion of its Equity Interest to the other Member shall be enforceable
by an action for specific performance of a contract relating to the
purchase of real property or an interest therein. In the event that the
selling Member shall have created or suffered any unauthorized liens,
encumbrances or other adverse interests against either the Property or
the selling Member's interest in the Company, the purchasing Member
shall be entitled either to an action for specific performance to
compel the selling Member to have such defects removed, in which case
the closing shall be adjourned for such purpose, or, at the purchasing
Member's option, to an appropriate offset against the purchase price,
which offset shall include all reasonable costs associated with
enforcement of this Section.
(c) At the election of the purchasing Member, the purchase
and sale of all or a portion of an Equity Interest will be structured
to avoid, if possible, a termination of the Company for Federal tax
purposes and/or under the Act, providing that such structure does not
adversely impact the selling Member or the contemplated transfer.
(d) At the request of the Ceppeto Members, any purchase and
sale or other transfer of all or any portion of the Ceppeto Members'
Entire Interest to the Managing Member in exchange for OP Units (or a
combination of cash and OP Units) will, to the extent reasonably
practicable, be structured in consideration of the tax consequences of
such transfer to the Ceppeto Members, providing that such structure (i)
does not adversely impact the Managing Member or its Affiliates, the
Property or the contemplated transfer (all as determined by the
Managing Member) and (ii) does not cause the Managing Member or its
Affiliates, the Property or the contemplated transfer to incur any
additional cost or other liability which is not paid in full by the
Ceppeto Members on the date of such sale or other transfer.
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(e) In connection with the sale or other transfer of the
Entire BP Interest to the Ceppeto Members or their designee, the BP
Member shall, at the Ceppeto Member's sole cost and expense, deliver
originals or certified copies of all books and records and other
material relating to the Property, and otherwise cooperate with the
reasonable requests of the Ceppeto Members in connection with the
transition of management of the Property to the Ceppeto Members or
their designee.
ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER
11.1. DISSOLUTION OR MERGER. For purposes of this ARTICLE 11,
the Ceppeto Members shall be treated as a single Member and the Boston
Properties Members shall be treated as a single Member. If either both the
Boston Properties Members or both Ceppeto Members shall be dissolved, or merged
with or consolidated into another Person, or if all or substantially all of
their assets shall be sold, or transferred, then unless such dissolution,
merger, consolidation, sale or transfer is expressly permitted under Article 10,
such dissolution, merger, consolidation, sale or transfer shall be a dissolution
of the Company, and the other Member shall be the Liquidating Member in the
dissolution of the Company. The Boston Properties Members shall not voluntarily
cause any such dissolution of the Company prior to the expiration of the Tax
Protection Period without the prior written consent of the Ceppeto Members,
which consent may be withheld in the Ceppeto Members' sole and absolute
discretion.
11.2. BANKRUPTCY, ETC. In the event:
(a) either both the Boston Properties Members or both
Ceppeto Members shall file a voluntary petition in bankruptcy or shall
be adjudicated a bankrupt or seek any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
for itself under the present or any future Federal bankruptcy code or
any other present or future applicable Federal, state, or other statute
or law relative to bankruptcy, insolvency, or other relief for debtors,
or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver, conservator or liquidator of said Member(s) or its
interest in the Company (the term "acquiesce" includes the failure to
file a petition or motion to vacate or discharge any order, judgment or
decree providing for such appointment within twenty (20) days after the
appointment); or
(b) a court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against either both
Boston Properties Members or both Ceppeto Members seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or any future Federal
bankruptcy code or any other present or future applicable Federal,
state or other statute or law relating to bankruptcy, insolvency, or
other relief for debtors, and said Member(s) shall acquiesce in the
entry for such order, judgment or decree (the term "acquiesce" includes
the failure to file a petition or motion to vacate or discharge such
order, judgment or decree within twenty (20) days after the entry of
the order, judgment or
65
decree) or such order, judgment or decree shall remain unvacated and
unstayed for an aggregate of ninety (90) days (whether or not
consecutive) from the date of entry thereof, or any trustee, receiver,
conservator or liquidator of said Member(s) or of all or any
substantial part of said Member's property or its interest in the
Company shall be appointed without the consent or acquiescence of said
Member(s) and such appointment shall remain unvacated and unstayed for
an aggregate of sixty (60) days (whether or not consecutive); or
(c) either both Boston Properties Members or both Ceppeto
Members shall admit in writing its inability to pay its debts generally
as they mature; or
(d) either both Boston Properties Members or both Ceppeto
Members shall give notice to any governmental body of insolvency, or
pending insolvency, or suspension or pending suspension of operations;
or
(e) either both Boston Properties Members or both Ceppeto
Members shall make a general assignment for the benefit of creditors or
take any other similar action for the protection or benefit of
creditors;
then such event shall cause the dissolution of the Company and the other Members
shall be the Liquidating Member.
11.3. RECONSTITUTION. Notwithstanding the provisions of
SECTIONS 11.1 and 11.2, if either both Boston Properties Members or both Ceppeto
Members are the subject of a dissolution or bankruptcy event as described above,
the remaining Members may, within ninety (90) days of any such event, elect to
(1) continue the Company or (b) transfer the assets of the Company to a newly
organized entity and accept ownership interests in such entity in exact
proportion to their respective interests in the Company at the time of
dissolution, PROVIDED that at the time the event described in this ARTICLE 11
occurs, the Company has at least one (1) continuing Member. An appropriate
amendment to or cancellation of the Certificate of Formation and all other
filings required by law shall be made in accordance with any action taken
pursuant to this SECTION 11.3.
ARTICLE 12. DISSOLUTION
12.1. WINDING UP. Upon dissolution of the Company by
expiration of the term hereof, by operation of law, by any provision of this
Agreement or by agreement between the Members, the Company's business shall be
wound up and all its assets distributed in liquidation. In such dissolution,
except as otherwise expressly provided in ARTICLE 11, the Managing Member shall
be the Liquidating Member. If both Boston Properties Members are the subject of
a dissolution or bankruptcy event described in ARTICLE 11, then Ceppeto, not
Managing Member, will be the Liquidating Member. The Liquidating Member shall
have the right to:
66
(a) wind up the Company and cause the Company's assets to be
sold and the proceeds of sale distributed as provided in Section 12.5;
or
(b) notwithstanding anything to the contrary contained in
this Agreement, cause the assets of the Company to be appraised and, at
its option, purchase the Entire Interest of the other Member, all in
accordance with SECTION 12.2.
12.2. PURCHASE OF NON-LIQUIDATING MEMBER'S INTEREST.
(a) For purposes of this SECTION 12.2, the Ceppeto Members
shall be treated as a single Member and the Boston Properties Members
shall be treated as a single Member. The Liquidating Member, within
thirty (30) days after the commencement of the dissolution of the
Company, may give notice (the "APPRAISAL NOTICE") to the other Member
electing to have the fair market value of the Company's assets
determined by appraisal pursuant to SECTION 12.2(b) (the "FAIR MARKET
VALUE"). The fees and expenses of such appraisers shall be borne by the
Company. The Liquidating Member shall have the option, by notice given
to the other Member within forty-five (45) days after receipt of the
determination of Fair Market Value pursuant to SECTION 12.2(b), to
purchase the other Member's Entire Interest at a price equal to the
amount which would have been distributable to the other Member in
accordance with the provisions of SECTION 9.3(b) or 9.4(b), as
applicable, and SECTION 12.5 if all of the Company's assets had been
sold for an amount equal to such Fair Market Value and any debts,
liabilities and expenses which would have been paid by the Company or
reserved against pursuant to SECTION 12.5 out of the proceeds of such
sale were deducted in determining such Fair Market Value. If after the
receipt of the determination of Fair Market Value pursuant to SECTION
12.2(b), the Liquidating Member elects not to exercise the option to
purchase the other Member's Entire Interest pursuant to this SECTION
12.2(a), then the Liquidating Member shall have all of its rights under
this ARTICLE 12 as if the Appraisal Notice had not been given. The
provisions of SCHEDULE 10.7(e) and SECTION 10.8 shall apply to a
purchase under this SECTION 12.2, except that any adjustments required
pursuant to SECTION 10.8 shall be applicable to any events and/or
liabilities or income which were not included in determining the Fair
Market Value.
(b) If the Fair Market Value of the assets of the Company is
required to be determined for purposes of this SECTION 12.2, such Fair
Market Value, if not otherwise agreed upon by the Members, shall be
determined as set forth in this SECTION 12.2(b), and otherwise in
accordance with SCHEDULE 10.7(a). All appraisers referred to herein
shall be real estate appraisers which are members of the New York
Chapter of the American Institute of Real Estate Appraisers for at
least seven (7) years. Each Member shall select one (1) appraiser. In
the event that either Member fails to select an appraiser within thirty
(30) days after receipt of the Appraisal Notice, then such Member's
appraiser shall be selected by the other Member from a list of no fewer
than five (5) appraisers compiled and maintained by the Managing
Member. After the selection, each appraiser shall independently
determine the gross fair market value of the assets of the Company. If
the separate appraisals differ, the Members shall have a period of ten
(10) days after receipt
67
of the appraisals to agree on the Fair Market Value. In the event the
Members cannot agree on the Fair Market Value in accordance with the
preceding sentence, the two (2) appraisers referred to therein shall
within ten (10) days after the expiration of the ten (10) day period
described in the preceding sentence select a third appraiser. In the
absence of such a selection, the third appraiser shall be selected by
the New York Chapter of the American Institute of Real Estate
Appraisers. The third appraiser shall decide which of the two (2)
appraisals established by the appraisers in accordance with this
SECTION 12.2(b) constitutes the Fair Market Value, and such decision
shall be conclusive and binding on the parties.
12.3. OFFSET FOR DAMAGES. In the event of dissolution
resulting from an event described in ARTICLE 11, the Liquidating Member shall be
entitled to deduct from the amount payable to the other Member pursuant to
SECTION 12.2, SECTION 12.4 or SECTION 12.5, the amount of damages, including
reasonable attorneys' fees and disbursements, incurred by the Company or the
Liquidating Member proximately resulting from any such event, as established by
a court order.
12.4. DISTRIBUTIONS OF OPERATING CASH FLOW. Subject to SECTION
12.5 as to proceeds of liquidation, during the period of liquidation the Members
shall continue to receive distributions of Operating Cash Flow and Capital Event
Proceeds and to share profits and losses for all tax and other purposes as
provided elsewhere in this Agreement.
12.5. DISTRIBUTIONS OF PROCEEDS OF LIQUIDATION. For purposes
of this SECTION 12.5, "proceeds of liquidation" shall equal cash available for
liquidation, net of liens secured by the Property, PROVIDED that neither the
Company nor the Members shall be personally liable for, nor shall either or any
of them be released from, such debts. The proceeds of liquidation shall be
applied in the order of priority set forth in this SECTION 12.5.
(a) FIRST. To the payment of: (1) debts and liabilities of
the Company, and (2) expenses of liquidation.
(b) SECOND. To the setting up of any reserves that the
Liquidating Member may deem necessary for any contingent or unforeseen
liabilities or obligations of the Company or of the Members arising out
of or in connection with the Company. Such reserves may be deposited by
the Company in a bank or trust company acceptable to the Liquidating
Member to be held by it for the purpose of disbursing such reserves in
payment of any of the aforementioned liabilities or obligations, and at
the expiration of such period as the Liquidating Member shall deem
advisable, distributing the balance, if any, pursuant to SECTION
12.5(c).
(c) THIRD. Any balance remaining shall be distributed to the
Members in accordance with SECTION 9.6(a).
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12.6. ORDERLY LIQUIDATION. A reasonable time shall be allowed
for the orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to enable the Members to minimize the losses
normally attendant upon a liquidation.
12.7. FINANCIAL STATEMENTS. During the period of winding up,
the Company's then independent certified public accountants shall prepare and
furnish to each of the Members, until complete liquidation is accomplished, all
the financial statements provided for in SECTION 7.1.
ARTICLE 13. MEMBERS
13.1. LIABILITY. A Member shall not be personally liable for
the debts, liabilities or obligations of the Company or of any other Member
except to the extent required under the Act. Notwithstanding the foregoing, a
Member will be liable for any distributions made to it if, after such
distribution, the outstanding liabilities of the Company (other than liabilities
to Members on account of their interests in the Company and liabilities for
which the recourse of creditors is limited to specific Company property) exceed
the fair value of the Company's assets (PROVIDED that the fair value of Company
property that secures recourse liability shall be included only to the extent
its fair value exceeds such liability) and the Member had knowledge of this fact
at the time the referenced distribution was received.
13.2. NO FIDUCIARY OBLIGATIONS. To the maximum extent
permitted by applicable law, none of the Managing Member nor any other Members
shall have any fiduciary duty or other duty (other than contractual obligations
under this Agreement, the Master Transaction Agreement or the Tax Protection
Agreement) to the other Members with respect to the business and affairs of the
Company. To the extent that any such fiduciary duty or other duties are imposed
on the Managing Member or any other Boston Properties Members or any Ceppeto
Members under the Act, the Ceppeto Members hereby unconditionally and
irrevocably waive the same and agree that neither the Managing Member nor any
other Boston Properties Members shall have any liability for breach of such
duties and the BP Members hereby unconditionally and irrevocably waive the same
and agree that neither of the Ceppeto Members shall have any liability for
breach of such duties. Each of the Members hereby covenant, as a material
inducement to the Managing Member and the other Members to enter into this
Agreement, that the Members shall not commence or join or otherwise bring or
advance or participate in any claim against the Managing Member or any other
Members based upon any purported breach of fiduciary duty or other duty (other
than contractual obligations under this Agreement, the Master Transaction
Agreement or the Tax Protection Agreement).
13.3. POWER OF ATTORNEY. The Ceppeto Members hereby
irrevocably constitute and appoint the Managing Member, with full power of
substitution, as their true and lawful attorney, which power shall be coupled
with an interest, in their name, place and ▇▇▇▇▇ to sign, execute, acknowledge,
swear to, deliver, record and file, as appropriate (collectively, the "Action")
and in accordance with this Agreement, any and all certificates, documents and
69
instruments that in the discretion of the Managing Member are required to be
signed, executed, acknowledged, sworn to, delivered, recorded or filed by such
Member to discharge the purposes of the Company as set forth in this Agreement;
PROVIDED that such action does not cause or result in the incurrence of any
personal liability on the part of such Member hereunder. Prior to the taking of
any Action pursuant to the power of attorney contained in this SECTION 13.3, the
Managing Member shall give not less than (5) Business Days prior written notice
to the Ceppeto Members, which notice is intended to provide the Ceppeto Members
with the opportunity to take such Action in lieu of the Managing Member,
PROVIDED HOWEVER, that nothing contained herein (including without limitation,
any failure of the Managing Member to deliver such notice, or any refusal on the
part of the Ceppeto Members to take such Action, or other action or notice given
by the Ceppeto Members to the effect that such Action is not to be taken) shall
limit or modify the power of attorney granted to the Managing Member herein.
13.4. CONSENT OF CEPPETO MEMBERS. Whenever the consent,
approval, determination or decision of the Ceppeto Members is required under
this Agreement, including to amend or waive any provisions of this Agreement,
such consent, approval, determination or decision will be deemed given by, and
binding upon, each Ceppeto Member if the Company obtains the written consent,
approval or decision of ▇▇▇▇ ▇▇▇▇▇, and each of the Ceppeto Members hereby
irrevocably agrees that ▇▇▇▇ ▇▇▇▇▇ will have the power and authority to grant
any such written consent or approval, or make any such determination or
decision, on behalf of, and as the duly authorized agent and representative of,
such Ceppeto Member. Each Ceppeto Member by execution and delivery of this
Agreement irrevocably constitutes and appoints ▇▇▇▇ ▇▇▇▇▇ as its true and lawful
attorney-in-fact with full power and authority in such Ceppeto Member's name,
place and stead to execute, acknowledge and deliver such certificates,
instruments, documents and agreements as are necessary or appropriate to make
any and all amendments or restatements of this Agreement. The appointment by
each Ceppeto Member of ▇▇▇▇ ▇▇▇▇▇ as attorney-in-fact is deemed to be a power
coupled with an interest and will survive, and will not be affected by the
subsequent bankruptcy, death, incapacity, disability, adjudication of
incompetence or insanity, or dissolution of any Ceppeto Member hereby giving
such power. It will be a condition to any transfer of a Ceppeto Member's
interest in the Company that the foregoing power of attorney be granted by the
transferee of such Ceppeto Member's interest. Notwithstanding the foregoing, in
the event of (a) the death, incapacity, disability, adjudication of incompetence
or insanity of ▇▇▇▇ ▇▇▇▇▇, or (b) the resignation by ▇▇▇▇ ▇▇▇▇▇ as authorized
agent and representative of the Ceppeto Members hereunder, such resignation to
be effective not less than thirty (30) days after delivery of notice to the
Company and the Managing Member, or (c) an election by the Ceppeto Members,
acting jointly, to replace ▇▇▇▇ ▇▇▇▇▇ as their agent and representative, a
replacement authorized agent and representative hereunder shall be appointed by
the Ceppeto Members, such person in all events to be reasonably acceptable to
Managing Member.
13.5. INDEMNIFICATION OBLIGATIONS; PLEDGE OF CEPPETO MEMBERS'
EQUITY INTEREST.
70
(a) CEPPETO INDEMNIFICATION OBLIGATION. From and after the
Effective Date, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Ceppeto and Ceppeto Holdings
(collectively, the "CEPPETO INDEMNITORS") agree, jointly and severally,
to indemnify, defend and hold harmless the BPLP Indemnified Parties
from and against all Losses which are incurred or suffered by any one
or more of them based upon, arising out of, in connection with or by
reason of:
(1) the breach by ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, the Ceppeto
Members or either of them of any of the representations and
warranties of ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, and/or the Ceppeto
Members or either of them contained in this Agreement; and/or
(2) Partnership Claims; and/or
(3) any liability, obligation, claim, lien, cost,
expense or encumbrance of any kind or nature (other than
pursuant to the Purchase Contracts and those costs and
expenses specifically set forth on the attached SCHEDULE
13.5(a)(3)), whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown, including
liabilities as guarantor or otherwise with respect to
obligations of others, or liabilities for taxes due or then
accrued or to become due, of the Company, the Original Company
or the Ceppeto Members or the constituent members and direct
and indirect beneficial owners of any of them, existing prior
to the Effective Date, or of Skyline I or Skyline II existing
prior to February 7, 2001, regardless of whether the existence
of such liability, obligation, claim, lien, cost, expense or
encumbrance constitutes a breach of any of the representations
and warranties of ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and/or the Ceppeto
Members or either of them contained in this Agreement.
(b) SURVIVAL. The right of the BPLP Indemnified Parties to
make claims for indemnification under SECTION 13.5(a)(2) and SECTION
13.5(a)(3) will survive the Effective Date indefinitely. With respect
to claims for indemnification made by the BPLP Indemnified Parties
under SECTION 13.5(a)(1), the following provisions will apply:
(1) All representations and warranties of the Ceppeto
Members contained in this Agreement shall survive the
Effective Date regardless of any investigation made as
follows: (A) the representations and warranties set forth in
SECTION 5.1 (Organization and Power), SECTION 5.2
(Authorization) and SECTION 5.6 (Ownership of Direct and
Indirect Interests in the Company) shall survive the Effective
Date indefinitely; and (B) all other representations and
warranties in this Agreement shall survive only until (but
excluding) the date which is the second anniversary of the
Effective Date (such representations and warranties described
in clause (B), the "LIMITED SURVIVAL REPRESENTATIONS").
(2) With respect to any claim by a BPLP Indemnified
Party for indemnification for a Loss resulting from the breach
of the representations or warranties of the Ceppeto Members
contained in this Agreement, a Notice of
71
Claim must be given to the Ceppeto Indemnitors within the
survival period for the relevant representation or warranty.
Notwithstanding the foregoing, (A) if a Notice of Claim
asserting a claim for indemnification under this SECTION 13.5
arising from the breach of any Limited Survival Representation
shall have been given prior to the expiration of such Limited
Survival Representation, such Limited Survival Representation
shall survive, only to the extent of the claim asserted in
such Notice of Claim, until such claim is resolved, and (B)
claims brought by any BPLP Indemnified Party in connection
with any Limited Survival Representation which is untrue as a
result of fraud by the Ceppeto Members may be brought at any
time, without regard to the limitations on survival set forth
in SECTION 13.5(b)(1).
(c) LIMITATIONS ON CERTAIN INDEMNIFICATION OBLIGATIONS OF
THE CEPPETO INDEMNITORS.
(1) THIRD PARTY RECOVERIES. There shall be netted from
any payment for a Loss required under SECTION 13.5(a): (A) the
amount of any indemnification received by any BPLP Indemnified
Party from an unrelated party with respect to such Loss, and
(B) the amount of any insurance proceeds or other cash
receipts paid to any BPLP Indemnified Party against any such
Loss.
(2) FULL RECOURSE. If the Ceppeto Indemnitors do not
pay, in full, any and all indemnity obligations under SECTION
13.5(a) within the applicable time period set forth in SECTION
13.5(d)(4), the indemnity obligations of the Ceppeto
Indemnitors under SECTION 13.5(a) shall, at BPLP Indemnified
Parties' election, be satisfied by any BPLP Indemnified Party
against the Ceppeto Members' Equity Interest pledged to the BP
Member pursuant to SECTION 13.5(e), and/or any other
collateral available to the BPLP Indemnified Parties
hereunder, in such order as the BPLP Indemnified Parties may
determine. In the event that the value of the Ceppeto Members'
Equity Interest and/or any other collateral, is less than the
amount of the Losses to be paid to the BPLP Indemnified
Parties, the shortfall amount shall be a joint and several
recourse obligation of all of the Ceppeto Indemnitors, and the
BPLP Indemnified Parties shall be entitled to collect said
shortfall from one or more of the Ceppeto Indemnitors, in the
BPLP Indemnified Parties' discretion.
(d) INDEMNIFICATION PROCEDURE.
(1) NOTICE OF CLAIM. In the event that any BPLP
Indemnified Party shall incur or suffer any Losses in respect
of which indemnification may be sought pursuant to this
SECTION 13.5, the BPLP Indemnified Party seeking to be
indemnified (the "INDEMNITEE") shall promptly provide a notice
(a "NOTICE OF CLAIM") to the Ceppeto Indemnitor from whom
indemnification is sought (the "INDEMNITOR"), which Notice of
Claim shall state the nature and basis of such claim, and the
amount of the claim to the extent specified of otherwise known
or
72
reasonably estimated. In the case of Losses arising by reason
of any third party claim, the Notice of Claim shall be given
promptly after the filing of any such claim against the
Indemnitee or the determination by the Indemnitee that any
such claim will ripen into a claim for which indemnification
will be sought, but the failure of the Indemnitee to give the
Notice of Claim within such time period shall not relieve the
Indemnitor of any liability that the Indemnitor may have to
the Indemnitee under this SECTION 13.5.
(2) INFORMATION. The Indemnitee shall provide to the
Indemnitor on request all information and documentation in the
possession or under the control of the Indemnitee reasonably
necessary to support and verify any Losses which the
Indemnitee believes give rise to a claim for indemnification
hereunder and shall give the Indemnitor reasonable access to
all books, records and personnel in the possession or under
the control of the Indemnitee that would have bearing on such
claim.
(3) THIRD PARTY CLAIMS. In the case of third party
claims for which indemnification is sought, the Indemnitor
shall have the option (A) to conduct any proceedings or
negotiations in connection therewith, (B) to take all other
steps to settle or defend any such claim (PROVIDED that the
Indemnitor shall not, without the consent of the Indemnitee,
settle any such claim (x) on terms which provide for (i) a
criminal sanction or fine, (ii) injunctive relief or (iii)
monetary damages in excess of the then value of the Ceppeto
Members' Equity Interest (to the extent then pledged to the BP
Member pursuant to SECTION 13.5(e) and (y) unless such
settlement includes a full and unconditional release of the
Indemnitee from all such claims, at no cost or other liability
or obligation of the Indemnitee), and (C) to employ counsel,
which counsel shall be selected by Indemnitee and shall be
reasonably acceptable to the Indemnitor, to contest any such
claim or liability in the name of the Indemnitor. In all such
events, the Indemnitee shall be entitled to be represented by
separate counsel at the Indemnitor's expense. So long as the
Indemnitor has assumed defense of an action or claim, such
action or claim shall not be settled without the Indemnitor's
consent, which shall not unreasonably be withheld. The
Indemnitor shall, within five (5) Business Days of receipt of
the Notice of Claim, notify the Indemnitee of its intention to
assume the defense of such claim. Until the Indemnitee has
received notice of the Indemnitor's election whether to defend
any claim, the Indemnitee shall take reasonable steps to
defend (but may not settle) such claim. If the Indemnitor
shall decline to assume the defense of any such claim, or
shall fail to notify the Indemnitee within five (5) Business
Days after receipt of the Notice of Claim of the Indemnitor's
election to defend such claim, the Indemnitee may defend
against and/or settle such claim. The costs and expenses of
all proceedings, contests, lawsuits and/or settlements in
respect of the claims described in this paragraph shall be
borne solely by the Indemnitor. Regardless of which party
shall assume the defense of the claim, the parties agree to
cooperate fully with one another in connection therewith.
73
(4) PAYMENT OF LOSSES. If (and to the extent) the
Indemnitor is responsible pursuant hereto to indemnify the
Indemnitee in respect of a third party claim, then within
thirty (30) days after the occurrence of a final
non-appealable determination with respect to such third party
claim (or sooner if (a) required by such determination or (b)
Indemnitee is required to earlier pay, deposit or otherwise
post all or any portion of such amount, or any amount in
consideration thereof) and delivery of notice from the
Indemnitee to the Indemnitor thereof, the Indemnitor shall pay
the Indemnitee, in immediately available funds, the amount of
any Losses (or such portion thereof as the Indemnitor shall be
responsible for pursuant to the provisions hereof). If (and to
the extent) the Indemnitor is responsible pursuant hereto to
indemnify the Indemnitee for Losses that do not involve
payment by the Indemnitee of a third party claim, then within
thirty (30) days after agreement on the amount of such Losses
or the occurrence of a final non-appealable determination of
such amount (or such earlier date as provided above) and
delivery of notice thereof by the Indemnitee to the
Indemnitor, the Indemnitor shall pay to the Indemnitee in
immediately available funds the amount of such Losses.
Notwithstanding anything to the contrary contained herein,
with respect to any claim in respect of which the Indemnitor
is (or is reasonably expected to be) liable under this SECTION
13.5, the Indemnitor shall pay, within thirty (30) days after
demand therefor by the Indemnitee, all out-of-pocket costs and
expenses incurred by Indemnitee in connection with any such
third party claim, including all legal fees and expenses
associated therewith.
(e) PLEDGE OF CEPPETO MEMBERS' EQUITY INTEREST.
(1) On the Effective Date, the Ceppeto Members shall
execute and deliver a Pledge and Security Agreement in the
form attached to this Agreement as EXHIBIT C, pursuant to
which the Ceppeto Members' Equity Interest will be pledged to
the BP Member as security for the indemnification obligations
of the Ceppeto Indemnitors under this SECTION 13.5. The
Ceppeto Members shall, at their expense, execute and deliver
all further instruments and documents, and take all further
action, that may be necessary or desirable in order to create,
perfect and protect the BP Member's security interest in the
Ceppeto Members' Equity Interest granted or purported to be
granted under the Pledge and Security Agreement, or to enable
the BP Member to exercise its rights and remedies with respect
to said security interest.
(2) For so long as no Notice of Claim has been given,
all distributions payable on account of the Ceppeto Members'
Equity Interest shall be currently payable to the Ceppeto
Members, notwithstanding the existence of the pledge.
(3) Such pledge shall be released on the second (2nd)
anniversary of the Effective Date (or such later date as is
provided in the Pledge and Security Agreement) unless prior to
such second (2nd) anniversary a Notice of Claim has been made
in accordance with this SECTION 13.5, in which event the
pledge will
74
remain in full force and effect until earlier of (i) the
resolution and/or satisfaction in full of any and all claims
set forth in such Notice of Claim (and the payment of any
other amounts as set forth in the Pledge and Security
Agreement) or (ii) the posting of substitute collateral in
form and substance satisfactory to the Managing Member in its
sole discretion and in an amount reasonably satisfactory to
the Managing Member. Upon full satisfaction of any such claim
or claims, the BP Member shall release the Ceppeto Members'
Equity Interest from the lien of the Pledge and Security
Agreement.
ARTICLE 14. NOTICES
14.1. IN WRITING; ADDRESS. Each notice, request, demand,
consent, approval and other communication required or permitted under or
otherwise delivered in connection with this Agreement shall be in writing and
will be deemed to have been duly given (a) when delivered by hand (so long as
the delivering party shall have received a receipt of delivery executed by the
party to whom such notice was delivered), or (b) three (3) Business Days after
deposit in United States certified or registered mail, postage prepaid, return
receipt requested, or (c) one (1) Business Day after delivery to a recognized
overnight courier service, or (d) when sent by telex or telecopier (with receipt
confirmed) PROVIDED a copy is also sent by one of the methods of delivery
described in clauses (a), (b) and (c) above, in each case addressed to the
parties as follows (or to such other address as a party may designate by notice
to the others):
If to either Ceppeto Member:
c/o Allied Partners, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which by itself shall not constitute notice) to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇, Weiner & ▇▇▇▇▇▇▇
1114 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company or any of the Boston Properties Members:
c/o Boston Properties, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ and (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which by itself shall not constitute notice) to:
▇▇▇▇▇▇▇ Procter LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
A copy of any notice or any written communication from the
Internal Revenue Service to the Company shall be given to each Member at the
addresses provided for above.
14.2. COPIES. A copy of any material notice, service of
process, or other document in the nature thereof, received by the Ceppeto Member
from anyone other than the other Member or the Company, shall be delivered by
the Ceppeto Member to the Managing Member as soon as practicable.
ARTICLE 15. MISCELLANEOUS
15.1. 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. All approvals of either party
hereunder shall be in writing.
15.2. INTERPRETATION. This Agreement and the rights and
obligations of the Members hereunder shall be governed by and interpreted in
accordance with the laws of the State of Delaware, without regard to its
principles of conflicts of laws.
76
15.3. ENTIRE AGREEMENT. This Agreement, the Master Transaction
Agreement, the Tax Protection Agreement and the other Transaction Documents
contain all of the understandings and agreements of whatsoever kind and nature
existing between the parties hereto with respect to this Agreement and the
rights, interests, understandings, agreements and obligations of the respective
parties pertaining to the Company.
15.4. BINDING EFFECT. Except as herein otherwise expressly
stipulated to the contrary, this Agreement shall be binding upon and inure to
the benefit of the parties signatory hereto, and their respective distributees,
successors and permitted assigns.
15.5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original and all of
which together will constitute the same instrument.
15.6. CONFIDENTIALITY. No publicity, media communications,
press releases or other public announcements concerning this Agreement or the
transactions contemplated hereby shall be issued or made by either Member
without the prior written consent of the other Member, which consent shall not
be unreasonably withheld, except to the extent required by law or stock exchange
rule. Notwithstanding the foregoing, Managing Member may, from time to time and
at any time, issue or make any publicity, media communications, press releases
or other public announcements concerning or with respect to the Property, and no
Ceppeto Member shall issue or make any such publicity, media communications,
press releases or other public announcements. The Ceppeto Members shall keep
confidential all information and other matters and material regarding the
Property, including without limitation, information, matters and material
relating to the leasing, financial and economic performance, operations and
management of the Property, and shall be disclosed by the Ceppeto Members only
to its legal advisors, accountants, officers, members, managers, directors and
possible lenders, as and to the extent reasonably necessary, and in each
instance only with the specific instructions to hold such information and other
matters and material confidential, or as otherwise required by law or court
order. For so long as ▇▇▇▇▇▇▇ ▇▇▇▇▇ and/or ▇▇▇▇ ▇▇▇▇▇ hold, directly or
indirectly, at least a twenty percent (20%) Percentage Interest in the Company,
the Company shall cause one (1) or more plaques to be maintained at the
Property, in form and substance reasonably satisfactory to the Members,
indicating that the Property is owned by Boston Properties and Allied Partners
(or their respective Affiliates). Such plaques may, at Boston Properties'
election, also indicate that the Property is managed by Boston Properties (or
its Affiliate). The Members, on behalf of themselves and their respective
Affiliates, consent and agree to the termination of those certain
confidentiality agreements (i) dated as of March 22, 2001 (the "MARCH 22
CONFIDENTIALITY AGREEMENT") between ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ on
behalf of the Hadar Parties (as defined therein) and BPLP and (ii) dated as of
February 16, 2001 (the "FEBRUARY 16 CONFIDENTIALITY AGREEMENT" and together with
the March 22 Confidentiality Agreement, the "CONFIDENTIALITY AGREEMENT") between
▇▇▇▇▇▇▇ Procter LLP on behalf of BPLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLC on behalf of the Original Company. Any confidential information
which has been provided pursuant to the Confidentiality Agreement may be
disclosed free of the restrictions and limitations of the Confidentiality
Agreement.
77
15.7. AMENDMENTS. As and to the extent permitted by applicable
law, this Agreement may be amended, altered or modified by the Managing Member
in its discretion; PROVIDED that in no event shall the Agreement be amended in
any manner which has an adverse effect on the Ceppeto Members without the prior
written consent of the Ceppeto Members. Managing Member shall provide written
notice to the Members not less than ten (10) Business Days prior to the
effective date of any amendment to this Agreement.
15.8. SEVERABILITY. Each provision hereof is intended to be
severable and the invalidity or illegality of any portion of this Agreement
shall not affect the validity or legality of the remainder.
78
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
BP/CG MEMBER I LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Authorized Representative
BP/CG MEMBER II LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Authorized Representative
BP/CG MEMBER III LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Authorized Representative
Signature Page
CEPPETO ENTERPRISES LLC, a Delaware
limited liability company
By: Ceppeto Holding Enterprises LLC,
its managing member
By: /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
CEPPETO SKYLINE HOLDING LLC, a
Delaware limited liability company
By: /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
AGREED AND ACCEPTED:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, individually, as to his representations, warranties, Covenants
and indemnification and other obligations contained in SECTIONS 5 AND 13
/s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇ ▇▇▇▇▇, individually, as to his representations, warranties, Covenants and
indemnification and other obligations contained in SECTIONS 5 AND 13
Signature Page